|UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K


[X]          ANNUAL REPORT
PURSUANT TO SECTION 13 or 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal
Year Ended June 30, 2001OR         [    ]   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 1-6802




Liberté Investors
Inc.(Exact name of registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|DELAWARE(State or other jurisdiction ofincorporation or organization) | 75-1328153(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

|200 Crescent Court,
Suite 1365, Dallas, Texas 75201(Address of principal executive offices)


Registrants telephone
number, including area code: (214) 871-5935Securities registered pursuant to Section
12(b) of the Act:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------

|Common Stock, $.01 par value per share | New York Stock Exchange
|-------------------------------------- | -----------------------

|Securities registered
pursuant of Section 12(g) of the Act:None


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes   X     No___


As
of September 24, 2001, there were outstanding 20,256,097 shares of the
registrants Common Stock. The aggregate market value of the voting stock
held by non-affiliates of the registrant, based on the closing price of these
shares on the New York Stock Exchange on September 24, 2001 was $31,008,141. For
the purposes of this disclosure only, the registrant has assumed that its
directors, executive officers and beneficial owners of 5% or more of the
registrants common stock are the affiliates of the registrant.



APPLICABLE
ONLY TO CORPORATE ISSUERS:The registrant had
20,256,097 shares of common stock, $.01 per share par value, outstanding as of September
24, 2001.




DOCUMENTS INCORPORATED
BY REFERENCE:Portions of the Registrants Proxy Statement to be furnished to
stockholders in connection with its 2001 Annual Meeting of Stockholders are incorporated
by reference in Part III of this Report.





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not 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-K or any amendment to this Form 10-K. [X]
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|LIBERTE INVESTORS INC.


FORM 10-K FOR THE
FISCAL YEAR ENDED JUNE 30, 2001


TABLE OF CONTENTS
|----------------------------------------------------------------------------------------------

|                                                                                                                                                  | Page |    
|------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ---
|PART I                                                                                                                                            |      |    
|                                                                                                                                                 
|Item 1.      Business                                                                                                                             |      | 3  
|Item 2.      Properties                                                                                                                           |      | 4  
|Item 3.      Legal Proceedings                                                                                                                    |      | 4  
|Item 4.      Submission of Matters to a Vote of Security Holders                                                                                  |      | 4  
|                                                                                                                                                 
|PART II                                                                                                                                           |     
|                                                                                                                                                 
|Item 5.      Market for the Registrants Common Equity and Related Stockholder Matters                                                            |      | 5  
|Item 6.      Selected Financial Data                                                                                                              |      | 6  
|Item 7.      Managements Discussion and Analysis of Financial Condition and Results of          
                                     Operations |      | 6  
|Item 7A.   Quantitative and Qualitative Disclosures About Market Risk                                                                             |      | 10 
|Item 8.      Financial Statements and Supplementary Data                                                                                          |      | 10 
|Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial          
                                     Disclosure  |      | 10 
|                                                                                                                                                 
|PART III                                                                                                                                          |     
|                                                                                                                                                 
|Item 10.    Directors and Executive Officers of the Registrant                                                                                    |      | 11 
|Item 11.    Executive Compensation                                                                                                                |      | 11 
|Item 12.    Security Ownership of Certain Beneficial Owners and Management                                                                        |      | 11 
|Item 13.    Certain Relationships and Related Transactions                                                                                        |      | 11 
|                                                                                                                                                 
|PART IV                                                                                                                                           |     
|                                                                                                                                                 
|Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                                                                       |      | 12 
|Signatures                                                                                                                                        |      | 14 
|Index to Consolidated Financial Statements                                                                                                        |      | F-1

|2
|-

|PART I



Item 1.
Business


Liberté
Investors Inc. (LBI or the Company) is a Delaware
corporation which was organized in April of 1996 in order to effect the
reorganization of Liberté Investors, a Massachusetts business trust (the
Trust), pursuant to which the Trust contributed its assets to the
Company and received all of the Companys outstanding common stock, par
value $.01 per share (Shares or Common Stock). The Trust
then distributed to its shareholders in redemption of all outstanding shares of
beneficial interest in the Trust (the Beneficial Shares) the Shares
of the Company. The Company assumed all of the Trusts assets and
outstanding liabilities and obligations. Thereafter, the Trust was terminated.


Since
August of 1996, the Company has been actively pursuing opportunities to acquire
one or more operating companies.



Portfolio
Review


At
June 30, 2001, the Company owned foreclosed real estate totaling $2.4 million.
At June 30, 2001, there were no outstanding notes receivables and all foreclosed
real estate was classified as nonearning.


Foreclosed
real estate consisted of three properties, all of which are held for sale. The
foreclosed real estate held by the Company at June 30, 2001 consisted of
undeveloped land located in Texas. See also Note 2 of Notes to Consolidated
Financial Statements.


At
June 30, 2001, the Company had impaired loans from prior foreclosure-related
deficiency notes and/or judgments with no carrying value. The face amounts
ranged from $12,000 to $3,118,000. These receivables are unsecured, and
collections are doubtful. Should any amount be collected on these receivables,
the Company would recognize a gain.



Competition


In
its ongoing efforts to liquidate its real estate assets, the Company competes
with commercial banks, savings and loan associations, and other financial
institutions that are seeking to sell their own portfolios of foreclosed real
estate. The primary factors affecting competition when selling real estate are
the value of the foreclosed real estate, the price at which the seller is
willing to sell the asset, and the sellers ability and willingness to
provide or arrange financing for the prospective buyer.


With
regard to efforts to identify suitable acquisition candidates, the Company
competes with numerous prospective buyers (many of which are much larger than
the Company), including various investment funds, other companies in similar
industries, corporate conglomerates, individual investors, etc. Economic
conditions have resulted in substantial amounts of cash becoming available for
new acquisition activity by both institutional and individual investors.
Consequently, many potential acquisition candidates targeted by the Company have
been pursued by numerous prospective buyers and bidding has been competitive.

3
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Federal Income
Tax


Effective
July 1, 1993, the Trust no longer qualified as a real estate investment trust as
defined by the Internal Revenue Code. Subsequently, the Company was organized in
1996 as a Delaware corporation in order to effect the reorganization of the
Trust by merging the Trust into the Company. Accordingly, the Trust and the
Company are subject to federal income taxes.


At
June 30, 2001, the Company had net operating loss carryforwards for federal
income tax purposes of approximately $221 million, which are available to offset
future federal taxable income. These carryforwards will expire in 2005 through
2011. See also Note 4 of Notes to Consolidated Financial Statements.



Personnel


At
June 30, 2001, the Company had one full-time employee and no part-time
employees. The Company engages real estate consultants as needed with regard to
real estate related matters and utilizes independent accountants and legal
advisors as needed when evaluating potential acquisitions.



Item 2.
Properties


The
Companys principal executive offices are located at 200 Crescent Court,
Suite 1365, Dallas, Texas and are occupied by the Company under a lease
agreement expiring December 31, 2003. See Note 3 of Notes to Consolidated
Financial Statements.



Item 3. Legal
Proceedings


The
Company is from time to time involved in routine litigation arising in the
normal course of business which, in the opinion of management, will not result
in a material adverse impact on the Companys consolidated financial
condition, results of operations, or cash flows without regard to any possible
insurance or third party reimbursement.



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


Not
applicable.


4
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II



Item 5. Market
for the Registrants Common Equity and Related Stockholder Matters



Price Range of
Common Stock


The
common stock of Liberté Investors Inc. is listed on the New York Stock
Exchange (the NYSE) under the symbol LBI. The following
table sets forth the high and low sales price per share for the common stock as
reported on the NYSE Composite Transaction Tape for the periods indicated:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fiscal Year    | High | Low        
|-------------- | ---- | -----------
|2001           |      |            
|First Quarter  |      | $      3.19
|Second Quarter |      | 3.19       
|Third Quarter  |      | 3.25       
|Fourth Quarter |      | 4.35       
|              
|2000           |      |            
|First Quarter  |      | $      3.69
|Second Quarter |      | 3.63       
|Third Quarter  |      | 3.63       
|Fourth Quarter |      | 3.38       

|The
high and low sales price per share of common stock as reported on the NYSE
Composite Transaction Tape on September 24, 2001, were $3.30 and $3.18, respectively. The approximate
number of shareholders of Common Stock of the Company as of September 24, 2001
was 3,300.



Dividend Policy


On
June 4, 2001, the Board of Directors of the Company declared a special cash
dividend of $0.125 per share paid on June 29, 2001 to stockholders of record on
June 19, 2001. The Company also paid a special cash dividend of $0.094 and $0.06
per share on June 30, 2000 and 1999, respectively. Although the Company has paid
dividends the past three years, the Company does not anticipate paying cash
dividends in the future as it intends to retain earnings for use in acquiring an
operating business.



Stock Transfer
Restrictions


The
Companys certificate of incorporation (the Charter) contains
prohibitions on the transfer of its common stock to avoid limitations on the use
of the net operating loss carryforwards and other federal income tax attributes
that the Company inherited from the Trust. The Charter generally prohibits any
transfer of Common Stock, any subsequent issue of voting stock or stock that
participates in the earnings or growth of the Company, and certain options with
respect to such stock, if the transfer of such stock would cause any group or
person to own 4.9% or more of the outstanding shares of, increase the ownership
position of any person that already owns 4.9% or more (by aggregate value) of
the outstanding shares, or cause any person to be treated like the owner of 4.9%
or more (by aggregate value) of the outstanding shares for tax purposes.
Transfers in violation of this prohibition will be void, unless the Board of
Directors consents to the transfer. If void, upon demand by the Company, the
purported transferee must return the shares to the Companys agent to be
sold, or if already sold the purported transferee must forfeit some, or
possibly, all of the sale proceeds. In addition, in connection with certain
changes in the ownership of the holders of the Companys shares, the
Company may require the holder to dispose of some or all of such shares. For
this purpose, person is defined broadly to mean any individual,
corporation, estate, debtor, association, company, partnership, joint venture,
or similar organization.
5
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 6. Selected
Financial Data (in thousands, except per share amount)


The
following table sets forth selected statement of operations and statement of
financial condition data at and for the five years ended June 30, 2001. This
information should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto of the Company and with
Managements Discussion and Analysis of Financial Condition and
Results of Operations, which are included elsewhere in this Form 10-K.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Year Ended June 30,
|--------------------------------- | -------------------
|
|
|Statement of Operations Data:     |                    
|Revenues                          |                    
|Net income                        |                    
|Basic and diluted net income      |                    
|per common share                  |                    
|Cash dividends declared per share |                    

|                                       | June 30,
|-------------------------------------- | --------
|
|
|Statement of Financial Condition Data: |         
|Total assets                           |         
|Stockholders equity                   |         

|Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations


Statements
contained in this Annual Report on Form 10-K which are not historical facts are
forward-looking statements. In addition, the Company, through its senior
management, from time to time makes forward-looking public statements concerning
its expected future operations and performance, including its ability to acquire
businesses in the future, and other developments. Such forward-looking
statements are necessarily estimates reflecting the Companys best judgment
based upon current information and involve a number of risks and uncertainties.
There can be no assurance that other factors will not affect the accuracy of
such forward-looking statements. While it is impossible to identify all such
factors, factors which could cause actual results to differ materially from
those estimated by the Company include, but are not limited to, the uncertainty
as to whether the Company will be able to make future business acquisitions or
that any such acquisitions will be successful, the Companys ability to
obtain financing for any possible acquisitions, general conditions in the
economy and capital markets, and other factors which may be identified from time
to time in the Companys Securities and Exchange Commission filings and
other public announcements.
6
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|General


During
the fiscal year ended June 30, 2001, Liberté Investors Inc. continued to
explore the potential acquisition of a viable operating company in order to
increase value to existing stockholders and provide a new focus and direction
for the Company. Although substantial efforts were made to identify quality
acquisitions in fiscal 2001, the Company has not yet entered into any definitive
acquisition agreements.



2001 compared
with 2000


Net
income for the year ended June 30, 2001 increased to $2,516,000 from $2,218,000
for the year ended June 30, 2000, an increase of 13%. This change in operating
results is discussed below.


Interest
income on interest-bearing deposits in banks increased to $2,923,000 for the
year ended June 30, 2001 from $2,854,000 for the year ended June 30, 2000. This
increase is primarily due to an increase in interest rates. Unrestricted cash
increased from $55.9 million at June 30, 2000 to $56.1 million at June 30, 2001
primarily due to interest earned on unrestricted cash accounts and proceeds from
the sale of foreclosed real estate.


Gains
on the sales of foreclosed real estate were $378,000 for the year ended June 30,
2001 as compared to $119,000 for the year ended June 30, 2000. The gains on
sales of real estate represent proceeds received from the sale of foreclosed
real estate in excess of carrying value. The gains recognized for the year ended
June 30, 2001 and 2000 were from the sale of 37.83 acres and 51.18 acres,
respectively, in San Antonio, Texas.


Other
income increased to $20,000 for the year ended June 30, 2001 from $84 for the
year ended June 30, 2000. Other income for the year ended June 30, 2001
represented a distribution from a trust regarding an acquisition, development
and construction loan made to Village Park Homes, Venture II, which was
comprised of 55 lots in Fontana, California. The Company had foreclosed on the
55 lots in January 1998 and sold the 55 lots in September 1998.


Foreclosed
real estate operations expense increased $97,000 from $137,000 for the year
ended June 30, 2000 to $234,000 for the year ended June 30, 2001. Foreclosed
real estate operations expense was higher for the year ended June 30, 2001 due
to an increase in penalties, interest and property taxes on property owned by
the Company in Arlington, Texas, as well as increased real estate consulting
fees and other miscellaneous real estate costs.


Legal,
audit and consulting fees were $123,000 for the year ended June 30, 2001,
relatively unchanged from $122,000 incurred in the year ended June 30, 2000.


Franchise
tax expense decreased from $44,000 for the year ended June 30, 2000 to a credit
of $21,080 for the year ended June 30, 2001. The decrease was due to the
completion and settlement of an audit of Texas franchise tax returns for the
years 1997 through 1999.


Compensation
and employee benefits expense was $83,000 for the year ended June 30, 2001,
relatively unchanged from $86,000 for the year ended June 30, 2000.
7
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|General
and administrative expense increased to $203,000 for the year ended June 30,
2001 from $185,000 for the year ended June 30, 2000. The increase is primarily
due to increased shareholder relations expense of $16,000.



2000 compared
with 1999


Net
income for the year ended June 30, 2000 increased to $2,218,000 from $1,850,000
for the year ended June 30, 1999, an increase of 20%. This change in operating
results is discussed below.


Interest
income on interest-bearing deposits in banks increased to $2,854,000 for the
year ended June 30, 2000 from $2,530,000 for the year ended June 30, 1999. This
increase is primarily due to an increase in interest rates. Unrestricted cash
increased from $55.3 million at June 30, 1999 to $55.9 million at June 30, 2000
primarily due to interest earned on unrestricted cash accounts and proceeds from
the sale of foreclosed real estate.


Gains
on the sales of foreclosed real estate were $119,000 for the year ended June 30,
2000 as compared to $120,000 for the year ended June 30, 1999. The gains on
sales of real estate represent proceeds received from the sale of foreclosed
real estate in excess of carrying value. The gains recognized for the year ended
June 30, 2000 were from the sale of 51.18 acres in San Antonio, Texas.


Other
income decreased to $84 for the year ended June 30, 2000 from $13,000 for the
year ended June 30, 1999. Other income for the year ended June 30, 1999
represented primarily dividends on RPI preferred stock. No dividend payments on
RPI preferred stock were received for the year ended June 30, 2000 due to the
liquidation of the 300,000 shares of Resurgence Properties, Inc.
(RPI) preferred stock in August 1998.


Foreclosed
real estate operations expense decreased $8,000 from $145,000 for the year ended
June 30, 1999 to $137,000 for the year ended June 30, 2000. Foreclosed real
estate operations expense was lower for the year ended June 30, 2000 due to a
reduction in real estate consulting fees and other miscellaneous real estate
costs.


Legal,
audit and consulting fees were $122,000 for the year ended June 30, 2000 as
compared to $68,000 incurred in the year ended June 30, 1999. Legal and
accounting expenses were higher for the year ended June 30, 2000 due to
additional legal and accounting fees for due diligence on a potential business
transaction and for contracts relating to the sale of foreclosed real estate.


Franchise
tax expense decreased from $75,000 in 1999 to $44,000 in 2000 due to a reduction
in Texas franchise tax expense during the year ended June 30, 2000.


Compensation
and employee benefits decreased by $21,000 from $107,000 during the year ended
June 30, 1999 to $86,000 for the year ended June 30, 2000. The decrease is due
to the Company only having one employee for a majority of the year ended June
30, 2000 as compared to two employees for a majority of the year ended June 30,
1999.


General
and administrative expense decreased from $232,000 for the year ended June 30,
1999 to $185,000 for the year ended June 30, 2000. The decrease is primarily due
to a reduction in shareholder relation expenses during the year ended June 30,
2000 and due to the payment of a search fee for a new employee during the year
ended June 30, 1999.
8
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liquidity and
Capital Resources


The
Companys principal funding requirements are operating expenses, including
legal, audit and consulting expenses incurred in connection with the evaluation
of potential acquisition candidates and other strategic opportunities. The
Company anticipates that its primary sources of funding operating expenses are
proceeds from the sale of foreclosed real estate, interest income on cash and
cash equivalents, and cash on hand.


Operating
activities for the year ended June 30, 2001 provided $2.3 million of cash
compared to $2.1 million and $1.8 million provided in 2000 and 1999,
respectively. The table below reflects cash flow from operating activities (in
millions):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Year Ended June 30,
|----------------------------------------- | -------------------
|
|Total income                              |                    
|Operating expenses                        |                    
|Net change in other receivables, assets   |                    
|and liabilities                           |                    
|                                          |                    
|Net cash provided by operating activities |                    
|                                          |                    

|Net
cash provided by investing activities for the year ended June 30, 2001 was
$475,000 compared to net cash provided of $431,000 for the year ended June 30,
2000 and net cash provided of $708,000 for the year ended June 30, 1999. Net
cash provided for 2001 and 2000 was primarily from sales of foreclosed real
estate, while net cash provided in 1999 was primarily from sales of foreclosed
real estate, liquidation of 300,000 shares of RPI preferred stock and
liquidation of restricted cash accounts. The table below reflects cash flow from
investing activities (in millions):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Year Ended June 30,
|----------------------------------------- | -------------------
|
|Liquidation of restricted cash            |                    
|Liquidation of RPI preferred stock        |                    
|Sales of foreclosed real estate           |                    
|                                          |                    
|Net cash provided by investing activities |                    
|                                          |                    

|Net
cash used in financing activities totaled $2.5 million for the year ended June
30, 2001 due to a cash dividend paid on June 29, 2001. Net cash used in
financing activities totaled $1.9 million for the year ended June 30, 2000 due
to a cash dividend paid on June 30, 2000. Net cash used in financing activities
totaled $1.2 million for the year ended June 30, 1999 due to a cash dividend
paid on June 30, 1999. Total cash and cash equivalents were $56.1 million at
June 30, 2001.


The
Company plans to finance acquisitions with its cash and cash equivalents,
borrowings and private or public debt and equity financings. On August 17, 1999,
certain restrictions on issuing additional shares of common stock expired, which
allows the Company to issue additional common stock to fund an acquisition.
Prior to August 17, 1999, the Company was effectively precluded from issuing any
additional shares of common stock for three years after the sale of common stock
to Hunters Glen in order to avoid restricting the use of its net operating
loss carryforwards.
9
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 7A.
Quantitative and Qualitative Disclosures About Market Risk


The
Companys financial instruments consists primarily of cash and cash
equivalents. As noted in Note 6 to the Consolidated Financial Statements, the
Company has approximately $56 million of its cash in interest bearing deposits
in two financial institutions, which are due on demand. Fair value of these
financial instruments approximates carrying value due to the liquidity and
short-term nature of these instruments. The Company is subject to interest rate
risk should rates fluctuate as it relates to interest income earned from these
financial instruments although the Companys deposits do adjust for
interest rate changes. It is the intention of management to ultimately acquire a
viable operating company in order to increase value to existing shareholders and
provide a new focus and direction for the Company. These financial instruments
would be used to fund such acquisitions.



Item 8.
Financial Statements and Supplementary Data


See
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K for a listing of the consolidated financial statements filed with this
report. The response to this item is submitted in a separate section of this
report.



Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure



Not
applicable

10
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART III



Item 10.
Directors and Executive Officers of the Registrant


The
information concerning the directors and executive officers of the Company is
set forth in the Proxy Statement (the Proxy Statement) to be filed
with the Commission and sent to stockholders in connection with the
Companys Annual Meeting of Stockholders to be held November 9, 2001, under
the headings DIRECTOR NOMINEES AND EXECUTIVE OFFICERS and
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, which
information is incorporated herein by reference.



Item 11.
Executive Compensation


The
information concerning executive compensation is set forth in the Proxy
Statement under the headings MANAGEMENT COMPENSATION,
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION and
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION, which
information is incorporated herein by reference.



Item 12.
Security Ownership of Certain Beneficial Owners and Management


The
information concerning security ownership of certain beneficial owners and
management is set forth in the Proxy Statement under the heading SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, which information
is incorporated herein by reference.



Item 13.
Certain Relationships and Related Transactions


Not
applicable.


11
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART IV



Item 14. Exhibits,
Financial Statement Schedules and Reports on Form 8-K
|-----------------------------------------------------------------------------------

|(a) |  | Documents
filed as part of this Annual Report on Form 10-K.
|--- |  | -----------------------------------------------------------

| |  | (1) |  | Consolidated
Financial Statements: See Index to Consolidated Financial Statements on Page F-1.
| |  | --- |  | ----------------------------------------------------------------------------------------------

| |  | (2) |  | Exhibits:
| |  | --- |  | ---------

| |  |  | ExhibitNumber |  |  | 
| |  |  | ------------- |  |  | 

| |  |  |  | 2.1 |  | Plan
of Reorganization, dated as of April 1, 1996, between the Trust and the Company
(incorporated by reference to Exhibit 2.1 of Registration Statement No. 333-07439 on Form
S-4, filed by the Company, which the Securities and Exchange Commission declared
effective on July 3, 1996 (the Registration Statement).
| |  |  |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 2.2 |  | Stock
Purchase Agreement, dated as of January 16, 1996, between the Trust and Hunters
Glen/Ford, Ltd. (the Purchaser) (incorporated by reference to Exhibit 4.1 of the
Trusts Current Report on Form 8-K filed with the Commission on January 24, 1996), as
amended by the Amendment to the Stock Purchase Agreement, dated as of February 27, 1996,
and the Second Amendment to the Stock Purchase Agreement, dated as of March 28, 1996
(incorporated by reference to Exhibit 2.1 of the Trusts Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996).
| |  |  |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 3.1 |  | The
Companys Charter (incorporated by reference to Exhibit 3.1 of the Registration
Statement).
| |  |  |  | --- |  | -----------------------------------------------------------------------------------------------

| |  |  |  | 3.2 |  | The
Companys Bylaws (incorporated by reference to Exhibit 3.2 of the Registration Statement).
| |  |  |  | --- |  | ----------------------------------------------------------------------------------------------

| |  |  |  | 4.1 |  | Form
of Registration Rights Agreement dated August 16, 1996, between the Company and the
Purchaser (incorporated by reference to Exhibit 4.1 of the Registration Statement).
| |  |  |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 4.2 |  | Form
of Agreement Clarifying Registration Rights dated August 16, 1996, between the Company,
the Purchaser, the Enloe Descendants Trust, and Robert Ted Enloe, III (incorporated by
reference to Exhibit 4.3 of the Registration Statement).
| |  |  |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 10.1 |  | Form
of Indemnification Agreement for the Companys directors and officers and schedule of
substantially identical documents (incorporated by reference to Exhibit 10.2 of the
Registration Statement).
| |  |  |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 10.2 |  | Retirement
Plan for Trustees of the Trust, dated October 11, 1988 (incorporated by reference to
Exhibit 10.23 of the Trusts Annual Report on Form 10-K for the year ended June 30, 1993).
| |  |  |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | 21.1 |  | A
list of the subsidiaries of the Company.
| |  |  |  | ---- |  | ------------------------------------------

|12
|--

|
|

|(b) |  | Reports
on Form 8-K.
|--- |  | --------------------

| | No
reports on Form 8-K were filed during the last quarter of the period covered by this
annual report.
| | ------------------------------------------------------------------------------------------------------

|13
|--

|SIGNATURES


Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|DATED:  September 24, 2001 |  | LIBERTÉ INVESTORS INC./s/ GERALD J. FORD
Gerald J. FordChief Executive Officer and Chairmanof
the Board
|-------------------------- |  | ---------------------------------------------------------------------------------------------------------------------

|Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Signatures | Title | Date
|---------- | ----- | ----

|/s/ GERALD J. FORD
Gerald J. Ford | Chief Executive Officer and Chairmanof the Board (Principal Executive Officer) | September 24, 2001
|--------------------------------------------- | ------------------------------------------------------------------------------ | ------------------

|/s/ ELLEN V. BILLINGS
Ellen V. Billings | Vice President & Controller
                           (Principal Financial Officer and Principal
                                            Accounting Officer) | September 24, 2001
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------

|/s/ GENE H. BISHOP
Gene
H. Bishop | Director | September 24, 2001
|--------------------------------------------- | -------- | ------------------

|/s/ HARVEY B. CASH
Harvey B. Cash | Director | September 24, 2001
|--------------------------------------------- | -------- | ------------------

|/s/ JEREMY B. FORD
Jeremy B. Ford | Director | September 24, 2001
|--------------------------------------------- | -------- | ------------------

|/s/ EDWARD W. ROSE, III
Edward W. Rose, III | Director | September 24, 2001
|------------------------------------------------------- | -------- | ------------------

|/s/ GARY SHULTZ
Gary Shultz | Director | September 24, 2001
|--------------------------------------- | -------- | ------------------

|14
|--

|Liberté
Investors Inc.



INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS


The
following consolidated financial statements of Liberté Investors Inc. are
included in response to Item 8 and Item 14 (a) (1) and 14 (a) (2):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                        | Page
|--------------------------------------------------------------------------------------- | ----
|Report of KPMG LLP, Independent Auditors                                                |     
|                                                                                       
|Consolidated Statements of Financial Condition                                          |     
|as of June 30, 2001 and 2000                                                            |     
|                                                                                       
|Consolidated Statements of Operations for the years ended June 30, 2001, 2000 and 1999  |     
|                                                                                       
|Consolidated Statements of Stockholders Equity for the years ended June 30, 2001, 2000 |     
|and 1999                                                                                |     
|                                                                                       
|Consolidated Statements of Cash Flows for the years ended June 30, 2001, 2000 and 1999  |     
|                                                                                       
|Notes to Consolidated Financial Statements                                              |     

|Separate
financial statements relating to the Companys subsidiary are omitted since it is
wholly-owned and such separate financial statements are not material.


All
financial statement schedules have been omitted because the required information is not
material to require submission of the schedule or because the information required is
included in the financial statements, including the notes thereto.

F-1
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|INDEPENDENT
AUDITORS REPORT



The Board of Directors and
StockholdersLiberté Investors Inc.:


We have audited the
consolidated financial statements of Liberté Investors Inc. and
subsidiary as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.


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


In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Liberté Investors Inc. and
subsidiary as of June 30, 2001 and 2000, and the results of their operations and
their cash flows for each of the years in the three-year period ended June 30,
2001, in conformity with accounting principles generally accepted in the United
States of America.




KPMG
LLP




Dallas, TexasAugust 15, 2001

F-2
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|LIBERTÉ
INVESTORS INC.AND
SUBSIDIARYCONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
|----------------------------------------------------------------------------------

|                                           | June 30,2001 | June 30,2000    
|------------------------------------------ | ------------ | ----------------
|Assets                                     |              |                 
|Cash and cash equivalents                  |              | $   56,102,635  
|Foreclosed real estate held for sale       |              | 2,359,334       
|Accrued interest and other receivables     |              | 5,239           
|Other assets, net                          |              | 96,323          
|                                           |              |                 
|Total assets                               |              | $   58,563,531  
|                                           |              |                 
|Liabilities and Stockholders Equity       |             
|Liabilities-accrued and other liabilities  |              | $        530,999
|Stockholders Equity                       |             
|Common stock, $.01 par value,              |             
|50,000,000 shares authorized,              |             
|20,256,097 shares issued and outstanding   |              | 202,561         
|Additional paid-in capital                 |              | 309,392,398     
|Accumulated deficit                        |              | (251,562,427    
|                                           |              |                 
|Total stockholders equity                 |              | 58,032,532      
|                                           |              |                 
|Commitments and contingencies              |             
|Total liabilities and stockholders equity |              | $   58,563,531  
|                                           |              |                 

|See notes to consolidated
financial statements.
F-3
|---------------------------------------------------

|LIBERTÉ
INVESTORS INC.AND
SUBSIDIARYCONSOLIDATED
STATEMENTS OF OPERATIONS
|-------------------------------------------------------------------------

|                                        | Year Ended June 30,
|--------------------------------------- | -------------------
|
|Income:                                 |                    
|Interest-bearing deposits in banks      |                    
|Gain on sales of foreclosed real estate |                    
|Other                                   |                    
|                                        |                    
|Total income                            |                    
|                                        |                    
|Expenses:                               |                    
|Insurance                               |                    
|Foreclosed real estate operations       |                    
|Legal, audit and consulting fees        |                    
|Directors fees and expenses             |                    
|Franchise tax                           |                    
|Compensation and employee benefits      |                    
|General and administrative              |                    
|                                        |                    
|Total expenses                          |                    
|                                        |                    
|Income before income taxes              |                    
|Income tax expense                      |                    
|                                        |                    
|Net Income                              |                    
|                                        |                    
|Basic and diluted net income            |                    
|per share of common stock               |                    
|                                        |                    
|Weighted average number of shares of    |                    
|common stock                            |                    
|                                        |                    

|See notes to consolidated
financial statements.


F-4
|-----------------------------------------------------

|LIBERTÉ
INVESTORS INC.AND
SUBSIDIARYCONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
|-----------------------------------------------------------------------------------

|                                  | Number ofShares | CommonStock | AdditionalPaid-InCapital | AccumulatedDeficit | Total
|--------------------------------- | --------------- | ----------- | ------------------------ | ------------------ | -----
|Balance at June 30, 1998          |                 | 20,256,097  |                          | $202,561           |      
|                                 
|Dividends paid ($0.06 per share)  |                 |            |                          |                   |      
|                                 
|Unclaimed dividends from          |                
|bankruptcy reorganization         |                 |            |                          |                   |      
|                                 
|Net income                        |                 |            |                          |                   |      
|                                  |                 |             |                          |                    |      
|Balance at June 30, 1999          |                 | 20,256,097  |                          | 202,561            |      
|                                 
|Dividends paid ($0.094 per share) |                 |            |                          |                   |      
|                                 
|Net income                        |                 |            |                          |                   |      
|                                  |                 |             |                          |                    |      
|Balance at June 30, 2000          |                 | 20,256,097  |                          | 202,561            |      
|                                 
|Dividends paid ($0.125 per share) |                 |            |                          |                   |      
|                                 
|Net income                        |                 |            |                          |                   |      
|                                  |                 |             |                          |                    |      
|Balance at June 30, 2001          |                 | 20,256,097  |                          | $202,561           |      
|                                  |                 |             |                          |                    |      

|See notes to consolidated
financial statements.

F-5
|----------------------------------------------------

|LIBERTÉ
INVESTORS INC.AND
SUBSIDIARYCONSOLIDATED
STATEMENTS OF CASH FLOWS
|-------------------------------------------------------------------------

|                                                              | Year Ended June 30,
|------------------------------------------------------------- | -------------------
|
|Cash flows from operating activities:                         |                    
|Net income                                                    |                    
|Adjustments to reconcile net income                           |                    
|to net cash provided by operating activities:                 |                    
|Depreciation and amortization                                 |                    
|Gain from sales of foreclosed real estate                     |                    
|Gain from sale of fixed assets                                |                    
|(Increase) decrease in accrued interest and other receivables |                    
|Decrease (increase) in other assets                           |                    
|(Decrease) increase  in accrued and other liabilities         |                    
|                                                              |                    
|Net cash provided by operating activities                     |                    
|                                                              |                    
|Cash flows from investing activities:                         |                    
|Additions to fixed assets                                     |                    
|Proceeds from sales of foreclosed real estate                 |                    
|Proceeds from sale of fixed assets                            |                    
|Proceeds from liquidation of other assets                     |                    
|Decrease in restricted cash investments                       |                    
|                                                              |                    
|Net cash provided by investing activities                     |                    
|                                                              |                    
|Cash flows from financing activity - dividend paid            |                    
|                                                              |                    
|Net increase in cash and cash equivalents                     |                    
|Cash and cash equivalents at beginning of year                |                    
|                                                              |                    
|Cash and cash equivalents at end of year                      |                    
|                                                              |                    

|See
notes to consolidated financial statements.

F-6
|----------------------------------------------------

|Liberté
Investors Inc. and Subsidiary



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



June 30,
2001, 2000 and 1999


(1)     Summary of
significant accounting policies


(a)
Organization  Liberté Investors Inc., a Delaware corporation
(the Company), was organized in April of 1996 in order to effect the
reorganization of Liberté Investors, a Massachusetts business trust (the
Trust). At a special meeting of the shareholders of the Trust held
on August 15, 1996, (the Special Meeting), the Trusts
shareholders approved a plan of reorganization whereby the Trust contributed its
assets to the Company and received all of the Companys outstanding common
stock, par value $.01 per share (Shares or Common
Stock). The Trust then distributed to its shareholders in redemption of
all outstanding shares of beneficial interest in the Trust (the Beneficial
Shares) the Shares of the Company. The Company assumed all of the
Trusts assets and outstanding liabilities and obligations.


Unless
otherwise indicated, the information contained in the consolidated financial
statements which relates to periods prior to August 16, 1996 is information
related to the Trust and information relating to periods on or after August 16,
1996 is information relating to the Company.


(b)
Business  The principal business activity of the Trust was
investing in notes receivable, primarily first mortgage construction notes and
first mortgage acquisition and development notes. Beginning in fiscal 1988,
however, the Trust progressively curtailed its lending activities and reduced
the size of its portfolio of foreclosed real estate in an effort to repay
indebtedness.


On
October 25, 1993, the Trust filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. On April 7, 1994, the Trust
emerged from bankruptcy pursuant to a plan of reorganization whereby certain
assets and liabilities, including remaining senior indebtedness, were
transferred to Resurgence Properties Inc. (RPI), and RPIs
common stock was distributed to the holders of the Trusts outstanding
subordinated indebtedness in full satisfaction of such holders claims
against the Trust. The Trust received shares of preferred stock of RPI and a
note receivable which was subsequently paid. On June 30, 1997, the court issued
an Administrative Closing Order and Final Decree with regard to the bankruptcy
case.


After
the reorganization of the Trust into the Delaware corporation in August 1996,
management has been pursuing the acquisition of an operating company in order to
utilize the net operating loss carryforwards available to offset future
earnings.


(c)
Consolidation  The accompanying financial statements include the
accounts of the Company and LNC Holdings, Inc., a wholly-owned subsidiary whose
sole asset is approximately 40 acres of land located in Arlington, Texas. All
intercompany balances have been eliminated.


(d)
Use of estimates  The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets, liabilities, revenues and expenses at the date of the consolidated
financial statements. Actual results could differ from those estimates.

F-7
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liberté
Investors Inc. and Subsidiary


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


(e)
Recognition of income  Interest income is recorded on an accrual
basis. The Company discontinues the accrual of interest income when
circumstances cause the collection of such interest to be doubtful. Interest
income on impaired loans is recognized on a cash basis only after all principal
has been collected. Collections on impaired loans with no carrying value are
recognized on a cash basis and are recorded as loan income.


(f)
Foreclosed real estate  Foreclosed real estate is recorded at the
lower of cost or fair value less estimated costs to sell. Cost is the note
amount at the time of foreclosure net of any allowances. The Company
periodically reviews its portfolio of foreclosed real estate held for sale using
current information including (i) independent appraisals, (ii) general economic
factors affecting the area where the property is located, (iii) recent sales
activity and asking prices for comparable properties and (iv) costs to sell
and/or develop that would serve to lower the expected proceeds from the disposal
of the real estate. Gains (losses) realized on liquidation are recorded directly
to income.


(g)
Income taxes  Income taxes are maintained in accordance with SFAS
No. 109, Accounting for Income Taxes, whereby deferred income tax
assets and liabilities result from temporary differences. Temporary differences
are differences between the tax basis of assets and liabilities and operating
loss and tax credit carryforwards and their reported amounts in the consolidated
financial statements that will result in taxable or deductible amounts in future
years.


(h)
Basic and diluted net income per share  Basic and diluted net
income per share is based on the weighted average number of shares outstanding
during the year.


(i)
Cash and cash equivalents  Cash and cash equivalents include highly
liquid investments with original maturities of three months or less.


(2)    Foreclosed
Real Estate


The
following is a summary of the Companys activity in foreclosed real estate
for the years ended June 30, 2000, 1999, and 1998:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | 2001 | 2000        | 1999
|---------------------------- | ---- | ----------- | ----
|Balance at beginning of year |      | $ 2,462,445 |     
|Cost of real estate sold     |      | (103,111    | )   
|                             |      |             |     
|Balance at end of year       |      | $ 2,359,334 |     
|                             |      |             |     

|All
of the Companys real estate for 2001, 2000, and 1999 consists of
undeveloped land located in the state of Texas.


On
January 20, 1998, foreclosure of the 55 lots in Fontana, California was
completed, and all right, title, and interest in the property were conveyed to
the Company. This property was sold in September 1998 to a single-family
homebuilder for $229,020, less associated selling costs of $17,020. A gain of
approximately $2,000 was recognized as a result of this transaction for the year
ended June 30, 1999. The proceeds from the sale of the 55 lots was reduced by
$3,689 for property taxes paid by the purchaser, which is treated as a non-cash
item in the statements of cash flows.
F-8
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liberté
Investors Inc. and Subsidiary


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



In
August 1998, the Company sold 56.6 acres of land in San Antonio, Texas to a
single-family homebuilder for $339,700, less associated selling costs of
$34,126. A gain of approximately $117,000 was recognized as a result of this
transaction for the year ended June 30, 1999. The buyer also has an option to
purchase two additional tracts totaling 109 acres of land adjacent to the 56.6
acres and has made a $50,000 deposit to the Company for this option to purchase.
The proceeds from the sale of the 56.6 acres were reduced by $186,420 to be used
by the buyer to extend a road into the property and by $2,756 in property taxes
paid by the purchaser. The sales agreement was established whereby if the option
to purchase the second tract was exercised, the aggregate sales price of the
second tract of land would be increased by $186,420. These amounts are also
treated as non-cash transactions in the statements of cash flows.


In
October 1999, the Company sold the second tract totaling 51.18 acres of land in
San Antonio, Texas to a single-family homebuilder for a price of $307,080. A
gain of approximately $119,000 was recognized as a result of this transaction.
The buyer has an option to purchase a third tract totaling 58 acres of land
adjacent to the 51.18 acres and has a $25,000 deposit with the Company for this
option. The proceeds from the sale of the 51.18 acres were increased by
$186,420, which had been deducted from the August 1998 purchase to be used by
the buyer to extend a road into the property. The buyer had previously paid a
$25,000 deposit on the 51.18 acres, which is also treated as a non-cash
transaction in the statements of cash flows.


In
August 2000, the Company sold 6.46 acres of land in San Antonio, Texas to a
developer for a price of $114,100, less associated selling costs of $1,966. A
gain of approximately $45,000 was recorded as a result of this transaction. The
proceeds from the sale of the 6.46 acres was reduced by $660 for property taxes
paid by the purchaser, which is treated as a non-cash item in the statements of
cash flows.


In
February 2001, the Company sold a 0.94-acre tract of land in San Antonio, Texas
to an individual for a price of $6,000, less associated selling costs of $162. A
gain of approximately $2,000 was recorded as a result of this transaction. The
proceeds from the sale of the 0.94 acres was reduced by $148 for property taxes
paid by the purchaser, which is treated as a non-cash item in the statements of
cash flows.


In
March 2001, the Company sold a 1.26-acre tract of land in San Antonio, Texas to
a business owner for a price of $100,000, less associated selling costs of
$1,521. A gain of approximately $64,000 was recorded as a result of this
transaction.


In
May 2001, the Company sold 29.07 acres of land in San Antonio, Texas to a
residential homebuilder for a price of $348,818, less associated selling costs
of $25,366. A gain of approximately $267,000 was recorded as a result of this
transaction.


(3)    
Commitments and Contingencies


The
Companys wholly-owned subsidiary, LNC Holdings Inc., owns approximately 40
acres of land located in Arlington, Texas which is encumbered by property tax
liens totaling approximately $1,407,000 including penalties and interest.


On
April 16, 1997, LNC Holdings Inc. received a notice of judgment from the City of
Arlington with regard to the delinquent taxes through that date. On June 28,
2001, LNC Holdings Inc. received an additional notice of judgment from the City
of Arlington with regard to the delinquent taxes from 1997 through that date.
LNC Holdings Inc. notified the City of Arlington that it would execute a deed
without warranty to allow the taxing units to obtain title to the property. No
response has been received. LNC Holdings Inc. has accrued property taxes and
related penalties and interest for calendar years 1996 through 2000 and for the
six month period ended June 30, 2001 totaling $254,000. Management believes that
resolution of the delinquent tax issue with the taxing authorities will not
result in a material adverse impact on the consolidated financial statements.
F-9
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liberté
Investors Inc. and Subsidiary


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



Cash
and cash equivalents at June 30, 1998 included restricted cash of approximately
$64,000 for claims due to bankruptcy. The claims represented unclaimed dividends
from May 1994. Any amount not claimed was voidable after five years. During May
1999, dividend checks totaling $11,506 had not been claimed, and all the
outstanding dividend checks were voided. In addition, a liability of $61,853
associated with unpaid dividend amounts was reversed. The restricted cash
accounts were closed and transferred into unrestricted cash accounts. These
amounts were credited to accumulated deficit since the amounts were previously
charged as a dividend to the accumulated deficit and are treated as a non-cash
transaction in the statements of cash flows.


The
Company entered into an operating lease dated May 16, 1997 relating to its
principal executive offices. On February 15, 2000, the Company signed a renewal
option on the operating lease regarding its principal executive offices. The
renewal expires December 31, 2003, contains an additional renewal option and
requires the Company to pay a proportionate share of operating expenses of the
building. In addition, the Company has entered into other operating leases for
office equipment.


Rental expense for fiscal
2001, 2000 and 1999 under these leases was approximately $80,000, $94,000, and
$88,000, respectively. Future minimum lease payments under these leases are as
follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fiscal Year EndingJune 30,   |  | Amount   
| | ---------------------------- |  | ---------
| | 2002                         |  | $  72,963
| | 2003                         |  | 72,963   
| | 2004                         |  | 36,481   
| |                              |  |          
| | Total future minimum rentals |  | $182,407 
| |                              |  |          

|The
Company is involved in routine litigation incidental to its business, which, in
the opinion of management, will not result in a material adverse impact on the
Companys consolidated financial condition, results of operations, or cash
flows, without regard to possible insurance or third party reimbursement.

F-10
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liberté
Investors Inc. and Subsidiary


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





(4)    Federal Income Taxes


There
was no income tax expense recorded for the years ended June 30, 2001, 1999, or
1998.


The
income tax expense for the years ended June 30, 2001, 2000, and 1999 differs
from the amounts computed by applying the U.S. Federal corporate tax rate of 34%
to income before income taxes as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | June 30, |                   
|-------------------------------------------- | -------- | ------------------
|
|Computed expected income tax expense       |          | $    855,537      
|Increase (decrease) in taxes resulting from: |         
|Adjustment to deferred tax asset and         |         
|permanent tax items                          |          | (4,233            
|Expiration of capital loss carryforward      |          | 1,629,812         
|Change in the beginning of the year          |         
|balance of the valuation allowance           |         
|for deferred tax assets allocated            |         
|to income taxes                              |          | (2,481,116        
|                                             |          |                   
|                                             |          | $                
|                                             |          |                   

|The
tax effects of temporary differences that give rise to significant portions of
the deferred tax assets at June 30, 2001 and 2000 are presented below:
|---------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | June 30, |                   
|------------------------------------------- | -------- | ------------------
|
|Deferred tax assets:                        |          |                   
|Net operating loss carryforwards            |          | $ 75,149,946      
|Basis differences of foreclosed real estate |          | 2,000,041         
|Capital loss carryforward                   |          |                  
|Other                                       |          | 1,913,607         
|                                            |          |                   
|Total gross deferred tax assets             |          | 79,063,594        
|Less:  valuation allowance                  |          | (79,063,594       
|                                            |          |                   
|Net deferred tax assets                     |          | $                
|                                            |          |                   

|The
net change in the valuation allowance for the years ended June 30, 2001, 2000
and 1999 was a decrease of $2,481,116, $754,017 and $630,071, respectively.
Based on current business activity and the current status of business
acquisitions, management believes it is more likely than not that the Company
will not realize the benefits of the loss carryforwards. Therefore, a full
valuation allowance has been established. In the event the Company expands its
business operations through an acquisition, the ability to use the loss
carryforwards may change.


At
June 30, 2001, the Company had net operating loss carryforwards for federal
income tax purposes of approximately $221 million, which are available to offset
future federal taxable income. The carryforwards will expire in 2005 through
2011. In addition, the Company has alternative minimum tax credit carryforwards
of $15,100 which are available to reduce future federal income taxes, if any,
over an indefinite period.






F-11
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liberté
Investors Inc. and Subsidiary


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS






(5)    Fair Value
of Financial Instruments


SFAS
No. 107, Disclosures about Fair Value of Financial Instruments
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition, for which it
is practicable to estimate that value. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts do not represent the underlying
value of the Company.


The
fair value of cash and cash equivalents approximates their carrying value
because of the liquidity and short-term maturities of these instruments. The
Company believes that its deficiency notes receivable, which have no carrying
value at June 30, 2001 and 2000, may have some fair value, but such value cannot
be estimated and any potential collections are not measurable as to timing or
amount.


(6)    Concentrations of
Credit Risk


At
June 30, 2001, the Company had certain concentrations of credit risk with two
financial institutions in the form of cash, which amounted to approximately $56
million. For purposes of evaluating credit risk, the stability of financial
institutions conducting business with the Company is periodically reviewed. If
the financial institutions failed to completely perform under the terms of the
financial instruments, the exposure for credit loss would be the amount of the
financial instruments less amounts covered by regulatory insurance.


(7)    Selected
Quarterly Financial Data (unaudited)


Interim
results are not necessarily indicative of fiscal year performance because of the
impact of seasonal and short-term variations. Selected quarterly financial data
are summarized as follows (dollars in thousands, except per share data):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | Quarters
|--------------------------------------- | --------
|
|Fiscal Year 2000                        |         
|Operating revenues                      |         
|Net income                              |         
|Basic and diluted net income per share: |         
|                                        |         
|Fiscal Year 2001                        |         
|Operating revenues                      |         
|Net income                              |         
|Basic and diluted net income per share: |         
|                                        |         

|F-12
|----