<PAGE>

                      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, 2003
                                   ------------------------------------------

( )      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                     1-6471
                                ---------------------------------------------

                               PGI INCORPORATED
-----------------------------------------------------------------------------
                (Name of small business issuer in its charter)

            Florida                                         59-0867335
-----------------------------------------------------------------------------
(State or other jurisdiction of                     (IRS Employer Ident. No.)
 incorporation or organization)

212 S. Central, Suite 100           St. Louis, Missouri       63105
-----------------------------------------------------------------------------
        (Address of principal executive offices)            (Zip Code)

Issuer's Telephone Number, including area code:         (314) 512-8650
                                                -----------------------------

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

                                                   Name of each Exchange
         Title of Each Class                       on which Registered
-------------------------------------      ----------------------------------
                None                                       None

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

Common Stock, Par Value $.10 per share
6% Convertible Subordinated Debentures due 1992

         Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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.

                       X   Yes          No
                     -----        -----

         Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the 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)

         State the issuer's revenues for its most recent fiscal year
$356,000.
--------

         The aggregate market value of voting stock held by non-affiliates
of the registrant cannot be determined. See page 5 of Form 10-KSB.

         State the number of shares outstanding of each of the Issuer's
classes of common equity as of the last practicable date.

         As of March 30, 2004, 5,317,758 shares of Common Stock $.10 per
         ---------------------------------------------------------------
value were outstanding.
----------------------

Exhibit Index is located on pages 38 to 42 of this report.

                                      1

<PAGE>
<PAGE>

<TABLE>
                                  PGI INCORPORATED AND SUBSIDIARIES
                                          FORM 10-KSB - 2003
                                  Contents and Cross Reference Index

<CAPTION>
Part     Item                                                                             Form 10-KSB
No.      No.      Description                                                               Page No.
---      ---      -----------                                                               --------
<S>                                                                                       <C>
I        1        Description of Business
                      General...................................................................3
                      Recent Developments.......................................................3

         2        Description of Property.......................................................4

         3        Legal Proceedings.............................................................4

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

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

         6        Management's Discussion and Analysis or Plan of Operation................5 - 11

         7        Financial Statements....................................................12 - 29

         8        Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure......................................30

         8A       Controls and Procedures......................................................30

III      9        Directors, Executive Officers, Promoters and Control Persons;
                      Compliance with Section 16(a) of the Exchange Act........................31

         10       Executive Compensation.......................................................32

         11       Security Ownership of Certain Beneficial Owners and
                      Management and Related Stockholder Transactions.....................32 - 33

         12       Certain Relationships and Related Transactions..........................33 - 35

         13       Exhibits and Reports on Form 8-K.............................................36

         14       Principal Accountant Fees and Services.......................................36

Signatures.....................................................................................37

Exhibit Index.............................................................................38 - 42
</TABLE>


                                      2

<PAGE>
<PAGE>

                                   PART I
                                   ------

Item 1.           Description of Business
-------           -----------------------

GENERAL

         As used in this Annual Report on Form 10-KSB, the "Company" refers,
unless the context otherwise requires, to PGI Incorporated and its
subsidiaries. The Company's executive offices are at 212 S. Central, Suite
100, St. Louis, Missouri, 63105, and its telephone number is (314) 512-8650.

         The Company was founded in 1958, and up until the mid 1990's was in
the business of building and selling homes, developing and selling home
sites and selling undeveloped or partially developed tracts of land. In the
last 8 years the Company's business focus and emphasis changed substantially
as it concentrated its sales and marketing efforts almost exclusively on the
disposition of its remaining real estate. This change was prompted by its
continuing financial difficulties due to the principal and interest owed on
its debt.

         Presently, the most valuable remaining asset is a parcel of 366
acres located in Hernando County, Florida. The Company also owns about 100
acres in scattered sites in Charlotte County, Florida, but most of these are
subject to easements which markedly reduce value and/or consist of wetlands
of indeterminate value. As of December 31, 2003, the Company owned
approximately 20 single family lots, located in Citrus County, Florida, of
which 17 lots were sold in January and February 2004. In addition, the
Company has been actively pursuing collection on delinquent contract
receivables from home site sales.

         As of January 1, 2004 the Company had no employees, and all
services provided to the Company are through contract services.

RECENT DEVELOPMENTS

         The Company largely completed the task of selling its single family
lot inventory, and presently is focused primarily on the remaining real
property assets located in Hernando County, Florida, and in Charlotte
County, Florida.

         The 366 acre parcel in Hernando County is difficult to value
because of uncertainty related to the possible extension of the Suncoast
Expressway, which terminates on the south side of Route 98 opposite the
subject property. Debate continues over whether the Suncoast Expressway will
be continued, which would almost certainly require acquisition of at least
part of the property. Further, there are presently several potential
corridors under discussion for such continuation, making it impossible to
predict which part of the property would be most affected. Development
and/or sale plans for this parcel as a result are necessarily held in
abeyance pending the decisions about the Suncoast Expressway. Present
activity on the 366 acre parcel primarily derives from a pipeline taking in
contiguous property and negotiation over the value of that taking.

         A small number of parcels in Charlotte County have been sold
leaving primarily the least salable properties for which there is no active
market.

                                     3

<PAGE>
<PAGE>

         The Company has been actively pursuing repossession of lots with
delinquent contracts receivable. The Company is in the process of
foreclosing on 12 lots, which represent the remaining contracts receivable
outstanding.

Item 2.           Description of Property
-------           -----------------------

         The primary asset of the Company is the 366 acre parcel located in
Hernando County, Florida, with frontage on Highway 98 generally opposite the
present termination of the Suncoast Expressway. The property is zoned and
platted for single family development generally consistent with the
Sugarmill Woods development to the west, although that platting probably is
no longer consistent with the highest and best use of the land once a final
determination has been made about the northerly extension of the Suncoast
Expressway. Approximately forty acres of the site have been designated in
the future land use plan as potentially suitable for commercial use. Value
along the western boundary of the property is reduced by the nearness of
electric and pipeline easements. (See also the section titled "Recent
Developments" under Item 1 and Note 9 of Item 7.)

         The Charlotte County assets described under Item 1 of this report
are generally characterized as being in one of three categories, each of
which is difficult to value and difficult to sell: (a) land subject to
electric easements for high voltage transmission line, (b) wetlands, and (c)
minor oddly shaped parcels.

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

         The Company is party to lawsuits in the normal course of its
business, presently including foreclosure actions by the Company against a
small number of delinquent accounts receivable and by the Company concerning
the value of the pipeline taking for the 366 acre parcel in Hernando County,
Florida, and a matter of the 1997 agricultural exemption status on
undeveloped Sugarmill Woods property. The Company does not believe that the
resolution of any of the suits individually, or collectively, will have a
material effect on its financial position. (See also Note 15 of Item 7.)

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

         A shareholders meeting was not held during the fiscal year ended
December 31, 2003.


                                     4

<PAGE>
<PAGE>

                                   PART II

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

         There is no public trading market for the Company's common equity
securities. Based on information received from the National Quotations
Bureau, Inc. there have been no reported transactions in the Company's
common stock, par value $.10 (the "Common Stock") since January 29, 1991. No
dividends have ever been paid on the Common Stock, and payment of dividends
is restricted under the terms of the two indentures pursuant to which the
Company's outstanding debentures are issued. As of December 31, 2003, there
were 607 holders of record of the Company's Common Stock and approximately
445 debenture holders.

         In an effort to reduce the number of shareholders of record of its
Common Stock to less than 500 in 2003, the Board of Directors of the Company
had endorsed a tender offer by PGIP, LLC, an affiliate of the Company, to
purchase shares of the Company's Common Stock held by shareholders who hold
99 or fewer shares of such Common Stock at a purchase price of $.50 per
share. The tender offer expired on June 12, 2003 and the Company was not
successful in reducing the number of shareholders of record of the Common
Stock to less than 500 with the intention to deregister the Common Stock
with the Securities and Exchange Commission.

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

PRELIMINARY NOTE

         Because the liabilities of the Company far exceed the reported
value of its assets, the most important information and analysis concerns
the nature and probable actions of the major holders of the Company's debt.
Foremost among these are the Company's 6.5% subordinated convertible
debentures, which matured June, 1991, with an original face amount of
$1,034,000, and its 6.0% subordinated convertible debentures which matured
May, 1992, with an original face amount of $8,025,000.

         The cumulative amount due for these two issues is as follows:

<TABLE>
<CAPTION>
                                                                      12/31/2003
                                                               Principal        Unpaid
                                                              Amount Due       Interest
                                                              ----------       --------
                                                                  ($ in thousands)

<S>                                                             <C>            <C>
         Subordinated debentures due June 1, 1991               $ 1,034        $    969
         Subordinated debentures due May 1, 1992                  8,025           9,185
                                                                -------        --------
                                                                $ 9,059        $ 10,154
                                                                =======        ========
</TABLE>

         Both issues have been in payment default for over ten years, and
there has been little contact with or on behalf of the bondholders over the
past several years. It is unclear whether any action on behalf of the
bondholders is presently likely, given the negative net worth of the Company
and continuing passage of time. Further, the Company believes that such
claims might be barred under the applicable statutes of limitations.

                                     5

<PAGE>
<PAGE>

Item 6.           Management's Discussion and Analysis or Plan of Operation
-------           ---------------------------------------------------------
                  (continued)
                  -----------


         If such claims are barred, it is possible that the Company would
potentially have to record net income in like amount, without the receipt of
any cash, and could potentially incur a large tax liability. Any such
potential tax liability might be averted and/or mitigated, however, by the
utilization of the Company's tax loss carryforwards, which as of December
31, 2003 totaled $33,000,000.

         Even if claims by the subordinated convertible debenture holders
are barred in full, however, and even if there is no cash tax consequence to
the Company as a result of the utilization of the tax loss carryforwards,
the Company would nonetheless have a substantial Stockholder's Deficiency.

         Similar defenses would not appear to apply to other creditors of
the Company and the credit agreements with the Company's Primary Lender and
with the holder of its secured Convertible Debentures Payable hold perfected
security interests in assets of the Company.

         Therefore, the Company's major effort and activities have been and
continue to be the efforts to liquidate assets of the Company to pay the
ordinary on-going costs of operation of the Company, with any large surplus
expected to be used to reduce the balance due to the Primary Lender (or to
the holder of the secured Convertible Debentures, as required should the
asset sale include their collateral).

         As the Company continues to try to sell its assets, it attempts to
realize full market value for each such asset, which may be at substantial
variance from the present carrying value. However, the major assets of the
Company that remain are both difficult to value and difficult to sell.

         The Company's largest single remaining asset is a 366 acre tract of
land in Hernando County, Florida. This property has frontage on Route 98 and
is generally opposite the present termination of the Suncoast Expressway. An
appraisal dated April 2, 2002, was performed by the firm Gillis and
Associates, and they reached a conclusion that the value of such asset is
$8,000 per acre. If the Company were able to realize a sales price of $8,000
per acre, a value of $2,928,000 for the entire tract would be achieved.

         This 366 acre tract is not readily salable, however, because of
uncertainty over the future northern continuation of the Suncoast
Expressway. It is possible that the northern continuation will not be built,
and if that determination were made then this tract would be attractive for
development. Presently, however, the Suncoast Expressway is planning
possible alternative routes to continue to the north, and most or all of
those possible routings would require a substantial taking out of the 366
acre tract. Development presently is thus effectively precluded pending a
final determination concerning the Expressway continuation.


                                     6

<PAGE>
<PAGE>

Item 6.           Management's Discussion and Analysis or Plan of Operation
-------           ---------------------------------------------------------
                  (continued)
                  -----------


         The next largest group of real property owned by the Company
consists of scattered sites in Charlotte County. Substantially all such
holdings, however, consist of property that is either (a) subject to
easements for high voltage electric transmission lines or (b) development
restrictions occasioned by being seriously impacted by wetlands. The
potential purchaser market for such properties is extremely limited.

         Generally, however, the Company intends to continue to emphasize
the liquidation of as many assets as is possible and to use the proceeds to
fund the normal cost of operations of the Company and/or to satisfy the
requirements of the Company's secured creditors.

RESULTS OF OPERATIONS

         Revenues for the year ended December 31, 2003 increased by $43,000
to $356,000 compared to revenues of $313,000 for the year ended December 31,
2002 mainly as a result of an increase in real estate sales. The net loss
was $2,414,000 ($.57 per share) for 2003 compared to a net loss of
$2,240,000 ($.54 per share) for 2002. Included in the 2003 and 2002 earnings
per share computation is $640,000 ($.19 per share of Common Stock) of annual
cumulative preferred stock dividends in arrears.

Costs and Expenses
------------------

         Expenses for the years 2003 and 2002 were:

<TABLE>
<CAPTION>
                                               2003              2002
                                               ----              ----
<S>                                          <C>              <C>
         Taxes and Assessments               $ 42,000         $122,000
         Consulting and Accounting             40,000           40,000
         Legal and Professional                94,000           26,000
         General and Administrative            66,000           51,000
</TABLE>

         Taxes and assessments decreased by $80,000 in 2003 due to a smaller
land inventory with the increase in real estate sales, and a reduction in
tax penalties accrued for 1997, (2003-$12,000, 2002-$67,000), see Note 15 of
the financial statements. Legal and professional and general and
administrative expenses increased in 2003 as a result of the odd lot tender
offer in 2003 described in Item 5. Also costs in 2003 were incurred
associated with intensified efforts in realizing lot sales or liquidating
land inventory.

Interest expense for the two years ended December 31, 2003 and 2002 was:

<TABLE>
<CAPTION>
                                                2003             2002
                                                ----             ----
                                                   ($ in thousands)
<S>                                            <C>              <C>
         Interest Expense                      $2,445           $2,249
</TABLE>

         Interest expense in 2003 increased by $196,000 compared to 2002.


                                     7

<PAGE>
<PAGE>

Item 6.           Management's Discussion and Analysis or Plan of Operation
-------           ---------------------------------------------------------
                  (continued)
                  -----------


FINANCIAL CONDITION

         Assets decreased at December 31, 2003 compared to assets at
December 31, 2002 reflecting the following changes:

<TABLE>
<CAPTION>
                                                                                  Increase
                                             2003              2002              (Decrease)
                                             ----              ----               ---------
                                                ($ in thousands)
<S>                                         <C>               <C>                   <C>
Cash and Cash Equivalents                   $  250            $   93                 157
Restricted Cash                                  1                 1                  --
Receivables                                    377               580                (203)
Land and Improvement                           670               718                 (48)
Other Assets                                   168               160                   8
                                            ------            ------                ----
                                            $1,466            $1,552                 (86)
                                            ======            ======                ====
</TABLE>

         Cash increased by $157,000 to $250,000 at December 31, 2003
compared to $93,000 at December 31, 2002. Net cash used in operations was
$41,000 for the year ended December 31, 2003 compared to net cash provided
by operations of $59,000 for the year ended December 31, 2002.

         Cash received from operations during 2003 was $352,000, a $61,000
increase from cash received during 2002.

         Cash expended for operations increased by $161,000 to $393,000
during 2003 from $232,000 in 2002, reflecting increases in the following
classifications; real estate operations ($2,000), interest payments
($87,000), taxes and assessments ($9,000), legal and professional ($46,000),
and general and administrative ($18,000).

         During 2003 investing activities provided $198,000 which included
$200,000 in repayment from Love Investment Company and $4,000 in proceeds
from another note receivable offset by $6,000 in expenditures relating to
inventory and deferred expenditures.

         The $200,000 used in investing activities during 2002 included
$440,000 in advances to Love Investment Company and $7,000 in expenditures
relating to inventory and deferred expenditures offset by $242,000 in
proceeds from the release of restricted cash and $5,000 in proceeds from
notes receivable.

         Liabilities were approximately $34,500,000 at December 31, 2003
compared to approximately $32,200,000 at December 31, 2002, reflecting the
following changes:


                                     8

<PAGE>
<PAGE>

<TABLE>
<CAPTION>
                                                                                         Increase
                                                       2003              2002           (Decrease)
                                                       ----              ----           ----------
                                                          ($ in thousands)
<S>                                                  <C>               <C>                <C>
Accounts payable and accrued expenses                $    69           $    56            $   13
Accrued real estate taxes                                402               436               (34)
Deferred Credits                                           3                --                 3
Accrued interest                                      21,571            19,225             2,346
Credit agreements - primary
  lender                                                 700               700                 -
Notes payable                                          1,198             1,198                 -

Convertible subordinated
  debentures payable                                   9,059             9,059                 -
Convertible debentures payable                         1,500             1,500                 -
                                                     -------           -------            ------
                                                     $34,502           $32,174            $2,328
                                                     =======           =======            ======
</TABLE>

         The $2,346,000 increase in accrued interest at December 31, 2003
compared to year-end 2002 reflects changes in the following:

<TABLE>
<CAPTION>
                                                                                        Increase
                                                       2003              2002          (Decrease)
                                                       ----              ----          ----------
                                                           ($ in thousands)
<S>                                                  <C>               <C>                <C>
Primary Lender                                       $     5           $    40            $  (35)
Debentures                                            19,406            17,098             2,308
Other                                                  2,160             2,087                73
                                                     -------           -------            ------
                                                     $21,571           $19,225            $2,346
                                                     =======           =======            ======
</TABLE>

         The accrued interest relating to debentures increased due to the
nonpayment of interest on the Company's debentures (see Notes 10 and 11 to
the consolidated financial statements under Item 7).

         The Company's capital deficiency increased to $33,036,000 at
December 31, 2003 from a $30,622,000 capital deficiency at December 31,
2002, reflecting the 2003 operating loss.

         On September 30, 2003, Articles of Merger were filed with the
Florida Department of State with an effective date of October 1, 2003. The
inactive entity, Southern Woods, Inc., was merged into Sugarmill Woods, Inc.
and the inactive entities, Deep Creek Utilities, Inc. and Sugarmill Woods
Management, Inc., were merged into PGI Incorporated.

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

         In May 2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Standards ("SFAS") No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS 150 establishes standards for classification and measurement in
the statement of financial position of certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability. The
FASB's Staff Position 150-3 deferred indefinitely the guidance in SFAS No.
150 on certain mandatorily redeemable

                                     9

<PAGE>
<PAGE>

noncontrolling interests. Management has determined that implementation of
SFAS 150 will not have an effect on the Company's financial statements.

         In November, 2002, FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others was issued. FIN 45 requires
the disclosures to be made a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee,
a liability for the fair value of the obligation undertaken in issuing the
guarantee. Management has determined that implementation of FIN 45 will not
have an effect on the Company's financial statements.

         In January of 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51, and in December 2003 the FASB deferred certain
effective dates of Interpretation No. 46. For all variable interest entities
other than special purpose entities, the revised Interpretation is effective
for periods ended after March 15, 2004. For variable interest entities
meeting the definition of special purpose entities under earlier accounting
rules, the Interpretation remains effective for periods ending after
December 31, 2003. The Interpretation requires the consolidation of entities
in which an enterprise absorbs a majority of the entity's expected losses,
receives a majority of the entity's expected residual returns, or both, as a
result of ownership, contractual or other financial interests in the entity.
Currently, entities are generally consolidated by an enterprise when it has
a controlling interest through ownership of a majority voting interest in
the entity. The Company has determined that is has no such interests.

         The FASB issued SFAS No. 145, "Recission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
in April 2002. This Statement eliminates the requirement that extinguishment
of debt be aggregated and classified as an extraordinary item and makes
certain other technical corrections. SFAS 145 is effective May 15, 2002.
Management has determined that implementation of SFAS 145 will not have an
effect on the Company's financial statements.

         The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" in June, 2001. The Statement requires an entity to record a
liability for an obligation associated with the retirement of an asset at
the time the liability is incurred by capitalizing the cost as part of the
carrying value of the related asset and depreciating it over the remaining
useful life of the asset. SFAS 143 is effective for fiscal years beginning
after June 15, 2002. Management has determined that implementation of SFAS
143 will not have an effect on the Company's financial statements.

         The FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" in August, 2001. This Statement addresses how
and when to measure impairment on long-lived assets and how to account for
long-lived assets that an entity plans to dispose of either through sale,
abandonment, exchange or distribution to owners. The Statement also requires
expected future operating losses from discontinued operations to be recorded
in the period in which the losses are incurred rather than the measurement
date. SFAS 144 is effective for fiscal years beginning after December 15,
2001. Management has determined that implementation of SFAS 144 will not
have an effect on the Company's financial statements.

                                     10

<PAGE>
<PAGE>

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses the
reporting that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred.

         SFAS 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Management will consider the requirements
of SFAS 146 if exit or disposal activities occur in the future.
Implementation of the Statement does not have an effect on the Company's
current financial statements.

Forward Looking Statements
--------------------------

         The discussion set forth in this Item 6, as well as other portions
of this Form 10-KSB, may contain forward-looking comments. Such comments are
based upon the information currently available to management of the Company
and management's perception thereof as of the date of the Form 10-KSB. When
used in this Form 10-KSB, words such as "anticipates," "estimates,"
"believes," "expects," and similar expressions are intended to identify
forward-looking statements but are not the exclusive means of identifying
such statements. Such statements are subject to risks and uncertainties.
Actual results of the Company's operations could materially differ from
those forward-looking comments. The differences could be caused by a number
of factors or combination of factors including, but not limited to: changes
in the real estate market in Florida and the counties in which the Company
owns any property; institution of legal action by the bondholders for
collection of any amounts due under the subordinated convertible debentures;
continued failure by governmental authorities to make a decision with
respect to the Suncoast Expressway as described under Item 1; changes in
management strategy; and other factors set forth in reports and other
documents filed by the Company with the Securities and Exchange Commission
from time to time.


                                     11

<PAGE>
<PAGE>

Item 7.           Financial Statements
-------           --------------------
                  Independent Accountants' Report
                  -------------------------------

Board of Directors and Stockholders
PGI, Incorporated
St. Louis, Missouri

We have audited the accompanying consolidated statements of financial
position of PGI Incorporated and Subsidiaries as of December 31, 2003 and
2002, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for each of the two years in the period ended
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI
Incorporated and Subsidiaries at December 31, 2003 and 2002, and the results
of its operations and its cash flows for each of the two years in period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has a significant
accumulated deficit, and is in default on its primary debt (Note 9), certain
sinking fund and interest payments on its convertible subordinated
debentures (Note 10) and its convertible debentures (Note 11). These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in this regard are described in Note 10. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

                                        /s/ BKD, LLP
St. Louis, Missouri
February 19, 2004


                                     12

<PAGE>
<PAGE>

<TABLE>
                                      PGI INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                         December 31, 2003 and 2002

<CAPTION>
                                    ASSETS                                                   LIABILITIES
                                    ======                                                   ===========
                                  2003         2002                                          2003           2002
                                  ----         ----                                          ----           ----
<S>                         <C>           <C>            <S>                         <C>            <C>
Cash and cash equivalents      250,000       93,000      Accounts payable and              69,000         56,000
                                                         accrued expenses (Note 8)
Restricted cash (Note 3)         1,000        1,000
                                                         Accrued real estate taxes        402,000        436,000
Receivables on real estate
sales- net (Note 4)             21,000            -
                                                         Deferred Credits                   3,000              -

Other receivables              356,000      580,000      Accrued Interest:
                                                         Primary Lender                     5,000         40,000
Land and improvement           670,000      718,000      Debentures                    19,406,000     17,098,000
inventories (Note 5)
                                                         Other                          2,160,000      2,087,000

Other assets (Note 7)          168,000      160,000      Credit Agreements (Note 9)
                                                         Primary Lender                   700,000        700,000
                                                         Notes payable                  1,198,000      1,198,000
                                                         Subordinated convertible
                                                         debentures payable             9,059,000      9,059,000
                                                         (Note 10)

                                                         Convertible debentures
                                                         payable (Note 11)              1,500,000      1,500,000
                                                                                     ------------   ------------

                                                         Commitments and               34,502,000     32,174,000
                                                         Contingencies (Note 15)     ------------   ------------

                                                         STOCKHOLDERS' DEFICIENCY
                                                         ========================
                                                         Preferred stock, par value
                                                         $1.00 per share;
                                                         authorized 5,000,000
                                                         shares; 2,000,000 Class A
                                                         cumulative convertible
                                                         Shares issued and
                                                         outstanding; (liquidation
                                                         preference of $8,000,000
                                                         and cumulative dividends)
                                                         (Note 13)                      2,000,000      2,000,000

                                                         Common stock, par value
                                                         $.10 per share;
                                                         authorized 25,000,000
                                                         shares; 5,317,758 shares
                                                         issued and outstanding
                                                         (Note 13)                        532,000        532,000
                                                         Paid-in capital               13,498,000     13,498,000

                                                         Accumulated deficit          (49,066,000)   (46,652,000)
                                                                                     ------------   ------------

                                                                                      (33,036,000)   (30,622,000)
                            ----------   ----------                                  ------------   ------------
                            $1,466,000   $1,552,000                                  $  1,466,000   $  1,552,000
                            ==========   ==========                                  ============   ============

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


                                                     13

<PAGE>
<PAGE>

<TABLE>
                             PGI INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                           Years ended December 31, 2003 and 2002

<CAPTION>
                                                          2003                       2002
                                                          ----                       ----
<S>                                                  <C>                        <C>
Revenues:
         Real estate sales (Note 2)                  $   308,000                $   238,000
         Interest income                                  39,000                     48,000
         Other income (Note 2)                             9,000                     27,000
                                                     -----------                -----------
                                                         356,000                    313,000
                                                     -----------                -----------

Costs and expenses:
         Cost of real estate sales (Note 2)               83,000                     65,000
         Interest                                      2,445,000                  2,249,000
         Taxes and assessments                            42,000                    122,000
         Consulting and accounting                        40,000                     40,000
         Legal and professional                           94,000                     26,000
         General and administrative                       66,000                     51,000
                                                     -----------                -----------
                                                       2,770,000                  2,553,000
                                                     -----------                -----------

Net (Loss)                                           $(2,414,000)               $(2,240,000)
                                                     ===========                ===========

(Loss) Per Share Available to Common
  Stockholders - Basic and Diluted (Note 18)                (.57)                      (.54)
                                                            ====                       ====

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


                                            14

<PAGE>
<PAGE>

<TABLE>
                                   PGI INCORPORATED AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 Years ended December 31, 2003 and 2002

<CAPTION>
                                                                               2003              2002
                                                                               ----              ----
<S>                                                                         <C>               <C>
Cash flows from operating activities:

Cash received from operations:
      Collections from real estate sales and receivables on such sales      $ 282,000         $ 252,000
      Interest received                                                        58,000            12,000
      Other operating receipts                                                 12,000            27,000
                                                                            ---------         ---------
                                                                            $ 352,000         $ 291,000
                                                                            ---------         ---------

Cash expended for operations:
      Payments for real estate sales                                           32,000            30,000
      Interest paid                                                            99,000            12,000
      Taxes and assessments                                                    74,000            65,000
      Consulting and accounting                                                34,000            35,000
      Legal and professional                                                   87,000            41,000
      General and administrative                                               67,000            49,000
                                                                            ---------         ---------
                                                                            $ 393,000         $ 232,000
                                                                            ---------         ---------

      Net cash flow provided by (used in) operating activities              $ (41,000)        $  59,000
                                                                            ---------         ---------

Cash flows from investing activities:
      Purchases of inventory and deferred expenditures                      $  (6,000)        $  (7,000)
      Proceeds from release of restricted cash                                    ---           242,000
      Payments for other receivables                                              ---          (440,000)
      Proceeds from notes receivable                                          204,000             5,000
                                                                            ---------         ---------
Net cash flow provided by investing activities                              $ 198,000         $(200,000)
                                                                            ---------         ---------

Net (decrease) increase in cash and cash equivalents                          157,000          (141,000)

Cash and cash equivalents at beginning of year                                 93,000           234,000
                                                                            ---------         ---------
Cash and cash equivalents at end of year                                    $ 250,000         $  93,000
                                                                            =========         =========

Non-cash investing and financing activities:
      Earnings capitalized into restricted cash                             $     ---         $   2,000
                                                                            ---------         ---------
      Interest paid from restricted cash                                    $     ---         $  17,000
                                                                            ---------         ---------
      Expenses paid from restricted cash                                    $     ---         $   2,000
                                                                            ---------         ---------

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


                                                  15

<PAGE>
<PAGE>

<TABLE>
                                    PGI INCORPORATED AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 Years ended December 31, 2003 and 2002

<CAPTION>
                                                                            2003                 2002
                                                                            ----                 ----
<S>                                                                    <C>                  <C>
Reconciliation of net (loss) to net cash (used in) operating
      activities:

Net (loss)                                                              $(2,414,000)        $(2,240,000)

Adjustments to reconcile net (loss) to net cash (used in) operating
      activities:
         Earnings capitalized into restricted cash                              ---              (2,000)
         Interest released from restricted cash                                 ---              17,000
         Expenses paid from restricted cash                                     ---               2,000

(Increase) decrease in assets:
      Other receivables                                                      (1,000)            (15,000)
      Land and improvement inventories-net                                   46,000              35,000
      Prepaid expenses and deposits                                             ---               4,000
Increase (decrease) in liabilities:
      Accounts payable and accrued expenses                                  13,000             (17,000)
      Accrued real estate taxes                                             (34,000)             54,000
      Deferred credits                                                        3,000
      Accrued interest                                                    2,346,000           2,221,000
                                                                        -----------         -----------

Net cash flow provided by (used in) operating activities                $   (41,000)        $    59,000
                                                                        ===========         ===========



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


                                                   16

<PAGE>
<PAGE>

<TABLE>
                                             PGI INCORPORATED AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                           Years ended December 31, 2003 and 2002


<CAPTION>
                             Preferred Stock               Common Stock                                Retained
                           ------------------           ------------------                             Earnings
                           Shares   Par Value           Shares   Par Value        Paid-In Capital      (Deficit)
                           ------   ---------           ------   ---------        ---------------      ---------


<S>                      <C>        <C>               <C>         <C>               <C>              <C>
Balances at 1/1/02       2,000,000  $2,000,000        5,317,758   $532,000          $13,498,000      $(44,412,000)

Net Loss                         -           -                -          -                    -        (2,240,000)
                         ---------  ----------        ---------   --------          -----------      ------------
Balances at 12/31/02     2,000,000  $2,000,000        5,317,758   $532,000          $13,498,000      $(46,652,000)

Net Loss                         -           -                -          -                    -        (2,414,000)
                         ---------  ----------        ---------   --------          -----------      ------------
Balances at 12/31/03     2,000,000  $2,000,000        5,317,758   $532,000          $13,498,000      $(49,066,000)
                         =========  ==========        =========   ========          ===========      ============


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


                                                            17

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       Significant Accounting Policies:
         --------------------------------

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

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after eliminating all significant
inter-company transactions.

Accounting 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 revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Revenue and Profit Recognition
------------------------------

Homesites
---------

         The Company adopted the installment method of profit recognition in
accordance with Statement of Financial Accounting Standard No. 66
"Accounting for Sales of Real Estate".

Acreage
-------

         Sales of undeveloped and developed acreage tracts are recognized,
net of any deferred revenue and valuation discount, when minimum down
payment and other requirements are met.

Land and Improvement Inventories
--------------------------------

         Land held for sale to customers and land held for bulk sale are
stated at cost, which is not in excess of estimated net realizable value.
Homesite costs are allocated to projects based on area methods, which
consider footage, future improvements costs and frontage.

Property and Equipment
----------------------

         Property and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives of
the related assets. Gains or losses resulting from the disposition of
property and equipment are respectively included in other income and other
expense.

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

         For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.


                                     18

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


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

         In May 2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Standards ("SFAS") No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS 150 establishes standards for classification and measurement in
the statement of financial position of certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability. The
FASB's Staff Position 150-3 deferred indefinitely the guidance in SFAS No.
150 on certain mandatorily redeemable noncontrolling interests. Management
has determined that implementation of SFAS 150 will not have an effect on
the Company's financial statements.

         In November, 2002, FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others was issued. FIN 45 requires
the disclosures to be made a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee,
a liability for the fair value of the obligation undertaken in issuing the
guarantee. Management has determined that implementation of FIN 45 will not
have an effect on the Company's financial statements.

         In January of 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51, and in December 2003 the FASB deferred certain
effective dates of Interpretation No. 46. For all variable interest entities
other than special purpose entities, the revised Interpretation is effective
for periods ended after March 15, 2004. For variable interest entities
meeting the definition of special purpose entities under earlier accounting
rules, the Interpretation remains effective for periods ending after
December 31, 2003. The Interpretation requires the consolidation of entities
in which an enterprise absorbs a majority of the entity's expected losses,
receives a majority of the entity's expected residual returns, or both, as a
result of ownership, contractual or other financial interests in the entity.
Currently, entities are generally consolidated by an enterprise when it has
a controlling interest through ownership of a majority voting interest in
the entity. The Company has determined that is has no such interests.

         The FASB issued SFAS No. 145, "Recission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
in April 2002. This Statement eliminates the requirement that extinguishment
of debt be aggregated and classified as an extraordinary item and makes
certain other technical corrections. SFAS 145 is effective May 15, 2002.
Management has determined that implementation of SFAS 145 will not have an
effect on the Company's financial statements.

         The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" in June, 2001. The Statement requires an entity to record a
liability for an obligation associated with the retirement of an asset at
the time the liability is incurred by capitalizing the cost as part of the
carrying value of the related asset and depreciating it over the remaining
useful life of the

                                     19

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
Management has determined that implementation of SFAS 143 will not have an
effect on the Company's financial statements.

         The FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" in August, 2001. This Statement addresses how
and when to measure impairment on long-lived assets and how to account for
long-lived assets that an entity plans to dispose of either through sale,
abandonment, exchange or distribution to owners. The Statement also requires
expected future operating losses from discontinued operations to be recorded
in the period in which the losses are incurred rather than the measurement
date. SFAS 144 is effective for fiscal years beginning after December 15,
2001. Management has determined that implementation of SFAS 144 will not
have an effect on the Company's financial statements.

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses the
reporting that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred.

         SFAS 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Management will consider the requirements
of SFAS 146 if exit or disposal activities occur in the future.
Implementation of the Statement does not have an effect on the Company's
current financial statements.

2.       Real Estate Sales and Other Income:
         -----------------------------------

Real estate sales and cost of sales consisted of:

<TABLE>
<CAPTION>
                                                         2003              2002
                                                         ----              ----
<S>                                                    <C>               <C>
         Homesite/acreage sales                        $308,000          $238,000
         Cost of Sales                                   83,000            65,000
                                                       --------          --------
         Gross Profit Margin                           $225,000          $173,000
                                                       ========          ========
</TABLE>

Other income for the years of 2003 and 2002 was:

<TABLE>
<CAPTION>
                                                        2003               2002
                                                        ----               ----
<S>                                                   <C>               <C>
         Other income                                 $  9,000          $  27,000
                                                      ========          =========
</TABLE>


                                     20

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


3.       Restricted Cash:
         ----------------

         Restricted cash includes restricted proceeds held by the primary
lender as collateral for debt repayment and escrowed receipts related to
sold contracts receivable.

         The primary lender utilized restricted funds to pay the interest
due on the primary lender debt of $17,000 in 2002.

         The Company utilized $239,000 of the primary lender restricted
escrow in April, 2002 to invest in a short term note with an affiliate of
L-PGI, the Company's preferred shareholder Love Investment Company.

         Restricted cash of $3,000 relating to sold contracts receivable was
released in June, 2002 after $2,000 was applied toward related expenses.

4.       Receivables on Real Estate Sales:
         ---------------------------------

         Net receivables on real estate consisted of:

<TABLE>
<CAPTION>
                                                                         2003          2002
                                                                         ----          ----
<S>                                                                    <C>           <C>
                  Contracts receivable on homesite sales               $ 64,000      $  71,000
                  Other                                                  21,000            ---
                                                                       --------      ---------
                                                                       $ 85,000      $  71,000
                  Less:  Allowance for cancellations                    (64,000)       (71,000)
                                                                       --------      ---------
                                                                       $ 21,000      $       0
                                                                       ========      =========
</TABLE>

         The Company generally considers receivables on real estate sales
delinquent if the scheduled installment payment is over 30 days past due. At
December 31, 2003 and 2002 delinquent receivables approximated $64,000 and
$71,000 respectively.

         Contracts receivable on home site sales and related receivables are
fully provided for cancellation at December 31, 2003 and 2002. The Company
has been actively pursuing collection on the delinquent receivables. An
assessment is made for each contract receivable as to the economic benefit
of reacquisition of the lot considering the cost of foreclosure, delinquent
taxes and association fees due, and estimated current sale value of the lot.
For those with benefit, foreclosure action is begun in the absence of
payment or receipt of a quit claim deed of the property back to the Company.
The Company is in the process of foreclosing on 12 lots which represent the
remaining contracts receivable outstanding.

         Other receivables relating to real estate sales at December 31,
2003 mainly represents receivables on lot sales which occurred in December,
2003.


                                     21

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


5.       Land and Improvements:
         ----------------------

         Land and improvement inventories consisted of:

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                           <C>                <C>
                  Unimproved land                             $613,000           $613,000
                  Fully improved land                           57,000            105,000
                                                              --------           --------
                                                              $670,000           $718,000
                                                              ========           ========
</TABLE>

6.       Property and Equipment:
         -----------------------

         Property and equipment consisted of:

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                            <C>               <C>
                  Furniture, fixtures and other                $31,000           $31,000
                     equipment
                  Less accumulated depreciation                (31,000)          (31,000)
                                                               -------           -------
                                                               $     -           $     -
                                                               =======           =======
</TABLE>

7.       Other Assets:
         -------------

         Other assets consisted of:

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                           <C>               <C>
                  Deposit with Trustee of 6 1/2%
                     debentures                               $160,000          $160,000
                  Other                                          8,000                 -
                                                              --------          --------
                                                              $168,000          $160,000
                                                              ========          ========
</TABLE>

8.       Accounts Payable and Accrued Expenses:
         --------------------------------------

         Accounts payable and accrued expenses consisted of:

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
<S>                                                           <C>               <C>
                  Accounts payable                            $ 24,000          $ 27,000
                  Accrued audit/tax expense                     27,000            23,000
                  Accrued consulting fees                       11,000             5,000
                  Accrued legal expense                          6,000                 -
                  Accrued insurance                                  -             1,000
                  Accrued miscellaneous                          1,000                 -
                                                              --------          --------
                                                              $ 69,000          $ 56,000
                                                              ========          ========

         Accrued Real Estate Taxes:
         --------------------------
         Accrued real estate taxes consisted of:
                  Current                                     $ 11,000          $ 17,000
                  Delinquent                                   391,000           419,000
                                                              --------          --------
                                                              $402,000          $436,000
                                                              ========          ========
</TABLE>


                                     22

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


9.       Credit Agreements - Primary Lender and Notes Payable:
         -----------------------------------------------------

         Credit agreements with the Company's primary lender and notes
payable consisted of the following:

<TABLE>
<CAPTION>
                                                                  2003              2002
                                                                  ----              ----
<S>                                                            <C>               <C>
         Credit agreements - primary lender
         (Balance is past due, bearing interest at
         prime plus 5.0%):                                     $  700,000        $  700,000

         Notes payable -
            $1,176,000 bearing interest at prime
            rate plus 2%, the remainder bearing
            interest at 12%, all past due                       1,198,000         1,198,000
                                                               ----------        ----------
                                                               $1,898,000        $1,898,000
                                                               ==========        ==========
</TABLE>

The prime rate at December 31, 2003 and 2002 was 4.0% and 4.25%
respectively.

         At December 31, 2003 assets collateralizing the Company's credit
agreements with its primary lender and notes payable totaled $734,000, of
which $1,000 represented escrow held by the primary lender, $63,000
represented gross receivables on real estate sales, and $670,000 represented
land and improvement inventories.

         The overall weighted average interest rate for the Company's credit
agreements with its primary lender and all remaining notes and mortgages was
approximately 7.2% as of December 31, 2003 and 7.75% as of December 31,
2002.

         Although substantially all of the Company's real and personal
property including all of the stock of the Company's wholly-owned
subsidiaries remains pledged as collateral, the Company negotiated
agreements with its mortgage holders to allow the Company to sell part of
its land holdings without requiring full payment of the secured debt.

         All of the primary lender debt and notes payable are past due.

10.      Subordinated Convertible Debentures Payable:
         --------------------------------------------

         Subordinated debentures payable consisted of:

<TABLE>
<CAPTION>
                                                                   2003                      2002
                                                                   ----                      ----
<S>                                                            <C>                       <C>
                  6 1/2%, due June 1991                        $1,034,000                $1,034,000
                  6%, due May 1992                              8,025,000                 8,025,000
                                                               ----------                ----------
                                                               $9,059,000                $9,059,000
                                                               ==========                ==========
</TABLE>

         Since issuance, $650,000 and $152,000 of the 6 1/2% and 6%
debentures, respectively, have been converted into common stock; however,
this conversion feature is no longer in effect.


                                     23

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


         The Company is in default of certain sinking fund and interest
payments on both subordinated debentures totaling $9,059,000 in principal
plus accrued and unpaid interest of $10,154,000 at December 31, 2003 and
$9,227,000 as of December 31, 2002.

         The debentures are not collateralized and are not subordinated to
each other, but are subordinated to senior indebtedness ($3,398,000 at
December 31, 2003). Payment of dividends on the Company's common stock is
restricted under the terms of the two indentures pursuant to which the
outstanding debentures are issued.

         In order to meet liquidity needs for future periods, the Company
has been and intends to continue to:

         -  actively seek buyers for the remaining portion of the
            underdeveloped acreage, when appropriate;
         -  diligently pursue collection of its receivables; and
         -  sell the remaining lots.

         No assurances can be made that the Company can achieve any of the
three above alternatives.

11.      Convertible Debentures Payable:
         -------------------------------

         In July and September 1989, the Company sold $1,282,000 and
$1,000,000 respectively, of convertible debentures to a partnership
affiliated with the Company's preferred shareholder. In connection with the
July 1992 Secured Lender Transaction in partial consideration for the
conveyance of 366 acres of property, the principal amount due to convertible
debenture holders was reduced by $782,000 and accrued interest thereon was
reduced by $389,000 leaving a balance of $1,500,000. The maturity date on
all the remaining debentures was extended to July 8, 1997 so that the
debentures are in default. The past due debentures accrue interest at 14%
compounded quarterly. The Company's primary lender credit agreements,
however, prohibit the payment of interest until such time as the primary
lender loans are repaid. At maturity the Convertible Debentures purchased on
July 24, 1989, were convertible into 868,788 common shares and those
purchased on September 29, 1989, were convertible into 1,726,568 common
shares, or a total of 2,595,356 shares of common stock at an initial
conversion price of $1.72 per share. The conversion price may be adjusted
upon the occurrence of certain events.

         The debentures held by Love-1989 Florida Partners, L.P., which
total $796,950 in principal amount are secured by a second mortgage behind
PGIP, LLC on the approximate 370 acres retained by the Company and a
security interest behind that held by PGIP, LLC in the restricted proceeds
escrow.

         Accrued interest was $9,252,000 and $7,870,000 at December 31, 2003
and 2002 respectively.


                                     24

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


12.      Income Taxes:
         -------------

         Reconciliation of the statutory federal income tax rates, 34% for
the years ended December 31, 2003 and 2002, to the Company's effective
income tax rates follows:

<TABLE>
<CAPTION>
                                                 2003                               2002
                                                 ----                               ----
                                                             ($ in thousands)
                                                      Percent of                         Percent of
                                    Amount of tax    Pre-tax Loss      Amount of tax    Pre-tax Loss
                                    -------------    ------------      -------------    ------------
<S>                                     <C>              <C>             <C>               <C>
Expected tax (credit)                   $(821)           (34.0%)         $(762)            (34.0%)
State income taxes, net of
  federal tax benefits                    (97)            (4.0%)           (90)             (4.0%)
Increase in valuation allowance
  and expiring credits
  operating loss                          918             38.0%            852              38.0%
                                        -----            -----           -----             -----
                                        $   -                -           $   -                 -
                                        =====            =====           =====             =====
</TABLE>

         At December 31, 2003, the Company had an operating loss carry
forward of approximately $33,000,000 which will expire at various dates
through 2022.

<TABLE>
<CAPTION>
                                                                 2003              2002
                                                                 ----              ----
                                                                    ($ in thousands)
<S>                                                             <C>               <C>
Deferred tax asset:
         Net operating loss carryover                           $12,898           $11,980
         Adjustments to reduce land to net
            realizable value                                         12                12
         Expenses capitalized under IRC 263(a)                       56                56
         ITC carry forward                                            -                 -
         Valuation allowance                                    (12,794)          (11,876)
                                                                -------           -------
                                                                $   172           $   172
Deferred tax liability:
         Basis difference of land and
            improvement inventories                             $   172           $   172
                                                                -------           -------

Net deferred tax asset                                          $     -           $     -
                                                                =======           =======

</TABLE>


                                     25

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


13.      Capital Stock:
         --------------

         In March 1987, the Company sold, in a private placement 1,875,000
shares of its Class A cumulative convertible preferred stock to Love-PGI
Partners, L.P. ("L-PGI") for a purchase price of $7,500,000 cash ($4.00 per
share). The Company also converted $500,000 of indebtedness owed to a
corporation owned by the Company's former Chairman of the Board of Directors
and members of his family into 125,000 shares of the cumulative convertible
preferred stock.

         The holders of the preferred stock are entitled to one vote per
share and, except as provided by law, will vote as one class with the
holders of the common stock. Class A preferred stockholders are also
entitled to receive cumulative dividends at the annual rate of $.32 per
share, an effective yield of 8%. Dividends accrued for an initial two year
period and, at the expiration of this period, preferred stockholders had the
option of receiving accumulated dividends, when and if declared by the Board
of Directors, in cash (unless prohibited by law or contract) or common
stock. At December 31, 2003 cumulative preferred dividends in arrears
totaled $5,555,000 ($640,000 of which related to the year ended December 31,
2003). On May 15, 1997 preferred dividends accrued through April 25, 1995
totaling $4,260,433 were paid in the form of 2,000,203 shares of common
stock.

         As of December 31, 2003, the preferred stock is callable or
redeemable at the option of the Company at $4.00 per share plus accrued and
unpaid dividends. In addition, the preferred stock will be entitled to
preference of $4.00 per share plus accrued and unpaid dividends in the event
of liquidation of the Company.

         At December 31, 2003 the Company had reserved 6,355,356 common
shares for the conversion of preferred stock and debentures.

         In an effort to reduce the number of shareholders of record of its
Common Stock to less than 500, the Board of Directors of the Company had
endorsed a tender offer by PGIP, LLC, an affiliate of the Company, to
purchase shares of the Company's Common Stock held by shareholders who hold
99 or fewer shares of such Common Stock at a purchase price of $.50 per
share. The tender offer expired on June 12, 2003 and the Company was not
successful in reducing the number of shareholders of record of the Common
Stock to less than 500 with the intention to deregister the Common Stock
with the Securities and Exchange Commission.

14.      Quarterly Results:
         ------------------

         In the fourth quarter of 2003 the Company accrued $12,000 in tax
penalties on 1997 real estate taxes in litigation.


                                     26

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


15.      Commitments and Contingencies:
         ------------------------------

         The Company is a party to various legal proceedings incidental to
the normal operation of its business.

         One instance of litigation involves Sugarmill Woods, Inc. and
Citrus County Tax Collector. Tax year 1997 remains in dispute on a matter of
timely filing of petition for exemption. In June 2002 the District Court of
Appeals denied the agricultural exemption for 1997 and the Company filed a
motion for rehearing. The trial court has conducted an evidentiary hearing
on our motion for rehearing but the motion was denied. An appeal to the
District Court of Appeals is pending.

16.      Related Party Transactions:
         ---------------------------

         As of December 31, 2003 the Company was in default of its primary
credit agreements with PGIP, LLC ("PGIP").

         PGIP is owned and managed by Love Savings Holding Company ("LSHC"),
Andrew S. Love, Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are
directors and executive officers of LSHC and own 90% of all the issued and
outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as the
executive officers and directors of the Company.

         The Company maintains its administration and accounting offices
with Love Real Estate Company ("LREC"). LREC, which is an affiliate of
L-PGI, the Company's preferred shareholder, is paid a monthly fee for the
following:

         1. Maintain books of original entry;
         2. Prepare quarterly and annual SEC filings;
         3. Coordinate the annual audit;
         4. Assemble information for tax filing, review reports as prepared
            by tax accountants and file same;
         5. Track shareholder records through transfer agent;
         6. Maintain policies of insurance against property and liability
            exposure;
         7. Handle day-to-day accounting requirements

         In addition, the Company receives office space, telephone service
and computer service from LREC. A fee of $2,800 per month was paid to LREC
in 2003 and 2002.



                                     27

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


         Effective March 25, 1987, the Company entered into a Management
Consulting Agreement with LREC. As a consultant to the Company and in
addition to the above services, LREC provides other services including, but
not limited to, strategic planning, marketing and financing as requested by
the Company. In consideration for these consulting services, the Company
pays LREC a quarterly consulting fee of one-tenth of one percent of the
carrying value of the Company's assets, plus reasonable out-of-pocket
expenses. As of December 31, 2003, the carrying value of the Company's
assets was approximately $1,466,000. Consulting fees totaling $6,000 were
accrued during 2003 and 2002 respectively. The Company made a payment of
$1,000 in 2002 for consulting fees. As of December 31, 2003 and 2002, a
total of $11,000 and $5,000, respectively, of unpaid fees had accrued under
this agreement.

         In 1985 a corporation owned by the former Chairman of the Board and
his family made an uncollateralized loan to the Company, which at December
31, 2003 had an outstanding balance, including accrued interest of $469,000.
Interest accrued on this loan for years 2003 and 2002 was $11,000 and
$12,000 respectively.

         From time to time, the Company invests in short-term debt
obligations of an affiliate of L-PGI, the Company's preferred shareholder,
Love Investment Company. The balance receivable at December 31, 2003 and
2002 was $340,000 and $540,000 respectively. Interest on the loans was
$34,000 and $36,000 for 2003 and 2002.

         In 2003 the Company incurred expenses totalling $25,000 for the
services of Hallmark Senior Housing, Inc., a related entity, to handle
analysis of real estate owned and options available. This effort resulted in
an increase in lot sales for 2003.

17.      Fair Value of Financial Instruments:
         ------------------------------------

         The following methods and assumptions were used to estimate the
fair value of each class of financial instrument for which it is practicable
to estimate that value:

Cash and Short-Term Investments:

         The carrying amount approximates fair value because of the short
maturity of those instruments.

Debt:

         It was not practicable to estimate the fair value of the Company's
debt with its primary lender, its notes payable and its convertible
debentures because these debts are in default causing no basis for
estimating value by reference to quoted market prices or current rates
offered to the Company for debt of the same remaining maturities.

                                     28

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)


Accounts Payable:

         The carrying amount approximates fair value because of the
short-term maturity of those debts. The estimated fair values of the
Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                         Carrying                    Fair
                  2003                                    Amount                    Value
                  ----                                    ------                    -----

<S>                                                    <C>                        <C>
Cash and short-term investments                        $   251,000                $ 251,000
Accounts payable                                            24,000                   24,000
Debt                                                    12,457,000                        -
</TABLE>

18.      (Loss) Per Share:
         -----------------

         The following is a summary of the calculations used in computing
basic and diluted (loss) per share:

<TABLE>
<CAPTION>
                                                           2003                       2002
                                                           ----                       ----
<S>                                                    <C>                        <C>
Numerator:
Net (Loss)                                             $(2,414,000)               $(2,240,000)
Preferred Dividends                                       (640,000)                  (640,000)
                                                       -----------                -----------
(Loss) Available to
  Common Shareholders                                  $(3,054,000)               $(2,880,000)
                                                       ===========                ===========

Denominator:
BASIC
Weighted average amount of shares
         outstanding                                     5,317,758                  5,317,758

DILUTED
Weighted average amount of shares
         outstanding                                     5,317,758                  5,317,758
Dilutive effect of assumed conversion
         of Preferred Stock                                      -                          -
                                                       -----------                -----------
Dilutive common shares                                   5,317,758                  5,317,758
                                                       ===========                ===========

(Loss) per share
         Basic                                                (.57)                      (.54)
         Diluted                                              (.57)                      (.54)
</TABLE>


                                     29

<PAGE>
<PAGE>

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

         Not Applicable.

Item 8A.          Controls and Procedures
--------          -----------------------

         The Company has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-15(c) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as
amended) under the supervision and with the participation of the Chief
Executive Officer ("CEO") and the Chief Financial Officer ("CFO" of the
Company. Based on this evaluation, the CEO and CFO concluded that the
Company's disclosure controls and procedures were effective as of December
31, 2003. There have been no changes in the Company's internal control over
financial reporting during the Company's fourth fiscal quarter ending
December 31, 2003, that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial
reporting.


                                     30

<PAGE>
<PAGE>

                                  PART III
                                  --------

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

         The following information, regarding executive officers and
directors of the Company, is as of March 25, 2004.

                           Position with Company and Business Experience
Name and Age               During the Last Five Years
------------               -------------------------------------------------

Laurence A. Schiffer       Director of the Company since April 1987;
      (age 64)             President and Chief Executive Officer of the
                           Company since February 1994; Vice Chairman of the
                           Board since May 1987; President and Chief
                           Executive Officer of Love Real Estate Company and
                           Love Investment Company since 1973; Chairman of
                           Heartland Bank and President of LSHC, the parent
                           company of Heartland Bank since December 1985;
                           Manager of PGIP since 1995; member of the Real
                           Estate Board of Metropolitan St. Louis and the
                           National Association of Real Estate Boards.

Andrew S. Love, Jr.        Chairman of the Company's Board of Directors
      (age 60)             since May 1987; Secretary since February 1994;
                           Chairman of the Board of Love Real Estate Company
                           and Secretary of Love Investment Company since
                           1973; Partner in St. Louis based law firm of
                           Bryan, Cave, McPheeters & McRoberts until 1991;
                           Director of Heartland Bank and Chairman of LSHC,
                           the parent company of Heartland Bank since
                           December 1985; Manager of PGIP since 1995.

         Executive officers of the Company are appointed annually by the
Board of Directors to hold office until their successors are appointed and
qualify.

         The directors of the Company have determined that the Company does
not have an audit committee financial officer serving on its board of
directors (which acts as the Company's audit committee). In addition, the
Company has not adopted a code of ethics that applies to its principal
executive officer and principal financial officer. The Company's decision
not to adopt a code of ethics or to have an audit committee financial expert
are primarily attributable to the following reasons: (i) as a result of its
continuing financial difficulties due to amounts owed on its debt, the
Company is focused almost exclusively on the disposition of its remaining
real estate; (ii) as described in Item 5, there have been no reported
transactions in the Company's Common Stock since January 29, 1991; (iii) the
board of directors of the Company consists of only two directors, and (iv)
the same person serves as the Company's chief executive officer and chief
financial officer.


                                     31

<PAGE>
<PAGE>

Item 10.          Executive Compensation
--------          ----------------------

         The Company's Chief Executive Officer is Mr. Laurence A. Schiffer.
Because of the Company's impaired financial condition, it does not
compensate in any manner Mr. Schiffer or Mr. Love, the Company's only other
executive officer, for the services they perform for the Company in that
capacity. Management services are provided to the Company by Love Real
Estate Company ("LREC") pursuant to that certain Management Consulting
Agreement by and between the Company and LREC dated March 25, 1987 (the
"Management Agreement"). Mr. Schiffer is an employee of, and receives an
annual salary from LREC. Mr. Love receives only a nominal salary from LREC.
Neither the Company nor LREC maintains records, which would allow either of
them to attribute any portion of the remuneration Mr. Schiffer receives from
LREC to the management services he performs for the Company. See Item 12.
"Certain Relationships and Related Party Transactions" for additional
information about the Management Agreement.

         Neither Mr. Schiffer nor Mr. Love received fees from any source
directly attributable to their services as directors of the Company during
2003.

Item 11.          Security Ownership of Certain Beneficial Owners and
--------          ---------------------------------------------------
                  Management and Related Stockholder Matters
                  ------------------------------------------

         The table below provides certain information as of March 25, 2004
regarding the beneficial ownership of the Common Stock and the Preferred
Stock by each person known by the Company to be the beneficial owner of more
than five percent of either the Common Stock or the Preferred Stock, each
director of the Company (which persons are also the Company's only executive
officers), and by virtue of the foregoing, the directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
                                                                                         Percent of Total
                                                                                         ----------------          Percent of
                                                        Common          Preferred       Common    Preferred       Total Voting
                  Name                                  Stock             Stock        Stock(1)     Stock           Power(1)
                  ----                                  -----             -----        --------     -----           --------
<S>                                                  <C>               <C>               <C>        <C>              <C>
         Estate of Harold Vernon                       998,777(2)(3)           -         18.8%         -             13.7%
         Alfred M. Johns                               437,414(4)        125,000(4)       8.2%       6.3%             7.7%
         Love-PGI Partners, L.P.                     2,260,706(5)      1,875,000(5)      42.5%      93.8%            56.5%
         Andrew S. Love, Jr.                         2,263,215(6)      1,875,000(6)      42.5%      93.8%            56.5%
         Laurence A. Schiffer                        2,263,215(7)      1,875,000(7)      42.5%      93.8%            56.5%
         All executive officers and directors
           as a group (2 persons)                    2,263,215(8)      1,875,000(8)      42.5%      93.8%            56.5%

<FN>
(1)      The above table does not include 2,595,356 shares that may be
         received upon conversion of the Company's Convertible Secured
         Debentures.
(2)      The shares of Common Stock owned by Mr. Vernon are currently in the
         possession of the Federal Deposit Insurance Corporation ("FDIC")
         which is the receiver for First American Bank and Trust, Lake
         Worth, Florida ("First American"). First American previously made a
         loan to Mr. Vernon, which was secured by these shares. The loan is
         in default and the Company understands that the FDIC has the right,
         pursuant to a pledge agreement, to vote the shares at any annual or
         special meeting of shareholders.
(3)      Information obtained from filings made with the Securities and
         Exchange Commission.
(4)      Sole voting and investment power over 302,401 shares of Common
         Stock; shared voting and investment power over 10,100 shares of
         Common Stock included in the table which are owned by Mr. John's
         wife; sole voting and investment power over the 125,000 shares of
         Preferred Stock.

                                     32

<PAGE>
<PAGE>

(5)      The controlling general partner of L-PGI is Love Investment
         Company, a Missouri Corporation owned by Mr. Love, Love family
         members and trusts, the Estate of Martha Love Symington and Mr.
         Schiffer. Messrs. Love and Schiffer serve as the executive officers
         and directors of Love Investment Company.
(6)      These shares are the same shares owned by L-PGI and PGIP, LLC. Mr.
         Love is an indirect owner of L-PGI and PGIP, LLC. See Footnote 5
         above and Item 12. "Certain Relationships and Related Transactions"
         for more information.
(7)      These shares are the same shares owned by L-PGI and PGIP, LLC. Mr.
         Schiffer is an indirect owner of L-PGI and PGIP, LLC. See Footnote
         5 above and Item 12. "Certain Relationships and Related
         Transactions" for more information.
(8)      These shares are the same shares reflected in Footnotes 5, 6 and 7.
         See Footnote 5 above and Item 12. "Certain Relationships and
         Related Transactions" for more information.
(9)      Addresses for beneficial owners are as follows:

<S>                                         <C>                                 <C>
         Estate of Harold Vernon            Love-PGI Partners, L.P.             Laurence A. Schiffer
         3201 W. Rolling Hills Circle       212 So. Central, Suite 100          212 So. Central, Suite 201
         Fort Lauderdale, FL 33328          St. Louis, MO 63105                 St. Louis, MO 63105

         Alfred M. Johns                    Andrew S. Love, Jr.
         One Woodland Drive                 212 So. Central, Suite 201
         Punta Gorda, FL 33950              St. Louis, MO 63105
</TABLE>

         As of December 31, 2003, the Company did not have a compensation
plan under which its equity securities may be issued.

Item 12.          Certain Relationships and Related Transactions
--------          ----------------------------------------------

         The Company's primary lender debt of $700,000 is with PGIP and is
secured by substantially all of the Company's real estate. PGIP became the
primary lender in March 1996, with the assignment by First Union, the
Company's former primary bank lender, of all its right, title and interest
in and to the loan documents. PGIP is 100% owned by LSHC. Messrs. Love and
Schiffer own approximately 90% of all of the issued and outstanding voting
stock of LSHC and serve as the directors and officers of LSHC. LSHC along
with Messrs. Love and Schiffer are the managers of PGIP.

         As further security to the primary lender indebtedness with PGIP, a
restricted proceeds escrow was established with the closing of the bulk
acreage sale in May 1998. The escrow agreement permits funds to be paid (i)
as requested by PGI and agreed to by PGIP, or (ii) as deemed necessary and
appropriate by PGIP to protect its interest in the remaining real estate,
including its right to receive principal and interest payments on the
indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP by
the Company. At December 31, 2003 and 2002, the restricted escrow balance
was $1,000, respectively. PGIP utilized $17,000 in 2002 to pay interest due
on the primary lender debt.

         The Company maintains its administration and accounting offices
with the offices of LREC in St. Louis, Missouri. LREC, a Missouri
Corporation, is an affiliate of L-PGI, and is located at 212 South Central
Avenue, Suite 100, St. Louis, Missouri 63105. A fee of $2,800 per month was
paid to LREC in 2003 and 2002. The following is a list of services provided:


                                     33

<PAGE>
<PAGE>

         1. Maintain books of original entry;
         2. Prepare quarterly and annual SEC filings;
         3. Coordinate the annual audit;
         4. Assemble information for tax filing, review reports as prepared
            by tax accountants and file same;
         5. Track Shareholder records through transfer agent;
         6. Maintain policies of insurance against property and liability
            exposure;
         7. Handle day-to-day accounting requirements; and
         8. Provide telephone and computer service.

         Although an amount is paid to LREC as reimbursement for expenses
and as a fee for providing management services to the Company, neither the
Company nor LREC maintain records which would allow them to attribute any
portion of the aforementioned monthly fee to reimbursement of particular
expenses or to payment for the management services performed for the Company
by individual employees of LREC, including Messrs. Love and Schiffer.

         Effective as of March 25, 1987, the Company entered into the
Management Agreement with LREC. As a consultant to the Company and in
addition to the above services, LREC provides other services including, but
not limited to, strategic planning, marketing, and financing as requested by
the Company. In consideration for these consulting services, the Company
pays LREC a quarterly consulting fee of one-tenth of one percent of the book
value of the Company's assets, plus reasonable out-of-pocket expenses. As of
December 31, 2003, the book value of the Company's assets was approximately
$1.5 million. Consulting fees totaling $6,000 were accrued during 2003 and
2002, respectively. The Company made a payment of $1,000 in 2002 for
consulting fees. As of December 31, 2003 and 2002, a total of $11,000 and
$5,000, respectively, of unpaid fees had accrued under the Management
Agreement.

         The Management Agreement will continue in effect until terminated
upon 90 days prior written notice by a majority vote of the Company's
directors who have no financial interest in LREC or in any LREC affiliated
entity. Currently all directors have a financial interest in LREC or one of
its affiliates.

         Mr. Love receives a nominal salary from LREC. Although Mr. Schiffer
receives a salary from LREC, such salary compensates him for his services to
LREC, which provides consulting services for numerous other entities
affiliated with the Company, and none of the amount earned by LREC under the
Management Agreement is intended to be allocated or attributable to any
officer or employee, including Mr. Schiffer, of LREC. No part of Mr.
Schiffer's annual salary from LREC is directly attributable to the
management services he performs for the Company as an employee of LREC
pursuant to the Management Agreement.

         In 1989, the Company sold an aggregate $2,282,451 principal amount
of the Convertible Debentures in a private placement to Love-1989. The
general partner of Love-1989 is Love Investment Company, which is owned by
Mr. Love, Love family members and trusts, the Estate of Martha Love
Symington and Mr. Schiffer. The above purchase by Love-1989 of the
Debentures was funded in part with a loan from L-PGI. Love-1989 has since
repaid the debt


                                     34

<PAGE>
<PAGE>

to L-PGI in full, in part by transferring a portion of the Debentures held
by Love-1989 to L-PGI. In July 1992, as partial consideration for the
Company's conveyance of 350 acres of property to L-PGI, the Company retired
$782,000 in principal amount of the Debentures held by L-PGI together with
$389,000 in accrued interest. The maturity date on all of the remaining
Debentures was extended to July 8, 1997 so that the Debentures are in
default.

         The Debentures were in part collateralized by a second mortgage in
favor of Love-1989 on 650 acres of the Property owned by the Company, which
was sold in May 1998. The 350 acres transferred to L-PGI as described above
were also included in the Property sold. Messrs. Love and Schiffer have
caused the Company to grant a second mortgage on the Retained Acreage to
Love-1989 and in their capacities as control persons of Love-1989, they
caused Love-1989 to release its second mortgage on the 650 acres of the
Property sold and they caused the Company to grant a security interest to
Love-1989 behind that held by PGIP in the restricted proceeds escrow which
is under the control of Messrs. Love and Schiffer since they and a company
they control are the managers of PGIP.

         As of December 31, 2003, Love-1989 held $796,950 in principal
amount of the Debentures with respect to which there was at that date
accrued and unpaid interest in the amount of $4,958,000. In 1990, $703,050
principal amount of the Debentures was transferred by Love-1989 to one of
its (now former) limited partners. That former limited partner continues to
hold such Debentures and as of December 31, 2003 there was accrued and
unpaid interest with respect thereto in the amount of $4,294,000.

         In 1985, a corporation owned by Alfred M. Johns, the former
Chairman of the Company, and his family made an uncollateralized loan to the
Company, which at December 31, 2003 had an outstanding balance, excluding
accrued interest, of $176,000. Besides being a direct owner of Common and
Preferred Stock, Mr. Johns has no other direct or indirect affiliations with
the Company.

         From time to time, the Company invests in short term debt
obligations with an affiliate of L-PGI, the Company's preferred shareholder,
Love Investment Company. The balance receivable at December 31, 2003 and
2002 was $340,000 and $540,000 respectively. Interest on the loans was
$34,000 and $36,000 for 2003 and 2002.

         In 2003 the Company incurred expenses totalling $25,000 for the
services of Hallmark Senior Housing, Inc., a related entity, to handle
analysis of real estate owned and options available. This effort resulted in
an increase in lot sales in 2003.

         The Company believes that the affiliated transactions are on terms
comparable to those, which would be obtained from unaffiliated persons.

                                     35

<PAGE>
<PAGE>

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

(a)      Exhibits
         Reference is made to the Exhibit Index contained on pages 38 to 42
         herein for a list of exhibits including each management contract,
         compensatory plan or arrangement required to be filed under this
         Item.

(b)      Reports on Form 8-K.
         None were filed in the fourth quarter of 2003.

Item 14.          Principal Accountant Fees and Services
--------          --------------------------------------

         Audit and tax fees rendered by BKD, LLP the principal accountant of
the Company, for the fiscal years ended December 31, 2003 and December 31,
2002 were:

<TABLE>
<CAPTION>
                                                   2003           2002
                                                   ----           ----
<S>                                              <C>            <C>
                  Audit Fees                     $23,300        $21,500
                  Tax Fees                         4,600          7,100
                  All Other Fees                   1,500            ---
                                                 -------        -------
                                                 $29,400        $28,600
                                                 =======        =======
</TABLE>

         Services for other fees relate to the merger in 2003 of some
inactive entities into their respective parent company.


                                     36

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES


In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on this 30th day of March, 2004.

                                            PGI INCORPORATED
                                            (Registrant)

Date:  March 30, 2004                       By: /s/ Laurence A. Schiffer
       --------------                           ------------------------
                                            Laurence A. Schiffer, President
                                            (Duly Authorized Officer and
                                            Principal Financial Officer)

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/ Andrew S. Love, Jr.      Chairman of the Board              March 30, 2004
-----------------------      Secretary
Andrew S. Love


/s/ Laurence A. Schiffer     Vice Chairman of the Board,        March 30, 2004
------------------------     President, Principal Executive
Laurence A. Schiffer         Officer, Principal Financial
                             Officer, and Principal Accounting
                             Officer


                                     37

<PAGE>
<PAGE>

EXHIBIT INDEX

2.       Inapplicable.

3.1      Articles of Incorporation (filed as Exhibit 3.1 to Registrant's
         Form 10-K Annual Report for the year ended December 31, 1980 and
         incorporated herein by reference).

3.2      Certificate of the Designation, Powers, Preferences and Relative
         Rights, and the Qualifications, Limitations or Restrictions
         Thereof, which have not been set forth in the Articles of
         Incorporation, of the Class A Cumulative Convertible Preferred
         Stock, effective as of March 24, 1987 (filed as Exhibit 3.2 to
         Registrant's Form 10-K Annual Report for the year ended December
         31, 1986 ("1986 Form 10-K") and incorporated herein by reference).

3.3      Bylaws of Registrant, as amended September 1987 (filed as Exhibit
         3.3 to Registrant's original Form 10-K Annual Report for the year
         ended December 31, 1987 ("Original 1987 Form 10-K") dated as of
         March 29, 1987 and incorporated herein by reference).

3.4      Amendments to the Articles of Incorporation effective March 13,
         1990 and July 27, 1990, dated as of November 13, 1990 (filed as
         Exhibit 19 to the September 30, 1990 Form 10-Q and incorporated
         herein by reference).

3.5      Amendments to the Bylaws of the Registrant by the Board of
         Directors of PGI Incorporated by the Unanimous Written Consent,
         dated as of March 17, 1995 (filed as Exhibit 3.5 to the December
         31, 1995 Form 10KSB and incorporated herein by reference).

3.6      Articles of Incorporation of PGI Incorporated as amended through
         December 22, 1997 (filed as Exhibit 3.1 to Registrant's June 30,
         1998 Form 10-QSB and incorporated herein by reference).

3.7      Restated Articles of Incorporation of PGI Incorporated executed
         September 4, 1998 with certificate from the State of Florida dated
         October 27, 1998 (filed as Exhibit 3.1 to Registrant's September
         30, 1998 Form 10-QSB and incorporated herein by reference).

4.1      Extension and Forbearance Agreement among PGI Incorporated, Punta
         Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast
         Credit Corporation and BancFlorida (formerly Naples Federal Savings
         and Loan Association), dated as of March 25, 1987 (filed as Exhibit
         4.4 to the 1986 Form 10-K and incorporated herein by reference).

4.2      Seventh Mortgage and Loan Modification Agreement among PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation and BancFlorida, dated as
         of March 25, 1987 (filed as Exhibit 4.5 to the 1986 Form 10-K and
         incorporated herein by reference).


                                     38

<PAGE>
<PAGE>

EXHIBIT INDEX (continued)


4.3      Eighth Mortgage and Loan Modification Agreement among PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation and BancFlorida, dated as
         of March 25, 1987 (filed as Exhibit 4.6 to the 1986 Form 10-K and
         incorporated herein by reference).

4.4      Restated Loan and Security Agreement among PGI Incorporated, Punta
         Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast
         Credit Corporation and BancFlorida, as well as Restated
         Consolidating Substituted Renewal Note and Future Advance Mortgage
         Note related thereto, dated as of March 25, 1987 (filed as Exhibit
         4.7 to the 1986 Form 10-K and incorporated herein by reference).

4.5      Forbearance Agreement among PGI Incorporated, Punta Gorda
         Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast Credit
         Corporation and BancFlorida (Restated Loan Agreement No. 1), dated
         as of October 19, 1985 (filed as Exhibit 4.1 to the Registrant's
         Form 10-Q Quarterly Report for the quarter ended September 30, 1985
         and incorporated herein by reference).

4.6      Amendment to Restated Loan Agreement No. 1 (Receivables Loan), as
         well as Restated Consolidating Substituted Renewal Note relating
         thereto, dated as of March 25, 1987 (filed as Exhibit 4.9 to the
         1986 Form 10-K and incorporated herein by reference).

4.7      Extension, Forbearance and Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation, and BancFlorida, dated as
         of May 20, 1988 (filed as Exhibit 4.1 to the Registrant's Form 10-Q
         Quarterly Report for the quarter ended June 30, 1988 and
         incorporated herein by reference).

4.8      Ninth Mortgage and Loan Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation, and BancFlorida, dated as
         of May 20, 1988 (filed as Exhibit 4.2 to Registrant's Form 10-Q
         Quarterly Report for the quarter ended June 30, 1988 and
         incorporated herein by reference).

4.9      Purchase Agreement among Finova Financial Services, PGI
         Incorporated and Punta Gorda Developers, Inc., as well as certain
         Exhibits and the Mortgage related thereto, dated March 15, 1988
         (filed as Exhibit 1 to Registrant's Form 8-K dated as of March 28,
         1988 and incorporated herein by reference).

4.10     Tenth Mortgage and Loan Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., as well as certain
         Exhibits and the Mortgage related thereto, dated May 30, 1989
         (filed as Exhibit 1 to Registrant's Form 8-K dated as of June 8,
         1989 and incorporated herein by reference).


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EXHIBIT INDEX (continued)


4.11     Eleventh Mortgage and Loan Modification among PGI Incorporated
         (formerly Punta Gorda Isles, Inc.), Sugarmill Woods, Inc. (formerly
         Punta Gorda Developers, Inc.), Burnt Store Marina, Inc. and Gulf
         Coast Credit Corporation and BancFlorida (formerly Naples Federal
         Savings and Loan Association), dated as of June 1, 1990 (filed as
         Exhibit 4.2 to Registrant's Form 10-Q Quarterly Report for the
         quarter ended June 30, 1990 and incorporated herein by reference).

4.12     Loan Forbearance Agreement among PGI Incorporated (formerly Punta
         Gorda Isles, Inc.), Sugarmill Woods, Inc, (formerly Punta Gorda
         Developers, Inc.), Burnt Store Marina, Inc. and Gulf Coast Credit
         Corporation and BancFlorida (formerly Naples Federal Savings and
         Loan Association), dated as of October 17, 1991 (filed as Exhibit
         4.12 to Registrant's Form 10-K dated March 30, 1994 and
         incorporated herein by reference).

4.13     Twelfth mortgage and loan modification among PGI Incorporated,
         Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast
         Credit Corporation and BancFlorida, dated as of July 8, 1992 (filed
         as Exhibit 4.1 to Registrant's Form 8-K dated as of July 24, 1992,
         and incorporated herein by reference).

4.14     Thirteenth mortgage and loan modification agreement among PGI
         Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., Gulf
         Coast Credit Corporation and First Union, dated as of May 13, 1994
         (filed as Exhibit 4.1 to Registrant's Form 8-K dated May 27, 1994
         and incorporated herein by reference).

4.15     Forbearance Agreement dated as of October 12, 1995 by First Union
         National Bank of Florida, PGI Incorporated, Sugarmill Woods, Inc.,
         Burnt Store Marina, Inc., Gulf Coast Credit Corporation, Southern
         Woods, Incorporated, Punta Gorda Isles, Inc., Deep Creek Utilities,
         Inc., Burnt Store Utilities, Inc., and Sugarmill Woods Sales, Inc.
         (filed as Exhibit 4(i) to Registrant's Form 8-K on November 1, 1995
         and incorporated herein by reference).

4.16     Note and Loan Document Purchase Agreement dated as of October 12,
         1995 by First Union National Bank of Florida, PGIP, L.L.C., PGI
         Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., and
         Gulf Coast Credit Corporation (filed as Exhibit 4 (ii) to
         Registrant's Form 8-K on November 1, 1995 and incorporated herein
         by reference).

4.17     Note Purchase and Loan Transaction dated as of March 28, 1996, by
         First Union National Bank of Florida, PGIP, LLC, PGI Incorporated,
         Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast
         Credit Corporation (filed as Exhibit 4.17 to Registrant's Form
         10-KSB/A dated August 27, 1997, and incorporated herein by
         reference).

9.0      Inapplicable.


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EXHIBIT INDEX (continued)


10.      Inapplicable.

10.3     Preferred Stock Purchase Agreement by and between PGI Incorporated
         and Love Development and Investment Company, dated as of February
         16, 1987 (filed as Exhibit (i) to the Registrant's Form 8-K Current
         Report dated February 25, 1987 and incorporated herein by
         reference).

10.4     Form of Convertible Debenture Agreement due April 30, 1992 between
         PGI Incorporated and Love-1989 Florida Partners, L.P. and Mortgage
         and Security Agreement dated July 28, 1989 between Sugarmill Woods,
         Inc. and Love-1989 Florida Partners, L.P. (filed as Exhibit 10.9 to
         the Registrant's Form 10-K Annual Report for the year ended
         December 31, 1989 and incorporated herein by reference).

10.5     Consulting Agreement between PGI Incorporated and Love Real Estate
         Company, dated as of March 25, 1987 (filed as Exhibit 10.7 to the
         1986 Form 10-K and incorporated herein by reference).

10.6     Option Agreement For Sale and Purchase dated January 31, 1997,
         between Sugarmill Woods, Inc., Love-PGI Partners, L.P., and The
         Nature Conservancy (filed as Exhibit 10.6 to Registrant's Form
         10-KSB/A dated August 27, 1997 and incorporated herein by
         reference).

10.7     First Amendment to Option Agreement for Sale and Purchase dated
         August 25, 1997 between Sugarmill Woods, Inc., Love-PGI Partners,
         L.P., and The Nature Conservancy (filed as part of Appendix B to
         Registrant's Proxy Statement dated December 8, 1997 and
         incorporated herein by reference).

10.8     Second Amendment to Option Agreement for Sale and Purchase dated
         September 29, 1997 between Sugarmill Woods, Inc., Love-PGI
         Partners, L.P., and The Nature Conservancy (filed as part of
         Appendix B to Registrant's Proxy Statement dated December 8, 1997
         and incorporated herein by reference).

11.      See Note 18 to the consolidated financial statements.

13.      Inapplicable.

14.      Inapplicable.

16.      Inapplicable.

18.      Inapplicable.

20.      Inapplicable.


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EXHIBIT INDEX (continued)


21.      Subsidiaries of the Registrant, filed herein.

22.      Inapplicable.

23.      Inapplicable.

24.      Inapplicable.

31.1     Principal Executive Officer certification pursuant to Rule 13a-14
         and 15d-14 under the Securities Exchange Act of 1934, as amended,
         as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
         2002, filed herein.

31.2     Principal Financial Officer certification pursuant to Rule 13a-14
         and 15d-14 under the Securities Exchange Act of 1934, as amended,
         as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
         2002, filed herein.

32.1     Principal Executive Officer Certification pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002, filed herein.

32.2     Principal Financial Officer Certification pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002, filed herein.


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