SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                   FORM 10-KSB

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

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

         For the fiscal year ended  MARCH 31, 1997
                                       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 0-5097

                           UNITED VANGUARD HOMES, INC.
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             (Exact name of Registrant as specified in its charter)

               Delaware                                11-2032899
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(State or other jurisdiction                (I.R.S. employer identification no.)
 of incorporation or organization)

4 Cedar Swamp Road, Glen Cove, New York                   11542
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(Address of principal executive offices)                (Zip code)

Registrant's telephone number, including area code: (516) 759-1188

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

Securities registered pursuant to Section 12(g) of the Exchange Act:
                                                    Common Stock, $.01 par value

         Check  whether  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  Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes /  /    No /X/

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-B 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-KSB or any  amendment to
this Form 10-KSB. / /

         State   Registrant's   revenues  for  its  most  recent   fiscal  year:
$7,962,433.

         State the aggregate  market value of  Registrant's  outstanding  voting
Common Stock held by non-affiliates of Registrant: $2,000,000.

            As of March 31, 1998,  there were  3,309,890  shares  outstanding of
Registrant's Common Stock.

Documents Incorporated by Reference:  None.

Transitional Small Business Disclosure Format:  Yes / /  No  /X/
<PAGE>
                                     PART I

Item 1.     DESCRIPTION OF BUSINESS

         THIS REPORT  CONTAINS  CERTAIN  FORWARD-LOOKING  STATEMENTS  WITHIN THE
MEANING OF SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE
COVERED BY THE SAFE  HARBORS  CREATED  HEREBY.  ALL  FORWARD-LOOKING  STATEMENTS
INVOLVE RISKS AND UNCERTAINTY. ALTHOUGH REGISTRANT BELIEVES THAT THE ASSUMPTIONS
UNDERLYING THE FORWARD-LOOKING  STATEMENTS CONTAINED HEREIN ARE REASONABLE,  ANY
OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN BE NO ASSURANCE
THAT THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  IN THIS REPORT WILL PROVE TO BE
ACCURATE.   IN  LIGHT  OF  THE   SIGNIFICANT   UNCERTAINTIES   INHERENT  IN  THE
FORWARD-LOOKING  STATEMENTS  INCLUDED HEREIN,  THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A  REPRESENTATION  BY  REGISTRANT  OR ANY OTHER PERSON
THAT THE OBJECTIVES AND PLANS OF REGISTRANT WILL BE ACHIEVED.

GENERAL

            United Vanguard Homes, Inc. ("Registrant"),  a Delaware corporation,
was  originally  organized on September 26, 1988 ("Old UVH") in order to combine
various  activities  relating to the  development,  ownership and  management of
senior  living  facilities  organized  and operated by Vanguard  Ventures,  Inc.
("Vanguard")  and its  principals  beginning in 1980. On March 30, 1993, Old UVH
merged into Coap Systems Inc. ("Coap"),  a relatively  inactive,  publicly-owned
subsidiary  of  Vanguard,  and  simultaneously  Coap  changed its name to United
Vanguard  Homes,  Inc.  Although   Registrant  is  subject  to  the  information
requirements of the Securities Exchange Act of 1934, there are only a few shares
of Registrant's  common stock,  $.01 par value per share ("Common Stock") in the
public float and there is no public market for the Common  Stock.  Registrant is
currently a majority-owned subsidiary of Vanguard.

         Registrant  is  an  owner,  manager  and  developer  of  senior  living
facilities which provide housing and various levels of care and services for the
elderly.

                                           FISCAL YEAR ENDED MARCH 31,
                                           ---------------------------
                                     1995                1996          1997
                                     ----                ----          ----

Statement of Operations Data:

   Revenues:
       Resident services          $ 4,887,000       $ 4,966,000     $ 5,000,000
       Healthcare services          2,491,000         2,555,000       2,682,000
       Management Fees                      0                 0          60,000
       Development fees               700,000         1,004,000         220,000
                                  -----------       -----------    ------------
               Total revenues     $ 8,078,000       $ 8,525,000     $ 7,962,000
                                  ===========       ===========    ============


                                      -2-
<PAGE>
            Senior  living   facilities   provide  a  combination   of  housing,
personalized support and healthcare services generally identified as INDEPENDENT
LIVING,  ASSISTED LIVING and SKILLED NURSING.  INDEPENDENT LIVING facilities are
designed  to enable  residents  to live  independently  yet remain free from the
chores of home  ownership  and concerns of daily life,  such as  transportation,
meal preparation, personal security and housekeeping. ASSISTED LIVING facilities
offer a  combination  of  housing  and  personal  care and  healthcare  services
designed to respond to the  individual  needs of those who require help with the
activities  of daily  living  but are not  sick or  bedridden.  SKILLED  NURSING
facilities are for those residents who require extensive care. A continuing care
retirement community ("CCRC") provides all three levels of services (independent
living, assisted living and skilled nursing) in the same facility, whereas other
facilities, known as congregate care facilities, provide only independent living
and assisted living services.

            As  residents  of  senior  living  facilities  "age-in-place,"  they
generally  require more  assistance.  In each of  Registrant's  currently  owned
and/or managed  senior living  facilities,  a significant  shift in the needs of
residents from independent living services to assisted living services has taken
place,  and to  accommodate  residents,  Registrant  is in the  initial  stages,
subject to regulatory approval, of converting a number of its independent living
apartments in certain of its properties to assisted living units.

            Registrant's  growth objective is to capitalize on the experience of
its management  team in the senior living industry and on the growing demand for
senior living facilities as an increasingly  preferred lifestyle for the elderly
by (i)  providing a full range of  high-quality  personalized  resident care and
services;  (ii) pursuing  development  opportunities  for itself or on behalf of
others;  and  (iii)  acquiring  properties  in the open  market or  through  the
exercise of purchase options obtained in the development process.

            Registrant   believes   that  its  business   will  benefit  in  the
foreseeable   future  from  significant  trends  affecting  the  long-term  care
industry, including an increase in the demand for senior care resulting from the
aging of the U.S.  population,  efforts to contain  healthcare costs by both the
public and private sector and the  increasing  financial net worth of the senior
population  which  makes the senior  living  facility an  available  option to a
broader market.  Registrant believes that these trends will result in increasing
demand  for  senior  living  facilities  that  generally  offer  a more  secure,
trouble-free environment and improved quality of life.

BUSINESS STRATEGY

            GENERAL. Registrant's business strategy is based upon the experience
of its management  team in the senior living  industry and on the growing demand
for senior living  facilities as an  increasingly  preferred  life style for the
elderly.  Registrant intends to capitalize on these two factors by (i) providing
a full range of  high-quality  personalized  resident  care and  services;  (ii)
pursuing development  opportunities for itself or on behalf of others; and (iii)
acquiring  properties  in the open  market or through  the  exercise of purchase
options obtained in the development process.


                                      -3-
<PAGE>
            PERSONALIZED  RESIDENT CARE AND SERVICES.  Registrant  believes that
income  qualified  elderly would choose  residential  CCRCs and assisted  living
facilities  over skilled nursing  facilities  when given the choice.  Registrant
believes that the elderly would choose the residential  assisted living facility
alternative  because of the significant  quality of life  advantages  which they
offer.  Consequently,  providing a high  quality of life for its  residents in a
safe, healthy and secure environment is the foundation of Registrant's  business
strategy.

            In  furtherance  of this  strategy,  Registrant  has  structured its
senior living  facilities to offer residents a supportive,  "home-like"  setting
and  availability of assistance with  activities of daily living  ("ADLs").  Its
facilities are, in many respects,  similar to conventional apartment living with
enhanced  services  allowing  residents a more  independent and social lifestyle
than they would  receive in a skilled  nursing  facility  or, in most cases,  at
home.  At the same time,  support is  provided  in a manner  sufficient  to meet
residents' requirements. General services in Registrant's residences include the
provision  of  three  meals  per day,  laundry,  housekeeping  and  maintenance.
Available support services include personal and routine nursing care, social and
recreational services and transportation. Personal care includes assistance with
activities such as bathing, dressing, personal hygiene, grooming, and eating and
ambulating. Registrant also provides or makes available routine nursing services
(in addition to its skilled nursing facility services),  entertainment,  banking
and  shopping.  Generally,  however,  Registrant  is able to tailor the changing
needs of its  residents  through the use of  individual  service  contracts  and
flexible staffing patterns.

            DEVELOPMENT  OPPORTUNITIES.  Operating  revenues and management fees
are generally stable once a facility is fully occupied. At that point, growth in
revenue of Registrant  becomes  dependent upon  development  and management fees
received  through the  development  and  management of additional  senior living
facilities on behalf of others.  Consequently,  the second part of  Registrant's
business  strategy  is to increase  the number of senior  living  facilities  it
develops  and  manages  for  itself or on behalf of  others,  in part  through a
strategy  whereby  Registrant may enter into an agreement  with an  unaffiliated
third-party  entity,  which may be a  not-for-profit  organization  exempt  from
federal income taxes under ss.  501(c)(3) of the Internal  Revenue Code of 1986,
as amended (the "Code") (a "501(c)(3) organization"), to develop a senior living
facility  for such  entity.  Registrant  would  generally  attempt  to  obtain a
management  agreement to operate the facility  upon its  completion as well as a
fair market value option to purchase the facility at a future time. Through this
type  of  transaction,  if  the  unaffiliated  entity  is  adequately  financed,
Registrant would not incur the start-up  development  costs and operating losses
typically  associated  with the  development  and initial  operation of a senior
living facility  because  Registrant would not be the owner.  However,  prior to
entering into such  agreement,  Registrant  may incur certain  initial  expenses
associated with its site selection process.  Registrant would earn a development
fee for the  development of the senior living  facility and a management fee for
its  operation  and might  exercise  its option,  if any, to purchase the senior
living facility.  The unaffiliated  third-party entity would benefit through the
attainment of a turnkey senior living facility.


                                      -4-
<PAGE>
            Registrant's  development  program  will  initially  focus  on  site
selection and residence size, both of which Registrant believes are essential to
the success of its development projects. In evaluating a prospective development
site,  Registrant will consider  primarily the strength of the market demand and
the ability to maximize the efficiency of its management resources in a specific
market or "cluster." Accordingly,  Registrant intends to select sites so that it
can strategically place three to five senior living facilities within a 200-mile
radius,  creating a regional  cluster of senior  living  facilities.  Registrant
believes  that the  clustering  concept will allow it to reduce costs by sharing
certain  management,  marketing and  operational  resources  within the regional
cluster.  Registrant  intends  to  locate  its  assisted  living  facilities  in
well-established  residential  neighborhoods in communities where the population
typically ranges from 40,000 to 100,000 people.  The size of a typical community
for a CCRC would  generally  be somewhat  larger,  ranging  between  100,000 and
500,000  people.  Registrant  intends to pursue the development of senior living
facilities in communities that show a strong need for senior living services and
a higher than average  percentage of middle-aged or elderly  individuals.  Other
factors that are considered in the site selection  process  include the level of
competition,  the local  labor  market,  the state  and  local  legislative  and
regulatory  environment and the presence of strong community  support for senior
living facilities.

            Once a site is selected,  Registrant may either advance funds to the
unaffiliated  third-party owner of the facility, which funds would be secured by
the assets of the  unaffiliated  third-party  entity  acquired with the advanced
funds,  principally the land for the proposed facility,  or expend funds itself,
on behalf of the third  parties.  To the extent such advances are not secured by
land, they will be reserved as uncollectible  until the unaffiliated  entity can
repay the advances.  While these  advances may at times consist of  Registrant's
working capital,  Registrant may also seek to arrange, through Vanguard or other
sources,   short  term  financing  to  satisfy  the  project's  initial  funding
requirements.  Registrant may set up a special purpose  wholly-owned  subsidiary
which would issue the debt, which debt may then be convertible into Registrant's
Common  Stock.  It is  intended  that these  advances  would be repaid  from the
proceeds  of  construction  financing  arranged by  Registrant  on behalf of the
unaffiliated third-party entity.  Registrant may be restricted from recording as
a receivable any advances to the unaffiliated  third-party  entity under certain
circumstances.   Registrant   would  then,   pursuant  to  project   development
agreements,  act  as  the  project  developer  for  what  would  typically  be a
development  fee of 7.5 percent of the project's  soft and hard costs.  Once the
project is completed, Registrant may act as the manager of the facility pursuant
to a management  agreement,  which would provide for a management fee of between
four and five percent of the facility's gross revenue,  depending on the type of
facility.

            ACQUISITION  OF  PROPERTIES.  In  addition  to the  development  and
management of senior living facilities for third parties, Registrant may acquire
existing senior living  facilities.  These  acquisitions  may be effected either
through  the  exercise  of  a  purchase  option  obtained  on  properties  which
Registrant had developed for third parties or through  acquisitions  in the open
market.


                                      -5-

<PAGE>
            When  a  facility   managed  by   Registrant   attains  a  level  of
profitability  after the payment of debt service and  management  fees  (usually
after stabilized  occupancy in excess of 90% and at times lower depending on the
level of debt service) and  Registrant  has a purchase  option,  the exercise of
Registrant's option will be considered.

SERVICES AND AMENITIES

            Registrant's  senior living facilities offer residents a supportive,
"home-like"  setting and  availability  of assistance  with  assistance in daily
living (ADLs).  The independent and assisted living community is very similar in
many respects to conventional  apartment living with enhanced  services allowing
the residents to live  independently  but yet  socialize in a safe  environment.
Residents are individuals  who, for a variety of reasons,  cannot live alone but
do not  typically  need the 24-hour  skilled  medical  care  provided in skilled
nursing  facilities.  Services  provided or  available  to these  residents  are
designed to respond to their  individual  needs and to improve  their quality of
life. This  individualized  assistance is available 24 hours a day, to meet both
anticipated and unanticipated needs. General services in Registrant's residences
include  the  provision  of three  meals  per  day,  laundry,  housekeeping  and
maintenance.  Available  support services  provided by facility staff or outside
agencies  include  personal and routine  nursing care,  social and  recreational
services,  transportation and special services needed by the resident.  Personal
care includes  assistance with activities  such as bathing,  dressing,  personal
hygiene, grooming, as well as eating and ambulating assistance.  Routine nursing
services,  which are made available and are provided according to the resident's
individual  need and state  regulatory  requirements,  include  assistance  with
taking medication, skin care and injections.  Organized activities are available
for social  interaction and  entertainment.  Special services  available include
banking,  grocery  shopping  and pet care.  Although a typical  package of basic
services  provided  to a resident  includes  meals,  housekeeping,  laundry  and
personal  care,  Registrant  does not have a standard  service  package  for all
residents.  Instead,  it is  able  to  accommodate  the  changing  needs  of its
residents through the use of individual  service contracts and flexible staffing
patterns.

            As  Registrant's  residents  age,  the  level  of care  required  by
particular  residents is expected to increase.  Registrant's  multi-tiered  rate
structure  for the services it provides is based upon the acuity of, or level of
services  needed by, each  resident.  Supplemental  and  specialized  health and
personal care services for those residents requiring 24-hour supervision or more
extensive  assistance  with ADLs is provided  to the  residents  by  third-party
providers who are  reimbursed  directly by the resident or a  third-party  payor
(such as Medicaid or Medicare).  In the event that a resident's acuity reaches a
level such that Registrant is unable to meet such resident's  needs,  Registrant
maintains  relationships  with local hospitals and skilled nursing facilities to
facilitate a transfer of the resident. A resident of Registrant's CCRCs would be
transferred  to the skilled  nursing  component  at the  facility,  if there are
available beds at such facility.

            Phoenix  Lifecare  Corp.,  a 501(c)(3)  organization,  provides home
healthcare   services  to  residents  of  Registrant's   Whittier  and  Whitcomb
facilities.


                                      -6-
<PAGE>
OPERATIONS

             The  day-to-day  operations  of each  senior  living  facility  are
managed by an on-site administrator who is responsible for the overall operation
of the senior living  facility,  including  quality of care,  marketing,  social
services  and  financial   performance.   The   administrator   is  assisted  by
professional  and  non-professional  personnel,  some of whom may be independent
providers or part-time personnel, including nurses, personal service assistants,
maintenance and dietary personnel.  The routine nursing services are provided by
a nurse who is typically  employed by  Registrant,  subject to state  regulatory
requirements.  The  nursing  hours  vary  depending  on  the  residents'  needs.
Registrant consults with outside providers,  such as pharmacists and dieticians,
for purposes of medication  review,  menu planning and responding to any special
dietary needs of its residents.  Personal care,  dietary services,  housekeeping
and laundry services are performed  primarily by personal service assistants who
are full-time employees of Registrant.  At The Whitcomb and The Whittier,  which
are not licensed to provide personal care or nursing services, such services are
provided by Phoenix Lifecare Corp.

            Registrant provides management services to each of its senior living
facilities  which  include  the  development  of  operating  standards  and  the
provision of  recruiting,  training and accounting  services.  It is anticipated
that, if Registrant grows, it will establish  regional offices that will include
a regional manager to oversee six to ten senior living facilities.  The regional
manager  will be  responsible  for  monitoring  and  supervising  all aspects of
operations in the region,  including  reviewing and monitoring  compliance  with
corporate  policies and  procedures  and acting as a liaison  between the senior
living facilities and corporate headquarters.

            Presently,  senior  living  facility  personnel  are  supported by a
corporate staff based at  Registrant's  headquarters.  Corporate  personnel work
with the  on-site  administrator  with  respect to the  establishment  of senior
living facility goals and strategies,  quality assurance oversight,  development
of Registrant  policies and procedures,  development and  implementation  of new
programs, cash management and treasury functions,  human resource management and
development.

            Registrant's  executive team has been carefully  selected based upon
each member's  knowledge  and  experience in the senior living field and related
areas.  Registrant has sought talented self-starters who are capable of handling
many  aspects  of  the  senior  living  business.  Registrant  believes  that  a
successful   senior   living   facility   is   operationally   related   to  the
hotel/hospitality  field and programmatically  related to the residential/social
model of healthcare.

MARKETING

            Registrant's  senior living  facilities  provide  affordably  priced
housing,  personalized  support and  healthcare  services and  primarily  target
private-pay residents.  By targeting senior living facility development projects
primarily in upper middle  income  communities  and by  maintaining  competitive
pricing,  Registrant  believes it will be able to achieve high occupancy levels.
Registrant  has found an  effective  niche in the  upper  middle  income  market
between the high


                                      -7-
<PAGE>
income  prospect  who can afford to obtain  services  at home and the low income
prospect who cannot afford to live in Registrant's senior living facilities.

            The  marketing of  independent  living  facilities is done through a
combination of media and direct mail  advertising,  referrals from residents and
various centers of influence (e.g., hospital administrators,  religious leaders,
service  clubs,  attorneys,  accountants,  bankers,  etc.) and various  types of
social  functions  at  a  senior  living  facility.  Marketing  assisted  living
facilities  is  better  accomplished  through  networking  with  major  referral
sources.  During the  rent-up  stage of a project,  the  marketing  staff  would
consist of a Director of  Marketing,  two sales  persons,  and a secretary.  The
senior living facility's administrator would also assist with special events and
market-oriented   social   affairs.   After  the  senior   living   facility  is
substantially  rented,  the  staff  can be  reduced  to a  single  or  part-time
Marketing Director and secretary.

PAYING FOR SENIOR LIVING CARE

            The  residents  of CCRCs and  assisted  living  facilities  or their
families  generally  pay the cost of care from  their own  financial  resources.
Depending on the nature of an individual's health insurance program or long-term
care insurance policy, the individual may receive reimbursement for the costs of
care.

            Government payments for assisted living outside of a skilled nursing
facility have been limited.  Some state or local governments offer subsidies for
rent or services  for low income  elderly.  Others may provide  subsidies in the
form of additional payment for those who receive SSI payments. Medicaid provides
reimbursement for certain financially or medically needy persons,  regardless of
age, and is funded  jointly by federal,  state and local  governments.  Medicaid
reimbursement  varies from state to state.  Only a limited number of states have
Medicaid  Waiver  programs  that allow  them to pay for  assisted  living  care.
Without a Medicaid  Waiver Program,  states can only use federal  Medicaid funds
for care in skilled nursing facilities.

GOVERNMENT REGULATION OF SENIOR LIVING FACILITIES

            In general,  senior living  facilities and  healthcare  services are
subject to extensive government  regulation.  The senior living facilities owned
and managed by the  Registrant  are subject to state  regulation  and  licensing
requirements and to Certificates of Need (CON) or similar statutes under which a
proposed  operator  must  demonstrate  public need for skilled  nursing  beds or
assisted  living  units and  satisfy  other  criteria.  The  operators  of those
facilities  must  also  comply  with  any  cost  reporting  or  other  reporting
requirements  imposed  by the  Medicaid  program  as well  as any  reimbursement
limitations  on  amounts  that  may be  charged  to the  program  or to  program
beneficiaries.  In order to  qualify as a state  licensed  facility  and,  where
applicable,  qualify for Medicaid reimbursement and/or resident SSI supplemental
payments,  the senior living  facilities  owned and managed by  Registrant  must
comply with regulations  that address,  among other things,  staffing,  physical
design, required services and resident characteristics. Such facilities are also
subject to various local building codes and similar  ordinances,  including fire
safety codes.  These  requirements vary from state to state and are monitored by
varying state and local agencies.


                                      -8-
<PAGE>
            Currently,  assisted living  facilities are not regulated as such by
the federal government. Current state requirements for assisted living providers
in many states are typically less stringent  than the  requirements  for skilled
nursing  facilities.  Management  anticipates that states that regulate assisted
living  facilities,  to the  extent  they do not  already  do so,  will  require
licensure as an assisted living facility and will establish varying requirements
with  respect to such  licensure.  The  facilities  that  Registrant  intends to
develop and manage will apply for appropriate licensure.

            The  facilities  owned and  managed  by  Registrant  are  subject to
periodic survey or inspection by governmental authorities. From time to time, in
the  ordinary  course  of  business  a  facility  may be  cited  for one or more
deficiencies  which  are  typically  addressed  in a plan of  correction  by the
facility.  Registrant  believes  that  the  properties  managed  by  it  are  in
substantial compliance with all applicable licensing,  reimbursement and similar
regulatory requirements.

            Registrant and the facilities it manages are also subject to various
state  and  federal  "fraud  and  abuse"  laws,  including  "anti-kickback"  and
"physician  self-referral"  laws.  Registrant  believes that  properties that it
manages are in material compliance with such laws and regulations.

            The laws, rules and regulations which govern  Registrant,  its owned
and managed  properties and other persons with whom Registrant has relationships
are very broad and are subject to continuing change and interpretation. Thus, it
is possible  that  certain of the past or present  contractual  arrangements  or
business practices of Registrant might be challenged.  No assurance can be given
that  Registrant or the facilities  managed by Registrant will be able to obtain
or maintain the CONs,  licenses and approvals necessary to conduct their current
or proposed businesses.  Further, no assurance can be given that federal,  state
and local laws,  rules and regulations  will not be amended or interpreted so as
to  require  Registrant  or a  facility  managed  by  Registrant  to change  its
contracts or practices or to obtain  additional  CONs,  approvals or licenses to
conduct its  business as now  conducted  or as proposed to be  conducted or that
Registrant  or such  facility  will be able to obtain  such CONs,  approvals  or
licenses.  The  failure  to obtain  or  maintain  requisite  CONs,  licenses  or
approvals  or to  otherwise  comply  with  existing  or future  laws,  rules and
regulations or  interpretations  thereof could have a material adverse effect on
Registrant's results of operations and financial condition.

COMPETITION

            The long-term  care  industry  generally is highly  competitive  and
Registrant  expects that the assisted  living business in particular will become
more competitive in the future. Registrant will be competing with numerous other
companies  providing  similar  long-term care  alternatives  such as home health
agencies,  lifecare at home,  community-based service programs,  congregate care
communities  and  convalescent  centers.  Providers of senior living  facilities
compete  for  residents  primarily  on the  basis of  quality  of  care,  price,
reputation,  physical  appearance of the facilities,  services  offered,  family
preferences,  physician referrals and location. Some of Registrant's competitors
are  significantly  larger than  Registrant  and have,  or may  obtain,  greater
resources than those of Registrant.


                                      -9-
<PAGE>
EMPLOYEES

            Registrant has approximately 250 employees of whom approximately 145
are full-time employees.

LITIGATION

            Registrant is involved in various lawsuits and claims arising in the
normal course of business. In the opinion of management of Registrant,  although
the  outcomes of these suits and claims are  uncertain  in the  aggregate,  they
should  not  have  a  material  adverse  effect  on the  Registrant's  business,
financial condition, and results of operations.

2.ab Item   DESCRIPTION OF PROPERTY.

            The  table  below  sets  forth  certain  information  regarding  the
properties owned or managed by Registrant as of March 31, 1997.
<TABLE>
<CAPTION>

                                                                  UNITS AS OF MARCH 31, 1997
                                                                  --------------------------
                                                 Independent        Assisted        Skilled         Occupancy
         NAME AND LOCATION                          LIVING           LIVING         NURSING         RATE (%)
         -----------------                       -------------------------------------------------------------

PROPERTIES OWNED:

<S>                                                    <C>             <C>             <C>              <C>
Hillside Terrace, Ann Arbor, MI                         66              9*             23               93
Olds Manor, Grand Rapids, MI                            98             54*             44               78
The Whitcomb, St. Joseph, MI                           102             34                               98

MANAGED ONLY PROPERTIES:

The Whittier, Detroit, MI                              229             52                               63
Cottage Grove Place, Cedar Rapids, IA**                135             49               16              67

PROPERTIES UNDER DEVELOPMENT:***

Presidential Place                                                   104
Hollywood, FL

Camelot Village                                                      120
Huntington, NY

Orchard Terrace                                         64
Ann Arbor, MI

Camelot Village                                                       80
Stroudsburg, PA

Laurelwood Estates                                                   108
Columbus, IN
</TABLE>

*These units currently licensed as Homes for the Aged.
**Occupancy commenced October 15, 1996.  Full certified Medicare unit (16 beds).

***Subject to funding being secured.

                                      -10-
<PAGE>
            The chart excludes the Harvest Village retirement  community located
in Atco, New Jersey  (consisting of 300 independent  living units and 60 skilled
nursing beds and  approximately  60 percent  occupied at March 31, 1997),  which
Registrant  had an option to acquire at March 31,  1997.  Registrant's  right to
purchase   Harvest   Village  expired  in  July  1997.  See  Item  12,  "Certain
Relationships and Related Transactions."

            HILLSIDE  TERRACE.  Hillside Terrace is a CCRC located in Ann Arbor,
Michigan, approximately 30 miles from Detroit. The facility is located 1.5 miles
from downtown Ann Arbor,  the main business  district and home to the University
of Michigan,  which  enables  residents to attend  nearby  cultural and athletic
events.  Hillside  Terrace  was  built in 1969 and was  renovated  in 1994.  The
facility  currently has 75 apartment  units and 23 nursing  beds,  and a 64-unit
expansion has been approved by the city of Ann Arbor.  This will  facilitate the
conversion of a majority of the existing  independent  living apartment units to
assisted living units.

            OLDS MANOR. Olds Manor is a CCRC located in Grand Rapids,  Michigan.
Olds Manor was built as a hotel in the 1920s but was  renovated in the 1960s for
use as a retirement center and nursing facility.  Olds Manor borders the central
business  district of Grand  Rapids,  adjacent to the Post Office and across the
street from city and county  administrative  offices.  Registrant estimates that
Olds Manor needs approximately $1 million for deferred maintenance.

            THE WHITCOMB.  The Whitcomb is an independent  living  facility with
assisted living services, as required, provided by the outside homecare agencies
of the residents' choice, located in downtown St. Joseph,  Michigan, which is on
Lake  Michigan at the mouth of the St. Joseph River.  St.  Joseph's  population,
approximately 80,000 residents,  and proximity to four cosmopolitan cities, make
The Whitcomb  accessible to a large population and secondary market.  St. Joseph
is 85 miles from Chicago,  195 miles from  Detroit,  80 miles from Grand Rapids,
Michigan and 35 miles from South Bend, Indiana. The Whitcomb,  formerly a hotel,
was built in 1928. It was renovated in 1973 and in 1989 and has 136 apartments.

            THE WHITTIER.  The Whittier is an independent  living  facility with
assisted living services, as required,  provided by outside homecare agencies of
the residents'  choice,  located in Detroit and has experienced a decline in its
occupancy over the last several years as a result of local demographic  changes.
However,  the Registrant has instituted a number of changes consisting of, among
other things, shifting the operational focus to assisted living and changing the
target   market,   which  now  targets  the  upper   middle   income,   retired,
African-American  community.  These  changes  have  resulted  in  a  significant
improvement in The Whittier's occupancy, increasing from a low of 130 apartments
as of October 31, 1995, to 176 as of March 31, 1997, to 199 as of July 31, 1997.
The Whittier was built in the 1920s and  renovated in 1972 and 1989.  Registrant
has an option  to  purchase  this  facility  at fair  market  value.  Registrant
estimates  that The  Whittier  needs  approximately  $1.5  million for  deferred
maintenance.

            See Item 12, "Certain  Relationships  and Related  Transactions" for
information  regarding  the possible sale of The  Whitcomb,  Whittier,  and Olds
Manor retirement facilities and the


                                      -11-
<PAGE>
proposed Presidential Place, Camelot Village in Huntington, Orchard Terrace, and
Camelot Village at Stroudsburg development projects.

PROJECTS IN DEVELOPMENT

            To provide the  appropriate  level of personal care  efficiently and
economically,  Registrant  intends to develop,  subject to the  availability  of
additional  capital  resources,  for itself or on behalf of  others,  or acquire
assisted  living  facilities  generally  ranging  in size from 80 to 120  units.
Registrant has developed a prototype assisted living facility. It is anticipated
that the prototype  assisted  living  facility  will be built on the  Properties
under  Development  listed  on the  preceding  page and  other  qualified  sites
presently  being  negotiated.  Each assisted  living  facility will generally be
built on a parcel of land  ranging  in size from 3 to 10 acres and will  contain
approximately  70,000 to 105,000  square feet.  Approximately  40 percent of the
building will be devoted to common areas and amenities, including reading rooms,
family or living rooms and other areas  designed to promote  social  interaction
among residents.  These areas will be located  primarily in a basic central core
structure  which  is  essentially  repeatable  in all of  Registrant's  proposed
facilities.  Modular  wings of  similar  design are added to the  central  core,
depending  upon the size of the  facility.  The building is usually two or three
stories and of either steel frame or masonry construction built to institutional
healthcare standards but strongly residential in appearance. The interior layout
is designed to promote a "home-like" environment, efficient delivery of resident
care  and  resident   independence.   Each  residential  unit  will  be  between
approximately  375 to 550  square  feet and is  expected  to cost  approximately
$60,000 to $90,000 to construct,  depending upon  construction  costs which vary
from state to state.

            Resident units in  Registrant's  prototype  assisted living facility
are functionally  arranged in eight to twelve apartment  clusters  surrounding a
"neighborhood"  living  area in  order  to  foster  social  interaction  between
residents. Registrant's prototype may be configured with several different types
of  resident  units,  including a mix of one- and  two-bedroom  suites and large
studio or alcove apartments.  All units have a small kitchen and roll-in showers
for easy wheelchair  access.  The ground level typically  contains a kitchen and
common dining area,  administrative offices,  exercise or physical therapy room,
arts and crafts,  beauty salon,  laundry room, a private  dining room,  library,
living room, and TV room. Typically, one floor or one or two wings of a facility
contain resident units and common areas,  including  separate dining facilities,
specifically  designed to serve  residents  with  cognitive  impairments  (e.g.,
Alzheimer's disease) or other special needs.

            CCRCs will generally be built on a parcel of land ranging from 10 to
30 acres and will contain from 150 to 200 units with an average size independent
living unit of between 900 and 1,000 square feet. The cost will average  between
$100,000 and $200,000 per independent living unit. Each CCRC will be tailored to
the specific needs of each site selected.

            In  order  to  increase  the  number  of  senior  living  facilities
Registrant  develops  and manages for itself or on behalf of others,  Registrant
may enter into an  agreement  with an  affiliated  or  unaffiliated  third-party
entity,  which may be a  501(c)(3)  organization,  to  develop  a senior  living


                                      -12-
<PAGE>
facility  for such  entity.  Registrant  would  generally  attempt  to  obtain a
management  agreement to operate the facility  upon its  completion as well as a
fair market value option to purchase the facility at a future time. Through this
type  of  transaction,   if  the  third-party  entity  is  adequately  financed,
Registrant would not incur the start-up  development  costs and operating losses
typically  associated  with the  development  and initial  operation of a senior
living facility  because  Registrant would not be the owner.  However,  prior to
entering into such  agreement,  Registrant  may incur certain  initial  expenses
associated with its site selection process.  Registrant would earn a development
fee for the  development of the senior living  facility and a management fee for
its  operation  and might  exercise  its option,  if any, to purchase the senior
living facility.  The third-party entity would benefit through the attainment of
a turnkey senior living  facility.  To date,  neither  Registrant nor any of the
501(c)(3)  organizations  involved with  Registrant  has received any inquiry or
comment  from  any  regulatory   authority  with  respect  to  its   contractual
arrangements with 501(c)(3) organizations.

MORTGAGE INDEBTEDNESS

            GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

            As of  March  31,  1997,  Hillside  Terrace,  Inc.,  a  wholly-owned
subsidiary  of  Registrant  and the owner of Hillside  Terrace,  was indebted to
Great-West Life & Annuity Insurance  Company ("GWL") in the aggregate  principal
amount of  $2,233,461.  Such  indebtedness  is  secured by a first  mortgage  on
Hillside  Terrace.  As  of  March  31,  1997,  Whitcomb  Tower  Corporation,   a
wholly-owned  subsidiary  of  Registrant  and the  owner  of The  Whitcomb,  was
indebted  to  GWL  in  the  aggregate  principal  amount  of  $2,084,404.   Such
indebtedness  is secured by a first  mortgage  on The  Whitcomb.  The payment of
principal  and  interest  on each of the  foregoing  first  mortgages  has  been
guaranteed  by Vanguard.  In addition,  as of March 31, 1997,  Whittier  Towers,
Inc., the owner of The Whittier,  was indebted to GWL in the aggregate principal
amount  $4,058,692.  Such  indebtedness  is secured by a first  mortgage  on The
Whittier. Each of the foregoing first mortgages bears interest at 7.5% per annum
and is due May 1, 1998. The first  mortgage  encumbering  The Whittier  provides
that a  default  under  such  loan is also a  default  under  both of the  first
mortgages encumbering Hillside Terrace and The Whitcomb. Consequently, a default
under  the  first  mortgage   encumbering  The  Whittier  could  result  in  the
foreclosure of Hillside  Terrace and The Whitcomb.  The  restrictions  and cross
collateral  provisions  of The  Whittier  mortgage  will  be  eliminated  if The
Whittier is sold and the GWL  mortgage on the  property  satisfied.  See Item 12
"Certain  Transactions and Related  Transactions" for information  regarding the
proposed sale of The Whittier.

            A 12-month extension of the May 1, 1998 due dates of GWL's mortgages
on Whitcomb, Hillside, and Whittier has been requested and granted.

            In the event  that any of  Whittier  Towers,  Inc.,  Whitcomb  Tower
Corporation,  or Hillside Terrace,  Inc. sells, conveys,  transfers,  pledges or
further  encumbers its property  without the prior written  consent of GWL, then
GWL has the right to declare due and  payable  the entire  balance


                                      -13-
<PAGE>

of the unpaid  principal with accrued and unpaid interest due thereon,  plus the
prepayment premium provided in the promissory note related to its mortgage.

            Olds  Manor,  Inc.  has  agreed  that prior to the date on which the
loans of GWL to Whittier Towers, Inc., Whitcomb Tower Corporation,  and Hillside
Terrace,  Inc. are repaid in full, Olds Manor,  Inc. will not, without the prior
written  consent of GWL,  sell,  assign,  transfer,  or otherwise  dispose of or
encumber the Olds Manor retirement facility.

            Hillside  Terrace,  The  Whittier,  and The Whitcomb are required to
deposit all net operating  income from the mortgaged  properties  into a reserve
account,  which account is being used to fund property  improvements and certain
other  expenditures.  The  Reserve  Account  also  has  been  pledged  to GWL as
additional security for repayment of the GWL loans.

            OLD KENT BANK

            As of March 31, 1997, Olds Manor, Inc., a wholly-owned subsidiary of
Registrant  and the owner of Olds  Manor,  was  indebted  to Old Kent Bank ("Old
Kent") in the  aggregate  principal  amount of $217,957.  Such  indebtedness  is
secured by a first mortgage lien on Olds Manor. The loan bears interest at prime
rate plus 1 percent per annum and is due in 2001.

            OLDS MANOR MORTGAGE TRUST

            As of March 31,  1997,  Olds Manor,  Inc. was indebted to Olds Manor
Mortgage Trust in the aggregate principal amount of $360,000. Such obligation is
secured by a mortgage on Olds Manor that is subordinate to the first mortgage on
Olds Manor held by Old Kent. The loan bears interest at prime plus 3 percent per
annum,  is  due  in  year  2000,  and  is  convertible  into  51,840  shares  of
Registrant's Common Stock at $6.94 per share. Registrant is the guarantor of the
Olds Manor Note.  The $360,000 Olds Manor Trust  mortgage is  subordinate to the
$218,000  Old Kent Bank  mortgage.  The Olds Manor  Trust  mortgage  has routine
covenants  respecting payment of taxes,  insurance,  repairs,  etc., except that
Olds Manor,  Inc.  cannot  permit any increase of the  principal of the Old Kent
Mortgage  without the consent of the trustee of the Olds Manor  Mortgage  Trust.
The trustee is Carl G. Paffendorf, the Chief Executive Officer of Registrant.

            WHITCOMB MORTGAGE TRUST

            As of March 31, 1997, Whitcomb Tower Corporation was indebted to The
Whitcomb  Mortgage  Trust in the aggregate  principal  amount of $850,000.  Such
obligation is secured by a mortgage on The Whitcomb that is  subordinate  to the
first  mortgage on The Whitcomb  held by GWL.  The loan bears  interest at prime
rate plus 3 percent per annum,  is due in 1999 and is  convertible  into 117,692
shares of Registrant's Common Stock at $7.22 per share.  Registrant is guarantor
of the Whitcomb Tower Note. The $850,000  Whitcomb Trust mortgage is subordinate
to GWL's $2,084,000 mortgage.  The Whitcomb Trust mortgage has routine covenants
respecting  payment of taxes,  insurance,  repairs,  etc.,  except that Whitcomb
Tower  Corporation  cannot  permit




                                      -14-
<PAGE>
any increase of the  principal  of the GWL  mortgage  without the consent of the
trustee of the Whitcomb Mortgage Trust. The trustee is Carl G. Paffendorf.

            CITIBANK, N.A. AND LLOYDS BANK PLC

            As of March 31, 1997,  Citibank and Lloyds held a second mortgage on
Olds Manor in the amount of $1,400,000 and a consolidated mortgage in the amount
of  $1,000,000  on The  Whittier,  The Whitcomb and  Hillside  Terrace  securing
Vanguard's  $6,350,000  guarantee  of a  construction  loan in  connection  with
Harvest  Village.  In  addition,  as of  March  31 1997,  Vanguard  had  pledged
1,340,573  shares of UVH Common  Stock owned by  Vanguard  as  security  for its
guarantee.  See Item 12, "Certain Transactions and Related  Transactions." These
mortgages, guarantee, and pledge were released on July 16, 1997.

Item 3.     LEGAL  PROCEEDINGS.  Registrant is not a party to any material legal
proceedings.  Registrant is involved in various  lawsuits and claims  arising in
the normal course of business.  In the opinion of the  management of Registrant,
although the outcomes of these suits and claims are uncertain,  in the aggregate
they  should not have a material  adverse  effect on  Registrant's  business  or
financial condition.

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable.




                                      -15-
<PAGE>
                                     PART II


Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

            (a) Market Information.  There is currently no public market for the
equity securities of Registrant.

            (b) Holders.

                                               Approximate Number of Record
                    Title of Class             Holders (as of March 31, 1997)
                    --------------             ------------------------------
Common Stock, par value $.01 per share                   800

            (c)  Dividends.  Registrant  has not paid any cash  dividends on the
Common Stock since its inception, and the Board of Directors does not anticipate
declaring  any cash  dividends  on the Common Stock in the  foreseeable  future.
Registrant  currently  intends to utilize  any  earnings  it may achieve for the
development of its business  (including the  acquisition or development of other
senior living  facilities) and working capital  purposes.  In addition,  certain
provisions of existing  indebtedness of Registrant limit future  indebtedness of
Registrant as well as the Registrant's ability to pay cash dividends.

Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

            Net Revenues increased by $477,000, or 6 percent, in fiscal 1996 and
decreased by $563,000,  or 7 percent in fiscal 1997. The fluctuation in revenues
in fiscal 1996 and fiscal 1997 was largely  attributable to development  fees in
the amount of $1,004,000 to $220,000. Resident and healthcare services increased
$143,000 in fiscal 1996 and $161,000 in 1997.  Resident and health care revenues
increased  as a result  of  higher  rates.  Occupancy  rates  declined  due to a
temporary  moratorium  on  admissions at one of  Registrant's  facilities.  From
January to October 1997 Olds Manor was subject to a moratorium  on admissions in
the Home for the Aged due to the allegation that certain services being rendered
were  beyond  the  scope  of the  facility's  Home for the  Aged  License.  As a
consequence of the moritorium, occupancy dropped from 97 percent as of March 31,
1996 to 78 percent as of March 31, 1997. The  moratorium was partially  released
in June 1997 and was completely lifted on October 14, 1997.

            General and administrative  expenses decreased $89,000 or 18 percent
in fiscal 1996 primarily due to the closing of the  Registrant's  Florida office
in fiscal 1995.  In fiscal 1997 General and  Administrative  expenses  increased
$467,050,  or 113 percent,  due to an increase in personnel costs and additional
costs associated with the Registrant's aborted public offering.

            Interest  expense,  net also fluctuated during the reporting period.
In fiscal 1996, interest expense, net decreased by $22,000, or 4 percent, and in
fiscal 1997, interest expense net decreased by $8,000, or 1 percent.



                                      -16-
<PAGE>
            In fiscal 1996, the net interest expense included interest income of
$78,000 on development  advances.  In fiscal 1997,  interest  expense  decreased
$95,000  principally  due to  conversion  of debt into  stock (see Note I to the
Registrant's  financial statement).  The interest expense decrease was offset by
interest income reduction of $87,000 resulting in the net decrease of $8,000.

            Income from  operations  declined from  $1,523,000 in fiscal 1996 to
$429,000 in fiscal 1997 due to the  decline in  Development  fees earned and the
increase in general and  administrative  expenses in fiscal 1997.  Income before
taxes declined from $1,032,000 in fiscal 1996 to a loss of $1,366,000 due to (i)
the decline in income  from  operations  in fiscal  1997,  (ii) debt  conversion
expense of $156,000 in fiscal 1997,  and (iii)  $1,170,000  of costs  associated
with the unsuccessful public offering.

            Income  tax  expense  increased  from  $420,000  in  fiscal  1996 to
$668,000 in fiscal 1997. The Registrant  provided for tax expense in fiscal 1997
despite  its  loss  from  operations  due to an  increase  in its  deferred  tax
valuation allowance of $981,000.

LIQUIDITY AND CAPITAL RESOURCES

            During fiscal 1997, the Registrant used  approximately  $341,000 for
operating  activities  compared to providing cash from  operating  activities of
approximately  $1,359,000  in  fiscal  1996.  The  decline  in cash  flows  from
operating  activities was  principally  due to the  Registrant's  loss in fiscal
1997. During fiscal 1997 cash flows from financing  activities were $464,000 due
to a net increase in bank borrowings,  $180,000,  and proceeds from the exercise
of warrants.

            At March 31, 1997 the Registrant had a deficiency in working capital
of $654,000, a decline of $754,000, due to the Registrant's loss in fiscal 1997.
Included  in the  deficiency  or  working  capital  are  $587,000  of  remaining
liabilities   associated  with   Registrant's   unsuccessful   public  offering.
Management  is currently  negotiating  with these  creditors  for  reductions in
amounts charged and extended payment terms.

            The   Registrant's   capital   is  not   sufficient   to  fund   its
past-operating  plans. Given the above, the Registrant is currently  negotiating
to sell a substantial  portion of its operating and development  properties.  If
such sales are successful,  the Registrant  would have adequate  capital to fund
future  development  projects.  In  addition,  the  Registrant  has  received  a
commitment letter from a financial institution to refinance substantially all of
the its outstanding  mortgages.  If the Registrant opts to pursue this financing
alternative, the Registrant believes it will have adequate working capital.

Item 7.     FINANCIAL  STATEMENTS.  See  page  F-1  for  Registrant's  financial
statements.

8.ab Item  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
FINANCIAL DISCLOSURE.
           None.


                                      -17-
<PAGE>
                                    PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act of Registrant.

            The following table sets forth  information  regarding the Directors
and executive officers of Registrant:

        NAME                  AGE                 Positions(s)

Carl G. Paffendorf             65      Chairman of the Board and Chief Executive
                                       Officer
Larry L. Laird                 60      President, Chief Operating Officer and
                                       Director
Paul D'Andrea                  65      Vice President - Finance
Craig M. Shields               56      Vice President and
                                       General Counsel
Theresa A. Govier              NA      Vice President - Administration and
                                       Secretary
Tara O'Sullivan                36      Vice President - Corporate Development
Douglas D. Laird               40      Vice President - Lifecare
Alan Guttman                   48      Treasurer
James E. Eden                  60      Director
Benjamin Frank                 63      Director
Francis S. Gabreski            78      Director
Robert S. Hoshino, Jr.         51      Director
Stanford J. Shuster            56      Director

            CARL  G.  PAFFENDORF  has  been  Chairman  of the  Board  and  Chief
Executive  Officer of Registrant  since 1988 as well as a Director of Registrant
since  inception.   Mr.   Paffendorf  has  been  involved  in  the  development,
management,  acquisition  and/or  financing of 12 retirement  communities  since
1979.  Mr.  Paffendorf has been president of Vanguard since 1979 and chairman of
Vanguard since 1972.  Vanguard is a real estate holding company.  Mr. Paffendorf
is an  attorney  and a member of the  Florida  and Ohio Bars and holds a Masters
degree in Tax Law (LLM).

            LARRY L. LAIRD has been  President  and Chief  Operating  Officer of
Registrant  since 1994 and a Director of  Registrant  since 1993.  Mr. Laird has
been involved in the development and management of retirement  communities since
1965.  Mr.  Laird's  experience  encompasses  the  development  of 42 retirement
facilities and the management of 51 retirement  facilities in 25 states.  He has
served as an industry leader and spokesman; an interstate lobbyist for stringent
legislation with regard to lifecare facilities; a founder,  director and officer
of both state and national industry  associations;  and has lectured in numerous
industry-related  forums. Mr. Laird received a B.A. from Central College, Pella,
Iowa and did graduate  work at the  University  of





                                      -18-
<PAGE>
Iowa in Iowa  City.  Mr.  Laird  continues  to serve as  executive  director  of
Friendship Village, Waterloo, Iowa, a lifecare facility. From October 1986 until
October  1992,  Mr.  Laird  served  as  president  of Forum  Lifecare,  Inc.,  a
wholly-owned  subsidiary of Forum Group,  Inc., and as a vice president of Forum
Group,  Inc. From October 1992 until July 1996,  Mr. Laird was also president of
Laird Lifecare Ltd., a developer of senior living  facilities.  Prior to 1986 he
was a co-founder  and executive vice  president and chief  operating  officer of
Life Care Services  Corporation in Des Moines,  Iowa. Mr. Laird is the father of
Douglas D. Laird, Vice President - Lifecare of Registrant.

            PAUL D'ANDREA has been Vice  President--Finance  of Registrant since
May 1994. From 1991 to 1994, Mr. D'Andrea was vice  president/controller  of ODA
Environetics International, Inc., a company engaged in architectural design, and
from  1975  through  1991 was  vice  president/treasurer  of Apco  Merchandising
Corporation,  a jewelry manufacturer and retailer.  Mr. D'Andrea received a B.S.
in accounting from New York University.

            CRAIG M.  SHIELDS has been Vice  President  and  General  Counsel of
Registrant since 1992. From 1992 through 1995 Mr. Shields was of counsel/partner
of the law firm of Quinn & Suhr, LLP, White Plains,  New York. From 1983 through
1991 he was founder/partner of the law firm of Collier,  Cohen,  Shields & Bock,
New York,  New York.  He was educated at Fordham  University  School of Law, New
York, New York, LL.B, and Lafayette College, Easton, Pennsylvania, B.A.

            THERESA  A.  GOVIER  has  been  Vice  President--Administration  and
Secretary  of  Registrant  since  1991.  Ms.  Govier has also been  employed  by
Vanguard  since 1977 as  executive  assistant to the  president  and director of
employee  benefits.  Ms. Govier attended Nassau  Community  College from 1988 to
1992.

            DOUGLAS D. LAIRD joined Registrant in 1996 and became Vice President
- Lifecare in February 1998. Mr. Laird was previously with Iowa Health System as
Vice President at St. Luke's Methodist  Hospital.  In his capacity at St Luke's,
he was responsible for all surgical, rehabilitation, and facilities services and
served as chairman of the  five-person  operating  council of the Hospital.  Mr.
Laird has a B.S.  degree in business  from Iowa State  University  and a Masters
degree in Hospital and Healthcare Administration from the University of Iowa. He
is also a Fellow in the American College of Health Care Executives. Mr. Laird is
the son of Larry L. Laird, the President and a Director of Registrant.

            TARA  O'SULLIVAN  joined  Registrant in January 1997 and became Vice
President - Corporate  Development in June 1997. She was previously with General
Investment & Development  Company,  a Boston based real estate  investment firm,
from 1987  through  1997.  Ms.  O'Sullivan  has  experience  in all  aspects  of
multi-family  operations and management;  and worked on numerous acquisition and
due  diligence  projects in the  industry.  Ms.  O'Sullivan  attended  The State
University of New York at Stony Brook and Dowling College, Long Island where she
received a B.S. degree in marketing and management.  She is a National Apartment
Association CAPS candidate.





                                      -19-
<PAGE>
            ALAN  GUTTMAN  has  been  Treasurer  of  Registrant  since  1991 and
Treasurer of Vanguard since 1985. Prior to joining  Vanguard,  he was controller
of Brittan Corporation, a real estate property owner and management company. Mr.
Guttman has a B.A. degree in accounting from the City University of New York.

            JAMES E. EDEN has been a Director of Registrant since June 1996. Mr.
Eden has been  president  of James E. Eden & Associates  and Eden &  Associates,
Inc. since 1992,  consulting businesses active in both the senior living and the
long-term  care  industries.  Since 1992, Mr. Eden has also been chairman of the
board and chief executive  officer of Oakwood Living Centers,  Inc., a long-term
care  company  which  operates  geriatric  and  rehabilitative  nursing beds and
centers  throughout  New England and Virginia.  From 1988 to 1992,  Mr. Eden was
employed by Marriott  Corporation,  first as vice president and general manager,
senior living  services  division,  which acquired and/or  developed  Marriott's
senior living  facilities  and later as executive vice  president,  where he was
responsible for trade association and governmental relations for senior markets.
Mr. Eden is a director of Omega  Healthcare  Investors,  Inc., a public  company
serving the senior living industry.

            BENJAMIN  FRANK has been a Director of  Registrant  since 1991.  Mr.
Frank is an attorney and real estate developer.  He holds a J.D. degree from New
York  University  School of Law and a B.Sc.  degree in Business  Management from
Boston  University.  Prior  to  1988  he was an  executive  with  Allied  Stores
Corporation  ("Allied") for 16 years.  His last position with Allied was that of
senior vice president  with overall  responsibility  for real estate,  legal and
governmental affairs.

            FRANCIS S.  GABRESKI  is a Director  of both UVH and  Vanguard.  Mr.
Gabreski is retired. He has a B.S. degree from Columbia  University.  He was the
top  American  Air Ace in the  European  Theater  during World War II and in the
Korean  conflict.  Upon  retirement  from the Air Force in 1962,  he  accepted a
position as  Assistant  to the  President of Grumman  Aerospace  Corporation,  a
position  he held  until  1978 when he was named  President  of the Long  Island
Railroad.  During his military career, Mr. Gabreski was awarded 17 United States
decorations  and  awards.  He was also  presented  with  decorations  from Great
Britain, Poland, France, the Republic of Korea, and Belgium.

            ROBERT S. HOSHINO, JR. has been a Director of Registrant since 1996.
Mr. Hoshino has been assistant  general counsel,  EBASCO Services  Incorporated,
New  York,  New  York,  an   international   company   engaged  in  engineering,
construction and  environmental  services,  since 1981. Mr. Hoshino holds a J.D.
degree from Columbia  University  School of Law, a B.A. from Colgate  University
and  continued his  education at the Wharton  School of Business,  University of
Pennsylvania, in its Advanced Management Program.

            STANFORD J.  SHUSTER has been a Director of  Registrant  since 1996.
Mr. Shuster is president  (since 1987) and chief executive  officer (since 1993)
of Rosewood  Estate USA,  Inc. a  development  and  management  firm of assisted
living  facilities  based in St.  Paul,  Minnesota.  Mr.  Shuster also serves as
president  (since  1973)  and chief  executive  officer  (since  1987) of Arthur



                                      -20-
<PAGE>
Shuster,  Inc.  ("ASI").  ASI is the nation's  largest firm  specializing in the
interior  design and contract  furnishings  of long-term care and senior housing
facilities. In addition, he is a founding member, executive committee member and
current  secretary-treasurer  of  the  National  Association  of  Senior  Living
Industries (NASLI). Mr. Shuster has been a member of the American Association of
Homes and Services for the Aging  (AAHSA)  since 1978 and a frequent  speaker at
many national  conventions  and seminars  regarding the provision of services to
the aging.

            Messrs.  Paffendorf,  D'Andrea, Frank, Gabreski, and Shields and Ms.
Govier are also officers and/or directors of Vanguard.

BOARD OF DIRECTORS COMPENSATION

            Outside  Directors are to be  compensated  at the rate of $6,000 per
year (payable in shares of Common Stock valued at fair market value) plus $1,000
for each meeting attended.  In addition,  each non-employee Director is eligible
to participate in the  Registrant's  1996 Outside  Directors' Stock Option Plan.
Registrant  also has an Audit  Committee  composed  of Messrs.  Eden,  Frank and
Hoshino.  Audit Committee  members will be compensated at the rate of $1,000 per
meeting,  when such meeting is not held in conjunction with a Board of Directors
meeting and $500 per meeting  when such  meeting is held in  conjunction  with a
Board of Directors meeting.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

            Section  16(a) of the  Securities  Exchange Act of 1934, as amended,
requires  Registrant's officers and Directors and persons who own more than five
percent of a registered class of Registrant's equity securities, to file reports
of  ownership  and  changes  in  ownership  with  the  Securities  and  Exchange
Commission.  Officers,  directors and greater than five percent stockholders are
required by the  Commission's  regulations to furnish  Registrant with copies of
all Section 16(a) forms they file.

                      Number of Late Reports       Number of Transactions Not
                        IN FISCAL 1997             REPORTED ON A TIMELY BASIS
                      ----------------------       --------------------------

Carl G. Paffendorf            1                              1
Larry L. Laird                2                              2
Paul D'Andrea                 1                              1
Craig M. Shields              1                              1
Theresa A. Govier             1                              1
Alan Guttman                  1                              1
Vanguard Ventures, Inc.       1                              1



                                      -21-
<PAGE>
Item 10.  EXECUTIVE COMPENSATION

            The  following   table  sets  forth  the  total   compensation   for
Registrant's  Chief  Executive  Officer and Chief  Operating  Officer during the
fiscal years ended March 31, 1997,  1996, and 1995. No such officer's salary and
bonus exceeded  $100,000 for services  rendered to Registrant during 1995, 1996,
or 1997.
                           SUMMARY COMPENSATION TABLE

                               Fiscal Year Ended          Annual Compensation
Name and Principal Position      March 31,                      Salary
---------------------------      ---------                      ------

Carl G. Paffendorf               1997                          $100,000*
  Chief Executive Officer        1996                              -(1)
                                 1995                              -(1)

Larry L. Laird                   1997                          $100,000
  Chief Operating Officer        1996                            96,000
                                 1995                            78,000

*           Mr.  Paffendorf was paid $75,600 by Vanguard  during the fiscal year
            ended  March  31,  1995  and  1996.  Registrant  estimates  that Mr.
            Paffendorf  devoted  50% of his time  during the  fiscal  year ended
            March 31, 1995 to  Registrant  and 60% of his time during the fiscal
            years  ended  March  31,  1996 and  March  31,  1997 to  Registrant.
            Registrant paid to Vanguard  administrative fees of $50,000 per year
            in each of the three fiscal years ended March 31, 1997.

            The following table sets forth certain  information  regarding stock
option  grants  made to the Chief  Executive  Officer  and the  Chief  Operating
Officer during the fiscal year ended March 31, 1997.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                                  Individual Grants
                                          % of Total Options
                                             Granted to       Exercise or
                           Options           Employees in      Base Price   Expiration
Name                      Granted(#)         Fiscal Year       ($/sh)         Date
----                      ----------         -----------       ------         ----

<S>                          <C>                 <C>           <C>          <C>
Carl G. Paffendorf           5,000               12%           $4.40        3/7/02
Larry L. Laird               5,000               12%           $4.00        3/7/02
</TABLE>

            The  following  table  sets  forth  certain  information   regarding
unexercised  stock  options  held  by the  Chief  Executive  Officer  and  Chief
Operating  Officer as of March 31,  1997.  No  options  were  exercised  by such
persons during the fiscal year ended March 31, 1997.


                                      -22-
<PAGE>
                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

                                      Number of Unexercised
                                      Options at March 31, 1997
Name                                  Exercisable/Unexercisable

Carl G. Paffendorf....................       11,640/11,360

Larry L. Laird........................       4,800/14,000

LONG-TERM INCENTIVE AND PENSION PLANS

                   Registrant  does not have any long-term  incentive or defined
benefit pension plans.

EMPLOYMENT AGREEMENTS

                   Effective  April  1,  1996,  Mr.  Paffendorf  entered  into a
three-year employment agreement with the Registrant, pursuant to which he serves
as its Chief Executive Officer.  Mr. Paffendorf's annual cash compensation under
the  employment  agreement is $100,000  during the first year of the  employment
agreement.  Mr.  Paffendorf has agreed not to compete with Registrant during the
term of his employment and for a period of three years  thereafter,  and he will
not, without Registrant's  written consent,  solicit the residents of facilities
owned  or  managed  by  Registrant  or any  management  contract  owned or being
negotiated by Registrant or its subsidiaries for a period of 24 months following
the end of the term of his  employment  agreement.  The agreement  automatically
renews  for  successive  one-year  terms  unless  either  party  terminates  the
agreement  at  least  45  days  prior  to the  end of the  initial  term  or any
subsequent term. Registrant may terminate the agreement for "cause" (a breach of
the terms and conditions of the agreement) upon 30 days' prior written notice to
Mr. Paffendorf.

            Mr. Laird  entered  into a two-year  employment  agreement  with the
Registrant  as of April 1,  1996,  pursuant  to which he serves as  Registrant's
President and Chief Operating Officer.  Mr. Laird's annual base salary under the
employment agreement is $100,000.  In Fiscal 1997, Mr. Laird received $25,000 in
cash  bonuses  and 3,000  shares of Common  Stock.  If Mr.  Laird is employed by
Registrant on March 31, 1998, Mr. Laird will receive a cash bonus of $25,000 and
3,000 shares of Common Stock.  If Mr. Laird dies prior to March  31,1998,  while
employed by  Registrant,  Mr.  Laird's estate will receive the full bonus due on
March 31, 1998.

                   During the term of his employment  agreement and for a period
of three years  thereafter,  Mr. Laird has agreed not to directly or  indirectly
engage in the  business  of owning or  managing  retirement  facilities  for the
elderly,  except for the  benefit of or on behalf of  Registrant  (other than as
Executive  Director  and an employee of  Friendship  Village,  Waterloo,  Iowa).
During the three-year noncompetition period after termination of employment, the
covenant not- to-compete  applies only to facilities  within a 15-mile radius of
facilities  owned by  Registrant.  Mr.  Laird has also agreed not to solicit the
residents of facilities owned or managed by Registrant,  any management contract
owned or being  negotiated by  Registrant,  or any employees





                                      -23-
<PAGE>
of  Registrant  for a period of 24 months  following  the end of the term of his
employment agreement.  Mr. Laird's employment agreement automatically renews for
successive  one-year terms unless either party terminates the agreement at least
45 days prior to the end of the initial term or any subsequent term.  Registrant
may terminate the agreement for "cause" (a breach of the terms and conditions of
the  agreement)  upon 30 days' prior written  notice to Mr. Laird.  In the event
that Mr. Laird's  employment is terminated,  Registrant  ceases to be manager of
Cottage Grove Place and Mr. Laird becomes its manager,  Registrant  will receive
one-half  of the  Cottage  Grove  Place  management  fee.  In the event that Mr.
Laird's  employment is terminated and  Registrant  ceases to be the developer of
Cottage Grove Place and Mr. Laird becomes its developer, Registrant will receive
90 percent of the development fee.

STOCK OPTION PLANS

                   1991 INCENTIVE  STOCK OPTION PLAN.  Under  Registrant's  1991
Incentive  Stock Option Plan (the  "Incentive  Plan"),  300,000 shares of Common
Stock are reserved for issuance upon the exercise of stock options.  As of March
31, 1997,  options to purchase an  aggregate  of 138,020  shares of Common Stock
were  outstanding  under the Incentive Plan. The Incentive Plan is designed as a
means to attract,  retain and  motivate  key  employees.  The Stock  Option Plan
Committee administers and interprets the Plan.

                   The  Incentive  Plan  provides  for the granting of incentive
stock options (as defined in Section 422 of the Code). Options are granted under
the  Incentive  Plan on such terms and at such prices as determined by the Stock
Option  Plan  Committee,  except  that the per share  exercise  price of options
cannot be less than the fair  market  value of the  Common  Stock on the date of
grant.  Each option is exercisable  after the period or periods specified in the
option  agreement,  but no option may be exercisable after the expiration of ten
years from the date of grant.  Options  granted under the Incentive Plan are not
transferable  other than by will or by the laws of descent and  distribution  or
pursuant to a qualified  domestic  relations order as defined by the Code or the
Employee Retirement Income Security Act.

                   1996 OUTSIDE DIRECTORS' STOCK OPTION PLAN.  Registrant's 1996
Outside  Directors' Stock Option Plan (the  "Directors'  Plan") provides for the
grant of  options  to  purchase  Common  Stock  of  Registrant  to  non-employee
directors  of  Registrant.  The  Directors'  Plan  authorizes  the issuance of a
maximum  of 90,000  shares of Common  Stock.  As of March 31,  1997,  options to
purchase an aggregate of 9,000 shares of Common Stock were outstanding under the
Directors' Plan.

                   The  Directors'   Plan  is   administered  by  the  Board  of
Directors.  Under the Directors' Plan each  non-employee  director elected after
April 1, 1996  will  receive  options  for 3,000  shares  of Common  Stock  upon
election.  To the extent that shares of Common  Stock remain  available  for the
grant of options under the  Directors'  Plan,  each year on April 1,  commencing
April 1, 1997, each non-employee  director will be granted an option to purchase
1,800  shares of Common  Stock.  The  exercise  price per share for all  options
granted under the Directors'  Plan will be equal to the fair market value of the
Common  Stock as of the date  preceding  the date of grant.  All options vest in
three equal annual  installments  beginning on the first anniversary of the date
of




                                      -24-
<PAGE>

grant. Each option will be for a ten-year term,  subject to earlier  termination
in the event of death or permanent disability.

BOARD  OF  DIRECTORS  INTERLOCKS  AND  INSIDER   PARTICIPATION  IN  COMPENSATION
DECISIONS

            Carl  G.   Paffendorf,   Registrant's   Chief   Executive   Officer,
participated  in the  decisions of  Registrant's  Board of Directors  concerning
executive office compensation.  However, Mr. Paffendorf abstained from decisions
concerning his own compensation.

BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

            The goal of the Board of Directors  is to  establish a  motivational
compensation  plan for  executives  that will enable  Registrant  to attract and
retain those individuals deemed most qualified to improve and enhance its future
performance. As part of its periodic review of executive compensation, the Board
of Directors  considers  such factors as level of  responsibility,  Registrant's
general  growth,  improved  financial  condition,  compensation of executives at
comparable companies and other relevant factors. The Board of Directors strongly
believes that by providing those persons who have substantial responsibility for
the  management  and growth of Registrant  with an opportunity to increase their
ownership of Registrant stock, the best interests of stockholders and executives
will be closely aligned.  Therefore,  the Board of Directors included executives
as eligible employees under Registrant's  Incentive Plan, whereby executives are
eligible to receive stock options that give them the right to purchase shares of
Common Stock of Registrant at specified prices in the future.

            The Board of Directors  believes  executive  compensation  should be
tied to benefits directly  accruing to stockholders from positioning  Registrant
to grow through  acquisitions,  increases in  stockholders'  equity and improved
operating results.  As indicated in the discussion above, the Board of Directors
believes that Registrant's  executive  compensation should be first and foremost
based on financial  performance  and returns to  stockholder.  The  compensation
levels of Registrant's officers are based on these two factors.

            The  Board of  Directors  will  continue  to  monitor  the level and
effectiveness of executive compensation.

PERFORMANCE GRAPH

            There has not been a public market for Registrant's Common Stock for
the past five years. Consequently, no performance graph is being filed with this
report.


                                      -25-
<PAGE>
Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

            The  following  table sets forth certain  information  regarding the
beneficial  ownership of the  Registrant's  Common Stock as of March 31, 1997 by
(i) each person who is known by  Registrant to be the  beneficial  owner of more
than 5% of  Registrant's  Common Stock,  (ii) each  director and each  executive
officer  (including shares owned by spouse or in trust), and (iii) all directors
and  executive  officers  as a group.  Except as  otherwise  noted,  each person
maintains a business  address at c/o United Vanguard Homes,  Inc., 4 Cedar Swamp
Road, Glen Cove, New York 11542,  and has sole voting and investment  power over
the shares shown as beneficially owned.

                                                                Percent of
                                Shares Beneficially            Outstanding
                                      Owned                    Common Stock
                                      -----                    ------------

Vanguard Ventures, Inc.              2,711,662 (1)                  82%
Carl G. Paffendorf                   2,776,903 (2)                  84%
Larry L. Laird                          22,800 (3)                   *
Benjamin Frank                          15,562 (4)                   *
Francis S. Gabreski                     31,486 (5)                   *
Robert S. Hoshino, Jr.                  17,817 (5)                   *
James E. Eden                                0
Stanford  J. Shuster                         0
Directors and Executive Officers,    2,882,148 (6)
as a Group (11 Persons)

-----------------
*           Less than 1%.

(1)         As of March 31,  1997,  Vanguard  had  pledged  1,340,573  shares of
            Common  Stock  owned by Vanguard  as  security  for its  guaranty in
            connection with construction loans to Harvest Village.  See Item 13,
            "Certain  Relationships and Related  Transactions."  This pledge has
            been released.

(2)         Mr. Paffendorf is an officer,  director and controlling  stockholder
            of Vanguard.  Consequently,  Mr.  Paffendorf may be deemed to be the
            beneficial  owner of all shares of Common  Stock owned by  Vanguard.
            Includes  8,400 shares of Common  Stock  issuable  upon  exercise of
            options and  convertible  securities  exercisable  within 60 days of
            March 31, 1997.
                                                      Footnotes contd. next page

                                      -26-
<PAGE>

(3)         Includes  4,800 shares of Common  Stock  issuable  upon  exercise of
            options and  convertible  securities  exercisable  within 60 days of
            March 31, 1997.

(4)         Includes  8,640 shares of Common  Stock  issuable  upon  exercise of
            options and  convertible  securities  exercisable  within 60 days of
            March 31, 1997.

(5)         Includes  8,640 shares of Common  Stock  issuable  upon  exercise of
            options and  convertible  securities  exercisable  within 60 days of
            March 31, 1997.

(6)         Includes  48,060  shares of Common Stock  issuable  upon exercise of
            options and  convertible  securities  exercisable  within 60 days of
            March 31, 1997.

Item 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

DUE FROM AFFILIATES

            Registrant is owed by Vanguard and affiliates cash advances,  unpaid
management  fees,  interest and other revenues.  These amounts  consisted of the
following as of March 31, 1997:


Due from Vanguard                                     $2,207,653
Due from Whittier Towers, Inc.. . .                    2,793,766
Due from Vanguard Affiliated
 Limited Partnerships (Vanguard is
 General Partner)...................                   1,219,670
Management fees and cash
 advances due from affiliated
 companies .........................                     770,103
                                                      ----------
                                                      $6,991,192
                                                      ==========

            At  March  31,  1997,  the  unreserved  amounts  due fom  affiliates
represent development fees and advances from the following:

            Presidential Care Corp....................$   27,646
            Camelot Village at Huntington, Inc........   102,718
            Camelot Village at Stroudsburg, LLC.......   137,243
                                                      ----------
                                                      $  267,607
                                                      ==========

            See Note C to the Consolidated Financial Statements.

HARVEST VILLAGE

            In  Fiscal   1997,   Registrant   had  the  right  to  purchase  the
300-unit/60-skilled  nursing bed Harvest Village retirement community located in
Atco,  New Jersey  ("Harvest  Village")  from an affiliate of Vanguard for $17.4
million,  consisting of (i) $13,500,000,  (ii) the cancellation of $6,094,000 of
indebtedness  due to  Registrant  from  Vanguard,  and (iii) the  assignment  to
Vanguard of the $7.5 million Promissory Note due from the Harvest Village lessee
Gateway




                                      -27-
<PAGE>

Communities,  Inc. ("GCI Note"). The intercompany debt and assignment of the GCI
Note was valued by the parties based upon an appraisal, at $3.9 million.

            In connection with the  restructuring of the  construction  loan for
Harvest Village in 1990, the  construction  lenders  (Citibank,  N.A. and Lloyds
Bank Plc) required  Vanguard to make a $7 million loan guaranty.  This guaranty,
$6,350,000 as of March 31, 1997,  was secured by a subordinate  mortgage on Olds
Manor in the amount of $1.4 million and a  subordinate  mortgage on The Whittier
in the amount of $1 million. The Whittier mortgage was cross-collateralized with
subordinate  mortgages  on Hillside  Terrace and The  Whitcomb.  As of March 31,
1997, the guaranty was also secured by 1,340,573  shares of  Registrant's  stock
owned by Vanguard.  Carl G.  Paffendorf,  Registrant's  Chief Executive  Officer
("Paffendorf"),  had guaranteed $1.00 of the Harvest Village  construction  loan
(to increase to the amount of the Vanguard guaranty if Harvest Village Partners,
L.P.,  the  owner  of  the  Harvest  Village  retirement  community,  filed  for
bankruptcy or certain other events occurred).

            In July 1997, (i) Registrant's right to purchase the Harvest Village
retirement facility terminated,  (ii) Vanguard contributed  substantially all of
its equity  interest in Harvest  Village  Partners,  L.P. to  Registrant,  (iii)
Registrant and Vanguard  transferred  100 percent of Harvest  Village  Partners,
L.P.  to  unaffiliated  purchasers,  and (iv) the Harvest  Village  construction
lenders,  Citibank,  N.A, and Lloyds Bank Plc,  assigned  their  mortgage on the
Harvest Village retirement facility to a company not affiliated with Registrant,
released their liens and security  interests in Registrant's  properties and the
stock of Registrant owned by Vanguard, and released Vanguard and Paffendorf from
their guarantees.

GUARANTEES

            Reference is made to the Harvest Village guarantees discussed above,
which have terminated. In addition, Registrant and affiliates guaranteed certain
debt as of March 31, 1997, as follows:

<TABLE>
<CAPTION>

                                                                                                                 Amount As of
             Guarantor(s)                              Maker(s)                            Lender/Obligee        March 31, 1997
             ------------                              --------                            --------------        --------------
<S>                                      <C>                                    <C>                                <C>
Registrant                               CBF Building Company                   Apple Savings Bank                 $  95,689
Registrant, Vanguard, Phoenix Lifecare   Camelot Village at Huntington, Inc.    State Bank of Long Island            450,000
Corp. and Paffendorf
Vanguard and Paffendorf                  Registrant                             State Bank of Long Island            362,500
Vanguard                                 Hillside Terrace, Inc.                 Great-West Life                    2,233,461
Vanguard                                 Whitcomb Tower Corp.                   Great-West Life                    2,084,404
Vanguard                                 Registrant                             Cedar Rapids CGP, L.C.               450,000
Registrant                               Vanguard                               Kevin O'Sullivan                     125,000
</TABLE>

            The Great-West Life mortgage on The Whittier was $4,058,692 at March
31, 1997. A default under The Whittier  mortgage is a default under the Hillside
Terrace and Whitcomb mortgages.  See Item 2, "Description of Property - Mortgage
Debt" and "Whittier Towers, Inc.," discussed below.



                                      -28-
<PAGE>

            In Fiscal 1998,  Registrant  borrowed $75,000 from State Bank, which
indebtedness has been guaranteed by Vanguard and Mr. Paffendorf.

            In Fiscal 1998  Registrant  entered into a $52,000  equipment  lease
financing with First Sierra Financial, Inc. Mr. Paffendorf personally guaranteed
the lease for which he is to receive 1,040 shares of  Registrant's  Common Stock
valued at $5.00 per share. These shares are subject to investment restrictions.

            See also "Camelot Village at Huntington, Inc.," discussed below, for
information  regarding  additional  guarantees of Registrant agreed to in Fiscal
1998.

LEASE OF CORPORATE OFFICE

            Registrant  leases its offices in Glen Cove, New York,  2,500 square
feet, from CBF Building Company, a limited  partnership in which Vanguard is the
general partner.  Registrant has sublet 550 square feet of its space to Vanguard
on the same terms as Registrant's lease with CBF.

ISSUANCE OF SHARES TO VANGUARD

            Effective March 31, 1995 Vanguard  contributed 1.2 million shares of
Registrant's  common Stock owned by Vanguard to  Registrant  in order to enhance
Registrant's  proposed  initial public offering ("IPO") (SEC  Registration  Nos.
33-80812 and 333-09037) by increasing  Registrant's earnings per share, increase
investor interest,  and increase the likelihood that an IPO overallotment option
would be  exercised.  The  capital  contribution  was  premised on the fact that
Registrant was going to complete the public  offering by September 30, 1996. The
IPO aborted in October  1996,  and,  effective  December  31,  1996,  Registrant
reissued 1,080,000 shares of Common Stock to Vanguard.

WHITTIER TOWERS, INC.

            Registrant  has an option,  exercisable  until December 31, 2002, to
purchase The Whittier from Whittier  Towers,  Inc. at a purchase  price equal to
the  appraised  fair  market  value  but not less than the  current  outstanding
balance of the first mortgage.  Against the purchase price shall be credited (i)
management  fees  relating to  management  of the premises  since April 1, 1996,
payable to  Registrant,  accrued but unpaid (ii) sums paid by Registrant to fund
capital  improvements  at the premises since April 1, 1996,  (iii) sums spent by
Registrant  on or after April 1, 1996 to fund negative cash flow of The Whittier
and (iv)  interest at 12 percent per annum on the sums referred to in items (ii)
and  (iii).  In the  event  that  Vanguard  receives  a  written  offer  from an
unaffilited  prospective  purchaser  to purchase  the  premises (or the stock of
Whittier  Towers,  Inc.),  Registrant  has agreed to either (i)  relinquish  its
option  rights or (ii) change the  purchase  price set forth in the option to be
the same as offered in the bona fide offer and promptly  exercise the option per
the bona fide offer's  price and terms.  If the option is  relinquished  and the
premises (or Whittier  Tower,  Inc. stock) are sold, then the net proceeds shall



                                      -29-
<PAGE>
be applied as  follows:  (i)  payment of accrued  since April 1, 1996 but unpaid
management  fees, (ii) sums paid by Registrant on or after April 1, 1996 to fund
capital  improvements  at the  premises,  (iii) sums spent by Registrant to fund
negative cash flow of The Whittier on or after April 1, 1996,  and (iv) interest
at 12 percent per annum on the sums referred to in items (i) through (iii).  The
remaining net profit (i.e., net of brokerage fees, closing costs, mortgage debt,
etc.) shall be split 50 percent to  Registrant  and 50 percent to  Vanguard.  On
December 24,  1997,  a letter of intent to sell The Whittier was executed  under
which  unaffiliated  persons  have  the  right  to  purchase  the  facility  for
approximately  $6.3  million.  If closing  is held,  Registrant  will  receive a
portion of the net proceeds  referred to above,  estimated at $1.2 million,  and
apply such sum to GWL mortgages on Whitcomb and Hillside. See Item 2 Description
of Property - Mortgage Indebtedness.

            Whittier  Towers,  Inc. has agreed to pay to Registrant a management
fee of 5% of the  gross  operating  income  of The  Whittier.  The  term  of the
agreement  is  60  months  (until  March  31,  2001)  and  will  continue  on  a
month-to-month basis thereafter. The agreement may be terminated by either party
upon 30 days' prior written notice.

            In March 1998,  Vanguard  sold all of the stock of Whittier  Towers,
Inc. to Phoenix Lifecare Corp. This sale does not adversely affect the rights of
Registrant described above.

PHOENIX LIFECARE CORP.

            Larry L. Laird, Registrant's President, is also President of Phoenix
Lifecare Corp.  ("Phoenix"),  a 501(c)(3) corporation which provides home health
care  services to  residents  of The  Whittier  and The  Whitcomb.  No director,
officer,  employee,  or  agent  of  Registrant  or  Vanguard,  or any  of  their
respective affiliates, is a director of Phoenix.

            Phoenix  employs   Registrant  for  management  and   administrative
services required in connection with Phoenix's home health care operations for a
fee equal to 5 percent of the gross operating income of Phoenix.

            There is a lease between Whitcomb Tower Corporation ("Whitcomb"),  a
subsidiary of Registrant,  whereby  Whitcomb  leases to Phoenix a portion of the
second and third floors and a portion of the basement of The  Whitcomb,  located
at 509 Ship Street,  St. Joseph,  Michigan,  consisting,  in the  aggregate,  of
approximately 450 square feet, for the term of one year from November 1, 1996 at
the monthly rental rate of $2,000 (which includes food service cost for tenant's
staff) per month for the first 12 months,  and in the event  that  tenant  shall
exercise the options as provided for in the Lease,  $2,000 per month for each of
the two option terms (each for one year).

            Phoenix  provides  health care services to residents of The Whitcomb
and The Whittier.  Registrant  earns a management  fee from Phoenix for services
rendered.  At March 31,  1997,  the  amounts due from  Phoenix,  for both unpaid
management  fees and loans,  aggregated  $502,496;  and loans from Registrant to
Phoenix'   subsidiaries,   Presidential   Care  Corp.  and  Camelot  Village




                                      -30-
<PAGE>
at Stroudsburg, LLC ("Stroudsburg"),  aggregated $164,889.  Registrant loaned an
additional $75,000 to Stroudsburg in Fiscal 1998.

PRESIDENTIAL CARE CORP.

            Presidential  Care Corp.  is a 501(c)(3)  corporation  organized  to
acquire land in Hollywood,  Florida, upon which an assisted living facility will
be built subject to financing being obtained. An application is pending with the
United  States   Department  of  Housing  and  Urban  Development  (HUD)  for  a
$10,000,000   (approximate)   mortgage  loan   guarantee.   Registrant  has  the
development and management contracts on this property, for which it will be paid
a 7 1/2 percent  development fee and a 5 percent management fee.  Registrant has
an option to purchase at fair market  value.  The option is  exercisable  at any
time during the period January 1, 2000 through December 31, 2005.

            In  consideration  of the  commitment  of  Vanguard to advance up to
$800,000 to fund the  acquisition  and  development  costs of an assisted living
faciity to be built on the Hollywood,  Florida site, Vanguard will receive a sum
equal to 50 percent of the net  proceeds  from the sale of the  assisted  living
facility. Vanguard has assigned this right to Registrant.

CAMELOT VILLAGE AT STROUDSBURG, LLC

            Stroudsburg is a limited liability company organized to acquire land
in  Stroudsburg,  Pennsylvania,  upon which an assisted  living facility will be
built,  subject to financing being obtained.  Registrant has the development and
management contracts on this property, for which it will be paid a 7 1/2 percent
development  fee and a 4 percent  management  fee.  Registrant  has an option to
purchase at fair market value.  The option is exercisable at any time until June
30, 2006.

            In  consideration  of the  commitment  of  Vanguard to advance up to
$300,000 to fund the  acquisition  and  development  costs of an assisted living
faciity to be built on the Stroudsburg, Pennsylvania site, Vanguard will receive
a sum equal to 50  percent  of the net  proceeds  from the sale of the  assisted
living facility. Vanguard has assigned this right to Registrant.

            Stroudsburg  has entered  into a letter of intent to sell its rights
to an unaffiliated 501(c)(3)  organization.  If this transaction closes, most of
the net proceeds will be due to Registrant.

CAMELOT VILLAGE AT HUNTINGTON, INC.

            Effective  January  1,  1997 all of the  outstanding  shares  of the
Common Stock of Camelot Village at Huntington,  Inc. were transferred by Phoenix
to Carl G. Paffendorf,  Registrant's Chief Executive  Officer,  at Phoenix' cost
plus Mr.  Paffendorf's  agreement to save Phoenix harmless from its guarantee of
mortgage  debt  due  State  Bank  of  Long  Island.  As  discussed  above  under
"Guarantees,"  Registrant,  Phoenix,  and others have guaranteed a $450,000 bank
loan to Camelot





                                      -31-
<PAGE>
Village at  Huntington,  Inc.,  the  proceeds  of which were used as part of the
purchase price for the  Huntington,  New York  property.  This mortgage has been
reduced to $300,000 and is due June 30, 1998.

            Camelot  Village  at  Huntington,  Inc.  ("Camelot")  is a New  York
corporation organized in 1996 to acquire land in Huntington, New York upon which
an  assisted  living  facility  will be built,  subject to zoning  approval  and
construction financing being obtained. The purchase price, closing costs, market
studies, and various zoning expenses as of March 31, 1997 totalled approximately
$1,050,000, of which $450,000 was borrowed from State Bank of Long Island, which
loan is secured by the Huntington property. The balance of $600,000 was advanced
by Registrant.  Registrant has the development and management  contracts on this
property,  for  which it will be paid a 7 1/2  percent  development  fee (not to
exceed $1,100,000) and a 5 percent  management fee.  Registrant has an option to
purchase at fair market  value.  In the event  Registrant  does not exercise its
purchase option,  Camelot will have the right to sell the Huntington facility to
the  highest  bidder.  Alternatively,  Camelot  will  have the right to sell the
facility to Registrant and Registrant must purchase the facility, at fair market
value, exercisable for 90 days at the end of the fifth year from the date of the
issuance of the Certificate of Occupancy on the facility,  but in all events not
later than March 31, 2007.

            Construction of the facility  requires the issuance of a special use
permit by the  Huntington  Zoning  Board of  Appeals.  In the event that  zoning
approval is not  received  and all appeals  have been  exhausted,  each  Camelot
investor will have the right : (1) to receive the return of his investment  plus
10 percent  annual  dividends (to the extent not paid).  If Camelot's  available
cash and the net  proceeds  from the  sale of the land are  insufficient  to pay
investors electing this option,  then Registrant will be required to make up the
shortfall.  (2) Alternatively,  each investor may exchange his Camelot stock for
shares of Registrant's  Common Stock at the lesser of (a) 80 percent of its fair
market value and (b) $7.00 per share.

            Carl G. Paffendorf,  Registrant's Chief Executive Officer,  owns all
of the Class A voting  stock of  Camelot.  Larry L.  Laird,  Registrant's  Chief
Operating Officer, Benjamin Frank, a Director of Registrant,  and Mr. Paffendorf
comprise the Board of Directors of Camelot.  Mr.  Paffendorf  owns 140 shares of
Class B stock of Camelot (out of a total of 2,800  shares to be issued),  for an
investment of $140,000.  Unaffiliated persons own or will own the balance of the
Class B shares at the same  price  paid by Mr.  Paffendorf,  $1,000  per  share.
Camelot  shareholders  are entitled to 100 percent of the net cash flow from the
Huntington  facility's  operations  and 50 percent of the net proceeds  from the
sale of the facility.

            Registrant  has  guaranteed  to  Camelot  investors  the  payment of
dividends  and   distributions  of  up  to  $1,500,000  in  the  aggregate.   In
consideration  of  Registrant's  guarantee  of $1.5  million  of the  investors'
investment  in  Camelot  stock,  Registrant  will  receive 50 percent of the net
proceeds from the sale of the facility.



                                      -32-
<PAGE>
LAURELWOOD ESTATES AT COLUMBUS, LLC

            Laurelwood  Estates at Columbus,  LLC  ("Laurelwood")  is a New York
limited liability company organized in 1997 to acquire land in Columbus, Indiana
upon which an assisted living facility will be built,  subject to the closing of
title and financing  being obtained.  Zoning has been obtained.  Sums paid under
the contract to purchase,  market  studies,  and various  zoning  expenses as of
March 31, 1997  totalled  approximately  $18,648,  of which sum was  advanced by
Registrant.  If Laurelwood acquires the Columbus,  IN property,  Registrant will
have the development and management contracts on this property for which it will
be paid a 7 1/2 percent  development  fee and a 5 percent  management  fee,  and
Registrant  will be granted an option to purchase at fair market value.  Carl G.
Paffendorf,  Registrant's Chief Executive  Officer,  owns all of the outstanding
interests of Laurelwood,  which he purchased from Registrant in January 1998 for
$1,000, Registrant's cost.

POSSIBLE SALE OF SUBSTANTIAL ASSETS

            In April  1998  Registrant  entered  into a letter of intent  with a
company  affiliated  with  one of  Registrant's  outside  directors  to sell the
Whitcomb and Hillside Terrace retirement  facilities,  Registrant's  rights with
respect to the proposed  Hollywood,  Florida and  Huntington,  New York assisted
living  projects  owned by  Presidential  Care  Corp.  and  Camelot  Village  at
Huntington, Inc., the Orchard Terrace assisted living project, the Cottage Grove
Management  Agreement,  and  certain  other  assets for a gross  sales  price of
approximately $17 million.

            If the various transactions close, which closings will be subject to
numerous  conditions  and  contingencies,  the net  proceeds to  Registrant  are
expected to be approximately $10 million.



                                      -33-
<PAGE>

                               POWERS OF ATTORNEY

     United Vanguard  Homes,  Inc. and each of the undersigned do hereby appoint
Paul  D'Andrea,  Larry  L.  Laird  and  Carl  G.  Paffendorf,  and  each of them
severally,  its or his true and lawful  attorneys to execute on behalf of United
Vanguard  Homes,  Inc. and the undersigned any and all amendments to this Report
and to file same with all exhibits  thereto and other  documents  in  connection
therewith,  with the Securities and Exchange Commission.  Each of such attorneys
shall have the power to act hereunder with or without the other.

                                   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 on the 26th day of May,
1998.


                                        UNITED VANGUARD HOMES, INC.
                                        (Registrant)

                                        By: /s/ Carl G. Paffendorf
                                           -----------------------------
                                           Name:  Carl G. Paffendorf
                                           Title: Chairman of the Board and
                                                  Chief Executive 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 date indicated.

        SIGNATURES                   TITLE                             DATE
        ----------                   -----                             ----

/S/ PAUL D'ANDREA              Vice President - Finance           May 26, 1998
------------------------       (Principal Financial 
Paul D'Andrea                  Officer and Principal
                               Accounting Officer)

/S/ BENJAMIN FRANK             Director                           May 26, 1998
-----------------------
Benjamin Frank

/S/ FRANCIS S. GABRESKI        Director                           May 26, 1998
-----------------------
Francis S. Gabreski

/S/ LARRY L. LAIRD             President, Chief                   May 26, 1998
-------------------------      Operating Officer
Larry L. Laird                 and Director


                                      -34-
<PAGE>

/S/ Carl G. Paffendorf         Chairman of the Board              May 26, 1998
-------------------------      and Chief Executive 
Carl G. Paffendorf             Officer


/S/ ROBERT S. HOSHINO, JR.     Director                           May 26, 1998
--------------------------
Robert S. Hoshino, Jr

/S/ JAMES E. EDEN              Director                           May 26, 1998
--------------------------
James E. Eden

/S/ STANFORD J. SHUSTER        Director                           May 26, 1998
--------------------------
Stanford J. Shuster



                                      -35-

<PAGE>
                                     PART IV

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

            (a)  EXHIBITS


      EXHIBIT NUMBER                         DESCRIPTION OF EXHIBIT
      --------------                         ----------------------

             1                    List of active subsidiaries of Registrant



          (b)  REPORTS ON FORM 8-K

      Registrant filed no reports on Form 8-K during the quarter ended March 31,
1997.



                                      -36-
<PAGE>
                                 MARCH 31, 1997
                                    FORM 10-K
                                    EXHIBIT 1


               ACTIVE SUBSIDIARIES OF UNITED VANGUARD HOMES, INC.
<TABLE>
<CAPTION>

                                    STATE &
                                    DATE OF
           NAME                      INC.        OWNER             BUSINESS
           ----                      ----        -----             --------

<S>                                 <C>           <C>   <C>
Hillside Terrace, Inc.              1/10/89       UVH   Owns 98-unit Hillside Terrace retirement
                                    MI                  facility, Ann Arbor, MI.

Olds Manor, Inc.                    8/26/88       UVH   Owns 196-unit Olds Manor retirement
                                    MI                  facility, Grand Rapids, MI.

Orchard Terrace, Inc.               7/5/95        UVH   Owns site for 64-unit expansion of
                                    MI                  the Hillside Terrace facility.

UVH Development Corp.               3/26/86       UVH   Developer of senior living facilities.
                                    MI

UVH Management Corp.                2/6/86        UVH   Real estate manager.
                                    FL

Vanguard Homes of N.J., Inc.        7/29/86       UVH   Former General Partner of Harvest
                                    NY                  Village retirement facility.

Whitcomb Tower Corporation          9/23/88       UVH   Owns 136-unit Whitcomb Tower
                                    MI                  retirement facility, St. Joseph, MI.
</TABLE>


<PAGE>
                                 C O N T E N T S



PAGE


Report of Independent Certified Public Accountants                         F-2


Financial Statements

      Consolidated Balance Sheets                                          F-3

      Consolidated Statements of Operations                                F-5

      Consolidated Statement of Stockholders' Deficiency                   F-6

      Consolidated Statements of Cash Flows                                F-7

      Notes to Consolidated Financial Statements                    F-8 - F-39





                                      F-1
<PAGE>
                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS


Board of Directors
     UNITED VANGUARD HOMES, INC.

We have audited the accompanying  consolidated balance sheets of United Vanguard
Homes,  Inc.  and  Subsidiaries  as of March 31,  1997 and 1996 and the  related
consolidated statements of operations,  stockholders' deficiency, and cash flows
for the years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of United Vanguard
Homes, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the consolidated
results of their operations and their consolidated cash flows for the years then
ended, in conformity with generally accepted accounting principles.





GRANT THORNTON LLP


Melville, New York
August 5, 1997, except for Note E, as to
     which the date is October 15, 1997



                                      F-2
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                    March 31,
<TABLE>
<CAPTION>

                     ASSETS                              1996               1997
                                                       ----------       ----------

CURRENT ASSETS
<S>                                                    <C>              <C>       
Cash ...........................................       $  210,245       $  202,924
Accounts receivable, less allowance for doubtful
accounts of $40,000 in 1996 and 1997 ...........          413,539          547,812
Development fees and advances ..................          270,864
Due from affiliates, net .......................          658,717          267,607
Prepaid expenses and other .....................          274,654          518,393
                                                       ----------       ----------

Total current assets ...........................        1,828,019        1,536,736

PROPERTY AND EQUIPMENT, NET ....................        2,361,698        2,276,651


OTHER ASSETS
Development fees and advances ..................          575,017          795,500
Restricted assets ..............................          176,352           99,600
Deferred income taxes ..........................          981,000
Other assets ...................................          165,453          176,437
                                                       ----------       ----------

                                                        1,897,822        1,071,537
                                                       ----------       ----------

                                                       $6,087,539       $4,884,924
                                                       ==========       ==========
</TABLE>






THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                      F-3
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                    March 31,
<TABLE>
<CAPTION>

                  LIABILITIES AND
             STOCKHOLDERS' DEFICIENCY                          1996                 1997
                                                             ----------        ------------

CURRENT LIABILITIES
<S>                                                        <C>                <C>
Current portion of long-term debt ..................       $   432,756        $    264,918
Accounts payable ...................................           435,757             487,758
Accrued expenses ...................................           617,043             660,084
Public offering costs ..............................           587,000
Income taxes payable ...............................           442,371             190,749
                                                           -----------        ------------

Total current liabilities ..........................         1,927,927           2,190,509


RESIDENT SECURITY DEPOSITS .........................           314,705             284,526


LONG-TERM DEBT, less current portion ...............         7,172,982           6,334,265


COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' DEFICIENCY
  Preferred stock $.001 par value;  1,000,000 shares
    authorized;  none issued and outstanding
  Common stock $.01 par value;  authorized,
    14,000,000 shares; issued and outstanding,
    1,827,833 shares and 3,320,950 shares in
    1996 and 1997, respectively ....................            18,278              33,210
Additional paid-in capital .........................         5,619,905           7,043,226
Accumulated deficit ................................        (8,966,258)        (11,000,812)
                                                           -----------        ------------

                                                            (3,328,075)         (3,924,376)
                                                           -----------        ------------

                                                           $ 6,087,539        $  4,884,924
                                                           ===========        ============
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                      F-4
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                              Year ended March 31,
<TABLE>
<CAPTION>

                                                     1996               1997
                                                ------------       ------------

Operating revenues
<S>                                             <C>                <C>        
Resident services                               $ 4,966,058        $ 4,999,025
Health care services                              2,555,138          2,682,928
Management fees                                                         60,000
Development fees                                  1,003,955            220,480
                                                -----------        -----------

                                                  8,525,151          7,962,433

Operating expenses
Residence operating expenses                      5,912,624          6,156,088
General and administrative                          414,703            881,784
Depreciation and amortization                       378,215            277,096
Provision for loss on advances to
affiliates, net of recoveries                       296,093            218,146
                                                -----------        -----------

                                                  7,001,635          7,533,114
                                                -----------        -----------

Income from operations                            1,523,516            429,319

Other income (expense)
Interest expense, net                              (600,871)          (592,552)
Other income                                        109,022            123,489
Debt conversion expense                                               (156,466)
Public offering costs                                               (1,170,344)
                                                -----------        -----------

                                                   (491,849)        (1,795,873)
                                                -----------        -----------

Income (loss) before income taxes                 1,031,667         (1,366,554)

Income taxes                                        420,000            668,000
                                                -----------        -----------

NET INCOME (LOSS)                               $   611,667        $(2,034,554)
                                                ===========        ===========

Income (loss) per share                         $       .35        $      (.81)
                                                ===========        ===========

Common shares and equivalents outstanding         1,739,830          2,506,511
                                                ===========        ===========
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                      F-5
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

                       Years ended March 31, 1996 and 1997

<TABLE>
<CAPTION>

                                                                         Additional
                                                                           paid-in        Accumulated
                                       Shares             Amount           Capital            Deficit              Total
                                       ------             ------           -------            -------              -----

<S>                                  <C>              <C>                <C>                <C>                 <C>
Balance, April 1, 1995 ......        1,698,833        $    16,988        $ 4,800,245        $ (9,577,925)       $(4,760,692)

Reissuance to parent ........          120,000              1,200             (1,200)
Shares issued as compensation            9,000                 90             49,860                                 49,950
Allocation of Federal tax
attributed to Parent company                                                 771,000                                771,000
Net income ..................                                                                    611,667            611,667
                                    ----------        -----------        -----------        ------------        -----------
Balance, March 31, 1996 .....        1,827,833             18,278          5,619,905          (8,966,258)        (3,328,075)

Shares issued upon conversion
of debt .....................          347,996              3,480          1,386,918                              1,390,398
Exercise of warrants ........           62,121                622            206,452                                207,074
Shares issued as compensation            3,000                 30              2,751                                  2,781
Shares reissued to VVI
previously cancelled
conditional on completion of
public offering .............        1,080,000             10,800            (10,800)
Allocation of Federal tax
attributed to Parent company                                                (162,000)                              (162,000)
Net loss ....................                                                                 (2,034,554)        (2,034,554)
                                    ----------        -----------        -----------        ------------        -----------

BALANCE, MARCH 31, 1997 .....        3,320,950        $    33,210        $ 7,043,226        $(11,000,812)       $(3,924,376)
                                    ==========        ===========        ===========        ============        ===========
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.


                                      F-6
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Year ended March 31,

<TABLE>
<CAPTION>

                                                               1996               1997
                                                          ------------        -----------

<S>                                                       <C>                <C>         
Cash flows from operating activities
Net income (loss) .................................       $   611,667        $(2,034,554)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities
Depreciation and amortization .....................           378,215            277,096
Debt conversion expense ...........................              --              156,466
Common stock issued for services ..................            49,950              2,781
Income taxes ......................................           190,000            669,000
Changes in operating assets and liabilities
Accounts receivable, advances and other
receivables .......................................           977,180            256,837
Prepaid expenses and other ........................           (84,746)          (243,739)
Development fees and advances .....................          (575,017)            50,381
Other assets ......................................           (34,232)           (25,591)
Accounts payable ..................................           (32,238)            52,001
Accrued expenses and public offering costs ........          (267,102)           780,041
Income taxes payable ..............................           310,621           (251,622)
Resident security deposits ........................            12,731            (30,179)
Deferred revenue ..................................          (177,221)              --
                                                          -----------        -----------
Net cash provided by (used in) operating
activities ........................................         1,359,808           (341,082)
                                                          -----------        -----------
Cash flows used in investing activities
Purchases of property and equipment ...............           (79,121)          (129,851)
                                                          -----------        -----------
Cash flows from financing activities
Proceeds from borrowings on mortgages and
notes payable .....................................           249,880            450,000
Principal repayments of mortgages and notes payable        (1,543,131)          (270,214)
Decrease (increase) in restricted cash financing ..           (26,752)            76,752
Proceeds from exercised warrants ..................              --              207,074
                                                          -----------        -----------
Net cash used in financing activities .............        (1,320,003)           463,612
                                                          -----------        -----------
NET DECREASE IN CASH ..............................           (39,316)            (7,321)
Cash at beginning of year .........................           249,561            210,245
                                                          -----------        -----------
Cash at end of year ...............................       $   210,245        $   202,924
                                                          ===========        ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest ..........................................       $   619,000        $   612,000
                                                          ===========        ===========
Income taxes ......................................       $    57,000        $   112,000
                                                          ===========        ===========
</TABLE>

Schedule of noncash investing and financing activities:
   During  1997,  the Company  entered  into capital  leases for  furniture  and
   equipment totalling $47,591. During 1997, debt of $1,390,398 was converted to
   equity.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                      F-7
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             March 31, 1996 and 1997

NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
         ACCOUNTING POLICIES

      1.    BUSINESS

            United  Vanguard Homes,  Inc.  ("UVH") (the "Company") is a Delaware
            corporation  which was originally formed in New York in 1964 as Coap
            Systems Inc. ("Coap") and is a majority-owned subsidiary of Vanguard
            Ventures,  Inc.  ("VVI").  UVH owns and operates  three  residential
            retirement centers in the State of Michigan,  which provide assisted
            living  services  for  residents  on  a  month-to-month  basis.  The
            facilities  are known as Olds Manor,  Hillside  Terrace and Whitcomb
            Tower. In addition, UVH, through wholly-owned subsidiaries, provides
            management and development  services for affiliated and unaffiliated
            companies.

      2.    BASIS OF PRESENTATION

            The  accompanying   consolidated   financial  statements  have  been
            prepared assuming that the Company will continue as a going concern.
            During fiscal 1997, the Company  incurred a loss of $2,034,554  and,
            as of March 31,  1997,  had a  deficiency  in  working  capital  and
            stockholders'  equity  of  $653,773  and  $3,924,376,  respectively.
            Further,  the  Company's  lack of working  capital  has  limited the
            Company's ability to pursue its development projects. The Company is
            presently pursuing various strategies to alleviate its deficiency in
            working  capital.  Such  strategies  include  (i)  negotiating  with
            professionals  and  other  vendors  associated  with  the  Company's
            unsuccessful  public offering to further defer or forgive payment of
            the remaining  balances due, (ii) refinancing a substantial  portion
            of the  Company's  mortgage  indebtedness  and  (iii)  a  sale  of a
            substantial  portion  of the  Company's  operating  and  development
            projects  which would allow the Company to pursue other  development
            opportunities.  The  Company  has  received  a letter  of  intent to
            refinance  the  Company's  mortgage  indebtedness  and has  received
            several  offers to purchase a  substantial  portion of the Company's
            properties. Although there can be no assurance that any of the above
            strategies  will  be  successful,  the  Company  believes  that  the
            underlying  value  of its  properties  will  allow  the  Company  to
            successfully implement its strategies.


                                      F-8
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997

NOTE A (CONTINUED)

      3.    PRINCIPLES OF CONSOLIDATION

            The consolidated  financial  statements  include the accounts of UVH
            and  its  wholly-owned  subsidiary  corporations.   All  significant
            intercompany  balances  and  transactions  have been  eliminated  in
            consolidation.

      4.    RESTRICTED ASSETS

            Restricted  assets  include cash of $99,600 that  collateralizes  an
            insurance bond required by Michigan State law for resident  security
            deposits.  In  addition,  restricted  use  cash  accounts  totalling
            approximately  $76,000  and  $107,000  at March  31,  1996 and 1997,
            respectively,  have been segregated pursuant to the terms of certain
            mortgage  indebtedness,  which requires the net operating  income of
            the Company's residential retirement centers, as defined, to be used
            to fund capital improvements and the related mortgage indebtedness.

      5.    PROPERTY AND EQUIPMENT

            Property  and  equipment   are  stated  at  cost  less   accumulated
            depreciation.  Depreciation  is  computed  using  the  straight-line
            method over the  estimated  useful lives of the related  assets,  as
            follows:

                 Buildings and improvements                10 to 30 years
                 Equipment                                 12-1/2 years
                 Vehicles                                   3 years
                 Furniture and office equipment             5 to 7 years

      6.    INCOME TAXES

            The  Company is  included  in the  consolidated  Federal  income tax
            return of VVI. It is the policy of VVI to allocate  income  taxes to
            the  Company  pro  rata on a  separate  return  basis,  charging  or
            crediting  the Company  with its  proportionate  share of expense or
            reduction in taxes.


                                      F-9
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE A (CONTINUED)

            Deferred  income  taxes are  recognized  for  temporary  differences
            between  financial  statement  and  income  tax bases of assets  and
            liabilities and loss carryforwards for which income tax benefits are
            expected to be realized in future years.  A valuation  allowance has
            been  established  to reduce the deferred tax assets,  as it is more
            likely than not,  that a portion or all of such  deferred tax assets
            will not be  realized.  The effect on deferred  taxes of a change in
            tax rates is  recognized  in income in the period that  includes the
            enactment date.

      7.    PER SHARE INFORMATION

            In June 1996,  the Company  approved a  1-for-1.6667  reverse  stock
            split and all share and per share  amounts  have been  retroactively
            restated.  In addition,  as a result of the Company  terminating its
            proposed public offering,  certain shares  previously  excluded from
            earnings per share have been retroactively reinstated.

            Earnings  (loss) per common  share are  calculated  by dividing  net
            income  (loss)  applicable  to common stock by the weighted  average
            number of common shares outstanding during the year and common stock
            equivalents.  On a fully-diluted  basis,  both net income (loss) and
            shares outstanding are adjusted to assume the conversion of mortgage
            indebtedness  from the date of issuance.  Fully-diluted  amounts are
            not presented as the effect would be immaterial or antidilutive.

      8.    STOCK-BASED COMPENSATION

            In 1997,  Statement of Financial Accounting Standards No. 123 ("SFAS
            No.  123"),  "Accounting  for  Stock-Based  Compensation,"  has been
            adopted and allows for a choice of the method of accounting used for
            stock-based  compensation.  Entities may use the  "intrinsic  value"
            method  currently based on APB No. 25 or the new "fair value" method
            contained  in SFAS No. 123.  The Company  accounts  for  stock-based
            compensation  under APB No. 25. As required by SFAS No. 123, the pro
            forma  effects  on  net  income  and  earnings  per  share  will  be
            determined  as if the fair value based  method had been  applied and
            disclosed in the notes to the financial statements.



                                      F-10
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE A (CONTINUED)

      9.    REVENUE RECOGNITION

            Revenues from services provided to residents, including, among other
            things,   room  and   board  and   health   care,   are   recognized
            contemporaneously  with the providing of said services and are shown
            in  the  accompanying   consolidated  financial  statements  net  of
            charitable and Supplemental Security Income discounts.

            Charitable  discounts result from the reduction of occupancy charges
            for qualified  residents to an amount equal to their ability to pay.
            Supplemental  Security  Income  ("SSI")  discounts  result  from the
            reduction of occupancy  charges for  qualified  residents to the net
            amount paid by the SSI program.  The discount amount is equal to the
            difference between the standard apartment rental fee (including meal
            and  housekeeping  charges)  and the amount  that is paid by the SSI
            program.

            Management  fee  revenues  are  recognized  monthly,  based  upon  a
            contractual rate of compensation.

            Fee income to which the Company is entitled in  connection  with the
            development  of  residential  retirement  centers it does not own is
            recognized  on  the  percentage-of-completion   basis.  The  Company
            accrues in full, as soon as determinable, any losses that arise from
            contracts for project development.

     10.    FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

            The Financial  Accounting  Standards  Board has issued  Statement of
            Financial  Accounting Standards No. 128, "Earnings per Share," which
            is effective  for  financial  statements  ending after  December 15,
            1997.  Early adoption of the new standard is not permitted.  The new
            standard eliminates primary and fully diluted earnings per share and
            requires  presentation  of basic  and  diluted  earnings  per  share
            together with disclosure of how the per share amounts were computed.
            The effect of adopting  this new  standard is not expected to have a
            material  impact  on the  disclosure  of  earnings  per share in the
            financial statements.


                                      F-11
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE A (CONTINUED)

            In June  1997,  the  Financial  Accounting  Standards  Board  issued
            Statement  of Financial  Accounting  Standards  No. 130,  "Reporting
            Comprehensive  Income" ("SFAS No. 130"),  and Statement of Financial
            Accounting  Standards  No. 131,  "Disclosures  About  Segments of an
            Enterprise and Related  Information"  ("SFAS No. 131").  The Company
            will  implement  SFAS No. 130 and SFAS No. 131 as required in fiscal
            1998,  which will require the Company to report and display  certain
            information related to comprehensive  income and operating segments,
            respectively.  Adoption  of SFAS No.  130 and SFAS No.  131 will not
            impact the Company's financial position or results of operations.

     11.    USE OF ESTIMATES

            In preparing  financial  statements  in  conformity  with  generally
            accepted  accounting  principles,  management  is  required  to make
            estimates and assumptions that affect the reported amounts of assets
            and liabilities and disclosure of contingent  assets and liabilities
            at the date of the  financial  statements,  as well as the  reported
            amounts of revenues and expenses during the reporting period. Actual
            results could differ from those estimates.


NOTE B - PROPERTY AND EQUIPMENT

      Property and equipment at March 31 consist of the following:

                                                1996                 1997
                                           -----------           --------------

          Land                            $   632,408            $  632,408
          Buildings and improvements        4,405,417             4,492,987
          Equipment                           850,969                940,841
                                          -----------            ----------

                                            5,888,794              6,066,236
          Less accumulated depreciation
              and amortization              3,527,096              3,789,585
                                          -----------             ----------

          Property and equipment, net      $2,361,698             $2,276,651
                                          ===========             ==========



                                      F-12
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE C - RELATED PARTY TRANSACTIONS

      DUE FROM AFFILIATES, NET

      Amounts due from affiliates  consist of cash advances,  unpaid  management
      fees,  interest  income and other revenue  items.  Most of the  affiliated
      companies  have been operating at a loss and their  respective  ability to
      repay the cash  advances and earned fees due to the Company is  uncertain.
      Accordingly,  a reserve  for such  amounts  has been  provided  for by the
      Company,  reducing  revenues,  fees and interest  income and providing for
      losses on cash advances to affiliates.  In the event such advances or fees
      are  remitted  by the  affiliates,  the  reserve is reduced  and income is
      recorded.  The amounts due from  affiliates  at March 31  consisted of the
      following:
<TABLE>
<CAPTION>

                                                                                           1996                 1997
                                                                                        ----------          ----------

<S>                                                                                     <C>                 <C>       
          Due from VVI                                                                  $2,452,137          $2,207,653
          Due from the Whittier, VVI affiliated company                                  2,406,266           2,793,766
          Due from VVI affiliated limited partnerships (VVI is
          general partner)                                                               1,235,661           1,219,670
          Management fees and cash advances due from
          affiliated companies                                                           1,088,208             770,103
                                                                                        ----------          ----------

                                                                                         7,182,272           6,991,192
          Less reserve for losses                                                        6,523,555           6,723,585
                                                                                        ----------          ----------

          Due from affiliates, net                                                      $  658,717          $  267,607
                                                                                        ==========          ==========
</TABLE>

      At March 31, 1996 and 1997,  the  unreserved  amounts due from  affiliates
represent development fees and advances from the following:
<TABLE>
<CAPTION>

                                                                                          1996                 1997
                                                                                        --------            ---------

<S>                                                                                     <C>                 <C>
          Presidential Care Corp. ("Presidential")                                      $658,717            $  27,646
          Camelot Village at Huntington, Inc.                                                                 102,718
          Camelot Village at Stroudsburg, LLC                                                                 137,243
                                                                                        --------            ---------

                                                                                        $658,717            $ 267,607
                                                                                        =======             =========
</TABLE>

                                      F-13
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE C (CONTINUED)

      1.    PRESIDENTIAL

            The unreserved amount at March 31, 1996 represented development fees
            and  advances  of  $143,200   and   $515,517,   respectively,   from
            Presidential Care Corp.  ("Presidential"),  a Florida not-for-profit
            corporation   affiliated  with  VVI.  The  Company  entered  into  a
            development agreement on March 24, 1995 to plan, design, develop and
            construct an assisted living retirement home in Hollywood,  Florida,
            and to arrange for permanent and interim financing.  The development
            agreement  provides for compensation to the Company for locating the
            land,  zoning  application  work and other services of 7 1/2% of the
            overall  project cost (as  defined),  payable upon  commencement  of
            construction.   The  Company   recognizes   development  fees  on  a
            percentage-of-completion  basis and has recognized $43,200 in fiscal
            1996.  The initial  $100,000  fee earned in fiscal 1995 had not been
            recognized  in fiscal  1995,  as the  underlying  project was in the
            initial  stages.  During  fiscal 1996,  the Company  reassessed  the
            collectibility   of  such  fee  and  a  recovery  of  $100,000   was
            recognized.  The  advances  of  $515,517  primarily  related  to the
            purchase of land.  Presidential received interim financing through a
            private  placement  and is  awaiting  approval  on its  construction
            financing.  All amounts due from Presidential at March 31, 1997 have
            been subsequently paid.

      2.    CAMELOT VILLAGE AT HUNTINGTON ("CAMELOT - HUNTINGTON")

            During  fiscal  1996,  the  Company  advanced  $73,449  to Camelot -
            Huntington,  a corporation  affiliated  with the Company,  which was
            fully  reserved in 1996 and  recovered in fiscal 1997.  At March 31,
            1997, the advances of $102,718 have  subsequently  been repaid.  The
            Company has entered  into a  development  agreement  with  Camelot -
            Huntington  and has  obtained an option to purchase  the  underlying
            property.  An assisted living facility is planned for  construction,
            subject to zoning and financing.

            The purchase price and related costs of the land, at March 31, 1997,
            totalled  approximately  $1,050,000,  of which $450,000 was borrowed
            from a bank.  The  loan is  secured  by the  property.  The  Company
            advanced the remaining $600,000, of which approximately $497,000 was
            collected  from the  proceeds  Camelot -  Huntington  received  from
            private investors in its sale of stock.


                                      F-14
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE C (CONTINUED)

            Construction of the facility  requires the issuance of a special use
            permit by the Huntington Zoning Board of Appeals.  In the event that
            zoning approval is not received and all appeals have been exhausted,
            each  Camelot - Huntington  investor  will have the right to receive
            the return of his investment  plus 10 percent  annual  dividends (to
            the extent not paid).  If Camelot - Huntington's  available cash and
            the net proceeds from the sale of the land are  insufficient  to pay
            investors electing this option, then the Company will be required to
            make up the  shortfall.  The  Company  has  guaranteed  to Camelot -
            Huntington  investors the payment of dividends and  distributions of
            up to $1,500,000 in the aggregate. In consideration of the Company's
            guarantee, the Company will receive 50% of the net proceeds, if any,
            from the sale of the  facility.  Alternatively,  each  investor  may
            exchange his Camelot - Huntington  stock for shares of the Company's
            common  stock at the lesser  of:  (a) 80 percent of its fair  market
            value or (b) $7.00 per share.

            Management  believes  that  Camelot  -  Huntington  is  still in its
            preliminary  phases of obtaining  zoning  approval and any potential
            future loss to the Company under its  commitments  and guarantees is
            not probable or estimable at this time for recognition purposes.

      3.    CAMELOT VILLAGE AT STROUDSBURG ("CAMELOT - STROUDSBURG")

            The  advances  of  $137,243  made  to  Camelot  -  Stroudsburg  were
            primarily for the purchase of real estate  intended for  development
            of an assisted living facility.  These advances were not reserved at
            March  31,  1997  since  management  believes  the  amount  will  be
            recovered  in the near future  either from a sale of the property or
            interim financing for project development.

      4.    PHOENIX LIFECARE CORP. ("PHOENIX")

            Phoenix,  a  not-for-profit  corporation  affiliated to the Company,
            provides health care services to residents of the Whitcomb Tower and
            the  Whittier (an  affiliate  of VVI) on behalf of the Company.  The
            Company earns a management  fee from Phoenix for services  rendered.
            The amounts due from  Phoenix of $355,942  and $502,496 at March 31,
            1996  and  1997,  respectively,  have  been  fully  reserved  and no
            management fees have been recognized during fiscal 1996 and 1997.


                                      F-15
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE C (CONTINUED)

      5.    RECEIVABLES FROM GATEWAY COMMUNITIES, INC. ("GATEWAY")

            Receivables from Gateway at March 31 were:
<TABLE>
<CAPTION>

                                                                                        1996            1997
                                                                                     ----------      ------------

<S>             <C>                                                                  <C>              <C>
                Note receivable, including accrued interest
                at 9%                                                                $7,481,953       $7,481,953
                Management fees and advances                                          1,076,197        1,076,197
                                                                                     ----------       ----------

                                                                                      8,558,150        8,558,150
                Less reserve for losses                                               8,558,150        8,558,150
                                                                                     ----------       ----------

                                                                                     $    -           $    -
                                                                                     ==========       ==========
</TABLE>

            Receivables from Gateway, a not-for-profit  and formerly  affiliated
            company and lessee and  operator of Harvest  Village,  a  continuing
            care retirement  community,  have been fully reserved by the Company
            as Gateway has  historically  suffered  losses and does not have the
            financial resources to pay this obligation. The Company acquired the
            note receivable  from Gateway  through a series of assignments  from
            VVI and affiliates.

            The  Company  intended  to acquire  Harvest  Village  from an entity
            indirectly  owned by VVI. In July 1997,  (i) the Company's  right to
            purchase the Harvest Village retirement  facility  terminated,  (ii)
            VVI contributed  substantially all of its equity interest in Harvest
            Village  Partners,  L.P. to the  Company,  (iii) the Company and VVI
            transferred  100  percent  of  Harvest  Village  Partners,  L.P.  to
            unaffiliated  purchasers,  and (iv) the Harvest Village construction
            lenders  assigned their mortgage on the Harvest  Village  retirement
            facility  to a company not  affiliated  with the  Company,  released
            their liens and security  interests in the Company's  properties and
            the stock of the  Company  owned by VVI,  and  released  VVI and the
            Company's Chief Executive Officer from their  guarantees.  (See Note
            G-3.)


                                      F-16
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE D - DEVELOPMENT FEES AND ADVANCES

      During 1994, the Company began developing a residential  retirement center
      in the State of Iowa known as Cottage Grove Place, an unaffiliated entity.
      Pursuant to the development  agreement,  the Company is obligated to plan,
      design,  develop  and  construct  the  property,   arrange  financing  and
      supervise occupancy development for a total fee of $2,270,000.  During the
      years  ended  1995,  1996  and  1997,  the  Company  recognized  $700,000,
      $1,003,955 and $220,480 (net of financing discount of $144,500 in 1996 and
      1997),  respectively,  of such development fee. The initial installment of
      $750,000 was paid upon the bond  closing,  which  provided  Cottage  Grove
      Place with its construction financing in 1995. An additional $385,005 will
      be paid in monthly installments during construction  provided construction
      is on time and on budget,  and the remaining  $1,135,000 will be paid upon
      the  later of:  (i) 90%  occupancy  achieved  by the  project  or (ii) the
      payment in full of the  short-term  bonds of Cottage  Grove  Place,  which
      mature on or before July 1, 2001, and the satisfaction of the Debt Service
      Coverage  Ratio and the Reserve Ratio (as defined)  after giving effect to
      the repayment of such short-term  bonds.  While the Company has earned and
      recognized a majority of the  development  fee, the terms of the agreement
      defer  payment.  A portion of the fee has been  discounted  at 10% to give
      effect to the estimated payment during the first quarter of fiscal 1999.

      The  components of fees and advances  receivable  from Cottage Grove Place
are as follows:

                                                  1996              1997
                                              ----------         ---------

          Advances                            $  39,861          $      -
          Development fees, net                 806,020           795,500
                                                -------           -------

                                                845,881           795,500
          Less long-term portion, net           575,017           795,500
                                                -------           -------

                                               $270,864          $      -
                                                =======           =======



                                      F-17
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE E - MORTGAGES AND NOTES PAYABLE
<TABLE>
<CAPTION>

                                                                                        1996                             1997
                                                                                   -------------                    ---------------

          1.          MORTGAGES PAYABLE

<S>                                                                                 <C>                              <C>
          Mortgages,  guaranteed  by VVI,  bearing  interest at
            7.5%  payable in monthly  installments of
            principal and interest of $30,429 are due
            May 1, 1998, as extended on October 15, 1997;
            restricted use cash accounts have been pledged
            as additional collateral (Note A).                                      $4,351,862                       $4,317,865
          Convertible mortgages with interest at prime, plus
            3% (11.5% at March 31, 1997), payable in
            interest only installments quarterly, maturity
            dates are March 1999 and August 2000, net of
            original issue discount of $59,356 and $42,789,
            respectively. Convertible into 169,602 shares of
            UVH common stock, as of March 31, 1997,
            subject to adjustment, as defined.                                       1,820,643                        1,167,211
          Mortgage with interest at prime plus 1% (9.5% at
            March 31, 1997) payable in monthly installments of
            $4,700; including interest balance due August 2001.                        252,433                          217,957
                                                                                    ----------                       ----------

                                                                                     6,424,938                        5,703,033
                                                                                    ----------                        ---------
</TABLE>



                                      F-18
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE E (CONTINUED)
<TABLE>
<CAPTION>

                                                             1996               1997
                                                          ------------       ---------

          2.          NOTES PAYABLE

<S>                                                        <C>              <C>
Note payable in monthly  installments of $5,000
  plus interest at prime plus 2% (10.5% at
  March 31, 1997). The note is pursuant to a line of
  credit  which expires April 7, 1998  .............       $  356,000       $  334,000
Convertible 7% promissory notes, interest payable
quarterly, compounded annually, maturity on
December 31, 2000; convertible into 19,208
shares of the Company's common stock at $8.33
per share ..........................................          795,000          160,000
Note payable in monthly installments of $12,500
plus interest until August 1999 at prime plus
1.5% (10% at March 31, 1997)  ......................                           362,500
Equipment notes payable, with interest ranging from
3% to 15% payable in monthly installments of
principal and interest of $1,469 until July 1999  ..            6,467           39,650
Promissory note payable, with interest at prime plus
1% (9.25% at March 31, 1996) payable in monthly
principal installments of $2,917, plus interest
until December 1996                                            23,333
                                                           ----------       ----------

                                                            1,180,800          896,150
                                                           ----------       ----------

                                                            7,605,738        6,599,183
Less current portion                                          432,756          264,918
                                                           ----------       ----------

                                                           $7,172,982       $6,334,265
                                                           ==========       ==========
</TABLE>



                                      F-19
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE E (CONTINUED)

      The aggregate maturities of mortgages and notes payable are as follows:

        Fiscal year ending March 31,
        1998                                  $   264,918
        1999                                    5,627,698
        2000                                      104,184
        2001                                      373,586
        2002                                      197,290
        Thereafter                                 31,507
                                              -----------

                                              $6,599,183
                                              ==========

NOTE F - INCOME TAXES

      The  consolidated  provision  (benefit)  for income taxes  consists of the
following at March 31:

                                                 1996              1997
                                             ----------        ------------

          Current
          Federal                           $   771,000        $(162,000)
          State and local                       230,000         (151,000)
                                            -----------        ----------

                                              1,001,000         (313,000)
                                            -----------        ----------

          Deferred
          Federal                              (449,000)         760,000
          State and local                      (132,000)         221,000
                                            -----------        ---------

                                               (581,000)         981,000
                                            -----------        ---------

                                            $   420,000        $ 668,000
                                            ===========        =========



                                      F-20
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE F (CONTINUED)

      The  Company  files its Federal  consolidated  tax return with its parent,
      VVI. To the extent the Company's  Federal tax  attributes  are utilized by
      VVI,  the Company  records the result as either an increase or decrease to
      additional paid-in capital.

      The Company's  effective  income tax rate differs from the statutory  U.S.
Federal income tax rate as a result of the following:
<TABLE>
<CAPTION>

                                                              1996          1997
                                                           ---------      --------

<S>                                                          <C>           <C>     
          Statutory Federal tax rate                         34.00%        (34.00%)
          State income taxes, net of Federal
          income tax benefit                                  6.23          (6.50)
          Other                                                .48           4.5
          Losses for which no future tax benefit
          has been recorded                                    -            76.88
                                                             -----        -------

          Effective tax rate                                 40.71%         40.88%
                                                             =====        =======
</TABLE>

      Temporary  differences  which  give rise to  deferred  tax  assets  are as
follows:

                                                   1996               1997
                                               ----------         -----------

          Net operating loss carryover         $  838,000         $1,047,000
          Due from affiliate                    5,274,000          5,296,000
          Fixed assets                            902,000            902,000
          Accrued expenses and other               57,000            190,000
                                               ----------         ----------

                                                7,071,000          7,435,000
          Valuation allowance                   6,090,000          7,435,000
                                               ----------         ----------

                                               $  981,000         $     -
                                               ==========         ==========



                                      F-21
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE F (CONTINUED)

      The Company has net operating  loss  carryforwards  for Federal income tax
      purposes  as of  March  31,  1997  of  approximately  $3,081,000.  The net
      operating  loss  carryforwards  expire  during  fiscal 1998 through  2012,
      $2,083,000  of which  expire  in  fiscal  1998.  Such net  operating  loss
      carryforwards  are subject to several  statutory  limitations  which limit
      their utilization.  Accordingly, no benefit from such utilization has been
      provided for. Any ownership  changes could limit the use of some or all of
      the net operating loss  carryforwards.  During 1997, the Company increased
      its deferred tax valuation  allowance  due to losses  incurred in 1997 and
      uncertainty as to the Company's ability to realize future tax benefits.


NOTE G - COMMITMENTS AND CONTINGENCIES

      1.    OPERATING LEASES

            Aggregate  rental expense under operating  leases was  approximately
            $35,000  and  $66,900  for the years  ended March 31, 1996 and 1997,
            respectively.  UVH rents its  administrative  office facilities from
            CBF Building  Company,  an affiliate of VVI,  under a lease expiring
            December 31, 2002, at an annual rental as follows:

              Fiscal year ending March 31,
              1998                                $  84,630
              1999                                   87,168
              2000                                   89,781
              2001                                   92,478
              2002                                   95,256
              Thereafter                            173,335
                                                    -------

                                                  $ 622,648
                                                    =======

      2.    PURCHASE COMMITMENT

            The  Company  may be  required  to  purchase a parcel of land at the
            Cottage Grove Place retirement  facility in Cedar Rapids,  Iowa, for
            $450,000  plus  interest  and taxes if Cottage  Grove Place fails to
            exercise its option to the property.



                                      F-22
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE G (CONTINUED)

      3.    COLLATERAL

            Under an amended and restated loan agreement of an affiliate of VVI,
            the  lenders  hold a second  mortgage  on the Olds Manor  retirement
            center (net book value of $286,000) in the amount of $1,400,000  and
            a consolidated  mortgage in the amount of $1,000,000 on the Whitcomb
            Tower  and  Hillside   Terrace   (net  book  value  of   $1,716,000)
            collateralizing VVI's $6,350,000 guarantee of a construction loan in
            connection with Harvest Village  Partners L.P., an affiliate of VVI.
            In  addition,  VVI has  pledged  1,340,573  shares of the  Company's
            common  stock  owned  by  VVI  as  additional   collateral  for  the
            guarantee. On July 16, 1997, these mortgages, guarantees and pledges
            were  released due to the sale of Harvest  Village  Partners L.P. to
            third parties. See Note C-5.

      4.    GUARANTEES

            The Company  guaranteed  a bank loan to CBF  Building  Company.  The
            balance outstanding on this loan is $95,689 at March 31, 1997.

            The Company guaranteed a bank loan to an affiliate with a balance of
            $450,000 at March 31, 1997 (Note C-2).

            The Company is a co-borrower on a line of credit given to VVI in the
            original  amount of $300,000.  The balance  outstanding at March 31,
            1996 and 1997 was approximately $283,000 and $192,000, respectively.

      5.    SELF-INSURANCE

            Effective April 1, 1992, the Company began to partially  self-insure
            for  health  and  medical  liability  costs for up to a  maximum  of
            $300,000 in claims.  The Company has  insurance  coverage for claims
            above the aforementioned  limit. The self-insurance  claim liability
            is determined on a nondiscounted  basis based on claims filed and an
            estimate of claims incurred but not yet reported. The amount of said
            liability accrued at March 31, 1997 was $131,625.



                                      F-23
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE G (CONTINUED)

      6.    CONCENTRATIONS OF CREDIT RISK AND REVENUES

            Financial  instruments  which  potentially  subject  the  Company to
            concentrations of credit risk are primarily cash and receivables.

            The  Company   maintains   its  cash  in  highly   rated   financial
            institutions  and limits the  amount of credit  exposure  to any one
            institution.  The Company has no bank deposits  exceeding  federally
            insured limits.

            A  concentration  of credit risk exists with respect to  development
            fees and advances and amounts due from affiliates.

      7.    EMPLOYMENT AGREEMENTS

            Effective  April 1, 1996,  the  Company  entered  into a  three-year
            employment  agreement with the Company's  Chief  Executive  Officer,
            pursuant to which annual cash  compensation  under the  agreement is
            $100,000 during the first year of employment.

            In  addition,  as of April 1,  1996,  the  Company  entered  into an
            employment   agreement  with  the  Company's   President  and  Chief
            Operating  Officer pursuant to which an annual base salary under the
            employment  agreement is $100,000.  In December  1995, the President
            received a $25,000 cash bonus and the Company  agreed to issue 9,000
            shares of the  Company's  common stock valued at $5.55 per share.  A
            bonus of $25,000 and 3,000 shares of the Company's  common stock was
            paid on June 30,  1996 and  $25,000  and 3,000  shares is payable on
            March 31, 1998, subject to continued employment.

      8.    POSSIBILITY OF CROSS DEFAULT

            An  affiliate  of VVI was  indebted  under a first  mortgage  in the
            principal  amount of  $4,087,500.  The mortgage  securing  this loan
            provides  that a default  under such loan is a default under each of
            the  Company's   Hillside  Terrace  and  Whitcomb  Tower  Mortgages.
            Therefore,  a potential VVI default on this  affiliate's  loan could
            result in the foreclosure of Hillside Terrace and Whitcomb Tower.


                                      F-24
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE G (CONTINUED)

      9.    GOVERNMENT REGULATION

            Healthcare  and senior living  facilities are areas of extensive and
            frequent   regulatory   change.   Changes   in  the   laws   or  new
            interpretations  of existing laws can have a  significant  effect on
            methods of doing  business,  costs of doing  business and amounts of
            reimbursement from governmental and other payors. The Company at all
            times attempts to comply with all  applicable  fraud and abuse laws;
            however,  there can be no assurance that  administrative or judicial
            interpretation  of  existing  laws or  regulations  will  not have a
            material  adverse  effect on the  Company's  operations or financial
            condition.


NOTE H - ACCRUED EXPENSES

      Accrued expenses consist of the following at March 31:

                                             1996                    1997
                                         ---------              ---------------

          Interest                        $ 95,551              $  79,465
          Real estate taxes                  1,814                 14,713
          Payroll and related taxes        220,234                242,291
          Insurance                        192,244                131,625
          Professional fees                107,200                155,056
          Other                                                    36,934
                                          --------               --------

                                          $617,043              $ 660,084
                                          ========               ========



                                      F-25
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE I - STOCKHOLDERS' EQUITY

      1.    COMMON STOCK

            On March 31, 1995, VVI contributed 1,200,000 shares of the Company's
            common stock to the Company,  which the Company then  simultaneously
            retired. As consideration for such contribution, VVI was entitled to
            be issued one share of common  stock for each $5.73  received by the
            Company  in  payment  of  amounts  due from  Gateway.  In 1996,  VVI
            received 120,000 shares as consideration for relinquishing the right
            to receive  such  shares  upon  collection.  As the amounts due from
            Gateway had been fully reserved for by the Company (Note C), the net
            contribution  of shares by the Company has been  accounted  for in a
            manner similar to a recapitalization.  The capital  contribution was
            premised  on the fact that the  Company  was going to  complete  the
            public  offering by  September  30,  1996.  The public  offering was
            terminated  in  October  1996,  and in  December  1996  the  Company
            reissued the remaining 1,080,000 shares of common stock to VVI.

            In March 1996,  the  expiration  date on  outstanding  warrants  was
            extended  from  March 31,  1996 to April 30,  1996 and the  exercise
            price was  adjusted  from $6.66 to $3.33 per share.  In April  1996,
            62,121 shares were issued in  connection  with the exercise of these
            warrants.

            In March 1996, the Company offered the  convertible  mortgageholders
            and  noteholders  the option to convert,  through April 30, 1996, to
            common  shares at a price of $3.75  instead of prices  ranging  from
            $6.67  through  $7.22.  In April 1996,  347,996  common  shares were
            issued in  connection  with the  offer.  As a result  of the  offer,
            167,887 additional shares were issued upon conversion, the estimated
            fair value of which  ($156,466) has been recorded as debt conversion
            expense in 1997.  Had the  conversion  of this debt and  exercise of
            warrants  taken place at the  beginning of 1996,  earnings per share
            would have been $.40 as compared to historical earnings per share of
            $.51.



                                      F-26
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE I (CONTINUED)

      2.    INCENTIVE STOCK OPTION PLAN

            The Company has reserved 210,000 shares of common stock for issue to
            key employees  under the Company's  Employee  Incentive Stock Option
            Plan (the "1991 Plan"), as amended. A summary of the activity within
            the 1991 Plan is as follows:

<TABLE>
<CAPTION>

                                              Weighted
                                            average price    Option price
                                              per share        per share          Granted        Available
                                              ---------        ---------          -------        ---------


<S>             <C>                            <C>          <C>                   <C>           <C>
                Balance, April 1, 1995         $4.06        $1.33 to $6.10        54,600        155,400

                Terminated                     1.33         $1.33                 (2,700)         2,700
                Granted                        4.08         $3.33 to $6.10        46,680        (46,680)
                                                                                --------        --------

                Balance, March 31, 1996        4.07         $1.33 to $6.10        98,580        111,420
                                                                                ========        =======

                Terminated                     4.35         $1.33 to $5.55        (1,260)         1,260
                Granted                        4.29         $4.00 to $4.40        40,700        (40,700)
                                                                                --------       ---------

                BALANCE, MARCH 31, 1997        4.14         $1.33 TO $6.00       138,020         71,980
                                                                                ========       =========
</TABLE>

            Under the plan,  option exercise prices must be at least 100% of the
            estimated  fair market  value of the common stock at the time of the
            grant.  Exercise  periods  are for ten  years,  but  terminate  at a
            stipulated  period of time after an employee's  death or termination
            of employment  for causes other than  disability or  retirement.  No
            options have been exercised since inception of the plan. The options
            become exercisable at the rate of 20% per year. Accordingly, options
            for an aggregate of 43.668 shares are exercisable at March 31, 1997.

            In June 1996, the Company adopted the 1996 Outside  Directors' Stock
            Option Plan (the "Directors' Plan"), which provides for the granting
            of options to purchase  common  stock of the Company to  nonemployee
            directors  of  the  Company.  The  Directors'  Plan  authorizes  the
            issuance of a maximum of 90,000 shares of common stock.


                                      F-27
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE I (CONTINUED)

            The Directors' Plan is administered by the Board of Directors. Under
            the Directors' Plan, each  nonemployee  director elected after April
            1, 1996 will  receive  options for 3,000 shares of common stock upon
            election. To the extent that shares of common stock remain available
            for the grant of options  under the  Directors'  Plan,  each year on
            April 1, commencing April 1, 1997, each nonemployee director will be
            granted an option to  purchase  1,800  shares of common  stock.  The
            exercise  price  per  share  for  all  options   granted  under  the
            Directors' Plan will be equal to the fair market value of the common
            stock as of the date  preceding the date of grant.  All options vest
            in  three  equal   annual   installments   beginning  on  the  first
            anniversary of the date of grant. Each option will be for a ten-year
            term,  subject  to  earlier  termination  in the  event  of death or
            permanent  disability.  Options for an aggregate of 3,000 shares are
            exercisable at March 31, 1997.

            A summary of activity within the 1996 Plan is as follows:

                                           Option price
                                            per share    Granted    Available
                                            ---------    -------    ---------

                Balance, April 1, 1996         -            -          -

                Granted                       $6.00      9,000      81,000

            In addition,  there are options outstanding,  at prices ranging from
            $1.33 to $6.00,  for  28,800 and  31,800  shares of common  stock at
            March 31, 1996 and 1997, respectively. These options were granted in
            addition to those outstanding under the 1991 Plan and the Directors'
            Plan.  Options for an aggregate of 20,280 shares are  exercisable at
            March 31, 1997.

            The following table summarizes significant ranges of all outstanding
and exercisable stock options at March 31, 1997:

<TABLE>
<CAPTION>

                         Options outstanding                     Options exercisable
                         -------------------                     -------------------
                              Weighted-        Weighted-                      Weighted-
Ranges of                      average         average                         average
exercise                      remaining        exercise                       exercise
prices              Shares   life in years      price          Shares          price
------              ------   -------------      -----          ------          -----


<S>                <C>          <C>             <C>            <C>             <C>  
$1.33              34,740       5.86            $1.33          27,792          $1.33
3.33 - 4.40        69,600       9.51             3.72           6,780           3.37
5.55 - 6.10        74,480       7.65             5.75          32,376           5.76
</TABLE>


                                      F-28
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE I (CONTINUED)

            The  weighted-average  option fair value on the grant date was $4.20
and $4.68 for options issued during the years ended March 31, 1996 and 1997.

            The Company has adopted the  disclosure  provisions  of Statement of
            Financial  Accounting Standards No. 123, "Accounting for Stock-Based
            Compensation"  ("SFAS No.  123");  it applies  APB  Opinion  No. 25,
            "Accounting   for  Stock   Issued   to   Employees,"   and   related
            interpretations  in accounting  for the Plans and does not recognize
            compensation  expense for such Plans.  If the Company had elected to
            recognize  compensation  expense  based  upon the fair  value at the
            grant  dates  for  awards  under  these  plans  consistent  with the
            methodology  prescribed by SFAS No. 123, the Company's  reported net
            income  (loss) per share would be  adjusted to the pro forma  amount
            indicated below for the years ended March 31:

                                             1996                    1997
                                           --------               -----------

                Net income (loss)
                As reported                $611,667              $(2,034,554)
                Pro forma                   548,720               (2,103,235)

                Income (loss) per share
                As reported                    $.35                    $(.81)
                Pro forma                       .32                     (.84)

            These  pro  forma  amounts  may  not  be  representative  of  future
            disclosures   because  they  do  not  take  into  effect  pro  forma
            compensation  expense  related to grants made before 1996.  The fair
            value of options  issued was estimated by applying the minimum value
            method,  as the Company's  common stock is not actively  traded.  In
            applying the minimum value method,  the Company  assumed an expected
            life of five years and an interest rate of 6.7% in 1996 and 1997.


                                      F-29
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997



NOTE J - BUSINESS SEGMENTS

      The Company owns and operates its three residential  retirement centers in
      Michigan to provide  living and extended care services to the elderly.  In
      addition to a room, the Company provides  significant  personal  services,
      including,  among other  things,  meal  preparation  and health care.  The
      Company's  management  provides the requisite  day-to-day  supervision and
      administration services to various affiliates and nonaffiliated companies.
      Losses and recoveries have been stated separately.

      Intersegment revenues are not significant.  Operating profit is defined as
      sales and other income directly  related to a segment's  operations,  less
      operating expenses.

      The following summaries set forth certain financial information classified
as described above:

                                                1996                 1997
                                           ------------           ------------

          Revenues
          Resident centers                  $7,521,196           $7,681,953
          Management and development
          companies                          1,003,955              280,480
                                             ---------            ---------

                                            $8,525,151           $7,962,433
                                             =========            =========

          Operating profits
          Resident centers                  $1,268,361           $1,261,079
          Management and development
          companies                            551,248             (613,614)
          (Loss) recovery on advances
          to affiliates                       (296,093)            (218,146)
                                            ----------           ---------- 

          Income from operations            $1,523,516           $  429,319
                                             =========           ==========



                                      F-30
<PAGE>
                  United Vanguard Homes, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                             March 31, 1996 and 1997


NOTE J (CONTINUED)

      Corporate  assets are principally  cash, and corporate  office  equipment,
furnishings and related assets.

                                              1996                 1997
                                          -----------         -----------

Identifiable assets are as follows:
Retirement centers                        $3,656,272          $3,331,635
Management and development companies       2,250,917           1,393,615
Corporate                                    180,350             159,674
                                          ----------          ----------

                                          $6,087,539          $4,884,924
                                          ==========          ==========






                                      F-31