<TABLE>
<CAPTION>

                                      EXHIBIT 13


(in thousands except per
share and other data)     2001      2000       1999       1998       1997      1996     1995    1994      1993      1992     1991
-----------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>         <C>      <C>         <C>         <C>      <C>      <C>      <C>      <C>       <C>       <C>
INCOME STATEMENT DATA
Revenues
  Net sales             $849,157   $993,916 $1,040,668   $880,856   $822,906 $762,396 $621,351 $510,153  $384,491 $296,849 $257,557
  Financial services
    and other income     301,799    299,429    303,615    246,923    198,797  166,345  136,741  118,083    91,750   74,330   62,392
-----------------------------------------------------------------------------------------------------------------------------------
                       1,150,956  1,293,345  1,344,283  1,127,779  1,021,703  928,741  758,092  628,236  476,241  371,179   319,949
-----------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
  Cost of sales          562,267    660,429    705,128    598,589    559,274   521,200  431,826  357,698  267,201  206,049  176,374
  SG&A                   374,628    384,067    367,430    302,598    270,996   236,188  188,835  153,698  113,695   84,785   76,420
  Financial services
    interest                 706      1,032      7,981      2,015      2,885     3,649    5,533    8,196   11,819   16,585   18,198
  Provision for credit
    losses                42,500     20,800     12,459      7,976      1,000        -        -        -        -     3,300    3,772
-----------------------------------------------------------------------------------------------------------------------------------
                         980,101  1,066,328  1,092,998    911,178    834,155   761,037  626,194  519,592  392,715  310,719  274,764
-----------------------------------------------------------------------------------------------------------------------------------
Operating income         170,855    227,017    251,285    216,601    187,548   167,704  131,898  108,644   83,526   60,460   45,185
Interest income
  (expense), net/other    (1,504)     1,608     (5,317)     5,499      5,152     4,596    3,902     (359)    (170)    (317)   (592)
-----------------------------------------------------------------------------------------------------------------------------------
Income before
  income taxes           169,351    228,625    245,968    222,100    192,700   172,300  135,800  108,285   83,356   60,143   44,593
Provision for
  income taxes           (62,700)   (84,600)   (91,000)   (84,400)   (73,200)  (65,500) (48,800) (39,000) (29,600) (20,800)(16,000)
-----------------------------------------------------------------------------------------------------------------------------------
Income before
  accounting change      106,651    144,025    154,968    137,700    119,500   106,800   87,000   69,285   53,756   39,343   28,593
Cumulative effect of
  accounting change           -          -          -          -          -         -        -     3,000       -        -        -
-----------------------------------------------------------------------------------------------------------------------------------
Net income              $106,651   $144,025   $154,968   $137,700   $119,500  $106,800  $87,000  $72,285  $53,756  $39,343  $28,593
-----------------------------------------------------------------------------------------------------------------------------------
Net income per share
  Basic                    $0.77      $1.03      $1.07      $0.93      $0.81     $0.72    $0.59    $0.51    $0.39    $0.30    $0.27
  Diluted                  $0.77      $1.03      $1.06      $0.92      $0.80     $0.72    $0.59    $0.49    $0.37    $0.29    $0.24
Average shares
  outstanding
   Basic                 137,702    139,474    145,211    148,463    148,324   148,253  147,020  141,046  136,391  130,103  106,884
   Diluted               138,340    139,815    145,931    149,504    149,346   149,183  148,285  149,875  149,106  142,100  126,216
Dividends per common
  share                    $.064      $.064      $.064      $.064      $.061     $.049    $.030       -        -        -        -
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets          $1,654,170 $1,506,378 $1,417,245 $1,457,757 $1,045,761  $886,350 $761,151 $701,148 $587,032 $554,780 $488,817
Debt obligations         141,862     99,216     96,477    247,591     22,806    30,290   48,737   70,680  137,038  192,931  227,444
Shareholders' equity  $1,147,478 $1,036,375   $947,768   $881,019   $754,526  $650,189 $544,187 $462,154 $348,630 $292,950 $200,992

KEY FINANCIAL RATIOS
As a % of revenue
  Operating income         14.8%      17.6%      18.7%      19.2%      18.4%     18.1%    17.4%    17.3%    17.5%    16.3%    14.1%
  Net income                9.2%      11.1%      11.5%      12.2%      11.7%     11.5%    11.5%    11.5%    11.3%    10.6%     8.9%
Debt as a % of
  total capital            11.0%       8.7%       9.2%      21.9%       2.9%      4.5%     8.2%    13.3%    28.2%    39.7%    53.1%

OTHER DATA
  Company-owned
    retail centers           297        318        306        273        245       216      192      165      143      127      123
  Independent retailers      634        707        671        702        663       580      421      372      371      312      330
  Manufacturing plants        20         20         19         18         17        17       16       13       13       11       10
  Communities                 81         76         75         71         67        64       55       46       33       20       12
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       12
<PAGE>

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

RESULTS  OF  OPERATIONS
     The  following  table  reflects  the  percentage  changes  in  sales by the
Company's  retail  and  community  sales  centers  and  in  wholesale  sales  to
independent  retailers.  It  also  shows  the  percentage changes in the average
number  of  Company-owned retail centers, communities and independent retailers,
the  average  sales  per  location,  and the average price per home sold in each
category.

<TABLE>
<CAPTION>
                                             Year ended June 30,
                                       2001 vs 2000      2000 vs 1999
----------------------------------------------------------------------
<S>                                    <C>            <C>
RETAIL
  Dollar sales                             -12.5%            -0.4%
  Number of retail centers                  -1.4%             7.8%
  Dollar sales per retail center           -11.2%            -7.6%
  Price of home                             -1.3%             8.2%
----------------------------------------------------------------------
WHOLESALE
  Dollar sales                             -19.9%           -16.2%
  Number of independent retailers           -2.7%             0.4%
  Dollar sales per independent retailer    -17.7%           -16.6%
  Price of home                              7.6%             2.4%
----------------------------------------------------------------------
COMMUNITIES
  Dollar sales                             -12.3%            28.4%
  Number of communities                      4.0%             3.4%
  Dollar sales per community               -15.6%            24.1%
  Price of home                             -1.5%             2.6%
----------------------------------------------------------------------
</TABLE>

FISCAL  2001  COMPARED  TO  FISCAL  2000
     Total revenues decreased 11% to $1.2 billion, as manufactured housing sales
decreased  15%  to $849 million, financial services income decreased slightly to
$228  million  and  rental  and  other  income  increased  4%  to  $74  million.
     Current  conditions  in  the  manufactured  housing  industry remain highly
competitive  at  both  the  retail  and  wholesale  levels. For fiscal 2001, the
industry was faced with manufacturing over-capacity and too many retail centers.
This  competitive  environment,  as well as an increase in industry foreclosures
and  aging  retail  inventory, has contributed to decreased industry and Company
sales,  and  significant  closings  of  retail  centers.
     Net  sales  of  the Retail group fell 13% to $586 million. This decline was
the result of an 11% decrease in homes sold, a 1% decrease in the average number
of Company-owned retail centers and a 1% decrease in the average price per home.
Multi-section  homes  accounted  for 50% of total new homes sold versus 51% last
year.
     During  the  year,  the  Company  opened seven retail centers and closed 28
under-performing  retail  centers.  The  Company  continually evaluates specific
markets  and opens, acquires or closes retail centers as conditions warrant. All
of  the  sales  centers  opened in fiscal 2001 were acquisitions. Two of the new
retail  centers  were  opened  in  the  fourth  quarter.
     Net sales of the Manufacturing group to independent retailers decreased 20%
to  $223  million,  as  the number of homes sold fell 26%. The average wholesale
price  increased  8% principally due to a shift toward multi-section homes which
accounted  for  52%  of  total  shipments  versus  49%  last  year.
     Net  sales  of  the  Communities  group decreased 12% to $39 million as 11%
fewer  homes  were  sold, and  the  average home selling price decreased 1%. The
Company  added  953  sites during the year bringing the total to 21,121 sites at
June  30,  2001.
     Within the Financial Services segment, interest and loan servicing revenues
increased  $16  million, and insurance related revenues rose $6 million.  Rental
and  other  income  increased  4%  on  an  8% rise in Communities rental income.
     The  average  outstanding  balance  of  installment  contract  and mortgage
receivables  declined  slightly to $437 million with a weighted average interest
rate  of  9.8%,  down from 11.9%. The average outstanding balance of receivables
sold  rose  12%  to  $3.7  billion, and the weighted average loan service spread
increased  to  3.4%  from  3.3%.
     Financial Services interest expense decreased $0.3 million to $0.7 million.
Debt  collateralized  by  installment  contract  receivables  dropped  32% to an
average of $7 million, and the weighted average interest rate increased to 10.6%
from  10.5%.  Loan  covenants  preclude prepaying these higher cost obligations.
     Gross  profit  margins  on  retail,  manufacturing,  and  communities sales
increased  to  33.8%  from  33.6%.
     Selling,  general  and  administrative  expenses  were  32.5%  and 29.7% of
revenues  for  the  years  ended  June  30,  2001,  and 2000, respectively. This
increase  was  primarily  due  to  a decline in overall sales volume and reduced
capacity  utilization  in  manufacturing.  Additional  costs  associated  with
portfolio  acquisitions  and  fixed  costs being spread over lower revenues were
also  a  factor.
     The  provision  for  credit  losses and contingent liabilities increased to
$42.5  million in 2001 from $20.8 million in 2000 which was primarily due to the
additional  number  of  contracts  in foreclosure as compared to the same period
last  year.  Net  credit  losses as a percentage of loans outstanding for fiscal
2001  increased to 1.8% from 1.4% while delinquency rates on all loans increased
to 2.6% on a unit basis from 2.2%. The size, character and rate of change in the
credit  loss  and contingent liability reserves are dependent upon many factors,
including,  but  not  limited  to, origination volume, portfolio performance and
market  conditions.
     The  changes  in  inventory  levels  at June 30, 2001, compared to June 30,
2000,  are  shown  as follows in  millions:

<TABLE>
<CAPTION>

                                          Increase (decrease)
<S>                                      <C>
MANUFACTURING
Raw materials                                   $ (3.5)
Finished goods                                    (1.9)

RETAIL
Inventory levels at Company-owned
  retail centers                                 (30.3)

COMMUNITIES
Inventory to stock five new Communities            0.5
Inventory levels at 76 Communities open
  at June 30, 2000                                (1.5)
--------------------------------------------------------------
                                                $(36.7)
--------------------------------------------------------------
</TABLE>

FISCAL  2000  COMPARED  TO  FISCAL  1999
     Total  revenues decreased 4% to $1.3 billion, as manufactured housing sales
decreased  4%  to  $994  million, financial services income decreased 2% to $229
million  and  rental  and  other  income  increased  1%  to  $71  million.
     Conditions  in  the manufactured housing industry are highly competitive at
both  the  retail and wholesale levels.  For fiscal 2000, the industry was faced
with  over-capacity  in manufacturing, too many retail centers, and high product
inventories.  This competitive environment, as well as rising interest rates and
general  credit  tightening,  has  contributed to decreased industry and Company
sales.

                                       13
<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

     Net  sales  of the Retail group fell slightly to $670 million. This decline
was  the result of an 8% decrease in homes sold, offset by an 8% increase in the
average number of Company-owned retail centers and an 8% increase in the average
price  per  home.  Multi-section homes accounted for 51% of total new homes sold
versus  49%  last  year.
     During  the  year,  the  Company  opened  26  retail  centers and closed 14
under-performing  retail  centers.  The  Company  continually evaluates specific
markets  and opens, acquires or closes retail centers as conditions warrant.  Of
the  26 new openings, 10 were acquired and 16 were greenfield start-ups.  Eleven
of  the  new  retail  centers  were  opened  in  the  fourth  quarter.
     Net sales of the Manufacturing group to independent retailers decreased 16%
to  $279  million,  as  the number of homes sold fell 18%. The average wholesale
price  increased  2%  principally  due  to  a  shift toward multi-section homes.
Multi-section  homes  accounted for 49% of total shipments versus 48% last year.
     Net sales of the Communities group increased 28% to $45 million as 25% more
homes  were sold while the average home selling price increased 3%.  The Company
added  460  sites  during  the  year  bringing  the  total  to  20,168  sites.
     Within the Financial Services segment, interest and loan servicing revenues
increased  $8  million,  and insurance related revenues rose $6 million.  Rental
and  other  income  increased  1%  on  a  9%  rise in Communities rental income.
     The  average  outstanding balance of receivables owned declined 27% to $440
million  with  a  weighted  average  interest  rate of 11.9%, up from 10.3%. The
average  outstanding  balance  of receivables sold rose 29% to $3.3 billion, and
the  weighted  average  loan  service spread decreased to 3.3% from 3.7%, as the
Federal  Reserve  increased  interest  rates.
     Financial  Services  interest  expense  decreased $7 million to $1 million.
Debt  collateralized  by  installment  contract  receivables  dropped  26% to an
average  of  $10  million,  and  the weighted average interest rate increased to
10.5%  from  10.4%.  Loan  covenants  preclude  prepaying  these  higher  cost
obligations.
     Gross  profit  margins  increased  to  33.6%  from 32.2%.  This increase is
attributable  to  a  higher percentage of retail sales in the total sales mix as
well  as  a  shift  in  mix  to  multi-section  units.
     Selling,  general  and  administrative  expenses  were  29.7%  and 27.3% of
revenues  for  the  years  ended  June  30,  2000,  and 1999, respectively. This
increase  as  a percentage of revenues was primarily due to a decline in overall
sales  volume,  in  addition  to growth of Company-owned sales centers without a
corresponding  increase  in  sales.  Additional set up costs associated with the
shift  in  mix  toward  multi-section units and sales of larger homes was also a
factor.
     Net  losses  as  a percentage of loans outstanding for fiscal 2000 remained
steady  at 1.4% while delinquency rates on all loans increased to 2.2% on a unit
basis  from 2.1%.  The size, character and rate of change in the credit loss and
contingent  liability  reserves  are dependent upon many factors, including, but
not limited to, origination volume, portfolio performance and market conditions.
     The  changes  in  inventory  levels  at June 30, 2000, compared to June 30,
1999,  are  shown  below  in  millions:

<TABLE>
<CAPTION>
                                               Increase
<S>                                         <C>
MANUFACTURING
Raw materials                                     $2.1
Finished goods                                     3.6

RETAIL
Inventory to stock 12 new Company-
  owned sales centers                              8.6
Inventory levels at 306 Company-owned
  sales centers open at June 30, 1999             21.0

COMMUNITIES
Inventory to stock one new community               0.3
Inventory levels at 75 communities
  open at June 30, 1999                            2.4
-----------------------------------------------------------
                                                 $38.0
-----------------------------------------------------------
</TABLE>

LIQUIDITY  AND  CAPITAL  RESOURCES
     The  Company anticipates meeting cash requirements with proceeds from asset
securitizations,  cash  provided  from  operations,  revolving  credit  lines, a
participation  facility and long-term debt.  A principal strength of the Company
is  its ability to access global capital markets; continued access to the public
and  private capital markets is critical to the Company's ability to continue to
fund  its  finance operations.  During the year ended June 30, 2001, the Company
raised  $886  million  through  asset  securitizations.
     At  June  30,  2001,  the  Company  had  debt  outstanding of $142 million.
Short-term  debt  available  consists  of $165 million committed and $71 million
uncommitted  lines  of  credit  for  working  capital  needs.  Debt  outstanding
principally  consists  of  $75  million  of  privately  issued senior notes, $46
million of short-term borrowings, $5 million of installment paper collateralized
debt  and  $16  million  of  tax-exempt  bonds.
      On  January  11,  2001,  the Company cancelled its committed one-year $300
million  commercial  paper  conduit  facility.  Subsequent to June 30, 2001, the
Company entered into a one-year committed $150 million participation facility to
be  used to facilitate the sale of manufactured housing contracts and mortgages.
     In  fiscal  2001, the Company repurchased 60,000 shares for $482,000. Under
Board  approved repurchase programs, all shares may be acquired, at management's
discretion,  over  time  on  the  open  market.  Shares repurchased are retired.
     The  Company  originated  and  acquired  approximately  $1.1  billion  of
installment  contracts  and  mortgage  loan  receivables  during  fiscal  2001.
Additional  investments  were  made  of  approximately  $14  million  to expand,
develop, or improve manufactured housing communities, $5 million for opening and
upgrading  Company-owned  retail  centers,  $4  million  for  construction  and
improvement  of manufacturing facilities, and $2 million for other fixed assets.
     In fiscal 2002, the Company expects to originate approximately $900 million
of  installment  contract  and  mortgage loan receivables.  It expects to invest
approximately  $24  million  in  acquisitions  or  construction  of manufactured
housing  communities,  up to $12 million for opening and upgrading Company-owned
retail  centers,  up  to  $6  million  for  construction  and  improvement  of
manufacturing  facilities,  and  up  to  $2  million  for  other  fixed  assets.

MARKET  RISK
      The Company is exposed to market risks related to fluctuations in interest
rates  on its installment paper contract receivables, related residual interests
and  variable  rate  debt,  which  principally  consists  of  revolving

                                       14
<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

credit  lines.  The  Company  uses interest rate swaps to minimize interest rate
risk  on  certain credit lines, effectively converting these to fixed rate debt.
Foreign  currency and commodity price risk are not considered to have a material
impact  on  the  Company.
     The  Company has variable interest rate installment contract receivables of
$14  million  at  June  30,  2001.  Holding  the  outstanding  principal  amount
constant,  each one percentage point increase in interest rates occurring on the
first  day  of  the  year would result in an increase in interest income for the
coming  year  of  approximately  $42,000,  net  of  tax.
     The  Company  has residual interests collateralized by installment contract
receivables  with  variable  interest  rate  terms.  These  installment contract
receivables  aggregate  $928  million  on June 30, 2001.  Holding the receivable
balances  constant,  each  one  percentage  point  increase  in  interest  rates
occurring  on  the first day of the year would result in a decrease in financial
services  income  for the coming year of approximately $3.7 million, net of tax.
     As  of  June  30,  2001,  the Company has outstanding debt of $142 million.
There  is  no  significant  exposure  to  changes  in  interest  rates  on  debt
obligations  as  the  majority of its long-term debt, $80 million, carries fixed
interest rates.  Remaining debt of  $62 million carries variable interest rates,
which  reprice  weekly.  Holding  the  variable  rate  debt  constant,  each one
percentage  point  increase  in interest rates occurring on the first day of the
year  would  result  in  an  increase in interest expense for the coming year of
approximately  $391,000,  net  of  tax.

EFFECTS  OF  INFLATION
     Inflation  has  had  an insignificant impact on the Company during the past
several  years.

FORWARD  LOOKING  STATEMENTS

     Certain  statements in this annual report are forward looking as defined in
the  Private Securities Litigation Reform Law.  These statements involve certain
risks  and uncertainties that may cause actual results to differ materially from
expectations  as  of the date of this report.  These risks fall generally within
three broad categories consisting of industry factors, management expertise, and
government  policy  and  economic  conditions.  Industry  factors  include  such
matters  as  potential  periodic  inventory  adjustments  by  both  captive  and
independent  retailers,  availability of wholesale and retail financing, general
or seasonal weather conditions affecting sales and revenues, catastrophic events
impacting  insurance  costs,  cost  of  labor  and/or raw materials and industry
consolidation  trends  creating  fewer,  but  stronger,  competitors  capable of
sustaining  competitive  pricing  pressures.
     Management  expertise  and  experience  affects  its  overall  ability  to
anticipate  and  meet  consumer  preferences,  maintain  successful  marketing
programs,  continue  quality manufacturing output, keep a strong cost management
oversight,  and  achieve  stable  results  from  its  securitization activities.
     Lastly,  management  has little control over government policy and economic
conditions  such  as  prevailing  interest  rates,  capital  market  liquidity,
government  monetary  policy,  stable  regulation  of  manufacturing  standards,
consumer  confidence,  favorable trade policies, and general prevailing economic
and  employment  conditions.

QUARTERLY  RESULTS  (unaudited)

<TABLE>
<CAPTION>
                                                              2001                                      2000
-------------------------------------------------------------------------------------------------------------------------------
                                              FIRST     SECOND    THIRD     FOURTH     First      Second     Third      Fourth
(in thousands except per share data)         SEPT. 30   DEC. 31   MAR. 31   JUNE 30    Sept. 30   Dec. 31    Mar. 31    June 30
-------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>       <C>      <C>      <C>          <C>       <C>       <C>        <C>
Revenues                                     $300,807  $284,853  $272,070  $293,226    $337,297  $309,159   $306,981   $339,908
Operating income                               45,408    45,468    38,620    41,359      56,277    55,551     56,725     58,464
Income before income taxes                     45,982    43,565    37,752    42,052      56,424    55,831     56,993     59,377
Net income                                     28,982    27,465    23,752    26,452      35,524    35,231     35,893     37,377
Earnings per share   - Basic                     $.21      $.20      $.17      $.19        $.25      $.25       $.26       $.27
                     - Diluted                   $.21      $.20      $.17      $.19        $.25      $.25       $.26       $.27
Price range of stock - High                    $10.00    $12.88    $14.50    $15.82      $11.88    $11.94     $10.13     $10.38
                     - Low                      $8.13     $8.75    $12.05    $11.55       $8.56     $8.50      $7.81      $7.94
Dividends per common share                      $.016     $.016     $.016     $.016       $.016     $.016      $.016      $.016
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       15
<PAGE>

REPORT  OF  INDEPENDENT  ACCOUNTANTS

     In  our  opinion,  the  accompanying  consolidated  balance  sheets and the
related  consolidated  statements of income, of shareholders' equity and of cash
flows  present  fairly,  in  all  material  respects,  the financial position of
Clayton  Homes, Inc. and Subsidiaries at June 30, 2001 and 2000, and the results
of  their  operations  and  their  cash flows for each of the three years in the
period  ended  June 30, 2001, in conformity with accounting principles generally
accepted  in  the  United States of America.  These financial statements are the
responsibility  of the Company's management; our responsibility is to express an
opinion  on  these  financial  statements based on our audits.  We conducted our
audits  of  these  statements  in  accordance  with auditing standards generally
accepted  in the United States of America which require that we plan and perform
the  audit to obtain reasonable assurance about whether the financial statements
are  free  of  material  misstatement.  An  audit  includes examining, on a test
basis,  evidence  supporting  the  amounts  and  disclosures  in  the  financial
statements,  assessing  the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.



PricewaterhouseCoopers  LLP
Knoxville,  Tennessee
August  7,  2001


CONSOLIDATED  BALANCE  SHEETS

<TABLE>
<CAPTION>

                                                                                               June 30,
(in thousands)                                                                              2001      2000
-------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>        <C>
ASSETS
    Cash and cash equivalents                                                           $  47,763   $  43,912
    Trade receivables                                                                      14,683      21,796
    Other receivables, principally installment contracts, net of  reserves for credit
      losses and unamortized discounts of $20,560 in 2001 and $4,217 in 2000              657,224     500,942
    Residual interests in installment contract and mortgage receivables                   170,122     150,329
    Inventories, net                                                                      185,695     222,431
    Securities available-for-sale                                                          30,956      47,734
    Restricted cash                                                                       111,060      96,904
    Property, plant and equipment, net                                                    309,438     305,479
    Deferred income taxes                                                                  22,710      24,284
    Other assets                                                                          104,519      92,567
-------------------------------------------------------------------------------------------------------------
Total assets                                                                           $1,654,170  $1,506,378
-------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
    Accounts payable and accrued liabilities                                           $  118,057  $  122,760
    Debt obligations                                                                      141,862      99,216
    Other liabilities                                                                     246,773     248,027
-------------------------------------------------------------------------------------------------------------
Total liabilities                                                                         506,692     470,003
-------------------------------------------------------------------------------------------------------------
Shareholders' equity
    Preferred stock, $.10 par value, authorized 1,000 shares, none issued                       -          -
    Common stock, $.10 par value, authorized 200,000 shares, issued 137,991
       at June 30, 2001, and 137,499 at June 30, 2000                                      13,799      13,750
    Additional paid-in capital                                                             43,593      39,500
    Retained earnings                                                                   1,081,137     983,806
    Accumulated other comprehensive income (loss)                                           8,949        (681)
-------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                              1,147,478   1,036,375
-------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                             $1,654,170  $1,506,378
-------------------------------------------------------------------------------------------------------------
</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

Clayton  Homes,  Inc.  and  Subsidiaries

                                       16
<PAGE>

CONSOLIDATED  STATEMENTS  OF  INCOME

<TABLE>
<CAPTION>
                                                             Year ended June 30,
(in thousands except per share data)              2001               2000           1999
---------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>            <C>
Revenues
    Net sales                                 $  849,157         $  993,916      $1,040,668
    Financial services                           227,916            228,642         233,848
    Rental and other income                       73,883             70,787          69,767
---------------------------------------------------------------------------------------------
                                               1,150,956          1,293,345       1,344,283
---------------------------------------------------------------------------------------------
Costs and expenses
    Cost of sales                                562,267            660,429         705,128
    Selling, general and administrative          374,628            384,067         367,430
    Financial services interest                      706              1,032           7,981
    Provision for credit losses                   42,500             20,800          12,459
---------------------------------------------------------------------------------------------
                                                 980,101          1,066,328       1,092,998
---------------------------------------------------------------------------------------------
Operating income                                 170,855            227,017         251,285
    Interest expense                              (5,561)            (5,749)        (11,995)
    Interest revenue/other                         4,057              7,357           6,678
---------------------------------------------------------------------------------------------
Income before income taxes                       169,351            228,625         245,968
Provision for income taxes                       (62,700)           (84,600)        (91,000)
---------------------------------------------------------------------------------------------
Net income                                    $  106,651         $  144,025      $  154,968
---------------------------------------------------------------------------------------------
Net income per common share
    Basic                                          $0.77              $1.03           $1.07
    Diluted                                        $0.77              $1.03           $1.06
Average shares outstanding
    Basic                                        137,702            139,474         145,211
    Diluted                                      138,340            139,815         145,931
---------------------------------------------------------------------------------------------
</TABLE>

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY

<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                         Total                 Additional                  Other
                                                     Shareholders'   Common     Paid-in    Retained    Comprehensive
(in thousands except share data)                        Equity        Stock     Capital    Earnings    Income (Loss)
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>        <C>        <C>         <C>
Balance at June 30, 1998                               $  881,019    $14,852    $162,413    $703,754        $     -
Net  income                                               154,968          -           -     154,968              -
  Other comprehensive income, net of tax
    Unrealized loss on securities available- for-sale        (821)         -           -           -           (821)
                                                          --------
       Comprehensive income                               154,147
  Purchase of 6,465,000 shares of common stock            (81,394)      (647)    (80,747)          -              -
  Dividends declared ($.064 per common share)              (9,606)         -           -      (9,606)             -
  Issuances related to stock incentive,
    employee benefit plans and other                        3,602         32       3,570           -              -
---------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999                                  947,768     14,237      85,236     849,116           (821)
Net  income                                               144,025          -           -     144,025              -
  Other comprehensive income, net of tax
    Unrealized loss on securities available-
      for-sale during the year                               (627)         -           -           -           (627)
    Realized  loss on securities available-
      for-sale included in net income                         767          -           -           -            767
                                                          --------
      Comprehensive income                                144,165
  Purchase of 5,382,000 shares of common stock            (49,776)      (538)    (49,238)          -              -
  Dividends declared ($.064 per common share)              (9,335)         -           -      (9,335)             -
  Issuances related to stock incentive,
    employee benefit plans and other                        3,553         51       3,502           -              -
---------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000                                1,036,375     13,750      39,500     983,806           (681)
NET  INCOME                                               106,651          -           -     106,651              -
  OTHER COMPREHENSIVE INCOME, NET OF TAX
    UNREALIZED GAIN ON RESIDUAL INTERESTS                   7,591          -           -           -          7,591
    UNREALIZED GAIN ON SECURITIES AVAILABLE-
      FOR-SALE DURING THE YEAR                              1,732          -           -           -          1,732
    REALIZED  LOSS ON SECURITIES AVAILABLE-
      FOR-SALE INCLUDED IN NET INCOME                         307          -           -           -            307
                                                          --------
      COMPREHENSIVE INCOME                                116,281
  PURCHASE OF 60,000 SHARES OF COMMON STOCK                  (482)        (6)       (476)          -              -
  DIVIDENDS DECLARED ($.064 PER COMMON SHARE)              (9,320)         -           -      (9,320)             -
  ISSUANCES RELATED TO STOCK INCENTIVE,
    EMPLOYEE BENEFIT PLANS AND OTHER                        4,624         55       4,569           -              -
---------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2001                               $1,147,478    $13,799     $43,593  $1,081,137         $8,949
---------------------------------------------------------------------------------------------------------------------
</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

Clayton  Homes,  Inc.  and  Subsidiaries

                                       17
<PAGE>

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

<TABLE>
<CAPTION>

                                                                                     Year ended June 30,
(in thousands)                                                               2001              2000         1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                    <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                $106,651      $144,025         $154,968
  Adjustments to reconcile net income to net cash provided
    by operating activities
    Depreciation and amortization                                           20,600        20,422           17,795
    Amortization of residual interests, net of gain on sale                 14,205         3,256          (15,089)
    Provision for credit losses                                             42,500        20,800           12,459
    Realized loss on securities available-for-sale                             488         1,218                -
    Deferred income taxes                                                   (4,082)       (3,861)          (8,267)
    Decrease (increase) in other receivables, net                            1,200         5,720          (93,014)
    Decrease (increase) in inventories                                      36,736       (37,987)         (17,331)
    Increase (decrease) in accounts payable, accrued
      liabilities, and other                                               (55,766)      (60,184)          14,631
--------------------------------------------------------------------------------------------------------------------
  Cash provided by operations                                              162,532        93,409           66,152
    Origination of installment contract receivables                       (815,546)     (983,090)      (1,085,484)
    Proceeds from sales of originated installment contract receivables     660,802       886,040        1,030,442
    Principal collected on originated installment contract receivables      40,686        48,040           80,610
--------------------------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                                 48,474        44,399           91,720

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of installment contract receivables                         (321,711)     (206,154)        (253,625)
  Proceeds from sales of acquired installment contract receivables         225,654       229,412          389,866
  Principal collected on acquired installment contract receivables          23,154        19,836           73,200
  Proceeds from sales of securities available-for-sale                      29,527        37,733               -
  Acquisition of property, plant and equipment                             (24,559)      (34,398)         (47,749)
  Decrease (increase) in restricted cash                                   (14,156)        3,223          (13,951)
--------------------------------------------------------------------------------------------------------------------
  Net cash provided by (used in) investing activities                      (82,091)       49,652          147,741

CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends                                                                 (9,320)       (9,335)          (9,606)
  Net borrowings (repayment) on credit facilities                           45,800            -          (227,873)
  Proceeds from (repayment of) long-term debt                               (3,154)        2,739           76,759
  Issuance of stock for incentive plans and other                            4,624         3,553            3,602
  Repurchase of common stock                                                  (482)      (49,776)         (81,394)
--------------------------------------------------------------------------------------------------------------------
  Net cash provided by (used in) financing activities                       37,468       (52,819)        (238,512)
--------------------------------------------------------------------------------------------------------------------
  Net increase in cash and cash equivalents                                  3,851        41,232              949
  Cash and cash equivalents at beginning of year                            43,912         2,680            1,731
--------------------------------------------------------------------------------------------------------------------
  Cash and cash equivalents at end of year                                 $47,763       $43,912           $2,680
--------------------------------------------------------------------------------------------------------------------
Supplemental disclosures for cash flow information
  Cash paid during the year for
    Interest                                                                $6,267        $6,781          $19,976
    Income taxes                                                           $76,723       $97,903          $95,931
--------------------------------------------------------------------------------------------------------------------
</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

Clayton  Homes,  Inc.  and  Subsidiaries

                                       18
<PAGE>

               NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
Consolidated  Financial  Statements
     The  consolidated  financial  statements  include  the  accounts of Clayton
Homes,  Inc.  (CMH) and its wholly- and majority-owned subsidiaries. CMH and its
subsidiaries are collectively referred to herein as the Company.  The Company is
a  vertically-integrated  manufactured  housing  company  headquartered  near
Knoxville,  Tennessee.  Employing approximately 6,500 people and operating in 33
states,  the  Company builds, sells, finances and insures manufactured homes, as
well  as  owns  and  operates  residential  manufactured  housing  communities.
Significant  intercompany  accounts and transactions have been eliminated in the
financial  statements.  See  Note  11,  Business  Segment  Information.

Income  Recognition
     Sales  to  independent retailers of homes produced by CMH are recognized as
revenue  upon  shipment.  Retail  sales  are  recognized  when:  cash payment is
received, or in the case of credit sales, which represent the majority of retail
sales,  when  a  down  payment  is  received  and  the home buyer enters into an
installment sales contract; construction of the home is complete; the home buyer
has  inspected  and  accepted  the home; and title has passed to the retail home
buyer.  Most  of  these  installment sales contracts, which are normally payable
over  84  to  360  months, are financed by Vanderbilt Mortgage and Finance, Inc.
(VMF),  the  Company's  financing  subsidiary.
     The  Company  acts  as agent on physical damage, family protection and home
buyer  protection  plan  insurance  policies  written  by unaffiliated insurance
companies  (ceding  companies)  for  the  purchasers of manufactured homes.  The
insurance policies are in turn reinsured by certain subsidiaries of the Company.
Premiums  from  policies represent short-duration contracts with terms of one to
10  years  and  are  deferred  and  recognized  as revenue over the terms of the
policies.  Claims  expenses  are recorded as insured events occur.  Expenses are
matched  to  revenue  over  the  terms  of the policies by means of deferral and
amortization  of  policy  acquisition  costs;  such  costs  include commissions,
premium  taxes  and ceding fees, which vary with and are directly related to the
production  of  insurance  policies.
     During  the  fourth  quarter  of 2001, the Company adopted Staff Accounting
Bulletin  (SAB)  No.  101,  Revenue  Recognition  in  Financial  Statements, and
determined  that  its  practices  already  comply  with  the revenue recognition
policy.  Thus,  such  adoption  did  not have a material impact on the Company's
reported  results  of  operations,  financial  position  or  cash  flows.

Installment  Contract  and  Mortgage  Receivables
     Installment  contract  receivables and mortgage loan receivables originated
or  purchased  by  VMF  are  generally sold to investors through an asset-backed
securities  vehicle,  with VMF retaining residual interests and servicing on the
contracts.
     Installment  contract  receivables  held  for  sale  are  included in other
receivables and are carried at the lower of aggregate cost or market. Certain of
the  installment  contract  receivables are purchased in bulk at a discount. The
purchase discounts are allocated between discount and reserves for credit losses
and contingent liabilities based on management's assessment of risks existing in
the  portfolio.  Discount  is  accreted  over  the life of the related portfolio
after  giving  consideration to anticipated prepayments. Adjustments between the
reserves  for  credit  losses  and  contingent  liabilities  and  discount  are
periodically  made  to  reflect  changes in the estimated collectibility of each
portfolio  purchased.
     VMF  provides  servicing for investors in installment contract receivables.
Total  contracts  serviced  at June 30, 2001, and 2000, including contracts held
for  investment, were approximately $4.3 billion and $3.9 billion, respectively.
Most  of  the  installment  contract receivables are with borrowers in the east,
south  and  southwest  portions  of  the United States and are collateralized by
manufactured  homes.  Interest  income  on  installment  contract receivables is
recognized  by  a method which approximates the simple interest method.  Service
fee  income  is recognized as the service is performed.  The Company accrues for
obligations  related  to  cash collections from sold and serviced only loans and
remits  these  collections  to investors on a monthly basis.  See Note 12, Other
Assets  and  Other  Liabilities.

Retained  Interests
     The  Company  utilizes  a  financial  components  approach to transfers and
servicing  of  financial  assets,  requiring  that  the  carrying  amount of the
receivables  sold  be  allocated  between  the  assets  sold  and  the  assets
(liabilities) created, if any, based upon their estimated fair value at the date
of  sale.  The  assets  (liabilities)  created  are:  1)  an interest-only strip
valued  as  the discounted present value of the excess (deficiency) interest due
the  residual  interest  owner  (VMF)  during the expected life of the contracts
over:  i) the stated investor yield; ii) the contractual servicing fee; and iii)
estimated  credit  losses;  and 2) servicing asset (liability), representing the
discounted  present  value  of  the  contractual  servicing fee over the cost of
servicing  the  contracts.  Profit  (loss)  recorded  at the time of the sale is
computed  as  the  difference  between  the  allocated  carrying  amount  of the
receivables  sold  and  the  proceeds  realized  from  the  sale.
     The  servicing  asset  at  June  30,  2001,  and  2000,  is  as  follows:

<TABLE>
<CAPTION>

(in thousands)                            2001         2000
-------------------------------------------------------------
<S>                                 <C>        <C>
Servicing asset beginning balance      $ 40,704     $ 27,024
Servicing asset recognized               15,994       23,781
Amortization                            (11,570)     (10,101)
-------------------------------------------------------------
Servicing asset ending balance         $ 45,128     $ 40,704
-------------------------------------------------------------
</TABLE>

     The  balance represents the estimated fair value of the aggregate servicing
assets  at June 30, 2001.  The estimate of fair value assumes: 1) discount rates
which,  at the time the asset was created, approximate current market rates; and
2)  expected  prepayment  rates  based on loan prepayment experience for similar
transactions.  Servicing  assets  are  periodically  evaluated in a deal by deal
basis  for  impairment based on the fair value of those assets.  The Company has
not experienced any impairment losses.  The servicing assets are amortized using
the  effective  interest  method over the estimated weighted average life of the
underlying  securities.
     Interest-only  securities  represent the right to receive future cash flows
from  securitization  transactions.  Such  cash flows generally are equal to the
value  of the principal and interest to be collected on the underlying financial
contracts  of  each  securitization  in  excess  of the sum of the principal and
interest  to  be paid on the securities sold and contractual servicing fee, less
estimated  credit  losses.  The  Company  carries  interest-only  securities  at
estimated  fair value.  As market quotes are generally not available, fair value
is  determined by discounting the projected cash flows over the expected life of
the  receivables  sold using current prepayment, default, loss and interest rate
assumptions.  Estimates  for  prepayments,  defaults,  and losses are determined
based  on  a  model  developed  by  the  Company

Clayton  Homes,  Inc.  and  Subsidiaries

                                       19
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

and  refined  to  reflect  Company-specific  experience and trends.  See Note 2,
Securitizations.
     The  residual  interests in the installment receivables sold are classified
as  available-for-sale  securities  (as  defined  by  Statement  of  Financial
Accounting  Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and  Equity  Securities).  On  April  1, 2001, the Company adopted the consensus
under Emerging Issues Task Force Issue No. 99-20, Recognition of Interest Income
and  Impairment  on  Purchased  and Retained Beneficial Interests in Securitized
Assets.  Under  previously  existing  accounting  requirements, declines in fair
value  of  such  beneficial  interests  were  recognized as other than temporary
impairment  when  the present value of the underlying cash flows discounted at a
risk-free  rate  using  current assumptions were less than the carrying value of
such  assets. Pursuant to EITF Issue No. 99-20, declines in fair value are to be
considered  other  than temporary when: (i) the carrying value of the beneficial
interests  exceeds  the  fair  value  of such beneficial interests using current
assumptions,  and  (ii)  the  timing  and/or extent of cash flows expected to be
received  on  the beneficial interests has adversely changed - as defined - from
the  previous  valuation date.   Under the new guidelines, the Company evaluated
the  expected future cash flows from its interest-only securities and determined
that  there  was a favorable difference in estimated cash flows of $12.0 million
($7.6  million  after  tax)  for  the  year ended June 30, 2001.  This favorable
adjustment  has  been  recorded as an element of accumulated other comprehensive
income.
     The Company follows SFAS No. 134, Accounting for Mortgage-Backed Securities
Retained  after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking  Enterprise,  which  requires  that the Company classify mortgage-backed
securities  retained  after  a  securitization  in accordance with SFAS No. 115.
Accordingly,  these  securities,  valued  at  $25.2  million,  are classified as
available-for-sale,  are stated at fair value, and can be reasonably expected to
mature  in  3-10 years.  The Company also has certain other investments that had
been  designated  as available-for-sale and accordingly have been stated at fair
value.  The  fair  value of these securities is estimated based on quoted market
prices,  when available.  If not available, fair value is estimated using quoted
market  prices  for similar financial instruments.  Net unrealized holding gains
and  losses  are  reported  as  a  separate  component  of  accumulated  other
comprehensive  income,  net  of  tax,  until  realized.

Cash  Equivalents
     For  purposes  of  the  statements  of  cash flows, all unrestricted highly
liquid  debt  instruments purchased with an original maturity of three months or
less  are  considered  to  be  cash  equivalents.

Inventories
     New  homes  and  raw  materials are carried at the lower of cost or market,
using  the  last-in,  first-out  (LIFO)  method  of  inventory  valuation.
Previously-owned  manufactured  homes  are recorded at estimated wholesale value
(cost)  but  not  in  excess  of  net  realizable  value.

Property,  Plant  and  Equipment
     Land  and improvements, buildings, and furniture and equipment are recorded
at  cost.  Major  renewals  and improvements are capitalized while replacements,
maintenance  and  repairs  which  do  not  improve  or  extend  the  life of the
respective  assets,  are expensed currently. When depreciable assets are sold or
retired,  the  cost  and  related  accumulated depreciation are removed from the
accounts,  and  any  gain  or  loss  is  included  in  earnings  for the period.
Depreciation  is  computed  primarily  by  the  straight-line  method  over  the
estimated  useful lives of the respective assets ranging from three to 40 years.
     The  Company  follows  SFAS  No.  121,  Accounting  for  the  Impairment of
Long-Lived  Assets  and  for Long-Lived Assets to Be Disposed Of, which requires
recognition  of  impairment  losses  for  long-lived  assets  whenever events or
changes  in  circumstances result in the carrying amount of the assets exceeding
the  sum  of  the  expected  future undiscounted cash flows associated with such
assets.  The  measurement  of  the  impairment losses recognized is based on the
difference between the fair values and the carrying amounts of the assets.  SFAS
121  also requires that long-lived assets held for sale be reported at the lower
of  carrying  amount  or  fair  value  less  cost  to sell.  The Company has not
experienced  any  impairment  losses.

Reserves  for  Credit  Losses  and  Contingent  Liabilities
     Reserves  for  credit  losses  and  contingent  liabilities are established
related to installment contract receivables and contracts in foreclosure. Actual
credit  losses  are  charged  to  the  reserves  when  incurred.  The  reserves
established  for  such  losses  are determined based on the Company's historical
loss  experience after adjusting for current economic conditions. Management, in
assessing  the loss experience and economic conditions, adjusts reserves through
periodic  provisions.  The  Company  also  maintains  a  reserve  for contingent
liabilities  related to guarantees of installment contract receivables sold with
recourse.

Interest  Rate  Swaps
     The  Company  uses  interest  rate  swaps  to assist in minimizing interest
incurred  on  its short-term variable rate debt.  The difference between amounts
received  and  amounts paid under such agreements is recorded as a reduction of,
or  addition  to,  interest  expense  as  incurred  over  the  life of the swap.
     In  2001,  the  Company  adopted  SFAS  No.  133, Accounting for Derivative
Instruments  and  Hedging Activities, which was subsequently amended by SFAS No.
138,  Accounting  for  Certain  Derivative  Instruments  and  Certain  Hedging
Activities.  SFAS  No.  133  establishes  accounting and reporting standards for
derivative  instruments  embedded in other contracts and for hedging activities.
See  Note  5,  Debt  Obligations.

Restricted  Cash
     Restricted  cash  primarily  represents:  1)  trust  account  cash balances
required by certain VMF servicing agreements, and 2) insurance reserves required
by  custodial  or  trust  agreements.

Income  Taxes
     Deferred  income  taxes  are  recorded  to  reflect  the  net tax effect of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting  purposes  and  the  amounts  used for income tax purposes.

Accumulated  Other  Comprehensive  Income
     Accumulated other comprehensive income is presented net of income taxes and
is  comprised  of  unrealized  gains  and  temporary  losses  on  securities
available-for-sale,  as  described  under  Retained  Interests.

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

                                       20
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

Other
     Per  share  and  share  data  have been retroactively adjusted to reflect a
5-for-4  stock  split paid in December 1998. Certain reclassifications have been
made  to  the  1999  and  the  2000  financial statements to conform to the 2001
presentation.

New  Accounting  Pronouncements
     In  June  2001,  the  FASB  issued  Statement  No.  141 (FAS 141), Business
Combinations,  and  Statement  No.  142 (FAS 142), Goodwill and Other Intangible
Assets.  FAS  141  supercedes  APB  16,  Business  Combinations,  and  primarily
addresses  the  accounting  for  the  cost  of  an  acquired business (i.e., the
purchase  price  allocation),  including any subsequent adjustments to its cost.
FAS  142  primarily  addresses the accounting for goodwill and intangible assets
subsequent  to  their  acquisition  (i.e.,  the post-acquisition accounting) and
supercedes  APB  17,  Intangible  Assets.
     The most significant changes made by FAS 141 involve the requirement to use
the  purchase  method  of  accounting  for  all  business  combinations, thereby
eliminating  use of the pooling-of-interests method along with the establishment
of new criteria for determining whether intangible assets acquired in a business
combination  should be recognized separately from goodwill. FAS 141 is effective
for all business combinations (as defined in the Statement) initiated after June
30, 2001, and for all business combinations accounted for by the purchase method
that are completed after June 30, 2001 (that is, the date of acquisition is July
1,  2001,  or  later).
       Under  FAS  142,  goodwill and indefinite lived intangible assets will no
longer  be  amortized  and  will be tested for impairment at least annually at a
reporting unit level. Additionally, the amortization period of intangible assets
with  finite lives is no longer limited to forty years. FAS 142 is effective for
fiscal  years  beginning  after  December  15,  2001, to  all goodwill and other
intangible  assets  recognized in an entity's statement of financial position at
that  date,  regardless  of  when  those assets were initially recognized. Early
application  is  permitted  for entities with fiscal years beginning after March
15,  2001, provided  that the first interim period financial statements have not
been  issued  previously.
     The Company does not expect adoption of either FAS 141 or FAS 142 to have a
material  impact  on  the  Company's  reported  results of operations, financial
position  or  cash  flows.

NOTE  2  -  SECURITIZATIONS
     In  September  2000, the FASB issued SFAS No. 140, Accounting for Transfers
and  Servicing  of  Financial  Assets  and  Extinguishments  of  Liabilities,  a
replacement  of  FASB Statement No. 125.  SFAS No. 140 revises the standards for
accounting  for  securitizations  and  other  transfers  of financial assets and
requires  certain  additional  disclosures.  SFAS  No. 140 was effective for all
transfers  and  servicing of financial assets and extinguishments of liabilities
occurring  after  March  31,  2001.
     The  original  key  economic  assumptions  used  in  measuring the retained
interests at the date of securitization resulting from securitizations completed
in  2001, the key economic assumptions used to measure all retained interests at
June  30,  2001, the sensitivity of the current fair value to adverse changes in
the  assumptions,  and certain cash flows received from securitization trusts in
2001  are  presented  as follows:

<TABLE>
<CAPTION>

($ in millions)
------------------------------------------------------------------
<S>                                                     <C>
ORIGINAL KEY ECONOMIC ASSUMPTIONS
Prepayment speed (% MHP Model)                                300
Weighted average life (in years)                             4.66
Expected credit losses                                      2.48%
Residual cash flow discount rate                           15.75%
------------------------------------------------------------------
CURRENT ECONOMIC ASSUMPTIONS AND SENSITIVITY ANALYSIS
Carrying value (fair value) of retained interests        $  195.3
Weighted average life (in years)                             4.49
Prepayment speed (% MHP Model)                           200-400%
  Impact of 10% adverse change                              ($8.6)
  Impact of 20% adverse change                             ($16.4)
Expected credit losses                                      1.90%
  Impact of 10% adverse change                             ($10.4)
  Impact of 20% adverse change                             ($20.9)
Residual cash flow discount rate                           15.75%
  Impact of 10% adverse change                              ($6.7)
  Impact of 20% adverse change                             ($12.8)
------------------------------------------------------------------
CASH FLOW ACTIVITY
Proceeds from new securitizations                        $  886.5
Servicing fees received                                  $   48.9
Cash flow received from retained interests               $   70.9
------------------------------------------------------------------
</TABLE>

     The  sensitivity  analysis is hypothetical and should be used with caution.
For  instance,  changes  in  fair  value  based  on  a  10  percent variation in
assumptions  generally  cannot  be  extrapolated because the relationship of the
change  in  assumption  to  the  change  in  fair  value  may not be linear.  In
addition, the effect of a variation in a particular assumption on the fair value
of  the  retained  interest is calculated without changing any other assumption,
when  in  reality,  changes  in  any one factor may result in changes in another
factor.
     Managed  receivables  at June 30, 2001, and related receivables past due 90
days  are  as  follows:

<TABLE>
<CAPTION>


                         Total Principal       90 Days or More
($ in millions)               Amount             Past Due (a)
-----------------------------------------------------------------
<S>                     <C>                   <C>
Held in portfolio             $  649                 $14.7
Securitized                    3,532                  51.2
-----------------------------------------------------------------
                              $4,181                 $65.9
-----------------------------------------------------------------
</TABLE>
(a)  Includes  bankruptcies  and  foreclosures.

     Net  credit  losses for the year ended June 30, 2001 totaled $51.1 million.
See  Note  6,  Reserves  for  Credit  Losses  and  Contingent  Liabilities.

NOTE  3  -  INVENTORIES
     Inventories  at  June  30,  2001,  and  2000,  are  as  follows:

<TABLE>
<CAPTION>

(in thousands)             2001          2000
------------------------------------------------
<S>                   <C>           <C>
Manufactured homes
   New                  $114,874      $148,658
   Previously-owned       54,171        53,593
   Raw materials          16,650        20,180
------------------------------------------------
                        $185,695      $222,431
------------------------------------------------
</TABLE>

     If  the  first-in,  first-out (FIFO) method of inventory valuation had been
used,  inventories would have been higher by $20,282,000 and $21,633,000 at June
30,  2001,  and  2000,  respectively.

                                       21
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

NOTE  4  -  PROPERTY,  PLANT  AND  EQUIPMENT
     Property,  plant  and equipment at June 30, 2001, and 2000, are as follows:

<TABLE>
<CAPTION>

(in thousands)                      2001          2000
---------------------------------------------------------
<S>                              <C>         <C>
Land and improvements            $ 215,910      $199,329
Buildings                          150,000       156,689
Furniture and equipment             50,422        45,964
---------------------------------------------------------
                                   416,332       401,982
Less: accumulated depreciation
   and amortization               (106,894)      (96,503)
---------------------------------------------------------
                                 $ 309,438      $305,479
---------------------------------------------------------
</TABLE>

NOTE  5  -  DEBT  OBLIGATIONS
     Debt  obligations  at  June  30, 2001, and 2000, are summarized as follows:

<TABLE>
<CAPTION>

(in thousands)                                               2001       2000
------------------------------------------------------------------------------
<S>                                                        <C>       <C>
Senior notes, 6.25%, due December 2003                   $ 75,000     $75,000
Debt collateralized by installment contract receivables,
  average effective rate 10.18% on June 30, 2001,
  due through 2004                                          5,229       8,373
Tax-exempt bonds, effective rate of 2.85% on
  June 30, 2001, due through 2030                          15,230      15,230
Lines of credit                                            45,800          -
Other notes payable                                           603         613
------------------------------------------------------------------------------
                                                         $141,862     $99,216
------------------------------------------------------------------------------
</TABLE>

     Annual maturities of debt as of June 30, 2001, are 2002 - $48,853,000; 2003
-  $1,977,000;  2004  -  $75,199,000;  2005  -  $0;  and  2006  -  $0.
     In  December  1998,  the  Company  issued  $75  million  of  6.25%  Senior
Subordinated  Notes due December 2003 (the "6.25% Notes"), with interest payable
each  June  and  December.  The  6.25% Notes are redeemable at the option of the
Company,  in whole, at 100% of the principal amount plus a make-whole premium at
any  time  prior  to  December  30, 2003. The 6.25% Notes are not subject to any
sinking  fund  requirements.
     On  January  11,  2001,  the  Company cancelled its committed one-year $300
million  commercial  paper  conduit  facility.  Subsequent to June 30, 2001, the
Company  entered  into  a  $150  million  participation  facility  to be used to
facilitate  the  sale  of  manufactured  housing  contracts.
     The Company has a $150 million five-year revolving credit facility with its
bank  group.  This  facility's  pricing is based on LIBOR rates; commitment fees
are  payable  quarterly  on  the  unused  portion  of  the  facility.
     The  Company's  tax-exempt manufacturing facilities' bonds carry no sinking
fund  requirements  and  bear  interest  at  weekly  adjustable  rates.
     The  preceding facilities are governed by various financial covenants which
require  maintenance  of  certain  financial ratios and are uncollateralized. In
addition, the Company has committed and uncommitted lines of credit amounting to
$86  million  with  several  banks,  interest based on LIBOR rates, of which $46
million  was  outstanding  at June 30, 2001. These lines are subject to periodic
review  by  each  bank  and  may  be  canceled  by  the  Company  at  any  time.
     Under  certain interest rate swap agreements, the Company agrees with other
parties to exchange the difference between fixed rate and variable rate interest
amounts  calculated by reference to an agreed upon notional principal amount. At
June  30,  2001,  the  Company's interest rate swap agreements have an aggregate
notional  amount  of  $100  million.  The interest rates on the notional amounts
range  from  5.42%  to  5.62%.

NOTE  6  -  RESERVES  FOR  CREDIT  LOSSES  AND  CONTINGENT  LIABILITIES
     An  analysis of the reserves for losses on installment contract receivables
and  contingent  liabilities  including  those  contracts in foreclosure for the
years  ended  June  30,  2001,  2000,  and  1999,  are  as  follows:

<TABLE>
<CAPTION>

(in thousands)                                                   2001       2000       1999
-----------------------------------------------------------------------------------------------
<S>                                                             <C>        <C>        <C>
Balance, beginning of year                                      $ 35,725   $ 44,275   $ 35,828
  Provision                                                       42,500     20,800     12,459
  Charges, net of recoveries applicable to installment
   contract receivables
     Purchased                                                   (13,105)   (12,199)   (13,384)
     Other                                                       (37,974)   (20,044)   (11,951)
  Reserves transferred  to unamortized discounts                  (1,000)    (6,000)    (1,981)
  Reserves associated with receivables purchased                   4,390      8,893     23,304
-----------------------------------------------------------------------------------------------
Balance, end of year                                            $ 30,536   $ 35,725   $ 44,275
-----------------------------------------------------------------------------------------------
</TABLE>

     The  reserves  for  credit  losses  are  netted against receivables and the
reserve  for  contingent  liabilities  is  included  in other liabilities on the
consolidated  balance sheets. The Company is contingently liable as guarantor on
installment  contract  receivables  sold  with  recourse.  At June 30, 2001, and
2000,  the  outstanding  principal  balances  of  these  receivables  totaled
approximately  $84  million  and  $117  million,  respectively.  There  were  no
receivables  sold  with  recourse  in  2001,  2000  and  1999.

NOTE  7  -  SHAREHOLDERS'  EQUITY
Stock  Option  Plan
     In  1983,  1985, 1991, and 1997, the Company established Stock Option Plans
for  a  total  of  17,021,036  shares of common stock which provide for granting
"incentive  stock  options"  or  "non-qualified  options" and stock appreciation
rights  to  officers  and  key  employees  of  the  Company.  In  addition,
non-management members of the Board of Directors have, with shareholder approval
of  prices  and provisions for exercise, been granted options to purchase shares
of  common  stock.  The option prices were established at not less than the fair
market  value as of the date of grant. Options are exercisable after one or more
years  and  expire  no later than 10 years from the date of grant.  Activity and
price  information  regarding  the  plans  are  as  follows:

<TABLE>
<CAPTION>
                                                  WEIGHTED             WEIGHTED
                                                    AVG      STOCK        AVG
                                   STOCK OPTION   EXERCISE  OPTIONS    EXERCISE
                         SHARES     PRICE RANGE    PRICE   EXERCISABLE  PRICE
------------------------------------------------------------------------------
<S>                    <C>         <C>             <C>     <C>          <C>
Balance June 30, 1998  4,303,038   $1.41 - $13.70  $ 9.32    1,187,395  $ 7.29
  Granted              1,477,846   $8.19 - $15.75  $12.73
  Exercised             (162,002)  $1.41 - $13.70  $ 5.03
  Canceled              (757,731)  $1.76 - $15.75  $11.55
------------------------------------------------------------------------------
Balance June 30, 1999  4,861,151   $1.41 - $15.75  $10.15    1,449,866  $ 8.13
  Granted                762,325   $9.38 - $11.88  $ 9.91
  Exercised             (208,725)  $1.41 - $ 8.27  $ 2.65
  Canceled              (309,295)  $3.64 - $15.75  $11.11
------------------------------------------------------------------------------
Balance June 30, 2000  5,105,456   $2.16 - $15.75  $10.36    1,655,984  $ 9.18
  GRANTED                875,825   $8.38 - $ 9.31  $ 9.10
  EXERCISED             (278,401)  $2.16 - $13.70  $ 5.88
  CANCELED              (242,418)  $7.22 - $15.75  $10.24
------------------------------------------------------------------------------
BALANCE JUNE 30, 2001  5,460,462   $3.83 - $15.75  $10.40    1,901,452  $ 9.84
------------------------------------------------------------------------------
</TABLE>

                                       22
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

     Options  available  for  future  grant  at  June  30,  2001, and 2000, were
4,299,675 and 4,939,727, respectively.  Options were held by 880 persons at June
30,  2001.
     The  following  table summarizes information about the plans' stock options
at  June 30, 2001, including weighted average remaining life (Life) and weighted
average  exercise  price  (Price):

<TABLE>
<CAPTION>
                             Options Outstanding            Options Exercisable
                       -----------------------------        -------------------
Range                  Number         Life      Price        Number       Price
-------------------------------------------------------------------------------
<S>                <C>            <C>          <C>          <C>        <C>
$ 3.83 - $ 5.05        155,857      0.6 years    $ 4.24       102,489     $ 3.83
$ 7.22 - $10.32      2,849,779      5.8 years    $ 8.72     1,051,092     $ 8.26
$11.50 - $15.75      2,454,826      6.0 years    $12.73       747,871     $12.89
</TABLE>

     The  Company  has elected to continue following Accounting Principles Board
Opinion  No.  25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations  in  accounting  for  its  stock  option  plans  rather than the
alternative  fair  value  accounting provided for under SFAS 123, Accounting for
Stock-Based  Compensation.  Under  APB  25,  because  the  exercise price of the
Company's  employee  and  director  stock options equals the market price of the
underlying  stock on the date of grant, no compensation expense is recognized in
the  accompanying  financial  statements.  Pro  forma  information regarding net
income  and  net  income  per  common share is required by SFAS 123 and has been
determined  as if the Company has accounted for its stock options under the fair
value  method  of  that  standard.  For  purposes  of pro forma disclosures, the
estimated  fair  value  of the options is amortized to expense over the options'
vesting  periods.  The  pro forma results do not purport to indicate the effects
on  reported  net income for recognizing compensation expense which are expected
to  occur  in  future years.  The Company's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                                June 30,
(in thousands except per share data)                   2001       2000      1999
----------------------------------------------------------------------------------
<S>                                                  <C>        <C>       <C>
Net income - as reported                             $ 106,651  $144,025  $154,968
Net income - pro forma                                 104,352   141,634   153,610
Net  income per diluted common share - as reported        $.77     $1.03     $1.06
Net income per diluted common share - pro forma            .75      1.01      1.05
----------------------------------------------------------------------------------
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes  option-pricing  model  with  the  following weighted average
assumptions  used  for  grants issued from 1999 to 2001; dividend yields ranging
from  0.41% to 0.76% with a weighted average yield of 0.59%; expected volatility
of  0.34%,  risk-free interest rates ranging from 4.10% to 6.54% with a weighted
average  rate of 5.65%; and expected lives ranging from 6.47 to 10.00 years with
a  weighted  average  life  of 8.75 years.  The weighted average grant date fair
value  of  options granted in fiscal years 2001, 2000 and 1999 was $4.06, $4.66,
and  $5.66  per  share,  respectively.

NOTE  8  -  INCOME  TAXES
     The components of deferred tax assets and liabilities at June 30, 2001, and
2000,  are  as  follows:

<TABLE>
<CAPTION>

(in thousands)                       2001       2000
--------------------------------------------------------
<S>                                <C>        <C>
Reserves for credit losses and
  contingencies and discounts      $  8,388   $  9,258
Insurance reserves                   10,850      9,911
Unearned premiums                     9,604      9,348
Residual interest in installment
  contract receivables               12,729     11,781
--------------------------------------------------------
    Total deferred tax assets        41,571     40,298
--------------------------------------------------------
Deferred costs                       (6,549)    (6,728)
Other comprehensive income           (5,256)         -
Other                                (7,056)    (9,286)
--------------------------------------------------------
    Total deferred tax liabilities  (18,861)   (16,014)
--------------------------------------------------------
    Net deferred tax asset         $ 22,710   $ 24,284
--------------------------------------------------------
</TABLE>

The  provision  for  income  tax  is  composed  of  the  following:

<TABLE>
<CAPTION>

(in thousands)             2001      2000      1999
------------------------------------------------------
<S>                      <C>       <C>       <C>
Current tax provisions
   Federal               $64,010   $82,654   $92,706
   State                   2,772     5,807     6,561
------------------------------------------------------
Total current             66,782    88,461    99,267
Deferred tax benefit      (4,082)   (3,861)   (8,267)
------------------------------------------------------
                         $62,700   $84,600   $91,000
------------------------------------------------------
</TABLE>

     At  June  30,  2001,  2000, and 1999, a deferred tax provision (benefit) of
$5,656,000,  $82,000,  and  ($482,000),  respectively, was allocated directly to
shareholders'  equity  for  the unrealized gain (loss) on residual interests and
securities  available-for-sale.  The  provision  for income tax reflected in the
financial  statements  differs  from  income  taxes  calculated at the statutory
federal  income  tax  rate  of  35%  in  2001,  2000  and  1999,  as  follows:

<TABLE>
<CAPTION>

(in thousands)                        2001     2000     1999
----------------------------------------------------------------
<S>                                  <C>      <C>      <C>
Income taxes at the statutory rate   $59,273  $80,019  $86,089
State income taxes, net of
  federal benefit                      1,802    3,775    4,265
Other, net                             1,625      806      646
----------------------------------------------------------------
                                     $62,700  $84,600  $91,000
----------------------------------------------------------------
</TABLE>

NOTE  9  -  EMPLOYEE  BENEFIT  PLANS
     The  Company  has a 401(k) defined contribution plan covering all employees
who meet participation requirements. The amount of the Company's contribution is
discretionary  as  determined  by  the  Board  of  Directors,  up to the maximum
deduction  allowed  for  federal  income tax purposes. Contributions accrued and
paid  were  $2,938,000,  $3,169,000, and $3,162,000 for the years ended June 30,
2001,  2000  and  1999,  respectively.

NOTE  10  -  COMMITMENTS  AND  CONTINGENCIES
     Certain  operating  properties  are  rented  under non-cancelable operating
leases  which  expire  at various dates through 2009. Total rental expense under
operating  leases  was $5,280,000 in 2001, $5,340,000 in 2000, and $5,210,000 in
1999.  Minimum  rental  commitments  under  non-cancelable  operating  leases,
primarily  for  retail  centers,  in  effect  at  June  30,  2001  were:  2002 -
$3,951,000;  2003  -  $3,217,000;  2004  - $2,391,000; 2005 - $1,531,000; 2006 -
$902,000;  and  thereafter  -  $1,279,000.

                                       23
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

     Institutions  financing  independent retailer purchases require the Company
to  execute repurchase agreements.  As a result of these agreements, the Company
is  contingently  liable for repurchasing homes in the event of a default by the
dealer  to  the  lending  institution.  These  agreements  are  customary in the
manufactured  housing  industry,  and  the Company's losses in the past have not
been  significant.  The maximum potential repurchase obligation is approximately
$74  million  at  June  30,  2001,  excluding  any  resale  value.
     At  June  30, 2001, the Company has letters of credit, primarily related to
insurance  reserves  and  performance  guarantees  related  to  asset  backed
securitizations  of  approximately  $118 million and $324 million, respectively.
The  Company  believes  a  significant  loss  from any such guarantee is remote.
Please  see  Note  6  for  discussion  of  guarantees  of  installment  contract
receivables.

NOTE  11  -  BUSINESS  SEGMENT  INFORMATION
     The  Company  has  identified  four  major  business  segments:  Retail,
Manufacturing,  Financial  Services, and Communities. The Retail group purchases
homes  from the Company's manufacturing operations and third party manufacturers
to  sell  to  retail  customers.  The  Manufacturing  group  builds  homes  for
Company-owned  and  independent  retailers.  Financial  Services provides retail
financing  of  manufactured homes, reinsures risk on family protection, physical
damage,  and  homebuyer  protection  plan insurance policies, and offers certain
specialty  finance  products. Communities owns and operates manufactured housing
communities.  Income  from  operations  consists  of total revenues less cost of
sales  and operating expenses.  Identifiable assets are used in the operation of
each  business  segment.
     Information  concerning  operations  by  business  segment  follows:

<TABLE>
<CAPTION>

(in thousands)                     2001         2000         1999
-----------------------------------------------------------------------
<S>                             <C>          <C>          <C>
Revenues
  Retail                        $  651,133   $  733,916   $  737,044
  Manufacturing                    496,154      624,586      654,471
  Financial Services               184,253      188,365      198,527
  Communities                       89,699       92,492       78,902
  Intersegment sales              (270,283)    (346,014)    (324,661)
-----------------------------------------------------------------------
                                $1,150,956   $1,293,345   $1,344,283
-----------------------------------------------------------------------
Income from operations
  Retail                        $   28,712   $   53,623   $   66,364
  Manufacturing                     36,637       62,729       72,377
  Financial Services                95,469      108,792      117,385
  Communities                       14,022       16,130       15,850
  Eliminations/other                (3,985)     (14,257)     (20,691)
-----------------------------------------------------------------------
                                   170,855      227,017      251,285
-----------------------------------------------------------------------
Interest
  Interest expense                  (5,561)      (5,749)     (11,995)
  Interest revenue/other income      4,057        7,357        6,678
-----------------------------------------------------------------------
Income before taxes             $  169,351   $  228,625   $  245,968
-----------------------------------------------------------------------

Identifiable assets
  Retail                        $  255,793   $  287,705   $  247,009
  Manufacturing                     82,616      100,112       94,773
  Financial Services             1,080,416      902,913      901,769
  Communities                      191,802      185,784      177,723
  Eliminations/other                43,543       29,864       (4,029)
-----------------------------------------------------------------------
                                $1,654,170   $1,506,378   $1,417,245
-----------------------------------------------------------------------
Depreciation and amortization
  Retail                        $    6,161   $    5,639   $    4,684
  Manufacturing                      5,767        6,516        5,478
  Financial Services                   512          472          235
  Communities                        7,030        6,724        6,412
  Eliminations/other                 1,130        1,071          986
-----------------------------------------------------------------------
                                $   20,600   $   20,422   $   17,795
-----------------------------------------------------------------------
Capital expenditures
  Retail                        $    5,211   $   11,535   $   18,152
  Manufacturing                      4,346        9,558       12,971
  Financial Services                    88          454          576
  Communities                       13,920       12,059       14,703
  Eliminations/other                   994          792        1,347
-----------------------------------------------------------------------
                                $   24,559   $   34,398   $   47,749
-----------------------------------------------------------------------
</TABLE>

NOTE  12  -  OTHER  ASSETS  AND  LIABILITIES
     At  June  30,  2001,  and  2000, other assets and liabilities consisted of:

<TABLE>
<CAPTION>

(in thousands)                             2001      2000
-------------------------------------------------------------
<S>                                  <C>       <C>
Other assets
  Interest and other receivables         $ 63,442  $ 52,605
  Deferred policy acquisition costs        19,716    19,304
  Prepaid expenses and other               21,361    20,658
-------------------------------------------------------------
                                         $104,519  $ 92,567
-------------------------------------------------------------
Other liabilities
  Investors payable                      $101,379  $ 85,161
  Reserve for contingent liabilities        9,970    32,075
  Escrow deposits                          11,494    10,603
  Unearned insurance premiums              96,555    94,669
  Other                                    27,375    25,519
-------------------------------------------------------------
                                         $246,773  $248,027
-------------------------------------------------------------
</TABLE>

NOTE  13  -  FAIR  VALUE  DISCLOSURE  OF  FINANCIAL  INSTRUMENTS
     SFAS  No.  107,  Disclosures  About  Fair  Value  of Financial Instruments,
requires  that  the  Company disclose the estimated fair values of its financial
instruments.  The  following  methodologies  and  assumptions  were  used by the
Company  to  estimate  its  fair  value  disclosures  for financial instruments.
     Fair  value  estimates  are  made  at  a  specific  point in time, based on
relevant  market  data  and  information  about  the  financial  instrument. The
estimates do not reflect any premium or discount that could result from offering
for  sale  in a single transaction the Company's entire holdings of a particular
financial  instrument.  The lack of uniform valuation methodologies introduces a
greater  degree of subjectivity to these estimated fair values. Comparability to
financial instruments between similar companies may not be reasonable because of
varying  assumptions  concerning  the  estimates  of  fair  value.

Cash  and  Cash  Equivalents
     The  carrying  values  for  cash  and  cash  equivalents,  including  those
restricted  by  agreement,  approximate  the  fair  value  of  the  assets.

Contracts  Held  For  Sale  and  as  Collateral
     Contracts  held  for  sale  are  generally recent originations or purchased
portfolios  which  will be sold with limited or no recourse during the following
year.  The  Company  does  not charge fees to originate loans, and, as such, its
contracts have origination rates in excess of rates on the securities into which
they  will be pooled. The Company estimates the fair value of the contracts held
for  sale  using  expected  future cash flows of the portfolio discounted at the
current  origination  rate.

                                       24
<PAGE>

        NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

     The carrying values of contracts pledged as collateral to long-term lenders
are  estimated  using  discounted  cash  flow  analyses and interest rates being
offered  for similar contracts. The carrying amount of contracts with a variable
rate of interest is estimated to be at fair value. The carrying value of accrued
interest  adjusted  for  credit  risk  equals  its  fair  value.

Debt  Collateralized  by  Installment  Contract  Receivables
     Debt  collateralized by installment contract receivables consists primarily
of  notes  collateralized  by  contracts  with maturities that coincide with the
underlying contract maturities. The fair value of these financial instruments is
based on the current rates offered to the Company for debt of similar maturities
using  a  discounted  cash flow calculation. Loan covenants preclude prepayment.
     The  carrying  amounts and estimated fair values of the Company's financial
assets  and  liabilities  are  as  follows:

<TABLE>
<CAPTION>
                                                   JUNE 30, 2001            June 30, 2000
                                               CARRYING   ESTIMATED      Carrying   Estimated
(in thousands)                                  AMOUNT    FAIR VALUE      Amount    Fair Value
-----------------------------------------------------------------------------------------------
<S>                                            <C>        <C>          <C>        <C>
Financial assets
  Cash and cash equivalents,
    including restricted cash                   $158,823    $158,823     $140,816     $140,816
  Contracts held for sale and as collateral,
    including accrued interest receivable        655,011     653,129      450,531      448,446
Financial liabilities
  Senior notes, 6.25%                             75,000      73,642       75,000       72,160
  Debt collateralized by installment
     contract receivables                          5,229       5,645        8,373        9,006
-----------------------------------------------------------------------------------------------
</TABLE>
Retained  interests  in  installment  contract  receivables  -  see  Note  2,
Securitizations

NOTE  14  -  EARNINGS  PER  SHARE
     The  following  reconciliation details the numerators and denominators used
to  calculate  basic  and diluted earnings per share for the respective periods:

<TABLE>
<CAPTION>

(in thousands except per share data)      2001      2000      1999
----------------------------------------------------------------------
<S>                                     <C>       <C>       <C>
Net income                              $106,651  $144,025  $154,968
Average shares outstanding
   Basic                                 137,702   139,474   145,211
   Add: common stock equivalents             638       341       720
   Diluted                               138,340   139,815   145,931
Earnings per share - Basic                 $0.77     $1.03     $1.07
                   - Diluted               $0.77     $1.03     $1.06
----------------------------------------------------------------------
</TABLE>

NOTE  15  -  RELATED  PARTY  TRANSACTIONS

     The Company maintains an agreement to purchase certain installment contract
receivables  originated  or  acquired  by a finance company in which the Company
maintains  a  50%  ownership  interest.  The  Company  acquired  approximately
$110,000,000,  $92,000,000, and $147,000,000 in installment contract receivables
and  received interest and other related fees totaling approximately $1,880,000,
$1,618,000,  and  $2,038,000  during  fiscal  2001, 2000 and 1999, respectively.

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