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

                                FORM 10-KSB

[  X  ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
                For the fiscal year ended December 31, 1997

                                    OR

[     ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
            For the transition period from _______ to _______.

                      Commission File Number  1-10084


                       RESORT INCOME INVESTORS, INC.
              ----------------------------------------------
              (Name of small business issuer in its charter)

         Delaware                                     36-3593298           
(State of other jurisdiction of                  (I.R.S. Employer Iden-    
incorporation or organization)                   tification Number)        

 150 South Wacker Drive, Suite 2900, Chicago, Illinois       60606
    (Address of principal executive offices)               (Zip Code)      

Issuer's telephone number: (312) 683-3323

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

 Title of each class          Name of each exchange on which registered    
Shares of Common Stock             NASDAQ Electronic Bulletin Board        

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

                                   None
                             (Title of Class)

Check whether the Issuer (1)  filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the Issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. 
YES [ X ].  NO [    ].

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  [ X ]

State the number of shares of common stock outstanding as of April 30,
1998: 4,156,000.

State issuer's revenues for its most recent fiscal year:  $853,655.

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within
the past 60 days: $968,877.

                    DOCUMENTS INCORPORATED BY REFERENCE

A portion of the prospectus of the Registrant dated October 24, 1988 (the
"Prospectus") and filed pursuant to Rule 424 under the Securities Act of
1933 is incorporated by reference into Parts II and III of this Annual
Report on Form 10-KSB.


<PAGE>


                             TABLE OF CONTENTS



                                                             Page
                                                             ----

PART I

ITEM 1.      DESCRIPTION OF BUSINESS . . . . . . . . . . . .    1

ITEM 2.      DESCRIPTION OF PROPERTY . . . . . . . . . . . .    5

ITEM 3.      LEGAL PROCEEDINGS . . . . . . . . . . . . . . .    5

ITEM 4.      SUBMISSION OF MATTERS TO A 
             VOTE OF SECURITY HOLDERS. . . . . . . . . . . .    7


PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND 
             RELATED STOCKHOLDER MATTERS . . . . . . . . . .    8

ITEM 6.      MANAGEMENT'S DISCUSSION AND 
             ANALYSIS OR PLAN OF OPERATION . . . . . . . . .    9

ITEM 7.      FINANCIAL STATEMENTS  . . . . . . . . . . . . .   19

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


PART III

ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS 
             AND CONTROL PERSONS; COMPLIANCE 
             WITH SECTION 16(a) OF THE EXCHANGE ACT. . . . .   20

ITEM 10.     EXECUTIVE COMPENSATION. . . . . . . . . . . . .   21

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 
             OWNERS AND MANAGEMENT . . . . . . . . . . . . .   22

ITEM 12.     CERTAIN RELATIONSHIPS AND 
             RELATED TRANSACTIONS. . . . . . . . . . . . . .   23


PART IV

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . .   24



SIGNATURES   . . . . . . . . . . . . . . . . . . . . . . . .   25





<PAGE>


                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

     Certain statements in this Annual Report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  Discussions containing forward-
looking statements may be found in this section and in the section headed
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."  Without limiting the foregoing, words such as "anticipates,"
"expects," "intends," "plans" and similar expressions are intended to
identify forward-looking statements.  These statements are subject to a
number of risks and uncertainties.  Actual results could differ materially
from those projected in the forward-looking statements.  The Company
undertakes no obligation to update these forward-looking statements to
reflect future events or circumstances.

     Resort Income Investors, Inc. (the "Company") is a Delaware
corporation organized pursuant to a Certificate of Incorporation filed on
July 20, 1988.  The Company commenced a public offering of up to 3,600,000
shares of common stock (subject to increase to 4,140,000 shares to cover
over-allotments) pursuant to a Registration Statement filed on Form S-11
under the Securities Act of 1933, as amended, which was declared effective
by the Securities and Exchange Commission on October 24, 1988.  Pursuant to
the public offering, the Company received gross proceeds of $51,750,000
from the sale of 4,140,000 shares, plus an additional $200,000 from the
sale of 16,000 shares to RC&H, Inc. ("RC&H"), the Company's initial
investment manager, at the public offering price of $12.50 per share.

     In late June 1995, Mr. Christopher B. Hemmeter ("CBH"), then the
Chairman of the Board, President and Chief Executive Officer of the
Company, informed the Company that interest and principal would not be paid
when due on demand loans made by the Company to him personally or to
entities affiliated with him (the "Affiliated Borrowers").  Further, he
informed the Company that he would not be able to make timely payments of
such interest and principal on behalf of the Affiliated Borrowers pursuant
to guarantees he had made in connection with the Affiliated Borrowers'
loans, thereby creating an event of default for each of the loans.  The
affected loans constituted all of the demand loans to related parties held
by the Company, aggregating $36,605,000, of which CBH and his wife,
Patricia Hemmeter, were personally the borrowers of $15,000,000 and the
Affiliated Borrowers were the borrowers of $21,605,000, as of the date of
such announcement.  On September 24, 1997, CBH and his wife filed a joint
voluntary petition pursuant to Chapter 7 of the Bankruptcy Code in the
United States Bankruptcy Court for the Central District of California.  The
current carrying value of the Company's loan to CBH has been written down
to zero and, based on current information, management of the Company does
not anticipate any significant amount of such indebtedness will be
satisfied.

     The Company announced on June 29, 1995, that it would commence an
orderly self-liquidation of its assets over an estimated 24- to 36-month
period.  The Company also determined that it would take a charge to income
in the second quarter of 1995 in an amount that, in management's judgment,
based upon then available information, would be adequate to absorb
estimated losses related to the loan portfolio.  The amount of the charge
was based on management's judgments regarding the ability of CBH and the
Affiliated Borrowers to repay such loans and also reflected management's
judgments concerning the extent that the estimated realizable value of the
Company's collateral would not provide for the recovery of the Company's
investment in the loans and accrued interest, in light of CBH's inability
to perform on his guarantees in a timely manner.  The Company reflected,
for the second quarter of 1995, an allowance of $10,367,903, consisting of
$9,900,000 for the loan to CBH and $467,903 for uncollectibility of
interest accrued as of December 31, 1994 but unpaid as of June 30, 1995. 
Further, interest of $2,043,017 accrued during 1995 but unpaid as of
June 30, 1995, was reversed by a charge against interest income. 
Additionally, $1,250,000 was provided for amounts that management estimated


<PAGE>


would be needed to advance to first lien holders and others to protect the
Company's collateral position while the plan of liquidation, which includes
negotiations with CBH and the Affiliated Borrowers, is accomplished.

     The Company also announced that Messrs. John R. Young and Daniel D.
Lane, the Company's then independent directors (the "Independent
Directors") assumed responsibility for negotiations with CBH and the
Affiliated Borrowers to maximize the Company's recovery of its investment
in loans and accrued interest.  Based on information provided to the
Independent Directors by CBH and the Affiliated Borrowers, the Independent
Directors reviewed CBH's financial condition and the financial condition of
the Affiliated Borrowers, as well as the terms of the Company's loans, the
collateral for certain of the loans (including the existence of senior
liens on certain of the collateral), appraisals of certain of such
collateral and other information concerning the value of the other
collateral, and other factors, to determine the amount of the charge and in
reaching the decision to proceed with the liquidation of the Company's
assets.

     The Company also decided to cease accruing interest on its current
loans for financial statement purposes only and convert each of its loans
to the Affiliated Borrowers maturing June 30, 1995 to demand loans, and
that periodic liquidating distributions be made to the stockholders of the
Company as loans are repaid, subject to allowances for necessary reserves
and working capital, to allow the Company to protect its remaining
collateral position and assets and, in that regard, that all quarterly
distributions be eliminated.  Finally, the Company determined that no new
loans would be made by the Company and that any additional advances related
to existing loans to the Affiliated Borrowers would be made only in an
effort to protect the collateral position of the Company.

     In addition, the Company, on June 29, 1995, also terminated its
advisory agreement with R.I.I. Advisors, Inc. ("R.I.I. Advisors"), the
Company's investment manager, which entity was controlled by affiliates of
CBH.

     On August 8, 1995, CBH resigned as Chairman of the Board, President
and Chief Executive Officer of the Company and Mr. Mark M. Hemmeter, the
son of CBH, resigned his positions with the Company as Executive Vice
President, Secretary, Treasurer and Director of the Company.  On such date,
the resignations of CBH and Mark Hemmeter were accepted by the Independent
Directors.  Also, the Company decided that Mr. John R. Young, an
Independent Director since the Company's inception in 1988, would become
the Chairman of the Board of Directors, President, Chief Executive Officer
and Chief Financial Officer of the Company immediately.  Also, Mr. Daniel
D. Lane, an Independent Director of the Company since 1990, would remain an
Independent Director of the Company and also be designated as the Company's
Secretary, Treasurer and Chief Accounting Officer.  At this time, the
Company also retained the consulting services of Mr. Neil D. Hansen to work
with the Company's Directors in connection with the Company's orderly self-
liquidation of its assets.  From the inception of the Company through 1990,
Mr. Hansen was the Company's Executive Vice President, Secretary and
Treasurer.  The Company also decided to relocate its headquarters to
Chicago, Illinois and establish banking relations with LaSalle National
Bank of Chicago.


<PAGE>


     From inception of the Company until May 4, 1991, RC&H acted as the
Company's investment manager.  On February 16, 1991, a majority of the then
independent directors of the Company authorized the termination of the
investment management agreement with RC&H effective May 4, 1991.  On such
date, R.I.I. Advisors became the Company's Investment Manager.  Both
advisors were controlled by affiliates of CBH.  As described earlier, on
June 29, 1995, the Company terminated its investment management agreement
with R.I.I. Advisors and retained Mr. Hansen, an outside consultant, to
assist the Directors in the orderly self-liquidation of the Company.  RC&H
and R.I.I. Advisors, when discussed in connection with their capacity as
the former investment managers to the Company, shall be referred to herein
collectively as the "Investment Manager."

     The original business plan of the Company contemplated the Company
principally making mortgage loans primarily to affiliates of CBH ("Mortgage
Loans") which would generally be secured by either luxury destination
resorts or unimproved property anticipated to be developed into luxury
destination resorts.  In light of the state of the real estate market in
general during the early 1990's, and the resort development market in
particular, the Company shifted its focus to making Mortgage Loans secured
by gaming related developments or unimproved property anticipated to be
developed into gaming related developments.  The Mortgage Loans were to be
secured principally by junior and, to a lesser extent, senior mortgages on
real properties or by interests in other real estate investment trust-
qualifying assets.  In addition, Hemmeter Guaranty Corporation (the
"Guarantor"), an affiliate of CBH, agreed to purchase defaulted Mortgage
Loans, if any, made to Affiliated Borrowers, in an aggregate amount of up
to 20% of the gross proceeds of the Company's public offering (the
"Mortgage Loan Purchase Guaranty").  Pursuant to the Mortgage Loan Purchase
Guaranty, the Guarantor was to pay the amount of any accrued but unpaid
base interest plus the amount of the outstanding principal and interest
reserve, subject to the Mortgage Loan Purchase Guaranty.

     The Company's objectives in making investments in Mortgage Loans were
to:  (i) distribute cash on a quarterly basis to stockholders (the
"Stockholders"); (ii) preserve and protect the Stockholders' capital; and
(iii) realize the benefit of capital appreciation in the value of the
assets collateralizing the Mortgage Loans through the receipt of bonus
interest.

     The Company's objective was to structure its Mortgage Loan portfolio
to provide for the receipt of points, base interest and bonus interest at
combined rates sufficient to allow the Company to make distributions to the
Stockholders on a quarterly basis, at a rate equal to a 12% per annum, non-
compounded, cumulative return on the initial public offering price ($12.50
per share), or $1.50 per share annually.  This return was guaranteed (the
"Cash Flow Guaranty") for the period from October 31, 1988 (initial closing
date) through October 31, 1991 (the "Cash Flow Guaranty Period"). 
Throughout such period, Affiliated Borrowers were obligated to pay
supplemental interest in amounts necessary to enable the Company to make
the specified distributions, which amounts were provided by the Guarantor
to the Affiliated Borrowers pursuant to the Cash Flow Guaranty.  During the
Cash Flow Guaranty Period a total of $385,528 of supplemental interest was
required and subsequently paid in order that the Company meet its cash flow
requirements under the Cash Flow Guaranty.  These amounts were credited
dollar-for-dollar against up to 50% of the amounts later remitted by the
Affiliated Borrowers as bonus interest, and all but $11,752 of the total
amount of supplemental interest was recaptured in this manner.

     Effective with the announcement of an intention to liquidate the
Company, the accounting basis used by the Company in preparing its
financial statements changed from historical cost to the liquidation basis
of accounting.



<PAGE>


     On July 25, 1995, the Company was informed that the Securities and
Exchange Commission (the "Commission") was conducting an informal inquiry
of matters related to the Company.  The Company has and continues to
provide information to the Commission in response to the Commission's
document requests.  On October 25, 1995, the Commission converted the
informal inquiry to a formal investigation.

     In October 1995, the Company also decided to retain an independent
financial advisor to review the status of the Company's loans, the
financial position of the Affiliated Borrowers and the proposed work out
plans to be presented by the Affiliated Borrowers.  It was determined that
an independent third party with extensive experience in real estate finance
related matters would provide the Directors with additional pertinent
information so as to assist the Directors as the Company proceeds with its
self-liquidation.  The Company sought bids from various independent
financial advisors and retained the firm of Coopers & Lybrand L.L.P.
("C&L") on November 3, 1995.  C&L analyzed certain assets securing the
Company's Waikiki, Outlaws, Canadian Pavilion, Sint Maarten and CBH Loans. 
The scope of services included analysis of the current status of the loans,
alternative courses of action and C&L's recommendations with regards to an
appraisal estimating the value of one of the assets collateralizing one of
the Company's loans.

     The Company also decided that it would seek to locate an additional
Director who would be considered independent under the terms of the
Company's Amended and Restated By-Laws.  On January 26, 1996, Messrs. Young
and Lane appointed Mr. Thomas A. Ellsworth as an Independent Director of
the Company, as well as a member of its Audit Committee.  See Item 9.

     As of December 31, 1997, the Company's investment in loans had a
carrying value of $0, which is net of a $14,267,000 allowance for
impairment of the loan to CBH and his wife, and a $1,600,000 allowance for
impairment on the Company's loans to the Outlaws Borrower, an Affiliated
Borrower.  At December 31, 1997, all the loans are on non-accrual status. 
Additionally, through December 31, 1997, the Company had advanced
approximately $740,000 to the Affiliated Borrowers in an effort to protect
the Company's collateral positions.

     The Company qualified and will be treated as a real estate investment
trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986,
as amended (the "Code"), for the year ended December 31, 1997. Management
of the Company believes that the Company will not be required to make
distributions to the Stockholders in the near term to maintain its status
as a REIT.

     The Company did not directly employ any persons during 1997.  Mr. Lane
resigned as the Company's Treasurer as of November 18, 1997 and Mr. Hansen
was elected by the Directors to replace Mr. Lane in such capacity on such
date.  The Independent Directors were compensated for their services as
directors and the Company entered into consulting arrangements with Messrs.
Young and Hansen.  See Items 9 and 10 for further details.

     On December 3, 1997, the Company filed preliminary proxy materials
with the Commission, outlining the Company's proposed plan of liquidation. 
In arriving at the determination to continue the Company's original plan to
liquidate, the Company's Board of Directors evaluated alternatives to
enhance stockholder value.  One alternative considered by the Directors was
the sale of all or substantially all of the assets of the Company to a
single buyer.  During the last three quarters of 1997, the Company received
unsolicited informal indications of interest from third parties concerning
possible acquisition of substantially all of the Company's assets.  The
Board has not, however, received a written offer, proposal or other
commitment that would provide for a greater distribution to the
stockholders than that which is currently anticipated under the terms of a


<PAGE>


liquidation.  Based on the Company's valuation of its current assets and
its anticipated expenses related to the liquidation of the Company,
management of the Company currently believes that the liquidation
distribution to the Stockholders will be approximately $.52 to $.62 per
share, however, there can be no assurance that an amount within this range
will be distributed to the Stockholders due to the fact that the exact
amount of the expenses related to the liquidation, the continued revenues
from the Company's assets and the exact amount the Company will receive at
the time it liquidates its assets cannot be quantified at this time.

ITEM 2.  DESCRIPTION OF PROPERTY

     The Company was formed to make Mortgage Loans and Temporary
Investments collateralized by interests in non-operating real property or
other real estate investment trust qualifying assets and will not own any
properties unless it is a result of a foreclosure action against the
collateral of its Affiliated Borrowers.  See Notes 5 and 6 of the Notes to
Financial Statements for information pertaining to the properties which
collateralize the Company's loans.

ITEM 3.  LEGAL PROCEEDINGS 

     (a & b)

     On July 3, 1995, a class action complaint captioned "Sarnoff v. Resort
Income Investors, Inc., et al., Doc. No. 95 B 1665" was filed against the
Company, CBH, Mark M. Hemmeter ("MMH") and Deloitte & Touche LLP, the
Company's independent auditors at that time, in U.S. District Court for the
District of Colorado alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and other provisions of the federal
securities laws and the rules promulgated by the Securities and Exchange
Commission (the "Commission").  On August 24, 1995, a second class action
suit captioned "Contract v. Resort Income Investors, Inc., et al., Doc. No.
95 B 2184," alleging similar violations of the federal securities laws, was
filed in the U.S. District Court for the District of Colorado against each
of the defendants in the Sarnoff lawsuit and Daniel D. Lane ("DDL"),
Christopher R. Hemmeter ("CRH"), Gregory Hooper ("GH") and John R. Young
("JRY").  In November 1995, the two actions were consolidated (collectively
referred to as the "class action litigation").

     In June 1995, two derivative actions were filed in the Court of
Chancery of the State of Delaware in and for New Castle County, "Alpert v.
Hemmeter et al., Doc. No. 14839," and "Frank, et al. v. Hemmeter et al.,"
Doc No. 14413.  The Company is a nominal defendant in each of these cases. 
The defendants in both cases are CBH, MMH, DDL and JRY.  The complaints
allege that CBH, MMH, DDL and JRY breached their fiduciary duties to the
Company, wasted Company assets and that CBH stood in a conflict of interest
position.  The complaints have been consolidated (collectively referred to
as the "derivative litigation").  The plaintiffs in the derivative
litigation in October 1997 filed an action in the U.S. District Court in
Colorado in order to seek approval of the settlement of the derivative
actions in that Court concurrently with the securities class action
settlement, described below.  The derivative complaint filed in Colorado
alleges substantially the same claims asserted in the complaints in the
Delaware litigation.

     On November 26, 1997, the parties to the class action litigation and
the derivative litigation filed a Stipulation of Settlement with the U.S.
District Court in Denver, Colorado.  On December 3, 1997, the District
Court held a hearing at which it granted preliminary approval of the
settlement and authorized the plaintiffs to distribute and publish notice
of the settlements.  The court granted final approval of the settlements. 
The Stipulation of Settlement emphasizes that the existence of the
settlements should not be considered an admission of liability by any
defendant with respect to any of the claims asserted.


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS (Continued)

     The federal district court granted final approval of the settlements
of both the federal securities class action litigation and derivative
litigation.  In approving the settlement, the Court held that it was in all
respects fair, reasonable and adequate to the members of the class, the
Company and all the parties.  The settlement was effective on April 14,
1998.  On April 28, 1998, the parties to the derivative litigation filed a
motion to dismiss the cases based on the approval of the settlement by the
federal district court.  Management of the Company anticipates the motion
will be granted in the near future.

     The class action litigation settlement provides that all investors,
other than the defendants, who purchased shares in the Company between
March 31, 1993 and June 29, 1995, will be eligible to participate in the
settlement proceeds.  The settlement of the class action litigation
provides for a payment of at least $5,630,000, plus accrued interest on
portions of this amount.  The economic components of the settlement are as
follows:

     1.   $3.63 million paid by the Company's directors' and officers'
issuer, and former auditors;

     2.   The approximately $1 million left from the settlement of the
derivative action, after attorneys fees are awarded by the Court;

     3.   A payment by the Company of an amount equal to the greater of: 
(a) 44 percent of the Company's net assets and liquidation valued as of
December 31, 1997, or (b) $1 million.  The amounts available for
distribution to the class of investors covered by the settlement will be
determined after court-approved attorneys' fees and expenses have been
awarded.  The amount that individual class members may receive will be
determined by the monies available after expenses and attorneys' fees and
the number and amount of claims filed.

     The derivative litigation was settled for $1,425,000, contributed by
the Company's directors' and officers' insurer, plus accrued interest.  As
stated above, this amount, less derivative counsel's attorney's fees, will
be contributed to the settlement of the class action litigation.  The
counsel in the derivative litigation filed a request for fees of 30 percent
of the settlement amount, including expenses.  Counsel for the Plaintiffs
in the class action litigation filed a request for 30 percent of the
recovery, not including payment from the settlement of the derivative
litigation, plus expenses.  The Court granted the fee and expense requests.

     Notices which thoroughly addressed the settlement terms and the
process for filing claims were previously forwarded to class members and
current stockholders, as of November 18, 1997,  from the Clerk of the
Court.  Stockholders and class members should address all questions
pertaining to the administration of claims and the process for submitting
proof of claim forms to:

                       FRG Information Systems Corp.
               RE:  Resort Income Investors, Inc. Litigation
                   823 United National Plaza - Suite 500
                         New York, New York 10017
                        Telephone:  (212) 490-3550

     Through April 30, 1998, the Company has paid $1,000,000 toward
settlement and will pay the remaining portion of its contribution, if any,
within five business days of the receipt of audited financial statements
for the period ending December 31, 1997, or the filing of its Annual Report
on Form 10-KSB for that period, whichever is earlier.  At December 31,
1997, the Company has recorded $1,240,025 of accrued litigation settlement
costs.  In consideration for the settlement of the litigation, plaintiffs
in the class action litigation on behalf of themselves and all class
members and plaintiffs in the derivative liti- gation on behalf of
themselves and derivatively on behalf of the Company


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS (Continued)

provided releases to the defendants in the class action and derivative
litigation.  These releases, among other things, release the defendants
from any claims, whether known or unknown, that were or could have been
asserted in the class action and derivative litigation, or in any way
related to the Company, including, but not limited to, the sale or purchase
of stock issued by the Company.

     The Company's Board of Directors believes that the settlements were
beneficial to the Company because its liquidation can be more readily
accomplished now that the Company is unencumbered by the expense and
uncertainty of defending the litigation.

     Pursuant to the Company's by-laws and Delaware law, the Company is
advancing CBH's, MMH's, CRH's, GH's, DDL's and JRY's costs of defense in
the class action and derivative litigation.  CBH, MMH, CRH, GH, DDL and JRY
have executed undertakings to repay the Company for the advances if it is
ever determined that they were not entitled to receive the advances.  As
discussed above, CBH filed a voluntary bankruptcy petition on September 24,
1997.

     On November 14, 1997, the Company was served with a complaint in the
action pending in the Civil District Court for the Parish of Orleans, State
of Louisiana, entitled The Venture International Group v. C.C. Partners
Corp., et al., No. 1993-00870.  The claims in the complaint filed by the
Ernest N. Morial New Orleans Exhibition Hall Authority and the City of New
Orleans seek rescission and/or cancellation of any agreements and consent
judgments entered into between the Company, Canadian Pavilion Limited
Partnership, C.C. Partners Corp., Con Demmas, Venture International Holding
Company and Venture International Group.  Management of the Company is
currently reviewing its options with regard to the lawsuit and at this time
is unable to make an assessment as to the outcome of the litigation.

     On October 25, 1995, the Commission issued a formal order of
investigation captioned In the Matter of Resort Income Investors, Inc.,
Case No. HO-5327.  In connection with the investigation, the Company was
requested to produce certain documents and information.  The Company has
complied with these requests.  The Company has been advised that the
investigation should not be construed as an indication by the Commission or
its staff that any violation of law has occurred, or as a reflection upon
any person, entity, or security.  The Company cannot, at this time, predict
the outcome of the investigation or the financial impact, if any, to the
Company.  The Company, however, is not aware of any investigational
activities undertaken by the SEC during the past year.  Accordingly, the
Company believes the investigation may be complete.


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

     (a - d)  None




<PAGE>


                                  PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     (a)  The Company's shares of common stock were listed and traded on
the American Stock Exchange (the "AMEX") under the symbol "RII" until the
Company's shares were delisted from the AMEX on April 26, 1996. 
Subsequently, a market for the Company's common stock was established via
the electronic bulletin board system of the National Association of
Securities Dealers Automated Quotations, under the symbol "RIIV".  The high
and low sales prices for the shares by quarter for the two years ended
December 31, 1997 were as follows:

                 Quarter         Quarter's        Quarter's
                 Ending            High             Low    
                 -------         ---------        ---------

                 03/31/96            $1.50            $1.06
                 06/30/96             1.00              .40
                 09/30/96              .69              .38
                 12/31/96              .55              .16

                 03/31/97              .29              .26
                 06/30/97              .30              .18
                 09/30/97              .50              .22
                 12/31/97              .43              .17

     (b)  As of the date hereof, there are approximately 800 recordholders
of the Company's shares.

     (c)  The Company did not pay any distributions to the Stockholders in
1996 and 1997.

     The Company intends to make distributions to Stockholders in a amount
equal to at least 95% of its taxable income in order to continue to qualify
as a REIT in accordance with the Code.  The Company intends to make
liquidating distributions during 1998 of its cash receipts from loan
recoveries, less any amounts reserved to cover the Company's operating
needs prior to completion of the liquidation, including the costs of the
liquidation and defending the pending litigation.  The Company continues in
its determination to suspend distribution payments to the Stockholders in
light of the pending litigation filed against the Company and certain of
its current and former officers and directors and to protect the Company's
collateral position.  See Item 3.

      On March 25, 1996, the Company announced that it will not appeal the
decision of the AMEX to remove its common stock from the AMEX and,
therefore, consented to such removal.  This action became necessary since
the Company decided to self-liquidate in an orderly fashion and no longer
satisfied the financial guidelines of the AMEX for continued listing.




<PAGE>


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

GENERAL

     Certain statements in this Annual Report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  Discussions containing forward-
looking statements may be found in this section and in the section headed
"Description of Business."  Without limiting the foregoing, words such as
"anticipates," "expects," "intends," "plans" and similar expressions are
intended to identify forward-looking statements.  These statements are
subject to a number of risks and uncertainties.  Actual results could
differ materially from those projected in the forward-looking statements. 
The Company undertakes no obligation to update these forward-looking
statements to reflect future events or circumstances.

LIQUIDITY AND CAPITAL RESOURCES

     PLAN OF OPERATION

     As of December 31, 1997, the Company had real estate interest held for
sale with a carrying value of $1,925,000.  See below for further detail
regarding the real estate interest held for sale.  On June 23, 1997 and
December 19, 1997, the Company received $38,142 and $38,142, respectively,
representing the payment of interest on the combined Colorado Gaming, as
defined below, notes due through December 1, 1997.

     The Company will not make any new loans, however, the Company has
advanced funds to the Affiliated Borrowers to the extent deemed necessary
to protect the Company's position in the underlying collateral.  Through
December 31, 1997, the Company has advanced approximately $740,000 to the
Affiliated Borrowers in an effort to protect the Company's collateral
positions.  Management of the Company is continuing in its decision that no
periodic liquidating distributions will be made to the Stockholders of the
Company.  The Company believes that it will not be required to make
distributions in the near term to maintain its status as a REIT.  The
statement of net assets reflects the Company's best estimates of amounts
expected to be realized by its efforts to collect its investment in loans
and accrued interest, as well as other estimates about the recovery of
assets and the amounts of liabilities.  While the estimates of the
realizable amount of the loans, real estate interest held for sale and
accrued interest are based on an analysis of each asset by the Directors,
as well as valuations by independent appraisers of certain of the
collateral, there are few directly comparable real estate properties that
have been sold that can be considered in preparing such estimates.  The
amounts the Company will ultimately realize could differ materially from
the amounts assumed in arriving at the estimates reflected in the
December 31, 1997 statement of net assets.

     The Company's near term capital requirements will be for ongoing
operating costs during the period of self-liquidation and the costs
incurred in connection with the settlement of the pending litigation.  The
Company believes that its existing cash, cash equivalents and investment
balances should be adequate to fund near-term capital requirements.



<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
  AND RESULTS OF OPERATIONS

     The Company loaned $12,900,000 (the "Sint Maarten Loan") to R.C.H.
Investments, N.V., an affiliate of the Investment Manager (the "Sint
Maarten Borrower"), which was secured by a second mortgage on a 28-acre
site on the island of Sint Maarten in the Netherlands Antilles (the "Sint
Maarten Property").  This loan matured on May 7, 1992.  On May 12, 1992,
the Company agreed to make a new loan to the Sint Maarten Borrower in the
amount of $12,900,000 (the "New Sint Maarten Loan") to replace the Sint
Maarten Loan.  The New Sint Maarten Loan had an original term of
approximately 12 months, and was scheduled to mature on May 7, 1993.  The
New Sint Maarten Loan was modified a number of times to increase the
interest rate and extend the maturity date.  In December 1994, the New Sint
Maarten Borrower transferred its interests in the Sint Maarten Property and
the attendant obligation related to the New Sint Maarten Loan to R.C.H.
Investments, L.L.C., a Delaware limited liability company, whose
constituent members were the shareholders of the Sint Maarten Borrower (the
"New Sint Maarten Borrower").  On December 29, 1994, the New Sint Maarten
Borrower received an extension of the New Sint Maarten Loan to June 30,
1995 and the demand feature was withdrawn in consideration for which the
interest rate could be increased prior to maturity at the option of the
Company.  Due to the inability of the Affiliated Borrower, as well as CBH
in his capacity as the guarantor of the New Sint Maarten Loan, to fulfill
their obligations under the terms of the New Sint Maarten Loan, the Company
converted the New Sint Maarten Loan to a demand loan on June 30, 1995, the
date the New Sint Maarten Loan was scheduled to mature.

     The Sint Maarten Property also secured a first mortgage in the
principal amount of $4,000,000 in favor of a lender unaffiliated with the
Affiliated Borrowers.  Interest payments due the senior lender subsequent
to June 30, 1995 and through December 31, 1995, in the amount of
approximately $354,000 were funded by the Company and charged against the
$1,250,000 provided for by the Company to protect the collateral positions
on the Company's various loans.  The senior encumbrance matured on
December 31, 1995.  The Affiliated Borrower requested an extension of the
loan from the senior lender.

     Based upon the results of an appraisal prepared by an independent
third party, the carrying value of the New Sint Maarten Loan was $7,900,000
as of December 31, 1995 after a $5,000,000 reserve for impairment of value
was recorded against the loan during the quarter ended December 31, 1995. 
The Affiliated Borrower received a formal demand for payment from the
senior lender which demand stated that if payment was not received by
June 13, 1996, the senior lender would institute legal proceedings against
both the Affiliated Borrower and CBH personally, as the guarantor of such
loan.  Representatives of the Company met with the senior lender during the
second quarter of 1996 and were informed that the senior lender had
commenced the foreclosure process.  In connection with the foreclosure
process undertaken by the senior lender, the Sint Maarten Property was put
out to auction.  Pursuant to the terms of the auction, a minimum bid of
$8,000,000 was required and if a bid equal to or in excess of such amount
was not received, the auction process would be continued at a later date
with a lesser minimum bid.  On September 26, 1996, the auction for the Sint
Maarten Property was held, however, the minimum bid was not received.  In
this regard, the auction was rescheduled for November 14, 1996 and the
minimum bid was reduced to $7,000,000.  Based on this new minimum auction
price, the Company took an additional reserve, as of September 30, 1996,
for $5,500,000.  On November 14, 1996, the auction for the Sint Maarten
Property was continued, however, the minimum bid was not received and it
was rescheduled again until December 12, 1996.  As had occurred in
September and November 1996, no minimum bid was received.  The auction then


<PAGE>


was rescheduled for January 30, 1997.  At the auction on January 30, 1997,
a bid was received in an amount sufficient to retire the amount of the
principal balance of the first mortgage plus all accrued and unpaid
interest and the related fees and costs of the senior lender and provide
the Company with approximately $1,784,300.  On February 6, 1997, the
Company received the $1,784,300 of proceeds from the sale by public auction
of the Sint Maarten Property.  As a condition to the sale, the Company
released its liens against the Sint Maarten Property.  Thus, the Company no
longer maintains any interest in the Sint Maarten Property.  For the
quarter ended December 31, 1996, the Company recorded a final loss reserve
in the amount of $615,700 to reflect the proceeds received of $1,784,300.

     On February 11, 1992, the Company made two demand loans to Outlaws
Casino, Ltd., an affiliate of the Investment Manager (the "Outlaws
Borrower") in the amounts of $1,200,000 (the "Crook Loan") and $500,000
(the "Hudspeth Loan") (collectively, the "Outlaws Loans").  The Outlaws
Borrower sought the loans in order to fund a portion of the acquisition of
two adjacent parcels of land in Black Hawk, Colorado, known as the Crook
Parcel (approximately 16,000 square feet) and the Hudspeth Parcel
(approximately 5,500 square feet).  The Outlaws Borrower originally planned
to combine the Crook Parcel and the Hudspeth Parcel and construct a casino
of approximately 50,000 square feet containing approximately 800 slot
machines thereon.  The Outlaws Loans were collateralized by an assignment
of a partnership interest in the Outlaws Borrower; the Crook Loan was also
secured by a second mortgage on the Crook Parcel which was subordinated to
a seller note with a principal balance at December 31, 1996 of $2,561,621. 
The Hudspeth Loan was also secured by a first mortgage on the Hudspeth
parcel.  There was no senior encumbrance on the Hudspeth Parcel.

     On July 17, 1992, the Outlaws Borrower made draws of $500,000 and
$200,000 against the Crook Loan and Hudspeth Loan, respectively.  On
September 2, 1992, the Outlaws Borrower paid the Company $95,000 in
principal towards the then outstanding principal balance of the Hudspeth
Loan.  On October 30, 1992 and November 6, 1992, the Outlaws Borrower paid
the Company $150,000 and $50,000, respectively, in principal towards the
outstanding principal balance of the Crook Loan.  On November 30, 1992, the
Company agreed to increase the Crook Loan by $100,000 to a total of
$1,600,000.  The additional funds were used to cover expenses related to
the planned expansion and renovation of the Outlaws Casino, which plans
were abandoned by the Outlaws Borrower.  Subsequent to funding the $100,000
increase, the aggregate principal amount of the Outlaws Loans was increased
to $2,205,000, consisting of $1,600,000 for the Crook Loan and $605,000 for
the Hudspeth Loan.  The maturity of the Outlaws Loans was extended by the
Company to June 30, 1995.  On such date, the Company ceased accruing
interest on the Outlaws Loans and converted them to demand loans.

     In October 1995, representatives of the Outlaws Borrower informed the
Company that the Outlaws Casino had very little cash and that its bills
were approximately 45 days in arrears.  Such representatives also told the
Company that it was an absolute necessity for the Outlaws Casino to build
up its working capital reserves to approximately $150,000 so as to be able
to fund the operating deficits which usually occur in the winter due to the
weather conditions which hinder ingress and egress to the casinos located
in Black Hawk, Colorado.  The Company was also advised that the October
mortgage payment on the senior encumbrance secured by the Crook Parcel was
not made and that the Outlaws Borrower was in negotiations with the senior
lender to revise the terms of the loan.  In addition, these representatives
informed the Company that they were developing a marketing plan for the
Outlaws Casino which would appeal to local patrons who do not desire to
game in a large casino and that a potential sale of the Outlaws Casino
would need to be deferred until spring of 1996.



<PAGE>


     Based on this information, the Company decided to modify the terms of
the Outlaws Loans to require the Outlaws Borrower to make monthly payments
of "net revenue" from the casino and real estate which the Outlaws Borrower
had mortgaged to the Company as security for the loans (the "Properties"). 
Net revenue was defined as all operating revenues from the Properties less:

(a) the ordinary and reasonable expenses of the operation of the
Properties; (b) the interest and principal payments required by the
existing senior lender on the property which secured the Crook Loan; and
(c) the funds necessary to maintain no less than $150,000 of working
capital. In addition, the previous unpaid interest as of October 31, 1995,
in the amount of $105,598, was capitalized and added to the outstanding
balances of the Outlaws Loans.  Simultaneously, due to uncertainties about
the financial wherewithal of the Outlaws borrower, a loan loss reserve was
taken in the same amount of $105,598.  Despite the revised marketing plan
of the Outlaws Borrower, operations at the Outlaws Casino did not result in
the generation of funds necessary to allow for sufficient working capital,
therefore, the Company never received any monthly payments of net revenue
from the Outlaws Borrower during 1996 or 1997.

     As of December 31, 1996, the outstanding loan balances were $1,600,000
for the Crook Loan and $518,800 for the Hudspeth Loan.  The report prepared
for the Company by Coopers & Lybrand LLP ("C&L") dated January 15, 1996
concluded that the market value of the fee simple interest in the Outlaws
Casino was $2,500,000.  As of December 31, 1996, the senior encumbrance on
the Crook Parcel was $2,561,621.  Therefore, the Company set up a reserve
for the entire $1,600,000 of the Crook Loan.  During the fourth quarter of
1996, the Company set up a reserve for the Hudspeth Loan in the amount of
$86,200 based on the valuation from an appraisal commissioned by the
Company, reducing the carrying value at December 31, 1996 to $518,800.  On
April 30, 1997, $605,000 was placed in escrow on behalf of the Company by
an affiliate of the Outlaws Borrower in exchange for the Company releasing
its interests in the loans secured by the Properties.  On June 20, 1997,
the Company received cash proceeds of $605,000 less $17,000 for a lost note
charge, resulting in a realized gain of $86,200 in 1997.  Thus, the Company
no longer maintains any interest in the Properties.  CBH continues to be
liable for the uncollected portion of the Crook Loan plus interest at the
rate of 11% per annum.  The loan is on non-accrual status as of
December 31, 1997.

     On May 12, 1992, the Company made a demand loan in the amount of
$900,000 (the "Waikiki Loan") to Hemmeter Investment Company, now known as
Mideast and China Trading Company, a Hawaii general partnership, an
affiliate of the Investment Manager (the "Waikiki Borrower").  The proceeds
of the Waikiki Loan were used to acquire options on various properties in
New Orleans, Louisiana, in connection with gaming-related developments
pursued by the Hemmeter organization.  The Waikiki Loan was secured by a
sub-leasehold mortgage on the International Marketplace, a retail center in
Honolulu, Hawaii (the "Waikiki Property"), CBH's personal guaranty and a
collateral assignment of the Waikiki Borrower's interest as the sub-
sublessor of the Waikiki Property.  This loan bore interest at the rate of
9.5% per annum, payable quarterly in arrears, and was due on the earlier of
demand or May 12, 1993.  The Company agreed to extensions of  the term of
the Waikiki Loan through September 30, 1994.  On September 30, 1994, the
Waikiki Loan was further extended to March 31, 1995 in consideration for
which the interest rate was increased to 19.5%, 10% of which accrued and
was to be payable at the time the Waikiki Loan matured.  On March 16, 1995,
the Company agreed to further extend the maturity of the Waikiki Loan to
June 30, 1995.  On June 30, 1995, this loan went into default.  As a
result, the Company ceased accruing interest on the Waikiki Loan and
converted it to a demand loan.



<PAGE>


     On April 8, 1994, the Company made a demand loan in the amount of
$1,000,000 (the "Waikiki II Loan") to the Waikiki Borrower.  The proceeds
of the loan were used to fund working capital requirements of Grand Palais
Casino, Inc. ("GPCI"), an affiliate of the Company.  The Waikiki II Loan
was also secured by the Waikiki Property, CBH's personal guaranty and a
collateral assignment of the Waikiki Borrower's interest as the sub-
sublessor of the Waikiki Property. This loan bore interest at the rate of
9.5% per annum payable quarterly in arrears, and was due on the earlier of
demand or October 8, 1994.  On September 30, 1994, the Waikiki II Loan was
extended to the earlier of demand or March 31, 1995 in consideration for
which the interest rate was increased to 19.5%, 10% of which accrued and
was to be payable at the time the Waikiki II Loan matured.  On March 16,
1995, the Company agreed to further extend the maturity of the Waikiki II
Loan to June 30, 1995.  On June 30, 1995, this loan went into default. 
Consequently, the Company ceased accruing interest on the Waikiki II Loan
for financial statement purposes only and converted it to a demand loan.

     The Company modified the terms of the two Waikiki Loans on November 1,
1995 so as to require the Waikiki Borrower to make monthly payments of
$15,042 with interest accruing at a rate of 11% per annum.  As of June 30,
1997, the combined outstanding principal balances were $1,824,791.  On
July 23, 1997, the Company completed negotiations with the Company's
Waikiki borrower resulting in the Company receiving the borrower's interest
in the subleasehold of the International Marketplace (the "Subleasehold
Interest"), a retail center in Honolulu, Hawaii in exchange for the Company
releasing its interest in the loans.  In addition to taking title, the
Company received approximately $197,000 of escrowed rental income for such
property from December 1, 1996.  

     The valuation of the Subleasehold Interest is based upon a discounted
cash flow analysis.  The discounted cash flow analysis is a method of
estimating the present worth of future cash flow expectations by
individually discounting each anticipated collection at an appropriate
discount rate.  By forecasting the anticipated income stream and
discounting future value to current value, the capitalization process may
be applied to derive a value that an investor would pay to receive the
income stream generated by the International Marketplace.  In addition, the
value of the Company's interest in International Marketplace was discounted
a further 15% to reflect the potentially shortened time period the Company
has to market the property.  The amount of proceeds received from the
disposition of the Subleasehold Interest is dependent on a number of
conditions, many of which are beyond the power of the Company to control.  
Therefore, assets of the Company, such as the interest in the International
Marketplace, may be sold at prices that may not necessarily be equal to or
greater than their book value.  

     The Company received approximately $197,000 of escrowed rental
receipts and approximately $228,000 in monthly rental income through
December 31, 1997 which are recorded as rental income on the Statement of
Changes in Net Assets in Liquidation.  The term of the sublease expires on
March 30, 2010.  As lessor, the Company receives $23,969 monthly in minimum
rent and percentage rent of 12% of gross sales for the period through
March 31, 2003 increasing to 14% for the period April 1, 2003 through March
30, 2010.  As lessee, the Company pays $12,913 monthly for minimum rent and
percentage rent equal to 8% of gross sales.  In addition, the Company
receives $19,067 monthly for maintenance, advertising, promotional and
operating fees.  The Company pays approximately $11,100 in common area
maintenance fees.  The Company currently anticipates that it will receive
approximately $30,000 per month of income from this interest in the near
term.


<PAGE>


     The Company made a loan to Canadian Pavilion Limited Partnership, an
affiliate of the Investment Manager (the "Canadian Pavilion Borrower"), in
the amount of $2,600,000 (the "Canadian Pavilion Loan"), on or about
November 18, 1991.  The proceeds of the Canadian Pavilion Loan were applied
as follows:  $1,000,000 to purchase the $2,900,000 of defaulted mortgages
and notes encumbering the subleasehold interest in the Canadian Pavilion
and approximately $800,000 was advanced to an affiliate of the Canadian
Pavilion Borrower for it to purchase the subleasehold interest from a third
party.  The remaining $800,000 was used to provide working capital to the
Canadian Pavilion Borrower.  Immediately after the closing of the Canadian
Pavilion Loan, the interest of this third party was transferred to the
Canadian Pavilion Borrower.  The Canadian Pavilion is a wharf-front
property on the Mississippi River in downtown New Orleans.  It is part of
the International Pavilion which was erected as an exhibition hall for the
1984 World's Fair.  The Canadian Pavilion Loan originally bore interest at
9-1/2% per annum, payable quarterly in arrears and was to mature on the
earlier of demand or November 19, 1992.  The Company extended the maturity
of the Canadian Pavilion Loan on a number of occasions.  On May 18, 1994,
the loan was again extended to the earlier of demand or December 31, 1994
and the interest rate was increased from 9.5% to 10.5% per annum, payable
quarterly in arrears.  On December 7, 1994, the terms of the loan were
further modified to increase the interest rate to 22% per annum, 11.5% of
which accrued and was payable when the Canadian Pavilion Loan was retired. 
In addition, this modification provided that the demand feature be removed
from the loan so that the loan could not be called prior to December 31,
1994.  On December 16, 1994, the maturity date of the Canadian Pavilion
Loan was further extended by the Company to June 30, 1995.  On May 1, 1995,
the interest rate on the loan was increased to 26%, the default rate, as a
result of a monetary default per the terms of the loan agreement.  On June
30, 1995, the Company ceased accruing interest on the Canadian Pavilion
Loan and converted it to a demand loan.  In addition, the Company made
additional advances to the Canadian Pavilion Borrower to preserve the
underlying collateral in the amount of approximately $113,000 subsequent to
June 30, 1995.  During the third quarter of 1995, negotiations by and
between various governmental agencies, the former owner of the Canadian
Pavilion and the Canadian Pavilion Borrower proved unsuccessful and the
Canadian Pavilion Borrower received a termination letter regarding its
lease from the New Orleans Exhibition Hall Authority ("NOEHA").  After
receipt of the NOEHA letter, the Company had numerous discussions with
representatives of the Canadian Pavilion Borrower and its counsel in New
Orleans and real estate professionals located in New Orleans.  After
considering the input of these various parties, as well as the lack of
acceptance of riverboat gaming in the downtown New Orleans area and the
poor performance of the temporary land-based casino in New Orleans, the
Company concluded that the value of the property securing the loan to the
Canadian Pavilion Borrower had been significantly reduced.  Furthermore,
certain ongoing financial obligations of the Canadian Pavilion Borrower,
including insurance, payments to governmental agencies and maintenance
expenses were continuing with no assurance that such amounts, which had
been advanced by the Company, would be repaid to the Company nor was there
any assurance that the Company would receive any of the principal portion
of the Canadian Pavilion Loan since, after extensive marketing of the
property securing the Canadian Pavilion Loan, no significant interest in
the acquisition of the property arose.  Based on these factors, the Company
took a reserve, as of September 30, 1995, for the full $2,600,000 of the
Canadian Pavilion Loan.

     The Company was named as a defendant in two lawsuits, one of which was
brought by the entity which sold the property to the Canadian Pavilion
Borrower under a lender liability theory and the second lawsuit was brought
by the City of New Orleans and NOEHA demanding that the Company's mortgages
memorializing the Canadian Pavilion Loan be removed.  The Company completed
a settlement with the plaintiffs in 1996 wherein it assigned its interest
in the collateral for the Canadian Pavilion Loan for $50,000 and a
settlement and release from the litigation.  Thus, the Company no longer


<PAGE>


maintains any interest in the collateral.  As the Company had fully
reserved against this loan, the settlement did not require the Company to
take any further reserves.  In November 1997, the Company was served with a
complaint related to the litigation involving the Company which was settled
in 1996, as described above.  Management of the Company is currently
reviewing its options with respect to the lawsuit and at this time is
unable to make an assessment as to the outcome of the lawsuit.  See Item 3.

     On January 4, 1994, the Company made a loan to CBH in the amount of
$12,900,000 (the "Hemmeter Loan"), the proceeds of which were used for
working capital purposes for CBH's various gaming affiliates and to retire
certain indebtedness secured by three of Mr. Hemmeter's residences, one in
Hawaii and two in California.  This loan was originally secured by junior
mortgages on the aforementioned residences, bore interest at 12% per annum,
was payable quarterly in arrears, and was scheduled to mature on January 3,
1995.  On September 14, 1994, the Hemmeter Loan was modified to provide for
an additional $1,100,000 ("Additional Principal") for a total principal
balance of the Loan of $14,000,000.  The Additional Principal originally
bore interest at the rate of 22%, 12% of which was payable under the same
terms as the original loan, and the remaining 10% was accrued and was to be
payable upon the maturity or earlier prepayment of the Hemmeter Loan.  In
addition, the interest rate on the original $12,900,000 in principal was
increased to 21.7% effective October 1, 1994, 12% of which was payable
under the same terms as the original loan, and the remaining 9.7% was
accrued and was to be payable upon the maturity or earlier prepayment of
the note.  On December 16, 1994, CBH informed the Company that he was
selling his residence in Hawaii in late December 1994 and requested a
release of the Company's lien on the Hawaii residence and an extension of
the maturity date of the Hemmeter Loan, including the Additional Principal.

In response to CBH's request, the Company agreed that:  (i) it would
release its lien on the Hawaii residence effective January 3, 1995; (ii)
the maturity date of the Hemmeter Loan, including the Additional Principal,
be extended to June 30, 1995; and (iii) the interest rate on the Hemmeter
Loan and the Additional Principal be increased to 22.7% and 23%,
respectively, assuming that the Company's lien on CBH's Hawaiian residence
is released.  Thirteen percent of the interest on both the Hemmeter Loan
and the Additional Principal was to be paid under the same terms as
described above, and the remaining 9.7% of the Hemmeter Loan and the
remaining 10% of the Additional Principal would accrue and be payable upon
the maturity or earlier repayment of the Hemmeter Loan and the Additional
Principal.  The lien on the Hawaii residence was released on January 3,
1995 and the new interest rates for the Hemmeter Loan and the Additional
Principal took effect on such date.  On May 2, 1995, the Company agreed to
a further modification of the Hemmeter Loan to provide for an additional
$1,000,000 (the "Second Additional Principal") thereby increasing the
principal amount of the Hemmeter Loan to $15,000,000.  The Second
Additional Principal bore interest at the rate of 23%, 10% of which was to
be payable upon the maturity or earlier prepayment of the Second Additional
Principal.

     The carrying value of the Hemmeter Loan, including the Additional
Principal and the Second Additional Principal, was reduced by the Company
three times, once at June 30, 1995 by a $9,900,000 reserve, again at
September 30, 1995 by a $2,950,000 reserve and finally by $977,000 at the
time the California residences that served as collateral for the loan were
sold.  Also, approximately $611,000 of the $1,250,000 collateral
preservation reserve made by the Company at June 30, 1995 was allocated to
the Hemmeter Loan.  After paying the costs associated with the sale of
CBH's California residences, the Company received net proceeds of
approximately $733,000.  CBH and his wife still have personal liability for
the remaining $14,267,000 balance of the loan.  However, the current
carrying value of the Hemmeter Loan is zero.


<PAGE>


     On September 24, 1997, CBH and his wife, Patricia Hemmeter, filed a
voluntary petition pursuant to Chapter 7 of the Bankruptcy Code in the
United States Bankruptcy Court, Central District of California.  Management
of the Company will monitor the bankruptcy proceedings and will file all
necessary claims in order to protect the Company's interest in the
bankruptcy estate.  The Company will vigorously pursue its claim in the
bankruptcy proceeding but it is premature to determine what distribution,
if any, the Company will receive from this bankruptcy.

     On February 14, 1994, the Company made a loan to Grand Palais Casino,
Inc. ("GPCI"), an affiliate of CBH, in the amount of $4,000,000 (the "GPCI
Loan").  The proceeds of the GPCI Loan were used to cover certain expenses
of GPCI incurred in connection with the development of the single land-
based casino in New Orleans, Louisiana, of which GPCI was to be a one-third
owner.  The GPCI Loan bore interest at a rate of 14% per annum, payable
quarterly in arrears, was secured by the personal guarantee of CBH and was
due to mature on September 30, 1994.  On April 8, 1994, an additional loan
was made to GPCI in the amount of $2,250,000 under the same terms and
conditions as the GPCI Loan.  On September 30, 1994, both of the loans to
GPCI, in the aggregate amount of $6,250,000, were extended to the earlier
of demand or March 31, 1995.  On November 16, 1994, the Company agreed to
subordinate both GPCI loans to senior indebtedness of GPCI in the amount of
$34,000,000 and to extend the term of the loan to February 25, 1998, in
consideration for which the interest rates were increased to a rate equal
to 150 basis points above the coupon rate of the $34,000,000 senior debt
(then 19.75%) beginning January 1, 1995.  On April 14, 1995, the Company
sold the two loans made to GPCI to an unaffiliated third party for the sum
of $6,250,000 plus all accrued and unpaid interest through the date of the
sale.

     On April 25, 1995, the Company made a loan to Hemmeter Enterprises,
Inc. ("HEI"), an affiliate of CBH, in the amount of $1,000,000, bearing
interest at the rate of 12% per annum, payable quarterly in arrears, and
due on demand (the "HEI Loan").  HEI, either directly or through affiliated
entities, was in the business of developing, owning and operating gaming
and related entertainment facilities.  HEI was a one-third partner in the
partnership attempting to develop the sole land-based casino in New
Orleans, Louisiana, and a 50% partner in a joint venture which developed
and operated a riverboat gaming project in New Orleans.  In addition, HEI
developed, owned and operated two of the largest casinos in Colorado.  The
proceeds of the HEI Loan were utilized by HEI for working capital purposes
and were secured by the guaranty of CBH.

     On May 13, 1995, the Company agreed to provide HEI with a senior bank
facility in the amount of $4,000,000 (the "HEI Senior Bank Facility"). The
HEI Senior Bank Facility was secured pari passu by deeds of trust for real
properties known as the Bullwhackers Casinos in Central City and Black
Hawk, Colorado, a second mortgage on the Canadian Pavilion Property and a
second mortgage on the riverboat operated in New Orleans by Grand Palais
Riverboat, Inc. ("GPRI"), an affiliate of CBH, and a collateral assignment
of GPRI's interests in the riverboat joint venture which was operated in
New Orleans. The HEI Senior Bank Facility was also guaranteed jointly and
severally by various subsidiaries of HEI, certain other affiliated entities
and by CBH.  The Company made an initial funding of $2,000,000 of the
$4,000,000 HEI Senior Bank Facility and $1,000,000 of the loan proceeds
were utilized to repay the HEI Loan. The HEI Senior Bank Facility bore
interest at the rate of 12% per annum and was scheduled to mature on
September 30, 1995.  On June 30, 1995, the Company determined that it would
not advance any additional sums to HEI under the terms of the HEI Senior
Bank Facility. In October 1995, HEI and GPRI both filed for bankruptcy
protection. As of December 31, 1995, the Company recorded a $1,000,000
reserve against the carrying value of the HEI Senior Bank Facility.  The
plans of reorganization of HEI and GPRI were approved by the bankruptcy
courts in June 1996.  In satisfaction of its interest, the Company received
the following in settlement of its claims:  (i) a 12% senior secured pay-


<PAGE>


in-kind note due 2003 in the principal amount of $601,702 issued by
Colorado Gaming & Entertainment Co., the successor to HEI ("Colorado
Gaming"); (ii) 60,170 shares of common stock of Colorado Gaming, which
entity is not publicly traded; and (iii) 27,089 shares of common stock of
Casino America, Inc., a publicly-held stock traded on the NASDAQ National
Stock Market under the symbol "CSNO."  On December 1, 1996, the Company
received cash proceeds of $899 and an additional note in the principal
amount of $34,000 with terms consistent with the original Colorado Gaming
note representing the payment of interest due on the original Colorado
Gaming note through December 1, 1996.  On June 23, 1997 and December 19,
1997, the Company received $38,142 and $38,142, respectively, representing
the payment of interest on the combined Colorado Gaming notes representing
interest due through December 1, 1997.  In addition, the Company was also
entitled to receive a small number of warrants of Casino America, Inc.  On
July 25, 1996, the Company exercised its right to purchase 6,913 additional
shares of common stock of Casino America, Inc. for $40,614 or $5.875 per
share.  Colorado Gaming has entered into a letter of intent to be acquired
by Ladbroke Group PLC for $6.25 per share plus the assumption of Colorado
Gaming's debt.  The transaction is currently expected to close late in the
second quarter or early in the third quarter of 1998.

     On December 3, 1997, the Company filed preliminary proxy materials
with the Commission, outlining the Company's proposed plan of liquidation. 
In arriving at the determination to continue the Company's original plan to
liquidate, the Company's Board of Directors evaluated alternatives to
enhance stockholder value.  One alternative considered by the Directors was
the sale of all or substantially all of the assets of the Company to a
single buyer.  During the last three quarters of 1997, the Company received
unsolicited informal indications of interest from third parties concerning
possible acquisition of substantially all of the Company's assets.  The
Board has not, however, received a written offer, proposal or other
commitment that would provide for a greater distribution to the
stockholders than that which is currently anticipated under the terms of a
liquidation.  Based on the Company's valuation of its current assets and
its anticipated expenses related to the liquidation of the Company,
management of the Company currently believes that the liquidation
distribution to the Stockholders will be approximately $.52 to $.62 per
share, however, there can be no assurance that an amount within this range
will be distributed to the Stockholders due to the fact that the exact
amount of the expenses related to the liquidation, the continued revenues
from the Company's assets and the exact amount the Company will receive at
the time it liquidates its assets cannot be quantified at this time.

     As of December 31, 1997, the Company had $1,515,937 in cash and cash
equivalents and investment securities.

     Management of the Company is continuing in its decision that no
periodic liquidating distributions will be made to the Stockholders of the
Comnpany at this time, however, management of the Company continues to
reevaluate this position on an ongoing basis.

RESULTS OF OPERATIONS

     Net assets in liquidation decreased from a balance of $4,801,590 at
December 31, 1996 to a balance of $2,818,240 at December 31, 1997.  The
decrease resulted primarily from the Company's payment of its operating
expenses and the provision for litigation settlement costs.

     Total revenue for the year ended December 31, 1997 was $551,224
compared to $70,703 for the same period in 1996.  The increase is due
primarily to rental income from the Company's subleasehold interest in the
International Marketplace.


<PAGE>


     Operating expenses for the year ended December 31, 1997 were
$1,596,980 compared to $1,912,678 for the same period in 1996.  This
decrease was due to decreased legal fees and liquidation costs related to
the litigation as discussed in Part I, Item 3 and the announcement of the
Company's self-liquidation.  During the year ended December 31, 1997, the
Company recorded a provision for litigation settlement costs of $1,240,025.

During the year ended December 31, 1996, the Company recognized allowances
for impairment on loans in the amount of $6,115,700 on its New Sint Maarten
Loan based upon the proceeds received on February 6, 1997 from the sale by
public auction of the Sint Maarten Property and $86,200 on the Hudspeth
Loan based on the valuation from an appraisal commissioned by the Company.





<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

     See Index to Financial Statements on Page F-1 of this Annual Report on
Form 10-KSB for the financial statements and financial statements
schedules, where applicable.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
         AND FINANCIAL DISCLOSURE

     On December 9, 1996, the Company dismissed Deloitte & Touche LLP
("D&T") as its independent auditing firm.  D&T's report on the financial
statements for the past two years did not contain an adverse opinion or a
disclaimer of opinion, nor was the report qualified or modified as to the
audit scope.  The audit report for 1995 was modified to include explanatory
paragraphs with respect to:  (1)  a change in accounting principles related
to the Company's change to the liquidation basis of accounting, effective
June 30, 1995; (2)  uncertainties related to the realization of assets and
satisfaction of liabilities in conjunction with the Company's liquidation;
and (3) the emphasis of a matter related to:  (a)  the formal investigation
of the Company by the Commission; (b)  two purported class actions; and (c)
three other actions then pending against the Company.  During 1994 and 1995
and the subsequent interim period preceding such dismissal, there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.  The
decision to change accountants was recommended and approved by the Audit
Committee of the Company's Board of Directors.

     On December 9, 1996, the Company engaged BDO Seidman, LLP ("BDO") as
the new independent accountants to audit the Company's financial
statements.  During 1994 and 1995, and the subsequent interim period prior
to engaging BDO, the Company had not consulted BDO regarding:  (i) either: 
the application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered
on the Company's financial statements, and no written report was provided
to the Company and no oral advice was provided that BDO concluded was an
important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue; or (ii) any matter that
was either the subject of a disagreement (as defined in paragraph
304(a)(l)(iv) of Regulation S-K) or a reportable event (as described in
paragraph 304(a)(l)(v) of Regulation S-K).





<PAGE>


                                 PART III


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

     (a, b, c, d & e)  The directors and executive officers of the Company
are:

     John R. Young           Chairman of the Board of Directors,
President, Chief Executive Officer and Chief Financial Officer

     Daniel D. Lane          Director and Secretary+

     Thomas A. Ellsworth     Director+

     Neil D. Hansen          Treasurer and Chief Accounting Officer


     John R. Young (64) - Chairman of the Board of Directors and President.

From 1988 through August 1995, Mr. Young was an Independent Director of the
Company.  On August 8, 1995, Mr. Young was appointed Chairman of the Board,
President, Chief Executive Officer and Chief Financial Officer of the
Company replacing CBH who had resigned his positions with the Company as of
such date.  Since May 1988, Mr. Young has been a consultant to the hotel
industry and since 1990 he has also been a director and was senior vice
president-real estate and development of Horizon Hotels, Ltd.  On June 6,
1997, Mr. Young was appointed Co-Chairman of the Board of Directors of
Horizon Hotels.  Mr. Young was Senior Vice President and Treasurer of ITT
Sheraton Corporation, and Executive Vice President of ITT Sheraton Realty
Corporation, which positions he had held from 1980 until May 1988.  Mr.
Young was responsible for directing all domestic and international treasury
and corporate finance activities regarding corporate financing
requirements, cash management, bank relationships and corporate insurance
requirements and risk management.  As Executive Vice President of ITT
Sheraton Realty Corporation, Mr. Young participated and consulted in the
acquisition, disposal and development of hotel properties and he has
continued to perform similar services for Horizon Hotels, Ltd. since 1990. 
Mr. Young had been employed by ITT Sheraton Corporation and its
predecessors since 1967.  Mr. Young is a member of the American Hotel and
Motel Association and the Urban Land Institute, and is a past treasurer and
founding member of the Citizens Housing and Planning Association of Greater
Boston.  Mr. Young has a Bachelor of Arts Degree from Middlebury College
and received a certificate from the National Mortgage School of the
American Bankers Association at Ohio State University.

     Daniel D. Lane (63) - Director of the Company and member of the Audit
Committee.  Mr. Lane has been an Independent Director of the Company since
1990 and, on August 8, 1995, was appointed to be the Company's Secretary,
Treasurer and Chief Accounting Officer, while also retaining his
Independent Directorship.  Mr. Lane resigned as the Company's Treasurer and
Chief Accounting Officer as of November 18, 1997.  Mr. Lane is one of two
founding principals and serves as Chairman and Chief Executive Officer of
Newport Beach-based Lane/Kuhn Pacific, Inc.  The company's business
operations have included several originally formulated master-plan
community development and home-building partnerships, including East Lake
Development Company, Lane/Kuhn Pacific Communities and Lane/Kuhn Pacific
Homes.  In 1960, Mr. Lane founded Lan Ron Enterprises and its related
entities.  These companies engaged in the development of thousands of
single-family homes.  Mr. Lane also served as managing partner of Cadillac
Fairview Homes West from 1977 to 1983.  Mr. Lane has been a member of the
Board of Directors of Fidelity National Financial, Inc. since 1992 and a
member of the University of Southern California Board of Trustees since
1987.  He received his Bachelors Degree in Real Estate from University of
Southern California.



<PAGE>


     Thomas A. Ellsworth (59) - Director of the Company and Chairman of the
Audit Committee since January 26, 1996.  Mr. Ellsworth is a principal of
PKF Investments, a hotel real estate consulting and brokerage company which
is a subsidiary of PKF Consulting, an international hotel consulting firm. 
Prior to joining PKF Investments in 1992, Mr. Ellsworth was a Senior Vice
President and Director of Real Estate of ITT Sheraton Corporation.  Mr.
Ellsworth had been employed by ITT Sheraton Corporation and its
predecessors since 1965.  Mr. Ellsworth is a board member of the Ipswich
Savings Bank, the Trustees of Reservations, the Massachusetts Farmland
Conservation Trust and the Essex County Greenbelt.  Mr. Ellsworth has a
Bachelor of Science Degree in Hotel Administration from Cornell University.

     Neil D. Hansen (51) - Treasurer and Chief Accounting Officer.  On
November 18, 1997, Mr. Hansen was elected by the Board of Directors as the
Company's Treasurer.  From the inception of the Company through 1990, Mr.
Hansen was the Company's Executive Vice President, Secretary and Treasurer.

He received a Bachelor of Science Degree in Finance from the University of
Illinois and a Master of Management Degree from Northwestern University. 
He is a certified public accountant.

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

+    Member of the Audit Committee which is responsible for reviewing the
Company's annual financial statements and other matters relating to the
Company's financial affairs.



ITEM 10.  EXECUTIVE COMPENSATION

     (a, b)      Not applicable.

     (c, d & e)  Not applicable.

     (f)   The Company pays each Independent Director:  (i) a fee of
$20,000 per year (which amount may be increased or decreased at the
discretion of the Directors); and (ii) reimbursements for travel expenses
and other out-of-pocket disbursements incurred in connection with attending
any meetings of the Board of Directors.  Mr. Lane and Mr. Ellsworth each
received a fee of $20,000 for serving as Independent Directors for the
entire year.  The Company entered into a consulting arrangement with Mr.
Young when he became the Company's President and Chief Executive Officer,
effective July 1995, pursuant to which Mr. Young received a fee of $10,000
per month.  Commencing January 1, 1997, Mr. Young's consulting fee was
reduced to $7,500 per month.  During the year ended December 31, 1997, the
Company paid the Independent Directors reimbursements aggregating
approximately $8,400.

     (g)   The Company does not have any employment contracts with any of
its executive officers.  In addition, the Company has no compensatory plan
or arrangement with any of its executive officers which would be triggered
by the retirement, resignation or any other termination of such executive
officer's employment with the Company or a change in such executive
officer's responsibilities following a change-in-control of the Company.

     (h)   Not applicable.






<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a)  The following entity is known by the Company to be the beneficial
owner or more than 5% of the outstanding shares of beneficial interest as
of March 16, 1998.

                                         Amount and Nature
Title          Name and Address of         of Beneficial       Percentage
of Class       Beneficial Owners             Ownership          of Class
--------       -------------------       -----------------     ----------

Common Stock   Credit Research & 
               Trading LLC              297,180 (1) shares        7.2%
               One Fawcett Place
               Greenwich, 
               Connecticut 06830

(1)  As stated in the report on Schedule 13D under the Securities Exchange
Act of 1934, as amended, filed on January 26, 1998, Credit Research &
Trading LLC ("Credit Research"), along with Mr. John Levin, an individual
associated with Credit Research, as a group, beneficially owned 326,327
shares (7.9%), as of January 15, 1998.  However, Mr. Levin and Credit
Research each disclaims any beneficial interest in the shares of the
Company's common stock owned by the other.


     (b)  The following table sets forth the ownership of shares owned
directly or indirectly by the Directors individually and by the Directors
and officers of the Company as a group as of March 16, 1998.

                                         Amount and Nature
Title          Name and Address of         of Beneficial       Percentage
of Class       Beneficial Owners             Ownership          of Class
--------       -------------------       -----------------     ----------

Common Stock   John R. Young                500 shares        less than 1%
               155 Walpole Street
               Dover, Massachu-
               setts  02030
                                                                    
Common Stock   Daniel D. Lane              13,000 shares      less than 1%
               Lane/Kuhn Pacific, Inc.
               14 Corporate Plaza
               Newport Beach, 
               California  92660

Common Stock   Thomas A. Ellsworth             None               None
               PKF Investments
               105 Belcher
               Essex, Massachu-
               setts  01920

Common Stock   Neil D. Hansen              2,000 shares       less than 1%
               Resort Income
               Investors, Inc.
               150 S. Wacker Dr.
               Suite 2900
               Chicago, IL  60606

               All Directors and           15,500 shares      less than 1%
               executive officers 
               of the Company 
               as a group

     (c)   There are no known arrangements which may at a subsequent date
result in a change of control of the Company.




<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     (a & b)  The Company entered into an investment management agreement
with RC&H on October 28, 1988, pursuant to which RC&H was to act as
investment advisor, manager and administrator of the Company until October
1991.  However, on February 16, 1991, a majority of the then independent
directors of the Company authorized the termination of the investment
management agreement with RC&H.  Consequently, all rights and
responsibilities of RC&H to the Company as its investment manager
terminated on May 4, 1991.  On such date, RII Advisors, an entity
controlled by affiliates of CBH, became the Company's new investment
manager.  RII Advisors was subject to the same terms and conditions, as
investment manager to the Company, as RC&H was previously.

     The Investment Manager was responsible for recommending investments
and supervising the day-to-day operations of the Company.  The investment
management agreement directed the Investment Manager to make investment
recommendations to the Directors, subject to the final approval of the
Directors, and to monitor the Company's assets and operations so that the
Company would continue to comply with the requirements of the Code for the
activities of a REIT.  The investment management agreement by and between
the Company and RII Advisors was terminated by the Company as of June 30,
1995. The Investment Manager did not receive any compensation from the
Company during 1995 or 1996.

     In August 1995, the Company retained Mr. Neil D. Hansen as a
consultant to assist the Company in connection with overseeing its loans
and their related collateral, investor relations, administrative services
and accounting and bookkeeping functions.  See Item 1.

     Reference is made to Notes 5 and 6 of Notes to Financial Statements
for a description of various loans made to related parties in accordance
with the terms of the Prospectus.

     (c)   At December 31, 1997, the Company had no demand loans
outstanding that were not fully reserved.  See Item 6, "Management's
Discussion and Analysis or Plan of Operation" for a detailed description of
each of the outstanding loans.

     (d)   There have been no other significant transactions with
promoters.



<PAGE>


                                  PART IV


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  The following documents are filed as part of this Report:

       (1)(2)    The financial statements indicated in Part II, Item 7
"Financial Statements."  Financial Statement Schedules are omitted as the
required information is included in the financial statements or the notes
thereto or is not applicable.

     The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (File No. 33-23521),
referencing the exhibit numbers used in such Registration Statement.

    Exhibit
    Number       Description
    -------      -----------

    3(a)         Restated Certificate of Incorporation
    3(b)         Amended and Restated By-laws
    10(a)        Form of Investment Management Agreement
    10(b)        Form of Cash Flow Guaranty Agreement
    10(c)        Form of Mortgage Loan Purchase Guaranty Agreement


     (b)   The following report on Form 8-K was filed during the quarter
ended December 31, 1997:

         A Current Report on Form 8-K was filed on October 23, 1997
wherein Item 5. Other Events disclosed the filing by Mr. Christopher B.
Hemmeter and his wife, Patricia K. Hemmeter, of a voluntary petition
pursuant to Chapter 7 of the Bankruptcy Code in the United States
Bankruptcy Court, Central District of California.  A second Current Report
on Form 8-K was filed on December 2, 1997 wherein Item 5. Other Events
disclosed that Mr. Neil D. Hansen was appointed the Company's Treasurer and
Chief Accounting Officer effective as of November 18, 1997.  Such filing
also disclosed under Item 7. Financial Statements and Exhibits that the
Company had entered into a settlement agreement in the securities class
action and derivative lawsuits involving the Company and certain of its
current and former officers and directors and its former independent
auditors.  A third Current Report on Form 8-K was filed on December 17,
1997 wherein Item 5. Other Events and Item 7. Financial Statements and
Exhibits disclosed that the Federal District Court in Colorado held a
hearing on December 3, 1997 at which the Court granted preliminary approval
of the proposed settlement of the class action and derivative lawsuits
currently pending against the Company and authorized the plaintiffs to
distribute and publish notice of such settlement.  It was also disclosed
that the Company had filed preliminary proxy materials with the Commission
outlining the Company's proposed plan of liquidation.


     (c)   An Annual Report will be sent to Stockholders subsequent to this
filing and the Company will furnish copies of such report to the Commission
at that time.


     (d)   Not applicable.





<PAGE>


                                SIGNATURES


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


                        RESORT INCOME INVESTORS, INC.
                        (Registrant)

                        By:  /s/ John R. Young                   
                             John R. Young
                             Chairman of the Board of Directors,
                             Chief Executive Officer, President and Chief
Financial Officer


                        Date:  May 7, 1998


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


  By:   /s/ John R. Young              By:   /s/ Neil D. Hansen
        John R. Young                        Neil D. Hansen
        Chairman of the Board of             Treasurer and Chief
        Directors, Chief Executive           Accounting Officer
        Officer, President and               
        Chief Financial Officer

  Date: May 7, 1998                    Date: May 7, 1998



  By:   /s/ Thomas A. Ellsworth
        Thomas A. Ellsworth
        Director

  Date: May 7, 1998



  By:   /s/ Daniel D. Lane
        Daniel D. Lane,
        Director and Secretary

  Date: May 7, 1998






<PAGE>





                         FINANCIAL STATEMENT INDEX





Report of Independent Certified Public Accountants . . . . . . . . . . .F-2

Statements of Net Assets in 
  Liquidation at December 31, 1997 and 1996. . . . . . . . . . . . . . .F-3

Statements of Changes in Net Assets in
  Liquidation (Liquidation Basis) for the Years Ended 
  December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . .F-4

Notes to Financial Statements. . . . . . . . . . . . . . . . . .F-5 to F-15




<PAGE>






            REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders of
 Resort Income Investors, Inc.
Chicago, Illinois

We have audited the accompanying statements of net assets in liquidation of
Resort Income Investors, Inc. (the "Company") as of December 31, 1997 and
1996 and the related statements of changes in net assets in liquidation for
the years then ended.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, on June 29, 1995, the
Board of Directors of the Company announced that it would commence an
orderly self-liquidation of its assets.  As a result, the Company has
changed its basis of accounting from the going concern basis to the
liquidation basis effective June 30, 1995.  Accordingly, the carrying
values of the remaining assets as of December 31, 1997 and 1996 are
presented at estimated realizable values and all liabilities are presented
at estimated settlement amounts.  Actual amounts will depend upon a number 
of factors, as a result, actual amounts are likely to differ from the
amounts presented in the accompanying financial statements, and the
differences could be material.  Also, as described in Note 9 to the
financial statements, the Company has settled certain shareholder
litigation matters.

In our opinion, such financial statements present fairly, in all material
respects, the net assets in liquidation of Resort Income Investors, Inc. as
of December 31, 1997 and 1996 and the changes in its net assets in
liquidation for the years then ended in conformity with generally accepted
accounting principles on the basis described in the preceding paragraph.




BDO Seidman, LLP


Chicago, Illinois
January 20, 1998,
except for Note 9
as to which the date
is March 13, 1998



<PAGE>


                       RESORT INCOME INVESTORS, INC.

             STATEMENTS OF NET ASSETS IN LIQUIDATION (NOTE 1)
                            (LIQUIDATION BASIS)

                        DECEMBER 31, 1997 AND 1996




                                                 1997            1996    
                                             -----------     ----------- 

ASSETS

Demand loans to related parties, 
  net of allowances. . . . . . . . . . .    $      --          4,127,891 
Real estate interest held for sale . . .       1,925,000           --    
Notes receivable . . . . . . . . . . . .         635,702         577,634 
Interest receivable on investments . . .           6,357           --    
Cash and cash equivalents. . . . . . . .       1,090,343         146,037 
Investment securities at
  market value . . . . . . . . . . . . .         425,594         327,026 
Deposit for class action settlement 
  (Note 9) . . . . . . . . . . . . . . .         250,000           --    
                                             -----------      ---------- 

Total Assets . . . . . . . . . . . . . .       4,332,996       5,178,588 
                                             -----------     ----------- 


LIABILITIES

Accounts payable and accrued expenses. .         274,731         376,998 
Accrued litigation settlement. . . . . .       1,240,025           --    
                                             -----------     ----------- 
Total liabilities. . . . . . . . . . . .       1,514,756         376,998 
                                             -----------     ----------- 

NET ASSETS IN LIQUIDATION. . . . . . . .     $ 2,818,240     $ 4,801,590 
                                             ===========     =========== 


























 The accompanying notes are an integral part of the financial statements.


<PAGE>


                       RESORT INCOME INVESTORS, INC.

            STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
                            (LIQUIDATION BASIS)

              FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996



                                                1997            1996     
                                            ------------     ----------- 

NET ASSETS IN LIQUIDATION
  AT JANUARY 1 . . . . . . . . . . . . .    $  4,801,590      13,057,684 

Interest income on cash and
  cash equivalents . . . . . . . . . . .          43,749          69,804 

Interest income on
  notes receivable . . . . . . . . . . .          82,641             899 

Allowance for provision for
  litigation settlement. . . . . . . . .      (1,240,025)          --    

Allowance for impairment of investment
  in loans . . . . . . . . . . . . . . .           --         (6,201,900)

Unrealized gain (loss) on investment
  securities . . . . . . . . . . . . . .         116,022        (212,219)

Gain on settlement of demand loan. . . .          86,200           --    

Rental income. . . . . . . . . . . . . .         424,834           --    

Operating expenses . . . . . . . . . . .      (1,596,980)     (1,912,678)

Unrealized gain on real estate 
  interest held for sale . . . . . . . .         100,209           --    
                                             -----------     ----------- 

NET ASSETS IN LIQUIDATION AT 
  DECEMBER 31. . . . . . . . . . . . . .     $ 2,818,240     $ 4,801,590 
                                             ===========     =========== 

























 The accompanying notes are an integral part of the financial statements.


<PAGE>


                       RESORT INCOME INVESTORS, INC.
                       NOTES TO FINANCIAL STATEMENTS


1.   OPERATIONS OF THE COMPANY

     Resort Income Investors, Inc. (the "Company") was organized on
July 20, 1988 as a twelve year, self-liquidating real estate investment
trust ("REIT"), as defined under the Internal Revenue Code.  The Company
was organized for the purpose of enabling stockholders to participate in
mortgage loans primarily to affiliates of Christopher B. Hemmeter ("CBH"),
secured by real property or other qualifying assets owned or to be acquired
for the development of luxury destination resorts.  During 1991, the Board
of Directors amended the Company's general investment strategy such that
the Company would primarily make loans secured by real and personal
property for the development of gaming related enterprises.  As of
December 31, 1997, all of the Company's loans had been made to affiliates
of the Company or RII Advisors, Inc., the Company's former investment
manager ("the Investment Manager"), also an affiliate of the Company.

     In late June 1995, CBH, then a director and officer of the Company,
informed the Company that interest and principal would not be paid when due
on demand loans made by the Company to him personally or to entities
affiliated with him (the "Affiliated Borrowers").  Further, he informed the
Company that he would not be able to make timely payment of such interest
and principal on behalf of the Affiliated Borrowers pursuant to guarantees
he had made in connection with the Affiliated Borrowers' loans, thereby
creating an event of default for each of the loans.  The affected loans
constituted all of the Company's demand loans, each of which was to a
related party, aggregating $36,605,000, of which CBH and his wife, Patricia
Hemmeter, were personally the borrowers of $15,000,000, and Affiliated
Borrowers were the borrowers of $21,605,000.

     The Board of Directors of the Company announced on June 29, 1995, that
it would commence an orderly self-liquidation of the Company's assets over
an estimated 24- to 36-month period.  The Company also announced a charge
to income would be made in the second quarter of 1995 in an amount that, in
management's judgment, based upon  then available information, would
reflect the impaired value.  The charge included allowances for losses on
loans, interest receivable and the reversal of certain accrued interest. 
The amount of the charge was based on management's judgments regarding the
ability of CBH and the Affiliated Borrowers to repay such loans, and also
reflected management's judgments concerning the extent that the estimated
realizable value of the Company's collateral would not provide for the
recovery of the Company's investment in the loans and accrued interest.  On
August 8, 1995, CBH and Mark M. Hemmeter resigned their positions as
executive officers and directors of the Company.  Throughout the remainder
of 1995, and during 1996 and 1997, the Company continued to evaluate the
ability of CBH to perform on his guarantees and the value of collateral
underlying the Company's loans and recorded additional charges for
estimated losses.  The Company's independent directors assumed
responsibility for negotiations with CBH and the Affiliated Borrowers to
maximize the Company's recovery of its investment in loans and accrued
interest.  Based on information provided to the independent directors by
CBH and the Affiliated Borrowers, the independent directors reviewed CBH's
financial condition and the financial condition of the Affiliated
Borrowers, as well as the terms of the Company's loans, the collateral for
certain of the loans (including the existence of senior liens on certain of
the collateral), appraisals of certain of such collateral and other
information concerning the value of the other collateral, and other
factors, to determine the amount of the charges and in reaching the
decision to proceed with the liquidation of the Company's assets.




<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1.   OPERATIONS OF THE COMPANY (Continued)

     On September 24, 1997, CBH and his wife, Patricia Hemmeter, filed a
voluntary petition pursuant to Chapter 7 of the Bankruptcy Code in the
United States Bankruptcy Court, Central District of California.  Management
of the Company will monitor the bankruptcy proceedings and will file all
necessary claims in order to protect the Company's interest in the
bankruptcy estate.  The Company will vigorously pursue its claim in the
bankruptcy proceeding but it is premature to determine what distribution,
if any, the Company will receive from this bankruptcy.


2.   BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION

     Effective with the announcement of an intention to liquidate the
Company, the accounting basis used by the Company in preparing its
financial statements changed from historical cost to the liquidation basis
of accounting.  Therefore, the December 31, 1997 and 1996 statements of net
assets in liquidation and the statements of changes in net assets in
liquidation for the years ended December 31, 1997 and 1996 have been
presented on the liquidation basis.  The December 31, 1997 and 1996
statements of net assets in liquidation reflect the Company's estimates in
management's judgement, based upon then available information, of amounts
expected to be realized by its efforts to collect its investment in loans
and accrued interest, as well as other estimates about the recovery of
assets and the amounts of liabilities.  While the estimates of the
realizable amount of the loans, accrued interest and the real estate
interest held for sale were based on an analysis of each asset, including
valuations by independent appraisers of certain of the collateral, there
are few directly comparable real estate properties that have been sold that
can be considered in preparing such estimates.  The amounts the Company
will ultimately realize from liquidation of its assets could differ
materially from the amounts assumed in arriving at the estimates reflected
in the December 31, 1997 statement of net assets.  Changes in estimates are
reflected in the period in which additional information becomes available.

     The amount ultimately available for distribution to stockholders will
depend on a variety of factors in addition to the amounts realized from the
liquidation of assets, including the timing of the liquidation process and
the resolution of contingent liabilities.  The amount distributed will
likely differ from the amount of net assets in process of liquidation
presented in the December 31, 1997 statement of net assets, and the
difference could be material.

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments with a
maturity of three months or less at the time of purchase to be cash
equivalents.

     Investments - Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."  SFAS No. 115 requires fair
value accounting for certain investments and securities.  The Company's
portfolio of debt securities are classified as available for sale.  The
Company determines realized gains or losses on sales of available-for-sale
securities using the specific identification method.



<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)


2.   BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     Demand Loans to Related Parties - Effective January 1, 1995, the
Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures."  There was no financial statement
effect at the date of adoption of these standards.  On June 29, 1995, the
Company recognized a charge of $10,367,903 in accordance with the
provisions of these accounting standards prior to the adoption of the
liquidation basis of accounting (see Notes 5 and 6).

     Financial Instruments - SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," requires the disclosure of fair value for certain
of the Company's financial instrument assets and liabilities.  It defines
the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale.

     At December 31, 1997 and 1996, the Company's financial instruments
consist of notes receivable, real estate interest held for sale, cash and
cash equivalents, demand loans to related parties, investment securities,
deposit for class action settlement, interest receivable on investments,
accounts payable and accrued expenses, and accrued liquidation settlement.
These instruments are included in the accompanying statement of net assets
in liquidation at their estimated net realizable values.  Management
believes that the estimated net realizable value of these financial
instruments approximates their fair value.  The basis for determining these
amounts for demand loans and notes receivable is described in footnotes 1
through 6 of these financial statements.  Investment securities fair values
are based on market quotes.  Based on the nature and terms of accounts
payable and accrued expenses, face amounts represent fair value.

     Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities 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.


3.   ACCRUED INTEREST AND REVENUE RECOGNITION

     The accrual of interest on the Company's demand loans was discontinued
effective June 29, 1995 and all accrued but unpaid interest was reserved
when it was announced that the Company would commence an orderly self-
liquidation as a result of CBH's acknowledgement that interest and
principal would not be paid when due on demand loans made by the Company to
him personally or to the Affiliated Borrowers.  Once a demand loan has been
placed in a non-accrual status, cash collections will be applied to the
carrying amount of the loan.  However, the Company is pursuing its
collection of all the principal and interest contractually due from the
Affiliated Borrowers and CBH. 


4.   NOTE RECEIVABLE AND INVESTMENT SECURITIES

     On May 13, 1995, the Company agreed to provide Hemmeter Enterprises,
Inc. ("HEI"), an affiliate of CBH, with a senior bank facility in the
amount of $4,000,000 (the "HEI Senior Bank Facility").  The HEI Senior Bank
Facility was collateralized pari passu by deeds of trust for real
properties located in Central City and Black Hawk, Colorado, a second
mortgage on the property securing the Company's Canadian Pavilion Loan and


<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)


4.   NOTE RECEIVABLE AND INVESTMENT SECURITIES (Continued)

a second mortgage on the riverboat operated in New Orleans by Grand Palais
Riverboat, Inc. ("GPRI"), an affiliate of HEI.  The HEI Senior Bank
Facility was also guaranteed jointly and severally by various subsidiaries
of HEI, certain other affiliated entities and CBH.  Prior to June 30, 1995,
the Company had advanced $2,000,000 under the HEI Senior Bank Facility.  On

June 30, 1995, the Company determined that it would not advance any
additional sums to HEI under the terms of the HEI Senior Bank Facility. 
During the fourth quarter of 1995, HEI and GPRI both filed for protection
under Chapter 11 of the United States Bankruptcy Code.  As of December 31,
1995, the Company had recorded a valuation allowance in the amount of
$1,000,000 against the carrying value of the HEI Senior Bank Facility.  The
plans of reorganization of HEI and GPRI were approved by the bankruptcy
courts in June 1996 and in satisfaction of the HEI Senior Bank Facility,
the Company received the following in settlement of its claims:  (i) a 12%
senior secured pay-in-kind note due 2003 in the principal amount of
$601,702 issued by Colorado Gaming & Entertainment Co., the successor to
HEI ("Colorado Gaming"); (ii) 60,170 shares of common stock of Colorado
Gaming, which entity is not publicly traded; and (iii) 27,089 shares of
common stock of Casino America, Inc., a publicly-held stock traded on the
NASDAQ National Stock Market under the symbol "CSNO."  The Company was also
entitled to receive a small number of warrants of Casino America, Inc.  On
July 25, 1996, the Company exercised its right to purchase 6,913 additional
shares of common stock of Casino America, Inc. for $40,614 or $5.875 per
share.  On December 1, 1996, the Company received cash proceeds of $899 and
an additional note in the principal amount of $34,000 from Colorado Gaming
with terms consistent with the original Colorado Gaming note representing
the payment of interest due on the original Colorado Gaming note through
December 1, 1996.  On June 23, 1997 and December 19, 1997, the Company
received $38,142 and $38,142, respectively, representing the payment of
interest on the combined Colorado Gaming notes due through December 1,
1997.

     Based upon quoted values, the market value of the Colorado Gaming
stock at December 31, 1997 was $5.70 per share providing a value of the
Company's shares of $342,969.  The Company originally recorded its
ownership interest in these shares as investment securities valued at
$180,510 as of June 30, 1996.  At December 31, 1997, the Company recorded a
marked to market adjustment of $102,289 representing an unrealized gain on
investment securities as a result of an increase in the Colorado Gaming
share price from $4.00 to $5.70 per share at December 31, 1997.  At
December 31, 1997, the total value of the 34,002 shares of Casino America,
Inc. are estimated to be approximately $2.43 per share providing a value of
the Company's shares of $82,625.  At December 31, 1997, the Company
recorded a market adjustment for an unrealized loss on investment
securities in the amount of $44,335 regarding the Casino America, Inc.
stock as a result of a decrease in its share price to $2.43 at December 31,
1997,  As of December 31, 1997, the Company had estimated the net
realizable value of the notes receivable from Colorado Gaming to be
$635,702.  Colorado Gaming has entered into a letter of intent to be
acquired by Ladbroke Group PLC for $6.25 per share plus the assumption of
Colorado Gaming's debt.  The transaction is currently expected to close
late in the second quarter or early in the third quarter of 1998.



<PAGE>


<TABLE>

                                           RESORT INCOME INVESTORS, INC.
                                     NOTES TO FINANCIAL STATEMENTS (CONTINUED)



5.   DEMAND LOANS TO RELATED PARTIES

     Demand loans to related parties at December 31, 1997 and 1996 consist of the following:

<CAPTION>

                                     Interest Rate/     Carrying          Face         Carrying          Face    
Borrower                               Maturity        Amount 1997     Amount 1997    Amount 1996     Amount 1996
----------                           --------------    -----------     -----------    -----------     -----------
<S>                                 <C>               <C>             <C>            <C>             <C>         
Outlaws (a). . . . . . . . . . . . .         11.00%
                                             Demand     $    --        $ 1,600,000    $   518,800     $ 2,205,000

MCTC (b) . . . . . . . . . . . . . .         11.00%
                                             Demand          --              --         1,824,791       1,824,791

RC&H Investments (c) . . . . . . . .         18.50%
                                             Demand          --              --         1,784,300      12,900,000

CBH and Patricia Hemmeter (d). . . .         27.00%
                                             Demand          --         14,267,000          --         14,267,000
                                                        ----------     -----------    -----------     -----------
                                                             --         15,867,000      4,127,891      31,196,791

Reserve for Impairment of Loans. . .                         --         15,867,000          --         27,068,900
                                                        ----------     -----------    -----------     -----------

                                                        $    --        $     --       $ 4,127,891     $ 4,127,891
                                                        ==========     ===========    ===========     ===========



<PAGE>


<FN>

                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.   DEMAND LOANS TO RELATED PARTIES (Continued)

----------

(a)    On February 11, 1992, the Company made two demand loans to
borrowers collectively known as the Outlaws, an affiliate of the Company.
The original amount of the borrowings aggregated $2,205,000.  The loans
were collateralized by an assignment of the borrowers' partnership interest
and a mortgage of the underlying collateral subordinated by a first
mortgage in the amount of approximately $2,560,000, and are personally
guaranteed by CBH.  The note was modified effective November 1, 1995
increasing the principal balance of the loan in the amount of $105,598, the
interest rate to 11% and extending the maturity date to February 29, 1996. 
A charge for impairment of $105,598 was simultaneously recorded by the
Company due to uncertainty regarding its collectibility.  A charge for
impairment in the amount of $1,600,000 was recorded during the fourth
quarter of 1995 against the outstanding carrying balance on the Crook Loan.

In addition, a charge for impairment in the amount of $86,200 was recorded
during the fourth quarter of 1996 against the outstanding carrying balance
of the Hudspeth Loan, reducing the carrying value at December 31, 1996 to
$518,800.  On April 30, 1997, $605,000 was placed in escrow on behalf of
the Company by an affiliate of Outlaws as consideration for the Company
releasing its liens against the property securing the Company's loans to
Outlaws.  On June 20, 1997, the Company received cash proceeds of $605,000
less $17,000 for a lost note charge, resulting in a realized gain of
$86,200 in 1997.  Thus, the Company no longer maintains any interest in
such property.  CBH continues to be liable for the uncollected portion of
the Crook Loan plus interest at the rate of 11% per annum.  The loan is on
non-accrual status as of December 31, 1997.

(b)    On May 12, 1992, the Company made a demand loan in the amount of
$900,000 to Mideast and China Trading Co. (MCTC) (formerly known as
Hemmeter Investment Company), an affiliate of the Company.  The loan was
collateralized by a subleasehold mortgage in the International Marketplace,
located in Honolulu, Hawaii, a collateral assignment in the borrower's
interest as sub-sublessor, and is personally guaranteed by CBH.  On
April 8, 1994, the Company funded an additional $1,000,000 demand loan. 
Both loans were modified in 1994 to increase the interest rate by
"Additional Interest".  The note was modified on November 1, 1995 by
restating the interest rate to 11%, extending the maturity date to
February 29, 1996 and eliminating the Additional Interest.  Interest
payments received by the Company during the quarter ended December 31, 1995
and the quarter ended March 31, 1996, of $45,125 and $30,084, respectively,
were applied against the carrying amount of the loans.  On July 23, 1997,
the Company completed negotiations with the Company's Waikiki borrower
resulting in the Company receiving the borrower's interest in the
subleasehold of the International Marketplace, a retail center in Honolulu,
Hawaii in exchange for the Company releasing its interest in the loans.  In
addition to taking title, the Company received approximately $197,000 of
escrowed rental income for such property from December 1, 1996.  The
Company currently anticipates that it will receive approximately $30,000
per month of income from this interest in the near term. See Note 7 "Real
Estate Interest Held for Sale" for further detail regarding the interest in
the International Marketplace.



<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.   DEMAND LOANS TO RELATED PARTIES (Continued)

(c)    The loan was collateralized by a second mortgage on a 28-acre
parcel of land bordering Simpson Bay Lagoon and the Caribbean Sea on the
island of Sint Maarten, Netherlands Antilles (the Property) and is
personally guaranteed for $5,900,000 by CBH.  The borrower is an affiliate
of the Company.  As a result of a monetary default under the terms of the
agreement, effective July 1, 1995, the Company exercised its right to
increase the interest rate on the loan and any subsequent advances, at the
default interest rate of 18.5% per annum.  A loss reserve in the amount of
$5,000,000 was recorded during the fourth quarter 1995 against the
outstanding carrying balance.  During the quarter ended September 30, 1996,
the Company recorded an additional loss reserve in the amount of $5,500,000
based upon the minimum sales price of $7,000,000 established for the
auction of the Property pursuant to the foreclosure sale implemented by the
senior lender and scheduled for November 14, 1996. On November 14, 1996,
the auction for the Sint Maarten Property was continued, however, the
minimum bid was not received and it was rescheduled again until December
12, 1996.  As had occurred in September and November of 1996, no minimum
bid was received.  The auction then was rescheduled for January 30, 1997. 
At the auction on January 30, 1997, a bid was received in an amount
sufficient to retire the amount of the principal balance of the first
mortgage plus all accrued and unpaid interest and the related fees and
costs of the senior lender and provide the Company with approximately
$1,784,300. On February 6, 1997, the Company received the $1,784,300 of
proceeds from the sale by public auction of the Property.  As a condition
to this sale, the Company released its liens against the Property.  Thus,
the Company no longer maintains any interest in the Property.  For the
quarter ended December 31, 1996, the Company recorded a final loss reserve
in the amount of $615,700 to reflect the proceeds received of $1,784,300.

(d)    On January 4, 1994, the Company made a demand loan to CBH, in the
amount of $12,900,000.  In September 1994, an additional $1,100,000 was
extended under the loan.  The loan was collateralized by junior mortgages
on certain residential properties in Hawaii and California.  The loan was
modified in 1994 to release the Hawaii residence as collateral effective
January 3, 1995 and to increase the interest rate.  On May 2, 1995, the
Company advanced an additional $1,000,000 to CBH.  The interest rate on the
additional $1,000,000 was 23% per annum, 10% per annum of which was to be
payable upon maturity or earlier prepayment of the additional $1,000,000
loan.  During 1995, a total allowance of approximately $14,267,000 was
recorded against the carrying value of the loan.  During February 1996, the
Company received approximately $733,000 as a partial repayment of the loan
from the sale of the California residences that were collateral of the
loan.  CBH continues to be liable for the uncollected portion of this loan
plus interest at the default rate of 27% per annum.  The loan is on non-
accrual status as of December 31, 1997.


</TABLE>


<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)


6.  IMPAIRMENT OF LOANS, ACCRUED INTEREST AND REVENUE RECOGNITION

     For the year ended December 31, 1996, the Company recorded allowances
of $6,201,900 consisting of $6,115,700 for the RC&H Investments loan to
reflect the proceeds received from the sale of the collateral by public
auction in February 1997 and $86,200 for the Hudspeth Loan based on the
valuation from an appraisal commissioned by the Company.  During 1997,
approximately $740,000 has been recorded against the $1,250,000 reserve for
expenses associated with the protection of the Company's collateral.  The
balance of this reserve at December 31, 1997, $73,371, is included in
accounts payable and accrued expenses in the accompanying statement of net
assets in liquidation and represents the Company's estimate of the
remaining costs expected to be incurred in protecting the Company's
collateral position.

     The accrual of interest on the Company's demand loans was discontinued
effective June 29, 1995 and all accrued but unpaid interest was reserved
when it announced that the Company would commence an orderly self-
liquidation as a result of CBH's acknowledgement that interest and
principal would not be paid when due on demand loans made by the Company to
him personally or to the Affiliated Borrowers.  Once a demand loan has been
placed in a non-accrual status, cash collections are applied to the
carrying amount of the loan.  However, the Company is pursuing its
collection of all the principal and interest contractually due from the
Affiliated Borrowers.


7.   REAL ESTATE INTEREST HELD FOR SALE

     On July 23, 1997, the Company completed negotiations with the
Company's Waikiki borrower resulting in the Company receiving the
borrower's interest in the subleasehold of the International Marketplace
(the "Subleasehold Interest"), a retail center in Honolulu, Hawaii in
exchange for the Company releasing its interest in the loans.  In addition
to taking title, the Company received approximately $197,000 of escrowed
rental income for such property from December 1, 1996.  

     The valuation of the Subleasehold Interest is based upon a discounted
cash flow analysis.  The discounted cash flow analysis is a method of
estimating the present worth of future cash flow expectations by
individually discounting each anticipated collection at an appropriate
discount rate.  By forecasting the anticipated income stream and
discounting future value to current value, the capitalization process may
be applied to derive a value that an investor would pay to receive the
income stream generated by the International Marketplace.  In addition, the
value of the Company's interest in International Marketplace was discounted
a further 15% to reflect the potentially shortened time period the Company
has to market the property.  The amount of proceeds received from the
disposition of the Subleasehold Interest is dependent on a number of
conditions, many of which are beyond the power of the Company to control.  
Therefore, assets of the Company, such as the interest in the International
Marketplace, may be sold at prices that may not necessarily be equal to or
greater than their book value.  

     The Company received approximately $197,000 of escrowed rental
receipts and approximately $228,000 in monthly rental income through
December 31, 1997 which are recorded as rental income on the Statement of
Changes in Net Assets in Liquidation.  The term of the sublease expires on
March 30, 2010.  As lessor, the Company receives $23,969 monthly in minimum
rent and percentage rent of 12% of gross sales for the period through
March 31, 2003 increasing to 14% for the period April 1, 2003 through March
30, 2010.  As lessee, the Company pays $12,913 monthly for minimum rent and
percentage rent equal to 8% of gross sales.  In addition, the Company
receives $19,067 monthly for maintenance, advertising, promotional and


<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

operating fees.  The Company pays approximately $11,100 in common area
maintenance fees.  The Company currently anticipates that it will receive
approximately $30,000 per month of income from this interest in the near
term.

8.  INCOME TAXES

     The Company believes it has qualified in 1997 and 1996 as a real
estate investment trust ("REIT"), as defined, under Sections 856 through
860 of the Internal Revenue Code.  In order to continue to qualify, the
Company is required to distribute at least 95% of its taxable income to
stockholders and meet certain other requirements.  Under the Internal
Revenue Code, qualifying REITs are relieved of income taxes on earnings
distributed to stockholders.

     At December 31, 1997, the Company's tax basis in its demand loans was
$15,867,000 compared to its book basis of $0 and its tax basis interest
receivable related to demand loans was $467,903 compared to its book basis
of $0.  Also, at December 31, 1997, the Company has a book reserve for
collateral protection costs in the amount of $73,371, the tax basis in this
liability was $0.  These differences are related to reserves recorded
during 1996 which are not currently deductible for tax purposes.


9.   LITIGATION

     On July 3, 1995, a class action complaint captioned "Sarnoff v. Resort
Income Investors, Inc., et al., Doc. No. 95 B 1665" was filed against the
Company, CBH, Mark M. Hemmeter ("MMH") and Deloitte & Touche LLP, the
Company's independent auditors at that time, in U.S. District Court for the
District of Colorado alleging violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and other provisions of the federal
securities laws and the rules promulgated by the Securities and Exchange
Commission (the "Commission").  On August 24, 1995, a second class action
suit captioned "Contract v. Resort Income Investors, Inc., et al., Doc. No.
95 B 2184," alleging similar violations of the federal securities laws, was
filed in the U.S. District Court for the District of Colorado against each
of the defendants in the Sarnoff lawsuit and Daniel D. Lane ("DDL"),
Christopher R. Hemmeter ("CRH"), Gregory Hooper ("GH") and John R. Young
("JRY").  In November 1995, the two actions were consolidated (collectively
referred to as the "class action litigation").

     In June 1995, two derivative actions were filed in the Court of
Chancery of the State of Delaware in and for New Castle County, "Alpert v.
Hemmeter et al., Doc. No. 14839," and "Frank, et al. v. Hemmeter et al.,"
Doc No. 14413.  The Company is a nominal defendant in each of these cases. 
The defendants in both cases are CBH, MMH, DDL and JRY.  The complaints
allege that CBH, MMH, DDL and JRY breached their fiduciary duties to the
Company, wasted Company assets and that CBH stood in a conflict of interest
position.  The complaints have been consolidated (collectively referred to
as the "derivative litigation").  The plaintiffs in the derivative
litigation in October 1997 filed an action in the U.S. District Court in
Colorado in order to seek approval of the settlement of the derivative
actions in that Court concurrently with the securities class action
settlement, described below.  The derivative complaint filed in Colorado
alleges substantially the same claims asserted in the complaints in the
Delaware litigation.




<PAGE>


                       RESORT INCOME INVESTORS, INC.
                 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9.   LITIGATION (Continued)

     On November 26, 1997, the parties to the class action litigation and
the derivative litigation filed a Stipulation of Settlement with the U.S.
District Court in Denver, Colorado.  On December 3, 1997, the District
Court held a hearing at which it granted preliminary approval of the
settlement and authorized the plaintiffs to distribute and publish notice
of the settlements.  The court granted final approval of the settlements. 
The Stipulation of Settlement emphasizes that the existence of the
settlements should not be considered an admission of liability by any
defendant with respect to any of the claims asserted.

     The federal district court granted final approval of the settlements
of both the federal securities class action litigation and derivative
litigation.  In approving the settlement, the Court held that it was in all
respects fair, reasonable and adequate to the members of the class, the
Company and all the parties.  The settlement was effective on April 14,
1998.  On April 28, 1998, the parties to the derivative litigation filed a
motion to dismiss the cases based on the approval of the settlement by the
federal district court.  Management of the Company anticipates the motion
will be granted in the near future.

     The class action litigation settlement provides that all investors,
other than the defendants, who purchased shares in the Company between
March 31, 1993 and June 29, 1995, will be eligible to participate in the
settlement proceeds.  The settlement of the class action litigation
provides for a payment of at least $5,630,000, plus accrued interest on
portions of this amount.  The economic components of the settlement are as
follows:

     1.   $3.63 million paid by the Company's directors' and officers'
issuer, and former auditors;

     2.   The approximately $1 million left from the settlement of the
derivative action, after attorneys fees are awarded by the Court;

     3.   A payment by the Company of an amount equal to the greater of: 
(a) 44 percent of the Company's net assets and liquidation valued as of
December 31, 1997, or (b) $1 million.  The amounts available for
distribution to the class of investors covered by the settlement will be
determined after court-approved attorneys' fees and expenses have been
awarded.  The amount that individual class members may receive will be
determined by the monies available after expenses and attorneys' fees and
the number and amount of claims filed.

     The derivative litigation was settled for $1,425,000, contributed by
the Company's directors' and officers' insurer, plus accrued interest.  As
stated above, this amount, less derivative counsel's attorney's fees, will
be contributed to the settlement of the class action litigation.  The
counsel in the derivative litigation filed a request for fees of 30 percent
of the settlement amount, including expenses.  Counsel for the Plaintiffs
in the class action litigation filed a request for 30 percent of the
recovery, not including payment from the settlement of the derivative
litigation, plus expenses.  The Court granted the fee and expense requests.

     Through April 30, 1998, the Company has paid $1,000,000 (unaudited)
toward settlement and will pay the remaining portion of its contribution,
if any, within five business days of the receipt of audited financial
statements for the period ending December 31, 1997, or the filing of its
Annual Report on Form 10-KSB for that period, whichever is earlier.  At
December 31, 1997, the Company has recorded $1,240,025 of accrued
litigation settlement costs.  In consideration for the settlement of the
litigation, plaintiffs in the class action litigation on behalf of
themselves and all class members and plaintiffs in the derivative
litigation on behalf of themselves and derivatively on behalf of the


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS (Continued)

Company provided releases to the defendants in the class action and
derivative litigation.  These releases, among other things, release the
defendants from any claims, whether known or unknown, that were or could
have been asserted in the class action and derivative litigation, or in any
way related to the Company, including, but not limited to, the sale or
purchase of stock issued by the Company.

     The Company's Board of Directors believes that the settlements were
beneficial to the Company because its liquidation can be more readily
accomplished now that the Company is unencumbered by the expense and
uncertainty of defending the litigation.

     Pursuant to the Company's by-laws and Delaware law, the Company is
advancing CBH's, MMH's, CRH's, GH's, DDL's and JRY's costs of defense in
the class action and derivative litigation.  CBH, MMH, CRH, GH, DDL and JRY
have executed undertakings to repay the Company for the advances if it is
ever determined that they were not entitled to receive the advances.  CBH
filed a voluntary bankruptcy petition on September 24, 1997.

     On November 14, 1997, the Company was served with a complaint in the
action pending in the Civil District Court for the Parish of Orleans, State
of Louisiana, entitled The Venture International Group v. C.C. Partners
Corp., et al., No. 1993-00870.  The claims in the complaint filed by the
Ernest N. Morial New Orleans Exhibition Hall Authority and the City of New
Orleans seek rescission and/or cancellation of any agreements and consent
judgments entered into between the Company, Canadian Pavilion Limited
Partnership, C.C. Partners Corp., Con Demmas, Venture International Holding
Company and Venture International Group.  Management of the Company is
currently reviewing its options with regard to the lawsuit and at this time
is unable to make an assessment as to the outcome of the litigation.

     On October 25, 1995, the Commission issued a formal order of
investigation captioned In the Matter of Resort Income Investors, Inc.,
Case No. HO-5327.  In connection with the investigation, the Company was
requested to produce certain documents and information.  The Company has
complied with these requests.  The Company has been advised that the
investigation should not be construed as an indication by the Commission or
its staff that any violation of law has occurred, or as a reflection upon
any person, entity, or security.  The Company cannot, at this time, predict
the outcome of the investigation or the financial impact, if any, to the
Company.  The Company, however, is not aware of any investigational
activities undertaken by the SEC during the past year.  Accordingly, the
Company believes the investigation may be complete.


10.   SUBSEQUENT EVENTS (UNAUDITED)

     During March and April of 1998, the Company paid $250,000 and
$500,000, respectively, toward the class action litigation settlement.

    In April 1998, the Company sold 34,002 shares of the Casino America,
Inc. stock for a total value of $102,152.