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)

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

     For the fiscal year ended  MARCH 31, 1998
                                ------------------------------------------------

                                       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.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

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

4 Cedar Swamp Road, Glen Cove, New York                     11542
--------------------------------------------------------------------------------
(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: $7,774,000.

     State the aggregate market value of Registrant's  outstanding voting Common
Stock held by non-affiliates of Registrant: $1,000,000.

     As  of  March  31,  1999,  there  were  3,313,265  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,
                                ---------------------------
                                   1997             1998
                                   ----             ----


Statement of Operations Data:

Revenues:
      Resident services .       $4,999,000       $4,705,000
      Healthcare services        2,683,000        2,763,000
      Management Fees ...           60,000          120,000
      Development fees ..          220,000          186,000
                                ----------       ----------
         Total revenues .       $7,962,000       $7,774,000
                                ==========       ==========


                                       -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  Section  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 Whittier  (which is managed by Registrant) and Whitcomb
(which is owned and managed by Registrant) 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

     At March 31,  1999  Registrant  had  approximately  250  employees  of whom
approximately 145 were full-time employees.


Item 2.  DESCRIPTION OF PROPERTY.
         -----------------------

     The table below sets forth certain  information  regarding  the  properties
owned or managed by Registrant:
<TABLE>
<CAPTION>

                                   INDEPENDENT  ASSISTED   SKILLED   OCCUPANCY
     NAME AND LOCATION             LIVING       LIVING     NURSING   RATE(%)(a)
     -----------------             ---------------------------------------------
<S>                               <C>         <C>        <C>       <C>
PROPERTIES OWNED:

Hillside Terrace, Ann Arbor, MI        63       12(b)       23       95
Olds Manor, Grand Rapids, MI           98       54(b)       44       84
The Whitcomb, St. Joseph, MI          102       34                   86

MANAGED ONLY PROPERTY:

The Whittier, Detroit, MI             205       58                   65

PROPERTIES UNDER DEVELOPMENT:

Camelot Village(c)                             120
Hicksville, NY

Camelot Village(c)
Huntington, NY                                 120

Camelot Cove on the Hudson (c)
North Bergen, NJ                      284       30          60

Orchard Terrace(c)                     64
Ann Arbor, MI

Presidential Place                             104
Hollywood, FL
</TABLE>

(a)  As of March 31, 1999.

(b)  These units currently licensed as Homes for the Aged.

(c)  Subject to funding being secured.


     Registrant sold its rights to manage Cottage Grove Place and to develop and
acquire the Stroudsburg site in November and December 1998, respectively.


                                      -10-

<PAGE>

     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,  located in Detroit,  Michigan.  The Whittier was
built in the 1920s and renovated in 1972 and 1989. Registrant estimates that The
Whittier needs approximately $1.5 million for deferred maintenance.

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

                                      -11-

<PAGE>

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  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.


                                      -12-

<PAGE>

MORTGAGE INDEBTEDNESS

     GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

     As of March 31,  1998 and 1999,  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  approximately  $2 million.  Such  indebtedness  is secured by a first
mortgage on Hillside  Terrace.  As of March 31,  1998 and 1999,  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 approximately
$2 million.  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, 1998 and 1999,
Whittier  Towers,  Inc.,  the owner of The Whittier,  was indebted to GWL in the
aggregate  principal amount of approximately  $4 million.  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  November  1, 1999.  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.

     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 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.


                                      -13-

<PAGE>

     OLD KENT BANK

     As of March 31,  1999,  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 $139,744.  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, 1999, 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
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,  1999,  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 mortgage.  The Whitcomb Trust mortgage has routine covenants respecting
payment  of  taxes,  insurance,   repairs,  etc.,  except  that  Whitcomb  Tower
Corporation  cannot  permit 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.

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

                                      -14-

<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, 1999)
           --------------                    ------------------------------

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 OF PLAN OF OPERATION.

YEAR ENDED MARCH 1997 VS. MARCH 1998

REVENUES

         Net  revenues  of  the  Registrant  represent  its  gross  consolidated
revenues, less charitable and Supplementary Social Security Income discounts.

         Net revenues  decreased by $188,000,  or 2 percent,  from $7,962,000 in
the 1997  period to  $7,774,000  in the 1998  period.  The  primary  cause was a
reduction in Resident  Services  Revenues  which  decreased  by  $294,000,  or 6
percent,  from  $4,999,000  in the 1997 period to $4,705,000 in the 1998 period.
The  decrease  was a result  of a  reduction  in  occupancy  due to a  temporary
moratorium on admissions at one of the Registrant's facilities.  From January to
October 1, 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 moratorium,  occupancy  dropped from 95 percent,  as of March
31, 1996, to 65 percent, as of March 31, 1998.

         Healthcare services revenues increased by $80,000,  or 3 percent,  from
$2,683,000 in the 1997 period to $2,763,000 in the 1998 period. The increase was
a result of higher rates.

                                      -15-

<PAGE>

         Management fees of $120,000 were earned this period on a contract which
began October 1, 1996.

         Development  Fee  income  decreased  by  $35,000  or 16  percent,  from
$220,000 in the 1997 period to $185,000 in the 1998 period. These fees are lower
this  year  since  they  are  based  on a 1995  development  agreement  which is
substantially completed.

RESIDENCE OPERATING EXPENSES

         Residence  operating  expenses  include all  retirement  and healthcare
center  operating  expenses,   including,   among  other  things,   payroll  and
employments  costs, food,  utilities,  repairs and maintenance,  insurance,  and
property taxes.

         Residence operating expenses increased by $40,000,  or 1 percent,  from
$6,156,000 in the 1997 period to $6,196,000 in the 1998 period.  The increase is
mainly attributable to salary increases.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses  include all marketing  costs, as
well as the general and  administrative  expenses  incurred at the  Registrant's
principal executive offices.  General and administrative expenses include, among
other things,  administrative salaries, rent, utilities,  insurance, and related
expenses.

         General  and  administrative  expenses  increased  by  $195,000,  or 22
percent,  from $881,000 in the 1997 period to $1,076,000 in the 1998 period. The
increase is  primarily  attributable  to an increase in  personnel  costs and an
increase in overhead  associated with Registrant's  unsuccessful public offering
and plans to expand its development projects.

PROVISION FOR RECOVERY ON ADVANCES TO AFFILIATES

         During  Fiscal 1998  Registrant  recorded a net recovery of Advances to
Affiliates  aggregating  $351,000 compared to a Net Loss on Advances of $218,000
in Fiscal  1997.  The  variance  is a function of net funds paid out or received
from Registrant's parent (Vanguard) and affiliated companies.  Future recoveries
are anticipated as Vanguard plans to liquidate some of its assets.

INTEREST EXPENSE, NET

         Interest  expense,  net,  decreased  by  $32,000,  or 5  percent,  from
$592,000  in the 1997 period to $560,000  in the 1998  period.  The  decrease is
primarily  attributable to interest accrued on prior years' tax assessment which
was recorded in the fourth quarter of 1997.


                                      -16-

<PAGE>

INCOME TAXES

         Income taxes decreased by $596,000, or 89 percent, from $668,000 in the
1997 period to $72,000 in the 1998 period.  The  decrease is primarily  due to a
write-off of $981,000 of deferred income assets in 1997.

LIQUIDITY AND CAPITAL RESOURCES

         During fiscal 1998 operating  activities provided cash of approximately
$267,000  compared to requiring  cash of  approximately  $341,000 from operating
activities in fiscal 1997. The increase in cash flows from operating  activities
was  principally  due to  Registrant's  net  profit  in fiscal  1998.  Investing
activities required approximately $47,000 in 1998 for fixed asset addition.

         During  fiscal 1998  Registrant  required  approximately  $166,703  for
financing  activities  compared to providing cash from  financing  activities of
approximately  $464,000  in 1997.  The  decline  in cash  flows  from  financing
activities was principally due to $225,000 in reduced  borrowing for the current
period and  approximately  $207,000 of proceeds from exercise of warrants  which
occurred only in year 1997.

         As of March 31, 1998  Registrant  had working  capital of $149,000,  an
improvement of $803,000,  attributable to Registrant's profit in fiscal 1998 and
the extensions granted on certain outstanding debt.

         Registrant's capital is not sufficient to fund its operating plans, and
Registrant  is  currently  negotiating  to  sell a  substantial  portion  of its
operating and development properties.  If such sales are successful,  Registrant
would have adequate capital to fund future  development  projects.  In addition,
Registrant  received a  commitment  from a financial  institution  to  refinance
substantially  all of its  outstanding  mortgages.  Although this commitment has
expired,  Registrant  believes it can  successfully  renegotiate  this financing
alternative,  which, in Registrant's  opinion,  would provide  adequate  working
capital.

PUBLIC OFFERING COSTS

         During  fiscal  1997,  Registrant  recorded  a charge  to  earnings  of
$1,170,344  representing  the  total  estimated  costs  of  its  aborted  public
offering.  During fiscal 1998, Registrant revised its estimate to reflect actual
costs incurred and, accordingly, recorded other income of $265,818.

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

Item 8.  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 as of March 31, 1999:


          NAME            AGE                   Positions(s)
          ----            ---       -----------------------------------------


Carl G. Paffendorf.......  66       Chairman of the Board and Chief Executive
                                      Officer
Paul D'Andrea............  66       Vice President - Finance
Craig M. Shields.........  57       Vice President and
                                      General Counsel
Theresa A. Govier........  NA       Vice President - Administration and
                                      Secretary
Alan Guttman.............  49       Treasurer
James E. Eden............  61       Director
Benjamin Frank             65       Director
Francis S. Gabreski        79       Director
Robert S. Hoshino          52       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).

     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.



                                      -18-

<PAGE>



     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.

     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,  Inc. since 1992, a consulting
business active in both the senior living and 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 private long-term care company which owns and
operates geriatric and rehabilitative nursing beds in Massachussets. In 1996 Mr.
Eden became Chairman of the Board and Chief  Executive  Officer of Senior Living
Properties,  LLC, a private  long-term  care  company  which  owns and  operates
nursing homes and assisted living facilities in Texas and Illinois. From 1988 to
1992, Mr. Eden was employed by Marriott Corporation, as Executive Vice President
and General  Manager,  Senior  Living  Services  Division,  which  acquired  and
developed  senior living  facilities.  Mr. Eden is a trustee of the Alliance for
Aging Research and a director of both Omega Healthcare Investors, Inc. and Omega
Worldwide,  Inc.,  public companies serving the senior living and long-term care
industries.

     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.


                                      -19-

<PAGE>



     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.

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

     In Fiscal  1998,  Messrs.  Larry L. Laird,  Douglas D. Laird,  and Ms. Tara
O'Sullivan,  then officers of Registrant,  left  Registrant's  employ and became
employees of Churchill  Estates,  Inc.  See Item 12 "Certain  Relationships  and
Related Transactions."

     Messrs.  Larry L. Laird and Stanley J.  Shuster  resigned as  directors  of
Registrant in September 1998.

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.



                                      -20-

<PAGE>

                       NUMBER OF LATE REPORTS      NUMBER OF TRANSACTIONS NOT
                          IN FISCAL 1998           REPORTED ON A TIMELY BASIS
                       -----------------------     --------------------------

James E. Eden                        1                       1
Carl G. Paffendorf                   1                       1
Stanford J. Shuster                  1                       1

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, 1998, 1997, and 1996.


<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                FISCAL YEAR ENDED   ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION         MARCH 31,            SALARY
---------------------------     -----------------   -------------------
<S>                               <C>              <C>

Carl G. Paffendorf                    1998            $100,000
  Chief Executive Officer             1997             100,000
                                      1996              75,600

Larry L. Laird                        1998            $100,000
  Chief Operating Officer             1997             100,000
                                      1996              96,000
</TABLE>

     No stock options were granted to the Chief Executive  Officer and the Chief
Operating Officer during the fiscal year ended March 31, 1998.

     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, 1998. No options were  exercised by such persons  during the fiscal
year ended March 31, 1998.


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

                                                     NUMBER OF UNEXERCISED
                                                    OPTIONS AT MARCH 31, 1998
NAME                                                 EXERCISABLE/UNEXERCISABLE
----                                                --------------------------

Carl G. Paffendorf.............................          13,000/10,000

Larry L. Laird.................................            9,640/9,160


                                      -21-

<PAGE>



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 Registrant,  pursuant to which he serves as its Chief
Executive  Officer.   Mr.   Paffendorf's  annual  cash  compensation  under  the
employment agreement is $100,000.  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 Registrant as
of April 1, 1996,  pursuant  to which he served as  Registrant's  President  and
Chief  Operating  Officer until November 1, 1998. Mr. Laird's annual base salary
under the employment agreement was $100,000.  In Fiscal 1997, Mr. Laird received
a $25,000 cash bonus and 3,000 shares of  Registrant's  Common Stock.  Mr. Laird
received a bonus of $25,000 and 3,000 shares of Common Stock for Fiscal 1998.

     Mr. Laird's employment with Registrant ended as of November 1, 1998. During
the three-year period  commencing  November 1, 1998, Mr. Laird has agreed not to
directly or indirectly  engage in the business of owning or managing  retirement
facilities  for the  elderly  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 of  Registrant  for a period of 24
months following the end of the term of his employment agreement.

STOCK OPTION PLANS

     1991 INCENTIVE STOCK OPTION PLAN. Under  Registrant's  1991 Incentive Stock
Option Plan (the "Incentive Plan"),  210,000 shares of Common Stock are reserved
for issuance upon the exercise of stock options.  As of March 31, 1998,  options
to purchase an  aggregate  of 130,040  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.


                                      -22-

<PAGE>



     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, 1998,  options to purchase an aggregate
of 18,000 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 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 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  grant.  Each
option will be for a ten-year term, subject to earlier  termination in the event
of death or permanent disability.

     Prior to the adoption of the  Directors'  Plan,  options had been issued to
outside  directors,  of which options to purchase 26,040 shares were outstanding
at March 31, 1998.

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


                                      -23-

<PAGE>

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.

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,  1998 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.



                                      -24-

<PAGE>

<TABLE>
<CAPTION>
                                                                  PERCENT OF
                                                                  OUTSTANDING
                                             SHARES BENEFICIALLY    COMMON
                                                  OWNED              STOCK
                                             ------------------   -----------
<S>                                            <C>                  <C>
Vanguard Ventures, Inc...........................2,711,662            82%
Carl G. Paffendorf...............................2,764,829(1)         84%
Larry L. Laird .....................................27,640(2)           *
Benjamin Frank......................................20,542(3)           *
Francis S. Gabreski.................................36,466(4)           *
Robert S. Hoshino, Jr...............................28,117(5)           *
James E. Eden ...................................... 1,600(6)           *
Stanford  J. Shuster.................................1,600(7)           *
Directors and Executive Officers,
as a group (13 Persons)..........................2,907,934(8)         88%
</TABLE>
 ..............

*        Less than 1%.

(1)      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  19,786  shares of Common  Stock  issuable  upon  exercise  of
         options and convertible  securities exercisable within 60 days of March
         31, 1998.

(2)      Includes 9,640 shares of Common Stock issuable upon exercise of options
         and  convertible  securities  exercisable  within  60 days of March 31,
         1998.

(3)      Includes  12,120  shares of Common  Stock  issuable  upon  exercise  of
         options and convertible  securities exercisable within 60 days of March
         31, 1998.

(4)      Includes  25,966  shares of Common  Stock  issuable  upon  exercise  of
         options and convertible  securities exercisable within 60 days of March
         31, 1998.

(5)      Includes 8,800 shares of Common Stock issuable upon exercise of options
         and  convertible  securities  exercisable  within  60 days of March 31,
         1998.

(6)      Includes 600 shares of Common Stock  issuable  upon exercise of options
         and  convertible  securities  exercisable  within  60 days of March 31,
         1998.

(7)      Includes 600 shares of Common Stock  issuable  upon exercise of options
         and  convertible  securities  exercisable  within  60 days of March 31,
         1998.

(8)      Includes  77,512  shares of Common  Stock  issuable  upon  exercise  of
         options and convertible  securities exercisable within 60 days of March
         31, 1998.


                                      -25-

<PAGE>

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, 1998:

Due from Vanguard .................       $1,552,570
Due from Whittier Towers, Inc. ....        2,978,538
Due from Vanguard Affiliated
 Limited Partnerships (Vanguard is
 General Partner) .................          169,171
Management fees and cash
 advances due from affiliated
 companies ........................          906,300



     Registrant  anticipates  that these types of transactions  will continue in
the future.

GUARANTEES

     Registrant and affiliates  guaranteed certain debt as of March 31, 1998, as
follows:

                                                                  Amount As of
     Guarantor(s)            Maker(s)          Lender/Obligee     March 31, 1998
----------------------- --------------------   ------------------ --------------

Registrant              CBF Building Company   Apple Savings Bank      $  68,350
Registrant, Vanguard,   Camelot Village at     State Bank of Long        350,000
Phoenix Lifecare Corp.  Huntington, Inc.       Island
and Paffendorf
Vanguard and Paffendorf Registrant             State Bank of Long        212,500
                                               Island
Vanguard                Hillside Terrace, Inc. Great-West Life         2,211,474
Vanguard                Whitcomb Tower Corp.   Great-West Life         2,063,890
Vanguard                Registrant             Cedar Rapids CGP, L.C.    450,000


     The Whitcomb and Hillside  Great-West  Life mortgages  were  $2,035,047 and
$2,180,561  at March 31,  1999.  The  Great-West  mortgage on The  Whittier  was
$4,016,076  at March 31, 1998 and  $3,959,860 at March 31, 1999. A default under
The  Whittier  mortgage is a default  under the  Hillside  Terrace and  Whitcomb
mortgages. See Item 2, "Description of Property Mortgage Debt."

     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 received 1,040 shares of Registrant's  Common Stock valued at $5.00
per share. These shares are subject to investment restrictions.



                                      -26-

<PAGE>



     CBF Building  Company is  discussing a $1,200,000  mortgage loan from State
Bank of Long Island which, if made,  would be secured by CBF Building  Company's
Glen Cove  property (in which  Registrant  has its offices)  and  guaranteed  by
Vanguard, Mr. Paffendorf, and Registrant.

     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.  Annual rent is $38,625 in 1998,  $39,784 in 1999,  $40,977 in
2000.  The lease expires on December 31, 2000.  Registrant has sublet 550 square
feet of its space to Vanguard on the same terms as Registrant's lease with CBF.

WHITTIER TOWERS, INC.

     Whittier Towers,  Inc., owned by Phoenix Lifecare Corp.  (discussed  below)
has  agreed to pay to  Registrant  a  management  fee of 5 percent  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.

     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.  In Fiscal 1998  Registrant  agreed to relinquish its option
rights effective upon the sale of The Whittier facility to an unaffiliated buyer
and payment to  Registrant:  (i) payment of accrued but unpaid  management  fees
since April 1, 1996,  (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 (1) through
(iii).  In  addition,  50 percent of the  remaining  net  profit  (i.e.,  net of
brokerage fees,  closing costs,  mortgage debt,  etc.), if any, shall be paid to
Registrant.


PHOENIX LIFECARE CORP.

     Certain  officers of Registrant are also officers 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.


                                      -27-

<PAGE>



     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.

     Whitcomb Tower Corporation ("Whitcomb"), a subsidiary of Registrant, leases
to Phoenix  approximately  450 square feet at The Whitcomb,  located at 509 Ship
Street,  St. Joseph,  Michigan,  for rent of $2,000 (which includes food service
cost for tenant's staff) per month.

     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, 1998, $726,748 was due from Phoenix for unpaid management fees.

PRESIDENTIAL CARE CORP.

     Presidential  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.  Presidential's  application with the United States
Department of Housing and Urban  Development  (HUD) for a  $10,362,000  mortgage
loan guarantee closed in March 1999, and financing is in place.

     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.

     At March 31, 1998,  Presidential  owed Registrant  $71,500 for various fees
and loans. An additional $86,600 was loaned to Presidential in November 1998.

     In March 1999, Registrant agreed to pay $90,915 to Presidential's architect
for services rendered in connection with the Hollywood, Florida project.

CAMELOT VILLAGE AT STROUDSBURG, LLC

     Stroudsburg  is a limited  liability  company  organized to acquire land in
Stroudsburg,  Pennsylvania,  upon which an assisted  living facility was to have
been built, subject to financing being obtained.  Until December 1998 Registrant
had development and management  contracts on this property,  for which it was to
have been paid a 7 1/2 percent  development fee and a 4 percent  management fee.
Registrant had an option to purchase at fair market value, exercisable at any


                                      -28-

<PAGE>

time until June 30, 2006.  This option  terminated  on December 4, 1998 with the
sale of the property to an unaffiliated buyer.

     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 have
been built on the  Stroudsburg,  Pennsylvania  site,  Vanguard  had the right to
receive  a sum  equal to 50  percent  of the net  proceeds  from the sale of the
property. Vanguard has assigned this right to Registrant.

     At March 31, 1998,  Stroudsburg owed Registrant  $155,237 for sums lent, of
which $50,000 was repaid in April 1998 and the balance repaid in December 1998.

CAMELOT VILLAGE AT HUNTINGTON, INC.

     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 construction 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 (not to exceed $1,100,000)
and a 5 percent  management  fee.  Registrant  has an option to purchase at fair
market  value at any time  during  the  five-year  period  after  completion  of
construction of the facility and issuance of a certificate of occupancy, but not
before the facility  becomes 85 percent  occupied.  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.

     Camelot is currently seeking construction financing.

     Carl G. Paffendorf,  Registrant's Chief Executive Officer,  owns all of the
Class A voting stock of Camelot.  Robert S.  Hoshino,  Jr. and  Benjamin  Frank,
Directors of Registrant,  and Mr. Paffendorf  comprise the Board of Directors of
Camelot.  Mr.  Paffendorf  owns 872 shares of Class B stock of Camelot (out of a
total of 2,800 shares issued) for an investment of $872,000, the same price paid
by unaffiliated  persons,  $1,000 per share. Mr. Hoshino owns 70 Class B shares,
also  purchased  at $1000 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 property.


                                      -29-

<PAGE>

     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 property.

UNITED VANGUARD HOMES, LLC

     United  Vanguard  Homes,  LLC  ("UVHLLC")  is a New York limited  liability
company which plans to build and operate a 374-unit  continuing  care retirement
community on a 5-acre site located in North  Bergen,  New Jersey  between  River
Road and the Hudson River overlooking  Manhattan to the East. Registrant located
the site on behalf of UVHLLC,  and UVHLLC has entered  into a  long-term  ground
lease of the  site,  with  option  to  purchase.  Registrant  will  develop  the
facility,  including  supervision  of  construction,  marketing,  and  arranging
financing.  After  construction  has  been  completed,  Registrant  will  be the
managing agent and will have an option to buy the facility. UVHLLC is controlled
by Carl G.  Paffendorf,  its sole member,  pending the sale of a syndication for
the project.

     Under  Ground Lease dated April 19, 1999,  as amended,  L.P.M.  Associates,
L.L.C., an unaffiliated company ("LPM"),  agreed to lease UVHLLC a 5-acre parcel
of land on River Road, North Bergen, New Jersey. UVHLLC has issued LPM a $75,000
promissory note in lieu of a cash security  deposit under the Ground Lease.  The
note becomes due the earlier of:

         1.       Ninety  days of  receipt of final and  unappealable  site plan
                  approval  for the  facility  from  the  Planning  Board of the
                  Township  of North  Bergen and the County of Hudson,  together
                  with all necessary variances and site waivers; or

         2.       November 1, 1999.

     The  Promissory  Note provided by UVHLLC  pursuant to the security  deposit
provision  of the  Ground  Lease  has  been  personally  guaranteed  by  Carl G.
Paffendorf.  Registrant has agreed to indemnify and hold Mr. Paffendorf harmless
from any loss he may incur as a result of this personal guarantee.

     Pending  the  funding  of  UVHLLC  by a  private  placement,  the  Board of
Directors of  Registrant  has  authorized  loans to UVHLLC for sums  required to
enter into the Ground  Lease and to fund costs of zoning  approval  and  related
costs.

POSSIBLE SALE OF SUBSTANTIAL ASSETS

     In  Fiscal  1999   Registrant   agreed   with   Churchill   Estates,   Inc.
("Churchill"),  a company affiliated with one of Registrant's  former directors,
Stanford J.  Shuster,  to sell to Churchill  the  Whitcomb and Hillside  Terrace
retirement  facilities,   Registrant's  rights  with  respect  to  the  proposed
Hollywood,  Florida assisted living project owned by Presidential,  Registrant's
rights with respect to the proposed Huntington, New York assisted living project
owned by Camelot,

                                      -30-

<PAGE>


the  proposed  Orchard  Terrace  assisted  living  project,  the  Cottage  Grove
Management  Agreement,  and  certain  other  assets for a gross  sales  price of
approximately $17.6 million.

     The Cottage  Grove Place  Management  Agreement was assigned to a Churchill
subsidiary in November 1998, for which Registrant received $150,000.

     The contracts with respect to the Whitcomb,  Hillside,  and Orchard Terrace
were  terminated in February 1999. The contract  relating to Hollywood,  Florida
was terminated in March 1999.


                                      -31-

<PAGE>



                               POWERS OF ATTORNEY

     United Vanguard  Homes,  Inc. and each of the undersigned do hereby appoint
Paul D'Andrea, Alan Guttman, 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 22nd day of June,
1999.

                                         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        June 22, 1999
-------------------------     (Principal Financial
Paul D'Andrea                 Officer and Principal
                              Accounting Officer)

/S/ BENJAMIN FRANK            Director                        June 22, 1999
-------------------------
Benjamin Frank


/S/ FRANCIS S. GABRESKI       Director                        June 22, 1999
-------------------------
Francis S. Gabreski


/S/ CARL G. PAFFENDORF        Chairman of the Board           June 22, 1999
-------------------------     and Chief Executive
Carl G. Paffendorf            Officer


/S/ ROBERT S. HOSHINO, JR.    Director                        June 22, 1999
-------------------------
Robert S. Hoshino, Jr.


/S/ JAMES E. EDEN             Director                        June 22, 1999
-------------------------
James E. Eden



                                      -32-

<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,
1998.


                                      -33-

<PAGE>


                                 MARCH 31, 1998
                                    FORM 10-K
                                    EXHIBIT 1



               ACTIVE SUBSIDIARIES OF UNITED VANGUARD HOMES, INC.

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

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

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

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

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

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


                                      -34-