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

                                    FORM 10-K
(Mark One)

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

                   For the fiscal year ended December 31, 2001

                                       OR

[ ]      TRANSMISSION REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File No. 33-87024C

                          TAYLOR INVESTMENT CORPORATION
             (Exact name of Registrant as specified in its charter)

           Minnesota                                      41-1373372
   -----------------------------             -----------------------------------
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                    Identification No.)


              43 Main Street S.E., Suite 506, Minneapolis, MN 55414
              -----------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                  Registrant's telephone number: (612) 331-6929

        Securities registered pursuant to Section 12(b) of the Act: None
                                                                    ----

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

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

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

                       $1,224,637 as of December 31, 2001
                       ----------------------------------

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date.

      Common Stock, $.01 Par Value - 484,129 shares as of December 31, 2001
      ---------------------------------------------------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of certain exhibits hereto are incorporated by reference to the
Company's Registration Statement on Form SB-2 (No. 33-87024C), effective January
12, 1995.



<PAGE>


<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                     PART I
<S>        <C>                                                                                                  <C>
ITEM 1.    BUSINESS...............................................................................................1
           General................................................................................................1
           Principal Business.....................................................................................1
           Competition............................................................................................2
           Regulation.............................................................................................3
           Employees..............................................................................................3
ITEM 2.    PROPERTIES.............................................................................................3
ITEM 3.    LEGAL PROCEEDINGS......................................................................................4
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................................4

                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................................4
ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA...................................................................5

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS..................................................................................5
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................14

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................................................15
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE..............................................................................28

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....................................................28

ITEM 11.   EXECUTIVE COMPENSATION................................................................................29
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT............................................................................................30
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................31

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.......................................31
SIGNATURES ......................................................................................................33

</TABLE>





                                       i
<PAGE>


                                     PART I

ITEM 1.      BUSINESS

             GENERAL

             Taylor Investment Corporation ("Taylor" or "the Company") was
             incorporated in 1979 by its president, Philip C. Taylor, who then
             had 11 years of experience in the development and sale of rural
             recreational properties. The Company's principal business is the
             purchase, development and sale of previously undeveloped tracts of
             land within a reasonable driving distance of major metropolitan
             areas, primarily in Minnesota, Wisconsin, Georgia, Texas and
             Tennessee. The Company subdivides these tracts into lots and
             markets them through its Four Seasons sales offices for use as
             primary residences, vacation retreats, retirement residences, and
             investment. The size of lots sold by the Company typically ranges
             from 1.5 to 2 acres each, but on occasion may be as large as 40
             acres. Historically, the Company has not participated on a regular
             basis in the construction of homes on the lots, which it sells, but
             has contracted for the construction of homes on an isolated basis.
             The Company believes it is the largest developer of waterfront
             properties for the construction of primary and second homes in
             Minnesota and Wisconsin and is not aware of any other major
             developer in those states.

             To simplify and facilitate the purchasing process for its
             customers, the Company offers qualified customers loans
             collateralized by mortgages on the lots. Customers desiring
             financing must submit credit applications to the Sales and
             Marketing Department, which then has a credit analysis completed on
             such customers to determine their creditworthiness. Depending on
             the results of this analysis, the Sales and Marketing Department
             approves or disapproves the loan or submits the information to the
             Finance and Accounting Department for further analysis. The number
             of lot purchases financed with Company-originated mortgage loans
             depends on the availability and terms of alternative sources of
             credit to the customer.

             The Company believes it must position itself to take advantage of
             the current and expected future demand for rural properties for
             primary and secondary homes. The Company's strategy is to expand
             the organization by exploring new markets outside its current
             locations.

             PRINCIPAL BUSINESS

             Taylor's operations are organized into four primary departments:
             Acquisitions, Development, Sales and Marketing, and Finance and
             Accounting.

             ACQUISITIONS - To locate potential quality properties for purchase,
             development, and sale, Taylor's Acquisition Department reviews plat
             maps for the areas served by its sales offices and identifies
             undeveloped tracts of land. The Acquisitions Department then
             obtains additional information regarding the property and any
             nearby amenities from such sources as topographical maps and
             reports from government agencies. Other due diligence activities
             conducted to determine the suitability of the property for purchase
             by the Company may include studies of local maps and development
             ordinances, reviews of zoning regulations, soil testing, water
             testing, trees and foliage typing, a study of local road access,
             and a consideration of potential lot layout. The Acquisitions
             Department also estimates the costs of development. If the results
             of these studies and estimates are favorable, an offer is made for
             the property in accordance with established pricing guidelines
             developed by the Company based on its past experience. Negotiations
             then typically commence and, if successful, a purchase agreement is
             entered into. The Company's obligations under a purchase agreement
             are generally conditioned upon Taylor obtaining the necessary
             subdivision approval from the local governmental authority.
             Negotiations may take as long as a year before a purchase can be
             concluded.

             DEVELOPMENT - After purchase negotiations are completed, the
             Company's Development Department is responsible for obtaining
             regulatory approval for the planned development. This process
             typically involves determining the layout of lots, or platting the
             property, attending public hearings, and conducting on-site
             inspections with governmental and regulatory personnel. To date,
             the Development



                                       1
<PAGE>

             Department has typically been successful in obtaining the necessary
             regulatory and governmental approvals; however, there can be no
             assurance that any particular transaction will be approved and
             ultimately consummated. The Development Department also works with
             a title insurance company in obtaining title abstracts, ordering
             title insurance, and preparing other facets of the acquisition for
             closing. After closing, the property is physically developed using
             road contractors, surveyors, and Company work crews. Lots are
             platted to maximize their attractiveness, privacy, and road and
             water access, taking into account view corridors and the layout of
             trees on the lot. Roads are installed, the property is prepared to
             receive telephone and electrical service, trails are cut,
             underbrush is removed, shorelines are cleared, and the property is
             otherwise prepared for marketing and sales to the buying public.
             The Company then assigns prices to each lot based on market prices
             for similar properties in the area. These sales prices generally
             range from $25,000 - $100,000 per lot.

             SALES AND MARKETING - Taylor's strategy is to purchase and develop
             high quality properties and then market the lots to residents of
             metropolitan areas. Most properties developed by the Company are
             within reasonable driving distances of major metropolitan areas.
             The Company's lots are targeted toward buyers who desire property
             with many attractive features on which to build primary and
             secondary homes for use as primary residences, vacation retreats,
             retirement residences, or investments. The primary purchasers of
             the Company's vacation properties are individuals ranging from 30
             to 60 years old. The Company's strategy for remaining competitive
             in this market involves building on its reputation of offering
             quality properties; using its own regional sales offices and
             personnel; offering "on-the-spot" financing for qualified
             purchasers; and offering properties with many appealing features,
             such as trails, water access, creeks, attractive views and
             shorelines.

             The Company's sales and marketing activities are conducted
             principally through its Four Seasons subsidiaries in Minnesota,
             Wisconsin, Georgia, Texas and Tennessee. A principal element of the
             Company's strategy and success to date has been the establishment
             and use of regional sales offices in general location to the
             developed properties. The Company's eight existing regional sales
             offices are located near Brainerd, Minnesota; Spooner, Minocqua,
             and Stevens Point, Wisconsin; Watersmeet, Michigan; Jasper,
             Georgia; Austin, Texas; and Knoxville, Tennessee. The Company
             advertises in major metropolitan newspapers and other publications,
             television, radio and participates in home and garden, outdoors,
             and sports shows to attract potential customers. Sales personnel
             are compensated based on sales performance but are not permitted to
             use "hard" sales techniques or enticements to prospective
             purchasers (such as free products) to visit property sites. To
             consummate sales, the Company relies heavily upon the quality of
             its properties combined with the availability of "on-the-spot"
             financing for qualified buyers.

             FINANCE AND ACCOUNTING - The Finance and Accounting Department is
             responsible for maintaining records of account for each project
             developed by the Company and managing the Company's trade
             receivables and payables and mortgages receivable. This department
             prepares management information reports, prepares and services
             mortgage loans extended to lot purchasers, projects cash flow and
             capital needs for acquisition and lending activities, and performs
             collection activities.

             The Company regularly offers financing for the purchase of its
             properties. Upon execution of a purchase agreement, a customer may
             submit an application for credit, which, combined with a credit
             report from a credit rating agency, is given to the Sales Manager
             for approval. Applications from customers who have experienced
             credit problems in the past are submitted to the Controller for
             ultimate approval or rejection. Approved customers execute notes
             secured by first mortgages on the lots purchased.

             COMPETITION

             The Company operates in a highly competitive environment. It
             competes with other real estate development companies and real
             estate brokers in developing and selling its properties. In
             addition, and to a lesser extent, it competes with banks and other
             financial institutions and with several private companies and
             individual lenders in making mortgage loans. The Company's
             competitive factors in the




                                       2
<PAGE>

             market for developed lots include the ability to acquire quality
             inventory and the quality of the sales force, and the principal
             competitive factor in the mortgage loan market is the ability to
             offer favorable terms, including interest rates. The Company
             believes that it competes successfully in its market because of the
             quality of its product, access to capital (which enables it to
             purchase large tracts at more favorable prices than smaller
             industry participants), its dedicated sales staff, its reputation,
             and its financial strength. Management believes that the Company's
             ability to facilitate and simplify purchases by offering
             competitive financing to qualified lot purchasers offers another
             competitive advantage.

             REGULATION

             The Company's sales personnel, consisting primarily of those based
             in its sales offices, must be registered as real estate brokers and
             maintain such registration with the Minnesota Department of
             Commerce, the Wisconsin Department of Registration and Licensing
             and the Tennessee Real Estate Commission. Minnesota requires
             registration of subdivisions containing more than ten lots. The
             Minnesota Department of Commerce granted a waiver of the
             registration and in its stead requires notification of the sale of
             any subdivision containing more than ten lots, which will be
             offered to Minnesota residents. No registration is required in
             Wisconsin, Georgia, Texas or Tennessee. In addition, the
             development of properties requires compliance with state and local
             zoning laws and regulations and local laws and ordinances regarding
             such matters as the size of lots, the construction of roads, and
             the amount of setback required from roads and bodies of water.

             The Company is subject to the Interstate Land Sales Full Disclosure
             Act, which requires registration with the Department of Housing and
             Urban Development of any project that consists of 100 or more lots.
             The Company has received a Multiple Site Subdivision Exemption from
             the Department of Housing and Urban Development allowing it to sell
             projects consisting of no more than 99 lots in any given
             noncontiguous site without registration.

             The Company is also subject to consumer protection laws, such as
             the Truth in Lending Act, in connection with its mortgage lending
             activities.

             EMPLOYEES

             As of December 31, 2001, the Company has 82 full-time and 18
             part-time employees. None of the Company's employees are
             represented by a labor union or are covered by a collective
             bargaining agreement. The Company has not experienced any work
             stoppages and believes employee relations are good.

ITEM 2.      PROPERTIES

             The Company leases its administrative office located at 43 Main
             Street SE, Suite 506, in Minneapolis, Minnesota, consisting of
             3,276 square feet in an office/residential complex. The lease
             expires March 31, 2007.

             The Company leases regional sales, acquisition and development
             offices at various locations in Minnesota, Wisconsin, Michigan,
             Georgia, Texas and Tennessee. These offices typically range from
             1,000 to 2,500 square feet and are leased on terms ranging from
             month-to-month to five years.

             Management believes that these facilities provide sufficient space
             to support its current activities, and that additional space will
             be available in the future as needed.




                                       3
<PAGE>

ITEM 3.      LEGAL PROCEEDINGS

             In the ordinary course of its business, the Company from time to
             time becomes subject to claims or proceedings relating to the
             purchase, subdivision, sale and/or financing of real estate.
             Additionally, from time to time, the Company becomes involved in
             disputes with existing or former employees. The Company believes
             that substantially all of the above are incidental to its business.

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

             There were no matters submitted to a vote of security holders
             during the year ended December 31, 2001.

                                     PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

             The Company's authorized capital stock consists of 10,000,000
             shares of common stock, $.01 par value, of which 484,129 shares
             were outstanding and held of record by 17 stockholders as of
             December 31, 2001. There is currently no public trading market for
             the Company's capital stock, and the Company does not expect such a
             market to develop in the foreseeable future. Holders of common
             stock have no preemptive or other rights to acquire stock or other
             securities of Taylor. Cumulative voting for directors is not
             permitted. Holders of common stock are entitled to one vote per
             share on matters submitted to a vote of stockholders. All shares of
             common stock presently outstanding are fully paid and
             non-assessable. The Company's Credit Agreement contains a covenant
             requiring the Company to obtain written approval for the
             declaration and payment of cash distributions. Distributions
             declared and paid in the future, if any, are subject to the
             discretion of the Board of Directors and will depend on the
             Company's earnings, financial condition, capital requirements, debt
             covenant limitations and other relevant factors. In addition, the
             Board of Directors is authorized to issue additional shares of
             common stock and to issue options and warrants for the purchase of
             such shares, the aggregate of which may not exceed the number of
             shares authorized by the Company's Articles of Incorporation.



                                       4
<PAGE>


ITEM 6.      SELECTED CONSOLIDATED FINANCIAL DATA

             The selected consolidated financial data set forth below should be
             read in conjunction with the Consolidated Financial Statements,
             related notes, and other financial information appearing elsewhere
             in this Annual Report.

<TABLE>
<CAPTION>
                                                                     As of or for the Year Ended December 31,
                                                               ----------------------------------------------------
                                                                 2001       2000       1999       1998       1997
                                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
             STATEMENT OF OPERATIONS DATA:
<S>                                                            <C>        <C>        <C>        <C>        <C>
             Revenues:
                Sales                                          $ 35,994   $ 28,838   $ 23,519   $ 19,934   $ 16,827
                Interest income on contracts receivable           1,051      1,058        988      1,086      1,009
                Equity in (losses) earnings from joint ventures    (172)      (121)        58         35         40
                Other revenue                                       377        546        409        318        406
                                                               --------   --------   --------   --------   --------
             Total revenue                                       37,250     30,321     24,974     21,373     18,282

             Costs and expenses:
                Cost of sales                                    21,001     15,874     12,453     11,672     10,616
                Reduction of inventory to net realizable value                            294        138        277
                Selling, general and administrative              11,750      9,338      7,955      5,959      6,127
                Interest                                          1,141      1,370      1,213      1,482      1,818
                                                               --------   --------   --------   --------   --------
             Total costs and expenses                            33,892     26,582     21,915     19,251     18,838

             Net income (loss) (1)                                3,358      3,739      3,059      1,273       (335)
             Net income (loss) per common share outstanding    $   6.94   $   7.72   $   6.32   $   2.63   $  (0.69)
             Dividends paid per common share outstanding       $   3.42   $   4.25   $   3.20   $   0.62   $   0.62

             BALANCE SHEET DATA:

             Inventory                                         $ 19,463   $ 18,463   $  9,939   $ 11,469   $ 12,232
             Contracts and mortgages receivable                  12,114     10,453      8,695      9,365      9,095
             Total assets                                        35,144     32,883     21,505     23,294     24,690
             Total debt                                          19,859     21,410     12,249     15,748     17,357
             Stockholders' equity                                10,930      9,226      7,543      6,033      5,060
             Book value per common share                       $  22.58   $  19.06   $  15.58   $  12.46   $  10.45

</TABLE>

        (1)  In January 1999, the Company obtained status as a Subchapter
             S-Corporation under the Internal Revenue Code. Accordingly, taxable
             income from operations in all fiscal years beginning after 1998 is
             allocated to the individual shareholders with no income tax expense
             recorded in the financial statements. Net income (loss) in 1998 and
             1997 is after tax expense (benefit) of $849 and ($221),
             respectively.

ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

             The following analysis of the consolidated results of operations
             and financial condition of the Company should be read in
             conjunction with the Company's consolidated financial statements
             and notes thereto included elsewhere in this document.

             OVERVIEW

             LAND AND STRUCTURE SALES - The Company's principal business is the
             purchase, development and sale of previously undeveloped tracts of
             land. The Company identifies, acquires and develops raw land
             inventory through its Acquisition and Development departments.
             Financing for the acquisition and development of real estate is
             provided primarily by a network of financial institutions located
             in proximity to the Company's properties as well as by an
             asset-based credit facility (the "Credit Agreement"). On average,
             75% of the purchase price of the acquired property is financed with
             loans from financial institutions, which are secured by mortgages
             on the acquired property. In addition, property sellers may also
             agree to provide financing for up to 70% of the purchase price.



                                       5
<PAGE>

             The Company records its inventory, which consists primarily of land
             held for sale, at the purchase price plus amounts expended for the
             acquisition, development and improvement of the land. Structure
             inventory consists of structures that existed on a property at the
             time of acquisition. The Company currently attempts to maintain its
             inventory at a level that, at any time, will meet its sales goals
             for the next twelve months. Inventory balances were $19.5 million
             and $18.5 million as of December 31, 2001 and 2000, respectively.

             Revenues from the sale of developed lots, and structures are
             recognized upon closing of the sale of the property and receipt of
             at least 10% of the purchase price.

             OTHER REVENUES - Other revenues consist primarily of interest
             income from the Company's financing operation. The Company records
             the finance receivables as contracts and mortgages receivable.
             Generally, mortgage loans on lots are originated for terms of up to
             ten years while loans on structures are offered for a maximum term
             of five years. The Company's underwriting parameters require a
             minimum down payment of 10%. Interest rates currently range from
             10.9% to 13.4% depending principally on the amount of the down
             payment and program under which the loans were originated.
             Company-financed sales were 31% of sales for each of the years
             ended December 31, 2001 and 2000. The Company is able to maintain a
             consistent percentage of financed sales because it offers
             competitive finance programs with low initial interest rates to
             customers. The weighted average interest rate on outstanding
             contracts and mortgages receivable was approximately 11.7% and
             11.2% as of December 31, 2001 and 2000, respectively.

             Other revenues also include closing fee income the Company collects
             for sales and equity in the income or loss of joint ventures.

             CRITICAL ACCOUNTING POLICIES

             In preparing the financial statements, the Company follows
             accounting principles generally accepted in the United States of
             America, which in many cases requires assumptions, estimates and
             judgments that affect the amounts reported. Many of these policies
             are relatively straightforward. There are, however, a few policies
             that are critical because they are important in determining the
             financial condition and results of operations and they can be
             difficult to apply. The most critical accounting policies applied
             in the preparation of the Company's financial statements relate to:

             o   accounting for contingencies, under which the Company accrues
                 an expense when it is probable that a liability has been
                 incurred and the amount can be reasonably estimated;

             o   measuring assets, including inventory held for sale, for
                 impairment; and

             o   accounting for tax increment financing receivables because of
                 the importance of management judgment in making the estimates
                 necessary to apply these policies.

             The difficulty in applying these policies arises from the
             assumptions, estimates and judgments that have to be made currently
             about matters that are inherently uncertain, such as future
             economic conditions, operating results and valuations as well as
             management intentions. As the difficulty increases, the level of
             precision decreases, meaning that actual results can and probably
             will be different from those currently estimated. The Company bases
             its assumptions, estimates and judgments on a combination of
             historical experiences and other reasonable factors.

             Contingencies, by their nature relate to uncertainties that require
             management to exercise judgment both in assessing the likelihood
             that a liability has been incurred as well as in estimating the
             amount of potential expense. The most important contingencies
             impacting the Company's financial statements relate to:

             o   the collectibility of contracts and mortgages receivable; and



                                       6
<PAGE>
             o   the valuation of inventories, including adjustments to reduce
                 inventory to the lower of cost or market.


             Measuring assets for impairment requires estimating intentions as
             to holding periods, future operating cash flows and residual values
             of the assets under review. Changes in management intentions,
             market conditions or operating performance could indicate that
             impairment charges may be necessary.

             Accounting for tax increment financing receivables involves
             estimating property values and tax rates well into the future, as
             well as evaluating length of time the property will remain vacant.
             To accomplish this, assumptions are made regarding real estate
             market inflation, tax rates and collectibility of taxes.

             See ITEM 8, Note 1 of the Notes to Consolidated Financial
             Statements, included in this Form 10-K for a further discussion of
             certain specific accounting policies.

             COMPARISON OF THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

             The Company reported a 24.8% increase in sales for the year ended
             December 31, 2001 to $36.0 million, including sales of structures
             of $0.7 million, or 2.0% of sales. For the same period in 2000,
             sales were $28.8 million, including $0.6 million in sales of
             structures, or 2.1% of sales. The increase in sales is attributable
             to a strong real estate market in certain areas of the country, the
             addition of several projects in newer markets, and the Company's
             ability to retain knowledgeable sales staff and successfully apply
             its marketing programs in those markets expanded to by the Company
             in recent years.

             The Company reported a 22.6% increase in sales for the year ended
             December 31, 2000 to $28.8 million, including sales of structures
             of $.6 million, or 2.1% of sales. For the same period in 1999,
             sales were $23.5 million, including $1.4 million in sales of
             structures, or 6.0% of sales. The overall sales increase is
             attributable to superior quality inventory in existing and new
             markets, a strong real estate market, particularly the Midwest, and
             the growth and retention of knowledgeable sales staff.



                                       7
<PAGE>


             The following table sets forth the sales, cost of sales and gross
             profit information for the years ended December 31, 2001, 2000 and
             1999.

<TABLE>
<CAPTION>
                 2001                  Land                     Structures                    Total

<S>                                <C>              <C>       <C>               <C>       <C>               <C>
             Sales                 $ 35,268,589     100.0%    $    725,078      100.0%    $  35,993,667     100.0%
             Cost of sales           20,354,927      57.7%         645,807       89.1%       21,000,734      58.3%
                                   ------------   -------     ------------    -------     -------------   -------
             Gross profit          $ 14,913,662      42.3%    $     79,271       10.9%    $  14,992,933      41.7%

                 2000                  Land                     Structures                    Total

             Sales                 $ 28,245,169     100.0%    $    592,830      100.0%    $  28,837,999     100.0%
             Cost of sales           15,365,177      54.4%         508,598       85.8%       15,873,775      55.0%
                                   ------------   -------     ------------    -------     -------------   -------
             Gross profit          $ 12,879,992      45.6%    $     84,232       14.2%    $  12,964,224      45.0%

                 1999                  Land                     Structures                    Total

             Sales                 $ 22,104,045     100.0%    $  1,414,393      100.0%    $  23,518,438     100.0%
             Cost of sales           11,344,516      51.3%       1,403,366       99.2%       12,747,882      54.2%
                                   ------------   -------     ------------    -------     -------------   -------
             Gross profit          $ 10,759,529      48.7%    $     11,027        0.8%    $  10,770,556      45.8%

</TABLE>

             For 2001, gross profit was $15.0 million or 41.7% of sales,
             compared to $13.0 million or 45.0% of sales for the same period in
             2000. The decrease in gross profit, as a percentage of sales, is
             principally due to lower margins on projects in Wisconsin as a
             result of a slightly softer real estate market and an increase in
             sales in new markets where slightly lower margins were achieved as
             compared with the Company's more established markets.

             For 2000, gross profit was $13.0 million or 45.0% of sales,
             compared to $10.8 million or 45.8% of sales for the same period in
             1999. Gross profit margin from the sale of lots was 45.6% for 2000
             and 48.7% in 1999. In 2000, gross profit margin from the sale of
             structures was 14.2%, while for the same period in 1999 gross
             profit margin from the sale of structures was 0.8%. The decrease in
             gross profit on land sales, as a percentage of sales, is
             principally due to the sell out of a few older projects at reduced
             prices. The Company also wrote down inventory $294,480 in 1999, to
             reflect its net realizable value.

             Other revenues decreased $170,000, or 31%, to $380,000 in 2001 from
             the same period in 2000. The decrease was primarily due to $80,000
             in nonrecurring marketing fees received related to land sales
             brokered by the Company during 2000. Additionally, in 2000, the
             Company revised its estimates of anticipated future tax collections
             under its tax increment financing receivable contracts with tax
             districts based on property value changes and changes in property
             tax assessments. These changes in estimate resulted in an increase
             in the value of such receivables and a corresponding increase in
             other revenue in 2000. There were no significant valuation
             adjustments in 2001.

             Other revenue was $550,000 in 2000, an increase of $140,000 from
             the same period in 1999. The increase is the result of a $250,000
             fee collected for development services performed on behalf of a
             joint venture, which was offset slightly by a 30% reduction in sale
             closing fees charged to customers from the prior year due to
             special mortgage incentive programs offered during 2000.

             Equity in losses from joint ventures increased $50,000 in 2001 to
             $170,000, resulting from losses generated by a land development
             joint venture formed by the Company during the first quarter of
             2001, in which it currently has a 33% ownership interest. Equity in
             losses from joint ventures were $120,000 in 2000 as compared to
             equity in earnings of $60,000 in 1999. The additional equity in
             losses from joint ventures in 2000 was primarily the result of
             start-up costs incurred by a land development joint venture formed
             in early 2000, in which the Company has a 33% ownership interest.

             Interest income in 2001 remained consistent with 2000, which was
             the result of a higher average balance of contracts and mortgages
             receivable during 2001offset by slightly lower average interest
             rates on




                                       8
<PAGE>

             contracts during the same period. Interest income increased to
             $1,060,000 in 2000 from $990,000 in 1999 as a result of an increase
             in the average balance of contracts and mortgages receivable.

             Selling, general and administrative expenses for 2001 were $11.7
             million or 32.6% of sales, compared to $9.3 million or 32.4% of
             sales for the same period in 2000. The increase in selling, general
             and administrative expense, as a percent of sales, is due primarily
             to $550,000 in costs written off associated with two parcels of
             land previously under contract that were ultimately not acquired.
             Factors offsetting this increase include a reduction of
             compensation and office expenses, as a percentage of sales.
             Compensation, primarily commissions, represented 79% of total
             selling, general and administrative expenses in 2001 as compared
             with 81% in 2000. Office expenses represented 9% and 11% of total
             selling, general and administrative expenses in 2001 and 2000,
             respectively.

             Selling, general and administrative expenses for 2000 were $9.3
             million or 32.4% of sales, compared to $8.0 million or 33.8% of
             sales for the same period in 1999. The decrease in selling, general
             and administrative expense, as a percent of sales, is attributable
             to increased sales and management's continued efforts to control
             expenses.

             Interest expense decreased $230,000, or 17%, to $1,140,000 in 2001
             from the same period in 2000. The decrease is the result of a
             significant reduction in interest rates throughout 2001 on the
             Company's variable rate borrowings, which include its lines of
             credit and substantially all real estate notes payable. The
             decrease was partially offset by higher average borrowings during
             2001 as a result of a growth in inventory. Interest expense of
             $1,370,000 in 2000 increased by 14% from $1,200,000 in 1999. The
             increase in interest expense was due to an increase in contracts
             and mortgages payable in 2000 from 1999.

             LIQUIDITY AND CAPITAL RESOURCES

             OVERVIEW - The Company's capital resources are provided from both
             internal and external sources. The Company's primary capital
             resources from internal operations are: (i) cash sales, (ii) down
             payments on sales which are financed, (iii) principal and interest
             payments on contracts and mortgages receivable, and (iv) borrowings
             collateralized by contracts and mortgages receivable. External
             sources of liquidity include borrowings under the Company's Credit
             Agreement, notes and mortgages payable to finance inventory
             acquisitions and development, and the issuance of debt securities.
             The Company's capital resources are used to support the Company's
             operations, including (i) acquiring and developing inventory, (ii)
             providing financing for customer purchases, (iii) meeting operating
             expenses, (iv) shareholder distributions, and (v) satisfying the
             Company's debt and other obligations. The Company anticipates that
             it will continue to require external sources of liquidity to
             support its operations, satisfy its debt and other obligations and
             to provide funds for future strategic inventory acquisitions and
             growth.

             The following table sets forth the Company's net cash flows for
             operating, investing and financing activities for the years ended
             December 31, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                         2001             2000            1999
<S>                                                                   <C>             <C>              <C>
             Net cash provided by (used in):
               Operating activities                                   $  4,907,572    $   (490,560)    $  5,985,547
               Investing activities                                        646,722      (1,311,324)         (41,473)
               Financing activities                                     (5,514,207)      1,523,042       (5,408,482)
                                                                      ------------    ------------     ------------
               Net increase (decrease) in cash                        $     40,087    $   (278,842)    $    535,592
                                                                      ============    ============     ============
</TABLE>

             Cash used for financing activities in 2001 consisted primarily of
             principal payments on notes, contracts, mortgages payable and
             subordinated debt and net repayments on lines of credit of $15.4
             million and distributions to shareholders of $1.7 million. These
             were offset by $11.5 million in proceeds from new notes, contracts,
             and mortgages




                                       9
<PAGE>

             payable. Cash provided for financing activities in 2000 consisted
             primarily of net borrowings on lines of credit and proceeds from
             new notes, contracts, and mortgages payable of $12.6 million. These
             were offset by $9.0 million in payments on notes, contracts,
             mortgages payable and subordinated debt and distributions to
             shareholders of $2.1 million. Cash used for financing activities in
             1999 consisted primarily of principal payments on notes, contracts,
             mortgages payable and subordinated debt and net repayments on lines
             of credit of $10.0 million and dividend payments to shareholders of
             $1.5 million.

             Cash provided by investing activities in 2001 represents $0.6
             million of repayment of receivables from joint ventures, a $0.6
             million reduction in funds held by trustee offset by a $0.3 million
             investment in joint ventures. Cash used for investing activities in
             2000 primarily related to investments in joint ventures of $0.5
             million and an increase in funds held by trustee of approximately
             $0.6 million.

             FINANCING SOURCES - The Company's financing sources consist of
             short-term financing under its Credit Agreement, seller financing,
             financing from a network of commercial banks, and sales of
             contracts and mortgages receivable. Permanent financing has been
             obtained through the issuance of $4.0 million of Senior
             Subordinated Debt. The source of repayment for the Company's
             working capital financing is the sale of lots and the receipt of
             principal and interest on contracts and mortgages receivables. As a
             lot is sold, a portion of the proceeds is used to pay down the
             respective financing and release a portion of the related mortgage.
             On average, the Company finances 75% of the cost of land
             acquisitions and development. Based on the terms of the Company's
             loan agreements, a loan is usually paid in full when approximately
             70% of the lots in a development are sold. Principal and interest
             received by the Company from customer contracts or mortgages
             receivable are applied to the outstanding balance under its Credit
             Agreement. The following table sets forth the Company's sources of
             financing and the amount of such financing and the weighted average
             interest rates on such borrowings at December 31, 2001 and 2000.

             SOURCES OF FINANCING
<TABLE>
<CAPTION>
                                                                            Average                        Average
                                                                2001          Rate             2000          Rate
<S>                                                        <C>                <C>        <C>                 <C>
             Lines of credit                               $   7,037,999      5.77%      $    8,261,038      10.56%
             Notes payable (1)                                 9,274,646      6.24            9,168,999       9.60
             Contracts and mortgages payable                     874,243      5.17              486,326       0.74
             Senior subordinated debt                          2,672,000     11.41            3,494,000      11.25
                                                           -------------     -----       --------------      -----
                    Total debt                             $  19,858,888      6.72%      $   21,410,363      10.04%
                                                           =============    ======       ==============      =====
</TABLE>

              ----------------------
             (1) Notes payable includes the real estate line of credit in the
                 amounts of $3,266,101 and $ $2,710,467 as of December 31, 2001
                 and 2000, respectively.



                                       10
<PAGE>


             "CREDIT AGREEMENT" - The Company began its borrowing relationship
                in 1986 and may currently borrow a total aggregate of up to
                $17.5 million under the Credit Agreement which includes the
                following four lines of credit:

             DESCRIPTION OF LINES OF CREDIT
<TABLE>
<CAPTION>
                                                                                     Balance
                                                               Amount of        Outstanding as of
                                                                Line(1)         December 31, 2001

<S>                                                          <C>                 <C>
             Mortgages and Contracts Receivable              $17,500,000         $   6,790,999
             Real Estate Mortgage                              8,500,000             3,266,101
             Project                                             250,000               172,000
             Interim Financing                                 4,000,000                75,000
                                                                                 -------------
                                                                                 $  10,304,100
                                                                                 =============

</TABLE>
             -----------------
             (1) These totals are the maximum principal amounts that may be
                 outstanding under each of the lines of credit; however, the
                 maximum aggregate principal amount outstanding under all of the
                 lines of credit cannot exceed $17.5 million.

             The amounts borrowed by the Company under the Mortgages and
             Contracts Receivable line of credit are at the discretion of the
             lender, are based on 90% of eligible contracts receivable, and are
             to be used to finance the development of properties. Borrowings
             under this credit line bear interest at the lender's base rate plus
             1.0% (5.75% as of December 31, 2001). The lender's base rate is
             equal to the interest rate publicly announced by the lender from
             time to time as its "Base" rate.

             The Company also may borrow up to $8,500,000 under the Real Estate
             Mortgage line of credit based on 80% of the purchase price of the
             real estate plus 80% of eligible development costs. Funds obtained
             by the Company under the Real Estate Mortgage credit line are to be
             used to purchase real estate pending development or sale.
             Borrowings under the Real Estate Mortgage line of credit bear
             interest at a rate equal to 1.0% over the lender's base (5.75% at
             December 31, 2001). The Project line of credit of $250,000 is to be
             used to finance project development costs and the purchase of real
             estate in connection with a project in northern Minnesota. The
             assets of the project secure this line of credit. Borrowings of up
             to $4,000,000 under the Interim Financing line are available to the
             Company at the discretion of the lender to cover demand overages on
             the other lines of credit. Borrowings under the Project and Interim
             Financing lines of credit bear interest at a rate equal to 1.5%
             over the lender's base rate (6.25% as of December 31, 2001). At
             December 31, 2001, $2,960,000 is available under the Company's
             mortgage and contracts receivable and interim financing credit
             facilities for operating needs and $5,233,899 is available under
             its real estate loan facility.

             All amounts borrowed by the Company under the Credit Agreement are
             due April 30, 2003 under an amendment to the Credit Agreement that
             changed the structure of the Agreement to a committed line. All
             funds advanced by the lender under the Credit Agreement are
             collateralized by an assignment by the Company of first mortgages,
             contracts for deed, security interests, or other rights or property
             interests acquired by the Company in connection with specific
             property development projects and a security interest in virtually
             all of the Company's assets. In addition, the Credit Agreement also
             contains a number of restrictive covenants and is personally
             guaranteed by the Company's president, Philip C. Taylor.

             NETWORK BANKS - Another recurring source of capital is a network of
             community banks, the majority of which Taylor has been utilizing as
             financing sources since the mid-1980s. These financial
             institutions, which are typically in proximity to the land being
             purchased, provide loans that are secured by a first mortgage on
             the land. Interest payments are made monthly and generally payments
             are made as the individual lots are sold. The Company's borrowings
             through the network of banks are shown as "Notes payable" in the
             table entitled "Sources of Financing."



                                       11
<PAGE>

             SELLER FINANCING - Seller financing or mortgages payable are
             equivalent to accounts payable that are due on resale and result
             from the Company's ordinary course of business. When the Company
             decides to acquire a parcel of land, the first source of financing
             it attempts to secure is financing from the seller. Seller
             financing typically consists of a purchase agreement evidencing the
             sale and outlining the terms of payment. The Company makes interest
             and principal payments on a scheduled amortization which varies by
             transaction, but which in no event extends beyond the sale of the
             property. The Company's use of seller financing is shown as
             "Contracts and mortgages payable" in the table entitled "Sources of
             Financing."

             SENIOR SUBORDINATED DEBT - In April 1994, the Company issued $1.0
             million of Senior Subordinated Notes, Series 1994 pursuant to Rule
             504 of Regulation D under the Securities Act of 1933, as amended.
             The proceeds were initially used to pay down existing debt.
             Ultimately the funds were used to acquire additional inventory. The
             Company issued an additional $3.0 million of Senior Subordinated
             Debt pursuant to a Registration Statement on Form SB-2, which
             became effective January 12, 1995. The proceeds of this offering
             were used to reduce existing debt, finance inventory, fund customer
             mortgage financing and open new offices during 1995.

             THE FOLLOWING SUMMARIZES THE COMPANY'S SIGNIFICANT CONTRACTUAL
             OBLIGATIONS AND COMMITMENTS THAT IMPACT LIQUIDITY.

<TABLE>
<CAPTION>


Contractual obligations                                                  Payments due by period
                                                   ----------------------------------------------------------------------
                                                      Within                                    After
IN THOUSANDS                                          1 YEAR       2-3 YEARS     4-5 YEARS     5 YEARS        TOTAL
=====================================================================================================================
<S>                                                  <C>           <C>           <C>            <C>         <C>
Notes, contracts and mortgages payable               $ 5,243       $ 4,008         $ 534        $ 364       $ 10,149
Senior subordinated debt                                 727         1,355           590            -          2,672
Operating leases                                         178           280           143           17            618
---------------------------------------------------------------------------------------------------------------------
Total contractual cash obligations                   $ 6,148       $ 5,643       $ 1,267        $ 381       $ 13,439
=====================================================================================================================

</TABLE>

             SALES OF CONTRACTS AND MORTGAGES RECEIVABLE - The general level of
             stability in its contracts and mortgages receivable portfolio has
             provided the Company with the opportunity to sell portfolios of
             receivables to raise cash when needed and to take advantage of
             positive interest rate spreads. Depending on the current interest
             rates, the sale can be at a discount or premium to par. The typical
             structure involves the Company selling the rights to payment on the
             contracts and mortgages with recourse, and also requires a small
             percentage of the sales price, approximately 5%, to be "held-back"
             and subsequently paid to the Company as the portfolio is paid down.
             In order to obtain more favorable pricing, the Company may retain
             servicing rights or grant put options to the purchasers in
             connection with the receivables sold. The put options typically
             require the Company to repurchase, at the option of the purchaser,
             the balance of the receivables within 60 days of the five-year
             anniversary of the sale. The sale of receivables with put options
             is accounted for as a financing transaction in the Company's
             consolidated financial statements. Future sales of contracts and
             mortgages receivable will depend on the Company's cash needs and
             prevailing interest rates.

             Put options were granted to three purchasers in 1996 on an initial
             aggregate amount of $5.6 million in contracts and mortgages
             receivable. As of December 31, 2001, $96,141 in contracts and
             mortgages receivable were outstanding with recourse, all of which
             had put options. During 2001, the Company extended the maturity of
             these contracts to December 31, 2005. Based on the scheduled
             amortization of these balances, however, the Company is potentially
             liable for the entire balance in 2002 if the put features are
             exercised. Should all of the put options be exercised, the Company
             would expect to use amounts available under its Credit Agreement to
             repurchase the contracts and mortgages receivable.



                                       12
<PAGE>


             The following table lists as of December 31, 2001, and 2000 the
             balance of the Company's contracts and mortgages receivable
             outstanding, the amount of the portfolio 90 days past due, average
             portfolio term and weighted average interest rate. The table also
             sets forth the amounts foreclosed and the contracts and mortgages
             foreclosed during the years ended December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                  2001             2000
<S>                                                           <C>               <C>
             Contracts and mortgages receivable:
               Balance outstanding                            $12,113,780       $10,452,589
                 Amount 90 days past due                          386,338           110,270
                 Percentage of Balance                              3.19%             1.05%
                 Amount foreclosed during period                   45,071           135,732
                 Percentage of balance                              0.37%             1.29%
             Average portfolio term                               3 years           4 years
             Weighted average interest rate                         11.7%             11.2%
</TABLE>


             The Company works aggressively and closely with its customers as
             soon as an account becomes overdue to attempt to avoid default and
             foreclosure. After the Company begins collection proceedings, most
             accounts are eventually made current and the Company receives full
             payment. On occasion, the Company must cancel the contract and
             begin foreclosure proceedings. During 2001, there were $45,071 in
             contract and mortgage receivable balances where the foreclosure
             process was complete, and an additional $99,611 were in the process
             of foreclosure. Subsequent to a completed foreclosure, the Company
             returns the underlying property to inventory and begins
             re-marketing the lot. Properties that are foreclosed upon and
             returned to inventory are generally resold at a profit resulting in
             minimal bad debt exposure.

             Based on expected cash generated from operations and the above
             available financing resources, management believes it has adequate
             sources of funds to meet the Company's anticipated working capital,
             capital expenditure, and debt service requirements for the
             foreseeable future.

             NEW ACCOUNTING STANDARDS - In June 2001, the FASB issued SFAS No.
             141, BUSINESS COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER
             INTANGIBLE ASSETS. SFAS 141 requires that the purchase method of
             accounting be used for all business combinations initiated after
             June 30, 2001. The standard had no impact for the Company in 2001.
             SFAS 142 changes the accounting for goodwill and certain other
             intangible assets from an amortization method to an impairment only
             approach. The standard also requires a reassessment of the useful
             lives of identifiable intangible assets other than goodwill and
             test for impairment of goodwill and intangibles with indefinite
             lives annually, or more frequently if events and circumstances
             indicate that the carrying amounts may not be recoverable. The
             adoption of SFAS 142 is not expected to have a material effect on
             the Company's financial position, results of operations or cash
             flows.

             During 2001, the Financial Accounting Standards Board (FASB) issued
             Statement of Financial Accounting Standards (SFAS) No. 143,
             ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, which is required to
             be adopted for fiscal years beginning after June 15, 2002. SFAS No.
             143 establishes accounting and reporting standards for obligations
             associated with the retirement of tangible long-lived assets and
             the associated asset retirement costs. It requires that the fair
             value of a liability for an asset retirement obligation be
             recognized in the period in which it is incurred if a reasonable
             estimate of the fair value can be made. The associated asset
             retirement costs are capitalized as part of the carrying amount of
             the long-lived asset. The Company expects to adopt SFAS No. 143 on
             January 1, 2003. The Company has not yet determined the impact of
             SFAS No. 143 on its financial position, results of operations or
             cash flows.

             The FASB also issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR
             DISPOSAL OF LONG-LIVED ASSETS, which is required to be adopted for
             fiscal years beginning after December 15, 2001. SFAS No. 144
             establishes accounting and reporting standards for the impairment
             or disposal of long-lived assets. The




                                       13
<PAGE>

             Company adopted SFAS No. 144 on January 1, 2002. The Company does
             not expect the adoption of SFAS No. 144 to have an impact on its
             historical financial position, results of operations or cash flows.

             SAFE HARBOR DISCLOSURE - Various forms filed by the Company with
             the Securities and Exchange Commission, including the Company's
             Form 10-K and Form 10-Q, and other written documents and oral
             statements released by the Company, may contain forward-looking
             statements. Forward-looking statements generally use words such as
             "expect," "anticipate," "believe," "project," "should," "estimate,"
             and similar expressions, and reflect the Company's expectations
             concerning the future. Such statements are based upon currently
             available information, but various risks and uncertainties may
             cause the Company's actual results to differ materially from those
             expressed in these statements. Among the factors which management
             believes could affect the Company's operating results are the
             following:

             o   Changing economic conditions, including economic downturns or
                 recessions;
             o   The ability of the Company to maintain and enhance its market
                 position relative to its competitors, realize productivity, and
                 continue to control expenses;
             o   The availability of suitable tracts of undeveloped land in
                 proximity to the marketplace;
             o   Changes in zoning and subdivision regulations;
             o   The availability and cost of financing; and
             o   Continuity of management.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

             INTEREST RATE RISK

             The Company is exposed to changes in interest rates primarily as a
             result of its borrowing activities used to fund operations and to
             acquire land. The Company uses both floating interest rate credit
             facilities and notes payable and fixed rate notes payable to
             accomplish this. At December 31, 2001 the Company currently has
             $13.9 million of floating interest rate debt under its credit
             facilities or under notes payable, $3.3 million of fixed rate notes
             payable and $2.7 million of fixed rate subordinated debt. The
             floating interest rates are based either upon the prevailing prime
             or three-month LIBOR interest rates. A hypothetical one-percent
             change in the prevailing prime or LIBOR, as applicable, would
             decrease net income of the Company by approximately $139,000 per
             year, based on the increased interest expense on variable rate
             debt. The fair value of fixed rate notes payable would not be
             impacted as substantially all of the $3.3 million in fixed rate
             notes payable mature in one year or less. A similar change in the
             interest rate would decrease the fair value of the Company's fixed
             rate subordinated debt by approximately $50,000.

             Additionally, an environment of increased interest rates may
             adversely affect the Company's ability to successfully market and
             sell its properties because the increased costs of borrowing would
             inflate the cost of inventory and make it more difficult for
             customers to finance purchases. The Company believes it can protect
             itself from sustained high interest rates by selling its contracts
             and mortgages receivable portfolios, originating loans with shorter
             maturities, and increasing the rates it charges to customers who
             utilize Company financing, or by incurring fixed rate debt. Such
             increases in rates would, however, have an adverse impact on the
             Company's cost of carrying inventory. The Company believes the best
             defense against rising interest rates is to buy only the best
             property, which can be turned quickly. However, sustained increases
             in interest rates could impact future sales levels. If demand for
             product was to decline for an extended period of time, the Company
             believes it could minimize the impact by reducing the sales price
             of the product to stimulate sales and would discontinue purchasing
             properties until the level of inventory more closely matched
             customer demand.





                                       14
<PAGE>


ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

             Independent Auditors' Report....................................16

             Consolidated Balance Sheets.....................................17

             Consolidated Statements of Income...............................18

             Consolidated Statements of Stockholders' Equity.................19

             Consolidated Statements of Cash Flows...........................20

             Notes to Consolidated Financial Statements......................21























                                       15
<PAGE>









INDEPENDENT AUDITORS' REPORT


Board of Directors
Taylor Investment Corporation
Minneapolis, Minnesota

We have audited the accompanying consolidated balance sheets of Taylor
Investment Corporation and subsidiaries (the Company) as of December 31, 2001
and 2000 and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2001. Our audits also included the financial statement schedule listed in
the Table of Contents at Item 14. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule 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 consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Taylor Investment Corporation and
subsidiaries at December 31, 2001 and 2000 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.


DELOITTE & TOUCHE LLP

February 28, 2002
Minneapolis, Minnesota



                                       16
<PAGE>

<TABLE>
<CAPTION>


TAYLOR INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
----------------------------------------------------------------------------------------------------------------------
                                                                                          2001               2000
<S>                                                                                 <C>                <C>
ASSETS

INVENTORY - Principally land held for sale                                          $   19,462,763     $   18,462,886

CONTRACTS AND MORTGAGES RECEIVABLE                                                      12,113,780         10,452,589

INVESTMENT IN JOINT VENTURES                                                               529,048            376,631

OTHER ASSETS:
   Cash                                                                                    730,554            690,467
   Tax increment financing receivable                                                      556,909            575,864
   Receivable from joint ventures                                                          556,889            479,977
   Other receivables                                                                       203,245            273,168
   Prepaid expenses and earnest money deposits                                             325,530            268,325
   Funds held by trustee                                                                    44,500            638,000
   Land, buildings, and equipment, less accumulated
      depreciation of $1,113,821 and $1,075,695, respectively                              431,484            425,194
   Loan acquisition costs and debt issuance costs, less accumulated
      amortization of $487,969 and $411,230, respectively                                  189,521            239,782
                                                                                    ---------------    ---------------
                    Total other assets                                                   3,038,632          3,590,777
                                                                                    ---------------    ---------------
                                                                                    $   35,144,223     $   32,882,883
                                                                                    ===============    ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

LINES OF CREDIT                                                                     $    7,037,999     $    8,261,038

NOTES PAYABLE                                                                            9,274,646          9,168,999

CONTRACTS AND MORTGAGES PAYABLE                                                            874,243            486,326

SENIOR SUBORDINATED DEBT                                                                 2,672,000          3,494,000

OTHER LIABILITIES:
   Accounts payable                                                                      3,195,037            737,531
   Accrued liabilities                                                                   1,081,978          1,262,593
   Deposits on land sales and purchase agreements                                           27,607             29,230
                                                                                    ---------------    ---------------
                    Total other liabilities                                              4,304,622          2,029,354

DEFERRED INCOME TAXES                                                                       51,041            217,343

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value; 10,000,000 shares authorized;
      484,129 shares issued and outstanding                                                  4,841              4,841
   Additional paid-in capital                                                              740,136            740,136
   Retained earnings                                                                    10,184,695          8,480,846
                                                                                    ---------------    ---------------
                    Total stockholders' equity                                          10,929,672          9,225,823
                                                                                    ---------------    ---------------
                                                                                    $   35,144,223     $   32,882,883
                                                                                    ===============    ===============
</TABLE>

See notes to consolidated financial statements.





                                       17
<PAGE>

<TABLE>
<CAPTION>


TAYLOR INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
---------------------------------------------------------------------------------------------------------------------

                                                              2001                   2000                  1999
<S>                                                  <C>                    <C>                      <C>
REVENUES:

   Sales                                             $        35,993,667    $        28,837,999      $     23,518,438

   Interest income on contracts receivable                     1,051,041              1,057,980               988,145

   Equity in (losses) earnings of joint ventures               (172,333)              (121,082)                57,653

   Other revenue                                                 377,743                546,321               409,368
                                                     --------------------   --------------------   -------------------
          Total revenue                                       37,250,118             30,321,218            24,973,604

COSTS AND EXPENSES:

   Cost of sales                                              21,000,734             15,873,775            12,453,402
   Reduction of inventory to net realizable value (Note 1)                                    -               294,480
   Selling, general, and administrative                       11,749,931              9,338,661             7,953,939
   Interest                                                    1,141,549              1,369,712             1,212,623
                                                     --------------------   --------------------   -------------------
          Total costs and expenses                            33,892,214             26,582,148            21,914,444


NET INCOME                                           $         3,357,904    $         3,739,070      $      3,059,160
                                                     ====================   ====================   ===================

NET INCOME PER COMMON SHARE
   OUTSTANDING                                       $              6.94    $              7.72      $           6.32
                                                     ====================   ====================   ===================

AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                             484,129                484,129               484,129
                                                     ====================   ====================   ===================
</TABLE>


See notes to consolidated financial statements.





                                       18
<PAGE>

<TABLE>
<CAPTION>


TAYLOR INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------
                                                                      ADDITIONAL
                                             COMMON STOCK               PAIN-IN        RETAINED
                                        SHARES            AMOUNT        CAPITAL        EARNINGS          TOTAL
                                     --------------------------------------------- ---------------- ---------------

<S>                                       <C>      <C>            <C>             <C>              <C>
BALANCE AT DECEMBER 31, 1998              484,129  $      4,841   $     740,136   $    5,288,405   $     6,033,382

  Dividends Paid                                                                      (1,549,212)       (1,549,212)
  Net Income                                                                           3,059,160         3,059,160
                                          -------   -----------   -------------   --------------   ---------------

BALANCE AT DECEMBER 31, 1999              484,129         4,841         740,136        6,798,353         7,543,330

  Dividends Paid                                                                      (2,056,577)       (2,056,577)
  Net Income                                                                           3,739,070         3,739,070
                                          -------   -----------   -------------   --------------   ---------------

BALANCE AT DECEMBER 31, 2000              484,129         4,841         740,136        8,480,846         9,225,823

  Dividends Paid                                                                      (1,654,055)       (1,654,055)
  Net Income                                                                           3,357,904         3,357,904
                                          -------   -----------   -------------   --------------   ---------------
BALANCE AT DECEMBER 31, 2001              484,129   $     4,841   $     740,136   $   10,184,695   $    10,929,672
                                          =======   ===========   =============   ==============   ===============

</TABLE>

See notes to consolidated financial statements.















                                       19
<PAGE>


<TABLE>
<CAPTION>


TAYLOR INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------
                                                                            2001            2000           1999
<S>                                                                           <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                 $ 3,357,904    $ 3,739,070     $ 3,059,160
   Adjustments to reconcile net income to net cash provided
       by operating activities:
     Depreciation and amortization                                                290,626        320,027         326,267
     Loss (gain) on disposal of assets                                             28,732           (907)         (4,613)
     Deferred income taxes                                                       (166,302)      (156,689)       (233,991)
     Equity in losses (earnings) from joint ventures                              172,333        121,082         (57,653)
     Contracts and mortgages receivables funded                                (9,716,675)    (7,856,127)     (5,293,516)
     Payments on contracts and mortgages receivable                             8,055,484      6,098,472       5,963,839
     Changes in assets and liabilities:
       Inventory - land held for sale                                             578,529     (3,013,105)      1,835,367
       Other receivables                                                           88,878       (507,521)        137,105
       Income tax receivable                                                            -              -        (241,664)
       Prepaid expenses                                                           (57,205)        74,277        (180,615)
       Accounts payable                                                         2,457,506        371,912         218,542
       Accrued liabilities                                                       (180,615)       337,334         444,062
       Deposits on land sales on purchase agreements                               (1,623)       (18,385)         13,257
                                                                              -----------    -----------     -----------
           Net cash provided by (used in) operating activities                  4,907,572       (490,560)      5,985,547

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of land, buildings and equipment                                     (232,713)      (226,324)       (110,473)
   Proceeds from sale of land, buildings and equipment                              9,000          3,500          10,000
   Investment in joint ventures                                                  (333,000)      (500,000)              -
   Proceeds from distributions of joint ventures                                    8,250          9,000          62,000
   Proceeds from repayment of joint venture receivables                           601,685              -
   Decrease (increase) in funds held by trustee                                   593,500       (597,500)         (3,000)
                                                                              -----------    -----------     -----------
           Net cash provided by (used in) investing activities                    646,722     (1,311,324)        (41,473)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net (payments) borrowings on lines of credit                                (1,223,039)     4,463,530      (2,022,925)
   Repayment of notes, contracts, and mortgage payables                       (13,309,470)    (8,807,615)     (7,819,844)
   Proceeds from notes, contracts, and mortgage payables                       11,534,004      8,144,943       6,165,723
   Loan acquisition costs                                                         (39,647)       (35,239)        (30,224)
   Dividends paid to stockholders                                              (1,654,055)    (2,056,577)     (1,549,212)
   Repayment of subordinated debt                                                (822,000)      (186,000)       (152,000)
                                                                              -----------    -----------     -----------
           Net cash (used in) provided by financing activities                 (5,514,207)     1,523,042      (5,408,482)
                                                                              -----------    -----------     -----------

INCREASE (DECREASE) IN CASH                                                        40,087       (278,842)        535,592

CASH AT BEGINNING OF PERIOD                                                       690,467        969,309         433,717
                                                                              -----------    -----------     -----------

CASH AT END OF PERIOD                                                         $   730,554    $   690,467     $   969,309
                                                                              ===========    ===========     ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the period for:
     Interest                                                                 $ 1,067,672    $ 1,773,121     $ 1,420,261
                                                                              ===========    ===========     ===========
     Income taxes                                                             $   166,302    $   156,689     $   507,619
                                                                              ===========    ===========     ===========
   Noncash financing activity - inventory and equipment
     purchased with notes, contracts and mortgages payable                    $ 3,969,030    $ 5,546,177     $   330,000
                                                                              ===========    ===========     ===========
   Noncash financing activity - inventory transferred to joint venture        $ 2,378,597    $       -       $        -
                                                                              ===========    ===========     ===========
   Noncash financing activity - note payable transferred to joint venture     $ 1,700,000    $       -       $        -
                                                                              ===========    ===========     ===========

</TABLE>



See notes to consolidated financial statements.






                                       20
<PAGE>


TAYLOR INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------
1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - Taylor Investment
        Corporation and subsidiaries (the Company) is a Minnesota corporation
        organized in 1979 which is engaged in land development activities. The
        Company owns 100% of Four Seasons Realty of Minnesota, Inc. (FSM), Four
        Seasons Realty of Wisconsin, Inc. (FSW), Four Seasons Realty of
        Michigan, Inc. (FSMI), Four Seasons Properties of Georgia, LLC (FSG),
        Four Seasons Properties of Tennessee, LLC (FST) and FSP Development of
        Texas (FSPT) and Laurentian Development Corporation. FSM, FSW, and FSMI
        are engaged in the sale of recreational property while FSG, FST, FSPT
        and Laurentian Development Corporation are engaged in both the
        development and sale of recreational and residential property.

        The consolidated financial statements include the accounts of the
        Company and its subsidiaries. All significant intercompany accounts and
        transactions have been eliminated.

        INVENTORY - PRINCIPALLY LAND HELD FOR SALE - Land held for sale is
        recorded at the purchase price plus amounts expended for development and
        improvement of the land but not at a price more than its net realizable
        value. Property sold and subsequently repossessed under the terms of a
        defaulted sales contract is recorded at the lower of the remaining
        unpaid contract balance or the net realizable value of the property.

        Total costs of a development are allocated to individual lots on the
        basis of the estimated selling price of each lot, as a percentage of the
        total estimated gross selling price of the entire development. In
        addition, development costs are allocated to individual lots for the
        purpose of recording cost of sales.

        Interest is capitalized on all projects during the development stage.
        Interest capitalized into inventory was $570,261 and $482,830 in 2001
        and 2000, respectively.

        During each period, the Company provides for identified, unsalable, and
        slow-moving inventory. As a result of a review of the carrying amount of
        this inventory, the Company determined that a reduction in the carrying
        value of structures inventory of $294,480 in 1999, was necessary to
        reduce this inventory to net realizable value.

        LAND, BUILDING, AND EQUIPMENT - Depreciation of buildings and equipment
        is computed using the straight-line method on the cost of the assets
        based on their estimated useful lives, which range from three to thirty
        years.

        Land, buildings, and equipment consist of the following at December 31:

                                                      2001            2000

        Land                                      $     11,022     $     11,022
        Buildings and improvements                     168,095          122,666
        Equipment                                    1,366,188        1,367,201
                                                  ------------     ------------
                                                     1,545,305        1,500,889

        Less accumulated depreciation                1,113,821        1,075,695
                                                  ------------     ------------
        Land, buildings, and equipment, net       $    431,484     $    425,194
                                                  ============     ============



                                       21
<PAGE>

        LOAN ACQUISITION AND DEBT ISSUANCE COSTS - Such costs are amortized over
        the term of the related loan using the straight-line method.

        REVENUE RECOGNITION - The Company recognizes revenue when a sale has
        closed and the buyer's cumulative down payment and principal paid total
        at least 10% of the sale price. Until 10% of the sale price is received,
        no revenue is recognized and all payments received are recorded as a
        current liability in the consolidated balance sheets under the caption
        "deposits on land sales and purchase agreements." During 2001, 2000 and
        1999, down payments on sales financed by the Company averaged 14%, 12%
        and 15% of the sale price, respectively.

        EARNINGS PER COMMON SHARE (EPS) - As the Company has no dilutive items
        that would require disclosure of diluted EPS, the Company calculates
        basic EPS as net income or loss divided by the weighted average number
        of common shares outstanding during the year.

        INVESTMENT IN JOINT VENTURES - The Company owns 33% of two limited
        liability companies, which were formed to acquire and develop specific
        plots of land. The Company accounts for these investments using the
        equity method of accounting. The Company invested $333,000 and $500,000
        in the joint ventures in 2001 and 2000, respectively. In 2001, the
        Company transferred inventory valued at $2.4 million and debt of $1.7
        million to one of the joint ventures in return for a receivable, which
        was repaid during 2001. At December 31, 2001 and 2000, the Company has
        loans outstanding of $556,889 and $479,977, respectively, to these
        limited liability companies. Such amounts are reflected as due from
        joint ventures on the consolidated balance sheets.

        FUNDS HELD BY TRUSTEE - Amounts represent cash paid to trustee for the
        purpose of paying scheduled maturities on senior subordinated debt.

        ESTIMATES - The preparation of consolidated financial statements, in
        conformity with generally accepted accounting principles, requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets
        and liabilities at the date of the financial statements and the reported
        amounts of revenues and expenses during the reporting period. Actual
        results could differ from those estimates.

        FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of contracts
        and mortgages receivable, lines of credit, notes payable, and contracts
        and mortgages payable are reasonable estimates of the fair value of
        these financial instruments based on the short-term nature of these
        instruments and, if applicable, the interest rates of these financial
        instruments. The fair value of the senior subordinated debt is estimated
        to be $2,672,000 and $3,494,000 at December 31, 2001 and 2000,
        respectively.

        IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically reviews the
        carrying amounts of all its long-lived assets and identifiable
        intangibles based on expected future cash flows from the use of those
        assets. If impairment indicators are present and the estimated future
        undiscounted cash flows are less than carrying value of the assets, the
        carrying value is reduced to the estimated fair value as measured by the
        discounted cash flows.

        NEW ACCOUNTING STANDARDS - Statement of Financial Accounting Standard
        (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
        ACTIVITIES, became effective for the Company effective January 1, 2001.
        SFAS No. 133, as amended, establishes accounting and reporting standards
        for derivative instruments, including certain derivative instruments
        embedded in other contracts and for hedging activities. The Company
        adopted SFAS No. 133 during the first quarter of 2001. Such adoption had
        no impact on the financial position, results of operations, or cash
        flows of the Company.

        In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS, and
        SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS 141 requires
        that the purchase method of accounting be used for all business
        combinations initiated after June 30, 2001. The standard had no impact
        for the Company in 2001. SFAS 142 changes the accounting for goodwill
        and certain other intangible assets from an amortization method to an
        impairment only approach. The standard also requires a reassessment of
        the useful lives of identifiable




                                       22
<PAGE>

        intangible assets other than goodwill and test for impairment of
        goodwill and intangibles with indefinite lives annually, or more
        frequently if events and circumstances indicate that the carrying
        amounts may not be recoverable. The adoption of SFAS 142 is not expected
        to have a material effect on the Company's financial position, results
        of operations or cash flows.

        During 2001, the Financial Accounting Standards Board (FASB) issued
        Statement of Financial Accounting Standards (SFAS) No. 143, ACCOUNTING
        FOR ASSET RETIREMENT OBLIGATIONS, which is required to be adopted for
        fiscal years beginning after June 15, 2002. SFAS No. 143 establishes
        accounting and reporting standards for obligations associated with the
        retirement of tangible long-lived assets and the associated asset
        retirement costs. It requires that the fair value of a liability for an
        asset retirement obligation be recognized in the period in which it is
        incurred if a reasonable estimate of the fair value can be made. The
        associated asset retirement costs are capitalized as part of the
        carrying amount of the long-lived asset. The Company expects to adopt
        SFAS No. 143 on January 1, 2003. The Company has not yet determined the
        impact of SFAS No. 143 on its financial position and results of
        operations.

        The FASB also issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR
        DISPOSAL OF LONG-LIVED ASSETS, which is required to be adopted for
        fiscal years beginning after December 15, 2001. SFAS No. 144 establishes
        accounting and reporting standards for the impairment or disposal of
        long-lived assets. The Company expects to adopt SFAS No. 144 on January
        1, 2002. The Company does not expect SFAS No. 144 to have an impact on
        its historical financial position, results of operations or cash flows.

2.      CONTRACTS AND MORTGAGES RECEIVABLE

        Contracts and mortgages receivable result from the sale of land or land
        and structures. Generally, these fixed rate receivables are collected in
        monthly installments, including interest, over eight to ten years. The
        Company also has certain mortgage receivables which are amortized over
        eight to ten years, with a balloon payment at the end of three or four
        years for the remaining unpaid principal. The weighted average maturity
        of contracts and mortgages receivable at December 31, 2001 and 2000 was
        approximately three and four years, respectively, and the weighted
        average interest rate on outstanding contracts and mortgages receivable
        was approximately 11.7% and 11.2%.

        Maturities of contracts and mortgages receivable at December 31, 2001
        are as follows:

<TABLE>

<S>                                                                              <C>

        Year ending December 31:
        2002                                                                     $    1,139,351
        2003                                                                          1,219,337
        2004                                                                          1,332,136
        2005                                                                          5,421,481
        2006                                                                            722,105
        Thereafter                                                                    2,398,531
                                                                                 --------------
                                                                                     12,232,941
        Less allowance for uncollectable contracts and mortgages receivable             119,161
                                                                                 --------------
                                                                                 $   12,113,780
                                                                                 ==============

</TABLE>


                                       23
<PAGE>


3.     TAX INCREMENT FINANCING RECEIVABLES

       Several taxing authorities have established tax increment financing
       districts whereby the Company will be reimbursed for costs incurred in
       the development of community infrastructure to the extent the community
       improvements and related development increase property taxes collected by
       the taxing authority. The Company recognizes these receivables, which are
       generally non-interest bearing, upon the sale of the developed property
       or upon the completion of the structure by the owner. Estimated amounts
       receivable under these agreements were $556,909 and $575,864 at December
       31, 2001 and 2000, respectively. Estimated maturity of these receivables
       at December 31, 2001 is as follows:

        Year ending December 31:
        2002                                                       $    129,556
        2003                                                             97,297
        2004                                                             86,665
        2005                                                             87,091
        2006                                                             46,822
        Thereafter                                                      581,123
                                                                   ------------
                                                                      1,028,554
        Less imputed interest at 10%                                    471,645
                                                                   ------------
                Net receivable                                     $    556,909
                                                                   ============

4.      LINES OF CREDIT

        The Company has a credit agreement that provides for total borrowings of
        up to $17,500,000 at the discretion of the lender. Although the credit
        agreement extends to April 30, 2003, amounts can be called on demand.
        The credit agreement provides for various lines of credit. Total
        borrowings outstanding under the credit agreement are secured by
        substantially all of the Company's assets and are guaranteed by the
        president of the Company. The credit agreement contains certain
        financial and restrictive covenants, including maintenance of minimum
        net worth (as defined), and limitation of capital expenditures. The
        Company was in compliance with all such covenants in the credit
        agreement at December 31, 2001 and 2000.

        At December 31, 2001 and 2000, the Company had borrowings outstanding of
        $6,790,999 and $7,361,038 respectively, under the line of credit based
        on 90% of eligible contracts receivable. In addition, the Company may
        borrow up to $8,500,000 for real estate purchases. The real estate
        borrowings are at the discretion of the lender based on 80% of the
        purchase price of the real estate plus 80% of eligible development
        costs. At December 31, 2001 and 2000, the Company had borrowings of
        $3,266,101 and $2,710,467, respectively, which are included in real
        estate notes payable (see Note 5). Borrowings under the line of credit
        and real estate loan facility bear interest at the lender's "base" rate
        plus 1.0% (5.75% and 10.5% at December 31, 2001 and 2000, respectively).
        The "base" rate is equal to the interest rate publicly announced by the
        lender from time to time as its "base" rate.

        Also, under the credit agreement, the Company has a $250,000 line to
        support financing of a major project. Borrowings under the project line
        bear interest at the lender's "base" rate plus 1.5% (6.25% and 11.0% at
        December 31, 2001 and 2000, respectively). Borrowings under the project
        line outstanding at December 31, 2001 and 2000 were $172,000 and $0,
        respectively, and are secured by a mortgage on the project.

        The credit agreement also provides the Company up to $4,000,000 in
        interim financing at the discretion of the lender. Borrowings under this
        facility at December 31, 2001 and 2000 were $75,000 and $900,000,
        respectively. Borrowings bear interest at the lender's "base" rate plus
        1.5% (6.25% and 11.0% at December 31, 2001 and 2000, respectively).

        At December 31, 2001, $2,960,000 is available under the Company's
        mortgage and contracts receivable and interim financing credit
        facilities and $5,233,899 is available under its real estate loan
        facility.





                                       24
<PAGE>

5.      NOTES PAYABLE
<TABLE>

<S>                                                                                 <C>              <C>

        Notes payable consisted of the following at December 31:
                                                                                        2001              2000
        Fixed rate notes payable, due through 2005 at
          various rates of interest ranging from 6.50% to 13.50%                    $   2,439,566    $    3,570,235
        Real estate notes payable, due through 2010
          at various rates of interest ranging from 4.42% to
          8.89%                                                                         6,835,080         5,598,764
                                                                                    -------------    --------------
                                                                                    $   9,274,646    $    9,168,999
                                                                                    =============    ==============
</TABLE>


        At December 31, 2001, notes payable was secured by certain land held for
        sale, contracts and mortgages receivable, and equipment. The president
        of the Company personally guarantees the notes payable.

        Maturity requirements on notes payable at December 31, 2001 are as
        follows:

        Years ending December 31:
        2002                                                   $    5,034,058
        2003                                                        3,747,959
        2004                                                           61,403
        2005                                                           47,923
        2006                                                           19,170
        Thereafter                                                    364,133
                                                               --------------
                                                               $    9,274,646
                                                               ==============

6.      CONTRACTS AND MORTGAGES PAYABLE

        The Company has entered into contracts for deed and mortgages for the
        purchase of land. At December 31, 2001, the agreements provide for
        interest rates from 0% to 8.0% and maturity dates through 2006. The
        contracts and mortgages payable are secured by land held for sale and
        land which has been sold and the related contracts receivable. Due to
        their short-term nature, imputed interest for relevant contracts with no
        stated interest rate is not significant.

        Maturity requirements on the contracts and mortgages payable at December
        31, 2001 are as follows:

        Years ending December 31:
        2002                                                      $      208,048
        2003                                                              95,779
        2004                                                             103,256
        2005                                                             351,207
        2006                                                             115,953
                                                                  --------------
                                                                  $      874,243
                                                                  ==============








                                       25
<PAGE>


7.     SENIOR SUBORDINATED DEBT

        The Company has $334,000 in senior subordinated notes outstanding which
        bear interest at 8% to 10% and are unsecured. In addition, the Company
        has $2,338,000 of senior subordinated debt that bears interest at 11% to
        12% and is unsecured. These notes contain certain restrictive covenants
        (as defined), including such items as maintenance of minimum net worth,
        limitation of dividend payments, maximum debt to equity ratio, and other
        financial ratios. The Company was in compliance with these financial
        covenants at December 31, 2001 and 2000. At December 31, 2001, principal
        maturities of senior subordinated debt are as follows:

        Years ending December 31:
        2002                                                  $      727,000
        2003                                                         760,000
        2004                                                         595,000
        2005                                                         590,000
                                                              --------------
                                                              $    2,672,000
                                                              ==============

8.      COMMITMENTS AND CONTINGENCIES

        The Company has sold certain contracts receivable to financial
        institutions under recourse sales agreements. In the event of default
        under these contracts receivable, the Company is required to pay the
        outstanding balance of the contract, whereupon the Company will
        reacquire title to the underlying land. Put options that typically
        require the Company to repurchase, at the option of the purchaser, the
        balance of the receivables within 60 days of the five-year anniversary
        of the sale, were also granted for these contracts receivable. At
        December 31, 2001 and 2000, the balance on contracts and mortgages
        receivable under such recourse sales agreements was approximately
        $96,141 and $486,251, respectively. Based on the scheduled amortization
        of these balances, the Company would be liable for the entire balance in
        2002, if the put features are exercised. Should all of the put options
        be exercised, the Company would expect to use amounts available under
        its Credit Agreement to repurchase the contracts and mortgages
        receivable.

        The Company has guaranteed notes payable for two limited liability
        companies in which it has a 33% ownership interest of $5,024,825 and
        $1,483,835 at December 31, 2001 and 2000.

9.      OPERATING LEASES

        The Company has entered into non-cancelable leases for office space.
        Estimated payments under these lease agreements at December 31, 2001 are
        approximately as follows:

        Years ending December 31:
        2002                                                   $      177,743
        2003                                                          151,881
        2004                                                          128,335
        2005                                                           74,693
        2006                                                           68,387
        Thereafter                                                     17,199
                                                               --------------
                                                               $      618,238
                                                               ==============

        Total rental expense for all operating leases was approximately
        $310,000, $260,000 and $230,000 for the years ended December 31, 2001,
        2000 and 1999, respectively.

10.     INCOME TAXES

        In January 1999, the Company filed with the Internal Revenue Service and
        obtained status as a Subchapter S-Corporation. Accordingly, taxable
        income from operations is allocated to the individual shareholders with
        no income tax expense recorded in the financial statements. The Company
        will continue to pay "built-in-gain" taxes related to deferred tax
        liabilities existing at December 31, 1998 for installment sales, until
        all installments of such sales have been received.





                                       26
<PAGE>

        The Company's deferred tax liability at December 31, 2001 and 2000 of
        $51,041 and $217,343, respectively, consists entirely of
        "built-in-gains" on installment sales.

11.     EMPLOYEE 401(k) PLAN

        The Company's 401(k) plan covers substantially all employees meeting
        minimum eligibility requirements. The plan provides for employee
        contributions of up to a maximum of 15% of each employee's compensation,
        with the Company matching 50% of the first 6% of each employee's
        contribution. The Company's contributions to the plan totaled
        approximately $109,000, $96,000 and $80,000 for the years ended December
        31, 2001, 2000 and 1999, respectively.

12.     TRANSACTIONS WITH OFFICERS AND EMPLOYEES

        Included in contracts and mortgages receivable at December 31, 2001 and
        2000 are contracts receivable from employees of the Company in the
        amount of $177,200 and $69,158, respectively. During the years ended
        December 31, 2001, 2000 and 1999, the Company had sales to officers and
        employees of approximately $138,000, $52,000 and $272,000, respectively.

13.     SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

        Summarized quarterly financial information for the years ended December
        31, 2000 and 2001 is presented below.


<TABLE>
<CAPTION>
                                                  1st Quarter       2nd Quarter      3rd Quarter       4th Quarter
        2001
<S>                                              <C>              <C>               <C>              <C>
        Revenue                                  $   6,633,504    $    8,540,544    $   9,400,419    $   12,675,651
        Costs and expenses                           6,008,643         7,535,355        8,295,255        12,052,961
                                                 -------------    --------------    -------------    --------------
        Net income                                     624,861         1,005,189        1,105,164           622,690
        Net income per share                     $        1.29    $         2.08    $        2.28    $         1.29

        2000

        Revenue                                  $   5,516,735    $    6,727,358    $   8,775,570    $    9,301,555
        Costs and expenses                           4,902,830         5,863,042        7,288,443         8,527,833
                                                 -------------    --------------    -------------    --------------
        Net income                                     613,905           864,316        1,487,127           773,722
        Net income per share                     $        1.27    $         1.79    $        3.07    $         1.60

</TABLE>





                                       27
<PAGE>



ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

             No changes in or disagreements with accountants have occurred
             during the two-year period ended December 31, 2001.

                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

             EXECUTIVE OFFICERS AND DIRECTORS

             The Company's executive officers and directors and their ages and
             positions with the Company are as follows:

<TABLE>
<CAPTION>
                   Name                     Age              Positions with Company

<S>                                         <C>        <C>
             Philip C. Taylor               50         President, Chairman of the Board,
                                                          Secretary and Treasurer
             Joel D. Kaul                   42         Vice President and Chief Operating
                                                          Officer
             W. John Driscoll               73         Director
             John H. Hooley                 50         Director
             Charles J. McElroy             47         Director
             William R. Sieben              49         Director

</TABLE>

             PHILIP C. TAYLOR is the founder, President, Chairman of the Board
             and majority shareholder of the Company. Mr. Taylor has been
             actively involved in real estate investment and development for
             over 20 years. Since 1979, management of the Company has been his
             full-time occupation. Mr. Taylor graduated in 1973 from the College
             of St. Thomas, St. Paul, Minnesota, with a Bachelor of Arts degree
             in Economics. In 1978, Mr. Taylor received his Juris Doctorate
             degree from William Mitchell College of Law, St. Paul, Minnesota.
             Mr. Taylor has been Chairman, President, Secretary, and Treasurer
             since the Company's formation.

             JOEL D. KAUL is Vice President and Chief Operating Officer. Mr.
             Kaul joined the Company in June 1995 and has over 10 years of
             experience in the real estate finance industry. From 1989-1995, Mr.
             Kaul served as senior asset manager for Dain Corporation. In this
             capacity, Mr. Kaul directed a staff of fifteen people in the
             management of a $300 million national real estate portfolio. Prior
             to joining Dain Corporation, Mr. Kaul spent four years employed as
             a CPA with Ernst and Young and Coopers and Lybrand. Mr. Kaul also
             served as the Chief Financial Officer for a Minnesota-based
             developer for four years. Mr. Kaul graduated cum laude in 1981 from
             the University of Wisconsin-LaCrosse, with a double major in
             finance and accounting.

             W. JOHN DRISCOLL has been a director of the Company since 1986. Mr.
             Driscoll is a director of Rock Island Company, a private investment
             firm where he served as Chairman of the Board from May 1993 to June
             1994 and as President prior to May 1993. Mr. Driscoll also serves
             as a member of the board of directors of Comshare, Inc.; John
             Nuveen & Co.; Xcel Energy; The St. Paul Companies, Inc. and
             Weyerhaeuser Company.

             JOHN H. HOOLEY has been a director of the Company since 1986. Mr.
             Hooley is President of Cub Foods, a division of Super Valu, Inc. He
             received a Bachelor of Arts degree in economics in 1974 from St.
             John's University, Collegeville, Minnesota. In 1980, he received
             his Juris Doctorate degree from William Mitchell College of Law,
             St. Paul, Minnesota.



                                       28
<PAGE>

             CHARLES J. MCELROY has been a director of the Company since 1986.
             Mr. McElroy is a partner with the firm of Larson, Allen, Weishair &
             Company, a regional certified public accounting firm. He received
             his Bachelor of Arts degree in accounting from the College of St.
             Thomas, St. Paul, Minnesota, in 1976. Mr. McElroy is Mr. Philip C.
             Taylor's brother-in-law.

             WILLIAM R. SIEBEN has been a director of the Company since 1986.
             Mr. Sieben is a partner in the law firm of Schwebel, Goetz &
             Sieben, P.A., of Minneapolis, Minnesota. He received his Bachelor
             of Arts in 1972 from St. Cloud State University and a Juris
             Doctorate degree from William Mitchell College of Law in 1977. He
             is past President of the Minnesota Trial Lawyers Association and
             has written several legal publications.

             All members of the Board of Directors hold office until the next
             annual meeting of stockholders or until their successors are
             elected and qualified. The Company pays each director an annual fee
             of $4,500, plus reimbursement of out-of-pocket expenses.

             The Company does not have a class of equity securities registered
             pursuant to Section 12 of the Securities Exchange Act of 1934 (the
             "Exchange Act") and therefore is not subject to Section 16 of the
             Exchange Act.

ITEM 11.     EXECUTIVE COMPENSATION

             The following table sets forth the compensation paid or accrued by
             the Company for services rendered during the years ended December
             31, 2001 and 2000 with respect to the President (Chief Executive
             Officer) and all officers of the Company whose total annual salary
             and bonus for 2001 exceeded $100,000:

             SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                            Annual Compensation
                                                       -------------------------------------------------------------
                  Name and                                                                            Other Annual
             Principal Position                          Year         Salary         Bonus(1)         Compensation
<S>                                                      <C>         <C>             <C>                 <C>
             Philip C. Taylor, President                 2001        $150,000        $280,395            $4,500(2)
                                                         2000         150,000         272,000             4,500

             Joel D. Kaul, Vice President                2001         100,000         346,775                -
                                                         2000         100,000         240,219                -

</TABLE>

             ----------------
             (1) The amount of Mr. Taylor's bonus is approved by the Board of
                 Directors and is related to the Company's profitability.

             (2) Annual fee paid to Mr. Taylor for serving as a member of the
                 Company's Board of Directors.







                                       29
<PAGE>


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

             The following table sets forth as of December 31, 2001, the number
             of shares of the Company's common stock beneficially owned by (i)
             each director of the Company, (ii) each executive officer of the
             Company named in the Summary Compensation Table, (iii) each person
             known by the Company to beneficially own more than five percent of
             the outstanding shares of the Company's common stock, and (iv) all
             executive officers and directors as a group. Unless otherwise
             indicated, each person has sole voting and dispositive power over
             such shares.

<TABLE>
<CAPTION>
                                                                                                       Shares
                   Name and Address of                                      Outstanding             Beneficially
                    Beneficial Owner                                        Shares (2)                Owned (1)
<S>                                                                          <C>                         <C>
             Philip C. Taylor
               43 Main Street SE, Suite 506
               Minneapolis, Minnesota  55414                                 387,804 (3)                 80.1%
             Charles J. McElroy
               Pillsbury Center
               220 South Sixth Street
               Suite 1000
               Minneapolis, Minnesota 55402                                  120,000 (4)                 24.8
             Joel D. Kaul
               2821 Overlook Lane North
               Stillwater, Minnesota  55082                                    7,541                      1.6
             John H. Hooley
               9770 Old Deer Trail
               Stillwater, Minnesota  55082                                    5,740                      1.2
             William R. Sieben
               1201 Southview Drive
               Hastings, Minnesota  55033                                      5,740                      1.2
             W. John Driscoll
               2090 First National Bank Building
               St. Paul, Minnesota  55101                                          0 (5)                  *
             All executive officers and directors
               as a group (6 persons)                                        406,825                     84.0

</TABLE>
             ----------------
             (1) Unless otherwise indicated, each person has sole voting and
                 dispositive power with respect to all outstanding shares
                 reported in the foregoing table.

             (2) Based on 484,129 shares of common stock outstanding at December
                 31, 2001.

             (3) Includes 132,573 shares owned by Mr. Taylor's wife, 120,000
                 shares held in trust for his children. The 120,000 shares held
                 in trust for Mr. Taylor's children have also been included in
                 the number of shares shown for Mr. Charles J. McElroy, the
                 trustee.

             (4) Includes 120,000 shares held by Mr. McElroy as trustee under
                 trusts for the benefit of Philip C. Taylor's children that have
                 also been included in the number of shares shown for Mr.
                 Taylor.

             (5) Does not include 35,700 shares held in a trust for which Mr.
                 Driscoll was the trustee or 7,140 shares held by Mr. Driscoll
                 as trustee as to which Mr. Driscoll disclaims beneficial
                 ownership.





                                       30
<PAGE>


ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

             Employees of the Company have from time to time purchased from the
             Company vacation property for their personal use. In connection
             with such purchases, the Company has provided, to such employees,
             mortgage financing on the same or similar terms it makes available
             to unaffiliated customers in the ordinary course of its business.
             In the opinion of management, the terms of such sales and financing
             are no more favorable to the employee(s) than those generally made
             available to its customers.

             Under the terms of the Subordinated Debt, the Company may not, and
             may not permit any subsidiary to, conduct any business or enter
             into any transaction or series of transactions with or for the
             benefit of any affiliate or any subsidiary of the Company, or any
             holder of 5% or more of any class of capital stock of the Company,
             except in good faith and on terms that are, in the aggregate, no
             less favorable to the Company or any subsidiary, as the case may
             be, than those that could have been obtained in a comparable
             transaction on an arm's length basis from a person not an affiliate
             of the Company or such subsidiary.


                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

             (a) List of documents filed as part of this report:

                 1.  FINANCIAL STATEMENTS

                     Consolidated Balance Sheets as of December 31, 2001
                     and 2000

                     Consolidated Statements of Income for the Years Ended
                     December 31, 2001, 2000 and 1999

                     Consolidated Statements of Stockholders' Equity for the
                     Years Ended December 31, 2001, 2000 and 1999

                     Consolidated Statements of Cash Flows for the Years Ended
                     December 31, 2001, 2000 and 1999

                     Notes to Consolidated Financial Statements



                 2.  FINANCIAL STATEMENT SCHEDULE

                     Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                        BEGINNING      CHARGED TO                         ENDING
                            DESCRIPTION                  BALANCE          COSTS         DEDUCTIONS        BALANCE
<S>                                                   <C>              <C>             <C>              <C>
                      2001
                      ----
                      Allowance for doubtful
                         accounts                     $   116,083      $    16,031     $    12,953      $   119,161

                      2000
                      ----
                      Allowance for doubtful
                         accounts                          96,709           23,573           4,199          116,083

                      1999
                      ----
                      Allowance for doubtful
                         accounts                         104,209           43,869          51,369           96,709


</TABLE>

                      All other schedules have been omitted because they are
                      not applicable.




                                       31
<PAGE>




                 3.  EXHIBITS.

                     3.1  Articles of Incorporation of the Company, as amended *

                     3.2  Bylaws of the Company, as amended *

                     4.1  Form of Debenture (included as Article Two of
                          Indenture filed as Exhibit 4.2) *

                     4.2  Forms of Indenture by and between the Company and
                          American Bank National Association, as Trustee *

                    10.3  Redevelopment Agreement between the City of Hillsboro,
                          Illinois and the Company dated April 26, 1994 *

                    10.5  Contract for Private Development between The Joint
                          East Range Economic Development Authority and
                          Laurentian Development Authority *

                    10.6  Second Contract for Private Development between The
                          Joint East Range Economic Development Authority and
                          Laurentian Corporate Authority *

                    10.8  Credit Agreement between Diversified Business Credit,
                          Inc. and the Company dated November 18, 1986, as
                          amended by Amendment to Credit Agreement dated June 2,
                          1993

                    10.9  Security Agreement between Diversified Business
                          Credit, Inc. and the Company dated November 18, 1986 *

                   10.10  Agreement between the City of Coleraine, Minnesota
                          and the Company dated September 26, 1994 *

                   21     Subsidiaries of the Company

              ---------------
              *     Incorporated by reference to the Company's registration
                    statement on Form SB-2 (No. 33-87024C), effective January
                    12, 1995.

             (b) REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during
                 the last quarter of the period covered by this report.







                                       32
<PAGE>


                                   SIGNATURES

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

                                        TAYLOR INVESTMENT CORPORATION
                                        (Registrant)

Dated:   March 26, 2002                 By     /S/ Philip C. Taylor
      ---------------------                   ---------------------
                                        Philip C. Taylor
                                        President and Chief Executive Officer

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

<TABLE>
<CAPTION>

SIGNATURE                                           TITLE                                        DATE
---------                                           -----                                        ----


<S>                                                 <C>                                 <C>
/S/ Philip C. Taylor                                Chairman of the Board, President,            March 26, 2002
--------------------------------------------        Secretary and Treasurer (Chief       --------------------------
Philip C. Taylor                                    Executive Officer)




/S/ W. John Driscoll                                Director                                     March 26, 2002
--------------------------------------------                                             --------------------------
W. John Driscoll



/S/ John H. Hooley                                  Director                                     March 26, 2002
--------------------------------------------                                             --------------------------
John H. Hooley



/S/ Charles J. McElroy                              Director                                     March 26, 2002
--------------------------------------------                                             --------------------------
Charles J. McElroy



/S/ William R. Sieben                               Director                                     March 26, 2002
--------------------------------------------                                             --------------------------
William R. Sieben



/S/ Michael D. Warmka
--------------------------------------------
Michael D. Warmka                                   Assistant Vice President                     March 26, 2002
                                                    and Controller (Principal            --------------------------
                                                    Accounting Officer)


</TABLE>



                                       33