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

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

                                    FORM 10-K
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     For the Fiscal Year Ended June 30, 2000
                                       OR
      [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the Transition Period from ______ to ______
                          Commission File Number 1-6802

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

                             Liberte Investors Inc.
             (Exact name of registrant as specified in its charter)

               DELAWARE                                     75-1328153
    (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                      Identification No.)

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

       Registrant's telephone number, including area code: (214) 871-5935
           Securities 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 25, 2000, 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 25, 2000 was  $30,420,132.  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 25, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE:

         Portions of the Registrant's Proxy Statement to be furnished to
    stockholders in connection with its 2000 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]

<PAGE>

                             LIBERTE INVESTORS INC.

                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2000

                                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 Company'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 Company.............. 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
<PAGE>

                                     PART I

Item 1. Business

     Liberte  Investors Inc. ("LBI" or the "Company") is a Delaware  corporation
which was  organized in April of 1996 in order to effect the  reorganization  of
Liberte  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, 2000, the Company owned  foreclosed  real estate  totaling $2.5
million.  At June 30, 2000, 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,  2000
consisted  of  undeveloped  land  located in Texas.  See also Note 2 of Notes to
Consolidated Financial Statements.

     At June 30,  2000,  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
<PAGE>

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 and  adopted
Statement of  Financial  Accounting  Standards  No. 109  "Accounting  for Income
Taxes".

     At June 30, 2000,  the Company had net  operating  loss  carryforwards  for
federal income tax purposes of approximately  $223 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, 2000,  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 a potential acquisition.


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
<PAGE>

                                     PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters

Price Range of Common Stock

     The common stock of Liberte  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
    -----------                                           ----          ---
    2000
          First Quarter............................    $  3 11/16    $ 3 1/16
          Second Quarter...........................       3 5/8        3 1/16
          Third Quarter............................       3 5/8        3 1/16
          Fourth Quarter...........................       3 3/8        2 13/16

    1999
          First Quarter............................    $  3 13/16    $ 2 5/8
          Second Quarter...........................       3 1/2        2 3/4
          Third Quarter............................       3 5/8        3 1/16
          Fourth Quarter...........................       3 3/4        3 1/8

     The high and low sales  price per share of common  stock as reported on the
NYSE  Composite   Transaction  Tape  on  September  25,  2000,  was  $3.00.  The
approximate  number  of  shareholders  of  Common  Stock  of the  Company  as of
September 25, 2000 was 3,800.

Dividend Policy

     On June 7, 2000,  the Board of Directors of the Company  declared a special
cash  dividend  of $0.094 per share paid to  stockholders  of record on June 30,
2000.  The  Company  also paid a special  cash  dividend of $0.06 and $0.031 per
share on June 30,  1999 and 1998,  respectively.  Although  the Company has paid
dividends  the past three  years,  the Company does not  anticipate  paying cash
dividends  in the future but 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


                                       5
<PAGE>

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.


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,
2000.  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.

<TABLE>
<CAPTION>
                                                                       Year Ended June 30,
                                               -------------------------------------------------------------------
                                                 2000           1999           1998           1997           1996
                                               -------        -------        -------        -------        -------
                                                         (dollars in thousands, except per share data)
<S>                                            <C>            <C>            <C>            <C>            <C>
Statement of Operations Data:
  Revenues                                     $ 2,973        $ 2,662        $ 2,778        $ 2,527        $ 2,784
  Provision for loan losses                         --             --             --             --            187
  Net income                                     2,218          1,850          1,450          1,309            835
  Basic and diluted net income
    per common share                              0.11           0.09           0.07           0.07           0.07
  Cash dividends declared per share              0.094           0.06          0.031             --             --

<CAPTION>
                                                                             June 30,
                                               -------------------------------------------------------------------
                                                 2000           1999           1998           1997           1996
                                               -------        -------        -------        -------        -------
                                                                     (dollars in thousands)
<S>                                            <C>            <C>            <C>            <C>            <C>
Statement of Financial Condition Data:
  Total assets                                 $58,475        $58,216        $57,535        $56,445        $33,354
  Long-term obligations                             --             --             --             --             --
  Stockholders' equity                          58,048         57,735         57,027         56,206         32,852
</TABLE>


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
<PAGE>

General

     During  the  fiscal  year  ended  June 30,  2000,  Liberte  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  have  been made to
identify  quality  acquisitions  in fiscal 2000, the Company has not yet entered
into any definitive acquisition agreements.

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


                                       7
<PAGE>

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.

1999 compared with 1998

     Net income for the year ended June 30, 1999  increased to  $1,850,000  from
$1,450,000  for the year ended June 30, 1998, an increase of 28%. This change in
operating results is discussed below.

     Interest  income  on  interest-bearing   deposits  in  banks  decreased  to
$2,530,000  for the year ended June 30, 1999 from  $2,721,000 for the year ended
June 30, 1998. This decrease is due to a decline in interest rates. Unrestricted
cash  increased from $54.0 million at June 30, 1998 to $55.3 million at June 30,
1999 primarily due to interest  earned on unrestricted  cash accounts,  proceeds
from the sale of foreclosed real estate and the liquidation of 300,000 shares of
RPI preferred stock.

     The Company did not receive any notes  receivable  interest  income for the
year ended June 30, 1999 as  compared  to $41 for the year ended June 30,  1998.
There were no  outstanding  balances  on notes  receivables  at June 30, 1999 or
1998.

     There  were no gains on sales of  foreclosed  real  estate  during the year
ended June 30, 1998 as compared  to $120,000  for the year ended June 30,  1999.
The gains  recognized  during the year ended June 30,  1999 are from the sale of
56.6  acres in San  Antonio,  Texas  and  from  the sale of 55 lots in  Fontana,
California.

     Other  income  decreased  to $13,000  for the year ended June 30, 1999 from
$57,000 for the year ended June 30,  1998.  Other income for the year ended June
30, 1998 consisted  primarily of dividends on RPI preferred and common stock and
interest received on property tax refunds.  Other income for the year ended June
30, 1999 represented  primarily  dividends on RPI preferred stock. Such dividend
payments for the year ended June 30, 1999 decreased significantly as compared to
the same  period in 1998 due to the  liquidation  in August  1998 of the 300,000
shares of RPI preferred stock held by the Company.

     Insurance  expense  decreased  to $122,000 for the year ended June 30, 1999
from  $151,000 for the year ended June 30, 1998.  This decrease is primarily due
to decreased premiums related to directors' and officers' insurance coverage.

     Foreclosed real estate  operations  expense decreased $48,000 from $193,000
for the year ended June 30, 1998 to $145,000  for the year ended June 30,  1999.
The  decrease is  primarily  due to lower  property  tax expense for fiscal 1999
resulting from the sale of 56.6 acres in San Antonio, Texas and from the sale of
55 lots in Fontana,  California and additional  expenses incurred in fiscal 1998
to foreclose on the 55 lots in Fontana, California.

     Loss on  write-down  of  foreclosed  real estate was  $407,000 for the year
ended June 30, 1998. There were no write-downs of foreclosed real estate for the
year ended June 30, 1999. The  write-down  for 1998 was made to more  accurately
reflect  estimated  sales  proceeds  less selling costs of single family lots in
Fontana, California.

     Legal,  audit and consulting  fees were $68,000 for the year ended June 30,
1999 as compared to $73,000 incurred in the year ended June 30, 1998. Legal fees
in 1999 were lower due to the  Company  having  sold 56.6 acres in San  Antonio,
Texas and 55 lots in Fontana, California, with no sales contracts pending on the
remaining foreclosed real estate.


                                       8
<PAGE>

     Franchise  tax expense  decreased  from  $96,000 in 1998 to $75,000 in 1999
because the Company  accrued less Texas  franchise  tax expense  during the year
ended June 30, 1999 and because fiscal 1998 tax expense was higher because of an
adjustment  to  record  1997  Delaware   franchise  tax  due  to  the  Company's
reorganization from the Trust to a Delaware corporation.

     Compensation and employee benefits increased by $17,000 from $90,000 during
the year  ended June 30,  1998 to  $107,000  for the year  ended June 30,  1999.
Compensation  expense  is higher  for the year  ended  June 30,  1999 due to the
Company  having just one employee for two months  during the year ended June 30,
1998.

     General and  administrative  expense  decreased  from $253,000 for the year
ended June 30, 1998 to $232,000 for the year ended June 30,  1999.  The decrease
is primarily due to a reduction in  shareholder  relations and other general and
administrative expenses during the year ended June 30, 1999.

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, 2000 provided $2.1 million
of cash  compared to $1.8  million and $2.2  million  provided in 1999 and 1998,
respectively.  The table below reflects cash flow from operating  activities (in
millions):

                                                       Year Ended June 30,
                                               --------------------------------
                                                2000         1999         1998
                                               ------       ------       ------
Total income                                   $  3.0       $  2.7       $  2.8
Operating expenses                               (0.8)        (0.8)        (1.3)
Net change in other receivables,
  assets and liabilities                         (0.1)        (0.1)         0.7
                                               ------       ------       ------
Net cash provided by operating activities      $  2.1       $  1.8       $  2.2
                                               ======       ======       ======

     Net cash provided by investing  activities for the year ended June 30, 2000
was $431,000  compared to net cash  provided of $708,000 for the year ended June
30, 1999 and net cash used of $16,000 for the year ended June 30, 1998. Net cash
provided for 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 and net cash used in 1998 was primarily for fixed asset
purchases.

The table below reflects cash flow from investing activities (in millions):

                                                       Year Ended June 30,
                                               --------------------------------
                                                2000         1999         1998
                                               ------       ------       ------
Liquidation of restricted cash                 $   --       $  0.1       $   --
Liquidation of RPI preferred stock                 --          0.3           --
Sales of foreclosed real estate                   0.4          0.3           --
                                               ------       ------       ------
Net cash provided by investing activities      $  0.4       $  0.7       $   --
                                               ======       ======       ======


                                       9
<PAGE>

     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.  Net  cash  used in  financing
activities  totaled  $0.6 million for the year ended June 30, 1998 due to a cash
dividend  paid on June 30,  1998.  Total  cash and cash  equivalents  were $55.9
million at June 30, 2000.

     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.


Item 7A. Quantitative and Qualitative Disclosure About Market Risk

     The Company's  financial  instruments  consists  primarily of cash and cash
equivalents.  As noted in Note 8 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
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Company

     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 10, 2000 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
<PAGE>

                                     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:

                     Exhibit
                     Number

                     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).


                                       12
<PAGE>

                     10.3   Agreement Regarding  Registration Rights,  Amendment
                            of  Stock  Option  Agreement,  and  Ratification  of
                            Pledge  Agreement,  dated as of November  13,  1995,
                            among the  Trust,  Robert Ted  Enloe,  III,  and the
                            Enloe Descendants' Trust  (incorporated by reference
                            to Exhibit 10.6 of the Registration Statement).

                     21.1   A list of the subsidiaries of the Company.

                     27.1   Financial Data Schedule  (included only in the EDGAR
                            filing).


       (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
<PAGE>

                                   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 25, 2000                   LIBERTE INVESTORS INC.


                                                  /s/ GERALD J. FORD
                                                  ------------------------------
                                                  Gerald J. Ford
                                                  Chief Executive Officer and
                                                  Chairman of 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       Chief Executive Officer and        September 25, 2000
------------------------     Chairman of the Board
    Gerald J. Ford           (Principal Executive Officer)


  /s/ SAMUEL C. PERRY      Vice President & Controller        September 25, 2000
------------------------     (Principal Financial Officer
    Samuel C. Perry          and Principal Accounting
                             Officer)


  /s/ GENE H. BISHOP       Director                           September 25, 2000
------------------------
    Gene H. Bishop


  /s/ HARVEY B. CASH       Director                           September 25, 2000
------------------------
    Harvey B. Cash


  /s/ JEREMY B. FORD       Director                           September 25, 2000
------------------------
    Jeremy B. Ford


/s/ EDWARD W. ROSE, III    Director                           September 25, 2000
------------------------
  Edward W. Rose, III


    /s/ GARY SHULTZ        Director                           September 25, 2000
------------------------
     Gary Shultz


                                       14
<PAGE>

                             Liberte Investors Inc.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     The following  consolidated  financial statements of Liberte 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.................................  F-2

Consolidated Statements of Financial Condition
      as of June 30, 2000 and June 30, 1999..............................  F-3

Consolidated Statements of Operations for the years ended
      June 30, 2000, 1999 and 1998.......................................  F-4

Consolidated Statements of Stockholders' Equity for the years
      ended June 30, 2000, 1999 and 1998.................................  F-5

Consolidated Statements of Cash Flows for the years ended
      June 30, 2000, 1999 and 1998.......................................  F-6

Notes to Consolidated Financial Statements...............................  F-7


     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
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Liberte Investors Inc.:

We have audited the consolidated  financial statements of Liberte 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 Liberte Investors
Inc.  and  subsidiary  as of June 30,  2000 and 1999,  and the  results of their
operations and their cash flows for each of the years in the  three-year  period
ended June 30, 2000, in conformity with accounting principles generally accepted
in the United States of America.

                                                            KPMG LLP


Dallas, Texas
August 4, 2000


                                      F-2
<PAGE>

                             LIBERTE INVESTORS INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                     June 30,         June 30,
                                                       2000             1999
                                                  -------------   -------------
Assets
Cash and cash equivalents                         $  55,887,941   $  55,280,342
Foreclosed real estate held for sale                  2,462,445       2,810,267
Accrued interest and other receivables                    5,128           3,790
Other assets, net                                       119,790         121,160
                                                  -------------   -------------
      Total assets                                $  58,475,304   $  58,215,559
                                                  =============   =============

Liabilities and Stockholders' Equity
Liabilities-accrued and other liabilities         $     427,044   $     480,728

Stockholders' Equity
Common stock, $.01 par value,
   50,000,000 shares authorized,
   20,256,097 shares issued and outstanding             202,561         202,561
Additional paid-in capital                          309,392,399     309,392,399
Accumulated deficit                                (251,546,700)   (251,860,129)
                                                  -------------   -------------

     Total stockholders' equity                      58,048,260      57,734,831
                                                  -------------   -------------

Commitments and contingencies

     Total liabilities and stockholders' equity   $  58,475,304   $  58,215,559
                                                  =============   =============


See notes to consolidated financial statements.


                                      F-3
<PAGE>

                             LIBERTE INVESTORS INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                         Year Ended June 30,
                                                       -------------------------------------------------------
                                                           2000                  1999                  1998
                                                       -----------           -----------           -----------
<S>                                                    <C>                   <C>                   <C>
Income:
  Interest-bearing deposits in banks                   $ 2,853,503           $ 2,529,537           $ 2,721,150
  Notes receivable interest                                     --                    --                    41
  Gain on sales of foreclosed real estate                  119,348               119,593                    --
  Other                                                         84                12,789                57,012
                                                       -----------           -----------           -----------
Total income                                             2,972,935             2,661,919             2,778,203
                                                       -----------           -----------           -----------

Expenses:
  Insurance                                                121,437               121,828               151,197
  Foreclosed real estate operations                        136,889               144,591               193,140
  Loss on write-down of foreclosed real estate                  --                    --               407,348
  Legal, audit and consulting fees                         122,200                68,396                72,847
  Directors fees and expenses                               60,000                63,000                63,500
  Franchise tax                                             43,965                75,266                96,270
  Compensation and employee benefits                        85,869               107,302                89,584
  General and administrative                               185,073               231,940               253,359
                                                       -----------           -----------           -----------
Total expenses                                             755,433               812,323             1,327,245
                                                       -----------           -----------           -----------

Income before income taxes                               2,217,502             1,849,596             1,450,958

Income tax expense                                              --                    --                 1,456
                                                       -----------           -----------           -----------

Net Income                                             $ 2,217,502           $ 1,849,596           $ 1,449,502
                                                       ===========           ===========           ===========

Basic and diluted net income
  per share of common stock                            $      0.11           $      0.09           $      0.07
                                                       ===========           ===========           ===========

Weighted average number of shares of
  common stock                                          20,256,097            20,256,097            20,256,097
                                                       ===========           ===========           ===========
</TABLE>

See notes to consolidated financial statements.


                                      F-4
<PAGE>

                             LIBERTE INVESTORS INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

<TABLE>
<CAPTION>
                                                                                     Additional
                                                    Number of         Common          Paid-In        Accumulated
                                                     Shares           Stock           Capital          Deficit            Total
                                                 -------------    -------------    -------------    -------------     -------------
<S>                                                 <C>           <C>              <C>              <C>               <C>
Balance at June 30, 1997                            20,256,097          202,561      309,392,399     (253,389,281)       56,205,679

Dividends paid ($0.031 per share)                           --               --               --         (627,939)         (627,939)

Net income                                                  --               --               --        1,449,502         1,449,502
                                                 -------------    -------------    -------------    -------------     -------------

Balance at June 30, 1998                            20,256,097          202,561      309,392,399     (252,567,718)       57,027,242

Dividends paid ($0.06 per share)                            --               --               --       (1,215,366)       (1,215,366)

Unclaimed dividends from
    bankruptcy reorganization                               --               --               --           73,359            73,359

Net income                                                  --               --               --        1,849,596         1,849,596
                                                 -------------    -------------    -------------    -------------     -------------

Balance at June 30, 1999                            20,256,097          202,561      309,392,399     (251,860,129)       57,734,831

Dividends paid ($0.094 per share)                           --               --               --       (1,904,073)       (1,904,073)

Net income                                                  --               --               --        2,217,502         2,217,502
                                                 -------------    -------------    -------------    -------------     -------------

Balance at June 30, 2000                            20,256,097    $     202,561    $ 309,392,399    $(251,546,700)    $  58,048,260
                                                 =============    =============    =============    =============     =============
</TABLE>

See notes to consolidated financial statements.


                                      F-5
<PAGE>

                             LIBERTE INVESTORS INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Year Ended June 30,
                                                                          --------------------------------------------------
                                                                               2000              1999               1998
                                                                          ------------       ------------       ------------
<S>                                                                       <C>                <C>                <C>
Cash flows from operating activities:
  Net income                                                              $  2,217,502       $  1,849,596       $  1,449,502
  Adjustments to reconcile net income
  to net cash provided by operating activities:
    Depreciation and amortization                                               12,801             17,448             17,715
    Gain from sales of foreclosed real estate                                 (119,348)          (119,593)                --
    Loss on write-down of foreclosed real estate                                    --                 --            407,348
    (Increase) decrease in accrued interest and other receivables               (1,338)               553                164
    Decrease (increase) in other assets                                             76               (374)            25,842
    (Decrease) increase  in accrued and other liabilities                      (28,684)            41,670            267,811
                                                                          ------------       ------------       ------------
     Net cash provided by operating activities                               2,081,009          1,789,300          2,168,382
                                                                          ------------       ------------       ------------

Cash flows from investing activities:
   Collections of notes receivable                                                  --                 --              1,693
   Additions to fixed assets                                                   (11,507)              (758)           (14,632)
   Proceeds from sales and basis reductions of
        foreclosed real estate                                                 442,170            331,154                 --
   Proceeds from sale of fixed assets                                               --              1,475                 --
   Proceeds from liquidation of other assets                                        --            300,000                 --
   Decrease (increase) in restricted cash investments                               --             75,816             (3,073)
                                                                          ------------       ------------       ------------
     Net cash provided by (used in) investing activities                       430,663            707,687            (16,012)
                                                                          ------------       ------------       ------------

Cash flows from financing activity:
   Dividends paid                                                           (1,904,073)        (1,215,366)          (627,939)
                                                                          ------------       ------------       ------------

Net increase in cash and cash equivalents                                      607,599          1,281,621          1,524,431
Cash and cash equivalents at beginning
      of year                                                               55,280,342         53,998,721         52,474,290
                                                                          ------------       ------------       ------------
Cash and cash equivalents at end of year                                  $ 55,887,941       $ 55,280,342       $ 53,998,721
                                                                          ============       ============       ============
</TABLE>

See notes to consolidated financial statements.


                                      F-6
<PAGE>

                      Liberte Investors Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 2000, 1999 and 1998

(1)  Summary of significant accounting policies

     (a)  Organization - Liberte  Investors  Inc., a Delaware  corporation  (the
"Company"), was organized in April of 1996 in order to effect the reorganization
of Liberte 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 generally accepted accounting  principles 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
<PAGE>

                      Liberte 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.


                                      F-8
<PAGE>

                      Liberte Investors Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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:

                                        2000            1999            1998
                                    -----------     -----------     -----------
Balance at beginning of year        $ 2,810,267     $ 3,028,273     $ 3,435,621
Write-down in value                          --              --        (407,348)
Cost of real estate sold               (347,822)       (218,006)             --
                                    -----------     -----------     -----------
Balance at end of year              $ 2,462,445     $ 2,810,267     $ 3,028,273
                                    ===========     ===========     ===========

     All of the Company's  real estate for 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. The 55 lots
were written-down by approximately  $407,000 at June 30, 1998 to more accurately
reflect  the  value of the lots  based  upon the  selling  price  less  costs to
complete.  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.

     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.


                                      F-9
<PAGE>

                      Liberte Investors Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(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  $1,301,000 including penalties and
interest.

     On April 16, 1997,  LNC Holdings Inc.  received a notice of final  judgment
from the City of Arlington with regard to the delinquent taxes. On May 27, 1997,
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 for
calendar  years 1996  through  1999 and for the six month  period ended June 30,
2000 totaling  $173,000.  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.

     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  2000,   1999  and  1998  under  these  leases  was
approximately $94,000, $88,000, and $72,000, respectively.  Future minimum lease
payments under these leases are as follows:

                 Fiscal Year Ending
                      June 30,                         Amount
                 ------------------                 -----------
                        2001                        $    72,868
                        2002                             72,963
                        2003                             72,963
                        2004                             36,481
                                                    -----------
            Total future minimum rentals            $   255,275
                                                    ===========

     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
<PAGE>

                      Liberte Investors Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4)  Federal Income Taxes

     Income tax expense attributable to income before income taxes consists of:

<TABLE>
<CAPTION>
                                                                    June 30,
                                                    ----------------------------------------
                                                       2000           1999            1998
                                                    ---------      ---------       ---------
<S>                                                 <C>            <C>             <C>
Federal
     Current                                        $      --      $      --       $   1,456
     Deferred                                              --             --              --
                                                    ---------      ---------       ---------
                                                    $      --      $      --       $   1,456
                                                    =========      =========       =========
</TABLE>

     The income tax expense for the years ended June 30,  2000,  1999,  and 1998
differs from the amounts  computed by applying the U.S.  Federal  corporate  tax
rate of 34% to income before income taxes as follows:

<TABLE>
<CAPTION>
                                                                    June 30,
                                                    ----------------------------------------
                                                       2000           1999            1998
                                                    ---------      ---------       ---------
<S>                                                 <C>            <C>             <C>
Computed "expected" income tax expense              $ 753,951      $ 628,863       $ 493,326
Increase (decrease) in taxes resulting from:
     Adjustment to deferred tax asset and
     permanent tax items                                   66          1,208        (231,233)
     Change in the beginning of the year
          balance of the valuation allowance
          for deferred tax assets allocated
          to income taxes                            (754,017)      (630,071)       (260,637)
                                                    ---------      ---------       ---------
                                                    $      --      $      --       $   1,456
                                                    =========      =========       =========
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
portions  of the  deferred  tax assets at June 30,  2000 and 1999 are  presented
below:

                                                            June 30,
                                                  -----------------------------
                                                       2000             1999
                                                  ------------     ------------
Deferred tax assets:
  Net operating loss carryforwards                $ 75,962,199     $ 76,652,292
  Basis differences of foreclosed real estate        2,038,682        2,103,969
  Capital loss carryforward                          1,629,812        1,629,812
  Other                                              1,914,017        1,912,654
                                                  ------------     ------------
    Total gross deferred tax assets                 81,544,710       82,298,727
    Less:  valuation allowance                     (81,544,710)     (82,298,727)
                                                  ------------     ------------
         Net deferred tax assets                  $         --     $         --
                                                  ============     ============

     The net  change in the  valuation  allowance  for the years  ended June 30,
2000,  1999  and  1998  was a  decrease  of  $754,017,  $630,071  and  $260,637,
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.


                                      F-11
<PAGE>

                      Liberte Investors Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     At June 30, 2000,  the Company had net  operating  loss  carryforwards  for
federal income tax purposes of approximately  $223,418,000,  which are available
to offset future federal taxable income.  The carryforwards  will expire in 2005
through 2011. The Company also has capital loss  carryforwards  of approximately
$4,794,000  which are available to offset future capital gains, if any,  through
2001. 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.


(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, 2000 and 1999,  may have some fair  value,  but such
value cannot be estimated and any potential collections are not measurable as to
timing or amount.


(6)  Other Assets

     In August 1998,  the Company  received  $300,000  from the  liquidation  of
300,000 shares of RPI preferred stock as well as $3,514 in accrued dividends. No
gain or loss was recorded as a result of the liquidation.


(7)  Concentrations of Credit Risk

     At June 30,  2000,  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.


(8)  Subsequent Event

     In August 2000,  the Company sold 6.46 acres of land in San Antonio,  Texas
for a price of  $114,000.  A gain of  approximately  $45,000  was  recorded as a
result of this transaction subsequent to June 30, 2000.