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, 1998

[ ]  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

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]

Issuers' revenues for its most recent fiscal year: $2,346,610.

The  aggregate  market value of the Common Stock held by  non-affiliates  of the
Registrant was $2,316,253 as of June 1, 1998.

As of June 1,  1998,  7,720,842  shares of the  Registrant's  Common  Stock were
outstanding.
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

PART I
     Item  1:  Description of Business...................................    3
     Item  2:  Description of Properties.................................   12
     Item  3:  Legal Proceedings.........................................   12
     Item  4:  Submission of Matters to a Vote of
               Security Holders .........................................   12

PART II
     Item  5:  Market for Common Equity and Related
               Stockholder Matters.......................................   13
     Item  6:  Management's Discussion and Analysis
               or Plan of Operation......................................   13
     Item  7:  Financial Statements......................................   22
     Item  8:  Changes in and Disagreements with
               Accountants on Accounting and
               Financial Disclosure......................................   36

PART III
     Item  9:  Directors, Executive Officers, Promoters
               and Control Persons; Compliance with
               Section 16(a) of the Exchange Act.........................   36
     Item 10:  Executive Compensation....................................   38
     Item 11:  Security Ownership of Certain Beneficial
               Owners and Management.....................................   41
     Item 12:  Certain Relationships and Related
               Transactions..............................................   42
     Item 13:  Exhibits and Reports on Form 8-K..........................   43

                                       2
<PAGE>
                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

Forward Looking Statements

     This report contains forward looking statements  relating to Colonial Trust
Company (the "Company").  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 with the
meaning of that term in Section 27A of 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, projection of revenues,  income,
or loss,  estimates of capital  expenditures,  plans for the 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 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

     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.

                                       3
<PAGE>

     On September 11, 1989,  the Company began  providing  trust services to the
public.   These  services  included  serving  as  trustee  on  inter  vivos  and
testamentary trusts, serving as the legal representative of estates of decedents
and wards,  serving as the custodian under individual  retirement accounts ("IRA
Accounts"),  and serving as trustee  for bond  offerings  of churches  and other
non-profit  organizations.  The Company is  presently  primarily  engaged in the
business of serving as trustee and paying agent on bond programs of churches and
other  non-profit  organizations.  The  Company  also  serves as trustee for IRA
Accounts.  Through its Personal Trust Division, the Company provides traditional
investment management,  administration and custodial services for customers with
trust assets. See "Trust Services, Personal Trust Division."

Bond Offering Services

     The Company's primary business historically has been serving as trustee and
paying agent for bond offerings of churches and other non-profit  organizations.
According to the National Association of Securities Dealers, the total principal
amount of bonds issued in the U.S. by non-profit  organizations in 1997 and 1996
was approximately $360 million and $352 million,  respectively. The overwhelming
majority of these bonds are sold by broker-dealers in offerings which 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.
The Company also receives  periodic sinking fund payments  (payments of interest
on the bonds by the non-profit organizations,  typically made on a weekly basis)
on their  respective  due dates.  In its capacity as paying  agent,  the Company
distributes  the  sinking  fund  payments  to  bondholders  pursuant  to a trust
indenture between the Company and the non-profit organization. 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.

                                       4
<PAGE>

     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.

     As of March 31, 1998, the Company had served as trustee and paying agent on
486 bond offerings  totaling  approximately  $390 million in original  principal
amount.  The  foregoing  includes  a total  of 79  bond  offerings  in  original
principal  amount of  approximately  $71 million  originated  in the fiscal year
ended March 31, 1998. The Company's  revenues from these activities  represented
approximately 67% of the Company's  aggregate  revenues for the year ended March
31, 1998. See "Item 6- Management's Discussion and Analysis or Plan of Operation
- Results of Operations for the Years Ended March 31, 1998 and 1997."

     As of March 31, 1998,  all bond  programs for which the Company was serving
as trustee and paying agent had been originated by fourteen broker/dealers,  and
four of those broker/dealers had originated bonds representing approximately 70%
of the aggregate principal amount of all bonds for which the Company was serving
as trustee and paying agent.  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  intends to attempt to develop  relationships  with  additional
broker/dealers  who are active in the non-profit bond financing  market. To that
end, in February 1996 the Company entered into an employment agreement with Marv
Hoeflinger  pursuant to which Mr.  Hoeflinger  currently serves as the Company's
Vice  President of Marketing.  Until  joining the Company,  Mr.  Hoeflinger  was
employed  as Senior Vice  President  with  Reliance  Trust  Company,  one of the
Company's  primary  competitors in the non-profit bond servicing  business.  Mr.
Hoeflinger  is  primarily  responsible  for  attempting  to  procure  additional

                                       5
<PAGE>

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

IRA Account Services

     The  Company  also  serves as trustee for IRA  Accounts.  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  uninvested
balance in each IRA Account.

     At March 31,  1998,  the  Company  was  serving  as  trustee  for 6,644 IRA
Accounts with an aggregate value of  approximately  $143 million,  including 141
IRA Accounts with an aggregate value of  approximately  $26 million  serviced by
the Company's Personal Trust Division.  Revenue from the Company's activities in
this area represented  approximately 19% of the Company's aggregate revenues for
the year ended March 31, 1998. See "Item 6-Management's  Discussion and Analysis
or Plan of Operation - Results of Operations  for the Years Ended March 31, 1998
and 1997."

     The  majority  of the  IRA  Accounts  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
accounts. 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.

     The  Company  intends to attempt to grow this  business  primarily  through
marketing efforts of Mr. Hoeflinger  directly to non-profit  organizations.  Mr.
Hoeflinger  promotes the  Company's  IRA services  through  investment  seminars
emphasizing  the Company's  ability and  willingness  to allow church bonds as a
self-directed IRA investment.

Traditional Trust Services; Personal Trust Division

     On  November  1,  1995,  the  Company  purchased  all  of  the  issued  and
outstanding common stock of Camelback Trust Company ("Camelback"). Camelback was
merged with and into the Company on July 31, 1996. Camelback now operates as the
Company's Personal Trust Division.

                                       6
<PAGE>

     The Personal Trust Division  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 Accounts.  At
March 31, 1998, the Personal  Trust Division  served as trustee or agent for 183
trust, other accounts, or investment agency accounts with a fair market value of
approximately  $51 million,  and served as custodian for  approximately  141 IRA
Accounts with a fair market value of approximately $26 million.

     The Personal Trust Division 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 quarterly basis to
individual  accounts  according  to the  fair  market  value  of the  supporting
fiduciary  assets in such account at the end of each  quarter.  Under the second
fee structure,  the Personal  Trust Division  charges a flat annual fee based on
the type of asset and the  services  rendered for its  services.  The fee varies
depending the level of investment  management the customer desires. The Personal
Trust  Division  charges a flat  annual fee of $500 and a fee of $25 per special
asset held in the account for IRA Accounts for which it serves as custodian.

     The Company is party to an investment  advisory  agreement  dated September
1995 with Hackett  Investment  Advisors,  Inc.  ("HIA"),  an investment  advisor
located  in  Scottsdale,  Arizona.  Pursuant  to  this  agreement,  the  Company
designates  HIA,  and HIA serves for the  Company,  as  investment  advisor on a
portion of the investment  accounts of the Personal Trust Division.  HIA further
refers to the Personal  Trust Division all business  opportunities  for which an
independent  corporate  fiduciary is necessary or appropriate.  The Company pays
HIA 30% of the gross fees collected by the Company from the Company's investment
management accounts receiving HIA advisory services.  The agreement with HIA was
scheduled  to  terminate  on January 31,  1998.  The parties  have  extended the
agreement  while they  negotiate a new  agreement.  As of the date hereof,  such
negotiations were continuing.

     The Company is also party to an investment advisory agreement dated January
2, 1997 with Wright Investors  Services  ("WIS").  WIS is an investment  advisor
located in  Bridgeport,  Connecticut.  Pursuant to this  agreement,  the Company
designates  WIS,  and WIS serves for the  Company,  as  investment  advisor on a
portion of the designated  investment  accounts of the Personal Trust  Division.

                                       7
<PAGE>

The Company  pays WIS 30% or 10%,  depending  upon the type of  account,  of the
gross fees  collected by the Company from the  Company's  investment  management
accounts  for which WIS serves as  investment  advisor.  The initial term of the
agreement   continued  in  effect  through   January  31,  1998.  The  agreement
automatically  renews for subsequent terms of one year each, unless either party
notifies  the  other in  writing,  at  least  three  months  in  advance  of the
anniversary  date of its intent to terminate  the  agreement.  The agreement was
automatically  renewed on January 2, 1998 and  continues in effect until January
2,1999.

     The  Company was  formerly a party to an  employment  agreement  with A. R.
"Bud" Olson,  who has primary  responsibility  for developing trust business for
the Personal  Trust  Division.  By mutual  agreement,  the Company and Mr. Olson
decided not to renew the employment  agreement (which terminated on December 31,
1997), and Mr. Olson currently serves as an at-will employee of the Company. Mr.
Olson has 38 years of experience as a trust  professional,  including 8 years of
experience as a trust professional in Phoenix. The profitability of the Personal
Trust  Division is dependent in large part on the efforts of Mr. Olson and, to a
lesser  extent,  HIA, to generate new trust business and upon the ability of HIA
and WIS to manage the trust accounts resulting from these efforts. Revenues from
the Personal Trust Division, including IRA servicing fees-personal,  represented
approximately  16% of the Company's  aggregate gross revenues for the year ended
March 31, 1998. See "-Growth Plans", "Item 10 Executive  Compensation-Employment
Agreements"  and  "Management's  Discussion  and Analysis or Plan of Operation -
Results of Operations for the Years Ended March 31, 1998 and 1997."

Growth Plans

     The  Company  intends to attempt to expand its  non-profit  bond  servicing
operations,  its  IRA  Account  servicing  operations,  and the  Personal  Trust
Division's   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 attempt to expand its  non-profit  bond  servicing
operations by(i) 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)  attempting  to develop  relationships  with  additional
broker/dealers from whom the Company will receive bond servicing referrals.  The
Company  also  intends to attempt  to develop  additional  sources of revenue by

                                       8
<PAGE>

serving as paying agent for non-profit loan funds  established by  denominations
of various  religious  organizations.  The  Company  may  establish  a bond loan
program  whereby a bond issuer meeting certain  financial  criteria could borrow
funds from the Company by pledging  unsold bonds of the  offering as  collateral
for such loan in an amount equal to the loan.  Bonds held as collateral  for the
loan would accrue  interest to the Company  offsetting the interest  charged for
the loan. In addition to the interest  earned on the loaned  funds,  the Company
would  earn  a  loan  commitment  fee.  Mr.  Hoeflinger  will  bear  significant
responsibility  for such matters.  See "Item  9-Directors,  Executive  Officers,
Promoters and Control Persons-Employment  Agreements." There may be no assurance
that the Company will be successful  in its efforts to increase  bond  servicing
revenues  or  to  develop  additional  sources  of  revenue.  See  "Management's
Discussion and Analysis or Plan of Operation Results of Operations for the Years
Ended March 31, 1998 and 1997."

     The Company intends to attempt to expand its IRA Account servicing business
through (i) attempting to develop  relationships  with new  broker/dealers  with
whom the Company has not  previously  had a  relationship,  and (ii)  investment
seminars emphasizing the

Company's  ability and willingness to allow church bonds as a self-directed  IRA
investment. There may be no assurance that the Company will be successful in its
efforts to increase IRA Account servicing revenues. See "Management's Discussion
and  Analysis or Plan of  Operation - Results of  Operations  for the Year Ended
March 31, 1998 and 1997."

     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.  The  Company  will be
dependent primarily upon the efforts of Bud Olson, the Personal Trust Division's
Vice  President of  Marketing,  and HIA, with whom the Company has an investment
advisory  agreement,  with respect to these matters.  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, 1998 and 1997."

     THE FOREGOING  DISCUSSION  ENTITLED "GROWTH PLANS" CONTAINS FORWARD LOOKING
STATEMENTS  WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AS AMENDED,
AND SECTION  21E OF THE  SECURITIES  EXCHANGE  ACT OF 1934,  AS AMENDED,  AND IS

                                       9
<PAGE>

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 BUSINESSES;
THE CONTINUED EMPLOYMENT OF KEY MANAGEMENT,  INCLUDING MESSRS. HOEFLINGER, OLSON
AND JOHN JOHNSON,  THE COMPANY'S CHIEF EXECUTIVE OFFICER; THE SUCCESS OF MESSRS.
HOEFLINGER  AND OLSON IN THEIR  RESPECTIVE  BUSINESS  DEVELOPMENT  EFFORTS;  THE
COMPANY'S SUCCESS IN MAINTAINING ITS EXISTING RELATIONSHIPS WITH BROKER/ DEALERS
WHO  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 WIS AND HIA AND THEIR SUCCESS IN MANAGING
THE TRUST AND IRA ACCOUNTS FOR WHICH IT PROVIDES  SERVICES;  NO MATERIAL CHANGES
IN EXISTING  LAWS,  RULES OR  REGULATIONS  AFFECTING THE  COMPANY'S  OPERATIONS;
COMPETITIVE FACTORS, SUCH AS INCREASED COMPETITION FOR THE COMPANY'S SERVICES IN
ONE OR MORE OF THE ABOVE  BUSINESSES;  AN INCREASE  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 Bank,  American  Church Trust Company and
National City Bank. 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.

     Competition in the IRA Account servicing business is intense.  However,  to
date the Company has focused  its  efforts on  procuring  IRA Account  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,  First  National Bank of Onaga 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.

                                       10
<PAGE>

     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  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
approximately  $1,756,469 on March 31, 1998. The legislation  also requires that
the Company's  net capital meet certain  liquidity  requirements.  Specifically,
$166,666,  $333,332 and $500,000 of such net capital must meet the  Department's
liquidity  requirements by December 31, 1997, December 31, 1998 and December 31,
1999, respectively. At March 31, 1998, $168,206 of the Company's net capital met
the Department's  liquidity  requirements.  The Company believes that it will be
able to satisfy the foregoing liquidity requirements from cash on hand and other
assets of the Company.

     The Company  believes that it is currently in substantial  compliance  with
all applicable federal, state and local laws and regulations.

Employees

     At March 31, 1998, the Company  employed 31 persons.  None of the Company's
employees  are  covered  by  a  collective  bargaining  agreement.  The  Company
considers its relations with its employees to be good.

                                       11
<PAGE>

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.  Prior to March 15,
1995, the Company leased approximately 1,500 square feet of office space for its
executive offices at 2510 West Dunlap, Suite 232, in Phoenix,  Arizona. On March
15,  1995,  the  lease was  assigned  to an  unrelated  third  party.  The lease
terminated in September 1996.

     The  Company  was  also a party  to a lease  for  commercial  office  space
formerly  occupied by Camelback as its executive office in Scottsdale,  Arizona.
The office lease terminated on February 14, 1998.

ITEM 3. LEGAL PROCEEDINGS.

     On November  1, 1996,  a former  employee of the Company  filed a charge of
race  discrimination  before the Civil Rights  Division of the Arizona  Attorney
General's  office  (the  "Agency").  The  action  was  filed  subsequent  to the
employee's discharge by the Company. The Company filed its statement of position
on  December  12,  1996,  in  which  the  Company  denied  all   allegations  of
discrimination or wrongdoing with respect to the former employee, and on January
27, 1997, the Company also filed responses to the Agency's interrogatories.  The
Agency  failed to take action before the  expiration  of the Arizona  statute of
limitations.  The matter has therefore  been referred to the United States Equal
Employment  Opportunity  Commission (" EEOC") and is pending before that agency.
At the present time,  the Company has been advised by its counsel in this matter
that,  in the  opinion of such  counsel,  it is too early in the  administrative
process  to  make a  determination  concerning  the  potential  outcome  of such
proceeding  or the  potential  liability  of the  Company  as a  result  of this
proceeding or other  potential  proceedings.  While  management does not believe
that the ultimate  resolution of this matter will have a material adverse effect
on the Company,  there can be no assurance how the EEOC will  ultimately rule on
this matter and whether subsequent litigation will be filed.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                       12
<PAGE>
                                     Part II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     On June 1, 1998,  the  Company  had  approximately  3,200  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".

     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, 1998, were
$.30 and $.23 per share,  respectively.  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

Results of Operations for the Years Ended March 31, 1998 and 1997.

     The Company had net earnings of $214,358, or $.03 per share, for the fiscal
year ended March 31, 1998,  compared to net  earnings of  $163,725,  or $.02 per
share,  for the year ended March 31,  1997,  an increase of 31%. The Company had
total revenue of $2,346,610 for the year ended March 31, 1998, compared to total
revenue of $1,786,245 for the prior year, an increase of 31%.

     The Company's  bond servicing  income  increased to $1,582,917 for the year
ended March 31, 1998,  compared to $1,226,591  for the year ended March 31, 1997
an  increase  of 29%.  The  increase  in bond  servicing  income  was  primarily
attributable  to the  increase  in the number of bond  accounts  serviced by the
Company.  At March 31, 1998, the Company was serving as trustee and paying agent
on 418 bond offerings totaling approximately  $315,000,000 in original principal
amount;  at March 31, 1997,  the Company was serving as trustee and paying agent
on 360 bond offerings totaling approximately  $267,000,000 in original principal
amount. The Company  anticipates that its bond servicing income will increase in
the year ending March 31,  1999,  by  approximately  15% - 25% over current year
levels as a result of an  increase  in the number and  principal  amount of bond
offerings for which the Company serves as trustee and paying agent.

                                       13
<PAGE>

     Revenue from the Company's IRA Account  servicing  activities  increased to
$443,991  for the year ended March 31, 1998  compared to $352,018 for the fiscal
year ended March 31,  1997,  an increase of 26% due  primarily to an increase in
the number of IRA  Accounts  serviced by the  Company.  At March 31,  1998,  the
Company  serviced  6,644 IRA Accounts with an aggregate  value of  approximately
$143,000,000,   including   141  IRA  Accounts   with  an  aggregate   value  of
approximately  $26,000,000 serviced by the Personal Trust Division; at March 31,
1997,  the  Company  serviced  6,186 IRA  Accounts  with an  aggregate  value of
approximately  $124,000,000.  The  Company  anticipates  that its IRA  servicing
revenue will increase in the fiscal year ending March 31, 1999 by  approximately
10% - 20% over  current-year  levels as a result of an increase in the number of
IRA Accounts serviced by the Company.

     Trust income derived from the Personal Trust Division increased to $279,903
for the fiscal  year ended  March 31,  1998,  compared  to 173,603 for the prior
fiscal year , an increase of 61%. At March 31, 1998, the Personal Trust Division
served as trustee or agent for 183 trust, other accounts, or investment accounts
with a fair market value of approximately $51 million.  The Company  anticipates
that trust income will increase by approximately 20-40% in fiscal 1999.

     Interest  income  increased  slightly  to $39,799 for the fiscal year ended
March 31, 1998,  compared to $34,033 in the prior  fiscal  year,  an increase of
17%.  The  increase  was  primarily  attributable  to a larger  balance held for
investment.

     The  Company's  general  and  administrative   expenses  increased  in  the
aggregate to  $1,984,485  for the fiscal year ended March 31, 1998,  compared to
$1,522,020 for the prior fiscal year, and decreased to 84.5% of revenues for the
fiscal year ended  March 31,  1998,  from 85.2% of revenues in the prior  fiscal
year.  The Company  anticipates  that general and  administrative  expenses will
increase in the aggregate in fiscal 1999 but will remain relatively  constant or
decrease  slightly  as a  percentage  of  revenues  from fiscal 1998 levels as a
result of spreading these increased costs over a larger revenue base.

     THE FOREGOING DISCUSSION CONTAINS VARIOUS FORWARD LOOKING STATEMENTS WITHIN
THE  MEANING OF SECTION  27A OF THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  AND
SECTION 21E OF THE SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED,  AND IS SUBJECT
TO THE SAFE HARBORS  CREATED  THEREBY.  ACTUAL  RESULTS COULD DIFFER  MATERIALLY
BECAUSE  OF  THE  FOLLOWING  FACTORS,  AMONG  OTHERS:  THE  COMPANY'S  CONTINUED

                                       14
<PAGE>

INVOLVEMENT IN EACH OF ITS CURRENT LINES OF BUSINESS;  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 REFERRALS FOR THE COMPANY; THE
CONTINUED  EMPLOYMENT OF KEY MANAGEMENT;  THE SUCCESS OF MESSRS.  HOEFLINGER AND
OLSON IN THEIR  BUSINESS  DEVELOPMENT  EFFORTS  ON  BEHALF OF THE  COMPANY;  THE
CONTINUATION  OF THE COMPANY'S  INVESTMENT  ADVISORY  AGREEMENT WITH HIA AND THE
SUCCESS OF HIA IN MANAGING THE TRUST AND INVESTMENT AGENCY ACCOUNTS FOR WHICH IT
PROVIDES SERVICES; INCREASED STAFFING OR OFFICE NEEDS NOT CURRENTLY ANTICIPATED;
INCREASED  COMPETITION  FOR THE  COMPANY'S  SERVICES,  COMPETITIVE  PRESSURES OR
PRICES  FOR THE  COMPANY'S  SERVICES;  AND  CHANGES  IN  RULES  AND  REGULATIONS
ADVERSELY IMPACTING THE COMPANY'S LINES OF BUSINESS.

Results of  Operations  for the Years Ended  March 31,  1997 and 1996.

     The Company had net earnings of $163,725, or $.02 per share, for the fiscal
year ended March 31, 1997,  compared to net  earnings of  $142,360,  or $.02 per
share,  for the year ended March 31,  1996,  an increase of 15%. The Company had
total revenue of $1,786,245 for the year ended March 31, 1997, compared to total
revenue of  $1,190,356  for the fiscal year ended March 31, 1996, an increase of
50%.

     The Company's bond servicing  income increased to $1,226,591 for the fiscal
year ended March 31, 1997, compared to $889,601 for the fiscal year ending March
31,  1996,  an  increase  of 38%.  The  increase  in bond  servicing  income was
primarily  attributable to the increase in the number of bond accounts  serviced
by the Company. At March 31, 1997, the Company was serving as trustee and paying
agent on 360 bond offerings  totaling  approximately  $267,000,000  in principal
amount;  at March 31, 1996,  the Company was serving as trustee and paying agent
on 314 bond offerings totaling approximately $243,000,000 in principal amount.

     Revenue from the Company's IRA servicing  activities  increased to $352,018
for the fiscal year ended March 31,  1997,  compared to $212,033  for the fiscal
year ended March 31, 1996,  an increase of 66%, due  primarily to an increase in
the number of IRA  Accounts  serviced by the  Company.  At March 31,  1997,  the
Company  serviced  6,186 IRA Accounts with an aggregate  value of  $124,000,000,
including 104  self-directed IRA accounts with an aggregate value of $26,000,000
serviced by Camelback  Trust Company;  at March 31, 1996,  the Company  serviced
4,723 IRA Accounts with an aggregate value of approximately $90,000,000.

                                       15
<PAGE>

     Trust  income  increased  to $173,603 for fiscal year ended March 31, 1997,
compared to $56,088 for the fiscal year ended March 31,  1996.  The trust income
for  fiscal  1996  represents  revenues  derived  from  Camelback's   investment
management accounts for the period November 1, 1995 to March 31, 1996.

     Interest  income  increased  to $34,033 for the fiscal year ended March 31,
1997, compared to $32,634 for the fiscal year ended March 31, 1996. The increase
was primarily attributable to a larger balance held for investment.

     The  Company's  general  and  administrative   expenses  increased  in  the
aggregate to  $1,522,020  for the fiscal year ended March 31, 1997,  compared to
$951,092  for the fiscal  year ended March 31,  1996 and  increased  to 85.2% of
revenues in the fiscal 1997 from 79.8% of revenues in the previous  fiscal year.
This increase was attributable to the following factors:  (i) salary and related
costs  attributable  to the addition of Mr.  Hoeflinger and nine  administrative
staff members;  and (ii) other additional  expenses related to administering the
Company's increased bond servicing business.

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
$1,756,469 on March 31, 1998. The  legislation  also requires that the Company's
net  capital  meet  certain  liquidity  requirements.   Specifically,  $166,666,
$333,332 and $500,000 of such net capital must meet the  Department's  liquidity
requirements  by December  31,  1997,  December  31, 1998 and December 31, 1999,
respectively.  At March 31, 1998,  $168,206 of the Company's net capital met the
Department's liquidity  requirements.  The Company believes that it will be able
to satisfy  the  foregoing  liquidity  requirements  from cash on hand and other
assets of the Company.  Net cash provided by operating  activities  was $150,482
for the year ended March 31,  1998.  The Company also  believes  that it will be
able to satisfy its working capital and capital expenditure requirements for the
foreseeable future from existing cash balances,  from 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.

Accounting Matters

Earnings per share: In February 1997, the Financial  Accounting  Standards Board
issued SAS No. 128, "Earnings Per Share". This Statement  establishes  standards
for computing and  presenting  earnings per share  ("EPS"),  and  supersedes APB

                                       16
<PAGE>

Opinion No. 15. This Statement  replaces primary EPS with basic EPS and requires
dual  presentation  of basic and diluted EPS.  This  Statement is effective  for
periods  ending after  December 15, 1997.  Basic and diluted EPS, as  calculated
under SAS No. 128, would have been $.03 and $.03 for the fiscal year ended March
31, 1998.  Basic and diluted EPS, as  calculated  under SAS No. 128,  would have
been $.02 and $.02 for the fiscal year ended March 31, 1997.

Risk Factors

     No Trading Market for Common Stock

     The  Company's  Common  Stock is not  listed  on the  Nasdaq  Stock  Market
("Nasdaq") or on any national or regional securities  exchange,  and there is no
established  trading market for the Common Stock.  The Company intends to pursue
the  listing  of its  Common  Stock on Nasdaq or a  securities  exchange  in the
future. However, the Company currently does not meet the listing requirements of
Nasdaq  or any  securities  exchange,  and there  may be no  assurance  that the
Company  will  qualify  for such a listing in the  future.  Until the Company is
successful in procuring a listing for its Common Stock on Nasdaq or a securities
exchange,  the  Company  will  attempt  to match  shareholders  who wish to sell
Company  Common Stock with persons who wish to buy such Common  Stock.  However,
based on historical  trading volume in the Company's Common Stock, a shareholder
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 need or wish to do
so.

     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  and  financial  controls.  Failure to do so
could have a material  adverse effect upon the Company's  operating  results and
financial condition.

                                       17
<PAGE>

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

     The Company's  future  financial  performance  will depend in part upon the
size of the non-profit bond market.  According to the NASD,  approximately  $360
million and $352 million in bonds were issued by non-profit organizations in the
years 1997 and 1996,  respectively.  However,  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.  Moreover, there can be no assurance that the
market for bonds issued by non-profit organizations will continue at or near the
levels reached in 1997 or 1996.  Based on the foregoing  figures,  the Company's
share of the non-profit bond servicing market was  approximately  18% and 23% in
1997 and 1996, respectively.  The Company's ability to increase its market share
will be dependent upon a number of factors,  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."  Revenues from the Company's bond servicing activities
accounted for  approximately  67% of the Company's  total revenues in the fiscal
year ended March 31, 1998.

     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 Division 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  16% of the Company's  total
revenues in the fiscal  year ended  March 31,  1998.  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. See "Item 1: Business-Personal Trust
Services."

                                       18
<PAGE>

     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, 1998,  all bond  programs for
which the Company was serving as trustee and paying agent had been originated by
14  broker/dealers,  and  four of  those  broker/dealers  had  originated  bonds
representing  approximately  70%  of  the  aggregate  principal  amount  of  all
outstanding bonds for which the Company was serving as trustee and paying agent.
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  businesses  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 Bank,  American Church Trust Company,
and National  City Bank.  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.

                                       19
<PAGE>

     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  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 by the  Department.  Additionally,  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 $1,756,469 million at March 31,
1998.  The  foregoing  legislation  also requires that the Company's net capital
meet  certain  liquidity  requirements.  Specifically,  $166,666,  $333,332  and
$500,000 of the Company's net capital must meet the  Department's  definition of
liquidity by July 20, 1997,  July 20, 1998 and July 20, 1999,  respectively.  At
March 31,  1998,  $168,206 of the  Company's  net  capital met the  Department's
liquidity requirements. The Company believes that it will be able to satisfy the
foregoing  liquidity  requirements  from  cash on hand and  other  assets of the
Company.  The  Company  also  believes  that  it  is  currently  in  substantial
compliance with all applicable federal, state and local laws and regulations.

     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,  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.

                                       20
<PAGE>

     Lack of 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.

     Year 2000

     The  Company  has  commenced  a study of its  computer  systems in order to
assess  its  exposure  to Year 2000  issues.  The  Company  expects  to make the
necessary modifications or changes to its computer information systems to enable
proper  processing  of  transactions  relating to the Year 2000 and beyond.  The
Company  estimates  that  expenditures  will be minimal  to modify its  existing
systems,  should it choose  to do so.  The  Company  will  evaluate  appropriate
courses of action,  including  replacement of certain  systems whose  associated
costs would be recorded as assets and subsequently  amortized or modification of
its existing system which costs would be expensed as incurred.  However, failure
of the Company to fully  address  and resolve its Year 2000 issues  could have a
material adverse effect on the Company.

ITEM 7. FINANCIAL STATEMENTS.

     The Company's audited financial statements, containing balance sheets as of
March 31,  1998 and 1997,  and related  statements  of  earnings,  stockholders'
equity and cash flows for each of the years in the three-year period ended March
31, 1998, are set forth on the following pages.

                                       21
<PAGE>
                             COLONIAL TRUST COMPANY

                              Financial Statements

                          March 31, 1998, 1997 and 1996

                   (With Independent Auditors' Report Thereon)






                                       22
<PAGE>
                       [LETTERHEAD OF KPMG PEAT MARWICK]


                          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, 1998 and 1997, and the related statements of earnings,
stockholders'  equity  and cash  flows for each of the  years in the  three-year
period ended March 31, 1998. These financial  statements are the  responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the 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, 1998 and 1997,  and the results of its  operations  and its cash flows
for  each  of the  years  in the  three-year  period  ended  March  31,  1998 in
conformity with generally accepted accounting principles.


                                     /s/ KPMG Peat Marwick LLP


Phoenix, Arizona
May 22, 1998

                                       23
<PAGE>
                             COLONIAL TRUST COMPANY
                                 Balance Sheets
                             March 31, 1998 and 1997

                                    ASSETS
                                                           1998           1997
                                                           ----           ----

Cash and cash equivalents                              $   28,475     $  132,426
Receivables                                               300,857        150,228
Note receivable (note 2)                                  389,489        361,057
Property and equipment, net (note 3)                      712,482        739,456
Excess of cost over fair value acquired, net              153,420        165,590
Restricted cash                                           168,206             --
Other assets                                              195,350        166,443
                                                       ----------     ----------
                                                       $1,948,279     $1,715,200
                                                       ==========     ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued liabilities               $  132,375     $  113,610
Income taxes payable (note 5)                              47,605         25,617
Deferred income taxes (note 5)                             11,830         19,429
                                                       ----------     ----------
                                                          191,810        158,656
                                                       ----------     ----------
Stockholders' equity (notes 6 and 8):
  Common stock,  no par value; 10,000,000
    shares authorized, 7,729,288 and
    7,777,401 shares issued and outstanding
    at March 31, 1998 and March 31, 1997,
    respectively                                          554,942        554,942
  Additional paid-in capital                              505,347        505,347
  Retained earnings                                       696,180        496,255
                                                       ----------     ----------
      Total stockholders' equity                        1,756,469      1,556,544

Commitments and contingencies (notes 4 and 8)
                                                       ----------     ----------
                                                       $1,948,279     $1,715,200
                                                       ==========     ==========

See accompanying notes to financial statements.

                                       24
<PAGE>
                             COLONIAL TRUST COMPANY
                             Statements of Earnings
                    Years ended March 31, 1998, 1997 and 1996

                                            1998         1997        1996
                                            ----         ----        ----
Revenue (note 1):
  Bond servicing income                  $1,582,917   1,226,591     889,601
  IRA servicing fees - corporate            348,660     297,631     152,599
  IRA servicing fees - personal              95,331      54,387      59,434
  Trust income                              279,903     173,603      56,088
  Interest income                            39,799      34,033      32,634
                                         ----------   ---------   ---------
      Total revenue                       2,346,610   1,786,245   1,190,356

General and administrative expenses       1,984,485   1,522,020     951,092
                                         ----------   ---------   ---------

      Income before income taxes            362,125     264,225     239,264

Income taxes (note 5)                       147,767     100,500      96,904
                                         ----------   ---------   ---------
      Net earnings                       $  214,358     163,725     142,360
                                         ==========   =========   =========

Basic earnings per share                 $      .03         .02         .02
                                         ==========   =========   =========

Diluted earnings per share               $      .03         .02         .02
                                         ==========   =========   =========

Weighted average shares outstanding--
 basic                                    7,764,868   7,777,401   7,328,059
                                         ==========   =========   =========

Weighted average shares outstanding--
 diluted                                  7,901,250   7,777,401   7,328,059
                                         ==========   =========   =========

See accompanying notes to financial statements.

                                       25
<PAGE>
                           COLONIAL TRUST COMPANY
                       Statements of Stockholders' Equity
                    Years ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                              Unrealized
                                                                               Holding
                                                                               Gains On
                                        Common Stock      Additional          Securities     Total
                                    --------------------   Paid-in   Retained  Available  Stockholders'
                                      Shares      Amount   Capital   Earnings  For Sale     Equity
                                      ------      ------   -------   --------  --------     ------
<S>                 `              <C>          <C>       <C>       <C>        <C>         <C>      
Balances at March 31, 1995          7,007,402    $500,000  390,889   190,170      --        1,081,059

Issuance of stock in an acquisition   769,999      54,942  114,458        --      --          169,400

Net earnings                               --          --       --   142,360      --          142,360

Change in unrealized  holding gains
 on securities available for sale          --          --       --        --     602              602
                                   ----------    --------  -------  --------    ----       ----------

Balances at March 31, 1996          7,777,401     554,942  505,347   332,530     602        1,393,421

Net earnings                               --          --       --   163,725      --          163,725

Change in unrealized  holding gains
 on securities available for sale          --          --       --        --    (602)            (602)
                                   ----------    --------  -------  --------    ----       ----------

Balances at March 31, 1997          7,777,401     554,942  505,347   496,255      --        1,556,544

Common stock acquired and retired     (48,113)         --       --   (14,433)     --          (14,433)

Net earnings                               --          --       --   214,358      --          214,358
                                   ----------    --------  -------  --------    ----       ----------

Balances at March 31, 1998          7,729,288    $554,942  505,347   696,180      --        1,756,469
                                   ==========    ========  =======  ========    ====       ==========
</TABLE>

See accompanying notes to financial statements.


                                       26
<PAGE>

                             COLONIAL TRUST COMPANY
                            Statements of Cash Flows
                    Years ended March 31, 1998, 1997 and 1996

                                                   1998        1997       1996
                                                   ----        ----       ----
Cash flows from operating activities:
  Net earnings                                  $ 214,358    163,725    142,360
  Adjustments to reconcile net earnings to net 
   cash provided by operating activities:
  Loss on sale of investments                          --      1,702         --
  Depreciation and amortization                    82,506     70,475     51,331
  Deferred income taxes                            (7,599)    (1,893)     1,888
  Increase in receivables                        (150,629)   (39,983)   (25,282)
  Increase in other assets                        (28,907)   (61,692)   (69,704)
  Increase in accounts payable and accrued
   liabilities                                     18,765     61,089     14,591
  Increase (decrease) in income taxes payable      21,988    (10,216)    11,997
                                                ---------   --------   --------
      Net cash provided by operating activities

                                                  150,482    183,207    127,181
                                                ---------   --------   --------

Cash flows from investing activities:
  Cash acquired in Camelback acquisition               --         --     71,702
  Costs incurred in Camelback acquisition              --         --    (56,389)
  Additions to note receivable                    (28,432)   (25,513)        --
  Proceeds from sale of investments                    --    462,579         --
  Purchase of property and equipment              (43,362)  (165,485)   (60,646)
  Proceeds from sale of furniture and equipment        --         --      3,441
  Increase in restricted cash                    (168,206)        --         --
                                                ---------   --------   --------
      Net cash provided by (used in) investing
       activities                                (240,000)   271,581    (41,892)
                                                ---------   --------   --------
Cash flows from financing activity:
  Repayment of note payable                            --   (540,000)        --
  Purchase and retirement of common stock         (14,433)        --         --

                                                ---------   --------   --------
      Net cash used in financing activities       (14,433)  (540,000)        --
                                                ---------   --------   --------
(Decrease) increase in cash and cash equivalents (103,951)   (85,212)    85,289

Cash and cash equivalents at beginning of year    132,426    217,638    132,349
                                                ---------   --------   --------
Cash and cash equivalents at end of year        $  28,475    132,426    217,638
                                                =========   ========   ========
SUPPLEMENTAL DISCLOSURES:
Interest paid                                   $      --     27,195         --
                                                =========   ========   ========
Income taxes paid                               $ 133,378    100,813     83,062
                                                =========   ========   ========

See accompanying notes to financial statements.

                                       27
<PAGE>

                             COLONIAL TRUST COMPANY
                          Notes to Financial Statements
                          March 31, 1998, 1997 and 1996

(1)    SIGNIFICANT ACCOUNTING POLICIES

       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 38  states.  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, 1998, Colonial was
       serving  as  trustee  for the  benefit  of the  bondholders  on 418  bond
       offerings  totaling  approximately  $315,000,000  in  original  principal
       amount.  The  amount  of sold and  unmatured  bonds  total  approximately
       $252,000,000  at March 31,  1998.  Colonial  also  serves as a trustee of
       6,503   self-directed   individual   retirement   accounts   for  certain
       bondholders   or   employees   of   religious    organizations   totaling
       approximately $117,000,000 at March 31, 1998.

       Colonial also serves as trustee or agent, provides investment management,
       administration,  and custodial  services.  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 183  accounts  with a fair  market  value
       totaling approximately  $51,000,000 at March 31, 1998. Colonial also acts
       as custodian for self-directed  IRA accounts.  Colonial held 141 accounts
       as custodian  with a fair market value of  approximately  $26,000,000  at
       March 31, 1998.

       BASIS OF PRESENTATION

       During 1996,  Colonial  acquired 100% of the outstanding  common stock of
       Camelback  Trust  Company  (Camelback).   All  significant   intercompany
       balances and  transactions  were  eliminated  in the 1996  consolidation.
       During  fiscal  1997,  the  asset  and   liabilities  of  Camelback  were
       transferred to Colonial and Camelback was dissolved.

       USE OF ESTIMATES

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

                                       28
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

       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, 1998,  approximately  70% 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
       quarterly  basis to  individual  accounts  according to the quarter's end
       fair market  value of the  supporting  fiduciary  assets.  The second fee
       structure  relates  to an  annual  fee  which  is  set  up to  cover  the
       maintenance  of fiduciary  assets which  Colonial holds in both trust and
       self-directed IRA accounts.

       At March 31, 1998,  30% of Colonial's  trust account  assets were held in
       trust for members of one family. The combined trust accounts approximated
       21% of Colonial's trust income revenues.

       CASH EQUIVALENTS, NONCASH SUPPLEMENTAL DISCLOSURE 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,  1998  and  1997  consist
       primarily of money market  accounts which invest  primarily in short-term
       government securities.

       During fiscal 1996, Colonial acquired  Camelback.  In connection with the
       acquisition, excess of cost over fair value acquired was recorded:

           Fair value of assets acquired              $ 594,008
           Common stock issued                         (169,400)
           Note payable assumed                        (540,000)
           Liabilities assumed                          (74,726)
                                                      ---------
           Excess of cost over fair value acquired    $ 190,118
                                                      =========

       During  fiscal  1997,  the excess of cost over fair value of $190,118 was
       reduced  by  $7,288  to  reflect  the fair  market  value of  assets  and
       liabilities assumed.
                                       29
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

       Colonial  places its cash in insured  financial  institutions  and United
       States government  securities with original maturities of three months or
       less.  At  March  31,  1998,   Colonial  had  no  deposits  at  financial
       institutions in excess of the FDIC insurance limit of $100,000.

       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
       impaired notes receivable during fiscal 1998, 1997 and 1996.

       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.

       EXCESS OF COST OVER FAIR VALUE ACQUIRED (GOODWILL)

       Goodwill  arose  in  connection  with the  acquisition  of  Camelback  by
       Colonial  on November 1, 1995 and is  amortized  using the  straight-line
       method over 15 years. Goodwill is carried net of accumulated amortization
       of $29,410 and $17,240 at March 31, 1998 and 1997, respectively.

       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.

       COMPUTATION OF EARNINGS PER COMMON SHARE

       During fiscal 1998,  the Company  adopted the  provisions of Statement of
       Financial  Accounting  Standards (SFAS) No. 128, Earnings Per Share. This
       statement establishes standards for computing and presenting earnings per
       share (EPS).  Under this new  statement,  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.  The fiscal 1997 and 1996  earnings  per share  amounts  have been
       restated to reflect the adoption of SFAS No. 128.

                                       30
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

       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 and
       pro forma earnings 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.

       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 exceed 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.

       RECLASSIFICATIONS

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

(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 $1,000,000 is due on demand,  bears interest payable monthly 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:

                                                 1998            1997
                                                 ----            ----
           Land                                 157,241         157,241  
           Building                             433,238         428,545
           Furniture                            111,210         108,329
           Equipment                            307,249         271,461
                                             ----------        --------
                                              1,008,938         965,576
           Less accumulated depreciation        296,456         226,120
                                             ----------        --------
                                             $  712,482        $739,456
                                             ==========        ========

                                       31
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

(4)    LEASE COMMITMENTS

       During fiscal 1998,  Colonial  leased office space and certain  equipment
       under various noncancelable operating lease arrangements. As of March 31,
       1998,  Colonial no longer  leases  office  space.  Rent  expense  totaled
       $14,181 for 1998, $17,507 for 1997, and $7,876 for 1996.

(5)    INCOME TAXES

       Income taxes  amounted to $147,767,  $100,500 and $96,904 for 1998,  1997
       and 1996,  respectively.  The actual  income  tax  expense  differs  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:

                                              1998        1997      1996
                                              ----        ----      ----
        Computed "expected" income 
          taxes                             $123,123    $89,837    $81,350
        State taxes (net of federal 
          income tax benefit)                 20,055     12,458     13,111
        Other items, net                       4,589     (1,795)     2,443
                                            --------   --------    -------
                                            $147,767   $100,500    $96,904
                                            ========   =========   =======

        Effective income tax rate               40.8%      38.0%      40.5%
                                            ========   ========    =======


       Components of income taxes consist of:

                                      Current        Deferred         Total
                                      -------        --------         -----
       1998:
         Federal                    $123,085         $(5,705)        $117,380
         State                        32,281          (1,894)          30,387
                                    --------         -------         --------
                                    $155,366         $(7,599)        $147,767
                                    ========         =======         ========
       1997:
         Federal                    $ 83,026         $(1,401)        $ 81,625
         State                        19,367            (492)          18,875
                                    --------         -------         --------

                                    $102,393         $(1,893)        $100,500
                                    ========         =======         ========
       1996:
         Federal                    $ 75,646         $ 1,393         $ 77,039
         State                        19,370             495           19,865
                                    --------         -------         --------

                                    $ 95,016         $ 1,888         $ 96,904
                                    ========         =======         ========

                                       32
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

       The tax effects of temporary  differences  that give rise to  significant
       portions of the deferred tax  liabilities  at March 31, 1998 and 1997 are
       presented below:

                                                              1998       1997
                                                              ----       ----
        Deferred tax liability:
          Property and equipment, principally due 
           to differences in depreciation and deductions    $11,830    $19,429
                                                            =======    =======

(6)    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, the 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  2,000,000
       shares have been reserved for issuance under the ISOP.

       Pursuant to the Directors Plan, each  non-employee  director  received an
       option  to  purchase  50,000  shares on the date the  Directors  Plan was
       approved by Colonial's stockholders and options to purchase 15,000 shares
       are  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 500,000  shares have been reserved for issuance  under
       the Directors Plan.

       At March 31, 1998,  there were 1,014,232 shares available for grant under
       the ISOP Plan and 260,000 shares  available for grant under the Directors
       Plan. The per share weighted  average fair value of stock options granted
       during  1998 and 1997 was  $.09 and  $.08,  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 6 years for both 1998 and
       1997.

                                       33
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

       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 would have been reduced to
       the pro forma amount  indicated  below for the years ended March 31, 1998
       and 1997:

                                         1998             1997
                                         ----             ----
           Net earnings:
             As reported               $214,358         $ 163,725
                                       ========         =========
             Pro forma                 $205,918         $ 160,619
                                       ========         =========
           Earnings per share:
             As reported - basic       $    .03         $     .02
                                       ========         =========
             As reported - diluted     $    .03         $     .02
                                       ========         =========
             Pro forma - basic         $    .03         $     .02
                                       ========         =========
             Pro forma - diluted       $    .03         $     .02
                                       ========         =========

       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 period of six years.

       A summary of the aforementioned stock option plans follows:
<TABLE>
<CAPTION>
                                    Year Ended March 31, 1998            Year Ended March 31, 1997
                                ----------------------------------  ---------------------------------
                                                  Weighted Average                   Weighted Average
                                Number Of Shares  Exercise Price    Number Of Shares   Exercise Price
                                ----------------  --------------    ----------------   --------------
     <S>                        <C>               <C>               <C>               <C>
       Balance at the beginning
        of the year                 818,290            $0.25               --              $  --
       Granted                      407,478             0.30          818,290               0.25
       Forfeited                         --               --               --                 --
       Exercised                         --               --               --                 --
                                  --------             -----         --------              -----    
       Balance at the end of the
           year                   1,225,768            $0.27          818,290             $ 0.25
                                  =========            =====         ========             ======
       Exercisable at the end of
           the year                 805,768            $0.26          528,290             $ 0.25
                                  =========            =====         ========             ======
</TABLE>

                                       34
<PAGE>
                             COLONIAL TRUST COMPANY
                    Notes to Financial Statements, Continued

(7)    FAIR VALUE OF FINANCIAL INSTRUMENTS

       Statement of Financial Accounting  Standards No. 107,  "Disclosures about
       Fair Value of Financial  Instruments," requires that the Company disclose
       estimated  fair  values  for its  financial  instruments.  The  following
       summary presents a description of the  methodologies and assumptions used
       to determine such amounts.

       CASH AND CASH EQUIVALENTS

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

       RECEIVABLES AND NOTES RECEIVABLE

       Fair  value  is  considered  to be  equal  to the  carrying  value of the
       accounts  and notes  receivables,  as they are  generally  short-term  in
       nature and the related amounts  approximate  fair value or are receivable
       on demand.

       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, 1998 and 1997,  the amounts that will  actually
       be realized or paid at settlement or maturity of the instruments could be
       significantly different.

(8)    COMMITMENTS AND CONTINGENCIES

       In fiscal 1998,  the Company  developed a plan to deal with the Year 2000
       problem  and  began  converting  its  computer  systems  to be Year  2000
       compliant.  The plan provides for the conversion  efforts to be completed
       by the end of March 31,  1999.  The Year 2000  problem  is the  result of
       computer  programs  being  written  using two digits  rather than four to
       define the applicable year. The Company does not believe  expenditures to
       be Year 2000  compliant  will be  material,  and is  expensing  all costs
       associated with these systems changes as the costs are incurred.

       Colonial is subject to the maintenance of a minimum  capital  requirement
       of $500,000 pursuant to State of Arizona (the State) banking  regulations
       of which  $166,666 must be "liquid" (as defined by the State) as of March
       31,  1998.  To  satisfy  this  requirement,   Colonial  owns  a  $168,206
       certificate of deposit held with a bank at March 31, 1998.  This asset is
       classified as  restricted  cash in the  accompanying  balance sheet as of
       March 31, 1998.

       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, the effect of such matters will not have
       a material adverse effect on the Company.

                                       35
<PAGE>

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, 1998:

        Name               Position                                  Age
        ----               --------                                  ---

    Lynn R. Camp           Chairman of the Board and Director         61

    Michael W. Borger      Director                                   43

    Gerald G. Morgan       Director                                   42

    John K. Johnson        President and Chief Executive Officer      40
                           and Director

    Cecil E. Glovier       Sr. Vice President Secretary               46

    Marvin D. Hoeflinger   Vice President                             55

    Christopher J. Olson   Vice President/Treasurer                   32

    A.R. Olson             Vice President                             62

     All directors hold office until the next annual meeting of shareholders and
the election and qualification of their successors. Both Messrs. Camp and Borger
were  members  of the Board of  Directors  of  Church  Loans  prior to  becoming
directors of the Company.

     Lynn R. Camp has served as a director of the Company since June 1990 and as
Chairman of the Board since October 1990. Mr. Camp is 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.

                                       36
<PAGE>

     Michael W. Borger has served as a director of the Company  since June 1990.
He  previously  served the Company as Vice  President of the Company from August
1991 until November  1995.  From June 1990 to August 1991 he served as President
of the Company. Mr. Borger is President,  Chief Executive Officer and a director
of Turnkey  Leasing Corp.  ("Turnkey  Leasing").  Mr. Borger has served in these
capacities for in excess of five years.  Turnkey  Leasing,  located in Amarillo,
Texas, leases computers,  general office equipment and construction equipment to
business  users.  Turnkey  Leasing  is also  engaged in the  business  of making
business loans.

     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 Exhibit 10 (f) hereto.

     Cecil E.  Glovier  has  served as Senior  Vice  President/Secretary  of the
Company  since  August  1996.  He  previously   served  as  the  Company's  Vice
President/Secretary  from November  1995 to August 1996.  Prior to that time, 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 Exhibit 10(g) hereto.

     Marvin D.  Hoeflinger  has served as Vice  President  of the Company  since
February 1996.  Prior to his  employment  with the Company,  Mr.  Hoeflinger was
Senior Vice  President and a Managing  Principal of Reliance  Trust  Company,  a
Georgia full service trust  company,  from October 1984 until February 1996. Mr.
Hoeflinger is employed pursuant to the terms of an employment agreement with the
Company.  See "Item 10 - Executive  Compensation  - Employment  Agreements"  and
Exhibit 10(e) hereto.

                                       37
<PAGE>

     Christopher J. Olson has served as Vice  President/Treasurer of the Company
since November  1995.  Prior to his  employment  with the Company,  he served as
President and Chief  Executive  Officer of Camelback  Trust Company from January
1993 to November 1995.

     A. R. Olson has served as Vice President of the Company since January 1996.
Prior to his employment with the Company, he was Vice President of Norwest Trust
in St. Cloud,  Minnesota from April 1993 to January 1996. Mr. Olson was Sr. Vice
President for  Administration  of Harris Trust Bank in Scottsdale,  Arizona from
September 1986 to April 1993.

     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, 1998.

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 John K.  Johnson,
the Company's  Chief  Executive  Officer (the "Named  Executive  Officer").  The
Company has no executive  officer whose salary,  bonuses and other  compensation
earned during the fiscal year ended March 31, 1998 exceeded $100,000:

                           SUMMARY COMPENSATION TABLE

                         Annual Compensation           Long-term Compensation
                    ----------------------------       ----------------------
   Name and              Fiscal                        Securities Underlying
Principal Position        Year     Salary      Bonus      Option/SARS (#)
------------------        ----     ------      -----   ---------------------
CEO-John K. Johnson       1998    $80,000    $19,444            0
    President             1997     80,000     12,872      300,000(a)
                          1996     55,000      8,811            0

(a)  On July 1, 1996,  Mr.  Johnson was  granted an option to  purchase  300,000
     shares of Common  Stock of the  Company  at an  exercise  price of $.25 per
     share.  The option to purchase  150,000 of such shares  vested  immediately
     upon grant.  The option to purchase the remaining  150,000  shares vests in
     three equal  installments  of 50,000  each on July 1, 1997,  1998 and 1999,
     respectively.

                                       38
<PAGE>

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

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

                                          Percent of Total
                    Number of Securities  Options Granted
    Name and         Underlying Options   to Employees in     Exercise or
Principal Position      Granted (#)         Fiscal Year    Base Price($/sh) Date
------------------  --------------------  ---------------  ---------------- ----
CEO-John K. Johnson          0                   0             N/A           N/A
President

     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  Officer,  and (b) the value of unexercised  stock options held by the
Named Executive Officer at March 31, 1998:

          AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
<TABLE>
<CAPTION>
                                              Number of Securities    Value of Unexercised
                                             Underlying Unexercised   In-the-Money Options
                        Shares                 Options at FY-End         at FY-End ($)
     Name and         Acquired On    Value      (#)Exercisable/          Exercisable/
Principal Position    Exercise(#)  Realized($)   Unexercisable           Unexercisable
------------------    -----------  -----------  -------------          -------------
<S>                   <C>          <C>         <C>                    <C>
CEO-John K. Johnson         0         $0         200,000/100,000      $10,000/$5,000
    President
</TABLE>

Employment Agreements

     The Company has entered into employment  agreements  with Mr. Johnson,  the
Company's President,  Mr. Glovier, the Company's Senior Vice President,  and Mr.
Hoeflinger, the Company's Vice President of

Marketing.

     Mr.  Johnson's  agreement has a three-year term which runs through June 30,
1999.  Under the agreement,  Mr.  Johnson's base salary is $80,000 per year. 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:

                                       39
<PAGE>

(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,  1998.  Such  bonus,  if any,  is payable 100 days from the end of the
Company's  fiscal year. The agreement also provided for 300,000  incentive stock
options  with an exercise  price of $.25 per share,  a total of 150,000 of which
vested immediately upon grant. The remaining 150,000 options vest in three equal
installments  of 50,000 each on July 1, 1997, 1998 and 1999,  respectively.  The
agreement also contains confidentiality and non-compete covenants.

     Under the  agreement  with Mr.  Glovier,  entered into in August 1997,  Mr.
Glovier is paid a base salary of $72,000  per year plus an annual  bonus in each
fiscal year that the Company generates  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.  Such bonus,  if any,  shall be paid within 90 days
from the end of the  Company's  fiscal year.  The  agreement  also  provided for
150,000 in incentive  stock  options  with an exercise  price of $.25 per share,
which vest in three equal  installments  of 50,000 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.

     Mr. Hoeflinger's agreement, entered into in February 1996, calls for a base
salary of $65,000 per year, plus potential bonuses payable annually in the event
stated  performance  goals are met. Mr.  Hoeflinger  also  received an option to
purchase  35,000 shares of the Company's  Common Stock on January 1, 1997 and an
option to  purchase a like  number of shares on January  1, 1998;  the  exercise
price of the option  granted  on  January  1, 1997 was $.25 per  share,  and the
exercise price of the option granted on January 1, 1998 was $.30 per share.  Mr.
Hoeflinger is also entitled to receive options to purchase an additional  35,000
shares of the Company's  Common Stock on January 1, 1999 and on each  successive
January 1 thereafter  during the term of the  agreement.  The exercise price for
any options granted in the future will be the fair market value of the Company's
Common  Stock on the date such  options  are  granted.  Mr.  Hoeflinger  is also
entitled to health and other  insurance  benefits,  reimbursement  of reasonable

                                       40
<PAGE>

business  expenses,  and other benefits on the same basis as the Company's other
executive officers.  The agreement with Mr. Hoeflinger runs through December 31,
2000,  unless  terminated  earlier  by  the  Company  for  "cause"  or  for  Mr.
Hoeflinger's  failure to meet certain  objective  performance goals contained in
the agreement.

Directors' Compensation

     The Company's  non-employee  directors were paid $16,600 in cash as a group
during the fiscal  year ended March 31, 1998 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

15,000 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,
1998 was $.30 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 1, 1998,  concerning
the Common Stock  beneficially  owned by each  director of the  Company,  by the
Company's Named Executive Officer,  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                  151,604 shares                  2.0%
       3517 Tripp
       Amarillo, Texas 79121

       Michael W. Borger             100,718 shares                  1.4%
       1602 S. Travis
       Amarillo, Texas 79102

       Gerald G. Morgan, Jr.         100,100 shares                  1.3%
       4705 Olsen
       Amarillo, Texas 79106

                                       41
<PAGE>

       John K. Johnson(2)            330,781 shares                  4.3%
       3414 E. Clark Road
       Phoenix, Arizona 85024

       William and Sue Johnson       436,581 shares                  5.7%
       14001 Interstate 27
       Amarillo, Texas 79119

       Directors and Executive
       Officers as a Group(4)        1,676,572 shares               21.7 %

     (1) A person is deemed to be the beneficial owner of securities that can be
acquired  within 60 days from the date set forth above  through the  exercise of
any  option,  warrant,  or right.  Shares of Common  Stock  subject to  options,
warrants,  or rights which are currently  exercisable  within 60 days are deemed
outstanding  for  computing the  percentage of the person  holding such options,
warrants or rights,  but are not deemed outstanding for computing the percentage
of any other person. The amounts and percentages are based upon 7,720,842 shares
of Common Stock outstanding on June 1, 1998.

     (2) The total  for Mr.  Johnson  includes  200,000  shares of Common  Stock
subject to immediately  exercisable options which have an exercise price of $.25
per share,  and 50,000  shares of Common Stock subject to options which vest and
become exercisable on July 1, 1998, and which have an exercise price of $.25 per
share.

     (3) Includes 350,323 shares owned by Amberwood  Management Company. 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.

     (4) The total for all directors and executive  officers as a group includes
578,290 shares subject to  unexercised  options that are  exercisable on June 1,
1998 or within 60 days thereafter.

     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.

     None.

                                       42
<PAGE>

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

Exhibit Number                                            Method of Filing
--------------                                            ----------------
     3.   (i)  Articles of Incorporation                          *
          (ii) By-Laws                                            *

    10.   (a)  Agreement with Great Nation Investment
               Corporation                                       **
          (b)  Form of IRA Account Agreement                     **
          (c)  Form of Trust Indenture Agreement                 **
          (d)  Agreements between Church Loans &                ***
               Investments Trust, Ben C. Powell
               and Secured Investors Securities, Inc.
          (e)  Employment Agreement with Marvin                ****
               Hoeflinger
          (f)  Employment Agreement with John K. Johnson      *****
          (g)  Employment Agreement with Cecil Glovier        *****

     11.       Schedule of Computation of Earnings Per Share  *****

     27.       Financial Data Schedule                        *****


*     Incorporated  by  reference to Exhibit No. 3 to the  Registrant's  Form 10
      dated October 24, 1990.

**    Incorporated by reference to Exhibit No.10 to  Registrant's  Annual Report
      on Form 10-KSB dated June 21, 1991.

***   Incorporated by reference to Exhibit No.10 to  Registrant's  Form 10 dated
      October 24, 1990.

****  Incorporated by reference to Exhibit No.10 to  Registrant's  Annual Report
      on Form 10-KSB dated June 27, 1996.

***** Filed Herewith

     (b)  Reports on Form 8-K

          None.

                                       43
<PAGE>

                                   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/ Cecil E. Glovier
                                      ----------------------------
                                      Cecil E. Glovier
                                      Sr. Vice President/Secretary
                                      (Principal Financial Officer)

Date:  June 29, 1998

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

/s/ Lynn R. Camp              Chairman of the Board          June 29, 1998
-------------------------
Lynn R. Camp


/s/ Michael W. Borger         Director                       June 29, 1998
-------------------------
Michael W. Borger

/s/ Gerald G. Morgan          Director                       June 29, 1998
-------------------------
Gerald G. Morgan

/s/ John K. Johnson           President and                  June 29, 1998
-------------------------     Director
John K. Johnson               (Principal Executive
                              Officer)

                                       44