SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended JUNE 30, 1995 [Fee Required]
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from __________to__________

COMMISSION FILE NUMBER 1-6802

LIBERTE INVESTORS
(Exact name of Registrant as specified in its charter)

Created Under a Declaration of Trust
Pursuant to the Laws of
The Commonwealth of Massachusetts 75-1328153
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 N. Pearl St., Suite 420, LB 168
Dallas, Texas 75201
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 214/720-8950

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class Name of each Exchange
Shares of Beneficial Interest, on which registered
Without Par Value New York Stock Exchange

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/

AT SEPTEMBER 15, 1995, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S SHARES OF
BENEFICIAL INTEREST HELD BY NON-AFFILIATES WAS $21,515,323.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by SQection 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X * NO
----- -----

* The registrant's confirmed plan of reorganization did not provide for a
distribution of securities; however, all required documents and reports have
been timely filed by the registrant after confirmation of the plan.

THE NUMBER OF SHARES OF BENEFICIAL INTEREST OUTSTANDING AS OF SEPTEMBER 15,
1995, WAS 12,153,658 SHARES, NET OF 269,550 SHARES HELD IN TREASURY.

-- DOCUMENTS INCORPORATED BY REFERENCE --
The proxy statement for the upcoming 1995 Annual Meeting is incorporated into
Part III of this Form 10-K by reference.
2

LIBERTE INVESTORS

FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1995

Table of Contents

Page
----

PART I

ITEM 1 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 3 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF
SECURITY-HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 6 SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

PART III

ITEM 10 TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . *
ITEM 11 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . *

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

* Incorporated by reference to the Trust's Proxy Statement for its upcoming 1995
Annual Meeting.
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PART I

ITEM 1. BUSINESS

OVERVIEW

Liberte Investors ("LBI" or the "Trust") is an unincorporated voluntary
association of the type commonly termed as a Massachusetts business trust
organized under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated June 26, 1969, as amended. The principal business
activity of LBI is investing in notes receivable, primarily first mortgage
construction notes and first mortgage acquisition and development notes.
Secondarily, LBI invests in other secured or guaranteed notes related directly
or indirectly to real estate. Over the past seven fiscal years, however, the
Trust has progressively curtailed its lending activities in an effort to repay
its indebtedness and reduce the size of its note receivable and real estate
portfolio.

The curtailment of lending activities began in June 1989 when the Trust's
outstanding commercial paper was downgraded by the rating agencies to below
investment grade. As a result, the Trust ceased originating investments
secured by commercial income producing real estate and limited new investment
originations to notes secured by single-family houses and lots. In May 1990
LBI restructured its unsecured senior indebtedness to pledge a portion of its
note receivables and foreclosed real estate and require amortization of the
indebtedness. In May 1991 LBI again restructured its senior indebtedness by
pledging all of its assets, extending the term, and amending the amortization
schedule. As a result of these efforts, LBI's senior indebtedness, including
outstanding commercial paper, was reduced from $692.6 million at June 30, 1989,
to $87.7 million at June 30, 1993. On April 1, 1993, LBI's remaining senior
indebtedness was due and payable, and on June 1, 1993, $100 million of
subordinated indebtedness matured. At this time, LBI reached agreement with a
committee representing the holders of subordinated notes for a restructure of
LBI's indebtedness in a voluntary "pre-negotiated" bankruptcy procedure.

Accordingly, on October 25, 1993, the Trust filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. On
November 2, 1993, the Trust filed with the Bankruptcy Court a disclosure
statement and related plan of reorganization. An order was entered by the
Bankruptcy Court confirming a modified plan of reorganization for the Trust on
January 24, 1994. On April 7, 1994, the Trust emerged from bankruptcy.
Pursuant to the plan of reorganization, certain assets and liabilities,
including the remaining senior indebtedness, were transferred to Resurgence
Properties Inc. ("RPI"), and RPI's common stock was distributed to the holders
of the Trust's outstanding subordinated indebtedness in full satisfaction of
such holders' claims against the Trust.

The plan of reorganization approved by LBI's creditors, shareholders and
the Bankruptcy Court contemplated that LBI would engage in the business of
investing in notes receivable secured by mortgages on real estate. After
emerging from Chapter 11, the Board of Trustees decided to delay making
investments in longer maturities of notes receivable until such time as LBI
reduced its investment in illiquid foreclosed real estate. Accordingly, LBI
concentrated its efforts on improving the operating performance of its
foreclosed real estate and arranging sales contracts thereon. By December 31,
1994, LBI had reduced its investment in foreclosed real estate (net of
reserves) to $7.5 million from $15.1 million at June 30, 1994.

Management developed, and the Board of Trustees approved, a revised
business plan to resume investments in construction and development notes
receivable secured by single-family houses and lots,

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subject to LBI obtaining a commitment for senior secured financing, in order
for LBI to utilize leverage to increase its projected profitability.
Accordingly, in January 1995 LBI made application with a commercial bank for a
senior line of credit in the amount of $60 million. The Trust obtained a
commitment for such financing on March 2, 1995.

An unsolicited proposal, pursuant to which the parties making the
proposal would tender to purchase up to 45% of the Trust's outstanding shares
of beneficial interest with the intention of having the Trust purchase
operating companies and distressed undervalued assets, was received on March 1,
1995. The proposal required that a majority of the Board of Trustees be
elected by the offeror and that the chief executive officer be replaced. The
Trust appointed a Special Committee composed of its outside Trustees, Messrs.
Bishop and Rose, to explore the alternatives for the Trust. The Special
Committee appointed special legal counsel and retained Bear Stearns & Co. as
its financial advisor.

The Trust has received numerous proposals from parties interested in
acquiring shares of LBI, for cash and/or other property, either from LBI's
shareholders or from newly issued shares from LBI. The Trust has also received
proposals to merge or otherwise combine operating companies into or with LBI.
Each of the proposals was reviewed by the Special Committee and its advisors.
In May 1995 the Special Committee determined that the Trust would not proceed
at such time with the managaement business plan previously approved by the
Board of Trustees. As a result of this action by the Special Committee, in
June 1995 the employment arrangement with Mr. Enloe was modified to reduce his
annual compensation and require that he devote only a portion of his time to
the business affairs of the Trust, thereby allowing Mr. Enloe to pursue other
business opportunities. Further, since management's proposal for leveraged
single-family construction and development lending was no longer being
considered by the Trust, the Special Committee was discontinued and henceforth
all proposals for the Trust's future operations would be considered by the full
Board of Trustees and its legal counsel and financial advisor.

At the present time, LBI and its advisors are continuing to investigate
and evaluate the active proposals and to solicit other proposals for
investments in or business combinations with LBI. LBI has established no time
schedule for accomplishing any transaction, nor can there be any assurance that
such a transaction can be consummated. During this period, the Board of
Trustees has authorized management to extend the maturities of a portion of its
notes receivable portfolio through new note receivable originations, but LBI
will not utilize any leverage in its investment activities.

PORTFOLIO REVIEW

At June 30, 1995, the Trust's portfolio of funded investments of notes
receivable and foreclosed real estate (excluding cash and cash equivalents)
totaled $21.2 million in principal amount ($10.7 million net of reserves).
There were no amounts to be advanced under any notes receivable at June 30,
1995, and at that date, all foreclosed real estate was classified as
nonearning.

At June 30, 1995, the Trust's portfolio of notes receivable aggregated
$5.8 million, carried interest rates ranging from 8.5% to 10.5% on the
outstanding balances, and had a weighted average yield on earning notes of
8.25% during the fiscal year. Notes classified as nonearning are notes on
which the accrual of interest has been discontinued. At June 30, 1995, the
Trust had no notes which were more than 90 days past due in interest but on
which the Trust was continuing to accrue interest.

At June 30, 1995, the Trust's nonearning assets aggregated $15.8 million
($5.3 million net of reserves) and consisted of: (i) $392,066 ($262,165 net of
reserves) of notes with respect to which the Trust had ceased to accrue
interest; and (ii) $15.4 million ($5.0 million net of reserves) of
investments in foreclosed real estate. The following table reflects the
Trust's nonearning assets net of reserves by type of property and geographic
location at June 30, 1995: NOTE C - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

Texas California Total
----------- ----------- -----------

Single-family residences $ - $ 262,165 $ 262,165
Single family lots 194,677 1,989,000 2,183,677
Land 2,832,516 - 2,832,516
----------- ----------- -----------
$ 3,027,193 $ 2,251,165 $ 5,278,358
=========== =========== ===========

The Trust maintains an allowance for possible losses ("Reserves") on its
investments in foreclosed real estate and notes receivable. At June 30, 1995,
the allowance for possible losses maintained by the Trust totaled $10.5
million. During fiscal 1995, provisions totaling $3.2 million and charge-offs,
net of recoveries, of $4.4 million were recorded in the allowance for possible
losses. The Trust is dependent on the liquidation of the properties for the
recovery of its investments in foreclosed real estate. All gains and losses
realized on liquidation are credited or charged, as the case may be, to the
allowance for possible losses on foreclosed real estate. See NOTE D - NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

TERMINATION OF MANAGEMENT AGREEMENT

The Trust was managed by Lomas Management, Inc. ("LMI") since its
inception in 1969 until February 28, 1995. LMI is a wholly owned subsidiary of
Lomas Financial Corp. ("LFC"), the original sponsor of the Trust. Mr. Enloe
was hired by the Trust as its full-time president and chief executive officer
and the Trust's first direct employee in 1992. Under the management agreement
in effect prior to July 1, 1992, whenever the Trust invested in any first
mortgage construction or acquisition and development note recommended by LMI,
LFC was required to participate, directly or through one or more of its
subsidiaries. Subsequent management agreements made no provision for this
required participation arrangement. On February 28, 1995, the Trust continued
its movement toward self administration by terminating its management agreement
with LMI and assuming all remaining operating and accounting responsibilities.
Any remaining property management requirements on assets owned with LFC are
provided for in the asset disposition agreement described below.

Effective February 28, 1995, the Trust entered into an "Asset Disposition
Agreement" with ST Lending, Inc. ("STL"), a wholly owned subsidiary of LFC,
whereby the Trust and STL exchanged their respective ownership positions in a
group of assets. No gain or loss was recognized as a result of this
transaction. Therefore, at June 30, 1995, the Trust owned 100% of its
foreclosed real estate and note receivable portfolio with the exception of one
real estate asset that remains 80% owned by the Trust (the Trust's portion
equals $1,164,000, net of reserves), and approximately 50% of a mortgage note
receivable originated to construct houses in California (the Trust's portion
equals $262,165, net of reserves). The Trust had no further funding obligation
under this note at June 30, 1995, and expects to receive

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repayments out of the sale proceeds from the completed houses in sufficient
amounts to retire this note during the next fiscal year.

A group of approximately 14 receivables, which have no carrying value and
relate primarily to deficiency judgments obtained during foreclosures or
remedial collection activities, remain 80% owned by the Trust and 20% owned by
STL. The Asset Disposition Agreement stipulates that the Trust will pay STL
10% of its gross proceeds received, in addition to STL's 20% ownership, from
this pool of loans in return for STL's asset administration. On or about March
1, 1996, STL will transfer its 20% ownership in this pool of assets to the
Trust.

Under the management agreement in effect prior to February 28, 1995 (the
"Management Agreement"), LMI was entitled to basic compensation at an annual
rate of 1% of the daily average book value of the Trust's Invested Assets (as
defined in the Management Agreement) plus $81,000 per year for accounting
services. During the fiscal year ended June 30, 1995, LMI received
compensation of $157,907. Additionally, STL received compensation of $10,898
which represents 10% of the Trust's gross proceeds received on the portion of
its portfolio described above.

The foregoing descriptions of the Management Agreement and the Asset
Disposition Agreement do not purport to be complete but are summaries of the
material provisions thereof.

COMPETITION

The Trust competes with commercial banks, savings and loan associations,
mortgage bankers, and other financial institutions that lend money to builders
and developers. Many of these institutions have greater capital, larger staffs
and other resources that are not necessarily available to the Trust. LBI
expects to focus on smaller loans and customers where LBI's service may be
considered an advantage.

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

CERTAIN CUSTOMERS

Revenue from RPI provided greater than 10% of total revenue for the
fiscal year ended June 30, 1995, and consisted of: (i) interest on a note
receivable collateralized by a pool of first mortgage loans and by Deeds of
Trust on various real estate assets, (ii) the receipt of $500,000 as a
settlement for early termination of a consulting arrangement originally
expected to end on March 31, 1996, and (iii) dividend income on the RPI
preferred stock held by LBI.

FEDERAL INCOME TAX/REIT STATUS

(July 1, 1993). Accordingly the Trust is subject to federal income tax on its
taxable income. With the change in status to a taxable entity, the Trust
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" (SFAS 109). Since there was no financial impact on the year
ended June 30, 1994, and the quarter ended September 30, 1994, neither an
amended Form 10-K nor Form 10-Q, respectively, have been filed to reflect the
adoption of SFAS 109. See NOTE H - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Also see "Transfer Restrictions" in Part II, Item 5.

EMPLOYEES

On June 30, 1995, the Trust had two full-time and four part-time
employees.

ITEM 2. PROPERTIES

The Trust's operations are conducted primarily in Dallas, Texas. At June
30, 1995, the Trust's headquarters were located on properties owned by LFC. As
of August 31, 1995, the Trust relocated in Dallas and leases its office space
from an unrelated third party. The lease term is less than one year. See also
the discussion of the Trust's foreclosed real estate under the heading
"Portfolio Review" in ITEM 1. BUSINESS.

ITEM 3. LEGAL PROCEEDINGS

The Trust is involved in routine litigation incidental to its business
which, in the opinion of management, will not result in a material adverse
impact on the Trust's financial condition, results of operation, or cash flows.

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

Not applicable.

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PART II

MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The New York Stock Exchange trading symbol for Liberte Investors' Shares
of Beneficial Interest is LBI. The approximate number of record holders of the
Trust's Shares of Beneficial Interest at September 15, 1995, was 2,319.
Depository companies held approximately 9,447,000 shares for an unknown number
of beneficial owners on that date. During the last two fiscal years, the Trust
has not paid any dividends and does not intend to pay dividends during fiscal
1996. The high and low per share prices during each quarter of the last two
fiscal years have been:

1995 1994
------------- ------------- -------------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ----- ----- ----- -----

September 30 2 1-5/8 1-5/8 1
December 31 1-7/8 1-1/2 1-7/8 5/8
March 31 2 1-5/8 2-1/2 1-1/2
June 30 2-1/4 1-1/2 2-1/8 1-3/8

TRANSFER RESTRICTIONS

In order to avoid limitations on the use of the Trust's tax attributes,
the Declaration of Trust as amended, generally prohibits the transfer of Shares
to any Person who is a holder of 5% or more of the Shares or to any Person who
would become a holder of 5% or more of the Shares after giving effect to the
transfer, directly or by attribution. "Person" for this purpose is defined
broadly to mean any individual, corporation, estate, debtor, association,
company, partnership, joint venture or similar organization.

If a transfer violates this prohibition, either (i) the Shares that were
purported to be transferred in excess of the 5% limit will be deemed to remain
the property of the initial transferor, or (ii) upon election by the Trust,
such Shares shall be transferred to an agent designated by the Trust, who will
sell them in an arm's-length transaction, the proceeds of such sale to be
allocated to the purported transferee up to (x) the amount paid by such
transferee for such Shares and (y) where the purported transfer was by gift
inheritance or any similar transfer, the fair market value of such Shares at
the time of the purported transfer.

If the purported transferee has resold the Shares to an unrelated party
in an arm's length transaction, the purported transferee will be deemed to have
sold the Shares as an agent for the initial transferor, and will be required to
transfer the proceeds of such sale to the agent designated by the Trust, except
to the extent that the agent grants written permission to the purported
transferee to retain a portion of the proceeds up to the amount that would have
been payable to such transferee had the Shares been sold by the agent rather
than by the purported transferee.

The Declaration of Trust further provides that the Trust may require, as
a condition to the registration of the transfer of any Shares, that the
proposed transferee furnish to the Trust all information

reasonably requested by the Trust with respect to the proposed transferee's
direct or indirect ownership interests in Shares.

The Board of Trustees of the Trust will have the power to approve
transfers that would otherwise be prohibited under the foregoing provisions.

New certificates evidencing ownership of Shares bear a conspicuous legend
referencing the transfer restrictions and are held by the Trust's transfer
agent for replacement of old certificates when submitted for transfer.

ITEM 6. SELECTED FINANCIAL DATA (in thousands, except per share amounts)

On October 25, 1993, the Trust filed for protection under Chapter 11 of
the United States Bankruptcy Code, and on April 7, 1994, the Trust emerged from
bankruptcy. Results for 1995 are not comparable to previous years because of
the bankruptcy. See NOTE E - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

YEAR ENDED JUNE 30
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------

Revenues $ 2,172 $ 10,019 $ 15,115 $ 19,763 $ 42,193
Interest expense - 7,673 16,295 20,515 36,537
Provision for possible losses 3,192 3,175 15,150 32,000 62,100
Loss before reorganization
items and extraordinary item (2,868) (11,147) (34,672) (43,141) (66,346)
Loss per share before reorganization
items and extraordinary item (0.23) (0.91) (2.94) (3.68) (5.67)
Cash dividends declared
per share - - - - -

AT JUNE 30
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------

Total assets $ 32,036 $ 36,316 $ 261,575 $ 337,527 $ 451,053
Shareholders' equity 31,620 34,914 63,591 98,333 141,309
Debt - - 187,725 234,057 303,223

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

On October 25, 1993, the Trust filed for protection under Chapter 11 of
the United States Bankruptcy Code, and on April 7, 1994, the Trust emerged from
bankruptcy. Results for 1995 are not comparable to 1994 and 1993 because of
the bankruptcy. See NOTE E - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

1995 Compared to 1994. The Trust's net loss was $2.9 million in fiscal
1995 compared to a $29.3 million loss in fiscal 1994. Contributing to the
smaller loss were the following factors that occurred in connection with the
Trust's emergence from bankruptcy: (i) an increase in consulting fee income
from RPI; (ii) the elimination of interest expense; (iii) the elimination of
reorganization items; (iv) the elimination of debt restructure costs; (v)
reductions in legal fees and foreclosed real estate expenses related to the
smaller size of the loan and foreclosed real estate portfolios; and (vi) a
substantial reduction in the Trust's cost of directors and officers insurance.
These factors were partially offset by a decrease in note receivable interest
and a decrease in foreclosed real estate income.

Income on notes receivable decreased from $5.7 million in fiscal 1994 to
$.7 million in fiscal 1995. The $5.0 million decrease was the result of a
significant decrease in average earning notes which was partially offset by an
increase in yield. Average earning notes declined from $74 million with a
yield of 7.77% in fiscal 1994 to $8 million with a yield of 8.25% in fiscal
1995.

Nonearning notes averaged $276,000 for fiscal 1995 compared to $19.7
million for fiscal 1994. Assuming that the yield on these notes would have been
the same as the yield on earning notes had they been on earning status, income
on notes receivable would have been $23,000 higher than reported in fiscal 1995
and $1.5 million higher in fiscal 1994. The Trust's efforts to reduce
nonearning assets continues.

At June 30, 1995, the Trust's portfolio of funded investments of notes
receivable and foreclosed real estate (excluding cash and cash equivalents)
totaled $21.2 million in principal amount, compared to $37.3 million at June
30, 1994. Funded earning investments decreased from $11.9 million at the end
of fiscal 1994 to $5.4 million at the end of fiscal 1995. There were no
amounts to be advanced under any notes receivable at June 30, 1995, and at that
date, all foreclosed real estate was classified as nonearning.

At June 30, 1995, the Trust's portfolio of notes receivable aggregated
$5.8 million compared to $12.1 million at June 30, 1994. The interest rates
on the notes at June 30, 1995, ranged from 8.5% to 10.5% on the outstanding
balances. The weighted average yield on the Trust's earning notes was 8.25%
and 7.77% during the fiscal years ended June 30, 1995, and June 30, 1994,
respectively. Notes classified as nonearning are notes on which the accrual of
interest has been discontinued. At June 30, 1995, and 1994, the Trust had no
notes which were more than 90 days past due in interest but on which the Trust
was continuing to accrue interest.

At June 30, 1995, the Trust's nonearning assets aggregated $15.8 million,
which consisted of: (i) $392,066 (or 1.2% of total assets) of notes with
respect to which the Trust had ceased to accrue interest; and (ii) $15.4
million (or 48.0% of total assets) of investments in foreclosed real estate.
At June 30, 1994, the Trust's nonearning assets aggregated $25.5 million, which
consisted of: (i) $272,308 (or 0.8% of total assets) of notes with respect to
which the Trust had ceased to accrue interest and (ii) $25.2 million (or 69.4%
of total assets) of investments in foreclosed real estate.

In addition to notes made to facilitate the sale of foreclosed real
estate, one new note was produced during fiscal 1995.

Income on foreclosed real estate was eliminated in fiscal 1995 as a
result of the sale or transfer of all remaining operating real estate during
the fourth quarter of fiscal 1994.

Income from temporary investments increased $683,000 to $892,000 in
fiscal 1995 principally as a result of the Trust's increase in cash and cash
equivalents to $20.6 million at June 30, 1995, from $9.8 million at June 30,
1994. The increase is principally a result of the collection of notes
receivable and the sale of foreclosed real estate.

Consulting fee and other revenue began in the fourth quarter of fiscal
1994 in connection with an agreement with RPI. The consulting agreement called
for the Trust to receive $87,500 of consulting fee income per quarter until
March 31, 1996. The Trust agreed to discontinue the consulting arrangement in
exchange for a payment of $500,000 in lieu of the $525,000 that would have been
received ratably over the next six calendar quarters.

The Trust's indebtedness and corresponding interest expense was
eliminated upon emergence from bankruptcy on April 7, 1994.

The provision for possible losses was $3.2 million in fiscal 1995 and
fiscal 1994. The allowance for possible losses was $10.5 million at June 30,
1995, compared to $11.7 million at June 30, 1994. While the Trust believes the
allowance for possible losses is adequate at June 30, 1995, management will
periodically review its portfolio using then-current information to make the
estimates and assumptions that are used to determine the adequacy of the
allowance for note losses and the valuation of the real estate acquired in
connection with foreclosures or in satisfaction of notes.

A $1.1 million and $1.2 million reversal to the allowance for possible
losses on notes receivable occurred in fiscal 1995 and fiscal 1994,
respectively, as a result of the substantial reduction in the Trust's portfolio
of notes receivable. The Trust's reduction in notes receivable involved a
substantial payoff of a large note during the second quarter of fiscal 1995 and
the transfer of the majority of notes receivable to RPI in connection with the
emergence from bankruptcy in fiscal 1994. These reversals partially offset the
provision for losses on the Trust's portfolio of foreclosed real estate.

The provision for possible losses on foreclosed real estate was $4.3
million in fiscal 1995 compared to $4.4 million in fiscal 1994. The allowance
for possible losses on foreclosed real estate was $10.4 million at June 30,
1995, compared to $10.1 million at June 30, 1994. The $4.3 million provision
for possible losses on foreclosed real estate in fiscal 1995 results from
increases in the estimates of losses on disposition of foreclosed real estate,
which are based primarily on updated property valuations which reflect recent
real estate sales. A large portion of the Trust's remaining foreclosed real
estate is in the form of land which is inherently illiquid and/or in geographic
locations where real estate markets for this type of property remain depressed.

Salaries and related expenses decreased $1.1 million to $619,000 in
fiscal 1995 compared to $1.7 million in fiscal 1994. Severance pay expenses
primarily related to Mr. Enloe's employment contract were $99,000 in fiscal
1995 compared to $519,000 in fiscal 1994. Bonus and stock compensation
expenses included a reversal (credit) of $60,000 in fiscal 1995 compared to an
expense of $704,000 in fiscal 1994.

9
12

General and administrative expenses decreased $740,000 to $402,000 in
fiscal 1995. The principal expense reduction in 1995 resulted from reduced
premium for the trustees and officers insurance coverages. The premium
decreased in fiscal 1995 as a result of the substantial decrease in the Trust's
assets and the reduction of the number of trustees and officers following the
emergence from bankruptcy on April 7, 1994.

Legal, audit and advisory fees, foreclosed real estate expenses, and
management fee expenses all have a significant correlation to the size of the
Trust's investment portfolio and as a result, these expenses were substantially
reduced following the transfer of approximately 85% of the Trust's assets to
RPI in connection with the emergence from bankruptcy.

Trustee fees and expenses were reduced to $61,000 in fiscal 1995 from
$249,000 in fiscal 1994 principally as a result of reducing the number of
trustees from nine to three upon emergence from bankruptcy. The Trustees also
agreed to reduce their fee compensation by 50% to $10,800 per year (not
including meeting fees).

The following expenses incurred in fiscal 1994 were related to
restructuring efforts which culminated the bankruptcy filing; (i) debt
restructuring of $2.1 million; (ii) reorganization items of $5.2 million; and
(iii) an extraordinary item of $12.9 million. No such expenses were incurred
in fiscal 1995. See NOTE E - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

1994 Compared to 1993. The Trust's net loss was $29.3 million in fiscal
1994 compared to a $34.7 million loss in fiscal 1993. Contributing to the
smaller loss were the following factors: (i) a decrease in the provision for
possible losses; (ii) a decrease in interest expense; (iii) an increase in
foreclosed real estate income and (iv) a decrease in debt restructure costs.
These factors were partially offset by a decrease in note receivable interest,
an increase in reorganization expense items and extraordinary losses due to the
bankruptcy filing and transfer of assets and liabilities to RPI in connection
with the Plan of Reorganization.

Income on notes receivable decreased from $11.3 million in fiscal 1993 to
$5.7 million in fiscal 1994. Of the $5.6 million decrease, substantially all
was the result of a decrease in average earning notes. Average earning notes
declined from $146 million with a yield of 7.71% in fiscal 1993 to $74 million
with a yield of 7.77% in fiscal 1994.

Average nonearning notes for fiscal 1994 totaled $19.7 million compared
to $21.3 million for fiscal 1993. Assuming that the yield on these notes would
have been the same as the yield on earning notes had they been on earning
status, income on notes receivable would have been $1.5 million higher than
reported in fiscal 1994 and $1.6 million higher in fiscal 1993.

There was no new note production in fiscal 1994 or fiscal 1993 other than
notes made to facilitate the sale of foreclosed real estate.

Income on foreclosed real estate increased from $3.6 million in fiscal
1993 to $4.0 million in fiscal 1994 primarily because several projects changed
from nonearning to earning status during the third quarter of fiscal 1993.
Foreclosed real estate is classified as earning if the net cash flow on the
individual property is projected to exceed the Trust's average cost of funds
during the succeeding twelve months. See NOTE A - NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.

Interest expense decreased from $16.3 million in fiscal 1993 to $7.7
million in fiscal 1994. Of the $8.6 million decrease, $5.5 million was the
result of a decrease in average debt outstanding and $3.1 million was the
result of a decrease in the average cost of debt. Average debt outstanding
declined from $213.6 million with an average cost of 7.63% in fiscal 1993 to
$140.8 million with an average cost of 5.45% in fiscal 1994. The average cost
of debt decreased in fiscal 1994 as a result of the Trust ceasing to accrue
interest on the Subordinated Notes on October 25, 1993. This was partially
offset by the expiration of an interest rate swap, which had resulted in a
reduction of interest expense, and the increase in the rate on the Trust's
senior debt to the default rate of prime or the corporate base rate plus 200
basis points for the period beginning May 16, 1993, until the Trust filed its
Chapter 11 petition on October 25, 1993. Average cost of debt for these
purposes includes bank fees and other rate adjustments such as the net effect
of the interest rate swap. This swap produced a reduction of interest costs of
$1,253,000 in fiscal 1993.

The provision for possible losses was $3.2 million in fiscal 1994
compared to $15.2 million in fiscal 1993. The allowance for possible losses
was $11.7 million at June 30, 1994, compared to $53.9 million at June 30, 1993.

The provision for possible losses on notes receivable was a reversal of
$1.2 million in fiscal 1994 compared to $1.3 million in fiscal 1993. The
allowance for possible losses on notes receivable was $1.6 million at June 30,
1994, compared to $17.7 million at June 30, 1993. The decrease in the
provision and allowance for possible losses on notes receivable in fiscal 1994
compared to fiscal 1993 includes the impact of a smaller note receivable
portfolio during fiscal 1994 and smaller net charge-offs in fiscal 1994
compared to fiscal 1993.

The provision for possible losses on foreclosed real estate was $4.4
million in fiscal 1994 compared to $13.9 million in fiscal 1993. The allowance
for possible losses on foreclosed real estate was $10.1 million at June 30,
1994, compared to $36.2 million at June 30, 1993. At June 30, 1994, foreclosed
real estate totaled $25.2 million compared to $164.4 million at June 30, 1993.
Any loss incurred upon foreclosure of collateral underlying a note is charged
to the allowance for possible losses on notes receivable.

The $13.9 million provision for possible losses on foreclosed real estate
in fiscal 1993 results primarily from a provision of approximately $2.4 million
related to the adoption of Statement of Position 92-3 as discussed below and
increases in the estimates of losses on disposition of foreclosed real estate,
which are based primarily on updated property valuations which reflect real
estate sales, the inability of the Trust to meet previous marketing plans for
disposal of foreclosed real estate, and the unavailability of real estate
financing for potential buyers.

Salary and related expenses increased $970,000 to $1.7 million in fiscal
1994 from $756,000 in fiscal 1993. Salary increases were immaterial while
compensation expense related to bonuses and stock option grants increased
$448,000. The Trust also established a liability for the expected termination
of Mr. Enloe's employment agreement in the amount of $481,000.

General and administrative expenses decreased $347,000 to $1.1 million in
fiscal 1994 compared to $1.5 million in fiscal 1993. The decrease was related
to reduction in: (i) shareholders related expenses of $144,000; (ii) travel
and lodging expenses of $118,000; (iii) corporate insurance premiums of
$30,000; and (iv) other miscellaneous expenses of $55,000.

11
14

Management fees totaled $1.8 million in fiscal 1994, compared to $2.9
million in fiscal 1993. The decrease is a result of the decrease in the
Trust's portfolio of invested assets. The decrease in legal and audit and
advisory expenses from fiscal 1993 to fiscal 1994 was primarily a result of a
decrease in legal fees related to the Trust's troubled assets and its senior
credit agreements.

Operating expenses included debt restructure costs of $7.4 million in
fiscal 1993 and $2.1 million in fiscal 1994. The fees incurred in fiscal 1993
were related to a possible restructuring with financing to have been provided
by a third party, a possible exchange of the subordinated notes for equity in
the Trust, and an agreement whereby the subordinated noteholders would exchange
their debt for equity in a new company that was expected to hold most of the
Trust's assets. Debt restructure costs in fiscal 1994 were incurred from July
through October 25, 1993, when the Trust filed a voluntary petition for
reorganization under Chapter 11.

Reorganization items netting $5.2 million in fiscal 1994 include amounts
incurred while the Trust was in Chapter 11 for legal and financial advisors and
consulting fees for the Trust and certain representatives of the Trust's
subordinated noteholders, senior debt holders and shareholders.

The extraordinary item totaling $12.9 million represents the difference
between $212.1 million of assets and $199.2 million in liabilities that were
transferred by the Trust to RPI upon its emergence from Chapter 11. See NOTE E
- - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

In fiscal 1993 the Trust adopted The American Institute of Certified
Public Accountants' Statement of Position 92-3, "Accounting for Foreclosed
Assets" ("SOP 92-3"). SOP 92-3 requires foreclosed assets held for the sale to
be carried at the lower of (a) fair value less estimated costs to sell or (b)
cost. Fair value was determined by discounting expected cash flows using a
risk-adjusted interest rate. Prior to adopting SOP 92-3, the Trust carried its
foreclosed assets held for sale at the lower of (a) net realizable value or (b)
cost. Net realizable value was determined using the Trust's cost-of-funds
rate. The adoption of this statement had an adverse effect on the Trust's
balance sheet and statement of operations of $2.4 million during fiscal 1993
because the Trust's cost-of-funds rate was less than the risk-adjusted discount
rate required to be used under SOP 92-3.

LIQUIDITY AND CAPITAL RESOURCES

Prior to its emergence from Chapter 11, the Trust faced substantial
liquidity problems due to reduced cash flows from operating and investing
activities, the required substitution of bank financing for commercial paper
financing, and its inability to borrow additional funds under its bank credit
facilities. Following its emergence from Chapter 11, the Trust no longer has
liquidity problems and has concentrated its efforts on liquidating its real
estate investments for cash and notes. The Trust's principal funding
requirements are now operating expenses including legal, audit, and advisory
expenses in connection with potential acquisition candidates. The Trust
anticipates that its primary sources of funding these disbursements will be its
collections on notes receivable, proceeds from the sale of foreclosed property,
and income on cash investments.

Operating activities for fiscal 1995 used $0.5 million of cash compared
to $33.3 million in fiscal 1994 and $14.6 million in fiscal 1993. The table
below reflects cash flow from operating activities (in millions):

YEAR ENDED JUNE 30
------------------------------------
1995 1994 1993
-------- -------- --------

Total income $ 2.2 $ 10.0 $ 15.1
Interest expense - (7.7) (16.3)
-------- -------- --------
Net interest margin 2.2 2.3 (1.2)
Operating expenses (1.8) (10.3) (18.3)
Net change in other receivables,
assets and liabilities (0.9) (7.2) 4.9
Reorganization items - (5.2) -
Extraordinary items - (12.9) -
-------- -------- --------
Net cash used by operating activities $ (0.5) $ (33.3) $ (14.6)
======== ======== ========

Net cash provided by investing activities for fiscal 1995 was $12.4
million compared to $44.6 million in fiscal 1994 and $52.3 million in fiscal
1993. The table below reflects the impact of the contraction of the Trust's
note receivable portfolio on cash flow from investing activities (in millions):

YEAR ENDED JUNE 30
------------------------------------
1995 1994 1993
-------- -------- --------

Collections on mortgage loans $ 1.4 $ 28.8 $ 36.3
Collections on RPI note receivable 0.6 - -
Advances on mortgage loans (0.3) (0.3) (1.8)
Sales of foreclosed real estate 10.3 13.4 23.4
Net sales (purchases) of restricted
cash investments 0.6 4.7 (3.2)
Expenditures on foreclosed real estate (0.2) (2.0) (2.4)
-------- -------- --------
Net cash used by investing activities $ 12.4 $ 44.6 $ 52.3
======== ======== ========

The Trust is a debt-free organization with a significant proportion of
its assets consisting of highly liquid investments and is currently exploring
acquisition opportunities in addition to growth in its notes-receivable
portfolio.

13
16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See ITEM 14 for a listing of the consolidated financial statements filed
with this report. The response to this item is submitted in a separate section
of this report.

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

Not applicable.

PART III

Pursuant to General Instruction G(3) to Form 10-K, the information
required by Items 10, 11, 12, and 13 is incorporated by reference to the
Trust's Proxy Statement for its upcoming 1995 Annual Meeting.

15
18

PART IV

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

(a) Documents filed as part of this report.

(1) The following consolidated financial statements are included in
this Item 14:

Pages
-----

Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . 22
Consolidated Balance Sheet at June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . 23
Consolidated Statement of Operations for Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statement of Shareholders' Equity for Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Statement of Cash Flows for Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 27

(2) The following consolidated financial statement schedule is
included in this Item 14:

Schedule IV - Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . 37

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted, or the information
required is included in the financial statements, including the
notes thereto.

(3) EXHIBITS:

Exhibit
Number
-------

(2.1)(9) The Registrant's First Amended Plan of Reorganization
dated December 14, 1993.

(2.2)(9) The Registrant's Modification to the First Amended
Plan of Reorganization dated January 9, 1994.

(3.1)(1) Declaration of Trust of the Registrant dated June 26,
1969, as amended by the First and Second Amendments
thereto.

(3.2)(2) Third Amendment to the Declaration of Trust of the
Registrant.

(3.3)(3) Fourth Amendment to the Declaration of Trust of the
Registrant.

(3.4)(10) Fifth Amendment to the Declaration of Trust of the
Registrant.

(3.5)(4) By-laws of the Registrant.

(10.1)(2) Management Agreement among the Registrant, Lomas
Management, Inc., and Lomas Financial Corporation,
dated as of July 1, 1992.

(10.2)(5) Participation Agreement between the Registrant and
Lomas Financial Corporation (formerly, Lomas &
Nettleton Financial Corporation) dated as of July 28,
1970.

(10.3)(6) Employment Agreement dated January 31, 1993, between
the Registrant and Robert Ted Enloe III.

(10.4)(6) Stock Option Agreement dated January 31, 1993,
between the Registrant and Robert Ted Enloe III.

(10.5)(7) Stock Option Agreement dated May 7, 1993, between the
Registrant and Robert Ted Enloe III.

(10.6)(7) Retirement Plan for Trustees of the Registrant dated
October 11, 1988.

(10.7)(8) Promissory note dated October 22, 1993, between the
Registrant and Robert Ted Enloe III.

(10.8)(8) Stock Pledge and Security Agreement dated October 22,
1993, between the Registrant and Robert Ted Enloe
III.

(10.9) Asset Disposition Agreement dated February 28, 1995,
between the Registrant and ST Lending, Inc.

17
20

(3) EXHIBITS: Continued

Exhibit
Number
-------

(10.10) The Registrant's 1995 Equity Incentive Plan.

(10.11) Stock Option Agreement dated February 15, 1995,
between the Registrant and Robert Ted Enloe III.

(10.12) Stock Option Agreement dated February 15, 1995,
between the Registrant and Bradley S. Buttermore.

(27) Financial Data Schedules.

(b) Reports on Form 8-K.

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

- --------------------------------------------------------------------------------
Footnotes

(1) Incorporated by reference to the Registrant's
Registration Statement on Form S-3 dated April 4, 1986
(No. 33-4577).

(2) Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended June 30, 1992.

(3) Incorporated by reference to the Registrant's Form 8-K
dated January 7, 1993.

(4) Incorporated by reference to the Registrant's
Registration Statement on Form S-11 dated June 30, 1969
(No. 2-33821).

(5) Incorporated by reference to the Registrant's
Registration Statement on Form S-2 dated March 1, 1985
(No. 2-95695).

(6) Incorporated by reference to the Registrant's Form 10-Q
dated March 31, 1993.

(7) Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended June 30, 1993.

(8) Incorporated by reference to the Registrant's Form 10-Q
dated December 31, 1993.

(9) Incorporated by reference to the Registrant's Form 8-K
dated February 9, 1994.

(10) Incorporated by reference to the Registrant's Form
10-K for the fiscal year ended June 30, 1994.

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

SIGNATURES

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

LIBERTE INVESTORS
Registrant

DATE: September 26, 1995 By /s/BRADLEY S. BUTTERMORE
------------------------
Bradley S. Buttermore
Senior Vice President,
Treasurer, and Secretary

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

/s/ TED ENLOE Trustee and September 26, 1995
---------------------------------- Principal Executive Officer
(Ted Enloe)

/s/ BRADLEY S. BUTTERMORE Principal Financial and September 26, 1995
---------------------------------- Accounting Officer
(Bradley S. Buttermore)

/s/ GENE H. BISHOP Trustee September 26, 1995
----------------------------------
(Gene H. Bishop)

/s/ EDWARD W. ROSE III Trustee September 26, 1995
----------------------------------
(Edward W. Rose III)

19
22

ANNUAL REPORT ON FORM 10-K

ITEM 8 AND ITEM 14(a)(1) AND (2), 14(c) and 14(d)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE AND EXHIBITS

YEAR ENDED JUNE 30, 1995

LIBERTE INVESTORS AND SUBSIDIARY

DALLAS, TEXAS

LIBERTE INVESTORS AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(ITEM 14(a)(1) and (2))

Page
----

Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Consolidated Balance Sheet at June 30, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 23

Consolidated Statement of Operations For Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Statement of Shareholders' Equity for Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Consolidated Statement of Cash Flows for Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Consolidated Financial Statement Schedule:
IV Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted, or the information required is included in the financial
statements, including the notes thereto.

21
24

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Shareholders and Trustees
Liberte Investors

We have audited the accompanying consolidated balance sheet of Liberte
Investors and subsidiary as of June 30, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1995. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Liberte Investors and subsidiary at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

ERNST & YOUNG LLP

Dallas, Texas
July 28, 1995

25
LIBERTE INVESTORS AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

June 30
----------------------------
1995 1994
----------- -----------

Assets
Notes receivable - Note B
RPI $ 5,406,132 $ 6,000,000
Mortgage loans 401,240 6,130,956
Foreclosed real estate - Note C
Nonearning 15,385,214 25,207,002
----------- -----------
21,192,586 37,337,958

Less: Allowance for possible losses - Note D 10,498,922 11,709,395
----------- -----------
10,693,664 25,628,563

Unrestricted cash and cash equivalents 20,576,517 9,157,640
Restricted cash and cash equivalents - Note F 59,245 623,300
Accrued interest and other receivables 103,888 324,555
Other assets 602,664 581,919
----------- -----------
$32,035,978 $36,315,977
=========== ===========

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

Liabilities and Shareholders' Equity
Liabilities
Accrued interest and other liabilities $ 416,164 $ 1,402,032

Shareholders' Equity - Note K
Preferred Stock, 10 million shares
authorized, none are outstanding
Shares of Beneficial Interest, no
par value, unlimited authorization:
12,423,208 issued and 12,153,658
outstanding, net of 269,550 held in
Treasury, at June 30, 1995; 12,423,208
issued and outstanding at June 30, 1994 31,619,814 34,913,945
----------- -----------
Commitments and Contingencies - Note F $32,035,978 $36,315,977
=========== ===========

See notes to consolidated financial statements.

23
26

LIBERTE INVESTORS AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended June 30
----------------------------------------------
1995 1994 1993
----------- ------------ ------------

Income
Notes receivable interest $ 657,511 $ 5,740,167 $ 11,259,126
Temporary investment interest 892,008 208,849 271,424
Foreclosed real estate - 3,952,256 3,550,828
Consulting fees and other 622,555 117,767 33,800
----------- ------------ ------------
2,172,074 10,019,039 15,115,178
----------- ------------ ------------
Expenses
Interest - 7,672,694 16,295,318
Provision for possible losses - Note D 3,192,000 3,175,000 15,150,000
Salaries and related costs 619,433 1,726,012 755,637
General and administrative 402,185 1,142,437 1,488,975
Legal, audit and advisory 321,469 737,619 2,111,667
Foreclosed real estate 274,546 2,505,716 3,277,262
Management fees - Note G 168,805 1,824,044 2,928,258
Trustees' fees and expenses 61,215 249,180 342,697
Debt restructure - 2,132,902 7,437,048
----------- ------------ ------------
5,039,653 21,165,604 49,786,862
----------- ------------ ------------
Loss before reorganization items
and extraordinary item (2,867,759) (11,146,565) (34,671,684)
Reorganization items:
Professional fees - (5,499,463) -
Interest earned on accumulated cash
resulting from Chapter 11 proceedings - 304,913 -
----------- ------------ ------------
- (5,194,550) -
Extraordinary item:
Loss on extinguishment of debt - Note E - (12,936,395) -
----------- ------------ ------------
Net Loss $(2,867,579) $(29,277,510) $(34,671,684)
=========== ============ ============
Loss per Share of Beneficial Interest
Loss before reorganization items
and extraordinary item $ (0.23) $ (0.91) $ (2.94)
Reorganization items - (0.43) -
Extraordinary item - (1.06) -
----------- ------------ ------------
Net loss $ (0.23) $ (2.40) $ (2.94)
=========== ============ ============
Weighted average number of
Shares of Beneficial Interest 12,322,773 12,221,975 11,788,750
=========== ============ ============

See notes to consolidated financial statements.

24
27
LIBERTE INVESTORS AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Shares of
Beneficial Interest
-------------------------
Number Amount
---------- ------------

Balance at July 1, 1992 11,804,208 $ 98,333,030
Rescind 240,000 shares
Shares of Beneficial Interest (240,000) (330,000)
Unearned compensation 240,000 302,500
Cancelled 31,000 shares (31,000) (42,625)
Net loss - (34,671,684)
---------- ------------
Balance at June 30, 1993 11,773,208 63,591,221

Shares issued under
stock options 650,000 975,000
Executive loan to purchase stock options - (374,766)
Net loss - (29,277,510)
---------- ------------
Balance at June 30, 1994 12,423,208 34,913,945

Deferred interest on executive loan - (22,227)
Purchase of 269,550 shares of treasury stock (269,550) (404,325)
Net loss - (2,867,579)
---------- ------------
Balance at June 30, 1995 12,153,658 $ 31,619,814
========== ============

See notes to consolidated financial statements.

LIBERTE INVESTORS AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended June 30
------------------------------------------------
1995 1994 1993
-------------- ------------- ---------------

Operating activities:
Loss before reorganization items
and extraordinary item $ (2,867,579) $ (11,146,565) $ (34,671,684)
Noncash expenses and revenues included in net loss:
Provision for possible losses 3,192,000 3,175,000 15,150,000
Net change in other receivables, assets and
liabilities (879,229) (20,151,576) 4,880,355
-------------- ------------- ---------------
Net cash used by operating activities
before reorganization items (554,808) (28,123,141) (14,641,329)

Net cash used by reorganization items -- (5,191,102) --
-------------- ------------- ---------------
Net cash used by operating activities (554,808) (33,314,243) (14,641,329)
-------------- ------------- ---------------

Investing activities:
Collections on notes receivable 1,997,003 28,828,704 36,293,250
Advances on notes receivable (308,299) (314,387) (1,760,983)
Expenditures on foreclosed real estate (127,350) (2,016,948) (2,414,009)
Sales and basis reductions of foreclosed
real estate 10,252,601 13,398,005 23,394,426
Net sales (purchases) of restricted cash
investments 564,055 4,745,018 (3,184,703)
-------------- ------------- ---------------
Net cash provided by investing activities 12,378,010 44,640,392 52,327,981
-------------- ------------- ---------------

Financing activities:
Purchase of treasury stock (404,325) -- --
Decrease in notes payable -- (4,597,411) (46,331,285)
-------------- ------------- ---------------
Net cash used by financing activities (404,325) (4,597,411) (46,331,285)
-------------- ------------- ---------------

Net increase (decrease) in unrestricted cash
and cash equivalents 11,418,877 6,728,738 (8,644,633)
Unrestricted cash and cash equivalents at
beginning of year 9,157,640 2,428,902 11,073,535
-------------- ------------- ---------------
Unrestricted cash and cash equivalents at
end of year $ 20,576,517 $ 9,157,640 $ 2,428,902
============== ============= ===============

Schedule of noncash investing and financing
activities:
Transfer of notes receivable to foreclosed
real estate $ 4,792,782 $ 18,252,995 $ 13,499,472
Charge-offs to allowance for possible
losses, net $ 4,402,473 $ 19,234,742 $ 20,252,734
Sales of foreclosed real estate financed
by notes receivable $ 138,400 $ 3,888,112 $ 14,679,561

Interest paid $ -- $ 4,754,000 $ 11,045,000

See notes to consolidated financial statements.

26
29

LIBERTE INVESTORS AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 1995

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Trust
and its subsidiary. Significant intercompany balances and transactions have
been eliminated.

Recognition of Income - Interest is taken into income as it accrues. The
Trust discontinues the accrual of interest income when circumstances exist
which cause the collection of such interest to be doubtful. Determination to
discontinue accruing interest is made after a review by the Trust's management
of all relevant facts including delinquency of principal and/or interest, and
credit of the borrower.

27
30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Allowance for Possible Losses - The Trust provides for possible losses on
notes receivable and foreclosed real estate based on an evaluation of each note
and each property acquired through foreclosure (or deed in lieu of
foreclosure). Consideration is given to the collectibility of the note and to
the estimated value of the collateral underlying a note or of properties held.
The Trust also maintains unallocated reserves on its portfolio of notes
receivable.

Foreclosed Real Estate - Foreclosed real estate is recorded at the lower
of cost or fair value less estimated costs to sell determined at, and
subsequent to, foreclosure. Any loss attributable to the excess of cost over
fair value at the time of foreclosure is charged to the allowance for losses on
notes receivable. Gains (losses) realized on liquidation are credited
(charged) to the allowance for losses on foreclosed real estate.

Foreclosed real estate is classified as earning if the net cash flow on
the individual property is projected to exceed the Trust's average cost of
funds during the succeeding twelve months. The properties on which the cash
flow is not projected to exceed the Trust's average cost of funds during the
succeeding twelve months are classified as nonearning.

In-Substance Foreclosures - Properties collateralizing notes receivable
that have been substantively repossessed or are being managed under the control
of the Trust are recorded as foreclosed real estate. A note is considered to be
an in-substance foreclosure if the following criteria are met: (1) the debtor
has little or no equity in the collateral, considering the current fair value
of the collateral; (2) proceeds for repayment of the note can be expected to
come only from the operation or sale of the collateral; and (3) the debtor has
either formally or effectively abandoned control of the collateral to the
creditor or retained control of the collateral but, because of the current
financial condition of the debtor, the economic prospects for the debtor and/or
the collateral in the foreseeable future, it is doubtful that the debtor will
be able to rebuild equity in the collateral or otherwise repay the note in the
foreseeable future.

Sales of Foreclosed Assets Financed by Notes Receivable - The Trust may
finance a portion of the sale of foreclosed real estate for qualified
borrowers. A cash downpayment of 20% is normally required, and the financing
terms generally do not exceed five years, with many financings being for less
than five years. The notes are made at market rates of interest either
floating over a base rate of interest or a fixed rate generally tied to similar
maturity treasury notes.

Adoption of Authoritative Statements - In May 1993 the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Note." SFAS No.
114 was subsequently amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114
requires impairment of a note be measured based on the present value of
expected future cash flows discounted at the note's effective interest rate.
The Trust is required to adopt this standard for the fiscal year beginning July
1, 1995.

In March 1995 the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that assets held for disposal
be valued at the lower of carrying amount or fair value less costs to sell.
The Trust is required to adopt this standard for the fiscal year beginning July
1, 1996.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Trust has determined that the adoption of SFAS No's. 114, 118, and
121 will not have a material effect on its financial position or results of
operation.

Loss Per Share of Beneficial Interest - Loss per Share of Beneficial
Interest is based on the weighted average number of shares outstanding during
the year.

Cash and Cash Equivalents - Cash and cash equivalents include highly
liquid investments with original maturities of three months or less.

Reclassifications - Certain amounts in prior years' financial statements
have been reclassified to conform to the current year's presentation.

NOTE B - NOTES RECEIVABLE

The following is a summary of notes receivable activity for the years
ended June 30, 1995, and 1994:

1995 1994
------------- --------------

Balance at beginning of year $ 12,130,956 $ 137,569,142

Advances and capitalized items
on notes receivable 341,714 340,323
Sales and collection of foreclosed
real estate financed by notes
receivable 138,400 3,888,112
Collections of principal (1,997,003) (28,828,704)
Foreclosures (4,792,782) (18,252,995)
Write-off of principal (13,913) (8,673,449)
Transfer of assets upon emergence
from Chapter 11 - (73,911,473)
------------- --------------
Balance at end of year $ 5,807,372 $ 12,130,956
============= ==============

29
32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE C - FORECLOSED REAL ESTATE

The following is a summary of the Trust's activity in foreclosed real
estate for the years ended June 30, 1995, and 1994:

1995 1994
------------ ------------

Balance at beginning of year $ 25,207,002 $ 164,416,526

Foreclosures 4,840,782 18,252,995
Expenditures 127,350 2,016,948
------------ -------------
Total additions 4,968,132 20,269,943
Cost of real estate sold (14,789,920) (28,437,212)
Transfer of assets upon emergence
from Chapter 11 - (131,042,255)
------------ -------------
Balance at end of year $ 15,385,214 $ 25,207,002
============ =============

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table sets forth the Trust's portion of foreclosed real
estate by type of property and geographic location:

June 30
-----------------------------------
1995 1994
----------- ------------

Type of Property:
Single-family $ - $ 1,726,091
Single-family lots 6,732,532 7,303,970
Condo lots/land - 4,768,677
Land 8,652,682 6,809,219
Completed properties:
Industrial - 4,522,155
Other - 76,890
----------- -----------
$15,385,214 $25,207,002
=========== ===========
Geographic location:
Texas $ 9,356,477 $11,149,820
California 6,028,737 5,725,691
Tennessee - 4,522,156
Rhode Island - 1,889,066
Massachusetts - 1,760,472
Other - 159,797
----------- -----------
$15,385,214 $25,207,002
=========== ===========

The Trust has substantively repossessed or obtained control of the
management of certain properties collateralizing $2,084,394 and $6,245,694 of
notes receivable at June 30, 1995, and 1994, respectively. As a result, these
notes have been accounted for as foreclosed real estate.

31
34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE D - ALLOWANCE FOR POSSIBLE LOSSES

A summary of transactions affecting the Trust's allowance for possible
losses for the three-year period ended June 30, 1995, is as follows:

Notes Foreclosed
Receivable Real Estate Total
----------- ------------ ------------

Balance at July 1, 1992 $23,275,974 $ 35,765,577 $ 59,041,551
Provision for possible losses 1,263,731 13,886,269 15,150,000
Amounts charged off, net of recoveries (6,811,338 (13,441,396) (20,252,734)
----------- ------------ ------------
Balance at June 30, 1993 17,728,367 36,210,450 53,938,817
Provision for possible losses (1,208,000) 4,383,000 3,175,000
Amounts charged off, net of recoveries (8,457,842) (10,776,900) (19,234,742)
Allowance related to assets transferred
upon emergence from Chapter 11 (6,499,604) (19,670,076) (26,169,680)
----------- ------------ ------------
Balance at June 30, 1994 1,562,921 10,146,474 11,709,395
Provision for possible losses (1,148,960) 4,340,960 3,192,000
Amounts charged off, net of recoveries (284,060) (4,118,413) (4,402,473)
----------- ------------ ------------
Balance at June 30, 1995 $ 129,901 $ 10,369,021 $ 10,498,922
=========== ============ ============

NOTE E - EMERGENCE FROM BANKRUPTCY

Upon the Trust's emergence from bankruptcy on April 7, 1994, certain
assets and liabilities were transferred to the holders of the subordinated
notes in full satisfaction of such notes. The net assets transferred exceeded
the debt satisfied resulting in a loss on extinguishment of debt, which has
been reported as an extraordinary item.

As part of this process, net notes receivable of $73.4 million, the
related accrued interest receivable of $.6 million, and net foreclosed real
estate of $111.3 million were transferred to RPI.

The Trust paid claims and closing costs, made debt payments and
transferred cash to RPI totaling $28.0 million.

The Trust received a $6.0 million note receivable from RPI and $.3
million of preferred stock in RPI. The Trust transferred additional assets
totaling $.3 million and liabilities for escrow deposits totaling $1.6 million
to RPI and adjusted its accrued liabilities by $.2 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In accordance with the terms of the Plan of Reorganization, the Trust was
relieved of its liability on the $83.1 million of senior debt, the $100.0
million of subordinated debt and the related $9.5 million of accrued interest
on the subordinated debt. The recording of the above transactions resulted in
an extraordinary loss on extinguishment of debt of approximately $12.9 million.

Fresh-start reporting, in which the emerging entities' assets and
liabilities would have been adjusted to their fair value, was considered but
deemed inappropriate since the reorganization value of the Trust's assets
immediately before the confirmation of the Plan was not less than the total of
all post-petition liabilities and allowed claims. Also, there was no change in
control of the Trust's ownership.

NOTE F - COMMITMENTS AND CONTINGENCIES

At June 30, 1995, the Trust had commitments for indemnification of
development bond issuers and other guarantees totaling $885,445.

Cash and cash equivalents at June 30, 1995, included restrictive cash of
$59,245 for claims due to bankruptcy. At June 30, 1994, restrictive cash
investments included $71,073 for claims due to bankruptcy, $480,500 to secure a
letter of credit, and $71,727 of borrowers' escrow deposits.

The Trust is involved in routine litigation incidental to its business,
which, in the opinion of management, will not result in a material adverse
impact on the Trust's financial condition, results of operations, or cash
flows.

NOTE G - TERMINATION OF MANAGEMENT AGREEMENT

33
36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Trust had no further funding obligation under this note at June 30, 1995, and
expects to receive repayments out of the sale proceeds from the completed
houses in sufficient amounts to retire this note during the next fiscal year.

NOTE H - FEDERAL INCOME TAXES

The Trust filed its June 30, 1994, Form 10-K and September 30, 1994, Form
10-Q as a real estate investment trust (a "REIT") as defined in the Internal
Revenue Code. Disclosures were made in those filings that there was some
uncertainty as to whether the Trust qualified as a REIT for its fiscal years
ended June 30, 1992, 1993, and 1994. In connection with the preparation of its
fiscal 1994 tax return, the Trust concluded that it no longer qualified as a
REIT effective the beginning of fiscal 1994 (July 1, 1993). Accordingly the
Trust is subject to federal income tax on its taxable income. The Trust
incurred taxable losses in fiscal 1995 and 1994; therefore, no provision for
income taxes is necessary in the financial statements for those periods. With
the change in status to a taxable entity, the Trust adopted SFAS No. 109
"Accounting for Income Taxes." Since there was no financial impact on the
year ended June 30, 1994, and the quarter ended September 30, 1994, neither an
amended Form 10-K nor Form 10-Q, respectively, have been filed to reflect the
adoption of SFAS 109.

At June 30, 1995, the Trust had, for federal tax purposes, net operating
loss carryforwards estimated to be in excess of $225 million which expire at
various times between the years 2005 and 2010. Significant components of the
Trust's deferred tax assets at June 30, 1995, consisted of net operating loss
carryforwards ($76.5 million), financial statement loss reserves ($3.2
million), and other items ($3.9 million), all of which were completely offset
by a valuation allowance. (The Trust has no material deferred tax
liabilities.)

The Trust had no income tax expense for the fiscal years ended June 30,
1995, and 1994. The difference between the statutory federal income tax rate
of 34% and the Trust's zero percent effective rate is due to the tax benefits
related to net operating losses which are fully reserved because of the
uncertainty that the Trust will realize the tax benefits related to those
losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107 "Disclosures about Fair Value of Financial Statements"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Trust.

The fair value of cash and cash equivalents approximates their carrying
value because of the liquidity and short-term maturities of these instruments.
The fair value of notes receivable - mortgage loans is estimated by discounting
cash flows at interest rates currently being offered for notes with similar
terms to borrowers of similar credit quality. The fair value of the note
receivable - RPI approximates its carrying value because it bears interest at a
LIBOR-based floating rate.

The estimated fair values of the Trust's financial instruments at June
30, 1995, are as follows (in thousands):

Carrying Fair
Amount Value
------ -----

Financial Assets:
Cash and cash equivalents $20,636 $20,636
Note receivable-RPI 5,406 5,406
Notes receivable - mortgage loans (net of allowance
for possible losses) 271 271

NOTE J - CERTAIN CUSTOMERS

35
38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE K - SHAREHOLDERS' EQUITY

Included in Shareholders' Equity is a deduction for a promissory note
in favor of the Trust from Robert Ted Enloe III in the amount of $365,625 plus
deferred interest thereon. The note has a term of 5 1/2 years and bears
interest at 5% compounded semi-annually, which is payable at maturity. The note
is secured by a pledge of 650,000 Shares of Beneficial Interest of the Trust.

On February 13, 1995, the Board of Trustees adopted the 1995 Equity
Incentive Plan (the "Plan") which provides for up to 1,500,000 shares to be
issued and used for employee incentive purposes. As of February 15, 1995,
options to purchase a total of 646,000 shares of the Trust's shares of
beneficial interest were granted to two executive officers of the Trust
("Incentive Stock Option Agreements"). The exercise price of these stock
options is $1.625 per share which approximated market value at the time of
grant. These stock options expire on February 15, 2005, pursuant to vesting
schedules indicated in the related Incentive Stock Option Agreements. The
effective date of the Plan is February 15, 1995, contingent upon approval by
the shareholders of the Trust by February 13, 1996.

On February 15, 1995, the Trust repurchased 269,550 Shares of Beneficial
Interest from LFC (a former affiliate) at a price which approximated market
value on that date.

SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

LIBERTE INVESTORS AND SUBSIDIARY
JUNE 30, 1995

- -----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H
- -----------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject To
Final Periodic Face Carrying Delinquent
Interest Maturity Payment Prior Amount of Amount of Principal or
Description Rate Date Terms Liens Mortgages Mortgages Interest
- -----------------------------------------------------------------------------------------------------------------------------

RPI Note receivable LIBOR + 2% 1998 Quarterly $5,406,132 $5,406,132 $ -

Construction loan:
Single-family
41st Street Prime + 1.5% 1995 Payable upon sale 340,364 340,364 340,364
of completed property.

Other (17 loans) 0-10.5% 1995-1998 60,876 4,604
------------------------
$5,807,372 $344,968
========================

37
40

NOTES TO SCHEDULE IV

June 30, 1995

(1) For income tax purposes the cost of notes is the carrying amount as shown
on the schedule. Allowance for possible losses of $129,901 is allocated
to notes receivable at June 30, 1995. Basis for the allocated amount is
explained under "Accounting Policies - Allowance for Possible Losses."

(2) Reconciliation of "Mortgage Loans on Real Estate" (in thousands):

YEAR ENDED JUNE 30
-----------------------------------
1995 1994 1993
------- -------- --------

Balance at beginning of year $12,131 $137,569 $178,672
Additions during year:
New mortgage loans and advances
on existing loans and other 480 4,228 16,598
------- -------- --------
12,611 141,797 195,270
Deductions during year:
Collections of principal 1,997 28,829 36,293
Foreclosures 4,793 18,253 13,499
Write-off of principal 14 8,673 7,909
Transfer of assets upon emergence
from Chapter 11 - 73,911 -
------- -------- --------
Balance at end of year $ 5,807 $ 12,131 $137,569
======= ======== ========

38
41

LIBERTE INVESTORS

INDEX TO EXHIBITS

Exhibit No.
- -----------

(10.9) Asset Disposition Agreement dated February 28, 1995, between
the Registrant and ST Lending, Inc.

(10.10) The Registrant's 1995 Equity Incentive Plan.

(10.11) Stock Option Agreement dated February 15, 1995, between the
Registrant and Robert Ted Enloe III.

(10.12) Stock Option Agreement dated February 15, 1995, between the
Registrant and Bradley S. Buttermore.

(27) Financial Data Schedules.