MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP


                               2000 Annual Report

                                 April 10, 2001


Dear Investor:

         The  general  partners of  Meridian  Healthcare  Growth and Income Fund
Limited  Partnership  are pleased to discuss the  operating  performance  of our
seven nursing home facilities.

OPERATIONS

         Operating  income from the nursing  centers showed a modest increase in
2000 when compared to 1999,  however higher interest costs and greater  non-cash
expenses  resulted in  decreased  earnings in 2000 when  compared to 1999.  Fund
profitability  decreased in 1999 when compared to 1998 due to the recognition in
1998 of revenue relating to the favorable resolution of a long-standing Maryland
Medicaid  reimbursement  issue.  The  settlement  of this issue  resulted in the
recognition of approximately $2,100,000 in revenue during fiscal year 1998.

         Overall, 2000 revenues of $55,764,000 increased $4,486,000 or 8.7% when
compared to revenues received during 1999. This increase is primarily the result
of Medicaid  rate  increases  and an  increase  in the number of Medicare  days.
Medicaid revenue increased $1,978,000 primarily due to overall rate increases of
approximately  11.1% driven  primarily by the four  Maryland  centers.  Medicare
revenue  increased  $1,505,000  relating to growth in the  Medicare  census.  In
fiscal year 2000 Medicare census made up 12.8% of the overall census as compared
to 11.5% in fiscal year 1999.

         Revenues  from  private  and  other  patients   increased  $995,000  to
$10,960,000  as compared to  $9,965,000  in 1999.  This  increase is a result of
higher insurance census and rates and higher private rates.

         Operating expenses  increased  $4,109,000 or 10.2% from the same period
in the prior year.  This  increase is  primarily  due to the  increased  cost of
nursing  services  and  ancillary  costs.  Nursing  costs  increased  $1,937,000
primarily due to increased  salaries and a higher utilization of temporary nurse
staffing.  The increase in nursing salary and wages and utilization of temporary
nurse  staffing  is a  result  of an  overall  shortage  of  nurses  within  the
healthcare  industry.  Ancillary expenses  increased  $1,395,000 or 24.9% during
2000  when  compared  to 1999 due to the  increased  acuity  level  of  patients
admitted to the centers.  The  remaining  increase in operating  costs is due to
higher health insurance costs, and general inflationary cost increases.

         Management and administrative  fees increased $261,000 or approximately
7.7% in 2000 as  compared  to 1999.  This  increase  is due to fees  paid to the
Fund's  manager,  which are calculated as a percentage of net revenues,  and are
reflective of the revenues increase in fiscal year 2000 as compared to 1999.

         Depreciation and amortization expense increased $203,000 in fiscal year
2000 as compared to fiscal year 1999.  This  increase is due  primarily  to fees
paid in connection  with the extension and subsequent  refinancing of the Fund's
mortgage loan.
                                        1
<PAGE>

OPERATIONS (continued)

         Interest expense  increased  $478,000 in 2000 as compared to 1999. This
increase is the result of higher variable interest rates during the year coupled
with a larger debt balance following the refinancing in June.

FINANCING

         The Fund closed its mortgage loan refinancing with a new bank for loans
totaling  $24,000,000  on June 12, 2000. The renewal terms provide for a term of
five years at an interest rate of 9.75%. Monthly payments are based on a 25-year
amortization  schedule with a balloon payment due at the end of the 5-year term.
Following the repayment of the original loan and transaction costs, the new loan
resulted  in  refinancing  proceeds  of  approximately   $1,225,000  which  were
designated to fund certain improvements to the nursing facilities. The Fund also
replaced its $4,000,000 line of credit facility with the same lender under terms
similar to the mortgage loan terms described above.

CASH DISTRIBUTIONS

         On February 15, 2001 the Fund made its fourth quarter 2000 distribution
to partners of $826,410.  This  distribution  was funded by fourth  quarter 2000
operations and reserves of approximately $403,000. During 2000 operations funded
approximately  80% of the distributions to partners while the balance was funded
by reserves  provided by the refinancing of the Fund's long-term debt. Review of
the 2001 budget  suggests  operations  from the seven  nursing  centers  will be
sufficient to fund a similar distribution in 2001.

SUMMARY

         The major challenge to the Fund in the foreseeable future is to control
operating expenses in light of Medicare's  conversion to the Prospective Payment
System, to maintain a quality mix of patients and to increase the overall census
at each of the facilities

Very truly yours,

    /s/ John M. Prugh                           /s/ Michael R. Walker


John M. Prugh, President                   Michael R. Walker, President
Brown Healthcare, Inc.                     Meridian Healthcare Investments, Inc.
Administrative General Partner             Development General Partner


                                        2

<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Partners of
Meridian Healthcare Growth and
Income Fund Limited Partnership:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Meridian
Healthcare Growth and Income Fund Limited  Partnership (the Fund) as of December
31, 2000 and 1999 and the related consolidated statements of earnings, partners'
capital  and cash  flows for each of the years in the  three-year  period  ended
December  31,   2000.   These   consolidated   financial   statements   are  the
responsibility  of the Fund's  management.  Our  responsibility is to express an
opinion on these consolidated financial statements 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 Meridian Healthcare
Growth and Income Fund Limited Partnership as of December 31, 2000 and 1999, and
the  results of its  operations  and its cash flows for each of the years in the
three-year  period  ended  December  31,  2000  in  conformity  with  accounting
principles generally accepted in the United States of America.

                                                      KPMG LLP

February 16, 2001
Philadelphia, Pennsylvania

                                        3

<PAGE>


                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                             December 31,
                                                                --------------------------------------
                                                                      2000                  1999
                                                                ---------------       ----------------
Assets
Current assets
<S>                                                             <C>                   <C>
    Cash and cash equivalents                                   $        1,108        $         2,511
    Accounts receivable, net of allowance for doubtful
      accounts of $1,245 in 2000 and $1,048 in 1999                      8,990                  7,224
    Estimated third-party payor settlements                                843                    342
    Prepaid expenses and other current assets                              650                    478
                                                                ---------------       ----------------

Total current assets                                                    11,591                 10,555
                                                                ---------------       ----------------

Property and equipment
    Land and improvements                                                1,978                  1,902
    Buildings and improvements                                          45,142                 44,204
    Furniture and equipment                                              5,538                  5,131
                                                                ---------------       ----------------
                                                                        52,658                 51,237
    Accumulated depreciation                                           (19,724)               (17,891)
                                                                ---------------       ----------------
                                                                        32,934                 33,346
                                                                ---------------       ----------------
Other assets
Goodwill, net of accumulated amortization                                4,490                  4,745
Loan acquisition costs, net                                                383                      -
                                                                ---------------       ----------------
                                                                ---------------       ----------------
                                                                         4,873                  4,745
                                                                ---------------       ----------------

Total assets                                                    $       49,398        $        48,646
                                                                ===============       ================

Liabilities and Partners' Capital
Current liabilities
    Current portion of long-term debt                           $          397        $        22,605
    Accrued compensation and related costs                               1,055                    778
    Accounts payable and other accrued expenses
      Trade                                                                829                  1,002
      Related party                                                      2,937                  1,924
    Estimated third-party payor settlements                              1,328                  1,934
                                                                ---------------       ----------------

Total current liabilities                                                6,546                 28,243
                                                                ---------------       ----------------

Deferred management fee payable                                            937                    894
Loan payable to Development General Partner                              1,188                  1,137
Long-term debt                                                          23,379                      -
                                                                ---------------       ----------------
                                                                        25,504                  2,031
                                                                ---------------       ----------------

Partners' capital
    General partners                                                      (142)                  (132)
    Assignee limited partners; 1,540,040 units issued
         and outstanding                                                17,490                 18,504
                                                                ---------------       ----------------

Total partners' capital                                                 17,348                 18,372
                                                                ---------------       ----------------

Total liabilities and partners' capital                         $       49,398        $        48,646
                                                                ===============       ================

</TABLE>


See the accompanying notes to consolidated financial statements.


                                        4
<PAGE>
                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

                       Consolidated Statements of Earnings
                 (Dollars in thousands except per unit amounts)

<TABLE>
<CAPTION>

                                                                     Years Ended December 31,
                                                        -------------------------------------------------
                                                              2000             1999             1998
                                                        ---------------   --------------   --------------


Revenues
<S>                                                     <C>               <C>              <C>
    Medicaid and Medicare patients                      $       44,514    $      41,031    $      42,641
    Private and other patients                                  10,960            9,965           11,121
    Investment and other income                                    290              282              346
                                                        ---------------   --------------   --------------
                                                                55,764           51,278           54,108
                                                        ---------------   --------------   --------------


Expenses
    Operating, including $8,449, $6,441 and $7,400
      to related parties                                        44,505           40,396           40,182
    Management and administration fees
      to related parties                                         3,629            3,368            3,522
    General and administrative                                     920              902              810
    Depreciation and amortization                                2,221            2,018            1,972
    Interest expense                                             2,207            1,729            1,854
                                                        ---------------   --------------   --------------
                                                                53,482           48,413           48,340
                                                        ---------------   --------------   --------------

Net earnings                                            $        2,282    $       2,865    $       5,768
                                                        ===============   ==============   ==============



Net earnings per unit of assignee limited partnership interest - basic (computed
    based on 1,540,040 units
    outstanding in 2000, 1999 and 1998)                 $         1.47    $        1.84    $        3.71
                                                        ===============   ==============   ==============

</TABLE>


See the accompanying notes to consolidated financial statements.

                                        5
<PAGE>
                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

                  Consolidated Statements of Partners' Capital
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                        Assignee
                                                     General         Limited
                                                    Partners         Partners           Total
                                                 --------------   --------------   ---------------

<S>                                              <C>               <C>              <C>
Balance at December 31, 1997                     $        (153)    $      16,504    $       16,351

Net earnings                                                58            5,710             5,768

Distributions to partners                                  (33)          (3,273)           (3,306)
                                                 --------------   --------------   ---------------

Balance at December  31, 1998                             (128)          18,941            18,813

Net earnings                                                29            2,836             2,865

Distributions to partners                                  (33)          (3,273)           (3,306)
                                                 --------------   --------------   ---------------

Balance at December  31, 1999                             (132)          18,504            18,372

Net earnings                                                23            2,259             2,282

Distributions to partners                                  (33)          (3,273)           (3,306)
                                                 --------------   --------------   ---------------

Balance at December  31, 2000                    $        (142)   $      17,490    $       17,348
                                                 ==============   ==============   ===============
</TABLE>



See the accompanying notes to consolidated financial statements.

                                        6
<PAGE>
                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                                             -----------------------------------------------

                                                                  2000            1999             1998
                                                             -------------   --------------  ---------------

Cash flows from operating activities
<S>                                                          <C>             <C>             <C>
    Net earnings                                             $      2,282    $       2,865   $        5,768
    Adjustments to reconcile net earnings to net cash
       provided by operating activities
          Depreciation of property and equipment                    1,834            1,765            1,721
          Amortization of intangibles                                 387              253              250
          Minority interest in net earnings of operating
            partnerships                                               30               34               24
          Increase in loan payable to Development General Partner      51               51               51
          Increase in deferred management fee payable                  43               42               40
          Change in other assets and liabilities
                Accounts receivable                                (1,766)              55             (842)
                Estimated third-party payor settlements, net       (1,107)             381           (2,680)
                Prepaid expenses and other current assets            (172)              87                -
                Accrued compensation and related costs                277             (163)            (113)
                Accounts payable and other accrued expenses           781             (177)           1,048
                                                             -------------   --------------  ---------------

Net cash provided by operating activities                           2,640            5,193            5,267
                                                             -------------   --------------  ---------------

Cash flows from investing activities -
    additions to property and equipment                            (1,421)          (1,458)            (535)
                                                             -------------   --------------  ---------------

Cash flows from financing activities
    Deferred financing fees                                          (429)               -                -
    Proceeds from long-term debt                                   24,000                -                -
    Repayment of long-term debt                                   (22,829)            (731)            (699)
    Distributions to partners                                      (3,306)          (3,306)          (3,306)
    Distributions to minority interests                               (58)            (115)             (74)
                                                             -------------   --------------  ---------------

Net cash used in financing activities                              (2,622)          (4,152)          (4,079)
                                                             -------------   --------------  ---------------

Net increase (decrease) in cash and cash equivalents               (1,403)            (417)             653
Cash and cash equivalents, beginning of year                        2,511            2,928            2,275
                                                             -------------   --------------  ---------------

Cash and cash equivalents, end of year                       $      1,108    $       2,511   $        2,928
                                                             =============   ==============  ===============
</TABLE>


See the accompanying notes to consolidated financial statements.

                                        7
<PAGE>

                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998



(1)    Organization and Operations

       Meridian  Healthcare Growth and Income Fund Limited Partnership(the Fund)
       was organized under the laws of the State of Delaware and will continue
       to operate through December 31, 2037, unless terminated sooner under the
       provisions of the Partnership Agreement.The Fund's Administrative General
       Partner is Brown Healthcare, Inc. and the Fund's Development General
       Partner is Meridian Healthcare Investments, Inc. Brown Healthcare Holding
       Co., Inc. is the Fund's Assignor Limited Partner. Meridian Healthcare
       Investments, Inc. is a subsidiary of Genesis Health Ventures, Inc.

       The Fund owns 98.99% limited  partnership  interests in each of the seven
       operating  partnerships.  Each  partnership  owns and  operates a nursing
       center located in Maryland,  New Jersey, or North Carolina.  As described
       further in Note 3, Meridian  Healthcare,  Inc. (MHC) and other affiliates
       of the Development General Partner manage the nursing centers and provide
       personnel to the operating  partnerships,  along with certain other goods
       and services.

       The Fund, through its operating  partnerships,  derives substantially all
       of its  revenue  from  extended  healthcare  provided  to nursing  center
       residents,  including  room and board,  nursing care, and drugs and other
       medical  services.  The  operations  of the  Fund  are  managed  and  its
       performance is evaluated based on the consolidated  results of operations
       and  financial  position of the Fund.  Total  patient days  available and
       occupancy  (unaudited)  at the facilities in each of the three years were
       as follows:

                                      Available
                        Year             Days            Occupancy
                  ---------------   --------------   -----------------

                        2000            430,000            86.2%
                        1999            429,000            87.9%
                        1998            429,000            91.7%



(2)    Summary of Significant Accounting Policies

       Principles of Consolidation

       The consolidated  financial  statements  include the accounts of the Fund
       and  each of its  98.99%  owned  consolidated  partnerships  based on the
       ability of the Fund to control the major operating and financial policies
       of each of the operating  partnerships under the terms of the partnership
       agreements.  All significant  transactions  and balances between the Fund
       and its consolidated partnerships have been eliminated in consolidation.



                                        8


<PAGE>

                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(2)    Summary of Significant Accounting Policies (continued)

       Cash and Cash Equivalents

       Cash and cash  equivalents  primarily  consist of cash deposits in banks,
       money  market  funds,  and  certificates  of  deposit.  All cash and cash
       equivalents have an original maturity of less than three months,  and are
       stated at cost which approximates market value.

       Revenue

       Revenue is recognized by the Fund in the period the related  services are
       rendered.  The Fund derives a  substantial  portion of its revenue  under
       Medicaid and Medicare reimbursement programs. Under certain retrospective
       Medicaid  systems,  revenues are generally based on  reimbursement of the
       reasonable  direct and indirect  costs of  providing  services to program
       participants.  The Fund separately estimates revenues due from each third
       party with which it has a contractual arrangement and records anticipated
       settlements  with these  parties in the  contractual  period during which
       services were rendered.  The amounts actually reimbursable under the cost
       based reimbursement  programs are determined by filing cost reports which
       are then subject to audit and  retroactive  adjustment by the payor.  The
       Fund provides an allowance for potential audit adjustments to the interim
       reimbursement  amounts received under these cost reimbursement  programs.
       Revisions to this  allowance,  if any, are recorded as an  adjustment  to
       revenues in the year such amounts are determined. Factors that management
       considers when establishing or adjusting an allowance for potential audit
       adjustments  include,  but are  not  limited  to,  changes  in  estimates
       resulting  from  improved cost  information  and  preliminary  results of
       third-party  audits and reviews.  Adjustments and final  settlements with
       third-party  payors  are  reflected  in  operations  at the  time  of the
       adjustment  or  settlement  as an  increase or decrease to the balance of
       estimated  third-party  payor  settlements  and revenue.  At December 31,
       2000, in the aggregate the Fund's  operating  partnerships  have recorded
       assets of $843,000 for cost report  receivables  and  $1,328,000 for cost
       report  liabilities  relating to Medicare and Medicaid  cost reports that
       have accumulated for the years 2000, 1999 and 1998.

       Revisions  to prior year cost  reimbursement  settlements  resulted in an
       increase to revenues of  $797,000,  $389,913  and  $3,094,000  for fiscal
       years ended in 2000, 1999 and 1998, respectively. The revenue adjustments
       for 2000 and 1999 are  primarily  due to the  revision  of the  estimated
       settlements  based upon final and interim audit  settlements  of the open
       cost report years. The majority of the 1998 adjustments resulted from the
       favorable  resolution of a Maryland  Medicaid issue which related to cost
       reports for years 1994 through  1997.  Maryland  Medicaid had proposed an
       audit adjustment reducing the amount of cost allowed for reimbursement of
       the  fees  paid to the  Fund's  manager  as the  state  auditor  took the
       position that the manager was a related  party.  Upon appeal by the Fund,
       the  State of  Maryland  determined  that the  Fund's  manager  was not a
       related party and that fees paid to



                                        9


<PAGE>


                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(2)    Summary of Significant Accounting Policies (continued)

       Revenue (continued)

       the manager were reimbursable  under the state Medicaid program,  subject
       to the applicable cost center ceilings.

       Pursuant to the Balanced  Budget Act of 1997,  effective  January 1, 1999
       the  Fund's  operating   partnerships  were  converted  to  the  Medicare
       Prospective Payment System ("PPS"). Under PPS, skilled nursing facilities
       are  reimbursed  at a  prospective  per diem rate for all covered  Part A
       skilled  nursing  facility  services,  as well as many services for which
       payment may be made under Part B when a beneficiary  who is a resident of
       a skilled nursing  facility  receives  covered  skilled nursing  facility
       care. There can be no assurances that any future  healthcare  legislation
       will not  adversely  affect  the  business  of the Fund.  There can be no
       assurance that payments under  government and private  third-party  payor
       programs  will be timely,  will  remain at levels  comparable  to present
       levels or will, in the future, be sufficient to cover the costs allocable
       to patients  eligible for  reimbursement  pursuant to such programs.  The
       Fund's  financial  condition and results of operations may be affected by
       the  revenue  reimbursement  process,  which in the  Fund's  industry  is
       complex and can involve  lengthy  delays between the time that revenue is
       recognized and the time that reimbursement amounts are settled.

       Property and Depreciation

       Property and equipment are stated at cost less accumulated  depreciation.
       Major renewals and betterments  are capitalized and ordinary  repairs and
       maintenance are charged against operations in the period incurred.  Asset
       costs and related accumulated  depreciation are removed from the accounts
       upon  disposition  of an asset and the resulting gain or loss is included
       in the determination of earnings. Property and equipment are reviewed for
       impairment  whenever  events  or  circumstances   provide  evidence  that
       suggests  that their  carrying  amount may not be  recoverable.  The Fund
       assesses  the  recoverability  of property and  equipment by  determining
       whether  the   carrying   value  can  be  recovered   through   projected
       undiscounted cash flows.

       Depreciation is computed using the straight-line method. Estimated useful
       lives  established  for  purposes of  computing  depreciation  range from
       thirty  to  forty  years  for   buildings,   twenty  years  for  building
       improvements, ten years for land improvements, and from five to ten years
       for furniture and equipment.



                                       10

<PAGE>


                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(2)    Summary of Significant Accounting Policies (continued)

       Goodwill

       Goodwill  arose  from the  Fund's  purchase  of its  limited  partnership
       interests  in  the   operating   partnerships   and  is  amortized  on  a
       straight-line  basis  over  thirty  years.  Accumulated  amortization  of
       goodwill  aggregated  $3,173,000  and $2,919,000 at December 31, 2000 and
       1999, respectively.

       Goodwill is reviewed  for  impairment  whenever  events or  circumstances
       provide  evidence that suggests that the carrying  amount of goodwill may
       not be recoverable.  The Fund assesses the  recoverability of goodwill by
       determining  whether  the  amortization  of the  goodwill  balance can be
       recovered through projected undiscounted cash flows.

       Income Taxes

       The  consolidated  financial  statements  of the Fund do not  include any
       provision for federal or state income taxes.  All items of Fund earnings,
       deductions and credits are allocated among the partners. The distributive
       share of the Fund's earnings, deductions and credits are included in each
       partner's federal and state income tax returns.

       A reconciliation of net earnings,  as reported on the Fund's consolidated
       statements of earnings,  to taxable earnings for the years ended December
       31, is summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                                      2000         1999          1998
                                                                   ----------  -----------   -----------

<S>                                                                <C>         <C>           <C>
Net earnings per consolidated statements of earnings               $   2,282   $    2,865    $    5,768
Accelerated depreciation deducted for income
    tax purposes over straight-line depreciation
    deducted for financial reporting purposes                           (153)        (164)         (195)
Amortization of goodwill deducted for financial reporting
    purposes, not deducted for income tax purposes                       252          251           241
Differences in timing of revenue recognition
    for financial reporting purposes and
    income tax purposes, primarily related to cost
    reimbursement settlements                                           (743)         (38)       (2,275)
Differences in timing of expense deductions for
    financial reporting purposes and income tax purposes                 (44)         516           (70)
                                                                   ----------  -----------   -----------

Taxable earnings                                                   $   1,594   $    3,430    $    3,469
                                                                   ==========  ===========   ===========

</TABLE>


                                       11

<PAGE>


                  MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(2)    Summary of Significant Accounting Policies (continued)

       Use of Estimates

       The  preparation  of financial  statements in conformity  with  generally
       accepted accounting  principles 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 estimated.


(3)    Related Party Transactions

       The nursing  centers owned by the operating  partnerships  are managed by
       MHC, an affiliate of the Development General Partner.  Under the terms of
       the management  agreements,  the operating  partnerships are obligated to
       pay monthly management fees at an annual rate equal to 6% of each nursing
       center's revenue.  However,  payment of one-half of the fees incurred for
       the  management  of the  Mooresville,  Salisbury  and  Woodlands  nursing
       centers was  deferred  during the  two-year  period  commencing  with the
       Fund's  acquisition  of  partnership  interests  in 1988 and 1989.  As of
       December 31, 2000 and 1999, the amounts  deferred  under this  agreement,
       including  interest at 9% per annum,  aggregated  $937,000 and  $894,000,
       respectively.  The Fund is obligated to repay these  amounts when certain
       financial criteria are met.

       The  Fund  is  obligated  to  pay  the  Administrative   General  Partner
       administration  fees  equal  to the  greater  of 1/2 of 1% of the  Fund's
       annual  revenue or $75,000.  Certain of the operating  partnerships  also
       purchase drugs and medical supplies and other services from affiliates of
       the  Development  General  Partner.  Such purchases are in turn billed to
       patients or third-party payors at prices which on average approximate the
       nursing center's cost.

       The Development General Partner loaned the Fund $597,000,  as required by
       the Cash Flow  Deficit  Guaranty  Agreement,  to  support  the  operating
       deficits  generated by the Mooresville,  Salisbury and Woodlands  nursing
       centers during each center's first two years of operations  subsequent to
       the Fund's acquisition of partnership interests.  Loans outstanding under
       this arrangement,  including  accumulated  interest from inception of the
       loan at 9% per annum, were $1,188,000 and $1,137,000 at December 31, 2000
       and 1999,  respectively.  The Fund is obligated to repay these loans when
       certain  specified  financial  criteria are met, the most  significant of
       which is the  payment  of a  preferred  return  to the  assignee  limited
       partners as defined in the Fund's partnership agreement.



                                       12

<PAGE>


                  MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(3)    Related Party Transactions (continued)

       Transactions  with the Fund's general  partners and their  affiliates for
       the years ended December 31 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                       2000         1999        1998
                                                     --------     -------     --------

<S>                                                 <C>          <C>         <C>
          Management and administration fees        $   3,629    $  3,368    $   3,522
          Drugs and medical supplies purchases          3,601       3,012        2,447
          Nursing and rehabilitation services           4,848       3,429        4,953
          Interest expense on borrowings                   94          93           91
</TABLE>


       Neither the Fund nor the operating partnerships employ any personnel. All
       staff required by the nursing  centers are employees of MHC which charges
       the  operating  partnerships  for all costs  related  to such  personnel,
       including  payroll taxes,  workers'  compensation,  health  insurance and
       other fringe benefits.  Salaries and benefits  represented  approximately
       64%,  67%,  and 65% in  2000,  1999  and  1998,  respectively,  of  total
       operating expenses.

(4)    Debt

       Effective  February 28, 2000,  the Fund extended its  $4,000,000  line of
       credit  agreement  which is  designated  for  working  capital  needs and
       issuance of letters of credit.  This  agreement  expired on May 31, 2000.
       Effective June 12, 2000, the Fund established a revolving credit facility
       with a maximum borrowing limit of $4,000,000.  Borrowing under the credit
       facility  will bear  interest at a floating  rate,  which shall equal the
       announced  commercial  prime rate. The term of the credit facility begins
       on June 12,  2000 and ends ten  days  after  the date of any  demand  for
       payment or on June 1, 2001. The bank shall review the credit facility for
       a one  year  extension  on or  before  June  1,  2001  and  each  June 1,
       thereafter. There were no borrowings outstanding under either the line of
       credit  agreement or the revolving  credit  facility at December 31, 2000
       and 1999.  Borrowings are secured primarily by the accounts receivable of
       the Fund.

       Effective February 28, 1998, the Fund refinanced all existing  mortgages.
       Under the terms of the refinancing, the mortgages matured on February 28,
       2000.  Effective  February  28,  2000,  the Fund  extended  all  existing
       mortgages  through June 12, 2000.  The  mortgages  bore interest at LIBOR
       plus 1.55%. The Fund closed its mortgage loan refinancing with a new bank
       for loans totaling $24,000,000 on June 12, 2000. The renewal terms became
       effective  on June 12,  2000 and  provide  for a term of five years at an
       interest  rate of 9.75%.  Monthly  payments  of  $229,886  are based on a
       25-year  amortization  schedule with a balloon  payment due at the end of
       the five year term.



                                       13

<PAGE>
                  MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(4)    Debt (continued)

       Debt at December 31 consisted of the following (in thousands):

                                              2000           1999
                                         -------------   ------------
          Mortgage notes payable
            Maryland facilities          $     10,667    $    15,640
            Woodlands facility                  5,575          5,586
            Frederick facility                  4,758          1,047
            Hamilton facility                   2,776            332
                                         -------------   ------------
                                               23,776         22,605
          Less current portion                   (397)       (22,605)
                                         -------------   ------------
                                         $     23,379    $         -
                                         =============   ============



       Principal  payments on the mortgage  loans during the next five years are
       as  follows:  $397,000  in  2001,  $468,000  in 2002,  $517,000  in 2003,
       $564,000 in 2004 and $21,830,000 in 2005.

       The mortgage  notes  payable are secured by deeds of trust on the related
       property.  Under  the  terms  of these  loan  agreements,  the  operating
       partnerships  are obligated to conform with specific  financial  criteria
       and are subject to certain other covenants.

       Cash  outflows  from  operating  activities  included  interest  paid  of
       $2,082,000,   $1,602,000   and   $1,738,000  in  2000,   1999  and  1998,
       respectively.

(5)    Distributions to Partners and Allocation of Net Earnings

       Cash is  distributable  and net earnings  are  allocable 1% to the Fund's
       general  partnership   interests  and  99%  to  its  limited  partnership
       interests. Cash distributable to partners is determined at the discretion
       of the Fund's general partners.  Cash distributions to partners were made
       from net cash  provided  by  operating  activities  as  disclosed  on the
       statements of cash flows and reserves of $666 in 2000,  and entirely from
       net cash flow provided by operations in 1999 and 1998. Cash distributions
       per unit aggregated $2.12 in 2000, 1999 and 1998.

(6)    Employee Benefit Plans

       Certain   employees  of  the  Fund's  nursing  centers  are  eligible  to
       participate in the Genesis Health  Ventures,  Inc.  Retirement  Plan. The
       Plan covers all  employees  having  1,000 hours or more service in a plan
       year.  Employees'  contributions  to the plan may be  matched by the Fund
       based on years of service.  During the plan years ended December 31, 2000
       and 1999, a company  match of 50% of employee  contributions  up to 3% of
       the employee's annual



                                       14

<PAGE>


                  MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

             Notes to Consolidated Financial Statements (continued)


(6)    Employee Benefit Plans (continued)

       gross salary was accrued. Additionally, the Plan provides for
       discretionary employer contributions based on profits.

       Certain  other  employees of the Fund's  nursing  centers are eligible to
       participate in Meridian  Healthcare,  Inc. Union Retirement  Savings Plan
       which  qualified  under Section  401(K) of the Internal  Revenue  Service
       Code.  Employees  of  the  company  covered  by a  collective  bargaining
       agreement are eligible for  participation in the Plan on the first day of
       the  quarter  following  the date  1,000 or more  hours  of  service  are
       completed and after attaining the age of 21. In accordance with the terms
       of the plan,  employees  may elect to  contribute a  percentage  of their
       respective   annual   compensation  to  the  plan,   subject  to  certain
       limitations.  The  Fund is  obligated  to  match  50% of each  employee's
       contribution up to 3% of their respective annual compensation.

       Charges to operations in connection with these plans aggregated  $230,000
       in 2000, $209,000 in 1999 and $185,000 in 1998.

(7)    Commitments and Contingencies

       The Fund is a party to  litigation  arising  in the  ordinary  course  of
       business. The Fund does not believe the results of such litigation,  even
       if the outcome is unfavorable to the Fund,  would have a material  effect
       on its consolidated financial position or results of operations.

(8)    Fair Value of Financial Instruments

       The Fund believes the carrying amount of cash and  equivalents,  accounts
       receivable   (net  of  allowance   for  doubtful   accounts),   estimated
       third-party payor settlements, prepaid expenses and other current assets,
       accounts payable and other accrued expenses and accrued  compensation and
       related costs approximates fair value because of the short-term  maturity
       of these instruments.

       The carrying value of the Fund's debt approximates its fair value.



                                       15

<PAGE>


                   MERIDIAN HEALTHCARE GROWTH AND INCOME FUND
                               LIMITED PARTNERSHIP

                             Partnership Information


Directors and Executive Officers

Meridian Healthcare Investments, Inc.
Development General Partner:

         Michael R. Walker
         President and Director

         Richard R. Howard
         Director

         George V. Hager, Jr.
         Vice President and Treasurer

Brown Healthcare, Inc.
Administrative General Partner:

         John M. Prugh
         President and Director

         Peter E. Bancroft
         Vice President and Director

         Terry F. Hall
         Secretary

         Timothy M. Gisriel
         Treasurer



                                    Form 10-K

A copy of the  Fund's  Annual  Report  on Form  10-K for 2000 as filed  with the
Securities  and Exchange  Commission is available to partners  without charge on
request by writing to:

         Investor Relations
         Brown Healthcare, Inc.
         225 East Redwood Street
         Baltimore, Maryland 21202

                                    Auditors

         KPMG LLP
         1600 Market Street
         Philadelphia, Pennsylvania 19103

                                  Legal Counsel

         Wilmer, Cutler & Pickering
         100 Light Street
         Baltimore, Maryland 21202




                               Further Information

Please  submit  changes  in  name,   address,   investment   representative  and
distribution instructions to Investor Relations at the above address.

For further  information  or questions  regarding your  investment,  please call
Jennifer Zepp, Investment Coordinator, at 410-547-3033


                                       16


<PAGE>