UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                   FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

            For the transition period from ___________ to ___________


                          Commission File Number 1-9900


                         ARIZONA LAND INCOME CORPORATION
              (Exact name of small business issuer in its charter)


            Arizona                                              86-0602478
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                        2999 North 44th Street, Suite 100
                             Phoenix, Arizona 85018
               (Address of principal executive offices) (Zip Code)


          Issuer's telephone number, including area code (602) 952-6800


         Securities registered under Section 12(b) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
Class A Common Stock, no par value               American Stock Exchange

         Securities registered under Section 12(g) of the Exchange Act:

                                      None
                                (Title of Class)
<PAGE>
     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 is not 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]

     The  issuer's  revenues  for the fiscal year ended  December  31, 2001 were
$642,719.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  registrant,  based  upon the  average of the high and the low prices of the
registrant's Series A Common Stock as reported by the American Stock Exchange on
March 15, 2002,  was  approximately  $5,147,510.  Shares of voting stock held by
each  executive  officer and  director and by each person who owns 5% or more of
the  outstanding  voting  stock have been  excluded in that such  persons may be
deemed  affiliates.  This  determination  of affiliate status is not necessarily
conclusive.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

     State the number of shares  outstanding of each of the issuer's  classes of
common stock, as of the latest practicable date.

     1,942,675      shares of Class A Common Stock outstanding on March 22, 2002
           100      shares of Class B Common Stock outstanding on March 22, 2002

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement for the registrant's 2002 Annual Meeting of
Shareholders  (the "Proxy  Statement") are  incorporated  herein by reference in
Part  III,  Items 9, 10,  11 and 12 of this Form  10-KSB  to the  extent  stated
herein.

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
                                TABLE OF CONTENTS
                                                                            Page

PART I.........................................................................1
  ITEM 1.  DESCRIPTION OF BUSINESS.............................................1
  ITEM 2.  DESCRIPTION OF PROPERTY.............................................3
  ITEM 3.  LEGAL PROCEEDINGS...................................................4
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................4

PART II........................................................................4
  ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............4
  ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........5
  ITEM 7.  FINANCIAL STATEMENTS................................................8
  ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE...........................................20

PART III......................................................................20
  ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..................20
  ITEM 10. EXECUTIVE COMPENSATION.............................................20
  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....20
  ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................20

PART IV.......................................................................21
  ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...................................21

                                        i
<PAGE>
                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS.

     BACKGROUND.  Arizona  Land Income  Corporation  (the  "Company")  is a real
estate  investment trust organized as an Arizona  corporation on March 10, 1988.
On that same date, the Company issued 100 shares of the Company's Class B Common
Stock to YSP Holdings,  Inc.,  the Company's  sponsor,  in return for an initial
capital contribution of $1,000.  Operations of the Company commenced on June 13,
1988, the date on which the Company completed its initial public offering.

     In June 1988,  the  Company  began  investing  in first  mortgage  loans on
unimproved real property  located  primarily in the  metropolitan  Phoenix area.
Such loans included mortgage loans secured or collateralized by first mortgages,
first  deeds of trust  and real  property  subject  to  agreements  for sale and
subdivision  trusts ("First Mortgage Loans").  From its inception until December
31, 1991, the Company purchased  interests totaling  $34,120,000 in twenty First
Mortgage Loans.  Since January 1, 1992, the Company has purchased only two First
Mortgage Loans, and has had to institute foreclosure proceedings with respect to
certain  properties   securing  other  First  Mortgage  Loans.  See  "Investment
Objectives  and Criteria"  below.  See also Note 4 to the  financial  statements
included in Item 7 for additional  information  concerning  the Company's  First
Mortgage  Loans.  The Company has not identified any  opportunities  to make new
loans;  therefore,  in the event of a loan  maturity  or sale of  property,  the
Company currently intends to distribute the proceeds,  beyond what is needed for
day-to-day operations of the Company, to its shareholders.

     The  Company's  goal has been to pay  distributions  of  available  cash to
shareholders and to preserve and protect  shareholders' net capital  investment.
The Company pays  extraordinary cash distributions to its shareholders when such
distributions  are warranted  based upon the Company's cash reserves at the time
of the  distribution  as well as the  Company's  projected  need  for  operating
capital.  During the 2001 fiscal year,  the Company  declared and paid four cash
distributions.  The  first  distribution  was for $.10 per share and was paid on
April  11,  2001 to  shareholders  of  record  on  April  2,  2001.  The  second
distribution  was  for  $.10  per  share  and  was  paid  on  July  12,  2001 to
shareholders  of record on June 29, 2001. The third  distribution  was for $1.00
per share and was paid on October 12, 2001 to  shareholders of record on October
2, 2001. The fourth  distribution was for $.10 per share and was paid on January
15, 2002 to shareholders of record on January 2, 2002.

     NO PRESENT INTENTION TO DISSOLVE.  As disclosed in the Company's prospectus
used in  connection  with  the  Company's  1988  initial  public  offering,  the
Company's  intent at the time of the  public  offering  was to  dissolve  within
approximately eight years after the date of such offering. The Company currently
has no immediate plans to dissolve and may not voluntarily  dissolve  anytime in
the immediate future. Any decision by the Company to dissolve will be determined
by the Company's  Board of Directors and will depend upon market  conditions and
other  pertinent  factors.  The  Company's  Board  of  Directors  possesses  the
discretion  to (i) continue to operate the Company and hold such First  Mortgage
Loans or real property until the Company's Board of Directors determines that it
is in the Company's best interest to dispose of such investments, (ii) sell such
First Mortgage Loans or real property on or about any proposed dissolution date,
in which case the sale  proceeds  in excess of monies owed by the Company to its
creditors would be distributed to the shareholders on a pro rata basis, or (iii)
issue to the shareholders  participating  interests in such First Mortgage Loans
or real property on a basis  proportionate  to their  respective stock ownership
interests in the Company.  In the event the Company  issues to its  shareholders
participating  interests in a First Mortgage Loan, the Advisor  (defined  below)
will continue to act as servicing  agent for the First Mortgage Loan and will be
paid a quarterly servicing fee equal to 1/16 of 1% of the aggregate  outstanding

                                       1
<PAGE>
loan balance of the First Mortgage Loan until the First Mortgage Loan is sold or
repaid.

     QUALIFICATION AS A REAL ESTATE  INVESTMENT TRUST. The Company has qualified
for real estate  investment  trust  ("REIT")  status for all tax years since its
inception, and management and the Company's Board of Directors believes that the
Company has completed the necessary steps to permit the Company to continue,  if
it so chooses, REIT status for the tax year ended December 31, 2001. REIT status
allows the Company to deduct from its federal  taxable income (and not pay taxes
upon) qualified  dividends paid to its  shareholders.  See Item 6 - Management's
Discussion and Analysis or Plan of Operation.

     Generally,  if the Company is to maintain its REIT  status,  it must meet a
series of qualifications  including: (i) restrict its investments principally to
assets that produce interest from mortgage loans  collateralized  by real estate
or which produce real property  rental income;  (ii) pay out at least 90% of its
taxable income (excluding capital gains) to its shareholders; (iii) pay taxes at
corporate tax rates on capital gains or distribute capital gains as dividends to
its shareholders; (iv) hold less than 10% of the voting securities of any single
issuer;  and (v) have an independent  manager or advisor for its assets.  If the
Company  fails to  maintain  its  status  as a REIT,  the  Company  would not be
entitled  to  deduct  from  its  federal   taxable  income   dividends  paid  to
shareholders.

     INVESTMENT  OBJECTIVES AND CRITERIA.  In evaluating potential  investments,
the Company has historically considered such factors as: (i) the borrower's cash
investment  in the real  property  securing the First  Mortgage  Loan;  (ii) the
loan-to-value  ratio of the First Mortgage Loan;  (iii) the maturity date of the
First Mortgage Loan;  (iv) the appraised  value, if any, or past purchase prices
of the real property  securing the First Mortgage  Loan;  (v) the existence,  if
any, of significant  debt junior to the first lien;  (vi) the potential that the
real property will appreciate in value;  (vii) the identity,  financial strength
and payment  history,  if any, of the borrower  under the First  Mortgage  Loan;
(viii) the growth,  tax and regulatory  environment of the  communities in which
the  properties  are or will be located;  (ix) the location and condition of the
real property;  (x) the supply of, and demand for, properties of similar type in
the vicinity;  (xi) the prospects for liquidity  through the sale or foreclosure
of the real property;  and (xii) such other factors that become  relevant in the
course of the Company's evaluation process.

     The Company's historical  investment objective was to locate First Mortgage
Loans that satisfied the foregoing  investment  criteria.  Due to generally poor
economic  conditions  in Arizona and in  metropolitan  Phoenix  during the early
1990s, the Company did not acquire any additional First Mortgage Loans from 1989
until 1998 (other than  refinancings or restructuring of existing First Mortgage
Loans). The Company acquired one First Mortgage Loan identified in Note 4 to the
Financial  Statements  as loan 22 in 1999.  The  Company did not acquire any new
First Mortgage Loans in 2001.

     MANAGEMENT  ARRANGEMENTS.  The  Company  has no  employees.  The  Company's
affairs are managed by its  non-salaried  officers under the  supervision of its
Board of Directors.  The Company and ALI Advisor,  Inc. (the "Advisor")  entered
into an advisory and servicing agreement (the "Advisory  Agreement") at the time
of the Company's  incorporation.  The Advisory  Agreement has expired by its own
terms;  however,  the Company and the Advisor have agreed to continue to operate
as if the terms and conditions of the Advisory Agreement are still in effect.

     Pursuant  to the  Advisor's  agreement  with the  Company,  the  Advisor is
authorized  to:  (i)  purchase  First  Mortgage  Loans,  subject  to review  and
ratification  by the Company's  Board of Directors;  (ii) serve as the exclusive
investment and financial advisor and provide research,  economic and statistical
data in connection with investments and financial  policies;  (iii) investigate,
select and conduct relations with accountants,  attorneys,  brokers,  investors,
and  others as  necessary;  (iv)  maintain  bank  accounts  and  records  deemed

                                       2
<PAGE>
appropriate  or  requested  by  the  Company's  Board;  (v)  perform  or  obtain
accounting  and other  services;  (vi) collect and remit  principal and interest
payments due on the First Mortgage Loans;  and (vii) perform such other services
as set forth in the Advisory Agreement.

     The Company has agreed to pay the Advisor a servicing fee for servicing the
Company's  First  Mortgage  Loans.  The servicing  fee is payable  quarterly and
equals 1/16 of 1% of the sum of (i) the  aggregate  outstanding  loan balance of
the First Mortgage Loans in the Company's mortgage loan portfolio,  and (ii) the
recorded value of property  acquired by the Company through  foreclosure,  as of
the first day of each fiscal quarter. During 2001 and 2000, the Company paid the
Advisor a servicing fee of approximately $24,000 and $30,000, respectively.

     The Company also agreed to pay the Advisor a management  fee for aiding the
Company  in  developing  investment  policies  and  analyzing  and  recommending
investments to the Company. The management fee will be paid for each quarter the
shareholders'  cumulative  return on  capital  investment  as of the end of such
quarter  exceeds  12.7%,  and will equal 30% of the Company's  available cash in
excess of that  necessary to provide  shareholders  with a cumulative  return on
capital  investment  in excess of 12.7%.  The  Company  did not  accrue or pay a
management fee to the Advisor in 2001 or 2000.

     The  Company  also agreed to  reimburse  the  Advisor  quarterly  for other
expenses  incurred in servicing  the Company's  First  Mortgage  Loans,  such as
legal, accounting and transfer agent fees and copying and mailing costs incurred
in preparing and mailing periodic  reports to shareholders.  The Company did not
reimburse the Advisor for any such expenses in 2001 or 2000.

     2001  TRANSACTIONS AND LOAN  MODIFICATIONS.  Set forth below is information
concerning the  transactions  and  modifications  that affect the First Mortgage
Loans and which  occurred  during 2001.  The mortgage  loan numbers  referred to
below are  identifiers  for those loans on the books and records of the Company.
Additionally,  these numbers are  identified in the Company's  initial  offering
prospectus  dated June 6, 1988 and in Notes 4 and 5 to the  Company's  financial
statements set forth in Item 7 hereof.

     2001 LAND SALES.  The  Company did not have any land sales  during the 2001
fiscal year.

     On July  25,  2001,  the  Company  received  payment  in  full on  mortgage
receivable  Loan No. 21 of  approximately  $2,000,000.  This  collection  was in
addition to periodic collections of principal on other notes.

ITEM 2. DESCRIPTION OF PROPERTY.

     The  Company's  principal  offices  are  located at the offices of Peacock,
Hislop, Staley and Given ("PHS&G"),  2999 North 44th Street, Suite 100, Phoenix,
Arizona,  85018. Messrs.  Peacock,  Hislop, Staley and Given are officers and/or
directors  of the  Company,  and  Messrs.  Peacock,  Hislop  and  Staley are the
shareholders  of ALI  Advisor,  Inc.  The  Company  does  not pay for the use of
PHS&G's facilities.

     Information  regarding the status of real property  acquired by the Company
pursuant to the foreclosure of certain First Mortgage Loans is set forth in Note
5 to the Company's Financial Statements contained in Item 7.

                                       3
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.

     Not applicable.

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

     Not applicable.

EXECUTIVE OFFICERS OF THE COMPANY.

     Barry W. Peacock,  age 64, has served as the Company's  President since its
inception in 1988.  Mr. Peacock is Chairman of the Board of PHS&G, a position he
has held since the inception of that company in June 1989. Mr. Peacock served as
a senior  executive  with YSP from 1964 until June 1989,  and most  recently  as
Managing Director-Municipal Bonds.

     Larry P. Staley,  age 59, has served as the Company's Vice President  since
its  inception in 1988.  Mr.  Staley is Vice  Chairman of the Board of PHS&G,  a
position he has held since June 1989.  Prior to that date,  Mr. Staley served in
various  capacities  with YSP,  where he was employed  from 1973 until he joined
PHS&G in 1989.

     David W. Miller,  age 53, has served as Secretary of the Company  since his
election to such office on September  22, 1988.  Mr. Miller has served as Senior
Vice President,  Chief Financial  Officer and a member of the Board of Directors
of PHS&G  since June  1989.  Prior to that date,  Mr.  Miller  served in various
capacities  with YSP,  where he was employed  from 1971 until he joined PHS&G in
1989.

                                     PART II

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

     The  Company has two classes of common  equity  securities,  Class A Common
Stock and Class B Common Stock.  All 100 shares of the Company's  Class B Common
Stock were  purchased by YSP  Holdings,  Inc.  ("YSP  Holdings"),  the Company's
sponsor, in connection with the formation of the Company and are currently owned
by YSP  Holdings.  The  Company's  Class B  Common  Stock is not  traded  on any
exchange.

     The  Company's  Class A Common  Stock is listed for trading on the American
Stock  Exchange  ("AMEX").  As of March 15, 2002,  there were  approximately  50
holders  of record of the Class A Common  Stock.  In the  Company's  estimation,
based upon information  available to the Company,  there are  approximately  500
beneficial  owners of the Company's  Class A Common  Stock.  The market price of
Class A Common  Stock at the close of  trading  on March 15,  2002 was $5.50 per
share. The following table sets forth the high and low closing prices on AMEX of
the Class A Common Stock for each quarterly period in 2000 and 2001 and the cash
distributions paid per share of Class A Common Stock for such periods.

                                       4
<PAGE>
     On March  15,  1994,  the  Company's  Board  of  Directors  authorized  the
repurchase  of  shares  of the  Company's  Class A Common  Stock in open  market
transactions.  Since  authorizing the repurchase of shares of Common Stock,  the
Company has  repurchased  667,325  shares of Class A Common  Stock.  The Company
intends to continue to  periodically  make open market  purchases of its Class A
Common Stock. During the 2001 fiscal year, 103,805 shares were repurchased.

                                                   DIVIDENDS/DISTRIBUTIONS
                                                    DECLARED PER SHARE OF
CALENDAR QUARTER            HIGH      LOW        CLASS A COMMON STOCK (1)(2)
----------------            ----      ---        ---------------------------
2000
  First Quarter            4 3/4     4                      0.10
  Second Quarter           4 3/4     4 1/16                 0.60
  Third Quarter            4 1/2     3 3/4                  0.10
  Fourth Quarter           4 7/8     4 1/16                 0.10
2001
  First Quarter            5.375     4.688                  0.10
  Second Quarter           5.10      4.65                   0.10
  Third Quarter            5.90      4.80                   1.00
  Fourth Quarter           4.90      4.45                   0.10

----------
(1)  See Note 7 to the financial statements included in Item 7.
(2)  The Company pays  extraordinary cash distributions to its shareholders when
     such  distributions are warranted based upon the Company's cash reserves at
     the time of the  distribution  as well as the Company's  projected need for
     operating  capital.  During 2001,  the Company  declared and paid four cash
     distributions.  The first  distribution was for $.10 per share and was paid
     on April 11, 2001 to  shareholders  of record on April 2, 2001.  The second
     distribution  was for $.10  per  share  and was  paid on July  12,  2001 to
     shareholders  of record on June 29, 2001.  The third  distribution  was for
     $1.00 per share and was paid on October 12, 2001 to  shareholders of record
     on October 2, 2001. The fourth  distribution was for $.10 per share and was
     paid on January 15, 2002 to shareholders of record on January 2, 2002.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

RESULTS OF OPERATIONS

     YEAR ENDED  DECEMBER  31,  2001 vs.  2000.  The  Company  had net income of
approximately  $498,000 or $.25 per share of Class A Common Stock,  for the year
ended  December 31, 2001,  compared to net income of  approximately  $530,000 or
$.25 per share of Class A Common  Stock,  for the year ended  December 31, 2000.
The decrease in the net income for the year ended December 31, 2001 is primarily
attributable  to  the  decrease  in  income  from  interest  earned  on  trading
securities. Interest income from First Mortgage Loans increased to approximately
$588,400  in 2001  from  approximately  $561,900  in  2000.  Gain on the sale of
property decreased from approximately $7,800 in 2000 due to a lack of land sales
in 2001.

     The  Company  had other  income of  approximately  $12,000 in both 2001 and
2000.  The other  income  received by the Company is primarily  attributable  to
lease rentals on land received by the Company through foreclosure actions.

                                       5
<PAGE>
     The Company's expenses increased in the aggregate to approximately $145,000
in 2001 compared to approximately  $135,000 in 2000. This increase of $10,000 is
primarily   attributable   to  the  increase  in   professional   services  from
approximately $35,000 in 2000 to approximately $46,000 in 2001.

     The Company did not record any loan loss  reserves or land  write-downs  in
2001 or 2000.

     Net cash used in operating activities was approximately $378,000 in 2001 as
compared to net cash provided by operating activities of approximately  $528,000
in  2000.  Net  cash  provided  by  investing  activities  in 2001  and 2000 was
approximately  $1,909,000  and  $2,150,000,   respectively.  Net  cash  used  in
financing  activities  in  2001  and  2000  was  approximately   $3,042,000  and
$3,046,000, respectively.

OUTLOOK

FORWARD-LOOKING  STATEMENTS.  The following discussion contains statements about
future  events,   expectations,   risks  and   uncertainties   that   constitute
forward-looking statements. Forward-looking statements are based on management's
beliefs, assumptions and expectations of our future economic performance, taking
into account the information currently available to management. These statements
are not statements of historical fact.  Forward-looking statements involve risks
and  uncertainties  that may cause  actual  results,  performance  or  financial
condition  to  differ  materially  from  the  expectations  of  future  results,
performance  or financial  condition we express or imply in any  forward-looking
statements.   The  words  "believe,"  "may,"  "will,"  "should,"   "anticipate,"
"estimate," "expect," "intend,"  "objective," "seek," "strive" or similar words,
or the negative of these words, identify forward-looking statements. The Company
qualifies any forward-looking statements entirely by these cautionary factors.

     REAL  ESTATE  INVESTMENT  OUTLOOK.  Refinancing  of the loan or sale of the
underlying  real  property  serves as a principal  method for borrowers to repay
mortgage loans on unimproved  real property such as the Company's First Mortgage
Loans.  In Arizona in general,  and in  metropolitan  Phoenix in  particular,  a
number of factors combined to negatively impact borrowers'  ability to refinance
their loans on unimproved  real property or sell the underlying  property during
the early 1990s.  First,  the shortage of  available  financing  for real estate
development  and  improvement  reduced the demand for unimproved  real property,
causing a lack of liquidity in the market for unimproved property.  Second, real
estate  values in  metropolitan  Phoenix  had been in decline  and only began to
stabilize in the middle to late 1990s.  Third, the lack of liquidity and decline
in values resulted in a large number of defaults on mortgage loans on unimproved
real property.  In turn,  this resulted in the  acquisition of large real estate
portfolios by Arizona financial institutions. These financial institutions, some
of which were under  government  supervision,  contributed to the illiquidity in
the market by holding their portfolios for extended periods of time.

     The Company  believes  these and other  factors  have  negatively  impacted
borrowers'  ability  to pay on their  First  Mortgage  Loans.  Because  interest
payments on First  Mortgage  Loans  constitute  the Company's  primary source of
income,  borrowers'  failure  to pay on their  First  Mortgage  Loans have had a
significant  adverse impact on the Company's  operating results.  In appropriate
circumstances,  the Company has modified a First Mortgage Loan at the request of
the borrower.  These  modifications have included the deferral by the Company of
principal due, the deferral of interest and, in certain instances, a decrease in
the interest rate paid by the borrower. In other circumstances,  the Company has
instituted  foreclosure  and other legal  proceedings to protect its interest in
the First Mortgage Loan and the underlying  property.  As a result,  the Company
now owns and has sold a number of properties. See Notes 4 and 5 to the financial
statements,  included  in  Item  7 for  additional  information  concerning  the
Company's First Mortgage Loans and for information regarding land held for sale.
The Company has not identified any  opportunities to make new loans;  therefore,
in the event of a loan  maturity  or sale of  property,  the  Company  currently

                                       6
<PAGE>
intends  to  distribute  the  proceeds,  beyond  what is needed  for  day-to-day
operations of the Company, to its shareholders.

     POTENTIAL  DISSOLUTION.  As disclosed in the Company's  prospectus  used in
connection with the Company's 1988 initial public offering, the Company's intent
at the time of the public  offering was to dissolve within  approximately  eight
years after the date of such  offering.  The Company  currently has no immediate
plans to dissolve  and may not  voluntarily  dissolve  anytime in the  immediate
future.  Any  decision  by the  Company to dissolve  will be  determined  by the
Company's  Board of Directors and will depend upon market  conditions  and other
pertinent factors.  The Company's Board of Directors possesses the discretion to
(i) continue to operate the Company and hold such First  Mortgage  Loans or real
property  until the Company's  Board of Directors  determines  that it is in the
Company's  best  interest to dispose of such  investments,  (ii) sell such First
Mortgage  Loans or real property on or about any proposed  dissolution  date, in
which  case the sale  proceeds  in  excess  of  monies  owed by the  Company  to
creditors would be distributed to the shareholders on a pro rata basis, or (iii)
issue to the shareholders  participating  interests in such First Mortgage Loans
or real property on a basis  proportionate  to their  respective stock ownership
interests in the Company.  In the event the Company  issues to its  shareholders
participating  interests in a First  Mortgage Loan, the Advisor will continue to
act as servicing  agent for the First Mortgage Loan and will be paid a quarterly
servicing fee equal to 1/16 of 1% of the aggregate  outstanding  loan balance of
the First Mortgage Loan until the First Mortgage Loan is sold or repaid.

LIQUIDITY AND CAPITAL RESOURCES

     The Company believes that the funds generated from interest on and payments
of First Mortgage Loans as well as the sale of its properties will be sufficient
to meet the Company's working capital requirements and to finance any additional
investments.  No other arrangements,  such as lines of credit, have been made to
obtain external  sources of liquidity.  However,  the Company believes that such
arrangements could be obtained by the Company, if necessary.

     The  Company   currently  has  no  commitments  for  any  material  capital
expenditures  and does not anticipate any such  expenditures  in the foreseeable
future.

DIVIDENDS

     In 2001, the Company declared and paid four cash  distributions.  The first
distribution  was  for  $.10  per  share  and  was  paid on  April  11,  2001 to
shareholders  of record on April 2, 2001. The second  distribution  was for $.10
per share and was paid on July 12,  2001 to  shareholders  of record on June 29,
2001. The third distribution was for $1.00 per share and was paid on October 12,
2001 to shareholders of record on October 2, 2001. The fourth  distribution  was
for $.10 per share and was paid on January 15, 2002 to shareholders of record on
January 2, 2002.

     In 2000, the Company declared and paid four cash  distributions.  The first
distribution  was  for  $.10  per  share  and  was  paid on  April  14,  2000 to
shareholders  of record on April 4, 2000. The second  distribution  was for $.60
per share and was paid on July 14,  2000 to  shareholders  of record on June 30,
2000. The third  distribution was for $.10 per share and was paid on October 16,
2000 to shareholders of record on October 2, 2000. The fourth  distribution  was
for $.10 per share and was paid on January 15, 2001 to shareholders of record on
December 29, 2000.

     In order for the Company to maintain  its status as a  qualified  REIT,  it
must, among other requirements, pay out in the form of dividends at least 95% of
its taxable income (excluding  capital gains) to shareholders and must pay taxes
at corporate  tax rates on capital  gains or  distribute at least 95% of capital
gains as dividends to shareholders.  If the Company fails to maintain its status
as a REIT,  the  Company  would no longer be entitled to deduct from its federal
taxable income (and not pay federal taxes on) dividends paid to shareholders.

                                       7
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

                                     INDEX

                                                                            Page
                                                                            ----

Report of Independent Public Accountants                                       9

Financial Statements-

  Balance Sheet - December 31, 2001                                           10

  Statements of Operations - For the Years Ended
    December 31, 2001 and 2000                                                11

  Statements of Stockholders' Equity - For the Years Ended
    December 31, 2001 and 2000                                                12

  Statements of Cash Flows - For the Years Ended
    December 31, 2001 and 2000                                                13

Notes to Financial Statements - December 31, 2001 and 2000                    14



        Certain schedules are omitted as the information is not required
                       or already included in the notes.

                                       8
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Arizona Land Income Corporation:

We  have  audited  the  accompanying   balance  sheet  of  Arizona  Land  Income
Corporation  (an Arizona  corporation)  as of December 31, 2001, and the related
statements of  operations,  stockholders'  equity and cash flows for each of the
two years in the period ended December 31, 2001. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 Arizona Land Income Corporation
as of December 31, 2001,  and the results of its  operations  and its cash flows
for each of the two years in the period ended  December 31, 2001,  in conformity
with accounting principles generally accepted in the United States.


                                                   ARTHUR ANDERSEN LLP

Phoenix, Arizona
March 25, 2002

                                        9
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                                  BALANCE SHEET

                                DECEMBER 31, 2001


                                     ASSETS

ASSETS:
  Cash and cash equivalents                                        $     27,306
                                                                   ------------
  Investments-
    Trading securities                                                  996,551
    Accrued interest receivable                                         162,424
    Mortgage notes receivable                                         3,170,798
    Investment in partnership                                           346,833
    Land held for sale                                                3,135,089
    Less - reserve for losses on land                                  (590,898)
                                                                   ------------
        Total investments, net                                        7,220,797
                                                                   ------------
        Total assets                                               $  7,248,103
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Accounts payable and other liabilities                           $     13,127
  Accrued property taxes                                                  2,305
  Dividends payable                                                     194,268
                                                                   ------------
        Total liabilities                                               209,700
                                                                   ------------
STOCKHOLDERS' EQUITY:
  Class A common stock, $.10 stated value, 10,000,000 shares
    authorized, 1,942,675 shares issued and outstanding                 194,267
  Class B common stock, $.10 stated value, 10,000 shares
    authorized, 100 shares issued and outstanding                            10
  Additional paid-in capital                                         21,986,289
  Distributions in excess of earnings                               (15,142,163)
                                                                   ------------
      Total stockholders' equity                                      7,038,403
                                                                   ------------
      Total liabilities and stockholders' equity                   $  7,248,103
                                                                   ============

       The accompanying notes are an integral part of this balance sheet.

                                       10
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                            STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                       2001             2000
                                                   -----------      -----------
REVENUES:
  Interest on mortgages                            $   588,375      $   561,864
  Interest on trading securities                        55,973           93,025
  Loss from investment in partnership                  (13,629)          (9,876)
  Other income                                          12,000           12,000
                                                   -----------      -----------
      Total revenues                                   642,719          657,013
                                                   -----------      -----------
EXPENSES:
  Property taxes                                        12,500           10,000
  Professional services                                 45,851           34,957
  Advisory fees to related party                        24,363           29,927
  Administration and general                            39,925           37,099
  Directors' fees                                       22,400           22,578
                                                   -----------      -----------
      Total expenses                                   145,039          134,561
                                                   -----------      -----------

INCOME BEFORE GAIN ON SALE OF PROPERTIES               497,680          522,452

GAIN ON SALE OF PROPERTIES, net                             --            7,795
                                                   -----------      -----------
      Net income                                   $   497,680      $   530,247
                                                   ===========      ===========
INCOME PER COMMON SHARE                            $       .25      $       .25
                                                   ===========      ===========
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                 1,954,762        2,136,453
                                                   ===========      ===========

        The accompanying notes are an integral part of these statements.

                                       11
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                           Common Stock               Additional       Distributions         Total
                                   ----------------------------        Paid-in           in Excess       Stockholders'
                                      Shares          Amount           Capital          of Earnings          Equity
                                   ------------    ------------      ------------      ------------      ------------
<S>                                <C>             <C>               <C>               <C>               <C>
BALANCE, December 31, 1999            2,308,580    $    230,858      $ 23,551,348      $(11,722,561)     $ 12,059,645
  Repurchase of Class A
    common stock                       (262,000)        (26,200)       (1,069,010)               --        (1,095,210)
  Dividends declared                         --              --                --        (1,922,052)       (1,922,052)
  Net income                                 --              --                --           530,247           530,247
                                   ------------    ------------      ------------      ------------      ------------
BALANCE, December 31, 2000            2,046,580         204,658        22,482,338       (13,114,366)        9,572,630
  Repurchase of Class A
    common stock                       (103,805)        (10,381)         (496,049)               --          (506,430)
  Dividends declared                         --              --                --        (2,525,477)       (2,525,477)
  Net income                                 --              --                --           497,680           497,680
                                   ------------    ------------      ------------      ------------      ------------
BALANCE, December 31, 2001            1,942,775    $    194,277      $ 21,986,289      $(15,142,163)     $  7,038,403
                                   ============    ============      ============      ============      ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       12
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                            STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                    2001            2000
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                    $    497,680    $    530,247
  Adjustments to reconcile net income to net cash (used in)
    provided by operating activities-
      Gain on sale of properties                                                          --          (7,795)
      Loss from investment in partnership                                             13,629           9,876
      Changes in certain assets and liabilities affecting
        operating activities-
          Increase in trading securities                                            (996,551)             --
          Decrease in accrued interest receivable                                    112,421           7,561
          Decrease in accounts payable and other liabilities                          (3,268)         (9,033)
          Decrease in accrued property taxes                                          (2,092)         (3,274)
                                                                                ------------    ------------
              Net cash (used in) provided by operating activities                   (378,181)        527,582
                                                                                ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Principal payments received under mortgage notes receivable                      1,945,839       2,142,168
  Proceeds from sales of properties                                                       --          15,628
  Additional investment in partnership                                               (36,800)         (8,000)
                                                                                ------------    ------------
              Net cash provided by investing activities                            1,909,039       2,149,796
                                                                                ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment of dividends                                                            (2,535,856)     (1,950,872)
  Repurchase of Class A common stock                                                (506,430)     (1,095,210)
                                                                                ------------    ------------
              Net cash used in financing activities                               (3,042,286)     (3,046,082)
                                                                                ------------    ------------
DECREASE IN CASH AND CASH EQUIVALENTS                                             (1,511,428)       (368,704)

CASH AND CASH EQUIVALENTS, beginning of year                                       1,538,734       1,907,438
                                                                                ------------    ------------
CASH AND CASH EQUIVALENTS, end of year                                          $     27,306    $  1,538,734
                                                                                ============    ============
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  New mortgages related to sales of properties                                  $         --    $     11,241
  Dividends declared in excess of dividends paid                                $    194,268    $    204,648
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       13
<PAGE>
                         ARIZONA LAND INCOME CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000


(1)  ORGANIZATION AND OPERATIONS:

Arizona Land Income  Corporation  (the Company) was incorporated in the State of
Arizona on March 10, 1988 as a wholly owned subsidiary of YSP Holdings, Inc. and
completed an initial  public  offering on June 13, 1988. The net proceeds of the
initial  public  offering  of  $25,808,600  were used to acquire  and  originate
mortgage  loans secured by unimproved  real  property  located  primarily in the
Phoenix  metropolitan area. The Company has two classes of common stock, Class A
and Class B. The Class A shares  are listed for  trading on the  American  Stock
Exchange.

The current  capitalization  of the Company and minimal  cash flow  requirements
afford the  Company  the ability to hold the  properties  and to finance  future
sales with a cash downpayment and terms.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

Investments  with an original  maturity of less than 90 days when  purchased are
considered cash equivalents.

TRADING SECURITIES

U.S. Treasury Notes with original maturity of 120 days are classified as trading
securities  upon  acquisition and recorded at fair value.  Unrealized  gains and
losses are  included  in  interest  on trading  securities  in the  accompanying
statements of operations.

MORTGAGE NOTES RECEIVABLE

Mortgage notes  receivable are presented at their unpaid  principal  balances in
the  accompanying  balance sheet. It is the Company's  policy to discontinue the
accrual of interest for notes in default as of the default date. In management's
opinion,  mortgage  notes  receivable are stated at amounts not in excess of net
realizable value.

INVESTMENT IN PARTNERSHIP

The  Company  has  a  19.46%  limited  partnership  interest  in  Pinnacle  Peak
Office/Resort  Investors.  The Company  accounts for this  investment  under the
equity  method.  The  Company  recorded  a loss of $13,629 in 2001 and a loss of
$9,876 in 2000,  related  to this  investment,  did not  receive  any  return on
capital  during  2001 and 2000 and  invested an  additional  $36,800 in 2001 and
$8,000 in 2000.

                                       14
<PAGE>
REVENUE RECOGNITION

Revenue from land sales is recognized in accordance  with Statement of Financial
Accounting  Standards (SFAS) No. 66,  ACCOUNTING FOR SALES OF REAL ESTATE,  when
the  parties  to the sale are  bound by the  terms of a  contract,  an  adequate
downpayment  is  received,  a  reasonable  likelihood  exists  that any  related
receivable  will be collected and all  conditions  precedent to the closing have
been performed.

Interest income from mortgage notes  receivable is recognized using the interest
(actuarial) method.  Accrual of interest income on mortgage notes receivables is
suspended when a loan is  contractually  delinquent for ninety days or more. The
accrual is resumed when the loan  becomes  contractually  current,  and past-due
interest  income is recognized at that time. In addition,  a detailed  review of
commercial loans will cause earlier suspension if collection is doubtful.

INCOME TAXES AND REIT STATUS

The Company has elected treatment as a real estate investment trust (REIT) under
Internal Revenue Code (IRC) Sections 856-860. A REIT is taxed in the same manner
as any corporation  except that it may deduct certain  qualifying  distributions
made to shareholders  and reduce or eliminate any potential  income taxes.  This
distribution deduction must be at least 95% of the REIT's taxable income for all
tax years beginning  before January 1, 2001. For tax years beginning  January 1,
2001 and  thereafter,  the  distribution  deduction  must be at least 90% of the
REIT's  taxable  income.  For all years  presented,  the Company has met the 95%
distribution requirement.

For income tax purposes,  certain  expenses or reserves for financial  reporting
purposes are not allowed as current tax deductions.  Similarly,  the Company may
take certain current  deductions for tax purposes that are not current  expenses
for financial  reporting  purposes.  For example in 2000, the Company recognized
gain on the sales of properties  for financial  reporting  purposes  which is in
excess  of the  current  taxable  amount  from the  sales.  As a result of these
differences, taxable income totaled approximately $511,000 and $530,000 for 2001
and 2000,  respectively,  before  deductions  for dividends  paid. Net operating
losses for federal income tax purposes available to offset future taxable income
totaled approximately $2.24 million at December 31, 2001, and expire through the
year ending 2010. Capital loss carryforwards  total  approximately  $216,000 and
will expire if unused through the year ending 2006.

INCOME PER COMMON SHARE

Income per common share is computed  based upon the weighted  average  number of
shares of common stock outstanding  during the year. There are no stock options,
warrants or other common stock equivalents.

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  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.

                                       15
<PAGE>
LONG-LIVED ASSETS

SFAS No.  121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF  LONG-LIVED  ASSETS  AND FOR
LONG-LIVED  ASSETS TO BE DISPOSED OF, is utilized to determine if writedowns are
required  related to land held for sale.  SFAS No. 121  requires  the Company to
recognize  impairment losses for long-lived assets whenever events or changes in
circumstances  result in the carrying amount of the assets  exceeding the sum of
the expected future cash flows associated with such assets.

ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133 (as amended by SFAS No. 138),  ACCOUNTING  FOR  DERIVATIVE  INSTRUMENTS  AND
HEDGING  ACTIVITIES,  which requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value.  In June 1999,  the FASB issued SFAS No. 137 which  deferred  the
effective  date of SFAS No. 133. The Company was required to adopt SFAS No. 133,
as amended,  on January 1, 2001.  The  adoption of this  statement on January 1,
2001  did  not  have  an  impact  on the  financial  statements  or  results  of
operations.

In August 2001,  the FASB issued SFAS No. 144,  ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS. This statement addresses financial accounting and
reporting for the  impairment or disposal of long-lived  assets.  This statement
supersedes  FASB Statement No. 121,  ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR  LONG-LIVED  ASSETS TO BE  DISPOSED  OF, and the  accounting  and
reporting  provisions APB Opinion No. 30,  REPORTING THE RESULTS OF OPERATIONS -
REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY,
UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS,  for the disposal of
a segment of a business (as previously defined in that Opinion). Management does
not believe the adoption of this  statement  will have a material  impact on the
operations or financial condition of the Company.

(3)  CONCENTRATIONS OF CREDIT RISK:

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of treasury securities and mortgage notes receivable.

The Company's  treasury  securities  are placed with a major bank. The Company's
investment policy limits its exposure to concentrations of credit risk.

The  Company's  mortgage  notes  receivable  result  primarily  from the sale of
property to a broad base of borrowers  although  several loans are a significant
portion of total assets (see Note 4).

(4)  MORTGAGE NOTES RECEIVABLE:

Management  determines  the rate and related  terms on its  individual  mortgage
notes  receivable  based  on  the  underlying  collateral,  the  quality  of the
borrower,  and the down payment  received.  The  majority of the mortgage  notes
receivable outstanding at December 31, 2001, were originated within the last 1-8
years, and in management's  opinion, the factors used to determine the rates and
related terms have not changed  significantly.  Given the varying structures and
payment terms,  management  believes that the fair market values of the mortgage
notes  receivable  approximate  their carrying amounts when compared to mortgage
notes receivable with similar risk profiles, structures and payment terms. As of
December 31, 2001,  all loans are current,  except as described  below,  and all
noncurrent loans are stated at amounts not in excess of the net realizable value
of the collateral securing the loans.  Therefore,  no additional  adjustment for
impairment is necessary.

                                       16
<PAGE>
Mortgage notes receivable consist of the following at December 31, 2001:

<TABLE>
<CAPTION>
                                                                                                   The Company's
                                                                                                   Participation
                                                                                                   Interest as a     The Company's
  Original                                      Stated       Final                                  % of Current   Participation at
    Loan       Collateral, Property            Interest    Maturity                                   Principal      December 31,
   Number       Location and Size                Rate        Date       Periodic Payment Terms         Balance            2001
   ------       -----------------                ----        ----       ----------------------         -------            ----
<S>         <C>                               <C>          <C>         <C>                         <C>             <C>
    3-1     635 acres - Section 9, Township       8%       02/05/11    Annual interest payments            80%        $  853,285
            6 South Range 3 East of the                                through February 2001,
            Gila and Salt River Base and                               then annual principal and
            Meridian - Pinal County,                                   interest payments of
            Arizona                                                    $158,955 through maturity.
                                                                       The loan is in default and
                                                                       management has initiated
                                                                       foreclosure proceedings.
                                                                       Management believes loan
                                                                       is fully collateralized.

      6     27 lots in Hidden Valley Ranch,   9% - 12.3%   07/01/05    Multiple borrowers (26) -        86.47%            38,921
            Pinal County, Arizona. 12                                  monthly payments of
            parcels in either Bellflower                               principal and interest
            Ranch or Butterfield Ranch -                               of varying payment amounts.
            Cochise County, Arizona.                                   Approximately $14,000 of
                                                                       these loans are late or
                                                                       in default but are fully
                                                                       collateralized.

     16     20 acres - West side of               9%       09/12/02    Annual payments of                 100%           188,619
            I-17; approximately                                        principal and interest
            2-3/4 miles north of                                       of $20,583 through
            Happy Valley Road -                                        September 12, 2001.
            Maricopa County,                                           Balloon payment
            Arizona                                                    consisting of unpaid
                                                                       principal plus accrued
                                                                       interest due September 12,
                                                                       2002. Loan is current.

   17-3     2.11 acres (Lots 4 and                8%       04/15/08    Monthly payments of                100%            60,470
            5, Phoenix International                                   principal and interest
            Science Center) I-17 and                                   of $993. Loan was paid
            Deer Valley Road,                                          in full in January 2002.
            Phoenix, Arizona.

     18     153.63 acres - Southwest              7%       03/27/10    Annual payments of                 100%         1,654,503
            corner of Pecos Road                                       principal and interest
            and Val Vista Drive -                                      of $144,258 through
            Maricopa County,                                           March 27, 2009.  Balloon
            Arizona.                                                   payment consisting of
                                                                       unpaid principal plus
                                                                       accrued interest due
                                                                       March 27, 2010. Loan
                                                                       was paid in full in
                                                                       January 2002.

     22     9.9 acres - Northwest               11.5%      12/15/01    Loan was renewed to mature          50%           375,000
            corner of Brookside                                        on March 15, 2002.  The
            Lane and Bell Road -                                       borrower is currently
            Surprise, Arizona                                          negotiating to extend the
                                                                       final maturity to September
                                                                       15, 2002. Monthly interest
                                                                       payments continue to be
                                                                       received by the Company and
                                                                       management believes the
                                                                       loan is fully collateralized.
                                                                                                                      ----------
                                                                                                                      $3,170,798
                                                                                                                      ==========
</TABLE>

                                       17
<PAGE>
Scheduled principal repayments of mortgage notes receivable, adjusted to reflect
the advance  repayments  in January  2002 on loans 17-3 and 18, at December  31,
2001, are as follows:

     Year                                Amount
     ----                             -----------

     2002                             $ 2,347,546
     2003                                  73,614
     2004                                  78,703
     2005                                  83,068
     2006                                  80,135
     Thereafter                           507,732
                                      -----------
                                      $ 3,170,798
                                      ===========

(5)  LAND HELD FOR SALE:

The Company has  received  land as a result of  foreclosures  on several  loans.
Interest accrual ceases at the date of default. The mortgage receivable balance,
related accrued interest and foreclosure  costs are transferred to land held for
sale at cost on the date the title is transferred. In management's opinion, land
held for sale is stated at amounts  not in excess of fair  value less  estimated
costs to sell.

The following land is owned by the Company at December 31:

<TABLE>
<CAPTION>
Original                                                        The Company's
  Loan                                                          Participation
 Number      Collateral, Property, Location and Size               Interest              2001
 ------      ---------------------------------------               --------          -----------
<S>          <C>                                                <C>                  <C>
   6         354.5 acres - Southwest corner of Warner               86.47%           $ 3,079,199
             and Sossaman Roads - Maricopa County,
             Arizona

  17         .01 acres - Southwest corner of I-17 and
             Deer Valley Road - Phoenix, Arizona                      100%                55,890
                                                                                     -----------
                                                                                     $ 3,135,089
                                                                                     ===========
</TABLE>

The reserve for losses of $590,898  at December  31,  2001,  relates to original
loan 6. These reserves are absorbed as the specific land sales occur. Reserve of
$27,871 was absorbed in  conjunction  with land sales during 2000. No additional
reserves were provided in 2001 or 2000.

(6)  RELATED PARTY TRANSACTIONS:

The Company is a party to the following  agreements  with  affiliates  who share
common management and directors with the Company:

   Affiliate                                    Agreement
-----------------       --------------------------------------------------------
ALI Advisor, Inc.       Advisory fees of 30% of available cash, as defined, will
                        be paid in any  quarter  when the  cumulative  return to
                        investors  is in excess of 12.7%.  A  servicing  fee for
                        servicing  loans  of  1/16  of 1% of  total  assets,  as
                        defined,  will be paid quarterly.  In addition,  certain
                        other overhead expenses will also be paid.

PHS Mortgage, Inc.      All loans made after the  initial  purchase  at June 13,
                        1988, have been  originated by the mortgage  company and
                        origination fees were paid by the borrowers.

                                       18
<PAGE>
Peacock, Hislop,        The  Company   utilizes  PHS&G  on  certain   investment
Staley & Given          transactions involving excess cash. No fees are paid for
(PHS&G)                 such services.

(7)  DIVIDENDS:

Distributions related to Class A dividends for 2001 are as follows:

                                                    Amount
Date Declared      Record Date      Date Paid      Per Share      Total Amount
-------------      -----------      ---------      ---------      ------------
  03/20/01           04/02/01        04/11/01        $ .10        $    194,267
  06/08/01           06/29/01        07/12/01          .10             194,267
  09/19/01           10/02/01        10/12/01         1.00           1,942,675
  12/13/01           01/02/02        01/15/02          .10             194,268
                                                     -----        ------------
                                                     $1.30        $  2,525,477
                                                     =====        ============

Approximately 20% of the dividends per share in 2001 represent  distributions of
ordinary  taxable  income.  The  remainder  represented  a return of  capital or
capital gain income.

Distributions related to Class A dividends for 2000 were as follows:

                                                    Amount
Date Declared      Record Date      Date Paid      Per Share      Total Amount
-------------      -----------      ---------      ---------      ------------
  03/08/00           04/04/00        04/14/00        $ .10        $    214,308
  06/13/00           06/30/00        07/14/00          .60           1,296,168
  09/22/00           10/02/00        10/16/00          .10             206,928
  12/15/00           12/29/00        01/15/01          .10             204,648
                                                     -----        ------------
                                                     $ .90        $  1,922,052
                                                     =====        ============

Approximately 28% of the dividends per share in 2000 represent  distributions of
ordinary  taxable  income.  The  remainder  represented  a return of  capital or
capital gain income.

                                       19
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

Not applicable.

                                    PART III

     The  information  required  by  this  Part  III  will  be  provided  in our
definitive  Proxy Statement for our 2002 Annual Meeting of  Shareholders,  which
definitive  Proxy  Statement  will be filed  with the  Securities  and  Exchange
Commission  pursuant to  Regulation  14A not later than 120 days  following  our
fiscal year ended December 31, 2001, and is incorporated  herein by reference to
the following extent:

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

     Information  responsive to this item is incorporated herein by reference to
the "Information  Concerning  Directors and Nominees"  section  contained in the
Company's  definitive  Proxy  Statement.  With the  exception  of the  foregoing
information and other  information  specifically  incorporated by reference into
this report on Form 10-KSB,  the Company's Proxy Statement is not being filed as
a part hereof.  Information respecting executive officers of the Company who are
not continuing directors or nominees is set forth at Part I of this Report.

ITEM 10. EXECUTIVE COMPENSATION.

     The Company did not compensate its executive officers for their services in
the fiscal year ending December 31, 2001. Additional  information  responsive to
this item is  incorporated  herein by reference to the "Executive  Compensation"
section of the Company's Proxy Statement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information  concerning the Class A Common Stock beneficially owned by each
director of the Company, by all officers and directors of the Company as a group
and by each shareholder  known by the Company to be the beneficial owner of more
than 5% of the  outstanding  Class A Common  Stock  is  incorporated  herein  by
reference  to  the  "Security   Ownership  of  Certain   Beneficial  Owners  and
Management" section of the Company's Proxy Statement.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information  responsive to this item is incorporated herein by reference to
the "Certain  Relationships and Related  Transactions"  section of the Company's
Proxy Statement.

                                       20
<PAGE>
                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

     The following is a list of the financial  statements of Arizona Land Income
Corporation included at Item 7 of Part II of this Form 10-KSB.

Financial Statements

                                                                  Page or Method
                                                                     of Filing
                                                                  --------------
Report of Independent Public Accountants                              Page 9
Financial Statements:
  Balance Sheet - December 31, 2001                                   Page 10
  Statements of Operations - For the Years Ended
   December 31, 2001 and 2000                                         Page 11
  Statements of Stockholders' Equity - For the Years
   Ended December 31, 2001 and 2000                                   Page 12
  Statements of Cash Flows - For the Years Ended
   December 31, 2001 and 2000                                         Page 13
  Notes to Financial Statements - December 31, 2001 and 2000          Page 14

(a)  Exhibits.

<TABLE>
<CAPTION>
Exhibit                                                                                          Page or Method
Number          Description                                                                        of Filing
------          -----------                                                                        ---------
<S>             <C>                                                             <C>
  3-A           Articles of Incorporation of the Company, as amended.           Incorporated by Reference to Exhibit 3-A to
                                                                                Amendment No. 3 to S-18 No. 33-20625.

  3-B           Bylaws of the Company, as amended.                              Incorporated by Reference to Exhibit 3-B to
                                                                                Amendment No. 3 to S-18 No. 33-20625.

 10-A           June 13, 1988 Advisory and Servicing Agreement between          Incorporated by Reference to Exhibit 10-A to the
                ALI Advisor, Inc. and the Company.                              Company's Annual Report on Form 10-K for the year
                                                                                ended December 31, 1998

 10-B           January 17, 1989 Stock Purchase and Sale Agreement              Incorporated by Reference to the Company's Report
                between Young, Smith & Peacock Holdings, Inc.,                  on Form 8-K dated January 30, 1989
                Young, Smith & Peacock, Inc., Barry W. Peacock,
                Thomas R. Hislop and Larry P. Staley.
</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>
Exhibit                                                                                          Page or Method
Number          Description                                                                        of Filing
------          -----------                                                                        ---------
<S>             <C>                                                             <C>
 10-C           Modification of Loan Document dated July 21, 1990,              Incorporated by Reference to Exhibit 10-E to the
                between ALI Advisor, Inc. and Pinnacle Peak                     Company's Annual Report on Form 10-K for the year
                Office/Resort Investors Limited Partnership, an                 ended December 31, 1990 ( "1990 Form 10-K")
                Arizona limited partnership (Loan 1).

 10-D           Modification of Loan Documents dated July 1, 1990,              Incorporated by Reference to Exhibit 10-F to the
                between ALI Advisor, Inc. and North Scottsdale                  1990 Form 10-K
                Horseman's Park Limited Partnership III, an
                Arizona limited partnership (Loan 5b).

10-E(1)         Indemnification Agreement dated May 12, 1992                    Incorporated by Reference to Exhibit 10-L to the
                between Arizona Land Income Corporation and Robert              Company's Annual Report on Form 10-K for the year
                Blackwell.                                                      ended December 31, 1993

10-E(2)         Indemnification Agreement dated October 1, 1991                 Incorporated by Reference to the Company's Annual
                between Arizona Land Income Corporation and Burton              Report on Form 10-K for the year ended
                Freireich.                                                      December 31, 1994

24              Powers of Attorney                                              See Signature page

99              Representation of Arthur Andersen LLP                           filed herewith
</TABLE>

(b)  Reports on Form 8-K

     During the last quarter of 2001, the Company filed no reports on Form 8-K.

                                       22
<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-KSB to
be signed on its behalf by the undersigned, thereunto duly authorized, this 28th
day of March, 2002.

                                  ARIZONA LAND INCOME CORPORATION

                                  By: /s/ Thomas R. Hislop
                                      ------------------------------------------
                                      Thomas R. Hislop
                                      Vice President and Chief Financial Officer

                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Barry W. Peacock, Thomas R. Hislop
and Larry P. Staley, and any of them (with full power to each of them to act
alone), as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-KSB
Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and to perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents and/or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-KSB has been signed below by the following persons on behalf
of the Company and in the capacities and on the date indicated.

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

/s/ Barry W. Peacock              President                       March 28, 2002
---------------------------
Barry W. Peacock

/s/ Thomas R. Hislop              Chairman of the Board,          March 28, 2002
---------------------------       Vice President, Treasurer,
Thomas R. Hislop                  Chief Executive Officer
                                  and Chief Financial Officer

/s/ Larry P. Staley               Vice President                  March 28, 2002
---------------------------
Larry P. Staley

/s/ Robert Blackwell              Unaffiliated Director           March 28, 2002
---------------------------
Robert Blackwell

/s/ Burton P. Freireich           Unaffiliated Director           March 28, 2002
---------------------------
Burton P. Freireich

                                       23
<PAGE>
<TABLE>
<CAPTION>
Exhibit                                                                                          Page or Method
Number          Description                                                                        of Filing
------          -----------                                                                        ---------
<S>             <C>                                                             <C>
  3-A           Articles of Incorporation of the Company, as amended.           Incorporated by Reference to Exhibit 3-A to
                                                                                Amendment No. 3 to S-18 No. 33-20625.

  3-B           Bylaws of the Company, as amended.                              Incorporated by Reference to Exhibit 3-B to
                                                                                Amendment No. 3 to S-18 No. 33-20625.

 10-A           June 13, 1988 Advisory and Servicing Agreement between          Incorporated by Reference to Exhibit 10-A to the
                ALI Advisor, Inc. and the Company.                              Company's Annual Report on Form 10-K for the year
                                                                                ended December 31, 1998

 10-B           January 17, 1989 Stock Purchase and Sale Agreement              Incorporated by Reference to the Company's Report
                between Young, Smith & Peacock Holdings, Inc.,                  on Form 8-K dated January 30, 1989
                Young, Smith & Peacock, Inc., Barry W. Peacock,
                Thomas R. Hislop and Larry P. Staley.

 10-C           Modification of Loan Document dated July 21, 1990,              Incorporated by Reference to Exhibit 10-E to the
                between ALI Advisor, Inc. and Pinnacle Peak                     Company's Annual Report on Form 10-K for the year
                Office/Resort Investors Limited Partnership, an                 ended December 31, 1990 ( "1990 Form 10-K")
                Arizona limited partnership (Loan 1).

 10-D           Modification of Loan Documents dated July 1, 1990,              Incorporated by Reference to Exhibit 10-F to the
                between ALI Advisor, Inc. and North Scottsdale                  1990 Form 10-K
                Horseman's Park Limited Partnership III, an
                Arizona limited partnership (Loan 5b).

10-E(1)         Indemnification Agreement dated May 12, 1992                    Incorporated by Reference to Exhibit 10-L to the
                between Arizona Land Income Corporation and Robert              Company's Annual Report on Form 10-K for the year
                Blackwell.                                                      ended December 31, 1993

10-E(2)         Indemnification Agreement dated October 1, 1991                 Incorporated by Reference to the Company's Annual
                between Arizona Land Income Corporation and Burton              Report on Form 10-K for the year ended
                Freireich.                                                      December 31, 1994

24              Powers of Attorney                                              See Signature page

99              Representation of Arthur Andersen LLP                           filed herewith
</TABLE>