<PAGE>

                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549

                                 FORM 10-KSB

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

         For the fiscal year ended           December 31, 2004
                                   -------------------------------------------

( )      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:  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
6.5% Convertible Subordinated Debentures due 1991

         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 in response 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
$719,000.
--------

         The aggregate market value of voting stock held by non-affiliates
of the registrant cannot be determined. See Item 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 31, 2005, 5,317,758 shares of Common Stock, par value
         -----------------------------------------------------------------
$.10 per share were outstanding.
-------------------------------

                                     1


                      PGI INCORPORATED AND SUBSIDIARIES
                            FORM 10 - KSB - 2004
                     Contents and Cross Reference Index

Part   Item                                                        Form 10-KSB
No.    No.    Description                                            Page No.
---    ---    -----------                                            --------

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........5

II     5      Market for Common Equity, Related Stockholder
                Matters and Small Business Issuer Purchases of
                Equity Securities........................................6

       6      Management's Discussion and Analysis or Plan
                of Operation.............................................7

       7      Financial Statements......................................13

       8      Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure.....................31

       8A     Controls and Procedures...................................31

       8B     Other Information ........................................31

III    9      Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16(a) of the
                Exchange Act............................................32

       10     Executive Compensation....................................33

       11     Security Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters..............33

       12     Certain Relationships and Related Transactions............34

       13     Exhibits..................................................37

       14     Principal Accountant Fees and Services....................37

Signatures..............................................................38

Exhibit Index...........................................................39

                                     2


                                   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, a Florida corporation, 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 10 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 a number of
scattered sites in Charlotte County, Florida (the "Charlotte Property"), but
most of these are subject to easements which markedly reduce their value
and/or consist of wetlands of indeterminate value. As of December 31, 2004,
the Company owned four single family lots, located in Citrus County,
Florida. In addition, the Company has been actively pursuing collection on
the remainder of lots with delinquent contracts receivable.

         As of January 1, 2005 the Company had no employees, and all
services provided to the Company are through contract services.

RECENT DEVELOPMENTS

         The principal remaining real property asset of the Company is a 366
acre undeveloped parcel in Hernando County, Florida, which property is
encumbered by a secured creditor claim. An appraisal dated April 2, 2002 was
performed by the appraisal firm Gillis and Associates, and they reached a
conclusion that the value of this property was $8,000 per acre, and hence
$2,928,000 for the parcel. During fiscal year 2003, the Company sold most of
its finished single family lot inventory, and, thus, we are primarily
focused on the disposition of this property and the Charlotte Property.

         External circumstances make it difficult to forecast the timing or
ultimate use of this 366 acre property. Principal among the external factors
is that the property is at the present northern termination of the Suncoast
Expressway. Planning continues for the proposed northward continuation of
the Suncoast Expressway, with the most actively considered routes each
predicated on taking part of the subject property. Until and unless the
uncertainty regarding the future expansion of the Suncoast Expressway is
resolved, planning with respect to this property is difficult.
Notwithstanding the foregoing, however, the Company has engaged a land
planner to begin suggesting possible development concepts assuming that the
Suncoast Expressway is continued with a route at the far western boundary of
the property.

                                     3

         Nine lots foreclosed in Citrus County on February 24, 2005, the
Company was granted its claim of $123,000 in delinquent receivables and did
not get title of the lots. On March 23, 2005 the Company foreclosed on one
lot in Charlotte County for a claim of $28,000 in delinquent receivables.
Any gain from these foreclosures will be recognized in 2005.

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

         The primary asset of the Company is a 366 acre tract of vacant land
in Hernando County, Florida. The present zoning, and hence the presently
proposed use, is for single family residential lot development. Several
factors suggest that this originally planned use may be inappropriate and/or
not the best use given present circumstances.

         Foremost among these factors is that the Suncoast Expressway may be
extended to the north. Such an extension is almost certain to impact the
property, since the probable routes as presently proposed would require a
significant part of the tract. Additional factors include the present lack
of water and sewers on the site, as well as the lack of roads on the site.
Also, about forty acres of the property have been designated in the Hernando
County's future land use plan for commercial use rather than single family
use. Finally, market demand appears to be shifting away from lots with
greenways as originally contemplated in favor of larger estate type lots.

         The Company is presently studying the possible use of the land, but
the possible extension of the Suncoast Expressway makes this difficult and
the timing of any potential development is uncertain at this time. Other
vacant parcels, which could be competitive do exist in the immediate area,
most of which do not suffer the same planning constraint concerning the
possible extension of the Suncoast Expressway.

         The property is encumbered by the primary lender debt of $500,000
and convertible debentures held by Love 1989 Florida Partners, L.P. which
total $6,604,000 in principal and interest at December 31, 2004. The primary
lender debt and convertible debentures are past due (See Notes 9 and 11 to
the Consolidated Financial Statements under Item 7).

         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, (b) subject to
development restrictions occasioned by being seriously impacted by wetlands,
or (c) minor, oddly shaped parcels. The potential purchaser market for such
properties is extremely limited.

         The Company believes the properties are adequately covered by
insurance.

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

         The Company is party to lawsuits in the normal course of its
business, presently including (i) an action by the Company concerning the
value of the pipeline taking for the 366 acre parcel in Hernando County,
Florida, and (ii) a dispute regarding the 1997 agricultural exemption status
for the 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 to the
Consolidated Financial Statements under Item 7.)


                                     4

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

         A shareholders meeting was not held during the fiscal year ended
December 31, 2004.




                                     5

                                   PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and
-------  ---------------------------------------------------------
         Small Business Issuer Purchases of Equity Securities.
         -----------------------------------------------------

         There is no public trading market for the Company's common equity
securities. There have been no reported transactions in the Company's common
stock, par value $.10 (the "Common Stock"), since January 29, 1991, with the
exception of the tender offer in 2003, described below. 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, 2004 there were 606
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
("PGIP"), 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:

                                                             12/31/2004
                                                      Principal        Unpaid
                                                      Amount Due      Interest
                                                      ----------      --------
                                                          ($ in thousands)

         Subordinated debentures due June 1, 1991       $1,034        $ 1,041
         Subordinated debentures due May 1, 1992         8,025         10,069
                                                        ------        -------
                                                        $9,059        $11,110
                                                        ======        =======

         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 at least
a portion of such claims might be barred under the applicable statutes of
limitations.

                                     6

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, 2004 totaled approximately $35,000,000.

         Even if claims by the subordinated convertible debenture holders
are barred in full and 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 hold perfected
security interests in assets of the Company.

         Therefore, the Company's major effort and activities have been, and
continue to be, 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 its present carrying value. However, the major assets of the
Company that remain are both difficult to value and difficult to sell.
Certain of these assets may be of so little value and marketability that the
Company may elect not to pay the real estate taxes on selected parcels,
which may eventually result in a defacto liquidation of such property by
subjecting such property to a tax sale.

                                     7

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

         Generally, 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, 2004 increased by $363,000
to $719,000 compared to revenues of $356,000 for the year ended December 31,
2003 reflecting increased real estate sales revenue. The net loss was
$2,183,000 ($.53 per share) for 2004 compared to a net loss of $2,414,000
($.57 per share) for 2003. Included in the 2004 and 2003 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 2004 and 2003 were:

                                              2004           2003
                                              ----           ----

         Taxes and Assessments              $35,000        $42,000
         Consulting and Accounting           40,000         40,000
         Legal and Professional              37,000         94,000
         General and Administrative          41,000         66,000

         Taxes and assessments decreased by $7,000 in 2004 due to a smaller
land inventory with the increase in real estate sales. Legal and
professional and general and administrative expenses decreased in 2004 as a
result of the odd lot tender offer in 2003 described in Item 5.

Interest expense for the two years ended December 31, 2004 and 2003 was:

                                              2004           2003
                                              ----           ----
                                               ($ in thousands)
         Interest Expense                    $2,676         $2,445

         Interest expense in 2004 increased by $231,000 compared to 2003 as
a result of interest accruing on past due balances which increase at various
intervals throughout the year and an increase in interest rates during 2004.

                                     8


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


FINANCIAL CONDITION

         Assets increased at December 31, 2004 compared to assets at
December 31, 2003 reflecting the following changes:

                                                             Increase
                                  2004          2003        (Decrease)
                                  ----          ----        ---------
                                   ($ in thousands)
Cash and Cash Equivalents        $  201        $  250           (49)
Restricted Cash                     252             1           251
Receivables                         368           377            (9)
Land and Improvement                637           670           (33)
Other Assets                        181           168            13
                                 ------        ------        ------
                                 $1,639        $1,466           173
                                 ======        ======        ======

         Cash decreased by $49,000 to $201,000 at December 31, 2004 compared
to $250,000 at December 31, 2003. Net cash provided by operations was
$418,000 for the year ended December 31, 2004 compared to net cash used in
operations of $41,000 for the year ended December 31, 2003.

         Cash received from operations during 2004 was $732,000, a $380,000
increase from cash received during 2003.

         Cash expended for operations decreased by $79,000 to $314,000
during 2004 from $393,000 in 2003, reflecting decreases in the following
classifications; interest payments ($38,000), legal and professional
($38,000), and general and administrative ($19,000) and increases in; real
estate operations ($2,000), taxes and assessments ($2,000) and consulting
and accounting ($12,000).

         During 2004, $267,000 of cash was used by the Company in investing
activities which included $17,000 in purchases of inventory and deferred
expenditures and $250,000 as a payment into the restricted escrow funds. The
$200,000 of cash used in financing activities in 2004 consisted of a
principal payment on the primary lender debt.

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

         Liabilities were approximately $36,900,000 at December 31, 2004
compared to approximately $34,500,000 at December 31, 2003, reflecting the
following changes:

                                     9


                                                                      Increase
                                              2004         2003      (Decrease)
                                              ----         ----      ----------
                                               ($ in thousands)
Accounts payable and accrued expenses       $    49       $    69      $  (20)
Accrued real estate taxes                       363           402         (39)
Deferred Credits                                  3             3          --
Accrued interest                             24,186        21,571       2,615
Credit agreements - primary
  lender                                        500           700        (200)
Notes payable                                 1,198         1,198           -

Convertible subordinated
  debentures payable                          9,059         9,059           -
Convertible debentures payable                1,500         1,500           -
                                            -------       -------      ------
                                            $36,858       $34,502      $2,356
                                            =======       =======      ======

         The $2,615,000 increase in accrued interest at December 31, 2004
compared to year-end 2003 reflects changes in the following:
                                                                      Increase
                                              2004         2003      (Decrease)
                                              ----         ----      ----------
                                               ($ in thousands)
Primary Lender                              $     4       $     5      $   (1)
Debentures                                   21,948        19,406       2,542
Other                                         2,234         2,160          74
                                            -------       -------      ------
                                            $24,186       $21,571      $2,615
                                            =======       =======      ======

         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 $35,219,000 at
December 31, 2004 from a $33,036,000 capital deficiency at December 31,
2003, reflecting the 2004 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 to
effectuate certain parent-subsidiary mergers involving the Company and
certain of its subsidiaries. An 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 the
Company.

                                     10

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

         In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Standards ("SFAS") No. 153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29" effective for
nonmonetary asset exchanges occurring in the fiscal year beginning January
1, 2006. SFAS No. 153 requires that exchanges of productive assets be
accounted for at fair value unless fair value cannot be reasonably
determined or the transaction lacks commercial substance. Management has
determined that the implementation of SFAS 153 will not have an effect on
the Company's financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity("SFAS 150"). 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 150 on certain mandatorily redeemable noncontrolling
interests. Management has determined that implementation of SFAS 150 did not
have an effect on the Company's financial statements.

         In December of 2003, the FASB issued Interpretation No. 46R,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51. 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.

         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 did not
have an effect on the Company's financial statements.

         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 was effective May 15, 2002.
Management has determined that implementation of SFAS 145 did 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 did not have an effect on the Company's financial statements.

                                     11

         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 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 did not have an
effect on the Company's 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.

                                     12



Item 7.  Financial Statements
-------  --------------------
         Report of Independent Registered Public Accounting Firm
         -------------------------------------------------------

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, 2004 and
2003, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for each of the two years in the period ended
December 31, 2004. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI
Incorporated and Subsidiaries at December 31, 2004 and 2003, and the results
of its operations and its cash flows for each of the two years in the period
ended December 31, 2004, 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
March 11, 2005

                                     13


<TABLE>
                                     PGI INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                        December 31, 2004 and 2003

<CAPTION>
                                ASSETS                                                   LIABILITIES
                                ======                                                   ===========
                               2004         2003                                        2004          2003
                               ----         ----                                        ----          ----
<S>                        <C>          <C>             <S>                       <C>           <C>
Cash and cash equivalents     201,000      250,000      Accounts payable and            49,000        69,000
                                                        accrued expenses (Note 8)

Restricted cash (Note 3)      252,000        1,000
                                                        Accrued real estate taxes      363,000       402,000
Receivables on real
estate sales - net
(Note 4)                        1,000       21,000
                                                        Deferred Credits                 3,000         3,000

Other receivables             367,000      356,000      Accrued Interest:
                                                        Primary Lender                   4,000         5,000
Land and improvement                                    Debentures                  21,948,000    19,406,000
inventories (Note 5)          637,000      670,000
                                                        Other                        2,234,000     2,160,000

Other assets (Note 7)         181,000      168,000      Credit Agreements
                                                        (Note 9) Primary Lender        500,000       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
                                                        Contingencies (Note 15)     36,858,000    34,502,000
                                                                                    ----------    ----------
                                                        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        (51,249,000)  (49,066,000)
                                                                                  ------------  ------------
                                                                                   (35,219,000)  (33,036,000)
                           ----------   ----------                                ------------  ------------
                           $1,639,000   $1,466,000                                $  1,639,000  $  1,466,000
                           ==========   ==========                                ============  ============

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

                                     14


                      PGI INCORPORATED AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   Years ended December 31, 2004 and 2003

                                                   2004                2003
                                                   ----                ----
Revenues:
         Real estate sales (Note 2)            $   674,000         $   308,000
         Interest income                            36,000              39,000
         Other income (Note 2)                       9,000               9,000
                                               -----------         -----------
                                                   719,000             356,000
                                               -----------         -----------

Costs and expenses:
         Cost of real estate sales (Note 2)         73,000              83,000
         Interest                                2,676,000           2,445,000
         Taxes and assessments                      35,000              42,000
         Consulting and accounting                  40,000              40,000
         Legal and professional                     37,000              94,000
         General and administrative                 41,000              66,000
                                               -----------         -----------
                                                 2,902,000           2,770,000
                                               -----------         -----------

Net (Loss)                                     $(2,183,000)        $(2,414,000)
                                               ===========         ===========

(Loss) Per Share Available to Common
  Stockholders - Basic and Diluted (Note 18)          (.53)               (.57)
                                                      ====                ====

        See accompanying notes to consolidated financial statements.

                                     15



<TABLE>
                                   PGI INCORPORATED AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 Years ended December 31, 2004 and 2003

<CAPTION>
                                                                               2004              2003
                                                                               ----              ----
<S>                                                                         <C>               <C>
Cash flows from operating activities:

Cash received from operations:
      Collections from real estate sales and receivables on such sales      $ 700,000         $ 282,000
      Interest received                                                        24,000            58,000
      Other operating receipts                                                  8,000            12,000
                                                                            ---------         ---------
                                                                            $ 732,000         $ 352,000
                                                                            ---------         ---------

Cash expended for operations:
      Payments for real estate sales                                           34,000            32,000
      Interest paid                                                            61,000            99,000
      Taxes and assessments                                                    76,000            74,000
      Consulting and accounting                                                46,000            34,000
      Legal and professional                                                   49,000            87,000
      General and administrative                                               48,000            67,000
                                                                            ---------         ---------
                                                                            $ 314,000         $ 393,000
                                                                            ---------         ---------

      Net cash flow provided by (used in) operating activities              $ 418,000         $ (41,000)
                                                                            ---------         ---------

Cash flows from investing activities:
      Purchases of inventory and deferred expenditures                      $ (17,000)        $  (6,000)
      Payments for restricted cash                                           (250,000)               --
      Proceeds from notes receivable                                               --           204,000
                                                                            ---------         ---------
Net cash flow provided by (used in) investing activities                    $(267,000)        $ 198,000
                                                                            ---------         ---------

Cash flows from financing activities:
      Principal payments on debt                                             (200,000)               --
                                                                            ---------         ---------
      Net cash flow (used in) financing activities                           (200,000)               --
                                                                            ---------         ---------

Net (decrease) increase in cash and cash equivalents                          (49,000)          157,000

Cash and cash equivalents at beginning of year                                250,000            93,000
                                                                            ---------         ---------
Cash and cash equivalents at end of year                                    $ 201,000         $ 250,000
                                                                            =========         =========

Non-cash investing and financing activities:

      Interest earned on restricted cash                                    $   1,000         $      --
                                                                            ---------         ---------

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

                                     16


<TABLE>
                                  PGI INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                               Years ended December 31, 2004 and 2003

<CAPTION>
                                                                           2004                2003
                                                                           ----                ----
<S>                                                                    <C>                 <C>
Reconciliation of net (loss) to net cash (used in) operating
  activities:

Net (loss)                                                             $(2,183,000)        $(2,414,000)

Adjustments to reconcile net (loss) to net cash (used in)
 operating activities:
  Earnings capitalized into restricted cash                                 (1,000)                 --

(Increase) decrease in assets:
  Other receivables                                                          9,000              (1,000)
  Land and improvement inventories - net                                    38,000              46,000
  Prepaid expenses and deposits                                             (2,000)                 --
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses                                    (19,000)             13,000
  Accrued real estate taxes                                                (39,000)            (34,000)
  Deferred credits                                                              --               3,000
  Accrued interest                                                       2,615,000           2,346,000
                                                                       -----------         -----------

Net cash flow provided by (used in) operating activities               $   418,000         $   (41,000)
                                                                       ===========         ===========

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

                                     17


<TABLE>
                                               PGI INCORPORATED AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                             Years ended December 31, 2004 and 2003


<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 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)

Net Loss                            -                 -                -               -                  -          (2,183,000)
                            ---------        ----------        ---------        --------        -----------        ------------
Balances at 12/31/04        2,000,000        $2,000,000        5,317,758        $532,000        $13,498,000        $(51,249,000)
                            =========        ==========        =========        ========        ===========        ============

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

                                     18


                      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.

                                     19


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


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

         In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Standards ("SFAS") No. 153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29" effective for
nonmonetary asset exchanges occurring in the fiscal year beginning January
1, 2006. SFAS No. 153 requires that exchanges of productive assets be
accounted for at fair value unless fair value cannot be reasonably
determined or the transaction lacks commercial substance. Management has
determined that the implementation of SFAS 153 will not have an effect on
the Company's financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity("SFAS 150"). 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 150 on certain mandatorily redeemable noncontrolling
interests. Management has determined that implementation of SFAS 150 did not
have an effect on the Company's financial statements.

         In December of 2003, the FASB issued Interpretation No. 46R,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51. 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.

         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 did not
have an effect on the Company's financial statements.

         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 was effective May 15, 2002.
Management has determined that implementation of SFAS 145 did 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


                                     20


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 did 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 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 did not have an
effect on the Company's financial statements.

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

Real estate sales and cost of sales consisted of:

                                       2004              2003
                                       ----              ----

         Homesite/acreage sales      $674,000          $308,000
         Cost of Sales                 73,000            83,000
                                     --------          --------
         Gross Profit Margin         $601,000          $225,000
                                     ========          ========

         In the second quarter 2004, the Company closed on sales of two
         unusual real estate parcels, with a sales price of $250,000 each.
         These two parcels were not carried for value on the Company's
         books, inasmuch as they were undevelopable thin strips of mangrove
         fringe. However, because of the height of the mangroves, the
         adjoining property owners purchased these fringe strips in order to
         be able to enhance the view amenity on their proposed developments.

         Other income was $9,000 for the years 2004 and 2003, respectively.
         The other income mainly consists of recoveries of contracts
         receivable which have been fully provided for.

                                     21



                      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 restricted escrow funds at December 31, 2004 and December 31,
2003 was $252,000 and $1,000 respectively. The Company restored $250,000 of
the restricted escrow funds in September 2004.

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

         Net receivables on real estate consisted of:

                                                            2004        2003
                                                            ----        ----

                 Contracts receivable on homesite sales   $ 64,000    $ 64,000
                 Other                                       1,000      21,000
                                                          --------    --------
                                                          $ 65,000    $ 85,000
                 Less:  Allowance for cancellations        (64,000)    (64,000)
                                                          --------    --------
                                                          $  1,000    $ 21,000
                                                          ========    ========

         The Company generally considers receivables on real estate sales
delinquent if the scheduled installment payment is over 30 days past due. At
December 31, 2004 and 2003 delinquent receivables approximated $64,000,
respectively.

         Contracts receivable on home site sales and related receivables are
fully provided for cancellation at December 31, 2004 and 2003. The Company
has been actively pursuing collection on the remainder of lots with
delinquent contacts receivable. 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. Nine lots foreclosed in
Citrus County on February 24, 2005, the Company was granted its claim of
$123,000 in delinquent receivables and did not get title of the lots. On
March 23, 2005 the Company foreclosed on one lot in Charlotte County for a
claim of $28,000. Any gain from these foreclosures will be recognized in
2005.

                                     22



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

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

         Land and improvement inventories consisted of:
                                                           2004         2003
                                                           ----         ----
                 Unimproved land                         $621,000     $613,000
                 Fully improved land                       16,000       57,000
                                                         --------     --------
                                                         $637,000     $670,000
                                                         ========     ========

6.       Property and Equipment:
         -----------------------
         Property and equipment consisted of:
                                                           2004         2003
                                                           ----         ----
                  Furniture, fixtures and other
                   equipment                             $ 31,000     $ 31,000

                  Less accumulated depreciation           (31,000)     (31,000)
                                                         --------     --------
                                                         $      -     $      -
                                                         ========     ========

7.       Other Assets:
         -------------
         Other assets consisted of:
                                                           2004         2003
                                                           ----         ----
                 Deposit with Trustee of 6 1/2%
                   debentures                            $161,000     $160,000
                 Prepaid Expenses                           8,000        7,000
                 Deferred Charges                          12,000        1,000
                                                         --------     --------
                                                         $181,000     $168,000
                                                         ========     ========

8.       Accounts Payable and Accrued Expenses:
         --------------------------------------
         Accounts payable and accrued expenses consisted of:
                                                           2004         2003
                                                           ----         ----
                 Accounts payable                         $12,000      $24,000
                 Accrued audit/tax expense                 29,000       27,000
                 Accrued consulting fees                    5,000       11,000
                 Accrued legal expense                      1,000        6,000
                 Accrued miscellaneous                      2,000        1,000
                                                          -------      -------
                                                          $49,000      $69,000
                                                          =======      =======

         Accrued Real Estate Taxes:
         --------------------------
                 Accrued real estate taxes consisted of:
                 Current                                 $  5,000     $ 11,000
                 Delinquent                               358,000      391,000
                                                         --------     --------
                                                         $363,000     $402,000
                                                         ========     ========

                                     23


                      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:
                                                     2004         2003
                                                     ----         ----
         Credit agreements - primary lender
         (Balance is past due, bearing interest
         at prime plus 5.0%):                    $  500,000   $  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
                                                 ----------   ----------
                                                 $1,698,000   $1,898,000
                                                 ==========   ==========

The prime rate at December 31, 2004 and 2003 was 5.25% and 4.0%
respectively.

         In September 2004, the Company made a principal payment of $200,000
to reduce the primary lender indebtedness.

         At December 31, 2004 assets collateralizing the Company's credit
agreements with its primary lender totaled $953,000, of which $252,000
represented escrow held by the primary lender, $64,000 represented gross
receivables on real estate sales, and $637,000 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 7.3% as of December 31, 2004 and 7.2% as of December 31, 2003.

         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:
                                                     2004         2003
                                                     ----         ----
         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
                                                 ==========   ==========

         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.

                                     24


                      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 $11,110,000 at December 31, 2004 and
$10,154,000 as of December 31, 2003.

         The debentures are not collateralized and are not subordinated to
each other, but are subordinated to senior indebtedness ($3,198,000 at
December 31, 2004). 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.

         No assurances can be made that the Company can achieve this
objective.

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., 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 $10,838,000 and $9,252,000 at December 31,
2004 and 2003 respectively.

                                     25


                      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, 2004 and 2003, to the Company's effective
income tax rates follows:

<TABLE>
<CAPTION>
                                                    2004                             2003
                                                    ----                             ----
                                                               ($ in thousands)
                                       Amount of tax                   Amount of tax
                                       -------------     Percent of    -------------        Percent of
                                                        Pre-tax Loss                       Pre-tax Loss
                                                        ------------                       ------------
<S>                                       <C>              <C>             <C>                <C>
Expected tax (credit)                     $(742)           (34.0%)         $(821)             (34.0%)
State income taxes, net of                  (87)            (4.0%)           (97)              (4.0%)
 federal tax benefits
Increase in valuation allowance             829             38.0%            918               38.0%
                                          -----            -----           -----              -----
                                          $   -                -           $   -                  -
                                          =====            =====           =====              =====
</TABLE>

         At December 31, 2004, the Company had an operating loss carry
forward of approximately $35,000,000 which will expire at various dates
through 2024.

                                                     2004         2003
                                                     ----         ----
                                                     ($ in thousands)
Deferred tax asset:
    Net operating loss carryover                   $ 13,727     $ 12,898
    Adjustments to reduce land to net
     realizable value                                    12           12
    Expenses capitalized under IRC 263(a)                56           56
    Valuation allowance                             (13,623)     (12,794)
                                                   --------     --------
                                                   $    172     $    172
Deferred tax liability:
    Basis difference of land and
     improvement inventories                       $    172     $    172
                                                   --------     --------

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

                                     26


                      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, 2004 cumulative preferred dividends in arrears
totaled $6,195,000 ($640,000 of which related to the year ended December 31,
2004). 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, 2004, 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, 2004 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 2004 the Company accrued $12,000 in tax
penalties on 1997 real estate taxes in litigation.

                                     27


                      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. In November 2004, the trial court conducted an
evidentiary hearing on our motion for rehearing, but the motion was denied.
In December 2004, an appeal to the District Court of Appeals was filed by
the Company. In February, 2005 the 5th District Court of Appeals has
affirmed the trial court's decision that denied Sugarmill Woods' request
that the subject property be classified agricultural for ad valorem tax
purposes. Based upon recent Florida Supreme Court precedent the Company
decided against moving for rehearing. The Company does not believe that the
resolution of this matter will have a material effect on its financial
position.

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

         As of December 31, 2004 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 2004 and 2003.

                                     28


                      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, 2004, the carrying value of the Company's
assets was approximately $1,639,000. Consulting fees totaling $7,000 and
$6,000 were accrued during 2004 and 2003, respectively. The Company made a
payment of $12,000 in 2004 for consulting fees. As of December 31, 2004 and
2003, a total of $5,000 and $11,000, 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, 2004 had an outstanding balance, including accrued interest of $480,000.
Interest accrued on this loan was $11,000 for the years 2004 and 2003.

         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, 2004 and
2003 was $340,000. Interest on the loans was $27,000 and $34,000 for 2004
and 2003, respectively.

         In 2004 and 2003 the Company incurred expenses totaling $8,000 and
$25,000, respectively, for the services of Hallmark Senior Housing, Inc., a
related entity, to handle analysis of real estate owned and options
available. This effort has generated an increase in real estate sales for
2004 and 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.

                                     29


                      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:

                                             Carrying              Fair
            2004                              Amount              Value
            ----                              ------              -----

Cash and short-term investments             $   453,000         $453,000
Other Receivables                               368,000          368,000
Accounts payable                                 12,000           12,000
Debt                                         12,257,000                -

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

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

                                               2004             2003
                                               ----             ----
Numerator:
Net (Loss)                                  $(2,183,000)     $(2,414,000)
Preferred Dividends                            (640,000)        (640,000)
                                            -----------      -----------
(Loss) Available to
  Common Shareholders                       $(2,823,000)     $(3,054,000)
                                            ===========      ===========

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                                     (.53)            (.57)
         Diluted                                   (.53)            (.57)

                                     30


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(e) 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, 2004. There have been no changes in the Company's internal control over
financial reporting during the Company's fourth fiscal quarter ending
December 31, 2004, that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial
reporting.

Item 8B. Other Information
-------- -----------------

         Not Applicable

                                     31


                                  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, 2005.

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

Laurence A. Schiffer  Director of the Company since April 1987;  President and
     (age 65)         Chief Executive Officer and Chief Financial 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.    Director and Chairman of the Company's Board of Directors
                      since May (age 61) 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 expert 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 (principal accounting
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.

                                     32



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

         The Company's Chief Executive Officer, and Chief Financial 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
2004.

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

         The table below provides certain information as of March 25, 2005
regarding the beneficial ownership of the Common Stock and the Class A
cumulative convertible preferred stock (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                             426,514(4)        125,000(4)      8.0%       6.3%         7.5%
         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 405,613 shares of Common
         Stock; shared voting and investment power over 20,901 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.

                                     33


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
         (2,509). 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
         (2,509). 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:

         <C>                            <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, 2004, 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 $500,000 at December 31, 2004,
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, 2004 and 2003, the restricted escrow balance
was $252,000 and $1,000, respectively. The Company restored $250,000 of the
restricted escrow funds in September 2004.

         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 2004 and 2003. The following is a list of services provided:

                                     34


         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, 2004, the book value of the Company's assets was approximately
$1.6 million. Consulting fees totaling $7,000 and $6,000 were accrued during
2004 and 2003, respectively. The Company made a payment of $12,000 in 2004
for consulting fees. As of December 31, 2004 and 2003, a total of $5,000 and
$11,000, 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

                                     35


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, 2004, 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 $5,807,000. 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, 2004 there was accrued and
unpaid interest with respect thereto in the amount of $5,032,000.

         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, 2004 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 of this receivable at December 31, 2004
and 2003 was $340,000. Interest on such receivables was $27,000 and $34,000
for 2004 and 2003, respectively.

         In 2004 and 2003, the Company incurred expenses totaling $8,000 and
$25,000, respectively, for the services of Hallmark Senior Housing, Inc., a
related entity, to provide analysis of real estate owned and options
available. This effort has generated an increase in real estate sales for
2004 and 2003.

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

                                     36


Item 13. Exhibits
-------- --------

         Reference is made to the Exhibit Index contained on page 39 herein
         for a list of exhibits required to be filed under this Item.

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, 2004 and December 31,
2003 were:

                                                  2004            2003
                                                  ----            ----

                Audit Fees                      $22,900          $23,300
                Audit Related Fees                    0                0
                Tax Fees                          3,900            6,100
                All Other Fees                        0                0
                                                -------          -------
                                                $26,800          $29,400
                                                =======          =======

         Tax fees are comprised of fees for tax compliance, tax planning,
and tax advice. Corporate tax services encompass a variety of permissible
services, including technical tax advice related to U.S. tax matters as well
as preparation of applicable tax returns.

                                     37



                      PGI INCORPORATED AND SUBSIDIARIES

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

                               PGI INCORPORATED
                               (Registrant)

Date: March 31, 2005           By: /s/ Laurence A. Schiffer
      --------------               ------------------------
                               Laurence A. Schiffer, President
                               (Duly Authorized Officer and
                               Principal Executive 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         Chairman of the Board               March 31, 2005
------------------         Secretary
Andrew S. Love


/s/ Laurence A. Schiffer   Vice Chairman of the Board,         March 31, 2005
------------------------   President, Principal Executive
Laurence A. Schiffer       Officer, Principal Financial
                           Officer, and Principal Accounting
                           Officer

                                     38


EXHIBIT INDEX

2.       Inapplicable.

3.1      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).

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 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).

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).

                                     39


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).

                                     40


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).

11.      See Note 18 to the consolidated financial statements.

13.      Inapplicable.

14.      Inapplicable.

16.      Inapplicable.

18.      Inapplicable.

20.      Inapplicable.

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,
         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,
         filed herein.

                                     42


EXHIBIT INDEX (continued)


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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