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

                                    FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended JUNE 30, 2001
                                                 -------------


Commission File Number: 0-18201
                       --------



                             EQUIVEST FINANCE, INC.
                             ----------------------
             (Exact name of Registrant as specified in its charter)

DELAWARE                                                           59-2346270
--------                                                           ----------
(State or other jurisdiction of         (I.R.S. Employer Identification  No.)
Incorporation or organization)

100 NORTHFIELD STREET, GREENWICH, CONNECTICUT                           06830
---------------------------------------------                           -----
(Address of principal executive offices)                            (Zip code)

Registrant's telephone number, including area code:  (203) 618-0065

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

Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act Of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _ _

As of June 30, 2001, 28,106,822 shares of common stock of Equivest Finance, Inc.
were outstanding.

Transitional Small Business Disclosure Format. Yes [ ] No [X]



<PAGE>

                     EQUIVEST FINANCE, INC. AND SUBSIDIARIES
                                    FORM 10-Q

                           QUARTER ENDED JUNE 30, 2001

                                                                           INDEX

PART I    FINANCIAL INFORMATION
------

Item 1.   Financial Statements

          Consolidated Condensed Financial Information:
               Consolidated Condensed Balance Sheets - June 30, 2001           3
                  (unaudited) and December 31, 2000
               Unaudited Consolidated Condensed Statements of Income  -        4
                  Three Months Ended June 30, 2001 and 2000
               Unaudited Consolidated Condensed Statements of Income  -        5
                  Six Months Ended June 30, 2001 and 2000
               Unaudited Consolidated Statement of Equity Accounts             6
               Unaudited Consolidated Condensed Statements of Cash Flow -      7
                  Six Months Ended June 30, 2001 and 2000
          Notes to Consolidated Condensed Financial Statements                 8

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                 16

Item 3.   Quantitative and Qualitative Disclosures About Market Risk          33


PART II   OTHER INFORMATION
-------

Item 1.   Legal Proceedings                                                   33

Item 2.   Changes in Securities and Use of Proceeds                           34

Item 3.   Defaults Upon Senior Securities                                     34

Item 4.   Submission of Matters to a Vote of Security Holders                 34

Item 5.   Other Information                                                   34

Item 6.   Exhibits and Reports on Form 8-K                                    34


SIGNATURES
----------

                                       2

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                     EQUIVEST FINANCE, INC. and SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                         June 30,             December 31,
                                                                                           2001                   2000
                                                                                   ---------------------  ---------------------
                                                                                         Unaudited

ASSETS

<S>                                                                                <C>                <C>
Cash and cash equivalents                                                          $      2,281,405   $       4,805,366
Receivables, net                                                                        244,726,859         258,950,064
Inventory                                                                                94,555,116          95,577,521
Property and equipment, net                                                              20,907,118          21,580,157
Goodwill, net                                                                            43,248,311          44,109,482
Other assets                                                                             17,637,137          11,951,491
                                                                                   -----------------  ------------------

TOTAL ASSETS                                                                       $    423,355,946   $     436,974,081
                                                                                   =================  ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Accounts payable                                                                   $      6,987,742    $      9,624,115
Accrued expenses and other liabilities                                                   25,809,247          23,194,002
Income taxes                                                                             30,923,657          29,974,986
Notes payable                                                                           267,936,562         288,374,503
                                                                                   -----------------  ------------------
TOTAL LIABILITIES                                                                       331,657,208         351,167,606

CONTINGENCIES, COMMITMENTS
  AND LIQUIDITY

STOCKHOLDERS' EQUITY
Cumulative Redeemable Preferred Stock--Series 2 Class A, $3 par value; 15,000
   shares authorized, 11,650 and 10,000 shares issued and outstanding at June
   30, 2001 and December 31, 2000, respectively; $1,000 per share
   liquidation value                                                                         34,950              30,000
Common Stock, $.01 par value; 50,000,000 shares authorized; 28,106,822 and
   28,089,722 shares issued and outstanding at June 30, 2001 and December 31,
   2000, respectively                                                                       281,068             280,897
Additional paid in capital                                                               63,933,795          62,246,553
Retained earnings                                                                        27,448,925          23,249,025
                                                                                   -----------------  ------------------
TOTAL STOCKHOLDERS' EQUITY                                                               91,698,738          85,806,475
                                                                                   -----------------  ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $    423,355,946    $    436,974,081
                                                                                   =================  ==================



                                      3

     See Accompanying Notes To Consolidated Condensed Financial Statements.



</TABLE>

<PAGE>

                     EQUIVEST FINANCE, INC. AND SUBSIDIARIES
             CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)




                                                     THREE MONTHS ENDED JUNE 30,
                                                      --------------------------
                                                      2001                 2000
                                                      ----                 ----
REVENUE

    Timeshare interval sales                       $15,791,357       $23,758,778
    Interest                                         9,307,188         9,506,252
    Resort operations                                5,086,778         5,231,587
    Other income                                       231,032           600,819
                                                   -----------       -----------

                                                    30,416,355        39,097,436
                                                   -----------       -----------

COSTS AND EXPENSES

    Interest                                         4,987,990         6,434,711
    Cost of timeshare intervals sold                 3,691,155         5,586,104
    Sales and marketing                              7,640,506        13,493,850
    Resort management                                2,951,015         3,232,977
    Depreciation and amortization                    1,158,420         1,237,834
    Provision for doubtful receivables               1,467,158         1,906,425
    Loss on sale of assets                             454,640               -0-
    General and administrative                       3,146,682         2,962,207
                                                   -----------       -----------

                                                    25,497,566        34,854,108
                                                   -----------       -----------

INCOME BEFORE PROVISION FOR INCOME TAXES             4,918,789         4,243,328

PROVISION FOR INCOME TAXES                           2,000,000         1,775,000
                                                   -----------       -----------

NET INCOME                                         $ 2,918,789       $ 2,468,328
                                                   ===========       ===========


Basic earnings per common share                    $      0.10       $      0.08
                                                   ===========       ===========

Diluted earnings per common share                  $      0.10       $      0.08
                                                   ===========       ===========

                                       4

     See Accompanying Notes To Consolidated Condensed Financial Statements.


<PAGE>

                     EQUIVEST FINANCE, INC. AND SUBSIDIARIES
             CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)





                                                      6 MONTHS ENDED JUNE 30,
                                                      -----------------------
                                                       2001               2000
                                                       ----               ----
REVENUE

    Timeshare interval sales                       $30,697,729       $46,314,219
    Interest                                        18,386,886        18,785,788
    Resort operations                               10,118,669        10,037,520
    Other income                                       456,314         1,166,667
                                                   -----------       -----------
                                                    59,659,598        76,304,194
                                                   -----------       -----------

COSTS AND EXPENSES

    Interest                                        10,570,311        12,594,990
    Cost of timeshare intervals sold                 6,941,190        10,953,127
    Sales and marketing                             14,687,137        25,919,869
    Resort management                                5,743,643         6,192,611
    Depreciation and amortization                    2,291,652         2,366,539
    Provision for doubtful receivables               3,256,168         3,689,182
    Loss on sale of assets                             454,640               -0-
    General and administrative                       5,639,957         5,728,274
                                                   -----------       -----------
                                                    49,584,698        67,444,592
                                                   -----------       -----------

INCOME BEFORE PROVISION FOR INCOME TAXES            10,074,900         8,859,602

PROVISION FOR INCOME TAXES                           4,225,000         3,725,000
                                                   -----------       -----------
NET INCOME                                         $ 5,849,900       $ 5,134,602
                                                   ===========       ===========

Basic earnings per common share                    $      0.20       $      0.17
                                                   ===========       ===========

Diluted earnings per common share                  $      0.20       $      0.17
                                                   ===========       ===========

                                       5

  See Accompanying Notes To Consolidated Condensed Financial Statements.


<PAGE>

                     EQUIVEST FINANCE, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENT OF EQUITY ACCOUNTS (UNAUDITED)
                         SIX MONTHS ENDED JUNE 30, 2001


<TABLE>
<CAPTION>

                                                                   Redeemable
                                                     Preferred      Common      Common
                                                   Stock-Series     Stock--     Stock--          Additional           Retained
                                    Total            2 Class A      Shares      Amount        Paid in Capital         Earnings
                                ---------------    -------------- ----------  -------------    ----------------    -----------------
<S>                              <C>              <C>            <C>         <C>              <C>                <C>
Balances at December 31, 2000     $ 85,806,475     $   30,000     28,089,722  $  280,897       $ 62,246,553       $ 23,249,025

Dividends on Series 2 Class A
Preferred Stock paid with 1,650
shares of Series 2 Class A
Preferred Stock                           --            4,950           --          --            1,645,050         (1,650,000)

Exercise of stock options               42,363           --           17,100         171             42,192               --

Net Income                           5,849,900           --             --          --                 --            5,849,900
                                  ------------     ----------     ----------  ----------       ------------       ------------

Balances at June 30, 2001         $ 91,698,738     $   34,950     28,106,822  $  281,068       $ 63,933,795       $ 27,448,925
                                  ============     ==========     ==========  ==========       ============       ============
</TABLE>


                                       6

     See Accompanying Notes To Consolidated Condensed Financial Statements.



<PAGE>

<TABLE>
<CAPTION>

                                                 EQUIVEST FINANCE, INC. AND SUBSIDIARIES
                                        CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)

                                                                                               SIX MONTHS ENDED JUNE 30,
                                                                                               ------------------------
                                                                                                2001                  2000
                                                                                           -------------         ------------

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
<S>                                                                                        <C>                  <C>
   Net Income                                                                              $   5,849,900        $   5,134,602
   Adjustments to reconcile net income to net cash used in operating activities:
      Amortization and depreciation                                                            2,291,652            2,366,539
      Provision for doubtful receivables                                                       3,256,168            3,689,182
      Changes in assets and liabilities
        Other assets                                                                          (6,393,143)         (12,276,469)
        Inventory                                                                              1,022,405              (62,864)
        Accounts payable and accrued expenses                                                     21,235            4,105,187
        Income taxes payable                                                                     948,671              425,505
                                                                                           -------------        -------------
                                           NET CASH PROVIDED BY OPERATING ACTIVITIES           6,996,888            3,381,682

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
   (Increase)/Decrease in receivables, net                                                    10,973,681          (14,801,394)
   Purchase of equipment                                                                         (56,589)                 -0-
                                                                                           -------------        -------------
                                           NET CASH PROVIDED BY INVESTING ACTIVITIES          10,917,092          (14,801,394)

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES
   Proceeds from notes payable                                                                36,552,821          132,930,034
   Payments on notes payable                                                                 (56,990,762)        (123,983,674)
                                                                                           -------------        -------------
                                  NET CASH (USED IN)PROVIDED BY FINANCING ACTIVITIES         (20,437,941)           8,946,360
                                                                                           -------------        -------------
                                                                  (DECREASE) IN CASH          (2,523,961)          (2,473,352)
                                                                                           --------------       -------------



Cash and Cash Equivalents at beginning of period                                               4,805,366            8,010,888
                                                                                           -------------        -------------
                                         CASH AND CASH EQUIVALENTS AT END OF  PERIOD       $   2,281,405        $   5,537,536
                                                                                           =============        =============

Supplemental Cash Flow Information:
      Interest paid                                                                        $  10,737,671        $  12,191,264
                                                                                           =============        =============

      Income taxes paid                                                                    $   3,461,925        $   2,531,951
                                                                                           =============        =============

      Noncash transactions
         Dividends on Series 2 Class A Preferred Stock paid with shares of
         Series 2 Class A Preferred Stock                                                  $   1,650,000        $           0
                                                                                           =============        =============

         Reclassification of investment in joint venture to inventory as a result
         of foreclosure                                                                    $           0        $   4,415,780
                                                                                           =============        =============
</TABLE>

                                       7

     See Accompanying Notes To Consolidated Condensed Financial Statements.

<PAGE>

                             EQUIVEST FINANCE, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

A. Basis of Presentation

     The accompanying consolidated condensed interim financial statements as of
June 30, 2001 and for the three-month and six-month periods ended June 30, 2001
and 2000 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, these statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal accruals) considered necessary
for fair presentation have been included. Operating results for the three-month
and six-month periods ended June 30, 2001 are not necessarily indicative of the
results expected for the year ended December 31, 2001. For further information,
please refer to the consolidated financial statements and footnotes thereto
included in Equivest Finance, Inc.'s (the "Company") Form 10-K for the year
ended December 31, 2000.

     PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and its  subsidiaries,  Equivest  Capital,  Inc.  (formerly,  Resort
Funding, Inc.) and its subsidiary,  BFICP Corporation  (collectively,  "Equivest
Capital"),  EFI Funding Company,  Inc., EFI Development Funding,  Inc., Equivest
Capital Funding, Inc. (inactive),  Resort Marketing Services,  Inc., Mirror Lake
Development, Inc., Mirror Lake Realty, Inc., Eastern Resorts Corporation and its
subsidiaries,  Eastern Resorts  Company,  LLC and Long Wharf Marina  Restaurant,
Inc.   (collectively,   "Eastern  Resorts");   Bluebeard's  Castle,   Inc.,  and
subsidiaries  thereof,  Castle  Acquisition,  Inc., Avenue Plaza LLC, Ocean City
Coconut Malorie Resort,  Inc., St. Augustine  Resort  Development  Group,  Inc.,
Equivest Washington,  Inc., Equivest St. Thomas, Inc., Equivest Maryland,  Inc.,
Equivest Florida, Inc., and Equivest Louisiana, Inc. (all of which were acquired
or created in connection  with the  acquisition  by the Company of six timeshare
vacation resorts, one resort development site, management contracts and consumer
notes  receivable from Kosmas Group  International,  Inc.  ("KGI") in March 1999
(the "Kosmas  Acquisition");  Peppertree  Resorts  Ltd.,  and its  subsidiaries,
Peppertree  Resort Villas,  Inc.,  Peppertree  Resorts  Vacation Club, Inc. (now
known as Equivest Vacation & Travel Club, Inc.),  Peppertree Vacation Club, Inc.
(now known as Equivest Club, Inc.), and Peppertree Resorts Management, Inc. (all
of which were  acquired in  connection  with the  acquisition  by the Company of
fifteen  timeshare  vacation  resorts,  management  contracts and consumer notes
receivable from Peppertree Resorts, Ltd. ("Peppertree Resorts") in November 1999
(the "Peppertree  Acquisition"));  and Equivest Texas, Inc, which was created in
connection with the acquisition by the Company of a resort  development  site on
May 3, 2000 (known as Riverside Suites). All significant  intercompany  balances
and transactions have been eliminated in consolidation.

B. Summary of Significant Accounting Policies

     USE OF ESTIMATES

     The preparation of these 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 costs and expenses during
the reporting period. Actual results could differ from the Company's estimates.

                                       8

<PAGE>

     INVENTORY AND COST OF TIMESHARE INTERVALS SOLD

     Inventory is stated at the lower of cost or market and consists of
timeshare intervals held for sale and construction in progress of new timeshare
units, including the cost of land for future timeshare units. These costs are
charged to cost of timeshare intervals sold based upon the relative sales values
of the intervals sold. Intervals reacquired are placed back into inventory at
the lower of their original historical cost basis or market value.

     PROPERTY AND EQUIPMENT

     Property and equipment (including equipment under capital lease) net of
accumulated depreciation, are stated at cost. The Company computes depreciation
using the straight-line method over the estimated useful lives of the assets,
which have been estimated as follows:

              Buildings and improvements                   5-40 years
              Furniture and equipment                      3-7 years

     EARNINGS PER SHARE

     Pursuant to SFAS 128, a reconciliation of the numerators and the
denominators of the basic and diluted per-share computation follows:

<TABLE>
<CAPTION>

                                                                       FOR THE QUARTER ENDED JUNE 30, 2001
                                                                       -----------------------------------


                                                        Income                     Shares              Per-Share
                                                       (NUMERATOR)              (DENOMINATOR)           AMOUNT
                                                        -----------              -------------         ---------
<S>                                                       <C>                       <C>                  <C>
Net Income                                              $ 2,918,789
Less: Preferred Stock dividends                            (158,250)
                                                        -----------

Basic earnings per share:
  Income available to common stockholders                 2,760,539                 28,090,849           $   0.10
                                                                                                         ========

Effect of dilutive securities:
  Warrants                                                     --                       75,165
  Stock options                                                --                      302,168
                                                         ----------               ------------

Diluted earnings per share:
  Income available to common stockholders
    plus assumed conversions                            $ 2,760,539                 28,468,182           $   0.10
                                                        ===========                ===========           ========

                                                                       FOR THE QUARTER ENDED JUNE 30, 2000
                                                                       -----------------------------------


                                                             Income                   Shares              Per-Share
                                                           (NUMERATOR)              (DENOMINATOR)           AMOUNT
                                                           -----------              -------------         ---------
     Net Income                                             $2,468,328
     Less: Preferred Stock dividends                         (150,000)
                                                          ------------

     Basic earnings per share:
       Income available to common stockholders              2,318,328                  28,089,722           $0.08
                                                                                                            =====

     Effect of dilutive securities:
       Stock options                                               ---                    256,098
                                                        --------------                -----------

     Diluted earnings per share:
       Income available to common stockholders
         plus assumed conversions                          $2,318,328                  28,345,820           $0.08
                                                           ===========                ===========           =====


                                       9

<PAGE>

                                                                    FOR THE SIX MONTHS ENDED JUNE 30, 2001
                                                                    ---------------------------------------
                                                             Income                   Shares              Per-Share
                                                           (NUMERATOR)              (DENOMINATOR)           AMOUNT
                                                           -----------              -------------         ---------

 Net Income                                                  $5,849,900
     Less: Preferred Stock dividends                          (304,125)
                                                          ------------

     Basic earnings per share:
       Income available to common stockholders               5,545,775                 28,090,289           $0.20
                                                                                                            =====

     Effect of dilutive securities:
       Warrants                                                    ---                     16,856
       Stock options                                               ---                    227,803
                                                       ---------------                -----------

     Diluted earnings per share:
       Income available to common stockholders
         plus assumed conversions                          $5,545,775                  28,334,948           $0.20
                                                           ===========                ===========           =====


                                                                 FOR THE SIX MONTHS ENDED JUNE 30, 2000
                                                                 --------------------------------------


                                                             Income                   Shares              Per-Share
                                                           (NUMERATOR)              (DENOMINATOR)           AMOUNT
                                                           -----------              -------------         ---------

     Net Income                                             $5,134,602
     Less: Preferred Stock dividends                         (300,000)
                                                          ------------

     Basic earnings per share:
       Income available to common stockholders               4,834,602                 28,089,722           $0.17
                                                                                                            =====

     Effect of dilutive securities:
       Stock options                                               ---                    269,616
                                                       ---------------                -----------

     Diluted earnings per share:
       Income available to common stockholders
         plus assumed conversions                           $4,834,602                 28,359,338           $0.17
                                                            ==========                 ==========           =====
</TABLE>

     REDEEMABLE PREFERRED STOCK

     In June 2001, the Board of Directors declared $1,650,000 in Series 2 Class
A Preferred Stock dividends. The dividends, which represented the cumulative
unpaid dividends through March 31, 2001, were paid through the issuance of 1,650
shares of Series 2 Class A Preferred Stock. At June 30, 2001, the cumulative
undeclared and unpaid dividends amount to $158,250.

     SFAS NO. 133 - ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, as amended, became
effective January 1, 2001. SFAS No. 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of the derivatives are recorded each period in current earnings or other

                                       10

<PAGE>

comprehensive income depending on whether a derivative is designated as part of
a hedge transaction, and if it is, the type of hedge transaction. The Company
currently has no derivative instruments.

     SFAS NO. 142 - GOODWILL AND OTHER INTANGIBLE ASSETS

     In June of 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). SFAS 142 is effective for the Company beginning January
2002 except for goodwill acquired after June 30, 2001, which would not be
subject to amortization.

     The statement will have a significant impact on the Company's future
reported income. Under SFAS 142, goodwill and certain other intangible assets
will no longer be amortized but shall be tested for impairment loss at least
annually. The impairment tests are to be at a reporting unit level (versus
Company wide) using the unit's fair value. Any goodwill impairment loss shall be
recorded in the income statement. Financial statements of prior periods will not
be restated; however, adjusted amounts, including per share amounts, will be
presented.

     The Company has started its study of SFAS 142; however, implementation of
the accounting change will require careful detailed analyses which has to be
determined and completed.

     RECLASSIFICATIONS

     Certain amounts for the three months and six months ended June 30, 2000
have been reclassified to be consistent with the year 2001 classifications.

C. Contingencies, Commitments and Liquidity

     CSFB CREDIT FACILITY. In November 1997, the Company entered into a credit
facility with Credit Suisse First Boston Mortgage Capital LLC ("CSFB"), which
provided up to $75.0 million to finance purchased receivables and to make
hypothecation loans, and $30.0 million to fund acquisition and development loans
(the "CSFB A&D Line"). The Company paid the CSFB consumer receivables debt in
full in February 2000. As of June 30, 2001, $11.2 million was outstanding under
the CSFB A&D Line, whose maturity has been extended until February 16, 2002 in
accordance with the terms of an agreement with CSFB (the "CSFB Extension"). The
CSFB Extension also extends until February 2002 the maturity date of certain
mortgage loans made by CSFB on the Company's properties in New Orleans,
Louisiana, St. Thomas, US Virgin Islands, and Ocean City, Maryland with an
aggregate unpaid principal amount of approximately $25.3 million. These loans
were originally made by CSFB to these companies, prior to the Kosmas
Acquisition. All of the mortgage loans to the Company and the third party
acquisition and development loans are repaid through release fee payments each
time a vacation ownership interval ("VOI") in any such property is sold.

     DG CREDIT FACILITY. In January 2000, the Company, through its subsidiary
EFI Funding Company, Inc., entered into a $150 million consumer loan credit
facility with DG Bank Deutche Genossenschaftsbank AG ("DG Bank") as Agent for
Autobahan Funding Company LLC ("DG Credit Facility"). The term of this facility
is five years, and the interest rate is based on lender's commercial paper rate
plus 1.35%. The facility currently acts as the main facility for funding all
subsidiary consumer loans and third party loans. Under the terms of the DG
Credit Facility, the Company is responsible for all loan servicing,
administration and processing. The Company in cooperation with DG Bank is
seeking to increase both the advance rate and the size of the total credit
allowable under the DG Credit Facility. There is no guarantee that the Company
will be successful in achieving these increases. If the Company does not obtain
an increase in the size of the DG Credit Facility, the Company may need to
develop alternative credit facilities with other lending institutions later in
2001. As of June 30, 2001, approximately $138.7 million was outstanding under
the DG Credit Facility, although aggregate portfolio growth after prepayments

                                       11

<PAGE>

tends to be relatively slow, particularly in the first and second quarters. The
Company believes that it has an excellent relationship with DG Bank, and that
the DG Credit Facility will be expanded to accommodate future portfolio growth.
However, there is no assurance that the current DG Credit Facility will be
expanded, or that changes will occur when needed by the Company.

     BANK OF AMERICA LOAN. In November 1999, the Company entered into a $20.7
million bridge loan with Bank of America, N.A. ("B of A Bridge Loan") in
connection with the Peppertree Acquisition. This B of A Bridge Loan had an
outstanding balance of $14.4 million as of June 30, 2001. The Company and Bank
of America have reached an agreement extending this loan for an additional two
years (the "B of A Extension Agreement"), subject to certain conditions and debt
covenants. These conditions include periodic monthly amortization payments
similar to what the Company has been paying Bank of America since August 2000,
and $3.5 million in principal pay downs ($1 million in November 2001, and $2.5
million in January 2002, out of the proceeds of sales of land and other assets
the Company plans to sell). The Company currently has contracts of sale in place
covering more than the necessary amount of principal pay downs, although there
is no assurance that such contracts will close as expected.

     1999 FINOVA LOAN AGREEMENT. The Company has $50 million in revolving credit
facilities with Finova Capital Corporation ("Finova"), comprised of a $20
million revolving facility to fund third party A&D and other loans (the "Finova
Third Party Line"), and a $30 million revolving facility to fund construction at
the Company's own resorts (the "Finova Internal Line") The outstanding balance
as of June 30, 2001, was $6.9 million on the Finova Internal Line, and $2.7
million on the Finova Third Party Line. Finova has filed for bankruptcy
protection and may not be able to fund commitments of this type. Furthermore,
any new loan commitments under these revolving lines could be subject to
approval of the U.S. Bankruptcy Court overseeing the Finova bankruptcy. The
Company believes that Finova is in default of its obligations under both
revolving facilities.

     OTHER INDEBTEDNESS. The Company has some additional facilities that were
either undertaken or assumed in conjunction with its development activities.
These facilities include some of the traditional timeshare industry lenders as
well as smaller regional or community banks. The aggregate balances of these
loans as of June 30, 2001, were approximately $31.5 million. The Company also
has approximately $8.5 million in additional debt relating to Peppertree Resort
properties. The majority of these other loans mature after the year 2001, and
are repaid out of release fees on sales of VOIs.

     Beginning in September 1996, the trustee reached settlements of the claims
of certain lenders against the Bennett Estate (as defined more fully under
"Bankruptcy of Related Entities" in the company's 10-K filed April 2, 2001)
relating to claims to certain lease collateral of the Bennett Estate. These
settlements required the settling banks to make new non-callable term loans to
Equivest Capital at concessionary interest rates of 0.5% to 4.0% (the
"Settlement Loans"). Equivest Capital is also obligated to pay the Bennett
Estate an annual arrangement fee of 3% of the unpaid principal balance of the
Settlement Loans in addition to the interest paid to the banks. The Settlement
Loans have a weighted average interest rate of 5.1% as of June 30, 2001,
including the arrangement fee. The Settlement Loans are also collateralized by
note receivables of the Company as to 100% of the face value of such notes. As
of June 30, 2001, Equivest Capital's total outstanding balance on the Settlement
Loans was approximately $16.5 million, and the weighted average remaining
maturity was 23 months. In addition to these Settlement Loans, Equivest Capital
also has an additional $8.3 million in loans from other community banks.
Beginning in 2001, the Company will begin refinancing the settlement loans.
Replacement loans may carry higher interest rates, and will most likely require
some level of additional collateralization.


                                       12

<PAGE>

     LIQUIDITY. At June 30, 2001, the Company's debt to equity ratio was 2.9:1
compared to 3.8:1 at December 31, 1999. The Company is seeking to reduce its
leverage further through a program of selected sale of land and other assets, as
well as normal debt repayment through timeshare release fees. Aggregate notes
payable decreased by $20.4 million due to net debt paydowns during the first six
months of 2001.

     The Company has high overall levels of debt, and substantially all of the
Company's assets have been pledged as collateral on its loans. The level of
indebtedness could have important consequences to investors including:

          o    Increasing  the  Company's   vulnerability   to  general  adverse
               economic or industry conditions;

          o    Limiting its ability to obtain additional financing to fund
               future lending, resort acquisition and development and general
               corporate requirements; and

          o    Requiring it to dedicate a substantial portion of its cash flow
               from operations to the payment of indebtedness, thereby reducing
               operating flexibility and opportunities for growth.

     The Company requires continuous financing to conduct its finance and resort
acquisition and development businesses. The Company needs sources of liquidity
to make new loans to consumers for the purchase of timeshare VOIs, to replace
existing facilities that are maturing, to acquire land and develop new timeshare
resorts, and to lend to third party developers. To meet its capital needs, the
Company plans to expand its equity base through retained earnings and equity
investments whenever possible; and to increase it's borrowing availability under
warehouse lines like the DG Credit Facility. In addition, the Company is
exploring the possibility of entering into additional financing transactions in
which it either sells or borrows against the collateral in its loan portfolio,
or issuing other debt securities in the capital markets as operations and market
conditions permit.

                                       13

<PAGE>

D.  Segment Information

     Financial information with respect to the financing and resort development
segments in which the Company operates follows for the periods indicated:

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------
                                                                           Resort
                                                         Financing       Development           Total
-------------------------------------------------------------------------------------------------------
Three months ended June 30, 2001:

-------------------------------------------------------------------------------------------------------
<S>                                                  <C>                 <C>              <C>
   Revenues from external customers                  $     9,452,157     $ 20,964,198     $ 30,416,355
-------------------------------------------------------------------------------------------------------
   Intersegment revenues                                   1,053,339               --        1,053,339
-------------------------------------------------------------------------------------------------------
   Segment Profit                                          3,686,712        1,882,890        5,569,602
-------------------------------------------------------------------------------------------------------
   Reconciliation of total segment profit to
   consolidated income before income
   taxes:
-------------------------------------------------------------------------------------------------------
   Total segment profit                                                                      5,569,602
-------------------------------------------------------------------------------------------------------
   Unallocated corporate expenses                                                             (650,813)
-------------------------------------------------------------------------------------------------------
   Consolidated income before provision
   for income taxes                                                                       $  4,918,789
-------------------------------------------------------------------------------------------------------
Three months ended June 30, 2000:

-------------------------------------------------------------------------------------------------------
   Revenues from external customers                     $  9,853,264     $ 29,244,172     $ 39,097,436
-------------------------------------------------------------------------------------------------------
   Intersegment revenues                                   2,565,821               --        2,565,821
-------------------------------------------------------------------------------------------------------
   Segment Profit                                          1,471,154        3,685,073        5,156,227
-------------------------------------------------------------------------------------------------------
   Reconciliation of total segment profit to
   consolidated income before income taxes:
-------------------------------------------------------------------------------------------------------
   Total segment profit                                                                      5,156,227
-------------------------------------------------------------------------------------------------------
   Unallocated corporate expenses                                                             (912,899)
-------------------------------------------------------------------------------------------------------
   Consolidated income before provision
        for income taxes                                                                  $  4,243,328
-------------------------------------------------------------------------------------------------------
</TABLE>

                                       14

<PAGE>

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
                                                                          Resort
                                                       Financing       Development    Total
----------------------------------------------------------------------------------------------------
Six months ended June 30, 2001:
----------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>             <C>
   Revenues from external customers                   $ 18,682,586     $ 40,977,012    $ 59,659,598
----------------------------------------------------------------------------------------------------
   Intersegment revenues                                 1,103,941               --       1,103,941
----------------------------------------------------------------------------------------------------
   Segment Profit                                        6,413,019        5,010,832      11,423,851
----------------------------------------------------------------------------------------------------
   Reconciliation of total segment
   profit to consolidated income
   before income taxes:
----------------------------------------------------------------------------------------------------
   Total segment profit                                                                  11,423,851
----------------------------------------------------------------------------------------------------
   Unallocated corporate expenses                                                        (1,348,951)
----------------------------------------------------------------------------------------------------
   Consolidated income before
   provision for income taxes                                                         $  10,074,900
----------------------------------------------------------------------------------------------------
Six months ended June 30, 2000:

----------------------------------------------------------------------------------------------------
   Revenues from external customers                   $ 19,391,921     $ 56,912,273    $ 76,304,194
----------------------------------------------------------------------------------------------------
   Intersegment revenues                                 5,355,367               --       5,355,367
----------------------------------------------------------------------------------------------------
   Segment Profit                                        3,709,698        6,788,809      10,498,507
----------------------------------------------------------------------------------------------------
   Reconciliation of total segment profit to
   consolidated income before
   income taxes:
----------------------------------------------------------------------------------------------------
   Total segment profit                                                                  10,498,507
----------------------------------------------------------------------------------------------------
   Unallocated corporate expenses                                                        (1,638,905)
----------------------------------------------------------------------------------------------------
   Consolidated income before
   provision for income taxes                                                          $  8,859,602
----------------------------------------------------------------------------------------------------
</TABLE>

                                       15

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

                           FORWARD-LOOKING STATEMENTS
                           --------------------------

     Certain matters discussed or incorporated herein by reference contain
forward-looking statements. These statements may be identified by the use of
words or phrases such as "believe," "expect," "anticipate," "should," "planned,"
"estimated," and "potential." Forward-looking statements are based on the
Company's current expectations. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for such forward-looking statements. In order to
comply with the terms of the safe harbor, the Company notes that a variety of
factors could cause actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. These factors include, among others, general economic and business
conditions, industry trends, changes in business strategy or development plans,
availability and quality of management, adverse weather conditions or other
natural causes affecting any of the Company's sales centers, costs of marketing
programs, including no-show rates among tour guests and price increases by third
party tour vendors, a downturn in the real estate cycle or other factors which
result in lower sales of vacation ownership interests, possible financial
difficulties of one or more of the developers with whom the Company does
business (such as the risk of carrying non-performing assets or losses if
defaulted loans prove to have insufficient collateral backing), fluctuations in
interest rates, increases in fees or interest costs associated with the
Company's indebtedness, availability of adequate liquidity, prepayments by
consumers of indebtedness, prepayments by developers, inability of developers to
honor replacement obligations for defaulted consumer notes, and competition from
organizations with greater financial resources.

                                       16

<PAGE>

                        THREE MONTHS ENDED JUNE 30, 2001
                        --------------------------------

                     JUNE 30, 2001 COMPARED TO JUNE 30, 2000



     During the second quarter of 2001, the Company's results included revenue
and expense from the Company's subsidiary in Texas, Riverside Suites, which was
acquired in May 2000. Other than the addition of the Riverside Suites project,
whose results were not material, results of the second quarter for both 2001 and
2000 include the same locations.

NET INCOME

     Income before provision for income taxes increased 16% to $4.9 million for
the three months ended June 30, 2001, as compared to $4.2 million for the same
period in 2000. Net income increased 18% to $2.9 million for the second quarter
of 2001 from $2.5 million for the same period in 2000. Diluted earnings per
share increased 25% to $0.10 for the second quarter of 2001 from $0.08 for the
same time period in 2000. The increase in net income is primarily attributable
to cost reduction measures, including the elimination of marginal sales
locations at Peppertree Resorts and unprofitable sales and marketing efforts,
improved net interest margin, as well as significant personnel cost reductions
at Peppertree Resorts and other acquired locations. These increases were
partially offset by a reduction in VOI sales and a loss on a sale of an asset.
The Company incurred a loss of $0.5 million upon the sale of a parcel of
Peppertree property that reduced notes payable by $1.0 million. Excluding the
loss on the sale of the property, income before provision for income taxes for
the second quarter of 2001 would have increased $0.5 million to $5.4 million, an
increase of 27% from $4.2 million for the comparable period.

     The Company's pretax income as a percent of revenues increased to 16.2% for
the second quarter of 2001 from 10.8% for the second quarter of 2000. During the
same period, total expenses decreased 27% from $34.9 million for the second
quarter of 2000 to $25.5 million for the same time period in 2001. The decline
in expenses is primarily due to the decrease in variable costs (cost of
timeshares sold and sales and marketing costs) associated with the reduction in
VOI sales. In addition, the restructuring at the Peppertree Resorts, the
reduction in resort management expenses and the increase in net interest margin
also contributed to the reduction in overall expenses and the increase in pretax
income. The declining interest rate environment and debt repayment positively
affected the net interest margin, which improved from 1.3% of average earning
assets for the second quarter of 2000 to 1.6% of average earning assets for the
same period in 2001.

     Total revenue decreased 22% to $30.4 million for the three months ended
June 30, 2001 as compared to $39.1 million for the same time period in 2000. The
decline in revenue is due almost entirely to reduced VOI sales revenue, which
declined $8.0 million during the second quarter of 2001 compared to the same
period in 2000. This reduction in sales revenue is primarily attributable to the
closure of five former sales centers and two telemarketing centers during 2000
at the Company's Peppertree subsidiary. The aggregate reduction in sales
revenues also reflected reduced tour volumes at non-Peppertree Resorts' sales
centers, partly the result of the Company eliminating higher cost tour sources,
and partly the result of slower overall economic activity. Of the total
reduction in VOI sales, $6.8 million was related to the former Peppertree
locations and $1.2 million was related to non-Peppertree Resorts sales
locations. Most of the decline in non-Peppertree Resorts VOI sales revenue
during the second quarter of 2001 was a result of approximately $1.1 million in
deferred sales pending the completion of new construction in Newport, a
condition that did not occur during the same period in 2000.


                                       17

<PAGE>

INTEREST INCOME

     Interest income includes interest earned from the Company's consumer
receivable portfolio and interest earned from the Company's third party loan
portfolio. Interest income decreased 2% to $9.3 million for the second quarter
of 2001 from $9.5 million for the second quarter of 2000. The slight decrease in
interest income is primarily due to lower average outstanding balances on third
party purchased receivables and acquisition and development loans. The declining
interest rate environment positively affected the net interest margin, which
improved from 1.3% of average earning assets for the second quarter of 2000 to
1.6% of average earning assets for the same period in 2001.

     Interest income related to the consumer loan portfolio increased to 96% of
total interest income for the second quarter of 2001, compared to 91% of
interest income for the same period in 2000. The increase is primarily due to
higher average outstanding balances of the owned consumer portfolio.

     Interest on A&D Loans decreased 52% to $0.4 million for the three months
ended June 30, 2001 from $0.7 million for the same period in 2000, mainly due to
lower average outstanding balances. Third party A&D Loan originations declined
41% from $2.8 million for the second quarter of 2000 to $1.6 million for the
second quarter of 2001. The decline in A&D loan originations is attributable to
the continued shift in the Company's consumer loan growth strategy from
generating receivables through new A&D lending to relying on captive
originations from the sale of VOIs in the Company's own resorts. All of the
Company's portfolio growth in the aggregate is a result of internally-generated
receivables.

VOI SALES

     VOI revenues decreased 34% to $15.8 million for the second quarter of 2001,
from $23.8 million for the same period in 2000. Vacation ownership revenue
decreased to 51.8% of total revenue for the second quarter of 2001 as compared
to 60.8% for the same period in 2000 due to the decline in VOI sales revenues.
Approximately $6.8 million of the aggregate reduction in sales revenue was
associated with the former Peppertree Resorts and $1.2 million was associated
with non-Peppertree Resorts VOI sales locations. Most of the $1.2 million
decrease in non-Peppertree Resorts VOI sales revenue was a result of
approximately $1.1 million in deferred sales pending the completion of new
construction in Newport, a condition that did not occur during the same period
in 2000. The $6.8 million reduction in sales revenue in the Company's Peppertree
subsidiary is due to the closure of five former sales centers and two
telemarketing centers during 2000. The aggregate reduction in sales revenues
also reflected reduced tour volumes at all sales centers, partly the result of
the Company eliminating higher cost tour sources, and partly the result of
slower overall economic activity.

     For the quarter ending June 30, 2001, the Company sold 879 fixed-week VOIs
and 483 points packages, at a combined average sales price of approximately
$11,807. VOI sales revenues for second quarter of 2001 reflected an 11% increase
in the average sales price of a VOI compared to the same period in 2000. The
Company now owns or manages 29 timeshare resort locations with a completed
inventory of approximately 26,400 VOIs. The Company operates twelve sales
centers, five of which sell points in the Company's "Vacation Club", as
described herein.

                                       18

<PAGE>

     The following tables sets forth the number of timeshare intervals sold and
the average sales price per timeshare interval:

                                                For the Quarter-ended

                                                  June 30,            June 30,
                                                   2001                2000
                                                ----------          -----------
Timeshare intervals and points packages sold        1,362               2,238
Average Sales Price                               $11,807             $10,615
Number of VOIs in inventory at period end          26,408              26,011

     Five of the Company's sales centers sell points in the Company's Vacation
Club rather than traditional timeshare weeks. Pricing policies for vacation
points involve a greater range of variation due to different sizes of points
packages than prices for fixed or floating week VOIs. Sales of biennial VOIs are
counted as a sale of an interval, though the customer pays a lower absolute
price for his or her alternate year usage rights. Inclusion of biennial sales
tends to lower the average sales price per interval, though the available number
of VOIs in inventory would be much greater if used as biennials rather than as
whole weeks or their equivalent in points. Based on all the foregoing factors,
the stated average sales price per timeshare interval may not reflect fully the
actual revenues received for each equivalent to a whole week of resort usage.

RESORT OPERATIONS

     Resort operations revenue decreased 3% from $5.2 million for the second
quarter of 2000 to $5.1 million for the same period in 2001. However, resort
management expenses decreased $0.3 million to $2.9 million for the second
quarter of 2001 compared with $3.2 million for the same period in 2000. Resort
management expense as a percentage of resort operation revenue declined to 58.0%
for the second quarter of 2001 as compared with 61.8% for same period in 2000.
The decline in resort management expense generally reflects cost reduction
measures.

OTHER INCOME

     Other income decreased 62% to $0.2 million for the second quarter of 2001
as compared to $0.6 million for the same period in 2000. The decrease in other
income is primarily due to a decrease in credit life proceeds and commitment fee
income.

PROVISION FOR DOUBTFUL RECEIVABLES

     The provision for doubtful receivables declined 23% from $1.9 million for
the second quarter of 2000 to $1.5 million for the same period in 2001. The
decrease in the provision for doubtful accounts reflects the 34% decline in VOI
sales. However, the Company's rate of provisioning for doubtful receivables as a
percentage of timeshare sales increased from 8.0% of VOI sales during the second
quarter of 2000 to 8.4% of VOI sales for the same period in 2001. Increases in
the rate of provisioning for doubtful receivables are driven by the Company's
Target Reserve Methodology ("TRM"), which requires additional provisions to
reflect both portfolio growth and increases in receivable aging. The increased
percentage rate of reserving for doubtful receivables was necessary to maintain
an adequate level of reserves during a time period in which sales declined by
34% during the second quarter of 2001 as compared to the second quarter in 2000.
As of June 30, 2001, the TRM analysis reflected an under reserved position of
$0.6 million. However, as of June 30, 2001 the Company's Reserve Coverage Ratio
(RCR) of total reserves and over collateralization to consumer receivables over
60 days past due was 5.7 times on the entire consumer loan portfolio, an
increase from an RCR of 4.4 times 60 day past due loans at June 30, 2000.
Similarly, the RCR on all consumer receivables over 90 days past due was 11.7
times on the entire consumer loan portfolio, an increase from a RCR of 7.4 times
at June 30, 2000.

                                       19

<PAGE>

           The Company assumes all default risk for receivables relating to
purchases of VOIs in the Company's own resorts. However, the Company has a right
to "chargeback" defaulted consumer receivables relating to consumer purchases in
third party resorts to the third party developers. Thus, as the proportion of
the Company's total consumer loan portfolio that relates to the Company's own
resorts grows, the total level of provisioning for doubtful receivables relating
to the Company's own sales becomes more significant.

           As part of its TRM, the Company has established a Minimum Target
Reserve ("MTR") for its owned consumer loans based on the principal aging of the
consumer loans. The following list sets forth the target reserve level based on
the aging of any given owned consumer note receivable:

        o       Current - 29 days past due               5%
        o       30 - 59 days past due                   10%
        o       60 - 89 days past due                   50%
        o       90+ days past due                       95%


           The targeted reserve level is based on the outstanding principal
balance of the Consumer loan less an inventory recapture amount. When the
Company believes that collectibility of a receivable is unlikely, that amount is
charged against the allowance for doubtful receivables.

           At June 30, 2001, the Company had total reserves (including over
collateralization on the Hypothecation Loans) for its loan portfolio equal to
$31.3 million or 12.3% of total loans. Included in this amount were total
reserves and over collateralization of $22.1 million on third party consumer
receivables or approximately 22.8% of the outstanding consumer receivables
portfolio attributable to third party resorts. This represented a reserve
coverage ratio of 19.6 times the $1.1 million of such receivables that were 60
or more days past due at June 30, 2001.

           At June 30, 2001 the Company also maintained an aggregate allowance
for doubtful receivables of $9.3 million, or 6.4% of the outstanding consumer
receivable portfolio from owned resorts. This represented a reserve coverage
ratio of 2.1 times the approximate $4.3 million in consumer receivables from
owned resorts that were 60 days or more past due as of that date. The $9.3
aggregate allowance for doubtful receivables represents a decrease of 14%
compared with $10.8 million allowance for doubtful receivables at June 30, 2000.

           The following table sets forth the performance of the consumer
receivable portfolio at June 30, 2001:

                       CONSUMER RECEIVABLE LOAN PORTFOLIO
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                    Current         30-59 days        60-89 days           90+ days           Total
                                                    -------         ----------        ----------           --------           -----
<S>                                               <C>                 <C>                <C>               <C>              <C>
Subsidiary Consumer Loans                         $135,720            $3,489             $2,043            $2,297           $143,549
                                                     94.6%              2.4%               1.4%              1.6%             100.0%

Third Party Loans  (1)                            $104,672            $2,148               $732              $394           $107,946
                                                     97.0%              2.0%               0.7%              0.3%             100.0%

Total                                             $240,392            $5,637             $2,775            $2,691           $251,495
                                                     95.6%              2.2%               1.1%              1.1%             100.0%
</TABLE>

(1)  Includes the consumer  receivables  that  collateralize  the  Hypothecation
     Loans.


                                       20

<PAGE>

     At June 30, 2001, 95.6% of the aggregate consumer receivable portfolio was
current, and there were 419 notes with a principal balance of $2.7 million that
were over 90 days past due. Of this amount, $2.3 million relates to the consumer
receivables in the Company's resorts. During 2001, the company wrote off 1,187
consumer notes with an outstanding principal balance of $8.2 million, leading to
a charge after inventory recovery of $5.8 million. Total reserves and
overcollateralization of approximately $31.3 million at June 30, 2001, compared
with $5.5 million in total consumer receivables that were 60 days or more past
due represented an overall reserve coverage ratio of 5.7 times the volume of 60
day past due notes.

     The following table sets forth the current and historic composition of
reserves and over collateralization, reserves as a proportion of total loans,
and the levels of past due loans and chargebacks:

<TABLE>
<CAPTION>

                                                                             LOAN RESERVES COVERAGE
                                                                             (DOLLARS IN THOUSANDS)

                                                                       AS OF DECEMBER 31,                                JUNE 30,
                                                    ------------------------------------------------------------         --------
                                                       1997              1998             1999              2000             2001
                                                       ----              ----             ----              ----             ----
<S>                                                  <C>               <C>              <C>                 <C>              <C>
A&D Loans past due                                   $9,485            $3,435           $3,821              $376             $365
Consumer Financing past due                           1,458             1,790            2,708             4,600            2,691
                                                    -------           -------          -------           -------            -----
Total past due loans                                $10,943            $5,225           $6,529            $4,976           $3,056

Total loans                                        $136,530          $160,952         $260,090           275,082          255,734

Total past due loans as % of
    Total loans                                        8.0%              3.2%             2.5%              1.8%             1.2%

General reserves                                     $2,442            $3,835          $10,073           $11,763           $9,259
Specific reserves                                    17,320            18,392           18,507            17,406           16,050
Overcollateralization                                 1,006             3,588            4,308             5,981            6,042
                                                    -------           -------          -------           -------            -----
Total reserves and
    Overcollateralization (1)                       $20,768           $25,815          $32,888           $35,150          $31,351
Total reserves and overcollateralization
    as % of total loans
                                                      15.2%             16.0%            12.6%             12.8%            12.3%

Chargebacks                                           6,376             5,875            5,542             5,796            3,738

Chargebacks as % of
    Consumer Financing (2)                             6.6%              5.5%             5.1%              5.4%             3.9%
------------------------
</TABLE>

(1)  Specific reserves and the overcollateralized contracts relate to specific
     developers, and any application of these reserves or overcollateralized
     contracts to defaulted loans would be done on a developer by developer
     basis.

(2)  Chargeback percentage is based on Consumer Financing, because only these
     loans can be charged back.

                                       21

<PAGE>

     The following two tables show current and historic levels of 90 day past
due loans and changes in the Company's allowance for doubtful accounts:

<TABLE>
<CAPTION>

                                                           90 DAY PAST DUE LOANS
                                                          (DOLLARS IN THOUSANDS)
                                                                    AS OF DECEMBER 31,
                                                   -----------------------------------------------------------        JUNE 30,
                                                     1997            1998               1999            2000            2001
                                                     ----            ----               ----            ----            ----
<S>                                                 <C>             <C>               <C>             <C>             <C>
  Total loan portfolio balance                      $136,530        $160,952          $260,090        $275,082        $255,734
  Principal amount of past due loans:
  A&D Loans                                           $9,485          $3,435            $3,821            $376            $365
  Purchased Receivables                                1,458           1,253             1,364             800             394
  Hypothecation Loans                                     --              --                --              --              --
  Consumer Loans                                          --             537             1,344           3,800           2,297
  Other Loans                                             --              --                --              --              --
                                                    ---------        --------         ---------        --------        --------
  Total principal amount of past due loans           $10,943          $5,225            $6,529          $4,976          $3,056

  Past due loans as a percentage of total
     principal amount of loans outstanding              8.0%            3.2%              2.5%            1.8%            1.2%



                                                                                CONSOLIDATED
                                                                  CHANGES IN ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                                                              (DOLLARS IN THOUSANDS)
                                                                       YEAR-ENDED DECEMBER 31,
                                                       --------------------------------------------------          JUNE 30,
                                                        1997          1998            1999           2000            2001
                                                        ----          ----            ----           ----            ----
Allowance for doubtful
  accounts, beginning of year                          $1,979        $2,442          $3,835         $10,073         $11,763

Allowance related to
  acquisitions                                             --           793           6,639             501              --

Provision for loan losses                                 925           791           2,192           9,078           3,256
Charges to allowance for
  doubtful accounts                                      (601)         (424)         (2,593)         (7,889)         (5,760)

Charges applied against
  specific developer
  holdbacks (1)                                           139           233              --              --              --
                                                      ---------     --------        -------          -------         -------
Allowance for doubtful
  accounts, end of year                                $2,442        $3,835         $10,073         $11,763          $9,259
----------------
</TABLE>

 (1) In accordance with the terms of certain agreements with developers, the
     Company charges certain bad debts directly against developer holdbacks,
     rather than against the general allowance for doubtful accounts.

                                       22

<PAGE>

INTEREST EXPENSE

     Interest expense, net of capitalized amounts, decreased 22% to $5.0 million
for the second quarter of 2001 as compared to $6.4 million for the same period
in 2000. The decrease in interest expense is a result of several loan facilities
that were repaid during the first six months of 2001, as well as significant
reduction in interest rates. The average outstanding balance decreased
approximately $20 million, while the weighted average interest rate on
outstanding debt decreased from 9.1% for the second quarter of 2000 to 6.5% for
the second quarter of 2001.

     The Company has not traditionally hedged against its interest rate risk due
to the wide spread on its receivables and the speed with which new originations
occur. However, under the DG Credit Facility, the facility requires the Company
to hedge within the facility once the interest rate spread has been reduced to
approximately 600 basis points. This is currently the largest financing facility
that the Company maintains. The significant reductions in market interest rates
experienced in late 2000 and continuing into 2001 result in lower interest costs
on virtually all the Company's debt while its interest receivable rates are
largely fixed.

COST OF TIMESHARE INTERVALS SOLD

     The cost of timeshare intervals sold for the second quarter of 2001
decreased to $3.7 million or 23.4% of VOI revenue, compared to $5.6 million for
the second quarter of 2000, or 23.5% of VOI revenue. The decline in dollar
volume is a result of the reduced volume of VOIs sold during the second quarter
of 2001 and the increase in average sales price in 2001 compared to 2000.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization decreased 6% from $1.2 million for the second
quarter of 2000 to $1.2 million for the second quarter of 2001. The slight
decrease is primarily due to $0.2 million reduction associated with debt issue.

     Goodwill amortization increased 19% to $0.4 million for the second quarter
of 2001 from $0.3 million for the same period in 2000. Goodwill associated with
the Peppertree Acquisition is approximately $18.0 million and is being amortized
over 20 years, while goodwill associated with the acquisition of Eastern Resorts
is approximately $25.7 million and is being amortized over 40 years.

     Depreciation of the properties increased 12% to $0.4 million for the second
quarter of 2001 from $0.3 million for the same period in 2000. The increase in
depreciation is a result of a larger base of depreciable assets.

SALES AND MARKETING

     Sales and marketing expense decreased 43% to $7.6 million for the second
quarter of 2001 from $13.5 million for the same period in 2000. The decrease in
total sales and marketing dollar expense is due to the decline in VOIs sold
during the quarter and to the reduction in sales commissions and marketing
expenses at Peppertree and other locations.

     Sales and marketing costs in the second quarter of 2001 decreased to 48.4%
of VOI sales revenues from 56.8% for the second quarter of 2000 and 54.7% for
the year 2000. Sales and marketing costs as a percentage of VOI sales revenue in
the former Peppertree resorts declined to 53.1% in the second quarter of 2001,
compared with 63.2% in the second quarter of 2000 and 64.0% for the full year
2000.

                                       23

<PAGE>

RESORT MANAGEMENT

     Resort management expense for the second quarter of 2001 totaled $3.0
million or 58.0% of resort operation revenue as compared $3.2 million or 61.8%
of resort operation revenue for the comparable period in 2000. The decline in
resort management expenses as a percentage of resort operation revenue is
primarily due to personnel cost reductions.

GENERAL AND ADMINISTRATIVE

     General and administrative expense increased 6% to $3.1 million for the
second quarter of 2001 from $3.0 million for the same period in 2000. General
and administrative expense as a percentage of total revenue increased to 10.3%
of total revenue for second quarter of 2001, compared with 7.6% of total revenue
for the second quarter of 2000. The following items contributed to the increase
in general and administrative expense: payroll costs, travel, outside service
costs, and servicing fees due to growth of the Company. General and
administrative costs may continue to increase in absolute dollars as the Company
invests in its management and organization infrastructure. Payroll related
expense comprises the largest segment of general and administrative expense,
representing approximately 53.4% of general and administrative expense during
the second quarter of 2001.

PROVISION FOR INCOME TAXES

     The provision for income taxes for the second quarter of 2001 increased 13%
to $2.0 million from $1.8 million for the same period in 2000. The increase is
attributable to the increase in pretax income during 2001 as compared to the
same period in 2000. The provision for income taxes represents approximately
40.7% and 41.8% of pretax income for 2001 and 2000, respectively.

LOSS ON SALE OF ASSETS

     The Company recognized a $0.5 million loss on the sale of assets during the
second quarter of 2001. The loss was incurred upon the sale of a parcel of
Peppertree property of $0.5 million. This transaction reduced notes payable by
approximately $1 million. The company is continuing its efforts to sell
additional surplus land.

INFLATION

     Inflation has not had a material impact on the Company's revenues,
operating income and net income during any of the Company's three most recent
years. However, to the extent inflationary pressures affect short-term interest
rates, a significant portion of the Company's debt service costs may be
affected, as may be the interest rates the Company charges to its customers
(both customers and developers).

                                       24

<PAGE>

                         SIX MONTHS ENDED JUNE 30, 2001
                         ------------------------------

                     JUNE 30, 2001 COMPARED TO JUNE 30, 2000

     During the first six months of 2001, the Company's results included revenue
and expense from the Company's subsidiary in Texas, Riverside Suites, which was
acquired in the second quarter of 2000. Other than the addition of the Riverside
Suites project, whose results were not material, results of the first six months
for both 2001 and 2000 include the same locations.

NET INCOME

     Income before provision for income taxes increased 14% to $10.1 million for
the six months ended June 30, 2001, as compared to $8.9 million for the same
period in 2000. Net income increased 14% to $5.8 million for the six months
ended June 30, 2001 from $5.1 million for the same period in 2000. Diluted
earnings per share increased 18% to $0.20 for the six months ended June 30, 2001
from $0.17 for same time period in 2000. The increase in net income is primarily
attributable to cost reduction measures implemented at Peppertree Resorts,
including the elimination of marginal sales locations and unprofitable sales and
marketing efforts, improved net interest margin, as well as significant
personnel cost reductions at Peppertree Resorts and other acquired locations.
These increases were partially offset by a reduction in VOI sales and a loss on
a sale of an asset. The Company incurred a loss of $0.5 million upon the sale of
a parcel of Peppertree property, which reduced notes payable by $1.0 million.
Excluding the loss on the sale of the property, income before provision for
income taxes for the first six months of 2001 would have increased $0.5 million
to $10.5 million, an increase of 19% from the comparable period income before
provision for income taxes of $8.9 million.

     The Company's pretax income as a percent of revenues increased to 16.9% for
the first six months of 2001 from 11.6% for the same period in 2000. During the
same period, total expenses decreased 26% from $67.4 million for the six months
ending 2000 to $49.6 million for the same time period in 2001. The decline in
expenses is primarily due to the decrease in variable costs (cost of timeshares
sold and sales and marketing costs) associated with the reduction in VOI sales.
In addition, the restructuring at the Peppertree Resorts, the reduction in
general and administrative overhead, the reduction in resort management expenses
and the increase in net interest margin also contributed to the reduction in
overall expenses and the increase in pretax income. The declining interest rate
environment positively affected the net interest margin, which improved from
2.5% of average earning assets for the six months ended June 30, 2000 to 3.0% of
average earning assets for the same period in 2001.

     Total revenue decreased 22% to $59.7 million for the six months ended June
30, 2001 as compared to $76.3 million for the same time period in 2000. The
decline in revenue is due almost entirely to reduced VOI sales revenue, which
fell $15.6 million during the first six months of 2001 as compared to the same
period in 2000. This reduction in sales revenue in the Company's Peppertree
subsidiary is due to the closure of five former sales centers and two
telemarketing centers during 2000. The aggregate reduction in sales revenues
also reflected reduced tour volumes at non-Peppertree Resorts' sales centers,
partly the result of the Company eliminating higher cost tour sources, and
partly the result of slower overall economic activity. Of the total reduction in
VOI sales, $12.1 million was related to former Peppertree locations and $3.5
million was related to non-Peppertree Resorts sales locations. Approximately
$1.1 million of the $3.5 million decline in non-Peppertree Resorts VOI sales
revenue during the first six months of 2001 was a result of deferred sales
pending the completion of new construction in Newport, a condition that did not
occur during the same period in 2000.

                                       25

<PAGE>

INTEREST INCOME

     Interest income includes interest earned from the Company's consumer
receivable portfolio and interest earned from the Company's third party loan
portfolio. Interest income decreased 2% to $18.4 million for the six months
ended 2001 from $18.8 million for the same period in 2000. The slight decrease
in interest income is primarily due to lower average outstanding balances on
third party purchased receivables and acquisition and development loans. The
declining interest rate environment and debt repayment positively affected the
net interest margin, which improved from 2.5% of average earning assets for the
six months ended June 30, 2000 to 3.0% of average earning assets for the same
period in 2001.

     Interest income related to the consumer loan portfolio increased to 96% of
total interest income for the six months ended June 30, 2001, compared to 91% of
interest income for the same period in 2000. The increase is primarily due to
higher average outstanding balances of the owned consumer portfolio.

     Interest on A&D Loans decreased 51% to $0.7 million for the six months
ended June 30, 2001 from $1.5 million for the same period in 2000, mainly due to
lower average outstanding balances. Third party A&D Loan originations declined
53% from $6.5 million for the first six months of 2000 to $3.1 million for the
same period in 2001. The decline in A&D loan originations is attributable to the
continued shift in the Company's consumer loan growth strategy from generating
receivables through new A&D lending to relying on captive originations from the
sale of VOIs in the Company's own resorts. All of the Company's portfolio growth
in the aggregate is a result of internally-generated receivables.

VOI SALES

     VOI revenues decreased 34% to $30.7 million for the six months ending June
30, 2001, from $46.3 million for the same period in 2000. Vacation ownership
revenue decreased to 51.4% of total revenue for the six months ended June 30,
2001 as compared to 60.7% for the same period in 2000 due to the decline in VOI
sales revenues. Approximately $12.1 million of the aggregate reduction in sales
revenue was associated with former Peppertree Resorts and $3.5 million was
associated with non-Peppertree Resorts VOI sales locations. The $12.1 million
reduction in sales revenue in the Company's Peppertree subsidiary is due to the
closure of five former sales centers and two telemarketing centers during 2000.
Approximately $1.1 million of the $3.5 million decline in non-Peppertree Resorts
VOI sales revenue during the first six months of 2001 was a result of deferred
sales pending the completion of new construction in Newport, a condition that
did not occur during the same period in 2000. The aggregate reduction in sales
revenues also reflected reduced tour volumes at all sales centers, partly the
result of the Company eliminating higher cost tour sources, and partly the
result of slower overall economic activity.

     For the six months ended June 30, 2001, the Company sold 1,701 fixed-week
VOIs and 737 points packages, at a combined average sales price of approximately
$12,354. VOI sales revenues for six months ended June 30, 2001, reflected a 40%
decrease in the number of VOIs sold, and an 8% increase in the average sales
price of a VOI compared to the same period in 2000. The Company now owns or
manages 29 timeshare resort locations with a completed inventory of
approximately 26,400 VOIs. The Company operates twelve sales centers, five of
which sell points in the Company's "Vacation Club", as described herein.

                                       26

<PAGE>

           The following tables sets forth the number of timeshare intervals
sold and the average sales price per timeshare interval:

                                                     For the Six Months
                                                    June 30,      June 30,
                                                      2001         2000
                                                   ----------  ------------
Timeshare intervals and points packages sold         2,438         4,040
Average Sales Price                                $12,354       $11,456
Number of VOIs in inventory at period end           26,408        27,236

     Five of the Company's sales centers sell points in the Company's Vacation
Club rather than traditional timeshare weeks. Pricing policies for vacation
points involve a greater range of variation due to different sizes of points
packages than prices for fixed or floating week VOIs. Sales of biennial VOIs are
counted as a sale of an interval, though the customer pays a lower absolute
price for his or her alternate year usage rights. Inclusion of biennial sales
tends to lower the average sales price per interval, though the available number
of VOIs in inventory would be much greater if used as biennials rather than as
whole weeks or their equivalent in points. Based on all the foregoing factors,
the stated average sales price per timeshare interval may not reflect fully the
actual revenues received for each equivalent to a whole week of resort usage.

RESORT OPERATIONS

     Resort operations revenue increased 1% to $10.1 million for the six months
ended June 30, 2001 from $10.0 million for the same period in 2000. However,
resort management expenses decreased $0.4 million to $5.7 million for the six
months ended June 30, 2001 compared with $6.2 million in the prior year. Resort
management expense as a percentage of resort operation revenue declined to 56.8%
for the first six months of 2001 as compared with 61.7% for same period in 2000.
The decline in resort management expense generally reflects cost reduction
measures.

OTHER INCOME

     Other income decreased 61% to $0.5 million for the six months ended June
30, 2001 as compared to $1.2 million for the same period in 2000. The decrease
in other income is primarily due to a decrease in credit life proceeds and
commitment fee income.

PROVISION FOR DOUBTFUL RECEIVABLES

     The provision for doubtful receivables declined 12% from $3.7 million for
the six months ended June 30, 2000 to $3.3 million for the same period in 2001.
The decrease in the provision for doubtful accounts as a percentage of timeshare
sales is reflective of the decline in VOI sales during the first six months of
2001. However, the Company's rate of provisioning for doubtful receivables
increased from 8.0% of VOI sales during the first six months of 2000 to 9.7% of
VOI sales for the same period in 2001. Increases in the rate of provisioning for
doubtful receivables are driven by the Company's Target Reserve Methodology
("TRM"), which requires additional provisions to reflect both portfolio growth
and increases in receivable aging. The increased percentage rate of reserving
for doubtful receivables was necessary to maintain an adequate level of reserves
during a time period in which sales declined by 34% during the first six months
of 2001 as compared to the same period in 2000. As of June 30, 2001, the TRM
analysis reflected an under reserved position of $0.6 million. However, as of
June 30, 2001 the Company's Reserve Coverage Ratio (RCR) of total reserves and
over collateralization to consumer receivables over 60 days past due was 5.7
times on the entire consumer loan portfolio, an increase from an RCR of 4.4
times 60 day past due loans at June 30, 2000. Similarly, the RCR on all consumer
receivables over 90 days past due was 11.7 times on the entire consumer loan
portfolio, an increase from a RCR of 7.4 times at June 30, 2000.


                                       27

<PAGE>

     The Company assumes all default risk for receivables relating to purchases
of VOIs in the Company's own resorts. However, the Company has a right to
"chargeback" defaulted consumer receivables relating to consumer purchases in
third party resorts to the third party developers. Thus, as the proportion of
the Company's total consumer loan portfolio that relates to the Company's own
resorts grows, the total level of provisioning for doubtful receivables relating
to the Company's own sales becomes more significant.

     As part of its TRM, the Company has established a Minimum Target Reserve
("MTR") for its owned consumer loans based on the principal aging of the
consumer loans. The following list sets forth the target reserve level based on
the aging of any given owned consumer note receivable:

                   o      Current - 29 days past due     5%
                   o      30 - 59 days past due         10%
                   o      60 - 89 days past due         50%
                   o      90+ days past due             95%


     The targeted reserve level is based on the outstanding principal balance of
the Consumer loan less an inventory recapture amount. When the Company believes
that collectibility of a receivable is unlikely, that amount is charged against
the allowance for doubtful receivables.

     At June 30, 2001, the Company had total reserves (including over
collateralization on the Hypothecation Loans) for its loan portfolio equal to
$31.3 million or 12.3% of total loans. Included in this amount were total
reserves and over collateralization of $22.1 million on third party consumer
receivables or approximately 22.8% of the outstanding consumer receivables
portfolio attributable to third party resorts. This represented a reserve
coverage ratio of 19.6 times the $1.1 million of such receivables that were 60
or more days past due at June 30, 2001.

     At June 30, 2001 the Company also maintained an aggregate allowance for
doubtful receivables of $9.3 million, or 6.4% of the outstanding consumer
receivable portfolio from owned resorts. This represented a reserve coverage
ratio of 2.1 times the approximate $4.3 million in consumer receivables from
owned resorts that were 60 days or more past due as of that date. The $9.3
aggregate allowance for doubtful receivables represents a decrease of 14%
compared with $10.8 million allowance for doubtful receivables at June 30, 2000.

     The following table sets forth the performance of the consumer receivable
portfolio at June 30, 2001:

<TABLE>
<CAPTION>

                                                          CONSUMER RECEIVABLE LOAN PORTFOLIO
                                                                  (IN THOUSANDS)

                                                   CURRENT        30-59 DAYS         60-89 DAYS          90+ DAYS              TOTAL
                                                   -------        ----------         ----------          --------              -----
<S>                                               <C>                 <C>                <C>               <C>              <C>
Subsidiary Consumer Loans                         $135,720            $3,489             $2,043            $2,297           $143,549
                                                     94.6%              2.4%               1.4%              1.6%             100.0%

Third Party Loans  (1)                            $104,672            $2,148               $732              $394           $107,946
                                                     97.0%              2.0%               0.7%              0.3%             100.0%

Total                                             $240,392            $5,637             $2,775            $2,691           $251,495
                                                     95.6%              2.2%               1.1%              1.1%             100.0%
</TABLE>

(2)  Includes the consumer  receivables  that  collateralize  the  Hypothecation
     Loans.



                                       28

<PAGE>

     At June 30, 2001, 95.6% of the aggregate consumer receivable portfolio was
current, and there were 419 notes with a principal balance of $2.7 million that
were over 90 days past due. Of this amount, $2.3 million relates to the consumer
receivables in the Company's resorts. During 2001, the company wrote off 1,187
consumer notes with an outstanding principal balance of $8.2 million, leading to
a charge after inventory recovery of $5.8 million. Total reserves and
overcollateralization of approximately $31.3 million at June 30, 2001, compared
with $5.5 million in total consumer receivables that were 60 days or more past
due represented an overall reserve coverage ratio of 5.7 times the volume of 60
day past due notes.

     The following table sets forth the current and historic composition of
reserves and over collateralization, reserves as a proportion of total loans,
and the levels of past due loans and chargebacks:

<TABLE>
<CAPTION>

                                                                             LOAN RESERVES COVERAGE
                                                                             (DOLLARS IN THOUSANDS)

                                                                       AS OF DECEMBER 31,                                JUNE 30,
                                                    ------------------------------------------------------------       ----------
                                                       1997              1998             1999              2000             2001
                                                       ----              ----             ----              ----             ----
<S>                                                  <C>               <C>              <C>                 <C>              <C>
A&D Loans past due                                   $9,485            $3,435           $3,821              $376             $365
Consumer Financing past due                           1,458             1,790            2,708             4,600            2,691
                                                   ---------         --------         --------           -------          -------
Total past due loans                                $10,943            $5,225           $6,529            $4,976           $3,056

Total loans                                        $136,530          $160,952         $260,090           275,082          255,734

Total past due loans as % of
    Total loans                                        8.0%              3.2%             2.5%              1.8%             1.2%

General reserves                                     $2,442            $3,835          $10,073           $11,763           $9,259
Specific reserves                                    17,320            18,392           18,507            17,406           16,050
Overcollateralization                                 1,006             3,588            4,308             5,981            6,042
                                                   ---------         --------         --------           -------          -------
Total reserves and
    Overcollateralization (1)                       $20,768           $25,815          $32,888           $35,150          $31,351
Total reserves and overcollateralization
    as % of total loans
                                                      15.2%             16.0%            12.6%             12.8%            12.3%

Chargebacks                                           6,376             5,875            5,542             5,796            3,738

Chargebacks as % of
    Consumer Financing (2)                             6.6%              5.5%             5.1%              5.4%             3.9%
------------------------
</TABLE>

(1)  Specific reserves and the overcollateralized contracts relate to specific
     developers, and any application of these reserves or overcollateralized
     contracts to defaulted loans would be done on a developer by developer
     basis.

(2)  Chargeback percentage is based on Consumer Financing, because only these
     loans can be charged back.

                                       29

<PAGE>

           The following two tables show current and historic levels of 90 day
past due loans and changes in the Company's allowance for doubtful accounts:

<TABLE>
<CAPTION>

                                                                    90 DAY PAST DUE LOANS
                                                                    (DOLLARS IN THOUSANDS)
                                                                        AS OF DECEMBER 31,
                                                   ----------------------------------------------------------          JUNE 30,
                                                      1997            1998              1999            2000              2001
                                                      ----            ----              ----            ----              ----
<S>                                                 <C>             <C>               <C>             <C>             <C>
  Total loan portfolio balance                      $136,530        $160,952          $260,090        $275,082        $255,734
  Principal amount of past due loans:
  A&D Loans                                           $9,485          $3,435            $3,821            $376            $365
  Purchased Receivables                                1,458           1,253             1,364             800             394
  Hypothecation Loans                                     --              --                --              --              --
  Consumer Loans                                          --             537             1,344           3,800           2,297
  Other Loans                                             --              --                --              --              --
                                                   ---------         --------         --------         -------          -------
  Total principal amount of past due loans
                                                     $10,943          $5,225            $6,529          $4,976          $3,056
  Past due loans as a percentage of total
     principal amount of loans outstanding             8.0%              3.2%             2.5%            1.8%            1.2%



                                                                              CONSOLIDATED
                                                                 CHANGES IN ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                                                           (DOLLARS IN THOUSANDS)
                                                                     YEAR-ENDED DECEMBER 31,
                                                      ------------------------------------------------------       JUNE 30,
                                                      1997             1998            1999           2000            2001
                                                      ----             ----            ----           ----            ----
Allowance for doubtful accounts, beginning
   of year                                          $1,979           $2,442          $3,835         $10,073         $11,763
Allowance related to acquisitions
                                                        --              793           6,639             501              --
Provision for loan losses                              925              791           2,192           9,078           3,256
Charges to allowance for doubtful accounts
                                                      (601)            (424)         (2,593)         (7,889)         (5,760)
Charges applied against specific
   developer   holdbacks (1)
                                                       139              233              --              --              --
                                                   ---------         --------      --------          -------          -------
Allowance for doubtful accounts, end of
   year                                             $2,442           $3,835         $10,073         $11,763          $9,259
----------------
</TABLE>

 (1) In accordance with the terms of certain agreements with developers, the
     Company charges certain bad debts directly against developer holdbacks,
     rather than against the general allowance for doubtful accounts.

                                       30

<PAGE>

INTEREST EXPENSE

     Interest expense, net of capitalized amounts, decreased 16% to $10.6
million for the six months ending June 30, 2001 as compared to $12.6 million for
the same period in 2000. The decrease in interest expense is a result of several
loan facilities that were repaid during the first quarter of 2001, as well as
significant reduction in interest rates. The average outstanding balance
decreased approximately $19 million, while the weighted average interest rate on
outstanding debt decreased from 8.8% for the first six months of 2000 to 7.1%
for the same period in 2001.

     The Company has not traditionally hedged against its interest rate risk due
to the wide spread on its receivables and the speed with which new originations
occur. However, under the DG Credit Facility, the facility requires the Company
to hedge within the facility once the interest rate spread has been reduced to
approximately 600 basis points. This is currently the largest financing facility
that the Company maintains. The significant reductions in market interest rates
experienced in late 2000 and continuing into 2001 result in lower interest costs
on virtually all the Company's debt while its interest receivable rates are
largely fixed.

COST OF TIMESHARE INTERVALS SOLD

     The cost of timeshare intervals sold for the six months ended June 30, 2001
decreased 37% to $7.0 million or 22.6% of VOI revenue, compared to $11.0 million
for the six months ended June 30, 2000, or 23.6% of VOI revenue. The decline in
dollar volume is a result of the reduced volume of VOIs sold during the first
six month of 2001.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization decreased 3% from $2.4 million for the first
six months of 2000 to $2.3 million for the same period in 2001. The slight
decrease is primarily due to $0.3 million reduction associated with debt issue.

     Goodwill amortization increased 8% to $0.8 million for the first six months
of 2001 from $0.7 million for the same period in 2000. Goodwill associated with
the Peppertree Acquisition is approximately $18.0 million and is being amortized
over 20 years, while goodwill associated with the acquisition of Eastern Resorts
is approximately $25.7 million and is being amortized over 40 years.

     Depreciation of the properties increased 44% to $0.7 million for the first
six months of 2001 from $0.6 million for the same period in 2000. The increase
in depreciation is a result of a larger base of depreciable assets.

SALES AND MARKETING

     Sales and marketing expense decreased 43% to $14.7 million for the six
months ended June 30, 2001 from $25.9 million for the same period in 2000. The
decrease in total sales and marketing dollar expense is due to the decline in
VOIs sold and to the reduction in sales commissions and marketing expenses at
Peppertree and other locations during the first six months of 2001.

     Sales and marketing costs for the first six months 2001 decreased to 47.8%
of VOI sales revenues from 56.0% for the same period in 2000, representing a
decrease from 54.7% for the year 2000. Sales and marketing costs as a percentage
of VOI sales revenue in the former Peppertree resorts fell to 54.3% for the
first six months of 2001, compared with 64.0% for the first six months of 2000
and the full year 2000.

                                       31

<PAGE>

RESORT MANAGEMENT

     Resort management expense for the first six months of 2001 decreased 7% to
$5.7 million or 56.8% of resort operation revenue as compared $6.2 million or
61.7% of resort operation revenue for the comparable period in 2000. The decline
in resort management expenses as a percentage of resort operation revenue is
primarily due to personnel cost reductions.

GENERAL AND ADMINISTRATIVE

     General and administrative expense decreased 2% to $5.6 million for the
first six months of 2001 from $5.7 million for the same period in 2000. General
and administrative expense as a percentage of total revenue increased to 9.5% of
total revenue for the first six months of 2001, compared with 7.5% of total
revenue for the same period in 2000. The increase in general and administrative
expense as a percentage of total revenue principally reflects the decrease in
total revenue. Payroll related expenses comprise the largest segment of general
and administrative expense, representing approximately 55.5% of total general
and administrative expense.

PROVISION FOR INCOME TAXES

     The provision for income taxes for the six months ended June 30, 2001
increased 13% to $4.2 million from $3.7 million for the same period in 2000. The
increase is attributable to the increase in pretax income during 2001 as
compared to the same period in 2000. The provision for income taxes represents
approximately 41.9% and 42.0% of pretax income for 2001 and 2000, respectively.

LOSS ON SALE OF ASSETS

     The Company recognized a $0.5 million loss on the sale of assets during the
second quarter of 2001. The loss was incurred upon the sale of a parcel of
Peppertree property of $0.5 million. This transaction reduced notes payable by
approximately $1 million. The Company is continuing its efforts to sell
additional surplus land.

INFLATION

     Inflation has not had a material impact on the Company's revenues,
operating income and net income during any of the Company's three most recent
years. However, to the extent inflationary pressures affect short-term interest
rates, a significant portion of the Company's debt service costs may be
affected, as may be the interest rates the Company charges to its customers
(both customers and developers).

                                       32

<PAGE>

ITEM 3.  QUANTITATIVE  AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by Item 3 is incorporated herein by reference to
Management's Discussion and Analysis of Financial Condition and Result of
Operations in Item 2 above.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     The Company is currently subject to litigation and claims arising from
employment, tort, contract, alleged negligence and construction matters, among
others, all arising in the ordinary course of its business. Management does not
expect any of these lawsuits or claims, even if adversely decided, to have a
material adverse effect on the Company or its business. The Company is, however,
required to disclose any material proceeding to which any director or officer
has a material interest adverse to the Company, and any material bankruptcy,
receivership or similar proceeding with respect to the Company. The Company is
also required to disclose any proceeding that involves primarily a claim for
damages if the amount involved, exclusive of interests and costs, exceeds ten
percent (10%) of the current assets of the Company on a consolidated basis.

     Except as set forth herein, there have not been any new developments with
respect to material proceedings to which any director or officer has a material
adverse interest, or any material bankruptcy, receivership, or similar
proceedings with respect to the Company, except as previously disclosed in the
Company's most recent 10-K filing for year ended December 31, 2000, and the
Company's Form 10-Q filed May 15, 2001, for the quarterly period ended March 31,
2001.

     As previously reported, the Company has filed a complaint against C. Wayne
Kinser ("Kinser"), a director and former principal owner of Peppertree, and
Pioneer Hotel Corporation, the sole general partner of Great Smokies Hotel
Associates, L.P. The complaint was originally filed with the Supreme Court of
New York but was voluntarily withdrawn and re-filed with the Superior Court
Division of the State of North Carolina. The complaint is a result of the
breach, by Kinser and the additional defendants, of the November 1999 Agreement
and Plan of Reorganization pursuant to which the Company purchased various
Peppertree entities. The complaint sets forth multiple causes of action,
including a default under a promissory note held by a wholly owned subsidiary of
the Company, and guaranteed by Kinser. The complaint further alleges that Kinser
defaulted upon his obligation to make payment of taxes due and owing by various
Peppertree entities and incurred prior to their acquisition by the Company, and
that Kinser breached his fiduciary duty to the Company, as a result of his
improper inducement of the Company to make a tax payment at a time when he
served as a Director of the Company. The Company's action seeks recovery of more
than $3 million from Mr. Kinser. This complaint includes an additional count,
asserting that defendant Kinser has further breached his fiduciary duty to the
Company by refusing to honor in good faith long standing business relationships,
thereby tortuously interfering with the business of the Company and its
subsidiaries. The defendants have yet to file a responsive pleading to the
complaint.

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<PAGE>

ITEM 2.  CHANGES IN SECURITIES.

           None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

           None.

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

           None.

ITEM 5.  OTHER INFORMATION.

           None.

ITEM 6.  (A) EXHIBITS.

     The following exhibits are filed herewith:

     10.1 Master Loan Modification  Agreement dated as of the 20th day of April,
     2001, by and among Equivest Finance,  Inc., ("EFI"),  Resort Funding, Inc.,
     ("RFI"),  Eastern  Resorts  Company,  LLC,  ("Company"),   Eastern  Resorts
     Corporation,  ("ERC"),  Ocean City Coconut Malorie Resort,  Inc., ("Coconut
     Malorie"),  Bluebeard's Castle,  Inc.,  ("Bluebeard"),  Castle Acquisition,
     Inc.,  ("Castle"),   Avenue  Plaza  LLC,  ("Avenue  Plaza"),  and  Equivest
     Washington, Inc., (f/k/a EFI D.C. Acquisition,  Inc.) ("EFI DC") (EFI, RFI,
     the Company, ERC, Coconut Malorie, Bluebeard,  Castle, Avenue Plaza and EFI
     DC shall be  individually  referred to as the "Borrower"  and  collectively
     referred to as the "Borrowers"),  jointly and severally,  and EFI, Equivest
     Maryland,   Inc.,  (f/k/a  EFI  Maryland   Acquisition,   Inc.)  ("Equivest
     Maryland"),  Equivest  Louisiana,  Inc., (f/k/a EFI Louisiana  Acquisition,
     Inc.) ("Equivest  Louisiana") and Equivest St. Thomas, Inc., (f/k/a EFI St.
     Thomas Acquisition,  Inc.) ("Equivest St. Thomas") (EFI, Equivest Maryland,
     Equivest  Louisiana and Equivest St. Thomas shall be individually  referred
     to as the "Guarantor" and  collectively  referred to as the  "Guarantors"),
     jointly and severally, and Credit Suisse First Boston Mortgage Capital LLC,
     ("CSFB").

     (B) REPORTS ON FORM 8-K:

     The Company filed the following reports on Form 8-K during the quarter
covered by this report:

(i)  April 6, 2001 Form 8-K announcing  record 2000 net earnings;  earnings per,
     and revenues;

(ii) May 1, 2001 Form 8-K announcing three new directors;

(iii)May 17, 2001 Form 8-K announcing record first quarter net income and
     earnings per share; pretax profit margin rises 42%.

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<PAGE>

                                   SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, there unto duly authorized.

EQUIVEST FINANCE, INC.

By:  /s/ Gerald L. Klaben, Jr.
------------------------------------
      GERALD L. KLABEN, JR.
      SENIOR VICE PRESIDENT AND CHIEF

FINANCIAL OFFICER

Dated:  August 10, 2001




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