================================================================================

                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

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

For the fiscal year ended June 30, 2001

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number 1-6868

                              SIENA HOLDINGS, INC.
             (Exact Name of Registrant as Specified in its Charter)

         Delaware                                               75-1043392
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization                                Identification No.)

   5068 West Plano Parkway, Suite 300, Plano Texas                  75093
      (Address of Principal Executive Offices)                    (Zip Code)

Registrant's telephone number, including area code:  (972) 381-4255

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

                                                         Name of Each Exchange
       Title of Each Class                                on Which Registered
       -------------------                                -------------------
Common Stock, par value $.10 per share                        Not applicable
Preferred Stock, par value $1.00 per share

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. |_|

      At September 24, 2001 the aggregate market value of the registrant's
common stock held by non-affiliates: $3,615,000

              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 Section 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 |_|

      On October 10, 1995, the Registrant and Certain of its subsidiaries filed
bankruptcy proceedings under Chapter 11 of the Federal Bankruptcy Code in the
District of Delaware.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

      The number of shares outstanding of the registrant's Common Stock, par
value $.10 per share, as of September 24, 2001: Common Stock -- 6,000,000
shares.

================================================================================

<PAGE>

                              SIENA HOLDINGS, INC.

                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                Table of Contents

                                                                            Page
                                                                            ----

                                     PART I

Item 1.  BUSINESS ..........................................................   3
Item 2.  PROPERTIES ........................................................   7
Item 3.  LEGAL PROCEEDINGS .................................................   7
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............   7

                                    PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
            AND RELATED STOCKHOLDER MATTERS ................................   8
Item 6.  SELECTED CONSOLIDATED FINANCIAL DATA ..............................   9
Item 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS ............................  11
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........  14
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .......................  15
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE .........................  43

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ...............   43
Item 11. EXECUTIVE COMPENSATION ...........................................   43
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...   44
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................   44

                                    PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K .   45


                                      -2-
<PAGE>

                              SIENA HOLDINGS, INC.

                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                     PART I

Item 1. BUSINESS

      Siena Holdings, Inc. ("SHI"), formerly Lomas Financial Corporation
("LFC"), was incorporated in Delaware in 1960, and its principal executive
offices are located at 5068 West Plano Parkway, Suite 300 in Plano, Texas.
Unless the context otherwise requires, the "Company," as used herein, refers to
SHI, formerly LFC, and its subsidiaries. The Company is primarily engaged in two
businesses through its wholly-owned subsidiaries: assisted care facility
management through Siena Housing Management Corp. and real estate development
through LLG Lands, Inc. Prior to October 1, 1996, the Company's wholly-owned,
principal subsidiary was Lomas Mortgage USA, Inc. ("LMUSA"), now known as Nomas
Corp. ("Nomas"). As a result of the confirmation of LMUSA's Chapter 11
reorganization plan (see "Item 1. Business -- Reorganization"), the Company's
interest in LMUSA was extinguished effective October 1, 1996. LFC's plan of
reorganization was confirmed on October 4, 1996, but not effective until March
1997.

Financial Information and Narrative Description of Industry Segments

      Financial information regarding revenues, operating profit and total
assets of the Company are included in "Item 8. Financial Statements and
Supplementary Data" within this report.

Assisted Care Facility Management

      The assisted care facility management subsidiary, Siena Housing Management
Corp. ("SHM"), is a wholly- owned subsidiary of the Company, and conducts
business in Houston, Texas pursuant to a management agreement. SHM manages and
maintains an assisted care facility in Houston, Texas under a management
agreement into which it entered on June 27, 1977 with Treemont , Inc.
("Treemont"). SHM is entitled to receive a fee under the agreement which,
subject to a required annual priority distribution of project net income to
Treemont and certain adjustments and expenditures specified by the agreement, is
equal to 3% of the facility's gross receipts and 25% of the facility's net
income.

      SHM may terminate the agreement on six months' written notice; however,
the termination date must fall on an anniversary of the date on which the
parties entered into the agreement. Treemont can only terminate the agreement
for cause or if Treemont fails to receive its required annual priority
distribution for two consecutive years. SHM has the right to extend the term of
the agreement from year to year in one-year increments until June 30, 2028.
Unless the agreement is terminated or its term is extended as described above,
the agreement will terminate on June 30, 2003.

      On January 4, 2001, the Company agreed to the First Amendment to
Management Agreement (the "First Amendment") with Treemont which specifies the
terms for a potential sale of the Treemont facility. SHM consents that the
owners of Treemont may sell the facility with absolute discretion and terminate
the Management Agreement in exchange for a graduated percentage of the net
proceeds (as defined) from the sale of the facility. The owners of Treemont
agree to provide written notice of the commencement of any negotiations. SHM has
not been notified of any sale negotiations to date. If a sale transaction is
ultimately concluded, SHM shall not be obligated to terminate the Management
Agreement if SHM does not receive at least $2 million as its share of the
proceeds.


                                      -3-
<PAGE>

Investment in Real Estate

      The Company's investment in real estate, owned by LLG, consists of 162.1
acres (approximately 138.0 acres net of flood plain) of unimproved land in
Allen, Texas (the "Allen property") as of June 30, 2001. The southern boundary
of the Allen property is the Exchange Parkway, which provides access to the
property from Central Expressway on the west and from Highway 5 on the east. As
of June 30, 2001, the Allen property included five tracts of land: one tract of
approximately 31.9 net acres zoned multi-family, one tract of approximately 77.2
net acres zoned light industrial (formerly single-family), two tracts of
approximately 24.2 net acres zoned commercial and one tract of 4.6 net acres
zoned residential. In the fourth quarter of fiscal year 2001, five acres of the
multi-family property was successfully re-zoned as light industrial. With a
continuing view towards maximizing shareholder value, management is attempting
to have the one residential tract re-zoned as commercial.

      The acreage was increased by a total of 5.7 gross acres and 13.7 net acres
in fiscal year 2000 due to management's decision to reclaim a portion of the
flood plain acreage and the results of a new land survey that redefined the
boundaries. The Company was successful in fiscal year 1999 in re-zoning and
relocation of zoning in certain tracts. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an on-going program involving the possible sale of all or part of the
Allen property or its continued development.

      On October 30, 2000, the Company completed the sale of approximately 5.6
acres of one of the commercial properties to 75 Exchange Partners, LP, an
unaffiliated partnership. Net cash proceeds from the sale totaled $1.204 million
and the Company recorded a gain on sale of real estate of $828,000 in the second
quarter of fiscal year 2001, as reported in the Company's Statements of
Consolidated Operations and Comprehensive Income.

      On February 23, 2001, the Company completed the sale of approximately 17.3
acres of property zoned light industrial to Crow Family Holdings Industrial
Texas, LP("Crow Family Holdings"), an unaffiliated partnership. Net cash
proceeds from the sale totaled $1.251 million and the Company recorded a gain on
sale of real estate of $945,000 in the quarter ended March 31, 2001, as reported
in the Company's Statements of Consolidated Operations and Comprehensive Income.
In addition, Crow Family Holdings has outstanding options, which expire 18
months from the original sale date, to purchase substantially all the remaining
light industrial property. There is no guarantee that any sales will be
consummated.

      The Company offset a portion of the income tax expense due to the gain on
sale of real estate against the existing deferred tax assets, resulting in a
decrease in the deferred tax assets. Approximately $20,000 of alternative
minimum tax expense was recorded by the Company for the year ended June 30,
2001. The only portion of federal income tax expense that is owed by the Company
is the alternative minimum tax liability as a result of the utilization of a
portion of the Company's net operating loss carryforwards and deductible
temporary differences.

      Based on the property sales described above, continuing negotiations on
other parcels and improved market conditions, management believes that the
Company would be able to sell the remaining Allen property for a value in excess
of the tax basis. As a result, the Company reduced the valuation allowance for
deferred tax assets by $341,000 and additional paid-in-capital was increased by
$341,000 for the year ended June 30, 2001. Due to the change in zoning received
on certain tracts in 1999 and the change in flood plain acreage in 2000, the
Company reduced the valuation allowance for deferred tax assets and additional
paid in capital was increased by $249,000 and $1.148 million for the year ended
June 30, 2000 and 1999, respectively. The Company reported a net deferred tax
asset balance of $1.908 million and $1.441 million as of June 30, 2001 and 2000,
respectively, included in long term assets on the Company's Consolidated Balance
Sheets. Any tax benefits recognized related to the valuation allowance for pre-
reorganization deferred tax assets as of June 30, 2001 will be allocated to
additional paid-in capital.


                                      -4-
<PAGE>

      The Company is involved in discussions and or entered into tentative
agreements to sell certain parcels of land, which it, in its best judgement,
considers to be reasonable and in the interests of its shareholders. However,
there can be no assurance that these or any future discussions and or tentative
agreements may lead to any real estate transactions, and when such transactions
might occur. These tentative agreements may not be completed due to various
uncertainties associated with ongoing negotiations and buyer due dilligence
contingencies. Any sales that might result from these discussions and or
tentative agreements as well as options described above would result in a gain
on sale for financial reporting purposes.

Employees

      At June 30, 2001, the Company had two executive officers under contract
and one full-time employee. One of the Company's subsidiaries, SHM, had 141
full-time and 20 part-time employees who provide services at an assisted care
facility in Houston, Texas. The compensation expense and all operating expenses
for SHM's employees are funded directly by the assisted care facility owner and
are not reflected in the Statements of Consolidated Operations and Comprehensive
Income, except indirectly through the management fee income received by SHM
based in part on the facility's net income. The exception is the compensation
for the operations manager of the facility, including commission and bonus,
which is funded directly by SHM and included in personnel expense on the
Company's Statements of Consolidated Operations and Comprehensive Income.

Reorganization

      On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA (collectively
the "Debtor Corporations") filed separate voluntary petitions for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the District of Delaware. The
petitioning subsidiaries were Lomas Information Systems, Inc. ("LIS") and Lomas
Administrative Services, Inc. ("LAS"). The Debtor Corporations filed two
separate plans of reorganization with the Bankruptcy Court. An order confirming
the second amended joint plan of reorganization filed on October 4, 1996 for
LFC, LIS and LAS (the "Joint Debtors") and a stipulation and order among the
Joint Debtors and the appointed statutory committee of unsecured creditors of
LFC (the "LFC Creditors' Committee") regarding technical modifications to the
plan of reorganization and confirmation order filed on January 27, 1997 together
with the second amended joint plan of reorganization filed on July 3, 1996 are
collectively referred to herein as the "Joint Plan". The Joint Plan was
confirmed on October 4, 1996, but not effective until March 7, 1997, after
certain conditions were either met or waived by the LFC Creditors' Committee.

      The Joint Plan provided for a transfer by the Company of $3 million in
cash to partially fund a litigation trust to pursue third-party claims pursuant
to the LFC/LMUSA joint litigation trust agreement among LFC and its subsidiaries
and LMUSA, dated March 6, 1997 (the "LFC/LMUSA Litigation Trust"). Subject to
certain exceptions, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. In March 2000, the
LFC Creditors' Trust received $7.1 million of net proceeds from the LFC/LMUSA
Litigation Trust resulting from litigation. There can be no assurance that the
LFC/LMUSA Litigation Trust will produce any additional proceeds which will
benefit the Creditors Trust and former creditors.

      The Class 3 general unsecured creditors were to receive a combination of
cash and new common stock as settlement of their allowed claim, pursuant to the
Joint Plan. On November 12, 1997, the initial distribution date (the "Initial
Distribution Date"), $12.5 million was disbursed to the distribution agent for
the Class 3 unsecured creditors. Additional cash distributions in the amounts of
$6.2 million, $4.3 million, $8.1 million and $1.2 million were disbursed to the
distribution agent for benefit of the Class 3 unsecured creditors on May 11,
1998, April 21, 1999, April 24, 2000 and February 16, 2001, respectively,
bringing the total cash distributed through June 30, 2001 to $32.3 million. The
amounts ultimately distributed to the former creditors will be solely dependent
on the success of the Company, the amounts realized from the collection of
assets and the settlement of liabilities for both the Creditors' Trust and the
LFC/LMUSA Litigation Trust.

      As provided for in the Joint Plan and a decision of the LFC Creditors'
Committee, 4,000,000 shares of the new common stock were issued by the stock
transfer agent on the initial distribution date of November 12, 1997. For
balance sheet presentation and earnings (loss) per share, the 4,000,000 shares
were considered issued as of April 1, 1997. As of March 7, 1999, the stock
distribution agent had distributed 3,822,121 shares of the new common stock to
former


                                      -5-
<PAGE>

creditors. In the second quarter of fiscal year 2000, the stock distribution
agent distributed the final 177,879 shares to all allowed creditors that had
received prior stock distributions.

      On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. See "Item 8.
Financial Statements and Supplementary Data--Stockholders' Equity" footnote.

      THE 6,000,000 SHARES OF THE NEW COMMON STOCK ARE RESTRICTED IF THE EFFECT
OF A TRANSFER WOULD RESULT IN AN OWNERSHIP INCREASE TO 4.5 PERCENT OR ABOVE OF
THE TOTAL OUTSTANDING SHARES OR FROM 4.5 PERCENT TO A GREATER PERCENTAGE OF THE
TOTAL OUTSTANDING SHARES, WITHOUT PRIOR APPROVAL BY THE BOARD OF DIRECTORS AS
DESCRIBED IN THE RESTATED CERTIFICATE OF INCORPORATION. SEE EXHIBITS TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997.

      THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN.

      Reference is made to "III. Background and General Information -- E. The
Chapter 11 Filings" in the Joint Disclosure Statement, a copy of which is filed
as an exhibit to the Company's annual report on Form 10-K for the year ended
June 30, 1996, for more information on the Company's reorganization. The
principal provisions of the Joint Plan are summarized in the Joint Disclosure
Statement. That summary is qualified in its entirety by reference to the Joint
Plan, which is attached as Exhibits I and II to the Joint Disclosure Statement.

Creditors' Trust

      The Joint Plan established a creditors' trust (the "Creditors' Trust") for
which the Company serves as trustee. The Creditors' Trust holds the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to creditors in accordance with the terms of the Joint Plan. The
Creditors' Trust is organized for the sole purpose of liquidating the
non-reorganized assets and will terminate on March 7, 2002, unless an extension
is approved by the Bankruptcy Court. The assets and liabilities of the
Creditors' Trust are not reflected in the accompanying Consolidated Balance
Sheets as the Company is not the beneficiary of the Trust. Accordingly, revenues
and expenses related to the Creditors' Trust assets and liabilities since April
1, 1997, are not reflected in the accompanying Statements of Consolidated
Operations and Comprehensive Income. The allocation of costs between the
Creditors' Trust and the Company is based on management's estimate of each
entity's proportional share of costs. Gains and losses from the Creditors' Trust
are solely for the former creditors' benefit and the Company has no risk of loss
on the assets or liabilities. The amounts ultimately distributed to the former
creditors will be solely dependent on the success of the Company, the amounts
realized from the collection of assets, and settlement of liabilities for both
the Creditors' Trust and the LFC/LMUSA Litigation Trust. See "Item 8. Financial
Statements and Supplementary Data - Creditors' Trust" for more information.
Stockholders who are not former creditors of the Joint Debtors are not
beneficiaries of the Creditors' Trust.

      THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. See "Item 1. Business --
Reorganization".


                                      -6-
<PAGE>

Item 2. PROPERTIES

      The Company's principal executive offices are located in leased facilities
at 5068 West Plano Parkway, Suite 300 in Plano, Texas. The original lease for
six months expired on August 15, 1998, after which the Company is operating
under a month-to-month lease with a 30-day cancellation notice.

Item 3. LEGAL PROCEEDINGS

      None.

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

      The Company held its Annual Meeting of Stockholders on December 15, 2000,
in Wilmington, Delaware for the following purposes:

      1.    To elect five directors (John P. Kneafsey, Eric M. Bodow, James D.
            Kemp, Matthew S. Metcalfe, and Frank B. Ryan) to serve until the
            next annual meeting and until their successors are elected and
            qualified.

                                       VOTING
      --------------------------------------------------------------------------
         Nominees for      Number of Shares  Number of Shares   Number of Shares
           Director               For             Against          Abstained
      -------------------  ----------------  -----------------  ----------------
      John P. Kneafsey        5,339,380              0                2,189
      Erik M. Bodow           5,279,653              0               61,916
      James D. Kemp           5,279,653              0               61,916
      Matthew S. Metcalfe     5,338,955              0                2,614
      Frank B. Ryan           5,279,653              0               61,916

      2.    To approve and authorize the Board of Directors to effect, in its
            discretion, a reverse stock split followed by a forward split of the
            Company's Common Stock.

                                      VOTING
      ------------------------------------------------------------------------
      Number of Shares  Number of Shares  Number of Shares  Number of Broker
             For             Against         Abstained         Non-Votes
      ----------------  ----------------  ----------------  ------------------
          5,334,971           2,935             3,663               0

      3.    To ratify the appointment of KPMG LLP as independent public
            accountants for the Company for the fiscal year ended June 30, 2001.

                                      VOTING
      -----------------------------------------------------------------------
      Number of Shares  Number of Shares  Number of Shares  Number of Broker
             For             Against          Abstained         Non-Votes
      ----------------  ----------------  ----------------  -----------------
          5,340,151            566               852               0


                                      -7-
<PAGE>

                                     PART II

Item  5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      As of June 30, 2001 and 2000, the Company had 15,000,000 shares of $.10
par value common stock authorized, with 6,000,000 shares issued and outstanding.
Pursuant to the Joint Plan and a decision by the LFC Creditors' Committee,
4,000,000 shares of common stock were reserved for issuance on April 1, 1997 and
ultimately issued by the stock transfer agent on November 12, 1997. For balance
sheet presentation and earnings (loss) per share, the 4,000,000 shares were
considered issued as of April 1, 1997. The process by the stock distribution
agent resulted in 3,822,121 shares of common stock actually distributed to
former creditors through March 7, 1999, the deadline for exchanging predecessor
company bonds for common stock. In the second quarter of fiscal year 2000, the
stock distribution agent distributed the final 177,879 shares, including shares
held for disputed claims, to all allowed creditors that had received prior stock
distributions. The common stock has no preemptive or other subscription rights
and there are no conversion rights, redemption or sinking fund provisions with
respect to such shares.

      On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. See "Item 8.
Financial Statements and Supplementary Data--Stockholders' Equity" footnote.

      At the annual meeting on December 15, 2000, the stockholders of SHI (the
"Stockholders") approved a proposal to amend the Company's certificate of
incorporation (a) to effect, as determined by the Board in its sole discretion,
a reverse stock split of the outstanding Common Stock on the effective date of
the amendment (the "Effective Date"), pursuant to which each 100 shares then
outstanding will be converted into one share (the "Reverse Stock Split"), and
(b) to effect a forward split of the Common Stock on the day following the
effective date of the Reverse Split, pursuant to which Common Stock then
outstanding as of such date will be converted into the number of shares of the
Common Stock that such shares represented immediately prior to the Effective
Date (the "Forward Stock Split"). In lieu of issuing less than one whole share
resulting from the proposed stock split to holders of fewer than 100 shares, as
the case may be, the Company would make a cash payment based on the higher of
either the stated book value of the Company on June 30, 2000, or the closing
prices of the Common Stock, as discussed in more detail in the Company's Proxy
Statement dated October 30, 2000. The Board is authorized, in its sole
discretion, to effect the Reverse Stock Split based on factors existing at the
time of determination, including (a) the availability of funds necessary to
consummate the Reverse Stock Split and the cost of such funds; (b) the market
price of the Common Stock; (c) the Board's determination of whether the Reverse
Stock Split will result in a reduction in the Company's administrative expenses;
(d) prevailing market conditions; (e) the likely effect on the market price of
the Common Stock; and (f) other relevant factors.

      Consummation of the proposed Reverse Stock Split / Forward Stock Split
will not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further action by the Stockholders. If the Board
determines to consummate a Reverse Stock Split / Forward Stock Split, the
Company will publicly announce the determination at least 10 days prior to the
Effective Date.

      SHI's common stock, with a trading symbol of SIEN, is traded in the over
the counter market. During the last two fiscal years, the high and low prices
and dividends declared on common stock per share have been (in dollars):

<TABLE>
<CAPTION>
                             2001                2000         Dividends Declared
                      ------------------  ------------------- ------------------
                        High      Low       High      Low       2001      2000
                      --------  --------  --------  --------  --------  --------
<S>                    <C>      <C>       <C>       <C>             <C>       <C>
First Quarter .....    1.59375  1.03125   1.375     1.03125         --        --
Second Quarter ....    1.625    1.1875    1.75      1.0625          --        --
Third Quarter .....    1.5      1.1875    1.625     1.125           --        --
Fourth Quarter ....    1.5      1.07      1.625     1.15625         --        --
</TABLE>


                                      -8-
<PAGE>

      The Company, as of June 30, 2001 and 2000, had 1,000,000 shares of $1.00
par value preferred stock authorized, with 0 shares issued and outstanding.

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

      In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997. Using fresh-start accounting, the gain on discharge of debt
resulting from the bankruptcy proceedings was reflected on the predecessor
Company's financial statements for the period ended March 31, 1997. In addition,
the accumulated deficit of the predecessor Company at March 31, 1997, was
eliminated, and, at April 1, 1997, the reorganized Company's financial
statements reflected no beginning retained earnings or deficit. Since April 1,
1997, the Company's financial statements have been prepared as if it is a new
reporting entity and a vertical black line has been placed to separate the
pre-reorganization operating results (the "Predecessor Company") from
post-reorganization operating results (the "Reorganized Company"), since they
are not prepared on a comparable basis.

      Under fresh-start accounting, all assets and liabilities were restated to
reflect their reorganization value, which approximated fair value at the date of
reorganization. The Company's management and representatives of the creditors'
committee concluded that, based on the fact that the Company has historically
incurred losses from operations and has projected minimal future operating
profits, the reorganization value of the Company (the fair value of the Company
before considering liabilities) was equivalent to the fair value of the
Company's tangible assets and that no other intrinsic value existed. As a
result, all assets and liabilities were stated at their fair value.

                  (remainder of page intentionally left blank)


                                      -9-
<PAGE>

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES
             (Formerly Lomas Financial Corporation and Subsidiaries)

                      SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                                                    Predecessor
                                                                      Reorganized Company                             Company
                                                ---------------------------------------------------------------------------------
                                                                                                      Three Month    Nine Month
                                                Year Ended   Year Ended    Year Ended   Year Ended   Period Ended   Period Ended
                                                  June 30,     June 30,      June 30,     June 30,      June 30,       March 31,
                                                   2001         2000          1999         1998            1997         1997
                                                ----------   ----------    ----------   ----------    ------------   ------------
                                                                     (in thousands, except per share data)
<S>                                             <C>           <C>           <C>           <C>           <C>           <C>
Statement  of Operations Data:
Revenues from operations ....................   $   2,701     $    872      $  1,002      $ 1,410       $   226       $   3,235
Income (loss) from operations before
  reorganization items and federal income tax       1,437           82            52           72           (86)         (5,464)
Reorganization items--net ...................          --           --            --           --            --          (7,447)
Income (loss) from operations before federal
  income tax ................................       1,437           82            52           72           (86)        (12,911)
Federal income tax expense ..................         503          (29)          (18)         (25)           --              --
Income (loss) before extraordinary item .....         934           53            34           47           (86)        (12,911)
Extraordinary gain on discharge of debt .....          --           --            --           --            --         135,966
Net income (loss) ...........................         934           53            34           47           (86)        123,055

Basic earnings (loss) per  share:
  Income (loss) before extraordinary item ...        0.16         0.01          0.01*        0.01*        (0.02)*            **
  Net income (loss) .........................        0.16         0.01          0.01*        0.01*        (0.02)*            **
  Average number of shares ..................       6,000        6,000         5,304*       4,000*        4,000 *            **

Diluted earnings (loss) per  share:
  Income (loss) before extraordinary item ...        0.15         0.01          0.01*        0.01*        (0.02)*            **
  Net income (loss) .........................        0.15         0.01          0.01*        0.01*        (0.02)*            **
  Average number of shares ..................       6,126        6,106         5,333*       4,044*        4,000 *            **
</TABLE>

<TABLE>
<CAPTION>
                                                     Reorganized Company
                                   -------------------------------------------------------
                                                        As of June 30
                                     2001        2000        1999        1998        1997
                                   -------     -------     -------     -------     -------
                                                        (in thousands)
<S>                                <C>         <C>         <C>         <C>         <C>
Balance Sheet Data:
Cash .........................     $ 5,914     $ 4,088     $ 4,111     $ 2,475     $ 1,941
Investment in real estate ....       4,570       4,949       4,879       4,800       4,800
Deferred tax assets--net .....       1,908       1,441       1,175          --          --
Total assets .................      12,743      10,632      10,420       7,448       7,051
Total liabilities ............       1,011         779         931       1,305         990
Total stockholders' equity ...      11,732       9,853       9,489       6,143       6,061
</TABLE>

*  Per share amounts for Reorganized Company are based on shares issued or
   reserved for issuance to creditors.
** Per share amounts are not meaningful due to reorganization.


                                      -10-
<PAGE>

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

Overview

      Statements contained herein that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
but not limited to statements regarding the Company's expectations, hopes,
beliefs, intentions or strategies regarding the future. Actual results could
differ materially from those projected in any forward-looking statements as a
result of a number of factors, including those detailed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
well as those set forth elsewhere herein. The forward-looking statements are
made as of the date of these financial statements and the Company undertakes no
obligation to update or revise the forward-looking statements, or to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.

      In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997, and since April 1, 1997, the Company's financial statements have
been prepared as if it is a new reporting entity. See "Item 8. Financial
Statements and Supplementary Data - Accounting Policies" footnote.

      The operating results of the Company during the years ended June 30, 2001,
2000, and 1999, were as follows (in thousands):

                                                       As of June 30,
                                             ---------------------------------
                                               2001         2000         1999
                                             -------      -------      -------

Operating income (loss):
   Assisted care management ..............   $   142      $   210      $   329
   Real estate ...........................     1,815          (12)         (15)
   Other .................................       633          510          502
                                             -------      -------      -------
                                               2,590          708          816
                                             -------      -------      -------
Expenses:
   General and administrative ............    (1,153)        (626)        (764)
                                             -------      -------      -------

Income before federal income tax .........     1,437           82           52
Federal income tax expense ...............      (503)         (29)         (18)
                                             -------      -------      -------
       Net income ........................   $   934      $    53      $    34
                                             =======      =======      =======

Results of Operations--Year Ended June 30, 2001 Compared with Year Ended June
30, 2000

      Assisted Care Management. SHM manages and maintains an assisted care
facility in Houston, Texas under a management agreement into which it entered on
June 27, 1977 with Treemont. See "Item 1. Business--Assisted Care Facility
Management" for more information on the management agreement. Operating income
from the assisted care management operations decreased from $210,000 for the
year ended June 30, 2000 to $142,000 for the year ended June 30, 2001, primarily
due to a decrease in the management fee received by SHM.

      On January 4, 2001, the Company agreed to the First Amendment to
Management Agreement (the "First Amendment") with Treemont which specifies the
terms for a potential sale of the Treemont facility. SHM consents that the
owners of Treemont may sell the facility with absolute discretion and terminate
the Management Agreement in exchange for a graduated percentage of the net
proceeds (as defined) from the sale of the facility. The owners of Treemont
agree to provide written notice of the commencement of any negotiations. SHM has
not been notified of any sale negotiations to date. If a sale transaction is
ultimately concluded, SHM shall not be obligated to terminate the Management
Agreement if SHM does not receive at least $2 million as its share of the
proceeds.


                                      -11-
<PAGE>

      Real Estate. The Company's investment in real estate, owned by LLG,
consist of 162.1 acres (approximately 138.0 acres net of flood plain) of
unimproved land in Allen, Texas (the "Allen property") as of June 30, 2001. The
southern boundary of the Allen property is the Exchange Parkway, which provides
access to the property from Central Expressway on the west and from Highway 5 on
the east. As of June 30, 2001, the Allen property included five tracts of land:
one tract of approximately 31.9 net acres zoned multi-family, one tract of
approximately 77.2 net acres zoned light industrial (formerly single-family),
two tracts of approximately 24.2 net acres zoned commercial and one tract of 4.6
net acres zoned residential. In the fourth quarter of fiscal year 2001, five
acres of the multi-family property was successfully re-zoned as light
industrial. With a continuing view towards maximizing shareholder value,
management is attempting to have the one residential tract re-zoned as
commercial.

      The acreage was increased by a total of 5.7 gross acres and 13.7 net acres
in fiscal year 2000 due to management's decision to reclaim a portion of the
flood plain acreage and the results of a new land survey that redefined the
boundaries. The Company was successful in fiscal year 1999 in re-zoning and
relocation of zoning in certain tracts. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an on-going program involving the possible sale of all or part of
the Allen property or its continued development.

      On October 30, 2000, the Company completed the sale of approximately 5.6
acres of one of the commercial properties to 75 Exchange Partners, LP, an
unaffiliated partnership. Net cash proceeds from the sale totaled $1.204 million
and the Company recorded a gain on sale of real estate of $828,000 in the second
quarter of fiscal year 2001, as reported in the Company's Statements of
Consolidated Operations and Comprehensive Income.

      On February 23, 2001, the Company completed the sale of approximately 17.3
acres of property zoned light industrial to Crow Family Holdings Industrial
Texas, LP, an unaffiliated partnership. Net cash proceeds from the sale totaled
$1.251 million and the Company recorded a gain on sale of real estate of
$945,000 in the quarter ended March 31, 2001, as reported in the Company's
Statements of Consolidated Operations and Comprehensive Income. In addition,
Crow Family Holdings has outstanding options, which expire 18 months from the
original sale date, to purchase substantially all the remaining light industrial
property. There is no guarantee that any sales will be consummated.

      The Company offset a portion of the income tax expense due to the gain on
sale of real estate against the existing deferred tax assets, resulting in a
decrease in the deferred tax assets. Approximately $20,000 of alternative
minimum tax expense was recorded by the Company for the year ended June 30,
2001. The only portion of federal income tax expense that is owed by the Company
is the alternative minimum tax liability as a result of the utilization of a
portion of the Company's net operating loss carryforwards and deductible
temporary differences.

      Based on the property sales described above, continuing negotiations on
other parcels and improved market conditions, management believes that the
Company would be able to sell the remaining Allen property for a value in excess
of the tax basis. As a result, the Company reduced the valuation allowance for
deferred tax assets by $341,000 and additional paid-in-capital was increased by
$341,000 for the year ended June 30, 2001. Due to the change in zoning received
on certain tracts in 1999 and the change in flood plain acreage in 2000, the
Company reduced the valuation allowance for deferred tax assets and additional
paid in capital was increased by $249,000 and $1.148 million for the year ended
June 30, 2000 and 1999, respectively. The Company reported a net deferred tax
asset balance of $1.908 million and $1.441 million as of June 30, 2001 and 2000,
respectively, included in long term assets on the Company's Consolidated Balance
Sheets. Any tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2001 will be allocated to
additional paid-in capital.

      The Company is involved in discussions and or entered into tentative
agreements to sell certain parcels of land, which it, in its best judgement,
considers to be reasonable and in the interests of its shareholders. However,
there can be no assurance that these or any future discussions and or tentative
agreements may lead to any real estate transactions, and when such transactions
might occur. These tentative agreements may not be completed due to various
uncertainties associated with ongoing negotiations and buyer due dilligence
contingencies. Any sales that might result from these discussions and or
tentative agreements as well as options described above would result in a gain
on sale for financial reporting purposes.

      The operating income for fiscal year 2001 is significantly higher than the
prior fiscal year as a result of the two real estate sales described above
accounting for $1.773 million of the $1.815 million real estate operating
income. During fiscal year 2001, improvement costs of $303,000 related to
developing the property were capitalized during fiscal year 2001 in accordance
with the Company's capitalization policy, as compared to $70,000 of costs that
were capitalized during fiscal year 2000. Of the $303,000 improvement costs in
fiscal year 2001, the Company capitalized $102,000 of


                                      -12-
<PAGE>

property taxes paid on a portion of the commercial real estate property. The
remainder of the increase over the prior year is due to work performed related
to the flood plain recovery project and the re-zoning project. The costs related
to the re-zoning, marketing and developing the property will continue, some of
which may be capitalized.

      Other Income. The Company reported other operating income of $633,000 for
the year ended June 30, 2001, as compared to $510,000 for the year ended June
30, 2000, including reimbursements from the Creditors' Trust of $415,000 and
$210,000 for fiscal year 2001 and 2000, respectively, for an overhead allocation
based upon management's estimate of resources used by the Creditors' Trust. The
trust expense reimbursement income for fiscal year 2001 included $237,000 for
success bonuses paid to the Company pursuant to existing compensation plans for
the directors and officers. This amount included $212,000 paid as a result of
the proceeds received by the Creditors' Trust in March 2000 from the LFC/LMUSA
Litigation Trust resulting from litigation.

      The Company reported an additional $80,000 of other income in fiscal year
2000 resulting from a decrease in the long term accrued medical insurance
premiums liability. In connection with the reorganization in March 1997, the
Company agreed to assume the pre-petition liability to provide certain employees
of a former subsidiary and their spouses with medical insurance. The total
amount of the liability was estimated using a life expectancy age of 90, an
annual health care cost increase rate of approximately 5% and a discount rate of
approximately 6.5%. As of June 30, 2001 and 2000, the Company was providing
payments to 27 people to be used toward the payment of insurance. During fiscal
year end 2000, there was a decrease in the population for whom the Company
provides payments to be used for medical insurance and, as a result, released
$80,000 of the long term liability for accrued medical insurance premiums.
Management expects this volatility to continue in the future due to the relative
small number of people covered by this liability.

      The remainder of the other operating income is primarily corporate
interest income, including interest related to the directors' deferred
compensation plan, of $203,000 and $214,000 for fiscal year 2001 and 2000,
respectively.

      General and Administrative Expenses. The Company reported an increase of
$527,000 in general and administrative expenses from $626,000 for the year ended
June 30, 2000 to $1.153 million for the year ended June 30, 2001. The increase
is primarily attributable to additional compensation expense of $75,000 and
$375,000 related to success bonuses paid to the directors and officers,
respectively, pursuant to existing compensation plans. The Company was
reimbursed by the Creditors' Trust for $238,000 of the total success bonuses
earned by the directors and officers. See "Stock and Compensation Plans"
footnote for further information. Additionally, the Company reported an increase
in corporate insurance expense of $20,000, an increase in professional, legal
and accounting fees of $35,000, and a $9,000 increase in interest expense
related to the directors' deferred compensation plan.

      Reverse Stock Split / Forward Stock Split. At the annual meeting on
December 15, 2000, the stockholders of SHI (the "Stockholders") approved a
proposal to amend the Company's certificate of incorporation (a) to effect, as
determined by the Board in its sole discretion, a reverse stock split of the
outstanding Common Stock on the effective date of the amendment (the "Effective
Date"), pursuant to which each 100 shares then outstanding will be converted
into one share (the "Reverse Stock Split"), and (b) to effect a forward split of
the Common Stock on the day following the effective date of the Reverse Split,
pursuant to which Common Stock then outstanding as of such date will be
converted into the number of shares of the Common Stock that such shares
represented immediately prior to the Effective Date (the "Forward Stock Split").
In lieu of issuing less than one whole share resulting from the proposed stock
split to holders of fewer than 100 shares, as the case may be, the Company would
make a cash payment based on the higher of either the stated book value of the
Company on June 30, 2000, or the closing prices of the Common Stock, as
discussed in more detail in the Company's Proxy Statement dated October 30,
2000. The Board is authorized, in its sole discretion, to effect the Reverse
Stock Split based on factors existing at the time of determination, including
(a) the availability of funds necessary to consummate the Reverse Stock Split
and the cost of such funds; (b) the market price of the Common Stock; (c) the
Board's determination of whether the Reverse Stock Split will result in a
reduction in the Company's administrative expenses; (d) prevailing market
conditions; (e) the likely effect on the market price of the Common Stock; and
(f) other relevant factors.

      Consummation of the proposed Reverse Stock Split / Forward Stock Split
will not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further


                                      -13-
<PAGE>

action by the Stockholders. If the Board determines to consummate a Reverse
Stock Split / Forward Stock Split, the Company will publicly announce the
determination at least 10 days prior to the Effective Date.

Results of Operations--Year Ended June 30, 2000 Compared with Year Ended June
30, 1999

      Assisted Care Management. Operating income from the assisted care
management operations decreased from $329,000 for the year ended June 30, 1999,
to $210,000 for the year ended June 30, 2000, primarily due to a decrease in the
management fee received by SHM. In fiscal year 1999, SHM reported an increase in
management fee income of $61,000 partially offset by a related increase in
personnel expense of $15,000. In addition, SHM reported a $19,000 decrease in
interest income as a result of a decision by management to maintain a smaller
cash balance at the subsidiary company, $22,000 increase in travel expenses and
a $7,000 increase in franchise tax expense over the prior fiscal year.

      Real Estate. The real estate operating loss for fiscal year 2000 is
consistent with that for fiscal year 1999. Improvement costs of $70,000 related
to developing the property were capitalized during fiscal year 2000 in
accordance with the Company's capitalization policy, as compared to $79,000 of
costs that were capitalized during fiscal year 1999.

      Other Income. The Company reported other operating income of $510,000 for
the year ended June 30, 2000, as compared to $502,000 for the year ended June
30, 1999, including reimbursements from the Creditors' Trust of $210,000 and
$339,000 for fiscal year 2000 and 1999, respectively, for an overhead allocation
based upon management's estimate of resources used by the Creditors' Trust. In
addition, the Company reported $80,000 of other income in fiscal year 2000
resulting from a decrease in the long term accrued medical insurance premiums
liability as discussed above.

      The remainder of the other operating income is primarily corporate
interest income, including interest related to the directors' deferred
compensation plan, of $214,000 and $155,000 for fiscal year 2000 and 1999,
respectively.

      General and Administrative Expenses. General and administrative expenses
decreased from $764,000 for the year ended June 30, 1999 to $626,000 for the
year ended June 30, 2000. The decrease is primarily attributable to the
directors' additional compensation expense of $98,000 reported in fiscal year
1999 related to success bonuses paid to the directors. See "Stock and
Compensation Plans" footnote for further information. Additionally, the Company
reported decreases from the prior year in most general and administrative
expense accounts, including decreases totaling $42,000 reported in consulting,
corporate insurance and travel expense.

      See "Item 8. Financial Statements and Supplementary Data" for more
information.

Liquidity and Capital Resources

      As of June 30, 2001, the only liabilities of the Company were accounts
payable and other accrued expenses which will be paid from current operating
cash available as of June 30, 2001.

Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is subject to potential fluctuations in earnings and the fair
value of certain of its assets, as well as variations in expected cash flows due
to changes in market interest rates and equity prices. On December 15, 2000, the
Company's board of directors authorized the use of up to 20% of the Company's
cash for the investment in equity securities, with no more than 50% invested in
any one company. The investment in equity securities exposes the Company to
general market risks. As of June 30, 2001, the amount invested in equity
securities was $160,000 with a fair market value of $139,000. The securities are
classified as available-for-sale and reported on the Company's Consolidated
Balance Sheets at fair market value with the unrealized holding loss included,
net of tax, in accumulated other comprehensive loss, a component of
stockholders' equity.


                                      -14-
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Siena Holdings, Inc.:

      We have audited the accompanying consolidated balance sheets of Siena
Holdings, Inc. and subsidiaries, (the "Company") as of June 30, 2001 and 2000,
and the related statements of consolidated operations and comprehensive income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 2001. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement schedules,
Schedule I -- Condensed Financial Information of Registrant as of June 30, 2001
and 2000 and for each of the years in the three-year period ended June 30, 2001
and Schedule III -- Real Estate and Accumulated Depreciation as of June 30,
2001, 2000 and 1999. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.

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

      In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Siena
Holdings, Inc. and subsidiaries, as of June 30, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 30, 2001, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion the related
financial statement schedules when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.


                                                                KPMG LLP

Dallas, Texas
August 30, 2001


                                      -15-
<PAGE>

                           CONSOLIDATED BALANCE SHEETS

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES
                        (in thousands, except par value)

<TABLE>
<CAPTION>
                                                                           June 30,
                                                                    ---------------------
                                                                      2001          2000
                                                                    --------      --------
<S>                                                                 <C>           <C>
ASSETS

Current Assets:
    Cash and cash equivalents .................................     $  5,914      $  4,088
    Investments in equity securities ..........................          139            --
    Receivables ...............................................           73           112
    Prepaid expenses ..........................................          139            42
                                                                    --------      --------
                                                                       6,265         4,242
                                                                    --------      --------
Long Term Assets:
    Investment in real estate .................................        4,570         4,949
    Deferred tax assets--net ..................................        1,908         1,441
                                                                    --------      --------
                                                                       6,478         6,390
                                                                    --------      --------
         Total Assets .........................................     $ 12,743      $ 10,632
                                                                    ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Accounts payable and accrued expenses .....................     $    158      $    161

Long Term Liabilities:
    Accrued medical insurance premiums ........................          447           516
    Deferred compensation and fees ............................          406           102
                                                                    --------      --------
                                                                         853           618
                                                                    --------      --------
                                                                       1,011           779
                                                                    --------      --------
Stockholders' Equity:
    Preferred stock--($1.00 par value, 1,000 shares authorized,
        0 shares issued and outstanding) ......................           --            --
    Common stock--($.10 par value, 15,000 shares authorized,
        6,000 shares issued and outstanding) ..................          600           600
    Additional paid-in capital ................................       10,164         9,205
    Retained earnings .........................................          982            48
    Accumulated other comprehensive loss, net of tax ..........          (14)           --
                                                                    --------      --------
                                                                      11,732         9,853
                                                                    --------      --------
         Total Liabilities and Stockholders' Equity ...........     $ 12,743      $ 10,632
                                                                    ========      ========
</TABLE>

See notes to consolidated financial statements.


                                      -16-
<PAGE>

                     STATEMENTS OF CONSOLIDATED OPERATIONS
                            AND COMPREHENSIVE INCOME

                     SIENA HOLDINGS, INC. AND SUBSIDIARIES
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                 Years Ended June 30,
                                                                           ---------------------------------
                                                                             2001         2000         1999
                                                                           -------      -------      -------
<S>                                                                        <C>          <C>          <C>
Revenues:
  Commissions and fees ...............................................     $   250      $   360      $   478
  Interest ...........................................................         246          214          174
  Trust expense reimbursement ........................................         415          210          339
  Gain on sale of real estate ........................................       1,773           --           --
  Gain on sale of equity securities ..................................           1           --           --
  Other ..............................................................          16           88           11
                                                                           -------      -------      -------
                                                                             2,701          872        1,002
                                                                           -------      -------      -------
Expenses:
  Personnel ..........................................................         724          382          434
  Other operating ....................................................         540          408          516
                                                                           -------      -------      -------
                                                                             1,264          790          950
                                                                           -------      -------      -------
Income from operations before federal income tax .....................       1,437           82           52
Federal income tax expense ...........................................        (503)         (29)         (18)
                                                                           -------      -------      -------
Net income ...........................................................         934           53           34
                                                                           -------      -------      -------

Other comprehensive loss, net of tax:
  Unrealized losses on equity securities:
    Unrealized holding losses arising during period ..................         (13)          --           --
    Less: reclassification adjustment for gains included in net income          (1)          --           --
                                                                           -------      -------      -------
  Other comprehensive loss, net of tax ...............................         (14)          --           --
                                                                           -------      -------      -------
Comprehensive income .................................................     $   920      $    53      $    34
                                                                           =======      =======      =======

Basic earnings per share:
  Net income .........................................................     $  0.16      $  0.01      $  0.01*
  Average number of shares ...........................................       6,000        6,000        5,304*

Diluted earnings per share:
  Net income .........................................................     $  0.15      $  0.01      $  0.01*
  Average number of shares ...........................................       6,126        6,106        5,333*
</TABLE>

* Average share and per share amounts are based on shares issued or reserved for
  issuance to creditors.

See notes to consolidated financial statements.


                                      -17-
<PAGE>

                 STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES

                    Years Ended June 30, 2001, 2000, and 1999
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                       Common                  Additional   Retained        Other
                                                       Shares       Common      Paid-in     Earnings    Comprehensive
                                                    Outstanding     Stock       Capital     (Deficit)        Loss         Total
                                                    -----------    --------    ---------   -----------  --------------   --------
<S>                                                      <C>       <C>          <C>          <C>           <C>           <C>
Balance at June 30, 1998 ........................        4,000     $    400     $  5,782     $    (39)     $     --      $  6,143
Net income for the year ended June 30, 1999 .....           --           --           --           34            --            34
Utilization of tax benefits of pre-reorganization
  net operating loss carryforwards and
  deductible temporary differences ..............           --           --           45           --            --            45
Decrease in valuation allowance attributable
  to pre-reorganization net operating loss
  carryforwards .................................           --           --        1,148           --            --         1,148
Issuance of common stock--net ...................        2,000          200        1,902           --            --         2,102
Issuance of stock options .......................           --           --           17           --            --            17
                                                      --------     --------     --------     --------      --------      --------
  Balance at June 30, 1999 ......................        6,000          600        8,894           (5)           --         9,489
Net income for the year ended June 30, 2000 .....           --           --           --           53            --            53
Utilization of tax benefits of pre-reorganization
  net operating loss carryforwards and
  deductible temporary differences ..............           --           --           46           --            --            46
Decrease in valuation allowance attributable
  to pre-reorganization net operating loss
  carryforwards .................................           --           --          249           --            --           249
Issuance of stock options .......................         ` --           --           16           --            --            16
                                                      --------     --------     --------     --------      --------      --------
  Balance at June 30, 2000 ......................        6,000          600        9,205           48            --         9,853
Net income for the year ended June 30, 2001 .....           --           --           --          934            --           934
Unrealized holding losses on equity securities,
  net of tax benefits ...........................           --           --           --           --           (13)          (13)
Reclassification adjustment for gains included
  in net income .................................           --           --           --           --            (1)           (1)
Utilization of tax benefits of pre-reorganization
  net operating loss carryforwards and
  deductible  temporary differences .............           --           --          602           --            --           602
Decrease in valuation allowance attributable
  to pre-reorganization net operating loss
  carryforwards .................................           --           --          341           --            --           341
Issuance of stock options .......................           --           --           16           --            --            16
                                                      --------     --------     --------     --------      --------      --------
  Balance at June 30, 2001 ......................        6,000     $    600     $ 10,164     $    982      $    (14)     $ 11,732
                                                      ========     ========     ========     ========      ========      ========
</TABLE>

See notes to consolidated financial statements.


                                      -18-
<PAGE>

                      STATEMENTS OF CONSOLIDATED CASH FLOWS

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                              Years Ended June 30,
                                                                        ---------------------------------
                                                                          2001         2000         1999
                                                                        -------      -------      -------
<S>                                                                     <C>          <C>          <C>
Operating activities:
  Net income ......................................................     $   934      $    53      $    34
  Adjustments to reconcile net income to cash  provided (used)
  by operations:
   Federal income tax expense charged to additional paid-in
    capital due to the utilization of pre-reorganization tax
    attributes ....................................................         602           46           45
   Increase in deferred tax / decrease in federal income tax
    expense relating to post-reorganization tax attributes ........        (119)         (17)         (27)
   Compensation expense for stock options .........................          16           16           17
   Gain on sale of real estate ....................................      (1,773)          --           --
   Gain on sale of equity securities ..............................          (1)          --           --
   (Increase) decrease in current accounts receivable and
     prepaid expenses .............................................         (58)         101          (82)
   Decrease in current accounts payable and accrued expenses ......          (3)         (69)        (364)
   Decrease in long term accrued medical insurance premiums .......         (69)        (133)         (62)
   Increase in long term deferred compensation and fees ...........         304           50           52
                                                                        -------      -------      -------
      Net cash provided (used) by operating activities ............        (167)          47         (387)
                                                                        -------      -------      -------
Investing activities:
  Purchases of equity securities ..................................        (166)          --           --
  Sale of equity securities .......................................           7           --           --
  Sale of real estate .............................................       2,455           --           --
  Increase in investment in real estate ...........................        (303)         (70)         (79)
                                                                        -------      -------      -------
      Net cash provided (used) by investing activities ............       1,993          (70)         (79)
                                                                        -------      -------      -------
Financing activities:
  Issuance of common stock--net ...................................          --           --        2,102
                                                                        -------      -------      -------
      Net cash provided by financing activities ...................          --           --        2,102
                                                                        -------      -------      -------

Net increase (decrease) in cash and cash equivalents ..............       1,826          (23)       1,636
Cash and cash equivalents at beginning of year ....................       4,088        4,111        2,475
                                                                        -------      -------      -------
Cash and cash equivalents at end of year ..........................     $ 5,914      $ 4,088      $ 4,111
                                                                        =======      =======      =======

Cash payments for:
  Interest ........................................................          --           --           --
  Federal income tax ..............................................          --           --           --
Non-cash transactions:
  Issuance of stock options .......................................     $    16      $    16      $    17
</TABLE>

See notes to consolidated financial statements.


                                      -19-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES

Significant Accounting Policies

      Principles of Consolidation and Basis of Presentation. The consolidated
financial statements include the accounts of Siena Holdings, Corp. ("SHI"),
formerly Lomas Financial Corporation ("LFC"), and its subsidiaries
(collectively, the "Company") after elimination of all significant intercompany
balances and transactions. SHI's wholly-owned, principal subsidiaries are Siena
Housing Management Corp. and LLG Lands, Inc.. Certain prior period amounts have
been reclassified to conform to the current period presentation.

      Prior to October 1, 1996, SHI's wholly-owned, principal subsidiary was
Lomas Mortgage USA, Inc. ("LMUSA"), now known as Nomas Corp.("Nomas"). As a
result of the confirmation of LMUSA's Chapter 11 reorganization plan, the
Company's interest in LMUSA was extinguished effective October 1, 1996. LFC's
plan of reorganization was confirmed on October 4, 1996, but not effective until
March 1997. In accordance with the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code", the Company adopted fresh-start
accounting as of March 31, 1997, after all material conditions required by the
Plan were satisfied. Since April 1, 1997, the Company's financial statements
have been prepared as if it is a new reporting entity.

      Under fresh-start accounting, all assets and liabilities were restated to
reflect their own reorganization value, which approximated fair value at the
date of reorganization. The Company's management and representatives of the
creditors' committee concluded that, based on the fact that the Company
historically incurred losses from operations and projected minimal future
operating profits, the reorganization value of the Company (the fair value of
the Company before considering liabilities) was equivalent to the fair value of
the Company's tangible assets and that no other intrinsic value existed. As a
result, all assets and liabilities were stated at their fair value. See the
"Reorganization" footnote.

      Cash and Cash Equivalents. Cash and cash equivalents include cash on hand
and investments with original maturities of three months or less.

      Investment in Equity Securities. Investments in equity securities are
classified as available-for-sale and are held by the Company's real estate
subsidiary, LLG Lands, Inc. Unrealized gains and losses are included, net of
tax, in accumulated other comprehensive loss, a component of stockholders'
equity as reported on the Company's Consolidated Balance Sheets. Realized gains
and losses are reported in revenue on the Company's Statements of Consolidated
Operations and Comprehensive Income.

      Investment in Real Estate. Real estate is carried at the fresh-start
reporting value as of March 31, 1997, adjusted for improvements capitalized in
accordance with the Company's capitalization policy. The Company continually
monitors the value of the real estate based on estimates of future cash flows.
Any amounts deemed to be impaired are charged, in the period in which such
impairment is determined. For the years ended June 30, 2001, 2000 and 1999,
there were no charges to earnings for impairment of the real estate.

      Accrued Medical Insurance Premiums. In connection with the reorganization
in March 1997, the Company agreed to assume the pre-petition liability to
provide certain employees of a former subsidiary and their spouses with medical
insurance. The total amount of the liability was estimated using a life
expectancy age of 90, an annual health care cost increase rate of approximately
5% and a discount rate of approximately 6.5%. The current portion of the accrued
medical insurance premiums is included in accounts payable and accrued expenses
and the long term portion of the accrued medical insurance premiums balance is
listed under long term liabilities, both on the Company's Consolidated Balance
Sheets. The accrual will be reviewed and adjusted, as required, due to either a
change in the health care cost factors used in the accrual calculation or a
decrease in the number of people in the population.


                                      -20-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Assisted Care Facility Management Fee. The Company, through its
wholly-owned subsidiary Siena Housing Management Corp. ("SHM"), manages and
maintains an assisted care facility in Houston, Texas under a management
agreement into which it entered on June 27, 1977 with Treemont, Inc.
("Treemont"). SHM is entitled to receive a fee under the agreement which,
subject to a required annual priority distribution of project net income to
Treemont and certain adjustments and expenditures specified by the agreement, is
equal to 3% of the facility's gross receipts and 25% of the facility's net
income.

      The compensation expense and primarily all operating expenses of SHM's
employees who provide services at the assisted care facility are funded directly
by the assisted care facility owner and are not reflected in the Statements of
Consolidated Operations and Comprehensive Income, except indirectly through the
management fee income received by SHM based in part on the facility's net
income. The exception is the compensation for the operations manager of the
facility which is funded directly by SHM and included in personnel expense on
the Company's Statements of Consolidated Operations and Comprehensive Income.

      Federal Income Taxes. Income taxes have been provided in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, the deferred tax assets and liabilities are
determined based on the difference between the financial reporting and tax basis
of assets and liabilities and operating loss and tax credit carry forwards and
enacted tax rates that will be in effect for the years in which the differences
are expected to reverse. Under fresh-start reporting, benefits realized from the
utilization of pre-reorganization net operating loss carryforwards and
recognition of pre-reorganization deductible temporary differences existing at
the date of confirmation of the Joint Plan are reported as direct additions to
additional paid-in capital.

      Earnings Per Share. Earnings per share were determined using the weighted
average shares issued or reserved for issuance. On November 5, 1998, the Company
received $2.2 million from the Company's Chairman of the Board ($2.102 million
net of stock offering expenses) in exchange for 2 million shares of the
Company's common stock, as approved by the Company's Board of Directors on
September 23, 1998. This transaction increased the number of outstanding shares
of common stock to 6 million. Effective December 1, 1997, the Company granted
stock options under the Stock Option Plan and the Directors' Stock Option Plan.
The effects of outstanding options are included in the calculation of diluted
earnings per common share to the extent that they are dilutive to earnings. The
options issued to the Directors of the Company were not included in the
calculation of diluted earnings per common share until the second quarter of
fiscal year 1999 as they were not approved by the Shareholders until December
16, 1998, with a retroactive effective date of December 1, 1997.

                  (remainder of page intentionally left blank)


                                      -21-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following is a reconciliation of net income and weighted average
common shares outstanding used to compute basic and diluted earnings per share
for the years presented:

<TABLE>
<CAPTION>
                                                            Years Ended June 30
                                                        ----------------------------
                                                         2001       2000       1999
                                                        ------     ------     ------
<S>                                                     <C>        <C>        <C>
Reconciliation of net income:
Basic net income:
  Net income ......................................     $  934     $   53     $   34
                                                        ======     ======     ======
Diluted net income:
  Net income ......................................     $  934     $   53     $   34
  Income effect of assumed conversions ............         --         --         --
                                                        ------     ------     ------
  Net income plus assumed conversions .............     $  934     $   53     $   34
                                                        ======     ======     ======

Reconciliation of weighted average common
  shares outstanding:
Basic shares of common stock:
  Weighted average common shares outstanding ......      6,000      6,000      5,304*

Diluted shares of common stock:
  Weighted average common shares outstanding ......      6,000      6,000      5,304*
  Plus: Dilutive potential common shares
        SHI Non-qualified Stock Option Plans ......        126        106         29*
                                                        ------     ------     ------
  Adjusted weighted average shares outstanding ....      6,126      6,106      5,333*
                                                        ======     ======     ======
</TABLE>

* Average shares outstanding are based on shares issued or reserved for issuance
  to creditors.

      Stock-Based Compensation. The Company has adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". This
statement provides a choice for the accounting of employee stock compensation
plans. A company may elect to use a fair-value methodology, under which
compensation cost is measured and recognized in the Statements of Consolidated
Operations and Comprehensive Income, or continue to account for these plans
under Accounting Principles Bulletin ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. The Company has elected to
continue to account for these plans under APB No. 25. The "Stock and
Compensation Plans" footnote contains a summary of the pro forma effects to
reported net income and earnings per share for the years ended June 30, 2001,
2000 and 1999, as if the Company had elected to account for employee stock
compensation plans utilizing the fair value methodology prescribed by SFAS No.
123.

      Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

Reorganization

      On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA (collectively
the "Debtor Corporations") filed separate voluntary petitions for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the District of Delaware. The
petitioning subsidiaries were Lomas Information Systems, Inc. ("LIS") and Lomas
Administrative Services, Inc. ("LAS"). The Debtor Corporations filed two
separate plans of reorganization with the Bankruptcy Court. An order confirming
the second amended joint plan of reorganization filed on October 4, 1996 for
LFC, LIS and LAS (the


                                      -22-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

"Joint Debtors") and a stipulation and order among the Joint Debtors and the
appointed statutory committee of unsecured creditors of LFC (the "LFC Creditors'
Committee") regarding technical modifications to the plan of reorganization and
confirmation order filed on January 27, 1997 together with the second amended
joint plan of reorganization filed on July 3, 1996 are collectively referred to
herein as the "Joint Plan". The Joint Plan was confirmed on October 4, 1996, but
not effective until March 7, 1997, after certain conditions were either met or
waived by the LFC Creditors' Committee.

      The Joint Plan provided for a transfer by the Company of $3 million in
cash to partially fund a litigation trust to pursue third-party claims pursuant
to the LFC/LMUSA joint litigation trust agreement among LFC and its subsidiaries
and LMUSA, dated March 6, 1997 (the "LFC/LMUSA Litigation Trust"). Subject to
certain exceptions, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. In March 2000, the
LFC Creditors' Trust received $7.1 million of net proceeds from the LFC/LMUSA
Litigation Trust resulting from litigation. There can be no assurance that the
LFC/LMUSA Litigation Trust will produce any additional proceeds which will
benefit the Creditors Trust and former creditors.

      The Class 3 general unsecured creditors were to receive a combination of
cash and new common stock as settlement of their allowed claim, pursuant to the
Joint Plan. On November 12, 1997, the initial distribution date (the "Initial
Distribution Date"), $12.5 million was disbursed to the distribution agent for
the Class 3 unsecured creditors. Additional cash distributions in the amounts of
$6.2 million, $4.3 million, $8.1 million and $1.2 million were disbursed to the
distribution agent for benefit of the Class 3 unsecured creditors on May 11,
1998, April 21, 1999, April 24, 2000, and February 16, 2001, respectively,
bringing the total cash distributed through June 30, 2001 to $32.3 million. In
addition, as assets in the Creditors' Trust are liquidated and/or the contingent
obligations are favorably resolved, additional distributions will be made to the
Class 3 unsecured creditors.

      As provided for in the Joint Plan and a decision of the LFC Creditors'
Committee, 4,000,000 shares of the new common stock were issued by the stock
transfer agent on the initial distribution date of November 12, 1997. For
balance sheet presentation and earnings (loss) per share, the 4,000,000 shares
were considered issued as of April 1, 1997. The process by the stock
distribution agent resulted in 3,822,121 shares of common stock actually
distributed to former creditors through March 7, 1999, the deadline for
exchanging predecessor company bonds for common stock. In the second quarter of
fiscal year 2000, the stock distribution agent distributed the final 177,879
shares, including shares held for disputed claims, to all allowed creditors that
had received prior stock distributions.

      The amounts ultimately distributed to the former creditors will be solely
dependent on the success of the Company, the amounts realized from the
collection of assets and the settlement of liabilities for both the Creditors'
Trust and the LFC/LMUSA Litigation Trust.

      The LFC Creditors' Trust and any proceeds from the LFC/LMUSA Litigation
Trust are solely for the benefit of the former creditors of the Joint Debtors.
Stockholders will not benefit from these trusts unless they held Class 3 -
general unsecured claims as defined in the Joint Plan.

      On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. The 6 million
shares of the new common stock are restricted if the effect of a transfer would
result in an ownership increase to 4.5 percent or above of the total outstanding
shares or from 4.5 percent to a greater percentage of the total outstanding
shares, without prior approval by the board of directors as described in the
restated certificate of incorporation.


                                      -23-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Creditors' Trust

      The Joint Plan established a creditors' trust (the "Creditors' Trust") in
which the Company serves as trustee. The Creditors' Trust holds the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to creditors in accordance with the terms of the Joint Plan. The
Creditors' Trust is organized for the sole purpose of liquidating the
non-reorganized assets and will terminate on March 7, 2002, unless an extension
is approved by the Bankruptcy Court. The assets and liabilities of the
Creditors' Trust are not reflected in the accompanying Consolidated Balance
Sheets as the Company is not the beneficiary of the Trust. Accordingly, revenues
and expenses related to the Creditors' Trust assets and liabilities since April
1, 1997, are not reflected in the accompanying Statements of Consolidated
Operations and Comprehensive Income. The allocation of costs between the
Creditors' Trust and the Company is based on management's estimate of each
entity's proportional share of costs. Gains and losses from the Creditors' Trust
are solely for the former creditors' benefit and the Company has no risk of loss
on the assets or liabilities. The amounts ultimately distributed to the former
creditors will be solely dependent on the success of the Company, the amounts
realized from the collection of assets and the settlement of liabilities for
both the Creditors' Trust and the LFC/LMUSA Litigation Trust. Stockholders who
are not former creditors of the Joint Debtors are not beneficiaries of the
Creditors' Trust. There can be no assurance that the LFC/LMUSA Litigation Trust
will produce any proceeds which will benefit the Creditors' Trust and the former
creditors.

      The Company charged to the Creditors' Trust expenses of $415,000,
$210,000, and $339,000 for the years ended June 30, 2001, 2000 and 1999,
respectively, reported as trust expense reimbursement on the Company's
Statements of Consolidated Operations and Comprehensive Income. The trust
expense reimbursement included $237,000, $0 and $98,000 of success bonuses paid
to the Company pursuant to compensation plans for the directors and officers
(see "Stock and Compensation Plans") for fiscal years 2001, 2000 and 1999,
respectively. The remainder of the trust expense reimbursement from the
Creditors' Trust consisted of an overhead allocation based upon management's
estimate of resources used by the Creditors' Trust.

      The LFC Creditors' Trust and any proceeds from the LFC/LMUSA Litigation
Trust are solely for the benefit of the former creditors of the Joint Debtors.
Stockholders will not benefit from these trusts unless they held Class 3 -
general unsecured claims as defined in the Joint Plan. See "Reorganization"
footnote.

Investment in Real Estate

      The investment in real estate in the amount of $4.6 million and $4.9
million as of June 30, 2001 and 2000, respectively, is owned by LLG Lands, Inc.
("LLG"), a wholly-owned subsidiary of the Company. For fresh-start reporting,
the land was valued by an independent third party using a discounted cash flow
method of future projected proceeds.

      As of June 30, 2001, the Company's investment in real estate consists of
162.1 acres (approximately 138.0 acres net of flood plain) of unimproved land in
Allen, Texas (the "Allen property"). The southern boundary of the Allen property
is the Exchange Parkway, which provides access to the property from Central
Expressway on the west and from Highway 5 on the east. The Allen property
includes five tracts of land: one tract of approximately 31.9 net acres zoned
multi-family, one tract of approximately 77.2 net acres zoned light industrial
(formerly single-family), two tracts of approximately 24.2 net acres zoned
commercial and one tract of 4.6 net acres zoned residential. In the fourth
quarter of fiscal year 2001, five acres of the multi-family property was
successfully re-zoned as light industrial. With a continuing view towards
maximizing shareholder value, management is attempting to have the one
residential tract re-zoned as commercial.

      The acreage was increased by a total of 5.7 gross acres and 13.7 net acres
in fiscal year 2000 due to management's decision to reclaim a portion of the
flood plain acreage and the results of a new land survey that redefined the
boundaries. The Company was successful in fiscal year 1999 in re-zoning and
relocation of zoning in certain tracts. As disclosed in prior filings, the
Company, with a continuing view towards maximizing shareholder value, has
undertaken an on-going program involving the possible sale of all or part of
the Allen property or its continued development.


                                      -24-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      On October 30, 2000, the Company completed the sale of approximately 5.6
acres of one of the commercial properties to 75 Exchange Partners, LP, an
unaffiliated partnership. Net cash proceeds from the sale totaled $1.204 million
and the Company recorded a gain on sale of real estate of $828,000 in the second
quarter of fiscal year 2001, as reported in the Company's Statements of
Consolidated Operations and Comprehensive Income.

      On February 23, 2001, the Company completed the sale of approximately 17.3
acres of property zoned light industrial to Crow Family Holdings Industrial
Texas, LP("Crow Family Holdings"), an unaffiliated partnership. Net cash
proceeds from the sale totaled $1.251 million and the Company recorded a gain on
sale of real estate of $945,000 in the quarter ended March 31, 2001, as reported
in the Company's Statements of Consolidated Operations and Comprehensive Income.
In addition, Crow Family Holdings has outstanding options, which expire 18
months from the original sale date, to purchase substantially all the remaining
light industrial property. There is no guarantee that any sales will be
consummated.

      The Company offset a portion of the income tax expense due to the gain on
sale of real estate against the existing deferred tax assets, resulting in a
decrease in the deferred tax assets. Approximately $20,000 of alternative
minimum tax expense was recorded by the Company for the year ended June 30,
2001. The only portion of federal income tax expense that is owed by the Company
is the alternative minimum tax liability as a result of the utilization of a
portion of the Company's net operating loss carryforwards and deductible
temporary differences.

      Based on the property sales described above, continuing negotiations on
other parcels and improved market conditions, management believes that the
Company would be able to sell the remaining Allen property for a value in excess
of the tax basis. As a result, the Company reduced the valuation allowance for
deferred tax assets by $341,000 and additional paid-in-capital was increased by
$341,000 for the year ended June 30, 2001. Due to the change in zoning received
on certain tracts in 1999 and the change in flood plain acreage in 2000, the
Company reduced the valuation allowance for deferred tax assets and additional
paid in capital was increased by $249,000 and $1.148 million for the year ended
June 30, 2000 and 1999, respectively. The Company reported a net deferred tax
asset balance of $1.908 million and $1.441 million as of June 30, 2001 and 2000,
respectively, included in long term assets on the Company's Consolidated Balance
Sheets. Any tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2001 will be allocated to
additional paid-in capital. See the "Federal Income Taxes" footnote.

      The Company is involved in discussions and or entered into tentative
agreements to sell certain parcels of land, which it, in its best judgement,
considers to be reasonable and in the interests of its shareholders. However,
there can be no assurance that these or any future discussions and or tentative
agreements may lead to any real estate transactions, and when such transactions
might occur. These tentative agreements may not be completed due to various
uncertainties associated with ongoing negotiations and buyer due dilligence
contingencies. Any sales that might result from these discussions and or
tentative agreements as well as options described above would result in a gain
on sale for financial reporting purposes.

Investments in Equity Securities

      Investments in equity securities are classified as available-for-sale and
are held by the Company's real estate subsidiary, LLG. As of June 30, 2001, the
cost and fair value of the securities based on quoted market prices were
reported as $160,000 and $139,000, respectively. Unrealized gains and losses are
included, net of tax, in accumulated other comprehensive loss, a component of
stockholders' equity as reported on the Company's Consolidated Balance Sheets.
Realized gains and losses are reported in revenue on the Company's Statements of
Consolidated Operations and Comprehensive Income.

Receivables

      The Company reported receivables of $73,000 and $112,000 as of June 30,
2001 and 2000, respectively, consisting primarily of a management fee receivable
from the assisted care facility of $60,000 and $90,000, respectively, as
discussed below. The remainder of the balance as of June 30, 2001 and 2000
included $13,000 and $22,000 due from the Creditors' Trust for allocation of
expenses (see "Creditors' Trust" footnote).


                                      -25-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The Company, through its wholly-owned subsidiary Siena Housing Management
Corp. ("SHM"), manages and maintains an assisted care facility in Houston, Texas
under a management agreement into which it entered on June 27, 1977 with
Treemont, Inc. ("Treemont"). SHM is entitled to receive a fee under the
agreement which, subject to a required annual priority distribution of project
net income to Treemont and certain adjustments and expenditures specified by the
agreement, is equal to 3% of the facility's gross receipts and 25% of the
facility's net income.

      SHM may terminate the agreement on six months' written notice; however,
the termination date must fall on an anniversary of the date on which the
parties entered into the agreement. Treemont can only terminate the agreement
for cause or if Treemont fails to receive its required annual priority
distribution for two consecutive years. SHM has the right to extend the term of
the agreement from year to year in one-year increments until June 30, 2028.
Unless the agreement is terminated or its term is extended as described above,
the agreement will terminate on June 30, 2003.

      On January 4, 2001, the Company agreed to the First Amendment to
Management Agreement (the "First Amendment") with Treemont which specifies the
terms for a potential sale of the Treemont facility. SHM consents that the
owners of Treemont may sell the facility with absolute discretion and terminate
the Management Agreement in exchange for a graduated percentage of the net
proceeds (as defined) from the sale of the facility. The owners of Treemont
agree to provide written notice of the commencement of any negotiations. SHM has
not been notified of any sale negotiations to date. If a sale transaction is
ultimately concluded, SHM shall not be obligated to terminate the Management
Agreement if SHM does not receive at least $2 million as its share of the
proceeds.

Current and Long Term Liabilities

      Accounts payable and accrued expenses consisted of the following (in
thousands):

                                                                    June 30,
                                                                 ---------------
                                                                 2001       2000
                                                                 ----       ----
Accrued medical insurance premiums - current portion .....       $ 54       $ 56
Accrued professional fees ................................         49         47
Accrued compensation - other .............................          9         15
Alternative minimum tax payable ..........................         20         --
Other accounts payable and accrued expenses ..............         26         43
                                                                 ----       ----
                                                                 $158       $161
                                                                 ====       ====

      In connection with the reorganization in March 1997, the Company agreed to
assume the pre-petition liability to provide certain employees of a former
subsidiary and their spouses with medical insurance. The total amount of the
liability was estimated using a life expectancy age of 90, an annual health care
cost increase rate of approximately 5% and a discount rate of approximately
6.5%. As of June 30, 2001 and 2000, the Company was providing payments to and 27
people, respectively, to be used toward the payment of insurance. As of June 30,
2001 and 2000, the current portion of the accrual for medical insurance premiums
is $54,000 and $56,000, respectively, and the long term liability amount,
included in long term liabilities on the Company's Consolidated Balance Sheets,
is $447,000 and $516,000, respectively. During fiscal year end 2000, the Company
experienced a favorable mortality rate and, as a result, released $80,000 of the
long term liability for accrued medical insurance premiums. Management expects
this volatility to continue in the future due to the relative small number of
people covered by this liability.

      The SHI Deferred Compensation Plan allows the members of the Board of
Directors to defer annual director fees, meeting fees, and success bonus
payments for a given calendar year. Interest earned on the cash will be accrued
and paid to the director. A deferred compensation balance of $406,000 and
$102,000, including accrued interest, is included in long term liabilities on
the Company's Consolidated Balance Sheets as of June 30, 2001 and 2000,
respectively. See "Stock and Compensation Plans" footnote.


                                      -26-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Federal Income Taxes

      The Company in prior years filed a consolidated federal income tax return
as the common parent of a group of corporations which included LFC and its
subsidiaries as well as LMUSA and its subsidiaries. The LMUSA Plan of
Reorganization was confirmed by the United States Bankruptcy Court on October 1,
1996 and it immediately emerged with a new name, Nomas Corp. (see
"Reorganization" footnote). As a result of the LMUSA Plan, the Company ceased to
own any common stock of LMUSA and its subsidiaries as of October 1, 1996.
Accordingly, SHI and its subsidiaries thereafter no longer file a consolidated
federal income tax return with Nomas and its subsidiaries. SHI and its
subsidiaries will instead continue to file their own consolidated federal income
tax return for the years ended June 30, 2001, 2000 and 1999. Various tax
attributes, including net operating loss carryforwards, have been allocated
between the SHI consolidated group and the Nomas consolidated group pursuant to
Internal Revenue Service consolidated return regulations and based upon the
balances calculated as of the date that LMUSA and its subsidiaries were
deconsolidated from the Company's consolidated group. All companies included in
a consolidated federal income tax return remain jointly and severally liable for
any tax assessments based on such consolidated returns.

      Fresh-start reporting requires SHI and its subsidiaries to report federal
income tax expense when in a taxable position before utilization of any
pre-reorganization net operating loss carryforwards and recognition of any
pre-reorganization deductible temporary differences. Benefits realized in the
consolidated income tax return from utilization of pre-reorganization net
operating loss carryforwards and recognition of pre-reorganization deductible
temporary differences existing at the date of confirmation of the Plan are
reported as direct increases to additional paid-in capital under fresh-start
reporting.

      SHI and its subsidiaries reported federal income tax expense of $503,000,
$29,000 and $18,000 for fiscal years ended June 30, 2001, 2000 and 1999,
respectively. The Company reported a tax benefit of $602,000, $46,000, and
$45,000 as an increase to additional paid-in capital for fiscal years ended June
30, 2001, 2000 and 1999, respectively, resulting from utilization of a portion
of the Company's pre-reorganization net operating loss carryforwards and
deductible temporary differences. Approximately $20,000 of alternative minimum
tax expense was recorded by the Company for the year ended June 30, 2001. The
only portion of federal income tax expense that is owed by the Company is the
alternative minimum tax liability as a result of the utilization of a portion of
the Company's net operating loss carryforwards and deductible temporary
differences.

      SHI and its subsidiaries had no gross deferred tax liabilities and
approximately $95 million and $95 million in gross deferred tax assets as of
June 30, 2001 and 2000, respectively, subject to an offsetting valuation
allowance of approximately $93 million and $94 million, respectively.
Essentially all of this valuation allowance is considered to be attributable to
pre-reorganization tax attributes. Accordingly, future utilization of these
pre-reorganization tax attributes on a consolidated basis will result in
adjustments to additional paid-in capital.

      The Company reported a net deferred tax asset balance of $1.908 million
and $1.441 million as of June 30, 2001 and 2000, respectively, included in long
term assets on the Company's Consolidated Balance Sheets. Based on the property
sales described above, continuing negotiations on other parcels and improved
market conditions, management believes that the Company would be able to sell
the remaining Allen property for a value in excess of the tax basis. As a
result, the Company reduced the valuation allowance for deferred tax assets by
$341,000 and additional paid-in-capital was increased by $341,000 for the year
ended June 30, 2001. Due to the change in zoning received on certain tracts in
1999 and the change in flood plain acreage in 2000, the Company reduced the
valuation allowance for deferred tax assets and additional paid in capital was
increased by $249,000 and $1.148 million for the year ended June 30, 2000 and
1999, respectively. Any tax benefits recognized related to the valuation
allowance for pre-reorganization deferred tax assets as of June 30, 2001 will be
allocated to additional paid-in capital. In addition, an adjustment of $1.5
million was made for the year ended June 30, 1999 to decrease the balance of the
deferred tax assets with an equal adjustment to the offsetting valuation
allowance, to reflect the absorption of a portion of the net operating loss
carryforward against cancellation of indebtedness income and an increase in the
net operating loss carryforward attributable to the allocation of additional
loss carryforwards resulting from the deconsolidation of the former LFC group
during the fiscal year ended June 30, 1997.


                                      -27-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which these temporary differences become deductible. Management
considers the reversal of any deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Management
believes that it is more likely than not that the Company will realize the
benefit of these deferred tax assets, net of the existing valuation allowance as
of June 30, 2001 and 2000. Any tax benefits recognized related to the valuation
allowance for pre-reorganization deferred tax assets as of June 30, 2001 will be
allocated to additional paid-in capital.

      SHI and its subsidiaries had allocable consolidated tax net operating loss
carryforwards at June 30, 2001 totaling approximately $269 million. These net
operating loss carryforwards expire in the years 2003 through 2019.
Approximately $137 million of these net operating losses arose prior to the
previous 1991 reorganization of the LFC group and will therefore remain subject
to the annual limitations of Internal Revenue Code ("IRC") Section 382. At June
30, 2001, SHI and its subsidiaries had a cumulative unused Section 382
limitation equal to the $137 million of pre-1991 net operating loss
carryforwards; accordingly, such pre-1991 net operating loss carryforwards may
be utilized currently by SHI and its subsidiaries under the restrictions of
Section 382. The remaining net operating losses of approximately $132 million
arose subsequent to the 1991 reorganization and are considered to come under the
"bankruptcy exception" of Section 382(1)(5) and are therefore not subject to the
annual limitations provided by Section 382(a).

      All of the net operating loss carryforwards are subject to applicable
provisions of the IRC, and approximately $261million of the total of $269
million of net operating loss carryforwards would be limited to zero if it were
determined that SHI underwent an ownership change, within the meaning of Section
382, during the two year period following the October 1, 1996 ownership change
resulting from the Plan of Reorganization. The remaining $8 million of net
operating loss will continue to be subject to the annual limitation of IRC
Section 382, and could be further limited upon any subsequent ownership change.

      The amounts and expiration dates of the regular tax net operating losses
of SHI and its subsidiaries at June 30, 2001, are as follows (in thousands):

             Amount of Net
            Operating Loss                      Expiration Date
               Carryover                         as of June 30
            ---------------                   ------------------
              $   2,464                               2003
                 54,431                               2004
                 27,495                               2006
                 82,943                               2007
                 21,496                               2008
                 22,906                               2009
                 41,080                               2010
                  8,075                               2011
                  1,634                               2012
                  2,526                               2013
                  4,203                               2019
              ---------
              $ 269,253
              =========

      The Company's alternative minimum tax net operating loss is approximately
the same as its regular tax net operating loss.


                                      -28-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The difference between actual tax expense and the amount computed by
applying the statutory rate to income from operations before federal income tax
consisted of the following components (in thousands):

<TABLE>
<CAPTION>
                                                                  Years Ended June 30,
                                                           ---------------------------------
                                                            2001         2000         1999
                                                           -------      -------      -------
<S>                                                        <C>          <C>          <C>
Tax expense at statutory rate ........................     $   503      $    29      $    18
Book/tax difference in loss reserves
  attributable to sale of assets .....................          85           --           --
Adjustment to net operating loss carryforward
  to reflect actual allocation of consolidated net
  operating loss to SHI and absorption against
  cancellation of indebtedness income ................          --           --        1,486
Increase in net operating loss (attributable
  to realization of pre-reorganization deductible
  temporary differences, resulting in an increase
  in the pre-reorganization net operating loss
  carryover) .........................................         (34)         (17)      (1,471)
Pre-reorganization net operating loss utilized .......         537           27           --
Change in valuation allowance for deferred
  tax assets for current year activity and for
  adjustment to net operating loss
  carryforward .......................................        (484)           7           12
Increase in deferred compensation accruals ...........        (113)         (11)         (18)
Increase in accrued stock option accruals ............          (6)          (6)          (9)
Provision to tax return adjustments ..................          15           --           --
                                                           -------      -------      -------
    Actual tax expense ...............................     $   503      $    29      $    18
                                                           =======      =======      =======
</TABLE>

      The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
2001, 2000 and 1999 are presented below (in thousands):

<TABLE>
<CAPTION>
                                                                    Years Ended June 30,
                                                            -------------------------------------
                                                              2001          2000          1999
                                                            --------      --------      --------
<S>                                                         <C>           <C>           <C>
Deferred tax assets:
  Post-reorganization net operating loss carryover ....     $     30      $     30      $     30
  Pre-reorganization net operating loss carryover .....       94,183        94,701        94,711
  Loss reserves .......................................          541           626           626
  Deferred compensation ...............................          142            29            18
  Unrealized loss on equity securities ................            7            --            --
  Non-qualified stock option expense ..................           21            15             9
                                                            --------      --------      --------
     Total gross deferred tax assets ..................       94,924        95,401        95,394
  Less valuation allowance ............................      (93,016)      (93,960)      (94,219)
                                                            --------      --------      --------
       Net deferred tax assets ........................     $  1,908         1,441      $  1,175
                                                            ========      ========      ========

Deferred tax liabilities:
       Net deferred tax liabilities ...................     $     --      $     --      $     --
                                                            ========      ========      ========
</TABLE>


                                      -29-
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stockholders' Equity

      As of June 30, 2001 and 2000, the Company had 15,000,000 shares of $.10
par value common stock authorized, with 6,000,000 shares issued and outstanding.
Pursuant to the Joint Plan and a decision by the LFC Creditors' Committee,
4,000,000 shares of common stock were reserved for issuance on April 1, 1997 and
ultimately issued by the stock transfer agent on November 12, 1997. For balance
sheet presentation and earnings (loss) per share, the 4,000,000 shares were
considered issued as of April 1, 1997. The process by the stock distribution
agent resulted in 3,822,121 shares of common stock actually distributed to
former creditors through March 7, 1999, the deadline for exchanging predecessor
company bonds for common stock. In the second quarter of fiscal year 2000, the
stock distribution agent distributed the final 177,879 shares, including shares
held for disputed claims, to all allowed creditors that had received prior stock
distributions. The common stock has no preemptive or other subscription rights
and there are no conversion rights, redemption or sinking fund provisions with
respect to such shares.

      Recognizing the need of the Company for additional working capital, the
Chairman of the Company offered to make a cash investment for a certain number
of shares of the Company's common stock. This offer was considered and accepted
by the Company's Board of Directors at its regularly scheduled quarterly meeting
held in Wilmington, Delaware on September 23, 1998. The Chairman did not
participate in the vote of the Board accepting this offer. On November 5, 1998,
the Company received $2.102 million, net of stock offering expenses of $98,000,
in exchange for 2 million shares of the Company's common stock. This transaction
increased the number of outstanding shares of common stock to 6 million.

      During the years ended June 30, 2001, 2000 and 1999, the valuation
allowance for deferred tax assets was decreased by $341,000, $249,000 and $1.148
million, respectively, and additional paid-in capital was increased by the same
amounts. Any tax benefits recognized related to the valuation allowance for
pre-reorganization deferred tax assets as of June 30, 2001, will be allocated to
additional paid-in capital.

      SHI and its subsidiaries reported federal income tax expense of $503,000,
$29,000 and $18,000 for fiscal years ended June 30, 2001, 2000 and 1999,
respectively. The Company reported a tax benefit of $602,000, $46,000, and
$45,000 as an increase to additional paid-in capital for fiscal years ended June
30, 2001, 2000 and 1999, respectively, resulting from utilization of a portion
of the Company's pre-reorganization net operating loss carryforwards and
deductible temporary differences. Approximately $20,000 of alternative minimum
tax expense was recorded by the Company for the year ended June 30, 2001. The
only portion of federal income tax expense that is owed by the Company is the
alternative minimum tax liability as a result of the utilization of a portion of
the Company's net operating loss carryforwards and deductible temporary
differences. See "Federal Income Taxes" footnote.

      At the annual meeting on December 13, 1999, the stockholders of SHI (the
"Stockholders") approved a proposal to amend the Company's certificate of
incorporation (a) to effect, as determined by the Board in its sole discretion,
a reverse stock split of the outstanding Common Stock on the effective date of
the amendment (the "Effective Date"), pursuant to which each 100 shares then
outstanding will be converted into one share (the "Reverse Stock Split"), and
(b) to effect a forward split of the Common Stock on the day following the
effective date of the Reverse Split, pursuant to which Common Stock then
outstanding as of such date will be converted into the number of shares of the
Common Stock that such shares represented immediately prior to the Effective
Date (the "Forward Stock Split"). In lieu of issuing less than one whole share
resulting from the proposed stock split to holders of fewer than 100 shares, as
the case may be, the Company would make a cash payment based on the higher of
either the stated book value of the Company on June 30, 1999, or the closing
prices of the Common Stock, as discussed in more detail in the Company's Proxy
Statement dated November 1, 1999. The Board is authorized, in its sole
discretion, to effect the Reverse Stock Split based on factors existing at the
time of determination, including (a) the availability of funds necessary to
consummate the Reverse Stock Split and the cost of such funds; (b) the market
price of the Common Stock; (c) the Board's determination of whether the Reverse
Stock Split will result in a reduction in the Company's administrative expenses;
(d) prevailing market conditions; (e) the likely effect on the market price of
the Common Stock; and (f) other relevant factors.

      Consummation of the proposed Reverse Stock Split / Forward Stock Split
will not change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares. The Board,
in its sole discretion, may abandon the proposed stock splits at any time before
the Effective Date without further


                                      -30-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

action by the Stockholders. If the Board determines to consummate a Reverse
Stock Split / Forward Stock Split, the Company will publicly announce the
determination at least 10 days prior to the Effective Date.

      The Company, as of June 30, 2001 and 2000, had 1,000,000 shares of $1.00
par value preferred stock authorized, with 0 shares issued and outstanding.

Stock and Compensation Plans

      Officer's Compensation Plan. Separate retention agreements (the "Retention
Agreements") were approved by the Board of Directors effective December 1, 1997,
for the Company's two executive officers, John P. Kneafsey - Chief Executive
Officer and W. Joseph Dryer - President. The Retention Agreements, with a five
year term, provide for the payment of: (1) a monthly retainer, (2) severance
upon early termination of the contract by the Company, and (3) a success bonus
based upon certain performance criteria of the Company and its subsidiaries and
the Company's results as trustee of the Creditors' Trust.

      In accordance with the success bonus defined above, the Board of Directors
approved bonuses payable to the executive officers of the Company in fiscal year
2001 in the amount of $375,000, including $198,000 in success bonuses reimbursed
by the Creditors' Trust and included in other income on the Company's Statements
of Consolidated Operations and Comprehensive Income. The majority of the bonuses
reimbursed by the Creditors' Trust were paid as a result of the proceeds
received by the Creditors' Trust in March 2000 from the LFC/LMUSA Litigation
Trust resulting from litigation. The remainder of the success bonuses earned
resulted from the real estate sales discussed in the "Investment in Real Estate"
footnote. One officer deferred all bonuses earned in accordance with the SHI
Deferred Compensation Plan as described below.

      Officer's Stock Option Plan. The Retention Agreements also awarded stock
options to Mr. Kneafsey and Mr. Dryer pursuant to the SHI Non-qualified Stock
Option Agreements. The plan according to the SHI Non-qualified Stock Option
Agreements (the "Stock Option Plan") granted the officers options to purchase an
aggregate of 434,750 shares of the Company's common stock, with an effective
date of December 1, 1997 (the "Date of Grant").

      The options granted under the Stock Option Plan have an exercise price of
$0.92 per common share and vest at a rate of twenty percent per year for five
years on the anniversary of the Date of Grant. The fair market value of the
common stock on the Date of Grant was $1.109. Upon the event of any
change-in-control of the Company (as defined) the stock options shall be 100%
vested. The stock options resulted in compensation expense of $16,000, $16,000
and $17,000, with a corresponding increase in additional paid-in capital, for
the years ended June 30, 2001, 2000 and 1999, respectively. Additional stock
options or other forms of long-term incentive compensation arrangements may from
time to time be granted by the Board of Directors.

      Director's Compensation Plan. At the annual meeting on December 16, 1998,
the shareholders of SHI (the "Shareholders") approved additional compensation
with a retroactive effective date of December 1, 1997, for the non-officer
members of the Board of Directors (the "Directors' Additional Compensation
Plan"). The Directors' Additional Compensation Plan, with a five year term,
provides for a success bonus for each non-officer director based upon certain
performance criteria of the Company and its subsidiaries and the Company's
results as trustee of the Creditors' Trust. The approval of the Directors'
Additional Compensation Plan authorized success bonuses in the amount of $98,000
to be paid to the non-officer directors, as a result of transactions that
occurred in fiscal year 1998. The expense was included in other operating
expenses on the Company's Statements of Consolidated Operations and
Comprehensive Income for the year ended June 30, 1999. One director was paid in
December 1998, after approval by the Shareholders. Certain non-officer directors
elected to defer a portion or all of the payment pursuant to the SHI Deferred
Compensation Plan (the "Deferred Compensation Plan"), approved by the Board of
Directors on and effective as of December 16, 1998. The Deferred Compensation
Plan allows the members of the Board of Directors to defer annual director fees,
meeting fees, and success bonus payments for a given calendar year. Interest
earned on the cash will be accrued and paid to the director.

      For fiscal year ended June 30, 2001, and in accordance with the success
bonus defined above, the directors of the Company collectively earned $75,000 in
success bonuses, including $40,000 reimbursed by the Creditors' Trust and
included in other income on the Company's Statements of Consolidated Operations
and Comprehensive Income. The


                                      -31-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

majority of the bonuses reimbursed by the Creditors' Trust were earned as a
result of the proceeds received by the Creditors' Trust in March 2000 from the
LFC/LMUSA Litigation Trust resulting from litigation. The remainder of the
success bonuses earned by the directors resulted from the real estate sales
discussed in the "Investment in Real Estate" footnote. Certain directors elected
to defer a portion or all of the payments earned pursuant to the Deferred
Compensation Plan. During the year ended June 30, 2001, four of the five
directors deferred some or all of directors' fees and success bonuses earned. A
deferred compensation balance of $406,000 and $102,000, including accrued
interest, is included in long term liabilities on the Company's Consolidated
Balance Sheets as of June 30, 2001 and 2000, respectively.

      Director's Stock Option Plan. The Non-qualified Stock Option Agreements
for the Board of Directors (the "Directors' Stock Option Plan") were also
approved by the Shareholders on December 16, 1998 (the "Date of Shareholder
Approval"). The Directors' Stock Option Plan granted each of the five directors'
the option to purchase 40,000 shares of the Company's common stock, with an
effective date of December 1, 1997 (the "Date of Grant").

      The options granted under the Directors' Stock Option Plan have an
exercise price of $0.92 per common share and vest at a rate of twenty percent
per year for five years on the anniversary of the Date of Grant. The fair market
value of the common stock on the Date of Shareholder Approval was $0.84375. Upon
the event of any change-in-control of the Company (as defined) the stock options
shall be 100% vested.

      The following table summarizes data relating to stock options activity for
the years ended June 30, 2001, 2000, and 1999:

                                                    Years Ended June 30,
                                            ----------------------------------
                                              2001         2000         1999
                                            --------     --------     --------
Number of shares subject to option:
   Outstanding at beginning of year ...      634,750      634,750      434,750
   Granted ............................           --           --      200,000
   Expired / canceled .................           --           --           --
   Exercised ..........................           --           --           --
                                            --------     --------     --------
        Outstanding at end of year ....      634,750      634,750      634,750
                                            ========     ========     ========

Exercisable at end of year ............      380,850      253,900      126,950
                                            ========     ========     ========

      All outstanding stock options have an exercise price of $0.92 per common
share.

      As allowed under the provisions of SFAS No. 123, the Company applies APB
Opinion 25 and related Interpretations in accounting for its stock option plans
and, accordingly, does not recognize compensation cost based on fair value as a
component of net income. The fair value of each option granted pursuant to the
officers' Stock Option Plan was estimated as of the grant date, using the
Black-Scholes multiple options approach prescribed by SFAS No. 123, with the
following assumptions: expected volatility of 58.58%, risk free interest rate of
6.35%, and an expected life of 10 years. The fair value of each option granted
pursuant to the Directors' Stock Option Plan was estimated as of the date of
shareholder approval, also using the Black-Scholes multiple options approach
prescribed by SFAS No. 123, with the following assumptions: expected volatility
of 138.53%, risk free interest rate of 4.58%, and an expected life of 9 years.
If the Company had elected to recognize compensation cost based on the fair
value of the options as of the grant date, the Company's net income as well as
earnings per share would have been reduced by the pro forma amounts (net of
income tax effect) indicated in the following table:

                            (table on following page)


                                      -32-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
                                                                                         Years Ended June 30,
                                                                                ---------------------------------------
                                                                                  2001          2000             1999
                                                                                --------      --------         --------
<S>                                                                             <C>              <C>           <C>
Reconciliation of net income (loss):
Basic net income (loss):
   Net income (As reported) ...............................................     $    934            53         $     34
   Pro forma compensation expense--net of tax effect ......................          (59)          (62)             (92)
                                                                                --------      --------         --------
   Pro forma net income (loss) ............................................     $    875            (9)        $    (58)
                                                                                ========      ========         ========
Diluted net income (loss):
   Net income (As reported) ...............................................     $    934            53         $     34
   Income effect of assumed conversions ...................................           --            --               --
                                                                                --------      --------         --------
   Net income plus assumed conversions (As reported) ......................          934            53               34
   Pro forma compensation expense--net of tax effect ......................          (59)          (62)             (92)
                                                                                --------      --------         --------
   Pro forma net income (loss) plus assumed conversions ...................     $    875            (9)        $    (58)
                                                                                ========      ========         ========
Earnings (loss) per share ("EPS") information:
Basic net income (loss):
   Net income (As reported) ...............................................     $   0.16          0.$1             0.01 *
   Pro forma compensation expense--net of tax effect ......................        (0.01)        (0.01)           (0.02)*
                                                                                --------      --------         --------
   Pro forma net income (loss) ............................................     $   0.15          0.$0            (0.01)*
                                                                                ========      ========         ========
Common shares used in computing basic EPS: ................................        6,000         6,000            5,304 *
                                                                                ========      ========         ========
Diluted net income (loss):
   Net income (As reported) ...............................................     $   0.15          0.$1             0.01 *
   Income effect of assumed conversions ...................................           --            --               --
                                                                                --------      --------         --------
   Net income plus assumed conversions (As reported) ......................         0.15          0.01             0.01 *
   Pro forma compensation expense--net of tax effect ......................        (0.01)        (0.01)           (0.02)*
                                                                                --------      --------         --------
   Pro forma net income (loss) plus assumed conversions ...................     $   0.14          0.$0            (0.01)*
                                                                                ========      ========         ========
Common shares used in computing diluted EPS: ..............................        6,126         6,106            5,333 *
                                                                                ========      ========         ========
</TABLE>

* Average share and per share amounts are based on shares issued or reserved for
  issuance to creditors.

Fair Value of Financial Instruments

      SFAS No. 107 requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for those that it
is practicable to estimate fair value. Fair value estimates are made as of a
specific point in time based on the characteristics of the financial instruments
and the relevant market information. Where available quoted market prices are
used, and in other cases, fair values are based on estimates using present value
or other valuation techniques. These techniques involve uncertainties and are
significantly affected by the assumptions used and the judgments made regarding
risk characteristics of various financial instruments, discount rates, estimates
of future cash flows, future expected loss experience and other factors. Changes
in assumptions could significantly affect these estimates and the resulting fair
values. The derived fair value estimates cannot be substantiated by comparison
to independent markets and could not be realized in an immediate sale of the
instruments.

      Under SFAS No. 107 fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. The aggregate fair value amounts presented do not
represent the underlying market value of the Company.


                                      -33-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Described below are the methods and assumptions used by the Company in
estimating fair values.

      Cash and Cash Equivalents. The carrying amounts reported in the
Consolidated Balance Sheets approximate the fair values and maturities are less
than three months.

      Investment in Equity Securities. The securities are classified as
available-for-sale and reported on the Company's Consolidated Balance Sheets at
fair market value based on quoted market prices, with any unrealized holding
gains (losses) included, net of tax, in accumulated other comprehensive income
(loss), a component of stockholders' equity.

      The estimated fair values of the Company's financial instruments are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                          June 30,
                                      ------------------------------------------------
                                               2001                      2000
                                      ----------------------    ----------------------
                                      Carrying                  Carrying
                                       Amount     Fair Value     Amount     Fair Value
                                      --------    ----------    --------    ----------
<S>                                   <C>          <C>          <C>          <C>
Financial Assets:
  Cash and cash equivalents .....     $  5,914     $  5,914     $  4,088     $  4,088
  Investment in equity securities          139          139           --           --
</TABLE>

      Financial instruments that potentially subject the Company to
concentrations of credit risk principally consist of excess cash invested
overnight in euro-dollar denominated accounts. As of June 30, 2001,
approximately $5.2 million of the Company's cash and cash equivalents balance of
$5.9 million was invested in euro-dollars. Approximately $450,000 of the
remainder of the Company's cash and cash equivalents was deposited in various
accounts at one financial institution and $250,000 was invested in a money
market fund at another institution. Subsequent to June 30, 2001, the Company
began investing excess cash in 30 day U. S. Treasury bills which is consistent
with the Company's policy for overnight investments.

Leases

      The Company incurred rental expense for office space of $10,000, $10,000
and $10,000 for the years ended June 30, 2001, 2000, and 1999, respectively, and
had no future minimum rental commitments at June 30, 2001 for noncancellable
leases.

      The Company also incurred expense of $18,000, $18,000 and $19,000 for the
years ended June 30, 2001, 2000, and 1999, respectively, for the reimbursement
of office space and expenses in Maryland utilized by the Chairman and Chief
Executive Officer of the Company, and is included in other operating expenses on
the Company's Statements of Consolidated Operations and Comprehensive Income.
The Company is not a party to the lease.

                  (remainder of page intentionally left blank)


                                      -34-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Quarterly Results (Unaudited)

           The following is a summary of the unaudited quarterly results of
operations for the year ended June 30, 2001 (in dollars, except per share
amounts):

<TABLE>
<CAPTION>
                                                           Year Ended June 30, 2001
                                              --------------------------------------------------
                                               First         Second        Third         Fourth
                                              Quarter       Quarter       Quarter       Quarter
                                              --------      --------      --------      --------
<S>                                           <C>           <C>           <C>           <C>
Revenues ................................     $    178      $  1,239      $  1,132      $    152
Income (loss) before federal income tax .           14           699           821           (97)
Federal income tax (expense) benefit ....           (5)         (245)         (287)           34
  Net income (loss) .....................            9           454           534           (63)

Basic earnings (loss) per common share:
  Net income (loss) .....................         0.00          0.08          0.09         (0.01)
Diluted earnings (loss) per common share:
  Net income (loss) .....................         0.00          0.07          0.09         (0.01)
</TABLE>

      Revenues were higher in the second and third quarters as a result of two
separate sales of a portion of the Company's real estate investment, resulting
in a gain on sale of real estate of $828,000 and $945,000 for the second and
third quarter, respectively. Refer to the "Investment in Real Estate" footnote
for more information on the real estate sales. In accordance with existing
compensation plans for the directors and officers, the Company incurred
additional compensation expense related to these sales in the amount of $99,000
and $113,000 in the second and third quarter, respectively, reported as
personnel expense on the Company's Statements of Consolidated Operations and
Comprehensive Income. The net gains reported from the sale of the real estate
also increased the federal income tax expense for the same two quarters.

      Trust expense reimbursement revenue from the Creditors' Trust was reported
quarterly by the Company in the amounts of $61,000, $265,000, $34,000 and
$55,000, respectively. The second and fourth quarters included specific
reimbursements for bonus payments to the directors and officers in accordance
with existing compensation plans in the amounts of $212,000 and $25,000,
respectively. These amounts were also reported as personnel expense on the
Company's Statements of Consolidated Operations and Comprehensive Income for the
same periods thereby eliminating a fluctuation in net income. See the "Stock and
Compensation Plans" footnote for further information.

      The Company reported increased travel expense in the amount of $10,000 in
the second quarter. Professional fees increased slightly by quarter, reported as
$13,000, $36,000, $31,000 and $57,000 for the first through the fourth quarter.
The Company incurred additional legal fees in the second quarter and higher
accounting fees in the fourth quarter.


                                      -35-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following is a summary of the unaudited quarterly results of
operations, as restated, for the year ended June 30, 2000 (in dollars, except
per share amounts):

<TABLE>
<CAPTION>
                                                                            Year Ended June 30, 2000
                                                              --------------------------------------------------
                                                               First         Second        Third         Fourth
                                                              Quarter       Quarter       Quarter       Quarter
                                                              --------      --------      --------      --------
<S>                                                           <C>           <C>           <C>           <C>
Revenues..................................................    $    224      $    223      $    194      $    231
Income before federal income tax .........................          39            12             5            26
Federal income tax expense ...............................         (14)           (4)           (2)           (9)
  Net income .............................................          25             8             3            17

Basic earnings per common share:
  Net income .............................................        0.00          0.00          0.00          0.00
Diluted earnings  per common share:
  Net income .............................................        0.00          0.00          0.00          0.00
</TABLE>

      Total revenues were consistent for all quarters in fiscal year 2000,
however, there were fluctuations in specific revenue categories during the year.
Management fees received by the Company's assisted care management subsidiary,
SHM, were $103,000, $106,000, $89,000 and $$60,000 for the four quarters,
respectively. The decrease is primarily due to lower occupancy and higher
expenses as reported by Treemont, which resulted in a lower management fee to
SHM.

      The Company reported trust expense reimbursement revenue from the
Creditors' Trust of $62,000, $64,000, $51,000 and $31,000 respectively for the
four quarters of fiscal year 2000, representing a decrease in the use of the
Company's resources for the Creditors' Trust (see the "Creditors' Trust"
footnote).

      In the fourth quarter, the Company reported a benefit in the amount of
$80,000 resulting from a decrease in the long term accrued medical premiums
liability. As discussed in the "Current and Long Term Liabilities" footnote, the
liability was reduced due to a decrease in the population of people for whom the
Company provides payments to be used for medical insurance.

      Expenses of SHM, primarily personnel and travel expenses, decreased
consistent with the decrease in management fee revenue. The Company also
experienced higher general and administrative expenses in the fourth quarter,
including accounting fees, consulting fees and franchise tax expense.

Industry Segment Data of Operations

      In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which requires that
companies disclose segment data on a basis that is used internally by management
for evaluating segment performance and allocating resources to segments. The
Company has two reportable segments: (1) assisted care management, which
receives a fee for managing and maintaining an assisted care facility in
Houston, Texas, and (2) real estate investment and development. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. See the "Significant Accounting Policies"
footnote for more information. The Company's management evaluates performance of
each segment based on profit and loss from operations excluding allocation of
corporate overhead expenses and interest income.


                                      -36-
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table summarizes the Company's identifiable assets by
segment as of June 30, 2001 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                         June 30, 2001      June 30, 2000
                                                                         -------------      -------------
<S>                                                                        <C>                <C>
Identifiable assets:
   Assisted care facility management (including receivable from
     parent company eliminated in consolidation) ..................        $      338         $      246
   Real estate ....................................................             6,645              4,950
                                                                           ----------         ----------
                                                                                6,983              5,196
                                                                           ----------         ----------
   Reconciling items:
     Corporate cash, receivables and prepaid expenses (including
       receivable from subsidiary eliminated in consolidation) ....             4,147              4,229
     Deferred tax assets--net .....................................             1,908              1,441
     Elimination of intercompany receivables ......................              (295)              (234)
                                                                           ----------         ----------
Total assets per the Consolidated Balance Sheets ..................        $   12,743         $   10,632
                                                                           ==========         ==========
</TABLE>

      The following tables summarize the Company's segment data of operations
for the years ended June 30, 2001, 2000, and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                 Years Ended June 30
                                                           ------------------------------
                                                               2001       2000       1999
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Revenues:
  Assisted care management .............................   $    250   $    360   $    498
  Real estate ..........................................      1,818          2         --
                                                           --------   --------   --------
                                                              2,068        362        498
                                                           --------   --------   --------
  Reconciling items:
    Corporate interest income ..........................        203        214        155
    Trust expense reimbursement ........................        415        210        339
    Other corporate revenue ............................         15         86         10
                                                           --------   --------   --------
                                                                633        510        504
                                                           --------   --------   --------
Total revenues per Statements of Consolidated Operations
  and Comprehensive Income .............................   $  2,701   $    872   $  1,002
                                                           ========   ========   ========

<CAPTION>
                                                                Years Ended June 30
                                                           ------------------------------
                                                             2001       2000       1999
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Operating income (loss):
  Assisted care management .............................   $    142   $    210   $    329
  Real estate ..........................................      1,815        (12)       (15)
                                                           --------   --------   --------
                                                              1,957        198        314
                                                           --------   --------   --------
  Reconciling items:
    Corporate interest income ..........................        203        214        155
    Trust expense reimbursement ........................        415        210        339
    Unallocated corporate expenses .....................     (1,153)      (626)      (763)
    Other ..............................................         15         86          7
                                                           --------   --------   --------
                                                               (520)      (116)      (262)
                                                           --------   --------   --------
Income  from operations before federal income tax
  per Statements of Consolidated Operations and
  Comprehensive Income .................................   $  1,437   $     82   $     52
                                                           ========   ========   ========
</TABLE>


                                      -37-
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

      On July 1, 2000, Statement of Financial Accounting Standards No. 133/ 138
"Accounting for Derivative Instruments and Hedging Activities", became effective
and requires companies to carry all derivative instruments on the balance sheet
at fair value. Since the Company has no derivative instruments, the adoption had
no effect on the accompanying financial statements.


                                      -38-
<PAGE>

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                              SIENA HOLDINGS, INC.

                            CONDENSED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       June 30,
                                                                                 --------------------
                                                                                   2001        2000
                                                                                 --------    --------
<S>                                                                              <C>         <C>
ASSETS
Current Assets:
    Cash and cash equivalents ................................................   $  3,975    $  4,085
    Receivables (including $20 and $80, respectively, receivables from
       subsidiaries eliminated in consolidation) .............................         33         102
    Prepaid expenses .........................................................        139          42
                                                                                 --------    --------
                                                                                    4,147       4,229
                                                                                 --------    --------
Long Term Assets:
     Investments (including $8,844 and $6,509, respectively, investments
       in subsidiaries eliminated in consolidation) ..........................      8,844       6,509
                                                                                 --------    --------
                                                                                    8,844       6,509
                                                                                 --------    --------
           Total Assets ......................................................   $ 12,991    $ 10,738
                                                                                 ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable and accrued expenses (including $275 and $154,
       respectively, payables to subsidiaries eliminated in consolidation) ...   $    406    $    267

Long Term Liabilities:
    Accrued medical insurance premiums .......................................        447         516
    Deferred compensation and fees ...........................................        406         102
                                                                                 --------    --------
                                                                                      853         618
                                                                                 --------    --------
                                                                                    1,259         885
                                                                                 --------    --------
Stockholders' Equity:
   Preferred stock--( $1.00 par value, 1,000 shares authorized, 0 shares
       issued and outstanding) ...............................................         --          --
   Common stock--($.10 par value, 15,000 shares authorized, 6,000 shares
       issued and outstanding) ...............................................        600         600
   Additional paid-in capital ................................................     10,164       9,205
   Retained earnings .........................................................        982          48
   Accumulated other comprehensive loss (including $14 and $0,
       respectively, accumulated other comprehensive loss from
       subsidiaries), net of tax .............................................        (14)         --
                                                                                 --------    --------
                                                                                   11,732       9,853
                                                                                 --------    --------
           Total Liabilities and Stockholders' Equity ........................   $ 12,991    $ 10,738
                                                                                 ========    ========
</TABLE>

Note: Certain reclassifications have been made to prior years' financial
      statement schedule to conform to the 2001 presentation.


                                      -39-
<PAGE>

    SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(Continued)

                              SIENA HOLDINGS, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
                        (in thousands, except par values)

<TABLE>
<CAPTION>
                                                           Years Ended June 30,
                                                    --------------------------------
                                                      2001        2000        1999
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
Revenues:
  Interest ......................................   $    203    $    214    $    155
  Trust expense reimbursement ...................        415         210         339
  Other .........................................         15          86          11
                                                    --------    --------    --------
                                                         633         510         505
                                                    --------    --------    --------
Expenses:
  Personnel .....................................        663         288         288
  Other operating ...............................        491         338         476
                                                    --------    --------    --------
                                                       1,154         626         764
                                                    --------    --------    --------
Loss from operations before income from
    subsidiaries and federal income tax .........       (521)       (116)       (259)
Equity in income of subsidiaries ................      1,274         126         311
Income from subsidiaries - federal tax share ....        684          72          --
                                                    --------    --------    --------
Income before federal income tax ................      1,437          82          52
Federal income tax expense ......................       (503)        (29)        (18)
                                                    --------    --------    --------
Net income ......................................        934          53          34
                                                    --------    --------    --------

Other comprehensive loss, net of tax:

  Other comprehensive loss from subsidiaries ....        (14)         --          --
                                                    --------    --------    --------
Other comprehensive loss ........................        (14)         --          --
                                                    --------    --------    --------

Comprehensive income ............................   $    920    $     53    $     34
                                                    ========    ========    ========
</TABLE>

Note: Pursuant to an existing tax sharing agreement, the Company began
      allocating federal income tax expense to one of its subsidiaries, Siena
      Housing Management, on January, 1, 2000.


                                      -40-
<PAGE>

    SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(Continued)

                              SIENA HOLDINGS, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              Years Ended June 30,
                                                                        --------------------------------
                                                                          2001        2000        1999
                                                                        --------    --------    --------
<S>                                                                     <C>         <C>         <C>
Operating activities:
   Net income .......................................................   $    934    $     53    $     34
   Adjustments to reconcile net income to cash used
   by operations:
     Federal income tax utilization of pre-reorganization tax
       attributes ...................................................        602          46          45
     Increase in deferred tax / decrease in federal income tax
       expense relating to post-reorganization tax attributes .......       (119)        (17)        (27)
     Compensation expense for stock options .........................         16          16          17
     Equity in income of subsidiaries ...............................     (1,274)       (126)       (311)
     Income from subsidiaries - federal tax share ...................       (664)        (72)         --
     (Increase) decrease in current assets and prepaid expenses -
       excluding receivables from subsidiaries ......................        (88)         53         (63)
     Increase (decrease) in current accounts payable and accrued
       expenses - excluding payables to subsidiaries ................         18         (69)       (344)
     Net (decrease) increase in receivables from and payables
       to subsidiaries - net of federal tax share ...................        230        (435)        565
     Decrease in long term accrued medical insurance
       premiums .....................................................        (69)       (133)        (62)
     Increase in long term deferred compensation and fees ...........        304          50          52
                                                                        --------    --------    --------
          Net cash used by operating activities .....................       (110)       (634)        (94)
                                                                        --------    --------    --------

Investing activities:
  Return of capital from investments in subsidiaries ................         --         615          --
                                                                        --------    --------    --------
          Net cash provided by investing activities .................         --         615          --
                                                                        --------    --------    --------

Financing activities:
  Issuance of common stock--net .....................................         --          --       2,102
                                                                        --------    --------    --------
          Net cash provided by financing activities .................         --          --       2,102
                                                                        --------    --------    --------

Net increase (decrease) in cash and cash equivalents ................       (110)        (19)      2,008
Cash and cash equivalents at beginning of year ......................      4,085       4,104       2,096
                                                                        --------    --------    --------
Cash and cash equivalents at end of year ............................   $  3,975    $  4,085    $  4,104
                                                                        ========    ========    ========

Non-cash transactions:
  Issuance of stock options .........................................   $     16    $     16    $     17
</TABLE>

Note: Pursuant to an existing tax sharing agreement, the Company began
      allocating federal income tax expense to one of its subsidiaries, Siena
      Housing Management, on January, 1, 2000.


                                      -41-
<PAGE>

             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

                      SIENA HOLDINGS, INC. AND SUBSIDIARIES
                                 (in thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                     Initial cost to Company     Cost capitalized to acquisition
                                                ------------------------------------------------------------------
                                                                Buildings and
        Description              Encumbrances       Land        improvements    Improvements    Carrying costs
------------------------------------------------------------------------------------------------------------------
<S>                                        <C>   <C>             <C>             <C>            <C>
185.1 gross acres of
    unimproved land in Allen,
    Texas (the "Allen
    property").................            --   $     4,800*     $         --    $       451    $          --

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

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Life on which
                                 Gross amount at which carried at close of                                            depreciation
                                             June 30, 2001 (**)                                                         in latest
                                 ------------------------------------------                                              income
                                              Buildings and                   Accumulated       Date of      Date     statements is
        Description               Land        improvements       Total       depreciation    construction  acquired     computed
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>                  <C>      <C>               <C>            <C>           <C>
185.1 gross acres of
    unimproved land in Allen,
    Texas (the "Allen
    property").................  $ 4,570      $          --        4,570    $          --      N/A           3/5/97        N/A
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The changes in the investment in real estate is as follows (in thousands):

                                          Years Ended June 30
                                   -------------------------------
                                     2001        2000       1999
                                   --------    --------   --------

                                   $  4,949    $  4,879   $  4,800
Additions during the year:
    Improvements, etc ..........        303          70         79
                                   --------    --------   --------
                                        303          70         79
                                   --------    --------   --------

Deductions during the year:
    Cost of real estate sold ...       (682)         --         --
                                   --------    --------   --------
                                       (682)         --         --
                                   --------    --------   --------

                                   $  4,570    $  4,949   $  4,879
                                   ========    ========   ========

*     The fair market value of the property on the date the Company adopted
      fresh-start accounting (see "Item 8. Financial Statements and
      Supplementary Data--Significant Accounting Policies" footnote).

**    The aggregate cost for Federal income tax purposes of the Allen property
      at June 30, 2001, 2000 and 1999 is $6.15 million, $6.74 million and $6.67
      million, respectively.


                                      -42-
<PAGE>


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

      None.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant

      The Company held its Annual Meeting of Stockholders on December 15, 2000,
and elected the following five directors to serve until the next annual meeting
and until their successors are elected and qualified:

      JOHN P. KNEAFSEY -- Chairman and Chief Executive Officer of the Company,
      since October 1996; President, Pathfinder Advisory Services, Inc., since
      1997; Senior Vice President - Investments, Prudential Securities, Inc.,
      from 1980 to 1997. Age 54.

      ERIC M. BODOW-- Chief Administrative Officer, GEM Capital Management,
      Inc., since 1998; Senior Vice President, Sagner/Marks, Inc., from 1992 to
      1998; Vice President, First National Bank of Chicago, from 1985 to 1992.
      Age 57.

      JAMES D. KEMP-- Principal, Antaean Solutions, LLC, since 1997; President
      and Chief Executive Officer, The Trust Company, N.A., from 1996 to 1997;
      President and Chief Executive Officer, Kemp Consulting, from 1992 to 1997;
      President, Ameritrust Texas, N.A., from 1980 to 1992. Age 54.

      MATTHEW S. METCALFE -- Chairman and President, Airland Corporation;
      Director Emeritus, Amsouth Bancorporation; Member, State of Alabama Oil
      and Gas Board; Chairman, Mobile Airport Authority. Age 70.

      FRANK B. RYAN-- Professor of Mathematics at Rice University (currently on
      leave); Director, Danielson Holding Corporation; Director, Texas Micro,
      Inc.; Director, America West Airlines, Inc. Age 65.

Executive Officers of the Registrant

      The following two executive officers were approved by the Board of
Directors and given separate five year retention agreements effective December
1, 1997:

      JOHN P. KNEAFSEY-- Chief Executive Officer of the Company. See information
      under "Directors of the Registrant" above.

      W. JOSEPH DRYER-- President and Chief Accounting Officer of the Company
      since October 4, 1996, prior thereto, Senior Vice President from January
      1995; President and Director of Russian River Energy Co. from 1992 to
      1994; President and Director of Geothermal Resources International, Inc.
      since 1994, prior thereto, an officer since 1984; and President of
      Worldcorp, Inc. since May, 2000. Age 46.

Item 11. EXECUTIVE COMPENSATION

      The information required by this Item is incorporated herein by reference
to the information contained in the Proxy Statement relating to the Company's
fiscal year 2001 Annual Meeting of Stockholders which will be filed with the SEC
no later than 120 days after the close of the fiscal year ended June 30, 2001.


                                      -43-
<PAGE>

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information required by this Item is incorporated herein by reference
to the information contained in the Proxy Statement relating to the Company's
fiscal year 2001 Annual Meeting of Stockholders which will be filed with the SEC
no later than 120 days after the close of the fiscal year ended June 30, 2001.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      None.


                                      -44-
<PAGE>

                                     PART IV

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

      (a) Documents filed as part of this report:

            (i) The following consolidated financial statements are included in
Item 8.

                                                                           Pages
                                                                           -----

           Consolidated Balance Sheets--June 30, 2001 and 2000.............  16
           Statements of Consolidated Operations and Comprehensive
             Income--Years Ended June 30, 2001, 2000 and 1999..............  17
           Statements of Consolidated Stockholders' Equity--Years
              Ended June 30, 2001, 2000 and 1999...........................  18
           Statements of Consolidated Cash Flows--Years Ended
              June 30, 2001, 2000 and 1999.................................  19
           Notes to Consolidated Financial Statements......................  20

            (ii) The following financial statement schedules are included in
Item 8:

           Schedule I--Condensed Financial Information of Registrant.......  39
           Schedule III--Real Estate and Accumulated Depreciation..........  42

           All other schedules are omitted as the required information is
           inapplicable or the information is presented in the Consolidated
           Financial Statements or related notes.

            Financial statements (and summarized financial information) of
      unconsolidated subsidiaries and 50- Percent-or-Less-Owned Persons
      accounted for by the equity method are not presented because they do not,
      individually or in aggregate, constitute a significant subsidiary.

      (b) Exhibits:

          Exhibit
          Number
          ------

          (21)        List of subsidiaries of Registrant.

      (c) Reports on Form 8-K:

            On October 30, 2000, the Company filed with the Commission a current
      report on Form 8-K relating to the sale of real estate property, which is
      discussed in greater detail under the "Investment in Real Estate" footnote
      in this report.

            On February 27, 2001, the Company filed with the Commission a
      current report on Form 8-K relating to the sale of real estate property,
      which is discussed in greater detail under the "Investment in Real Estate"
      footnote in this report.

<PAGE>

                                   SIGNATURES

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

                                                 SIENA HOLDINGS, INC.
                                                      Registrant


Date:  September 26, 2001                 /S/       W.  JOSEPH DRYER
                                       -----------------------------------------
                                                    W. Joseph Dryer
                                             Principal Accounting Officer

      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.


Date:  September 26, 2001                /S/      W. JOSEPH DRYER
                                      -----------------------------------------
                                                   W. Joseph Dryer
                                                      President

<PAGE>

      Pursuant to the requirements of the Securities Exchange Act of 1934 and in
response to General Instruction D to Form 10-K, this report has been signed
below on behalf of the registrant by the following directors on the dates
indicated.

Date:  September 26, 2001             By  /S/      JOHN P. KNEAFSEY
                                        ----------------------------------------
                                              (John P. Kneafsey, Chairman)

Date:  September 26, 2001             By  /S/       ERIC M. BODOW
                                        ----------------------------------------
                                                   (Eric M. Bodow)

Date:  September 26, 2001             By  /S/       JAMES D. KEMP
                                        ----------------------------------------
                                                   (James D. Kemp)

Date:  September 26, 2001             By  /S/     MATTHEW S. METCALFE
                                        ----------------------------------------
                                                 (Matthew S. Metcalfe)

Date:  September 26, 2001             By  /S/        FRANK RYAN
                                        ----------------------------------------
                                                    (Frank Ryan)