SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[ X ]   Annual report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 For the fiscal year ended December 31, 1997 or

[   ]   Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

        For the transition period from ____________ to ____________

        Commission file number 0-27108

                          REGENT ASSISTED LIVING, INC.
                 (Name of small business issuer in its charter)

            Oregon                                     93-1171049
            (State or other jurisdiction of            (IRS Employer
            incorporation or organization)             Identification No.)

            121 SW Morrison Street
            Suite 1000
            Portland, Oregon                           97204
            (Address of principal executive offices)   (Zip Code)

                    Issuer's telephone number: (503) 227-4000

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

Securities registered pursuant to Section 12(g) of the Act:  Common Stock

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes  [X]   No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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 issuer's revenues for its most recent fiscal year:  $13,958,282

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of March 20, 1998: $9,146,150

State the number of shares of Common Stock outstanding at March 20, 1998:
4,633,000

                       Documents Incorporated by Reference
                       -----------------------------------

                                                      Part of Form 10-KSB into
Document                                              which incorporated
--------                                              ------------------------

Proxy Statement for 1998 Annual                             Part III
  Meeting of Shareholders

Transitional Small Business Disclosure Format (check one):  Yes [ ]  No [X]
<PAGE>
                                TABLE OF CONTENTS
                                -----------------


Item of Form 10-KSB                                                     Page
-------------------                                                     ----

PART  I

      Item 1 -    Description of Business                                 1

      Item 2 -    Description of Property                                13

      Item 3 -    Legal Proceedings                                      17

      Item 4 -    Submission of Matters to a Vote of Security Holders    17

      Item 4(a) - Executive Officers of the Registrant                   17

PART II

      Item 5 -    Market for Common Stock
                  and Related Stockholder Matters                        19

      Item 6 -    Management's Discussion and Analysis
                  or Plan of Operation                                   19

      Item 7 -    Financial Statements                                   27

      Item 8 -    Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure                 27

PART III

      Item 9 -    Directors, Executive Officers and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act      27

      Item 10 -   Executive Compensation                                 27

      Item 11 -   Security Ownership of Certain Beneficial
                  Owners and Management                                  28

      Item 12 -   Certain Relationships and Related Transactions         28

      Item 13 -   Exhibits and Reports on Form 8-K                       28

SIGNATURES                                                               32

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                                     PART I


Item 1.  Description of Business

Overview and Background

     The Company is an owner, operator, and developer of private-pay assisted
living communities. Assisted living is part of a spectrum of long-term care
services that provide a combination of housing, personal services, and health
care designed to respond to elderly individuals who require assistance with
activities of daily living in a manner that promotes maximum independence. The
Company's founder, Walter C. Bowen, helped pioneer the development of assisted
living communities in the late 1980s, and the Company's senior management
collectively has more than 50 years of experience in the acquisition,
development, and management of assisted living communities.

     At the end of 1998 the Company believes that it will be a leading provider
of assisted living services in the western United States. During 1997, the
Company doubled its number of assisted living communities and nearly doubled the
number of beds under ownership, operation, or management and expects those
numbers to double again in 1998. On December 31, 1997, the Company owned or
operated 901 beds in seven assisted living communities and also managed two more
communities with 162 additional beds, for total operations of 1,063 beds.

     The Company believes that high-quality assisted living services can be more
efficiently and profitably provided in its prototypical communities than in
existing facilities that could be converted to use as an assisted living
community. Thus, in 1997 the Company continued upon an aggressive expansion
program begun in 1996 of acquiring sites in select markets in the western United
States and beginning the development and construction of new communities. During
1997, the Company also began making selective acquisitions of existing
communities that complement the Company's planned development of prototypical
communities. In 1997, the Company opened three internally developed communities,
began managing an additional community, and acquired a fifth community - adding
a total of 491 additional beds to the Company's operations. During the first
quarter of 1998 the Company opened four internally developed prototypical
communities comprising 512 additional beds, entered into a long-term lease for
another 60-bed community, and completed construction of an additional three
internally developed prototypical communities comprising an additional 371 beds.
Counting the later communities, as of March 30, 1998, the Company had a total of
2,006 beds within its operations. Furthermore, at that time the Company had
entered into agreements to acquire at least three additional communities
comprising a total of 183 beds and had five new communities under construction
comprising 526 beds. If each of these communities is acquired or completed, the
Company will then operate approximately 2,700 beds. Additionally, the Company
has sixteen sites in various stages of development.

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Assisted Living

     The assisted living industry has evolved over the past 15 years in response
to pressure from the public to contain spiraling medical and other health care
related costs, and the choice assisted living provides to allow senior citizens
to age in place in a residential environment. Assisted living offers a
combination of housing and personalized health and support services for senior
citizens who cannot live completely independently but who do not require the
24-hour medical care provided by a skilled nursing facility, which skilled care
typically also costs much more than that provided at an assisted living
community. In addition to housing and meals, the services commonly provided in a
congregate care facility, assisted living communities provide a range of
personal care and support services designed to meet the individual needs of
residents, including instrumental activities of daily living ("IADLs") such as
laundry and transportation services. Generally, assisted living residents
require higher levels of care than residents in congregate care but lower levels
of care than patients in skilled nursing facilities. For instance, assisted
living residents often require assistance with activities of daily living
("ADLs") such as bathing, dressing, incontinence care, and taking medications
but generally are not bed-ridden and can often provide various degrees of
self-care. Assisted living seeks to encourage residents to live as independently
as possible, emphasizing quality care while treating residents with dignity and
respect.

Business Strategy

     The principal elements of the Company's business strategy are described
below.

     Personalized Quality Care. The Company's primary focus is on providing high
quality personalized care for each resident. The Company seeks to provide a wide
range of high-quality services and care tailored to the needs of its residents
in an attractive, home-like environment. The Company has established quality
assurance programs to insure that high-quality services are being provided to
every resident in its communities. These programs include periodic surveys of
the residents, their families, and community staff and the formation at each
community of a resident council, consisting of residents and their families, to
assist in evaluating the services provided to residents. The Company provides a
toll-free number that families of residents can use to make recommendations or
register complaints and frequently includes comment cards with resident
billings. The Company also attempts to achieve high-quality care through the
establishment of operational standards and performance goals. These standards
and goals apply to each of the Company's communities and relate to such matters
as health services, food service, housekeeping, maintenance, and administration.

     Special Needs. A significant component of the Company's business is
providing services and activities required by residents afflicted with
Alzheimer's disease and other age-related dementias. Each of the Company's
larger assisted living communities is expected to have a special "Kingswood"
unit located in a separate wing or area of the community that will have its own
dining facilities, resident lounge areas, and specially-trained staff. The
physical separation of the special needs unit from the rest of the community
enables special needs residents to receive

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the unique care they require with a minimum of disruption to other residents.
The Company has also developed a stand-alone special needs assisted living
community it calls "Regent Court" that is designed to serve solely residents
with special needs.

     Multiple Levels of Care. By providing graduated levels of care to residents
based on individual need, the Company permits its residents to "age in place"
and retains residents who might otherwise move to other facilities, which
assists the Company in maintaining its occupancy levels at its larger
communities. The Company believes that this high level of personalized quality
care also creates satisfied residents who, along with their families, are key
sources of referrals for the Company.

     High Quality and Private Payor Focus. The Company seeks private pay
residents to the greatest extent possible. Private pay residents occupied
approximately 96 percent of the Company's units during 1997. The Company
believes that caring for private pay residents is more profitable because the
Company is able to charge market rates for its extensive, high-quality services
without regard to government-imposed cost containment pressures. The Company had
revenue per occupied unit in 1997 of $33,988 whereas the industry average, as
compiled for the American Seniors Housing Association, was $23,738 per occupied
unit for the same period. The Company will continue to focus its development
efforts primarily in larger, more affluent communities with median incomes
sufficient to support the Company's full service approach to assisted living.

     Professional Management. The Company has developed and uses quality
assurance programs and operating standards to maintain quality and control
costs. This approach is coupled with a decentralized management structure under
which local managers and care coordinators responsively address residents'
individual needs. The relatively larger size of the Company's communities also
permits the Company to recruit and retain more highly paid, experienced managers
and professional staff.

     Education and Training. The Company believes that education, training, and
development enhance the effectiveness of its employees which in turn generates
enhanced employee and resident satisfaction and decreases employee and resident
turnover. Managers, on-site marketing directors, and other administrative
personnel receive periodic training both at the community and at the Company's
corporate office. The Company, through ongoing in-service training, maintains a
highly trained staff that is responsive to the changing needs of the Company's
residents.

     Marketing. The Company's marketing strategy focuses on enhancing the
reputation of the Company's communities and creating awareness of the Company
and its services among potential referral sources. The Company also markets its
services through doctors and other professionals by direct mail and other
methods. The Company's experience is that satisfied residents, resident
families, and professional health care providers are the most important sources
of referrals for the Company. In addition, the Company emphasizes community
outreach through such programs as adult day care and respite care. These
programs permit individuals to use the Company's services

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on a temporary basis, which provides the Company with an additional source of
revenue and increases awareness of the Company's communities among potential
full-time residents.

     Rapid Growth and Development. The Company intends to increase the number of
communities it operates primarily through the development of new communities
based upon the Company's three prototypes. See "Principal Product Lines." The
Company will also undertake acquisitions when it locates suitable properties,
however the Company believes that because there are few acceptable stand-alone
assisted living communities such acquisitions will continue to be limited.
Nonetheless, the Company may pursue opportunistic acquisitions of congregate
care or other facilities that are suitable for conversion to its operating
model. The Company may also in the future acquire or enter businesses ancillary
to the operation of assisted living communities, such as a retail pharmacy or
rehabilitation therapy business.

Principal Services

     Services provided to residents of the Company's communities are designed to
respond to their individual needs; promote independence, dignity and choice; and
improve their quality of life. Services are available 24 hours a day to meet
both anticipated and unanticipated needs. General services in the Company's
communities include the provision of three meals per day, laundry, housekeeping,
transportation, activities, and medication maintenance. Available support
services include personal care and routine nursing care, social and recreational
services, transportation, and other special services needed by the resident.
Personal care includes services such as bathing, dressing and grooming, as well
as assistance with personal hygiene, ambulation, and eating. Other services
include assistance with banking, grocery shopping, and pet care.

     Each of the Company's communities offers residents services on a packaged
basis. These packages of services are based on three progressively more
comprehensive levels of care and two additional levels of care for special needs
residents. This approach permits the Company to charge residents for graduated
levels of care. Each level of care is priced to reflect all services provided at
that level. In addition, this approach simplifies the billing process, which
permits residents to plan their personal budgets with confidence. As the
required level of care increases, the Company's revenues per resident also
increase.

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     The following table summarizes the services associated with each level of
care provided by the Company:

-------------------------------------------------------------------------------
                            Graduated Levels of Care
Assisted Living

      Level One   o  Minimal assistance with ADLs and IADLs
                  o  Services include
                      - Meals
                      - Housekeeping and laundry
                      - Personal care
                      - Scheduled transportation

      Level Two   o   All Level One services plus moderate assistance with
                      ADLs and IADLs
                      - Direct hands-on assistance as needed for
                      - Medical treatments (e.g., injections)
                      - Dressing
                      - Other daily activities

      Level Three o   All Level Two services plus routine hands-on assistance
                      with ADLs and IADLs
                  o   Personal care services include
                      - Incontinence care
                      - Bathing and dressing
                      - Mobility and/or ambulation assistance
                  o   Close supervision as required for residents with special
                      behavioral conditions

Special Needs (Alzheimer's Disease and Age-Related Dementias)

      Level One   o   Required assisted living services
                  o   Direct hands-on assistance, behavioral intervention and
                      redirection as needed
      Level Two   o   All Special Needs Level One services, plus routine
                      hands-on assistance with ADLs and personal care, including
                      - Incontinence care
                      - Bathing and dressing
                      - Mobility and/or ambulation assistance
                  o Increased frequency of certain services and increased
                    supervision
-------------------------------------------------------------------------------

     The Company estimates that, of the current residents in its communities,
38.8 percent require assisted living level one care, 23.1 percent require
assisted living level two care, 12.4 percent require assisted living level three
care, 16.8 percent require special needs level one care and 7.1 percent require
special needs level two care. Additionally, 1.8 percent of the Company's
residents do not require assistance with activities of daily living and are
therefore excluded from the above care level percentages. The Company charges a
variety of rates depending upon the

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<PAGE>
level of care required and whether the resident chooses to live alone or in a
companion suite. The single occupancy rates range from $1,700 to $2,700 per
month for assisted living level one care, $1,850 to $3,140 per month for
assisted living level two care, and $2,000 to $3,580 per month for assisted
living level three care. Special needs care ranges from $2,695 (double
occupancy) to $4,520 (single occupancy) per month for special needs level one
care, and $2,995 (double occupancy) to $4,840 per month (single occupancy) for
special needs level two care. The Company leases units to residents on a
month-to-month basis. Residents are also required to pay the Company a nominal,
nonrefundable administrative fee prior to admission.

Principal Product Lines

     The Company currently provides its services in stand-alone assisted living
communities. The existing communities offer many services and activities
designed to meet the varying needs of the residents, including the unique
services required by residents afflicted with Alzheimer's disease or other
age-related dementias ("special needs"). This community concept is generally
identified by the Company as a "Regent" community and is the genesis of the
Company's prototypical community, three of which opened in 1997 and ten of which
will open in 1998. The Company has recently developed alternative sizes for its
Regent community to adapt its prototypical plan, based upon operational
efficiencies and resident living and service considerations, to differing market
demands. The Company has also developed a new type of community, called "Regent
Court," at which it provides services solely to residents with special needs.

     (i)  Regent

          The "Regent" is the Company's primary stand-alone assisted living
     community prototype. This prototype design has been developed and refined
     through the Company's experience as an operator of its existing assisted
     living communities, which also contain a significant portion of the
     important attributes of the Regent prototype. Use of this prototype will
     continue to allow the Company to control development costs and maintain
     efficiency in development and operations.

          The prototypical Regent community is a stand-alone assisted living
     community containing from 90 to 135 assisted living beds, with between 10
     and 20 percent of the total generally comprising the special needs unit. A
     "stand-alone" assisted living community is a facility devoted entirely to
     assisted living, as distinct from other facilities that may offer assisted
     living units in a separate wing or floor as well as other forms of
     long-term care such as congregate care or skilled nursing. The buildings
     generally range in size from 60,000 to 86,000 square feet and are generally
     built on parcels ranging in size from 3 to 6 acres. The buildings are two
     or three stories, depending upon site restrictions, and of wood frame
     construction. The exterior features are designed to be compatible with the
     predominant architectural designs of the area and with an emphasis on a
     residential versus institutional appearance. Individual units range in size
     from 320 square feet for a studio to 450 square feet for a one-bedroom
     apartment. Two-bedroom units are

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     approximately 755 square feet in size. In some locations the Company is
     developing a small number of 900 square foot two-bedroom cottages next to
     the community for occupancy by a spouse of a community's resident or for
     those who do not require the more intensive services offered within the
     community.

          In addition to the larger prototype, the Company has developed a
     smaller version for markets in which there currently is less demand for
     assisted living services. The smaller "Regent" community will be
     approximately 40,000 to 55,000 square feet and be comprised of between 60
     and 90 beds, generally with at least 24 beds comprising the special needs
     unit. The community is designed with the same operational efficiencies and
     resident living and service considerations as the larger model, including
     similar sized living units, but with generally smaller lounge, dining, and
     recreation areas to reflect the lower resident population.

          The Regent's interior layout is designed to promote efficient delivery
     of services and resident independence. Circulation is organized around a
     core area on the ground level which contains the kitchen and common dining
     area, administrative offices, a commercial laundry, a private dining room,
     lounge, day room and public restrooms. Elevators are conveniently located
     for easy access to all common areas and resident units. Each Regent
     community is expected to contain a special needs unit called "Kingswood"
     that is designed to house and address the needs of residents afflicted with
     Alzheimer's disease and other age-related dementias. The special needs
     units are located in a separate wing or area of the community and have
     their own dining facilities, resident lounge areas, and specially trained
     staff. The physical separation of the special needs unit from the rest of
     the community enables special needs residents to receive the unique care
     they require with a minimum of disruption to other residents.

     (ii) Regent Court

          The "Regent Court" is a specially designed facility solely for
     residents afflicted with Alzheimer's disease or other age-related
     dementias. The typical Regent Court resident will have cognitive
     difficulties, impaired motor functions, may be wander prone, and may have
     incontinence. Accordingly, as with the Kingswood special needs unit of the
     Regent community, these communities will be much smaller than the Regent,
     typically 21,000 to 25,000 square feet in a one-story configuration, and
     typically will service up to 48 residents within its 24 units. The Regent
     Court's 24 units are divided into four "neighborhoods" of equal size and
     both the overall layout and that of each neighborhood are designed to
     promote the efficient delivery of services. Generally, two neighborhoods
     will be reserved for those residents with a high level of function and two
     for those with low levels of functioning. The community is designed in this
     manner with the primary goal of providing high-quality care to special
     needs residents who require unique care while providing for maximum
     efficiencies of operation. Because the residents generally are easily
     agitated and confused, organizing care within separate neighborhoods
     permits the

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     Company to assign staff to a specific neighborhood in caregiver clusters.
     This permits the Company to minimize each resident's exposure to multiple
     persons and allows staff to more thoroughly learn about and provide for a
     resident's special needs.

          Each neighborhood is connected to the others and to the main
     administrative area by a series of hallways, walkways, and a courtyard.
     Furthermore, due to the propensity of the Regent Court's residents to
     wander, exterior pathways will be secured with fences to provide maximum
     independence to the residents while also insuring their safety. Some Regent
     Courts will also feature covered walkways to permit residents opportunities
     for exercise on inclimate days.

Development of Additional Communities

     The Company plans to continue its rate of rapid growth primarily through
construction of new Regent and Regent Court prototype communities in selected
markets in the western United States. From January 1, 1997, through December 31,
1998, the Company plans to have developed, constructed, and opened thirteen
large Regent communities and one Regent Court community. Also during 1998, the
Company plans to enter into long-term leases for an additional three communities
in desired, but generally less populated markets to complement the two
additional communities acquired during 1997 and the first quarter of 1998. Upon
completion of these transactions, the Company will have a total of approximately
2,600 beds under operation by December 31, 1998. Furthermore, the Company plans
to complete construction on a minimum of six large Regent communities, three
mid-size Regent communities, and five Regent Courts in 1999, adding
approximately 1250 additional beds to Regent's operations during 1999.

     If the Company fulfills its current plan to have opened thirteen internally
developed Regent communities and one internally developed Regent Court community
by December 31, 1998, it will have surpassed the Company's initial development
goal, expressed at the time of its initial public offering, to develop twelve
Regent communities in that time. In 1997 the Company increased its development
goal. However, during the fourth quarter of 1997 the Company redesigned its
Regent Court prototype to reflect and take advantage of several recent
developments in Alzheimer's care programs. The redesign resulted in the delayed
start of four Regent Courts to the second quarter of 1998 and thus the Company
will not complete five Regent Court communities by the end of 1998. Furthermore,
the Company experienced unforeseen delays by governmental agencies in issuing
building permits that resulted in the significant delay of the beginning of
construction of at least three Regent communities during 1997. The Company will
therefore not meet its increased goal of opening fifteen new Regent communities
by the end of 1998 and will instead open 13. Nonetheless, the Company will have
more than offset any gross bed loss in its increased goal due to the five
acquisitions the Company will have completed by year-end.

     The Company is currently under construction on three large Regent
communities (368 beds) that will open by the end of the third quarter of 1998
and one Regent Court (48 beds) that will open during the fourth quarter of 1998.
Additionally, the Company has commenced construction of a large Regent community
that will open during the first quarter of 1999. The

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Company has either purchased or obtained the right to purchase real property on
which it could, assuming all necessary governmental approvals are obtained,
construct an additional sixteen communities and the Company is engaged in at
least preliminary development activities on each of these sites.

     The Company is actively engaged in discussions regarding the acquisition of
additional sites for development of the Company's prototype communities. The
Company is targeting areas in eleven western states with favorable demographics
in which to accomplish its growth plan. The Company believes that each site
acquired or under consideration would accommodate one of the Company's prototype
assisted living communities and fit well with the Company's growth strategy.

     The Company expects that the development time for a prototype community
will range from approximately six months to one year and may be longer in some
cases. The Company expects that the average construction time will be
approximately eleven to thirteen months for a Regent community and seven to nine
months for a Regent Court community. Furthermore, the Company estimates that
each of the Company's new communities will be approximately 25 percent
pre-leased and that it will take approximately 15 months from occupancy for each
Regent community to achieve an occupancy level of 95 percent or higher, at which
point, in the Company's experience, occupancy remains relatively stable. The
Company expects that it will take approximately five to six months for a Regent
Court community to achieve an occupancy level of 93 percent or higher. The cost
to construct a Regent community varies from site to site and is expected to
average approximately $75,000 per residential unit. The estimated cost to
construct a Regent Court is approximately $80,000 per bed, but this amount will
also vary from site to site.

     The Company's ability to achieve its development plans will depend upon a
variety of factors, many of which are beyond the Company's control. Furthermore,
there is also no assurance that the Company will elect to acquire any of the
sites it has under option or that the Company will be able to develop
successfully any of the sites its has acquired or will in the future acquire.
See "Forward Looking Statements."

     The Company's Markets. In evaluating a prospective development project, the
Company will consider primarily the size of the population, income and age
demographics, strength of the market demand, and the ability to maximize the
efficiency of its management resources in a specific market or "cluster." The
Company intends to locate its Regent communities in metropolitan areas of 50,000
or more people with a high percentage of affluent elderly persons and to select
sites so that it can strategically place multiple communities within a several
hundred mile radius, creating a cluster of communities. With the development of
the smaller Regent community, the Company can locate a larger number of
communities within a region and thereby obtain greater operating efficiencies.
Furthermore, due to the smaller size of the Company's Regent Court, they are
capable of being developed in markets of different sizes depending upon the
demand for Alzheimer's care. Other factors that will be considered in the site
selection process include the level of competition, the local labor market, the
state and local tax structure,

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and the state and local legislative and regulatory environment.

Competition

     Providers of assisted living housing and services compete for residents
primarily on the basis of quality of care, price, reputation, physical
appearance of the communities, services offered, family and physician
preferences, and location. The Company's current and potential competitors
include national, regional, and local operators of long-term care residences,
rehabilitation hospitals, extended care centers and skilled nursing facilities,
assisted and independent living centers, retirement communities, home health
agencies and similar institutions. The Company believes that assisted living is
a distinct and rapidly growing segment within the long-term care industry and
that it is distinguishable from other long-term care alternatives on the basis
of price, physical appearance, and range of services offered. Moreover, the
Company believes its communities are distinguishable from assisted living
facilities that do not cater primarily to private pay residents. Therefore,
although some of the Company's competitors have significantly greater resources
than those of the Company, the Company believes that it competes favorably in
all of the markets in which it operates due to the quality of its care and
services, operating systems, community designs, and community locations in the
market.

Government Regulation

     The Company's assisted living communities are subject to regulation and
licensing by local and state health and social service agencies and other
regulatory authorities. Although regulatory requirements differ from state to
state, these requirements generally address, among other things: personnel
education, training and records; staffing levels; community services, including
administration and assistance with self-administration of medication; community
design and specifications; resident characteristics; food and housekeeping
services; emergency evacuation plans; and resident rights and responsibilities.
In order to qualify as a state licensed facility eligible to receive Medicaid
funding, the Company's communities must comply with additional regulations in
these areas. The Company's communities are also subject to various zoning
restrictions, local building codes and other ordinances, including fire safety
codes. These requirements vary from state to state and are monitored in varying
degrees by state agencies. Licenses have been obtained for the Company's current
communities in California, Idaho, New Mexico, Oregon and Texas, and the Company
expects that it will be able to obtain licenses in other states as required. One
of the Company's communities, Sunshine Villa, is subject to restrictions that
require the Company to make 15 percent of the units at the community available
to low income residents.

     Assisted living facilities are subject to less regulation than other
licensed health care providers, but more regulation than standard congregate
care or independent living facilities. However, the Company anticipates that
states and the federal government will likely impose additional regulations and
licensing requirements. Currently, certain states require licenses to provide
the assisted living services offered by the Company. Certain states also require

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Certificates of Need for assisted living facilities, but this is not a
requirement in states where the Company currently conducts business. There can
be no assurance that administrative or judicial interpretation of existing laws
or regulations or enactments of new laws or regulations will not have a material
adverse effect on the Company's results of operations or financial condition.
The Company believes that its current communities are in substantial compliance
with all applicable regulatory requirements. To the Company's knowledge, no
material regulatory actions are currently pending or have been threatened with
respect to any of its current communities.

     Although only a small portion of the Company's revenues are derived from
the Medicaid program, the Company is subject to Medicaid fraud and abuse laws
which prohibit any bribe, kickback, rebate or remuneration of any kind in return
for the referral of Medicaid patients, or to induce the purchasing, leasing,
ordering, or arranging of any goods or services to be paid for by Medicaid.
Violations of these laws may result in civil and criminal penalties and
exclusions from participation in the Medicaid program. The Company believes it
is in substantial compliance with all applicable Medicaid laws.

Employees

     As of December 31, 1997, the Company employed approximately 389 full-time
and 153 part-time employees, and the corporate offices employed 37 individuals
full-time. None of these employees is represented by any labor union. Management
believes that its employee relations are good.

Trademarks

     The Company has obtained trademark protection of its "Regent," "Regent
Court," and "Kingswood" tradenames.

Forward Looking Statements

     The information set forth in this report regarding the Company's
acquisition of sites for development, the Company's development, construction
and opening of new assisted living communities, the operation and performance of
the Company's new assisted living communities, the Company's plans to develop,
construct and operate new Regent Court communities, and the ability of the
Company's newly developed communities to compete for residents constitute
"forwardlooking statements" within the meaning of Section 27A of the Securities
Act of 1933 and are subject to the safe harbor created by that section. From
time to time, information provided by the Company, or statements made by its
employees, may contain other forward-looking statements. The following important
factors, among others, could cause the Company's actual results to differ
materially from those expressed in the Company's forward-looking statements
contained in this report and presented elsewhere by management. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this report. The Company undertakes no obligation
to release publicly the results of

                                       11
<PAGE>
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date of this report.

     There is no assurance that the Company will be able to achieve its plan to
develop, construct, and open the stated number of Regent and Regent Court
communities by the end of any specified period, or that any newly opened
community will be profitable. The Company's development, construction and
opening of new assisted living communities are subject to the risk that the
Company will be unable to obtain, or will experience delays in obtaining,
necessary zoning, land use, building, occupancy and other required governmental
permits and authorizations. The Company's opening of new assisted living
communities on schedule is also subject to the risk that the Company or its
contractor will experience delays in the construction of one or more
communities.

     The achievement by the Company of its planned growth is subject to a number
of financing risks. The Company expects to incur significant debt and lease
obligations in connection with financing its growth plan. The Company currently
does not have commitments for all of the financing necessary to finance its
growth plan. If the Company were unable to obtain additional required financing,
or if such financing were not available on acceptable terms, the Company
believes that its plan to open the stated number of Regent and Regent Court
communities by the end of 1999 would likely be delayed or curtailed.
Furthermore, if the Company is unable to generate sufficient cash flow from
operations to satisfy required debt and lease payments, the Company will be
required to obtain additional financing to satisfy those obligations.

     The Company's growth strategy is subject to the risk that lease-up and
occupancy rates at newly-developed communities may not be achieved or sustained
at expected levels. This could result at a particular community for a number of
reasons, including competition from other nearby providers of long-term senior
care, the failure of management to assess accurately the demand for long-term
care in a particular market, and the failure of the Company's prototypical
communities to be accepted in a particular market. If expected occupancy levels
are not achieved within the expected time frame, the Company may not be able to
repay or refinance a short-term construction loan obtained to construct the
relevant community. If occupancy rates at newly-developed communities are not
achieved and sustained at expected levels, the Company will experience greater
than anticipated operating losses in connection with the opening of new
communities and the Company's need for additional financing to meet its growth
plans will increase.

     The Company's growth strategy is also subject to the risk that construction
costs for new communities may exceed original estimates. The Company's
agreements with its contractors generally provide for the contractor to
construct a community on a cost-plus basis. In addition, the Company's
sale/leaseback financing arrangements with REITs generally provide for the
Company to develop and construct the new community for a fixed amount.
Accordingly, the risk of construction cost over-runs on its new communities is
generally borne by the Company. Moreover, construction cost over-runs would
increase the Company's capital requirements and

                                       12
<PAGE>
compel the Company to raise additional financing, beyond what is currently
anticipated, in order to achieve its growth plans.

     The Company's planned growth will place increasing pressure on the
Company's management controls and require the Company to locate, train,
assimilate, and retain additional community managers and support staff. There is
no assurance that the Company will be able to manage this growth successfully.
The failure of the Company to manage its planned growth successfully could have
a material adverse effect on the financial performance of the Company and
increase the Company's need for additional financing.

Item 2.  Description of Property

     Current Communities. The table below sets forth certain information
regarding the Company's Communities as at December 31, 1997.

<TABLE>
<CAPTION>
                                              Regent
                                            Operations
Community                  Location          Commenced        Units(1)    Beds(2)     Interest
----------------------------------------------------------------------------------------------
<S>                        <C>                 <C>              <C>        <C>        <C>
Oregon
     Regency Park          Portland            1987             122        142        Lease
     Park Place            Portland            1986             112        112        Manage

Washington
     Sterling Park         Redmond             1990             162        192        Lease

California
     Sunshine Villa        Santa Cruz          1990             106        126        Lease
     Sun Oak               Citrus Heights      1997              40         50        Manage
     Willow Creek          Folsom              1997             104        119        Own

Idaho
     Willow Park           Boise               1997             117        134        Lease
     West Wind             Boise               1997              48         52        Lease

Texas
     Hamilton House        San Antonio         1997             116        136        Lease
                                                                ---      -----
     Totals:                                                    927      1,061
                                                                ===      =====
</TABLE>

                                       13
<PAGE>
Communities completed during the first quarter of 1998:

<TABLE>
<CAPTION>
Community                  Location          Units(1)     Beds(2)       Interest
--------------------------------------------------------------------------------
<S>                        <C>                  <C>        <C>          <C>
Oregon
     Sheldon Park          Eugene               108        124          Lease

California
     Laurel Springs        Bakersfield          113        130          Own
     Summerfield House     Vacaville            109        126          Own
     Orchard Park          Clovis               112        128          Lease
     The Palms             Roseville             93        108          Lease
     Sunnyside Court       Fremont               40         60          Lease(3)

Arizona
     Canyon Crest          Tucson               117        137          Lease

New Mexico
     Sandia Springs        Rio Rancho           109        130          Lease
                                                ---        ---
     Totals:                                    801        943
                                                ===        ===
</TABLE>


Anticipated 1998 openings:

<TABLE>
<CAPTION>
                                             Scheduled
Community                  Location           Opening         Units(1)    Beds(2)     Interest
------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>                 <C>        <C>       <C>
Wyoming
     Aspen Wind            Cheyenne          2nd Quarter         77         77        Lease(4)
     Meadow Wind           Casper            2nd Quarter         53         53        Lease(4)
     Spring Wind           Laramie           2nd Quarter         53         53        Lease(4)

Washington
     Northshore House      Kenmore           2nd Quarter         85         98        Joint Venture(5)

Nevada
     Mira Loma             Henderson         2nd Quarter        115        133        Own

Texas
     Parmer Woods          Austin            3rd Quarter        117        137        Own

Arizona
     Regent Court          Scottsdale        4th Quarter         48         48        Lease
                                                                ---        ---
     Totals:                                                    548        599
                                                                ===        ===
</TABLE>

                                       14
<PAGE>
Construction commenced for 1999 opening:

<TABLE>
<CAPTION>
                                             Scheduled
Community                  Location           Opening         Units(1)    Beds(2)     Interest
----------------------------------------------------------------------------------------------
<S>                        <C>               <C>                 <C>        <C>       <C>
Arizona
     Desert Flower         Scottsdale        1st Quarter         102        112       Own

(1)  A "unit" is a single- or double-occupancy studio or one or two bedroom
     apartment.

(2)  "Beds" reflects the actual number of beds used by the Company for census
     purposes, which in no event is a number greater than the maximum number of
     licensed beds permitted under the community's license.

(3)  Acquired through a lease financing effective March 18, 1998.

(4)  The Company has entered into a Purchase Agreement to acquire this community
     upon completion of construction. The Company anticipates assigning its
     interest in the Agreement to a real estate investment trust ("REIT") and
     leasing the completed community from the REIT.

(5)  The Company owns a 50 percent interest in a joint venture with an
     independent third party and will manage the community for the joint
     venture.
</TABLE>


     Each community for which the Company's interest is noted as "leased,"
except for Regency Park and Sterling Park, is leased from a real estate
investment trust (a "REIT") pursuant to a long term lease providing for an
initial term of approximately 14 to 15 years from the inception date. Each lease
provides for extensions that may permit the lease to continue for a total period
of between 25 and 35 years from the inception date.

     The Company leases Regency Park and Sterling Park from entities controlled
by Mr. Bowen. Each lease expires in 2005, has annual base rent payments in
addition to percentage rent payments equal to ten percent of the Company's
annual gross revenues from operations in excess of the gross revenues for each
property in calendar year 1995, and contains three 10-year renewal options and a
right of first refusal if the lessor proposes to sell the property. Under the
leases, the Company is responsible for, among other costs, maintenance, property
taxes, capital expenditures and direct operating costs related to the
communities. The base yearly lease payments are $1,271,000 and $1,486,250 for
Regency Park and Sterling Park, respectively. The payment terms of the Leases
were based on the fair market values of the underlying properties, as determined
by independent appraisals, upon the inception of the leases. The aggregate
annual base rent payments under each Lease, when expressed as a percentage of
the appraised value of that property, reflects a lease rate of approximately
10.25 percent, which the Company believes was typical for leases in the health
care industry upon the inception of each lease. In obtaining the consent of the
Regency Park ownership entity's lender to the Company's lease on that community,
the Company agreed that not less than 25 percent of its outstanding stock will
be owned by Mr. Bowen and that Mr. Bowen will continue to control the management
of the Company.

                                       15
<PAGE>
     The Company manages Park Place, a community owned by a limited partnership
in which Mr. Bowen is a general partner and beneficially owns a 1.85 percent
interest. The Company receives a management fee equal to five percent of the
gross revenues of Park Place. In 1997, the fee paid to the Company for managing
Park Place was $151,793.

     Development Sites. The Company is actively engaged in discussions to
acquire additional sites in several western states. In considering a prospective
site for development of a Regent community, the Company generally seeks a 3 to 6
acre parcel of undeveloped land located within a metropolitan area of 50,000
persons or more. A site of 1.5 to 3 acres is generally acquired for a Regent
Court community. The Company generally also seeks relatively flat parcels of
land zoned for multi-family residences with reasonable access to utilities and
streets. In the course of its evaluation, the Company generally will conduct a
geotechnical study of a site to determine if the soils have proper compaction
for the Company's development. The Company conducts "level one" environmental
assessments of each new property prior to acquisition.

     In addition to the land for each of the communities under construction, as
of March 30, 1998, the Company had acquired two additional sites for the
development of Regent communities in San Clemente, California and Summerlin,
Nevada and four sties for the development of Regent Court communities in
Modesto, California; Corvallis and Portland, Oregon; and Kent, Washington. In
addition, as of March 30, 1998, the Company had entered into a joint venture to
develop and operate an assisted living community in Rancho Mirage, California
and had obtained options to acquire an additional ten sites for the development
of Regent communities. The Company has completed significant development
activity on the acquired sites and has commenced preliminary development
activities on each of the sites under option. Preliminary development activities
include due diligence activities (including the evaluation of environmental and
geotechnical matters), the preparation of architectural and engineering plans,
and the negotiation of definitive arrangements regarding the acquisition of the
site and the financing of the development.

     The Company is actively engaged in discussions regarding the acquisition of
sites for additional development. The Company is targeting areas in twelve
western states with favorable demographics and regulatory structures that it
believes will allow it to enhance its growth. The Company believes that each
site acquired or under consideration would accommodate one of the Company's
prototype assisted living communities and fit well with the Company's growth
strategy. There is no assurance that the Company will elect to acquire any of
the sites it has under option or that the Company will be able to develop
successfully any of the sites its has acquired or will in the future acquire.

     Office Facilities. The Company currently leases approximately 10,500 square
feet of office space in one location in Portland, Oregon.

                                    16
<PAGE>
Item 3.  Legal Proceedings

     As of March 30, 1997, there were no material pending legal actions to which
the Company is a party or to which any of its property is subject.


Item 4.  Submission of Matters to a Vote of Security Holders

     Not applicable.


Item 4(a).  Executive Officers of the Registrant

     As of March 30, 1998, the executive officers of the Company were as set
forth below.

      Name                 Age      Position
      ----                 ---      --------

      Walter C. Bowen      55       Chairman of the Board, Chief Executive
                                    Officer, and President

      James W. Ekberg      45       Executive Vice President of Acquisitions
                                    and Development

      Eric W. Jacobsen     37       Chief Operating Officer

      Steven L. Gish       39       Chief Financial Officer, Treasurer,
                                    and Director

      David R. Gibson      36       Vice President for Corporate Affairs,
                                    General Counsel, and Secretary

     Walter C. Bowen. Mr. Bowen is the founder of the Company and became the
Chief Executive Officer, President and a director of the Company upon its
formation. Mr. Bowen has been involved in the development, ownership, and
management of assisted living facilities since 1986, and has devoted a majority
of his time to the ownership and operation of those facilities over the past
five years. Mr. Bowen has also been the Chief Executive Officer of several
related companies including Bowen Property Management Company, Bowen Financial
Services Corp., a company formed to obtain financing for real estate development
projects, and Bowen Development Company, a real estate construction company
(collectively, the "Bowen Companies"), since their formation. Mr. Bowen attended
the University of Oregon and is a graduate of Portland State University. Mr.
Bowen serves on the Board of Directors of the Assisted Living Facilities
Association of America and on the advisory board for the National Investment
Conference for the Senior Living and Long Term Care Industries.

     Eric W. Jacobsen. Mr. Jacobsen became Chief Operating Officer of the
Company in August 1995 and has served as the chief operating officer of the
assisted living business of the

                                       17
<PAGE>
Bowen Companies since September 1994. Mr. Jacobsen joined the Bowen Companies in
February 1994 as Vice President of Development and Acquisitions. In his current
capacity Mr. Jacobsen oversees the management of the Company's communities and
is responsible for strategic planning for new communities. From July 1988 to
February 1994, Mr. Jacobsen served as Director of Development and Acquisitions
of Holiday Retirement Corp., the largest owner and operator of senior living
facilities in the United States. Mr. Jacobsen holds a degree in business
administration from the University of Oregon.

     James W. Ekberg. Mr. Ekberg became Executive Vice President of Acquisitions
and Development of the Company in August 1995 and is responsible for the
development and construction of new facilities and for strategic acquisitions.
Mr. Ekberg joined the Bowen Companies in 1985 as Controller and has served as
Executive Vice President since 1991, in which capacity he was responsible for
the development of numerous projects for the Bowen Real Estate Group and oversaw
the operations of Bowen Development Company. Mr. Ekberg holds a bachelor's
degree in accounting from the Honors College of Michigan State University.

     Steven L. Gish. Mr. Gish became Chief Financial Officer and Treasurer of
the Company in August 1995. Mr. Gish joined the Bowen Companies in 1991 as
Controller. Prior to that time, Mr. Gish served as Treasurer and Controller of
McCormick and Baxter Creosoting Company, an industrial wood preservative
company. Mr. Gish received a Bachelor of Science degree in accounting from the
University of Oregon in 1980.

     David R. Gibson. Mr. Gibson became Vice President for Corporate Affairs,
General Counsel, and Assistant Secretary of the Company in March 1996 and became
Secretary in May 1997. Mr. Gibson's primary responsibility with the Company is
to oversee its legal affairs. Prior to joining the Company, Mr. Gibson practiced
law for over eight years, the last seven with the law firm of Bogle & Gates
where he was a Senior Attorney in the firm's business department, assisting
clients in real estate, commercial finance, and business transactions. Mr.
Gibson received his law degree, cum laude, from Northwestern School of Law of
Lewis and Clark College in 1987 and his Bachelor of Science degree in accounting
from the University of Oregon in 1984.

                                       18
<PAGE>
PART II

Item 5.  Market for Common Stock and Related Stockholder Matters

     The Company's Common Stock is quoted on the Nasdaq National Market System
under the symbol "RGNT." The following table sets forth the high and low closing
sale prices as reported on the Nasdaq National Market System for the periods
indicated.

<TABLE>
<CAPTION>
          Quarter Ended                          High             Low
          -------------                          ----            -----
          <S>                                    <C>             <C>
          March 31, 1996                         8               4 3/4
          June 30, 1996                          8 1/4           5 3/8
          September 30, 1996                     7 1/2           4 1/2
          December 31, 1996                      6 1/2           3 1/8
          March 31, 1997                         5 3/4           3 5/8
          June 30, 1997                          5 3/4           4
          September 30, 1997                     7               4 7/8
          December 31, 1997                      7 1/2           4 7/8
</TABLE>

     According to the Company's Transfer Agent, the Company had 29 holders of
record of the Common Stock as of March 20, 1998.

     Since its initial public offering in December 1995, the Company has not
paid cash dividends on its Common Stock and presently intends to continue this
policy in order to retain its earnings for the development of the Company's
business. The Company's ability to pay dividends may be limited by the terms of
future debt and equity financings and other arrangements. Furthermore, the
Company's ability to declare and pay cash dividends on its Common Stock is
restricted by the terms of its Preferred Stock.


Item 6.  Management's Discussion and Analysis or Plan of Operation.

Overview

     The Company is an owner, operator and developer of private-pay assisted
living communities. Assisted living is part of a spectrum of long-term care
services that provide a combination of housing, personal services, and health
care designed to respond to elderly individuals who require assistance with
activities of daily living in a manner that promotes maximum independence. The
Company's revenues are derived primarily from resident fees for basic housing,
personalized health care services, and other support services.

     Since its initial public offering on December 26, 1995, at which the
Company raised approximately $12.2 million, the Company has embarked upon a
strategy of aggressive growth primarily through internal development of
prototypical assisted living communities. This report covers the second full
year of the Company's operations following its initial public offering and

                                       19
<PAGE>
describes in detail the Company's rapid growth which began in 1997 and which is
expected to continue through 1998 and beyond.

     The Company raised an additional $10 million through the sale of preferred
stock in December 1996 and announced on March 26, 1998, that it had agreed to
the principal business terms of a private placement of $10.5 million of
convertible subordinated debentures. The proceeds of these two transactions
have, and will continue to, permit the Company to grow rapidly. From January 1,
1997, through March 30, 1998, the Company completed ten new prototypical
communities comprising 1,272 beds, acquired through long-term leases two
additional communities comprising 112 beds, added a management contract for a
50-bed community, commenced construction on an additional five prototypical
communities comprising 528 beds, and entered into contracts to acquire three
additional communities comprising 183 beds. Upon the completion of each of these
transactions the Company will have approximately 2,700 beds under operation,
compared to the 570 beds the Company operated at the time of its initial public
offering and 1,063 beds as of December 31, 1997. Additionally, the Company is
engaged in development activities related to sixteen additional Regent
communities and five Regent Court communities.

     Recognizing the importance of internal controls, systems and procedures,
during 1997 the Company increased and refined its human resources functions,
employee training, marketing efforts, strategic planning, financial reporting,
and information systems. The Company's efforts in this regard will be of great
benefit as the Company continues to add a significant number of beds to its
operations in 1998 and beyond. Another essential element to such growth will be
the continued development of the Company's relationships with its commercial
banking and real estate investment trust financing partners. The Company
recently announced a commitment by LTC Properties, Inc. to provide approximately
$54.6 million of sale/leaseback financing to be used to refinance communities
completed during 1998 and for the acquisition of three additional communities.

Development and Acquisition of Additional Communities

     The Company's current growth plan anticipates completion of an additional
three new Regent communities, one new Regent Court community, and the
acquisition of three other communities by December 31, 1998. An additional
sixteen Regent communities and five Regent Court communities are currently under
development. As the Company continues to conduct its preliminary development
activities on these sites it will determine whether to proceed with construction
of a new community. Currently, most of these projects are scheduled for
completion during 1999. The future profitability of the Company is largely
dependent upon the continued expansion of its operations. During this expansion
period, the expenses associated with development, construction, and leasing of
these communities are expected to be significant.

     The Company expects that its typical 110-unit newly developed Regent
community will generate losses during the pre-opening period, during which the
Company hires senior community management and conducts extensive marketing
actives, and during the first eight to

                                       20
<PAGE>
ten months of operations, at which time management expects that such communities
will, on average, have achieved approximately 65-70 percent occupancy and have
reached break-even cash flow. Stabilized occupancy of 95 percent or higher is
expected by the fifteenth month of operation, on average. Management expects
occupancies will remain fairly stable after 95 percent occupancy is achieved.

     Similarly, newly developed Regent Court communities are expected to
generate losses during the pre-opening period and during the first four to five
months of operations. Management anticipates that newly developed Regent Court
communities will achieve break-even cash flow within five to six months after
commencing operations, at which time the communities are expected to have
achieved approximately 60-70 percent occupancy. Stabilized occupancy of 93
percent or higher is expected by the ninth month of operation. Based upon its
experience operating the Kingswood units at its existing communities, management
expects occupancies will remain fairly stable in its Regent Court communities
after 93 percent occupancy is achieved.

     Although the Company expects that it will be able to increase income from
its communities as a result of management's continuing efforts to maximize
occupancy, align resident rates with services provided and control expenses, the
pre-opening and initial operating expenses associated with the large number of
communities the Company expects to open in 1998 will result in a net operating
loss for the year. Furthermore, if the Company expands its growth plan through
the development of additional new communities or if a significant number of
newly developed communities fail to reach break-even cash flow within the
expected time period, the Company may continue to incur operating losses beyond
1998.

Results of Operations

     The following discussion and analysis should be read in conjunction with
the Financial Statements under Item 7. The Company's revenues are derived
primarily from resident fees for basic housing, personalized health care
services, and other support services. Operating expenses are comprised generally
of resident operating expenses, which include community payroll expenses, food,
property taxes, utilities, insurance and other direct residence operating
expenses; general and administrative expenses, which consist of payroll expenses
and overhead for executive, development, operations, and accounting personnel at
the Company's main office in addition to support functions such as legal,
accounting, and other administrative expenses; lease expense; and depreciation
and amortization expense.

                                       21
<PAGE>
     The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain items included in the Company's
consolidated financial statements:

<TABLE>
<CAPTION>
                                                              1997                1996
                                                            ------              ------
<S>                                                          <C>                 <C>
Revenues:
  Rental and service                                          98.5%               98.7%
  Management fee                                               1.5                 1.3
                                                            ------              ------
    Total revenues                                           100.0               100.0
                                                            ------              ------

Operating expenses:
  Residence operating expenses                                76.6                61.1
  General and administrative expenses                         25.6                13.8
  Lease expense                                               24.9                20.8
  Depreciation and amortization                                2.5                 1.9
                                                            ------              ------

    Total operating expenses                                 129.6                97.6
                                                            ------              ------

    Operating income (loss)                                  (29.6)                2.4

Interest income                                                2.7                 2.7
Interest expense                                              (1.0)               (4.2)
Other income, net                                              0.2                 0.1
                                                            ------              ------

    Income (loss) before income taxes
      and extra-ordinary loss                                (27.7)                1.0

Provision for income taxes                                    (0.1)               (0.4)
                                                            ------              ------

    Income (loss) before extra-
      ordinary loss                                          (27.8)                0.6

Extraordinary loss, net of income tax
     benefit                                                    --                (0.4)
                                                            ------              ------

    Net income (loss)                                        (27.8)%               0.2%
                                                            ------              ------
</TABLE>


Comparison of Years Ended December 31, 1997 and 1996

     Revenues. Revenues for 1997 totaled $13,958,282 compared to $13,260,249 in
1996. The Company operated three communities and managed a fourth community in
1996, whereas in 1997 the Company added its fourth stabilized community through
an acquisition in July, began operating three newly developed communities, one
each in May, October and November, and began managing a new community in May.
The increase in revenue of $698,033, or 5.3 percent,

                                       22
<PAGE>
includes $457,193 from newly opened communities and a decrease in revenue of
$232,882 at the three communities that the Company operated throughout 1996 and
1997. Revenue from operation of the stabilized community acquired in July was
$438,585 for the six months ended December 31, 1997. Overall average occupancy
at the Company's stabilized communities declined to 92.4% for the year ended
December 31, 1997, from 95.4% for the same period in 1996. The decline in
stabilized revenues from, and occupancy rate at, the Company's stabilized
communities relates primarily to the continued under-budget performance at
Sterling Park, the Company's largest community, which is due in large part to
continuing market pressures.

     Residence Operating Expenses. Residence operating expenses were $10,689,905
for 1997, and $8,108,045 for 1996, an increase of $2,581,860 or 31.8 percent.
The current year includes $2,276,381 of start-up and pre-opening costs related
to eleven of the Company's newly developed communities. Residence operating
expenses, excluding the effect of the newly developed communities, totaled 63.3
percent and 61.9 percent of rental and service revenues for 1997 and 1996,
respectively.

     General and Administrative Expenses. General and administrative expenses
were $3,568,382 for 1997, compared to $1,834,960 for 1996. The increase of
$1,733,422 is due primarily to increased payroll and ancillary costs resulting
from staffing increases related to the implementation of the Company's plan for
growth.

     Lease Expense. Lease expense for the Company's leased communities totaled
$3,479,176 for 1997 compared to $2,757,250 for 1996. The increase of $721,926
includes $595,415 related to two newly developed communities and $128,711
related to the community acquired in July.

     Depreciation and Amortization. Depreciation and amortization expense was
$356,852 for 1997, compared to $245,656 for 1996. The increase of $111,196
relates primarily to the purchase of resident vans for the Company's newly
developed communities and the purchase of furniture and equipment for the
Company's headquarters in connection with implementation of the Company's growth
plan.

     Interest Income. Interest income increased in 1997 to $381,326 from
$361,565 for 1996. Interest income is earned from the Company's investment of
cash and cash equivalents in high-quality, short-term securities placed with
institutions with high credit ratings.

     Interest Expense. Interest expense decreased for the year ended December
31, 1997, to $136,636, from $561,466 for 1996. The Company capitalized
$1,789,548 of interest charges incurred during 1997, compared to $13,054 in
1996. The capitalized interest offsets substantially higher interest costs
incurred by the Company in the current fiscal year arising from increased
borrowing for construction purposes.

                                       23
<PAGE>
     Extraordinary Loss. The extraordinary loss in 1996 of $53,097, net of an
income tax benefit of $33,900, resulted from the write-off of previously
capitalized loan fees. The write-off occurred in connection with the
sale/leaseback of Sunshine Villa, which has been accounted for as a financing
transaction.

     Net Income (Loss). Net operating results decreased to a loss of $3,877,654
during the year ended December 31, 1997, from net income of $23,598 for the same
period in 1996. The decrease in net results is primarily due to an increase in
general and administrative expenses (as discussed above), an increase in lease
expense (as discussed above), a decrease in residence operating profit (rental
and service revenue less residence operating expenses) of $1,918,964, offset by
a decrease in interest expense of $424,830.

Liquidity and Capital Resources

     At December 31, 1997, the Company had a working capital deficit of
$4,303,527 compared to approximately $10,326,089 of working capital at December
31, 1996, a decrease of $14,628,616. The decrease in working capital is due
primarily to implementation of the Company's growth plan.

     Net cash used in operating activities totaled approximately $2,637,000 for
1997, which resulted primarily from a net loss of approximately $3,878,000, net
of $694,000 related to depreciation and a non-cash compensation change, and less
the net positive change in other operating assets and liabilities of $547,000.

     Net cash used in investing activities totaled approximately $50,189,000 for
1997, consists of approximately $53,100,000 for land acquisition, development
and construction costs, net of approximately $2,900,000 related to the maturity
of investments. The land acquisition, development, and construction costs are
related to the development of assisted living communities. At December 31, 1997,
the aggregate purchase price for six parcels of land for which the Company had
purchase options was approximately $4,413,000. The Company has paid initial
deposits relating to these sites and has also completed the demographic analysis
and other preliminary due diligence for purposes of developing assisted living
communities at these sites.

     Net cash provided by financing activities totaled approximately $46,040,000
during 1997, consisting primarily of net proceeds from issuances of long-term
debt and short term borrowing for construction activities.

     On December 16, 1996, the Company completed the sale of $10 million of its
Preferred Stock to Prudential Private Equity Investors III, L.P. ("PPEI"). The
Preferred Stock is convertible into 1,818,181 shares of Common Stock. In
connection with the sale of the Preferred Stock, the Company issued to PPEI a
Stock Purchase Warrant to purchase 200,000 shares of the Company's Common Stock
at $5.50 per share. The Company is required to pay a quarterly cumulative
dividend on the Preferred Stock at the rate of six percent per annum.

                                       24
<PAGE>
     As of December 31, 1997, the Company had completed the following
construction loans:

<TABLE>
<CAPTION>
Amount              Community                         Lender
-----------         -----------------------           --------------------------
<S>                 <C>                               <C>
$ 6,850,000         Folsom, California                US National Bank of Oregon
$ 6,480,000         Kenmore, Washington               US National Bank of Oregon
$ 7,600,000         Vacaville, California             US National Bank of Oregon
$ 7,200,000         Bakersfield, California           Guaranty Federal Bank, FSB
$ 7,700,000         Austin, Texas                     Guaranty Federal Bank, FSB
$ 7,375,500         Rio Rancho, New Mexico            Guaranty Federal Bank, FSB
$ 6,255,000         Eugene, Oregon                    Wells Fargo
$ 6,450,000         Roseville, California             Key Bank
$ 7,115,000         Tucson, Arizona                   Bank United of Texas, FSB
$ 7,000,000         Henderson, Nevada                 Bank United of Texas, FSB
</TABLE>

In addition to the foregoing loans, the Company has also obtained a commitment
from a bank to provide up to $15,000,000 of financing with which to develop up
to five Regent Court communities.

     The Company's current growth plan anticipates the development,
construction, and opening of ten new Regent communities and one new Regent Court
community by the end of 1998, the acquisition of three additional communities by
the end of 1998, and an additional nine Regent and five Regent Court communities
by the end of 1999. The Company has obtained all financing necessary to complete
its development plan for 1998 and has obtained a $12.8 million commitment from a
real estate investment trust to provide all financing necessary to acquire the
three identified communities during 1998. The total cost to develop and
construct the fourteen communities planned for 1999, including the estimated
initial operating deficits, will likely be between $80-90 million. A substantial
portion of these costs will be incurred during 1998. The Company anticipates
that it will be able to obtain the financing, upon acceptable terms, necessary
to complete the thirteen communities planned for 1999 although it has not
obtained any commitments in that regard at this time. Provided that the Company
can obtain financing upon acceptable terms, the Company estimates that it has
the necessary equity capital to complete construction and to fund the initial
operating deficits of the thirteen communities planned for 1999.

     The Company may enter into additional arrangements with one or more
unrelated parties regarding the joint development and ownership of one or more
of the Company's communities currently under construction or development in
order to further leverage the Company's growth. Furthermore, the Company may
utilize various forms of financing that would permit a community to be sold to
or initially developed by a third party who would incur the initial operating
deficits and permit the Company to manage the community for a customary fee. The
Company, under such financing methods, would likely have the option to either
purchase the community or enter into a long-term lease at such time as the
Company deems appropriate. The Company has not obtained any commitments for this
form of financing.

                                       25
<PAGE>
     If the Company were unable to obtain additional required financing, or if
such financing is not available on acceptable terms, the Company expects that
its plan to develop an additional nine Regent communities and five Regent Court
communities by the end of 1999 would likely be delayed or curtailed.
Furthermore, if the Company expands its growth plan, development activities do
not result in the construction of a community on the site, the Company
experiences a decline in the operations of its current communities or the
Company does not achieve and sustain anticipated occupancy levels at its new
communities, then the Company may require additional financing to complete its
growth plan.

     The Company does not presently intend to pay dividends to holders of its
Common Stock and intends to retain future earnings to finance the development of
assisted living communities and expand its business.

Subsequent Events

     During the first quarter of 1998 the Company refinanced two assisted living
communities through sale/leaseback transactions with two REITs for an aggregate
sales price of $18.1 million, repaying approximately $11.7 million of its
mortgage indebtedness, recognizing approximately $2.6 million in deferred gain,
and generating approximately $5.8 million of net proceeds.

     On March 30, 1998, the Company completed a private placement pursuant to
which parties agreed to purchase up to $10.5 million of convertible subordinated
debentures due 2008. The debentures bear interest at 7.5 percent per annum and
are convertible into the Company's Common Stock at an effective price of $7.50
per share. The Company intends to utilize the proceeds to finance the Company's
continued rapid expansion of internally developed communities, to repay
short-term borrowings, and for general working capital purposes.

Inflation

     Management believes that the Company's operations have not been materially
adversely affected by inflation. The Company expects salary and wage increases
for its skilled staff will continue to be higher than average salary and wage
increases, as is common in the health care industry. To date, the Company has
been able to offset the effects of inflation on salaries and other operating
expenses by increases in rental and service rates. The Company expects to be
able to continue to do so in the future, subject to applicable statutory,
regulatory, and zoning restrictions.

Recent Accounting Pronouncements

     New accounting pronouncements are discussed in Note 1 of the Notes to
Consolidated Financial Statements.

                                       26
<PAGE>
Item 7.  Financial Statements

     The financial statements required by this item are included on pages F-1 to
F-23 of this Report.


Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

     On December 29, 1997, the Company dismissed its previous certifying
accountant, Coopers & Lybrand L.L.P., and retained its new certifying
accountant, KPMG Peat Marwick LLP. The decision to change accountants was
approved by the Audit Committee of the Company's Board of Directors. The reports
of Coopers & Lybrand L.L.P. on the Company's financial statements for 1995 and
1996, being the two fiscal years preceding the year addressed in this report,
contain no adverse opinion or disclaimer of opinion and were not modified as to
uncertainty, audit scope, or accounting principles. Furthermore, during fiscal
years 1995 and 1996, and during the subsequent interim periods to December 29,
1997, there were no disagreements with Coopers & Lybrand L.L.P. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Coopers & Lybrand L.L.P. would have caused it to make reference thereto in
connection with its report on the financial statements for such years.


PART III

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

     Information with respect to directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement for its 1998
annual meeting of shareholders to be filed not later than 120 days after the end
of the fiscal year covered by this report and is incorporated herein by
reference. Information with respect to executive officers of the Company is
included under Item 4(a) of Part I of this report. Information required by Item
405 of Regulation S-B is included under "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Company's definitive proxy statement for
its 1998 annual meeting of shareholders to be filed not later than 120 days
after the end of the fiscal year covered by this report and is incorporated
herein by reference.


Item 10.  Executive Compensation

     Information with respect to executive compensation will be included under
"Executive Compensation" in the Company's definitive proxy statement for its
1998 annual meeting of shareholders to be filed not later than 120 days after
the end of the fiscal year covered by this report and is incorporated herein by
reference.

                                       27
<PAGE>
Item 11.  Security Ownership of Certain Beneficial Owners and Management

     Information with respect to security ownership of certain beneficial owners
and management will be included under "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement for its 1998
annual meeting of shareholders to be filed not later than 120 days after the end
of the fiscal year covered by this report and is incorporated herein by
reference.


Item 12.  Certain Relationships and Related Transactions

     Information with respect to certain relationships and related transactions
with management will be included under "Certain Transactions" in the Company's
definitive proxy statement for its 1998 annual meeting of shareholders to be
filed not later than 120 days after the end of the fiscal year covered by this
report and is incorporated herein by reference.


Item 13.  Exhibits and Reports on Form 8-K

     (a)(1) Financial Statements

     The financial statements are listed in the Index to Financial Statements on
page F1 of this Report.

     (a)(2) Exhibits

     Exhibit
     Number

     (1) 3.1      Restated Articles of Incorporation, as amended effective
                  December 13, 1996.

     (2) 3.2      Restated Bylaws, as amended effective December 12, 1996.

         4.1      See Article II of Exhibit 3.1 and Articles I and VI of
                  Exhibit 3.2.

     (1)10.1      Lease Agreement between the Company and Regency Park
                  Apartments Limited Partnership.

     (1)10.2      Lease Agreement between the Company and the Bowen-Gionet
                  Joint Venture.

     (1)10.3      Employment Agreement between the Company and Walter C. Bowen.

     (1)10.4      Employment Agreement between the Company and James W. Ekberg.

     (1)10.5      Employment Agreement between the Company and Eric W. Jacobsen.

     (1)10.6      Employment Agreement between the Company and Steven L. Gish.

                                       28
<PAGE>
     (1)10.7      Employment Agreement between the Company and Gregory Roderick.

     (1)10.8      Restrictive Covenant Agreement between the Company and
                  Walter C. Bowen.

     (1)10.9      Restrictive Covenant Agreement between the Company and
                  James W. Ekberg.

     (1)10.10     Restrictive Covenant Agreement between the Company and
                  Eric W. Jacobsen.

     (1)10.11     Restrictive Covenant Agreement between the Company and
                  Steven L. Gish.

     (1)10.12     Restrictive Covenant Agreement between the Company and
                  Gregory Roderick.

     (5)10.13     1995 Stock Incentive Plan, as amended effective December 4,
                  1997.

     (1)10.14     Form of Incentive Stock Option Agreement.

     (1)10.15     Form of Nonqualified Stock Option Agreement.

     (1)10.16     Administrative Services Agreement among the Company and
                  certain of the Bowen companies.

     (1)10.17     Indemnity Agreement between the Company and Walter C. Bowen.

     (1)10.18     Indemnity Agreement between the Company and James W. Ekberg.

     (1)10.19     Indemnity Agreement between the Company and Eric W. Jacobsen.

     (1)10.20     Indemnity Agreement between the Company and Steven L. Gish.

     (1)10.21     Regulatory Agreement by and between the Company (as assignee)
                  and the Oregon Housing and Community Services Department
                  ("OHCS").

     (1)10.22     Form of First Amendment to Regulatory Agreement between the
                  Company and OHCS.

     (1)10.23     Management Agreement regarding Park Place.

     (1)10.24     Subordination and Attornment Agreement with The Canada Life
                  Assurance Company regarding Regency Park.

     (1)10.25     Promissory Note from the Company to Sunshine Villa, Inc.

     (1)10.26     Note from the Company to United States National Bank of
                  Oregon.

                                       29
<PAGE>
     (1)10.27     Line of Credit Instrument between the Company and United
                  States National Bank of Oregon.

     (2)10.28     Letter of Understanding, effective as of March 8, 1996,
                  between the Company, Dr. Marvin S. Hausman, and Northwest
                  Medical Research Partners.

     (2)10.29     Employment Agreement, effective as of March 20, 1996, between
                  David R. Gibson and the Company

     (2)10.30     Restrictive Covenant Agreement, effective as of March 20,
                  1996, between David R. Gibson and the Company

     (3)10.32     Preferred Stock and Warrant Agreement between Prudential
                  Private Equity Investors III, L.P. ("PPEI") and the Company
                  dated as of December 16, 1996.

     (3)10.33     Stockholders Agreement among the Company, PPEI, and Walter C.
                  Bowen dated as of December 16, 1996.

     (3)10.34     Registration Agreement between the Company and PPEI dated as
                  of December 16, 1996.

     (3)10.35     Stock Purchase Warrant in favor of PPEI for 200,000 Shares of
                  Common Stock.

     (3)10.36     First Amendment to Lease between the Company and Regency Park
                  Apartments Limited Partnership dated December 16, 1996.

     (3)10.37     Second Amendment to Lease between the Company and Sterling
                  Park, L.L.C. dated December 16, 1996.

     (3)10.38     Form of Indemnity Agreement between the Company and directors.

     (4)16        Letter from Coopers & Lybrand L.L.P.

     (5)21        List of Subsidiaries.

     (5)23.1      Consent of Coopers & Lybrand L.L.P.

     (5)23.2      Consent of KPMG Peat Marwick LLP.

     (5)27.1      Financial Data Schedule

     (5)27.2      Restated Financial Data Schedule

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

                                       30
<PAGE>
(1)  Incorporated by reference to Exhibits to the Company's Registration
     Statement on Form S-1, effective December 20, 1995 (Registration No.
     33-96912).

(2)  Incorporated by reference to Exhibits to the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 1995.

(3)  Incorporated by reference to Exhibits to the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 1996.

(4)  Incorporated by reference to the Exhibit to the Company's Form 8-K dated
     December 29, 1997.

(5)  Filed herewith.


     All other schedules and exhibits are omitted because the required
information is not applicable or is not present in amounts sufficient to require
submission of the schedule or because the information required is included in
the financial statements and notes thereto.

     (a)(3) Form 8-K

     The Company filed a Form 8-K, dated December 29, 1997, with respect to a
change in its accountants as described therein.

                                       31

<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 1997 and 1996


                   (With Independent Auditors' Report Thereon)


<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                                      Index

                                                                       Page(s)

Independent Auditors' Report - KPMG Peat Marwick LLP                   F - 1

Report of Independent Accountants of Coopers & Lybrand L.L.P.          F - 2

Financial Statements:
     Consolidated Balance Sheets                                       F - 3
     Consolidated Statements of Operations                             F - 4
     Consolidated Statements of Changes in Shareholders' Equity        F - 5
     Consolidated Statements of Cash Flows                             F - 6

Notes to Consolidated Financial Statements                             F - 7
<PAGE>
                          Independent Auditors' Report




The Board of Directors and Shareholders
Regent Assisted Living, Inc.:


We have audited the accompanying consolidated balance sheet of Regent Assisted
Living, Inc. and subsidiaries (the Company) as of December 31, 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Regent
Assisted Living, Inc. and subsidiaries as of December 31, 1997, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.



                              KPMG PEAT MARWICK LLP



Portland, Oregon
February 13, 1998, except as to
     note 11 which is as of March 27, 1998

                                      F - 1
<PAGE>
                        Report of Independent Accountants




The Board of Directors and Shareholders
Regent Assisted Living, Inc.:


We have audited the accompanying consolidated balance sheet of Regent Assisted
Living, Inc. and subsidiary (the Company) as of December 31, 1996 and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Regent
Assisted Living, Inc. and subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.



                            COOPERS & LYBRAND L.L.P.



Portland, Oregon
March 21, 1997





                                      F - 2
<PAGE>
<TABLE>
<CAPTION>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets


                                                                                           December 31
                                                                                --------------------------------
                                   Assets                                                1997               1996
                                   ------                                       -------------     --------------
<S>                                                                             <C>                   <C>
Current assets:
     Cash and cash equivalents                                                  $   1,865,576     $    8,650,817
     Investments                                                                            -          2,939,448
     Accounts receivable                                                              128,110            148,976
     Prepaid expenses                                                                 249,708            126,148
     Construction advances receivable                                                 123,670          1,125,315
                                                                                -------------     --------------

                  Total current assets                                              2,367,064         12,990,704

Restricted cash                                                                     2,361,993          1,646,485
Property and equipment, net                                                        69,820,324         17,383,668
Investment in joint venture                                                           401,460            263,579
Deferred income tax asset                                                                   -            304,300
Other assets                                                                          752,932            588,948
                                                                                -------------     --------------

                  Total assets                                                  $  75,703,773     $   33,177,684
                                                                                =============     ==============

                      Liabilities and Shareholders' Equity

Current liabilities:
     Current portion of long-term debt                                          $     218,881     $      150,950
     Short-term borrowings                                                          4,500,000                  -
     Construction accounts payable                                                    583,043            667,312
     Accounts payable and other accrued expenses                                      685,136          1,453,668
     Accrued payroll                                                                  502,568            335,155
     Accrued interest                                                                 179,963             57,530
                                                                                -------------     --------------

                  Total current liabilities                                         6,669,591          2,664,615

Long-term debt                                                                     51,450,545          9,981,235
Deferred development fees, net                                                        898,802                  -
Other liabilities                                                                     517,578            474,423
                                                                                -------------     --------------

                  Total liabilities                                                59,536,516         13,120,273
                                                                                -------------     --------------

Minority interest                                                                     250,000                  -
                                                                                -------------     --------------

Commitments

Shareholders' equity:
     Preferred stock, no par value, 5,000,000 shares authorized;
        1,666,667 shares issued and outstanding in 1997 and 1996                    9,349,841          9,349,841
     Common stock, no par value, 25,000,000 shares authorized;
        4,633,000 shares issued and outstanding in 1997 and 1996                   10,808,703         10,808,703
     Accumulated deficit                                                           (4,241,287)          (101,133)
                                                                                -------------     --------------

                  Total shareholders' equity                                       15,917,257         20,057,411
                                                                                -------------     --------------

                  Total liabilities and shareholders' equity                    $  75,703,773      $  33,177,684
                                                                                =============     ==============



See accompanying notes to consolidated financial statements.
</TABLE>


                                      F - 3
<PAGE>
<TABLE>
<CAPTION>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations


                                                                                              Years ended
                                                                                              December 31
                                                                                --------------------------------
                                                                                         1997               1996
                                                                                -------------      -------------
<S>                                                                               <C>                 <C>
Revenues:
     Rental and service                                                         $  13,751,027      $  13,088,131
     Management fees                                                                  207,255            172,118
                                                                                -------------      -------------

                  Total revenues                                                   13,958,282         13,260,249
                                                                                -------------      -------------

Operating expenses:
     Residence operating expenses                                                  10,689,905          8,108,045
     General and administrative                                                     3,568,382          1,834,960
     Lease expense                                                                  3,479,176          2,757,250
     Depreciation and amortization                                                    356,852            245,656
                                                                                -------------      -------------

                  Total operating expenses                                         18,094,315         12,945,911
                                                                                -------------      -------------

                  Operating income (loss)                                          (4,136,033)           314,338

Interest income                                                                       381,326            361,565
Interest expense                                                                     (136,636)          (561,466)
Other income, net                                                                      26,566             20,658
                                                                                -------------      -------------

                  Income (loss) before income
                     taxes and extraordinary loss                                  (3,864,777)           135,095

Provision for income taxes                                                             12,877             58,400
                                                                                -------------      -------------

                  Income (loss) before extraordinary loss                          (3,877,654)            76,695

Extraordinary loss, net of income tax benefit                                               -             53,097
                                                                                -------------      -------------

                  Net income (loss)                                             $  (3,877,654)     $      23,598
                                                                                =============      =============

Diluted earnings (loss) per common share:
     Before extraordinary loss                                                          (0.97)     $        0.01
     Extraordinary loss                                                                     -              (0.01)
                                                                                -------------      -------------

                  Net income (loss)                                             $       (0.97)     $           -
                                                                                =============      =============

Weighted average common shares outstanding - basic                                  4,633,000          4,633,000
                                                                                =============      =============

Weighted average common shares outstanding - diluted                                4,633,000          4,666,800
                                                                                =============      =============


See accompanying notes to consolidated financial statements.
</TABLE>

                                      F - 4
<PAGE>
<TABLE>
<CAPTION>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                 Consolidated Statements of Shareholders' Equity


                                           Preferred stock
                            ---------------------------------------------
                                 Series A                   Series B                Common stock                          Total
                            -------------------        ------------------       -------------------      Accumulated  shareholders'
                            Shares       Amount        Shares      Amount       Shares       Amount        deficit       equity
                            ------       ------        ------      ------       ------       ------        -------       ------

<S>                       <C>        <C>             <C>        <C>          <C>         <C>           <C>            <C>
Balance, December 31,
     1995                        -   $         -            -   $        -   4,633,000   $10,758,703   $   (98,501)   $10,660,202

Issuance of preferred
     stock, net of
     issuance costs of
     $600,159             1,283,785    7,201,910      382,882    2,147,931           -             -             -      9,349,841
Proceeds from issuance
     of common stock
     warrant                     -             -            -            -           -        50,000             -         50,000
Preferred stock
     dividends                   -             -            -            -           -             -       (26,230)       (26,230)
Net income                       -             -            -            -           -             -        23,598         23,598
                          ---------    ----------    ---------   ---------   ---------    ----------    ----------     ----------

Balance, December 31,
     1996                 1,283,785    7,201,910      382,882    2,147,931   4,633,000    10,808,703      (101,133)    20,057,411

Preferred stock
     dividends                  -              -            -            -           -             -      (600,000)      (600,000)
Non-cash compensation
     charge                      -             -            -            -           -             -       337,500        337,500
Net loss                         -             -            -            -           -             -    (3,877,654)     3,877,654)
                          ---------    ----------    --------    ---------   ---------    ----------    ----------     ----------

Balance, December 31,
     1997                 1,283,785   $7,201,910      382,882   $2,147,931   4,633,000   $10,808,703   $(4,241,287)   $15,917,257
                          =========    =========     ========    =========   =========    ==========    ==========    ==========


See accompanying notes to consolidated financial statements.
</TABLE>

                                     F - 5
<PAGE>
<TABLE>
<CAPTION>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows


                                                                                                           Years ended
                                                                                                           December 31
                                                                                            ----------------------------------
                                                                                                    1997                  1996
                                                                                            ------------          ------------
<S>                                                                                         <C>                   <C>
Cash flows from operating activities:
     Net income (loss)                                                                     $  (3,877,654)         $     23,598
     Adjustments to reconcile net income (loss)
        to net cash provided by (used in) operating activities:
           Depreciation and amortization                                                         356,852               245,656
           Non-cash compensation charge                                                          337,500                     -
           Amortization of deferred development fees                                             (21,198)                    -
           Extraordinary loss                                                                          -                86,997
           Deferred income taxes                                                                 304,300              (304,300)
           Changes in other assets and liabilities:
               Accounts receivable                                                                20,866               (33,240)
               Prepaid expenses                                                                  (61,560)              (48,220)
               Restricted cash                                                                         -                76,364
               Other assets                                                                      (67,141)             (149,187)
               Accounts payable and other accrued epenses                                         38,418               529,890
               Accrued payroll                                                                   167,413               252,290
               Accrued interest                                                                  122,433                23,591
               Other liabilities                                                                  43,155                57,418
                                                                                           -------------          ------------

                  Net cash provided by (used in) operating activities                         (2,636,616)              760,857
                                                                                           -------------          ------------

Cash flows from investing activities:
     Purchases of property and equipment                                                     (52,898,548)           (9,685,259)
     Increase (decrease) in construction accounts payable                                        (84,269)              885,486
     Maturity (purchase) of investments, net                                                   2,939,448              (986,906)
     Investment in joint venture                                                                (137,881)             (263,579)
     Deposits to replacement reserve account, net                                                 (7,909)              (43,200)
                                                                                           -------------          ------------

                  Net cash used in investing activities                                      (50,189,159)          (10,093,458)
                                                                                           -------------          ------------

Cash flows from financing activities:
     Short-term borrowings                                                                     4,500,000                     -
     Proceeds from issuance of long-term debt                                                 41,700,424             9,487,752
     Payments on long-term debt                                                                 (163,183)           (5,682,956)
     Construction advances                                                                     1,001,645            (1,125,315)
     Payments and deposits for financing arrangements, net                                      (234,364)              (92,735)
     Restricted cash for financing arrangements, net                                            (707,599)           (1,603,285)
     Deferred development fee from financing arrangements                                        920,000                     -
     Contributions by minority partner                                                           250,000                     -
     Proceeds from issuance of preferred stock                                                         -             9,349,841
     Proceeds from issuance of common stock warrant                                                    -                50,000
     Preferred stock issuance costs                                                             (600,159)               14,164
     Preferred stock dividends                                                                  (626,230)                    -
                                                                                           -------------          ------------

                  Net cash provided by financing activities                                   46,040,534            10,397,466
                                                                                           -------------          ------------

                  Net increase (decrease) in cash and cash equivalents                        (6,785,241)            1,064,865

Cash and cash equivalents, beginning of period                                                 8,650,817             7,585,952
                                                                                           -------------          ------------

Cash and cash equivalents, end of period                                                   $   1,865,576          $  8,650,817
                                                                                           =============          ============


See accompanying notes to consolidated financial statements.
</TABLE>

                                      F - 6
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(1)  Operations and Summary of Significant Accounting Policies

     Regent Assisted Living, Inc. (the Company) is an owner, operator and
     developer of private-pay assisted living communities. Assisted living is
     part of a spectrum of long-term care services that provide a combination of
     housing, personal services and health care designed to respond to elderly
     individuals who require assistance with activities of daily living in a
     manner that promotes maximum independence.

  (a)  The Company

       The results of operations for the year ended December 31, 1996 reflect
       the operations of three assisted living communities (458 beds) and
       property management services provided to one community (112 beds). The
       results of operations for the year ended December 31, 1997, additionally
       reflect the start-up operations of three new internally developed
       assisted living communities (389 beds), one acquired community (48 beds)
       and one additional management account (48 beds).

       As of December 31, 1997, an additional 11 assisted living communities
       (1,299 beds) are under construction. Also, the Company has acquired five
       sites and has purchase options to acquire six additional parcels, all for
       future development.

  (b)  Principles of Consolidation

       The consolidated financial statements include the accounts of the Company
       and its majority owned subsidiaries. All significant intercompany
       transactions and balances have been eliminated in consolidation.

  (c)  Cash and Cash Equivalents

       The Company maintains its cash in bank deposit accounts which, at times,
       may exceed federally insured limits. Cash equivalents consist of highly
       liquid debt instruments purchased with an original maturity of three
       months or less. The Company's cash equivalents are in high quality
       securities placed with institutions with high credit ratings. This
       investment policy limits the Company's exposure to concentrations of
       credit risk, and the Company has not experienced any credit related
       losses.

                                                                     (Continued)

                                      F - 7
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


  (d)  Investments

       The Company classifies its investments as available-for-sale securities.
       Realized gains and losses on sales of securities are reflected in
       operations; unrealized gains and losses are reflected in the statement of
       changes in shareholders' equity. The Company had no unrealized gains or
       losses on its investments as of December 31, 1997 and 1996.

  (e)  Property and Equipment

       Property and equipment are stated at cost with depreciation being
       provided over the assets' estimated useful lives using straight-line and
       accelerated methods as follows:

           Buildings                                            40 years
           Land improvements                                    10 years
           Furniture and equipment                           5 - 7 years

       Interest incurred during construction periods is capitalized as part of
       the building costs. Maintenance and repairs are expensed as incurred;
       renewals and improvements are capitalized. Upon disposal of property and
       equipment subject to depreciation, the related costs and accumulated
       depreciation are removed and resulting gains and losses are reflected in
       operations.

       The Company has adopted Statement of Financial Accounting Standards No
       121, Accounting for Impairment of Long-Lived Assets and for Long-Lived
       Assets to be Disposed Of. This Statement requires that long-lived assets
       and certain identifiable intangibles to be held and used by an entity be
       reviewed for impairment whenever events or changes in circumstances
       indicate that the carrying amount of an asset may not be recoverable. The
       adoption of this Statement did not affect the Company's results of
       operations.

  (f)  Restricted Cash

       The Company is required to provide letters of credit to lenders in
       connection with certain financing arrangements. Financial institutions
       providing the letters of credit have required cash collateral for the
       letters of credit, totaling $2,310,884 and $1,603,285 as of December 31,
       1997 and 1996, respectively. Restricted cash also includes a replacement
       reserve required to be maintained for one of the communities.


                                                                     (Continued)

                                      F - 8
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


  (g)  Investment in Joint Venture

       The Company has a 50% investment in Regent Northshore House, L.L.C., a
       joint venture organized to develop an assisted living community in
       Kenmore, Washington. As of December 31, 1997, the community was under
       construction and has not commenced operations. The Company accounts for
       its investment under the equity method.

  (h)  Pre-opening Costs

       The Company expenses pre-opening and start-up costs as incurred.

  (i)  Development Fees

       The Company defers development fees and amortizes them over the term of
       the related lease.

  (j)  Revenue Recognition

       Revenue from owned or leased assisted living communities is recorded when
       services are rendered and consist of resident fees for basic housing,
       personalized health care and other support services. Management fees
       related to property management services for other assisted living
       communities, substantially all of which are owned by affiliated entities,
       are recorded when the services are rendered.

  (k)  Income Taxes

       Under the asset and liability method, deferred income tax assets and
       liabilities are recognized for the future tax consequences attributable
       to differences between the financial statement carrying amounts of
       existing assets and liabilities and their respective tax bases. Deferred
       income tax assets and liabilities are measured using enacted tax rates
       expected to apply to taxable income in the years in which those temporary
       differences are expected to be recovered or settled. The effect on
       deferred tax assets and liabilities of changes in tax rates is recognized
       in the statement of operations in the period that includes the enactment
       date.


                                                                     (Continued)

                                      F - 9
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


  (l)  Computation of Per Share Amounts

       Beginning December 31, 1997, basic earnings per share (EPS) and diluted
       EPS are computed using the methods prescribed by Statement of Financial
       Accounting Standard No. 128, Earnings Per share (SFAS 128). Basic EPS is
       calculated using income (loss) attributable to common shares (after
       deducting preferred dividends) divided by the weighted average number of
       common shares outstanding for the period. Diluted EPS is calculated using
       income (loss) attributable to common shares (after deducting preferred
       dividends and considering the effects of dilutive common equivalent
       shares) divided by the weighted average number of common shares and
       dilutive common shares outstanding for the period. Prior period amounts
       have been restated to conform with the presentation requirements of SFAS
       128.

       The difference between the weighted average common shares outstanding for
       basic and diluted earnings per share in 1996 relates to stock options.

  (m)  Stock-Based Compensation Plan

       The Company accounts for its stock-based compensation plan under
       Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
       to Employees (APB 25). Effective January 1, 1996, the Company adopted the
       disclosure requirements of Statement of Financial Accounting Standards
       No. 123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123
       requires that companies which do not choose to account for stock-based
       compensation as prescribed by this statement shall disclose the pro forma
       effect on earnings per share as if SFAS 123 had been adopted.
       Additionally, certain other disclosures are required with respect to
       stock compensation and the assumptions used to determine the pro forma
       effects of SFAS 123.

  (n)  Use of Estimates

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities
       and disclosure of contingent assets and liabilities at the date of the
       financial statements and the reported amounts of revenues and expenses
       during the reporting period. Actual results could differ from those
       estimates.

  (o)  Financial Instruments

       The carrying amounts of cash and cash equivalents, investments, accounts
       receivable, construction advances receivable and restricted cash
       approximate fair value because of the short-term nature of these accounts
       and because amounts are invested in accounts earning market rates of
       interest. The carrying amount of debt approximates fair value inasmuch as
       the interest rates approximate the current rates available to the
       Company.


                                                                     (Continued)

                                     F - 10
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


  (p)  New Accounting Pronouncements

       In June 1997, the FASB issued Statement of Financial Accounting Standards
       No. 130, Reporting Comprehensive Income (SFAS 130). This statement
       establishes standards for reporting and displaying comprehensive income
       and its components in a full set of general purpose financial statements.
       The objective of SFAS 130 is to report a measure of all changes in equity
       of an enterprise that result from transactions and other economic events
       of the period other than transactions with owners. The Company expects to
       adopt SFAS 130 in the first quarter of 1998 and does not expect
       comprehensive income (loss) to be materially different from currently
       reported net loss.

       In June 1997, the FASB issued Statement of Financial Accounting Standards
       No. 131, Disclosures about Segments of an Enterprise and Related
       Information (SFAS 131). This statement establishes standards for the way
       that public business enterprises report information about operating
       segments interim and annual financial statements. It also establishes
       standards for related disclosures about products and services, geographic
       areas and major customers. The Company expects to adopt SFAS 131 for its
       fiscal year beginning January 1, 1998 and does not expect the adoption of
       SFAS 131 to have a significant impact on their financial statements.

  (q)  Reclassifications

       Certain reclassifications have been made to the consolidated financial
       statements for 1996 to conform to the 1997 presentation.

(2)  Property and Equipment

     Property and equipment are stated at cost and consist of the following:

<TABLE>
<CAPTION>
                                                                                    1997            1996
                                                                            ------------     -----------

         <S>                                                                <C>              <C>
         Land                                                               $  1,730,810     $ 1,100,000
         Buildings and improvements                                           12,713,346       6,520,556
         Furniture and equipment                                               1,512,868         530,540
         Construction in progress                                             54,429,419       9,456,006
                                                                             ------------    -----------

                                                                              70,386,443      17,607,102

         Less accumulated depreciation and amortization                          566,119         223,434
                                                                             -----------     -----------

                   Property and equipment, net                               $69,820,324     $17,383,668
                                                                             ===========     ===========
</TABLE>


                                                                     (Continued)

                                     F - 11
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




     Land, buildings and certain furniture and equipment serve as collateral for
     long-term debt. Construction in progress includes land, development and
     building costs incurred in connection with the construction of the
     Company's new communities and the cost of land held for development.
     Property and equipment includes the asset value attributable to a capital
     lease in the amount of $7,724,177 at December 31, 1997 and 1996.
     Accumulated amortization related to this lease was $390,700 and $200,403 at
     December 31, 1997 and 1996, respectively.

(3) Other Assets

     Other assets consist of the following:

                                                       1997           1996
                                                       ----           ----

         Resident security and trust deposits       $ 517,578    $ 473,437
         Deferred financing costs, net                195,381       89,961
         Other                                         39,973       25,550
                                                     --------     --------

                   Total other assets               $ 752,932    $ 588,948
                                                     ========     ========

     Pursuant to rental agreements, residents are required to provide security
     deposits, and in certain cases, the last month's rent. A liability for
     these deposits is recorded in other liabilities in the consolidated
     financial statements.


                                                                     (Continued)

                                     F - 12
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(4) Long-Term Debt
<TABLE>
<CAPTION>

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

<S>                                                                     <C>             <C>
         Capital lease obligation, due in monthly
             installments of $69,100, including interest at
             8.40%, due in November 2012 (see note 7)                   $  8,072,754    $   8,217,044
         Notes payable to a bank, due in monthly installments
             of $6,056, including interest at various rates
             between 8.75% and 8.88%, all maturing at
             various dates in 2002                                           279,774                -
         Note payable to a corporation, quarterly payments
             of interest only at 9.00%, due in December 2000                 500,000          500,000
         Construction loans, totaling $63,545,500, for
             communities under construction, interest varies
             between 8.38% and 9.50%, maturities vary from
             August 1999 through September 2003                           42,250,452        1,362,721
         Other                                                               566,446           52,420
                                                                        ------------    -------------

                                                                          51,669,426       10,132,185

         Less amounts due within one year                                    218,881          150,950
                                                                        ------------    -------------

         Amounts due after one year                                     $ 51,450,545    $   9,981,235
                                                                        ============    =============
</TABLE>

     Principal payments on long-term debt for the years ending December 31 are
as follows:

         1998                                      $     218,881
         1999                                          4,967,038
         2000                                         14,955,143
         2001                                          4,548,534
         2002                                          6,370,391
         Thereafter                                   20,609,439
                                                     -----------

                                                   $  51,669,426
                                                     ===========

     The Company incurred total interest costs of approximately $1,926,200 and
     $574,500 in 1997 and 1996, respectively, of which approximately $1,789,500
     and $13,100 has been capitalized as part of construction in progress.
     Interest costs paid by the Company in 1997 and 1996 totaled approximately
     $1,803,800 and $550,900, respectively.

     The Company, along with its joint venture partner, has guaranteed a
construction loan in the amount of $6.5 million.


                                                                     (Continued)

                                     F - 13
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(5) Shareholders' Equity

       The Company is authorized to issue 5,000,000 shares of preferred stock.
       The Board of Directors has the authority to issue preferred stock in one
       or more series and to fix the number of shares constituting any such
       series, and the preferences, limitations and relative rights, including
       the dividend rights, dividend rate, voting rights, terms of redemption,
       redemption price or prices, conversion rights and liquidation preferences
       of the shares constituting any series, without any further vote or action
       by the shareholders of the Company.

       On December 16, 1996, the Company issued 1,283,785 shares of Series A
       preferred stock and 382,882 shares of Series B preferred stock
       (collectively, the "Preferred Stock") for a total of $9,950,000. In
       connection with this transaction, a warrant was issued to the holders of
       the preferred stock for $50,000, allowing the warrant holder to purchase
       200,000 shares of common stock at an exercise price of $5.50 per share.

       The preferred stock is convertible into 1.091 shares of common stock. The
       Series A preferred shares are convertible at any time at the option of
       the holder. The Series B preferred shares are convertible upon the
       occurrence of certain "Conversion Events" as defined in the Company's
       amended articles of incorporation.

       Dividends on the preferred stock accrue at an annual rate of 6% of the
       liquidation value of $5.50 per share.

       In connection with the sale of the preferred stock, the Company also
       entered into a stockholders' agreement with the preferred shareholder and
       the founding shareholder regarding the voting and disposition of shares
       held by the preferred shareholder and the founding shareholder, and an
       agreement providing the preferred shareholder with rights to require the
       Company to register shares of common stock upon conversion of the
       preferred stock.

(6) Stock Options

   (a) 1995 Stock Incentive Plan

       The Company adopted a stock incentive plan (the 1995 Stock Incentive
       Plan), which provides for the award of incentive stock options to key
       employees and the award of nonqualified stock options, stock appreciation
       rights, bonus rights and other incentive grants to employees, independent
       contractors and consultants. A total of 600,000 shares of common stock
       may be issued under the 1995 Stock Incentive Plan. As of December 31,
       1997 options to purchase 393,000 shares had been granted pursuant to the
       Plan.


                                                                     (Continued)

                                     F - 14
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




       The 1995 Stock Incentive Plan is administered by the Board of Directors,
       which has the authority, subject to the terms of the Plan, to determine
       the persons to whom options or rights may be granted, the exercise price
       and number of shares subject to each option or right, the character of
       grant, the time or times at which all or a portion of each option or
       right may be exercised and certain other provisions of each option or
       right.

       Options are exercisable over a period of time in accordance with the
       terms of option agreements entered into at the time of grant. Generally,
       options expire 10 years from date of grant and are expected to become
       exercisable over a five-year period. Options granted under the 1995 Stock
       Incentive Plan are generally nontransferable by the optionee and, unless
       otherwise determined by the Board of Directors, must be exercised by the
       optionee during the period of the optionee's employment or service with
       the Company or within a specified period following termination of
       employment or service.

       Non-employee members of the Board of Directors of the Company are
       automatically granted an option to purchase 2,000 shares of common stock
       when they become a director. Each non-employee director is automatically
       granted an option to purchase 2,000 additional shares of common stock in
       each subsequent calendar year that the director continues to serve in
       that capacity. The exercise price for these options will generally be the
       fair market value of the common stock at the date of grant.

       During the year ended  December 31, 1997, the Company recognized
       compensation  expense in the amount of $337,500 for options granted below
       fair value on the grant date.

   (b) Options Granted by Shareholder

       In August 1995, the Company's founding shareholder granted options to
       purchase an aggregate of 170,000 shares of common stock, of which 165,000
       were to certain officers of the Company. These options vest and become
       immediately exercisable, and are subject to the terms of option
       agreements which contain terms similar to those governing the options
       granted under the 1995 Stock Incentive Plan.


                                                                     (Continued)

                                     F - 15
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements





       A summary of option activity is as follows:

<TABLE>
<CAPTION>
                                                                       Weighted-
                                                     Number              average
                                                       of               exercise
                                                     shares                price
                                                     ------                -----
           <S>                                       <C>                 <C>
           Balance, December 31, 1995                354,000             $  6.83

           Options granted                           184,500                4.85
                                                     -------

           Balance, December 31, 1996                538,500                6.15

           Options granted                           239,500                3.55
           Options canceled                         (215,000)               6.97
                                                     -------

           Balance, December 31, 1997                563,000                4.73
                                                     =======
</TABLE>

       The following table summarizes information about stock options
outstanding as of December 31, 1997:

<TABLE>
<CAPTION>

                                                                                          Options exercisable
                                                         Weighted-                     ------------------------
                                                          average        Weighted-                    Weighted-
               Range of                                  remaining        average                      average
               exercise                   Number        contractual      exercise        Number       exercise
                 price                  outstanding        life            price       exercisable      price
                 -----                  -----------        ----            -----       -----------      -----

           <S>                              <C>           <C>           <C>              <C>        <C>
           $6.00 - $8.00                    170,000       7.7 years     $     6.12       170,000    $     6.12
           $3.00 - $7.50                    393,000       8.4 years           4.13       112,100          5.22
                                           --------                                     --------

                                            563,000                                      282,100
                                           ========                                     ========
</TABLE>

     The total value of options granted during 1997 and 1996 was computed as
     approximately $1,250,000 and $916,000, respectively, which would be
     amortized on a pro forma basis over the vesting period of the options. The
     weighted average fair market value of the option grants during 1997 and
     1996 was $5.22 and $4.96, respectively.
                                                                     (Continued)

                                     F - 16
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




       The Company has adopted the disclosure-only provisions of SFAS No. 123.
       The following table presents the Company's net income (loss) and earnings
       per share, assuming compensation cost had been determined based on the
       fair value at the date of grant, and recognized as expense on a
       straight-line basis over the vesting period of the options, consistent
       with the provisions of SFAS No. 123.

<TABLE>
<CAPTION>
                                                                   1997                1996
                                                                   ----                ----

           <S>                                             <C>                  <C>
           Income (loss) before
               extraordinary loss       As Reported        $ (3,877,654)        $    76,695
                                        Pro Forma            (4,235,654)           (104,041)

           Net income (loss)            As Reported          (3,877,654)             23,598
                                        Pro Forma            (4,235,654)           (157,138)

           Diluted earnings (loss)
               per common share
               before extraordinary
               loss                     As Reported               (0.97)               0.01
                                        Pro Forma                 (1.04)              (0.03)

           Diluted earnings (loss)
               per common share         As Reported               (0.97)                  -
                                        Pro Forma                 (1.04)              (0.03)

</TABLE>
       For purposes of the above pro forma information, the fair value of each
       option grant was estimated as of the date of grant using the
       Black-Scholes option pricing model with the following weighted average
       assumptions.

                                                     1997                1996
                                                     ----                ----

           Risk-free interest rate                   6.25%               6.75%
           Expected life                         6.5 years           9.1 years
           Expected volatility                       43.1%               36.6%
           Expected dividend yield                      0%                  0%


                                                                     (Continued)

                                     F - 17
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(7) Commitments

   (a) Operating Leases

       The Company leases seven communities under non-cancelable lease
       agreements expiring in the years 2005 through 2012. The leases are
       subject to additional rent payments based on a percentage of the increase
       in annual revenue of the respective facility. The Company is responsible
       for all costs including repairs, property taxes and other direct
       operating costs.

       The Company leases its corporate offices under a noncancelable operating
       lease expiring February 2003. The corporate offices were shared with
       certain other related entities in 1997, and a portion of the total lease
       expense was paid by those entities (see note 9(a)).

       Future minimum lease payments required under these leases for the years
       ending December 31 are as follows:

           1998                                        $   5,405,000
           1999                                            5,475,000
           2000                                            5,469,000
           2001                                            5,470,000
           2002                                            5,456,000
           Thereafter                                     30,415,000
                                                       -------------

                                                       $  57,690,000
                                                       =============

       Lease and rent expense for the Company totaled approximately $3,648,700
       and $2,845,300 in 1997 and 1996, respectively.

   (b) Capital Lease

       During 1996, the Company entered into a sale leaseback transaction
       accounting for this transaction as a financing. The total consideration
       for the sale was $8,300,000, which was recorded as a capital lease
       obligation by the Company (see note 4). As a result of the transaction,
       the Company realized net cash proceeds of approximately $2,660,000 (after
       related costs of approximately $99,000) and retired long-term debt
       totaling $5,541,000. In connection with the retirement of the existing
       debt, the Company wrote off the unamortized balance of the loan costs
       related to that debt resulting in an extraordinary charge of $86,997,
       before income tax benefit of $33,900. The Company recognized a gain on
       this transaction of approximately $733,000 for income tax purposes.


                                                                     (Continued)

                                     F - 18
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




       The Company will continue to operate this community pursuant to a lease
       agreement that expires in 2012. This lease is subject to additional rent
       payments based on a percentage of the increase in annual revenue of the
       community. The Company is also responsible for all costs including
       property taxes, maintenance and other direct operating costs.

   (c) Other Lease Financing

       The Company entered into arrangements pursuant to which a real estate
       investment trust (REIT) specializing in health care properties agreed to
       provide lease financing for the development of three of the Company's
       communities. Two of the communities commenced operations in 1997 and one
       community was under construction at December 31, 1997. The Company
       advanced approximately $124,000 and $1,125,000 of reimburseable
       construction costs at December 31, 1997 and 1996, respectively. These
       leases are included in note 7(a). Upon commencement of operations at the
       communities, lease payments begin and are accounted for as operating
       leases.

   (d) Construction Financing

       The Company has entered into construction loans in the aggregate of $63.5
       million for the construction of nine of its communities. The Company has
       also obtained from a bank a commitment to provide up to $15 million to
       finance five stand-alone Alzheimers' projects. The Company, along with
       its joint venture partner, has guaranteed a construction loan of $6.5
       million. All of these loans are generally for a term of 3 years, are
       collateralized by the related property, and are guaranteed by a
       shareholder.


                                                                     (Continued)

                                     F - 19
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(8) Income Taxes

     The components of the provision for income taxes before extraordinary loss
for the year ended December 31, 1997 and 1996 are as follows:

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

         Current:
             Federal                    $  (271,194)        $   300,774
             State                          (20,229)             61,926
                                        -----------         -----------

                                           (291,423)            362,700

         Deferred:
             Federal                        257,370            (256,200)
             State                           46,930             (48,100)
                                        -----------         -----------

                                            304,300            (304,300)
                                        -----------         -----------

                                        $    12,877         $    58,400
                                        ===========         ===========

     Income tax expense for the year ended December 31, 1997 and 1996 differs
     from the amounts computed by applying the U.S. Federal income tax rate of
     34% to pretax income before extraordinary loss as follows:

<TABLE>
<CAPTION>
                                                                                      1997          1996
                                                                              ------------    ----------
         <S>                                                                  <C>             <C>
         Computed "expected" tax expense (benefit)                            $ (1,314,024)   $   45,932
         Increase (decrease) in income taxes resulting from:
             State taxes, net of federal benefit                                  (151,973)        9,125
             Increase in valuation allowance                                     1,513,097             -
             Other, net                                                            (34,223)        3,343
                                                                              ------------    ----------

         Actual income tax expense                                            $     12,877    $   58,400
                                                                              ============    ==========
</TABLE>


                                                                     (Continued)

                                     F - 20
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




     The tax effects of temporary differences that give rise to the deferred tax
assets at December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                                                                                      1997            1996
                                                                             -------------    ------------
         <S>                                                                 <C>              <C>
         Sale leaseback transaction (note 2)                                 $     311,785    $    285,800
         Accrued expenses                                                           77,900               -
         Federal and state operating loss carryforwards                            644,945               -
         Deferred development fees                                                 341,185               -
         Other                                                                     137,282          18,500
                                                                             -------------    ------------

                      Total gross deferred tax assets                            1,513,097         304,300

         Less valuation allowance                                               (1,513,097)              -
                                                                             -------------    ------------

                      Net deferred tax assets                                $           -    $    304,300
                                                                             =============    ============
</TABLE>

     At December 31, 1997, the Company has net operating loss carryforwards for

<PAGE>

     Federal and state income tax purposes of approximately $1,573,000 and
     $2,371,000, respectively, which are available to offset future Federal and
     state taxable income, if any, through 2012.

     The net change in the total valuation allowance for the years ended
     December 31, 1997 and 1996 was an increase of $1,513,097 and $-0-,
     respectively.

(9)  Related Party Transactions

     Certain executive officers of the Company fulfill similar executive
     functions for other companies, which are owned or controlled by the
     majority shareholder, and spend significant amounts of time on the business
     of such companies.

   (a) Administrative Services Agreement

       The Company has entered into agreements with companies owned by the
       majority shareholder, whereby the Company will provide each of these
       entities executive assistance, accounting and financial management
       services, legal and administrative assistance, insurance, management
       information services and other management services as required. Under the
       terms of the agreement, the Company is reimbursed at its cost on a
       monthly basis for all services provided. Such reimbursements totaled
       approximately $408,000 in 1997 and $398,000 in 1996.


                                                                     (Continued)

                                     F - 21


<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




   (b) Construction Contracts

       Throughout 1997 and 1996, construction of the Company's new communities
       has been performed pursuant to construction contracts with a company
       owned by the majority shareholder. The terms of these contracts provide
       for, among other things, contractor's profit and overhead of up to 5% of
       the construction costs. Such fees totaled approximately $1,058,000 in
       1997 and $181,000 in 1996.

   (c) Lease Arrangements

       The Company leases two assisted living communities from entities
       controlled by the majority shareholder. The leases, expiring in 2005, are
       for 10 year terms at annual base rentals of $2,757,250 and are subject to
       additional rent payments based on a percentage of the increase in annual
       revenue of the respective community. Lease payments totaled $2,776,248
       and $2,757,250 in 1997 and 1996, respectively. The Company is responsible
       for all costs including repairs to the facilities, property taxes and
       other direct operating costs of the communities. The underlying mortgage
       lender for one of the leased communities requires that not less than 25
       percent of the outstanding stock of the Company be owned by the current
       majority shareholder and that the current majority shareholder continue
       to control the management of the Company.

   (d) Management Fees

       The Company manages one assisted living community from an entity
       controlled by the majority shareholder. The Company receives a management
       fee equal to 5 percent of the gross revenues of the community which
       amounted to approximately $151,800 and $147,800 in 1997 and 1996,
       respectively.

(10) Retirement Plan

     Employees of the Company participate in a salary deferral plan under the
     provisions of Section 401(k) of the Internal Revenue Code whereby they may
     defer a portion of their gross wages. The employer may make additional
     contributions to the Plan. Employer contributions made by the Company
     totaled approximately $92,300 and $53,000 in 1997 and 1996, respectively.


                                                                     (Continued)

                                     F - 22
<PAGE>
                          REGENT ASSISTED LIVING, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(11) Subsequent Events

     During the first quarter of 1998, the Company entered into sale leaseback
     agreements with real estate investment trusts (REITs) related to two
     assisted living communities. These communities were sold for an aggregate
     of $18.1 million, resulting in a net gain approximating $2.6 million, which
     was deferred and will be amortized over the respective lease term.

     The Company will continue to operate these communities pursuant to lease
     agreements, expiring at various dates from 2011 to 2013. The terms of these
     agreements provide for annual base rental payments of $1,615,370. These
     leases are subject to typical rent escalations. The Company is responsible
     for all costs including property taxes, maintenance and other direct
     operating costs.

     On March 27, 1998, the Board of Directors approved a private placement of
     $10.5 million of the Company's convertible subordinated debentures due
     2008. The debentures will bear interest at 7.5 percent per annum and are
     convertible into the Company's common stock at a price of $7.50 per share.
     The closing of this transaction is subject to the satisfaction of customary
     conditions.

     Upon closing of the private placement of the Company's convertible
     subordinated debentures, the Company will have secured a commitment to
     receive approximately $54.6 million of sale leaseback financing.

                                     F - 23

<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Portland, State of Oregon, on the 30th day of March, 1998.

                                       REGENT ASSISTED LIVING, INC.


                                       By: WALTER C. BOWEN
                                           -------------------------------------
                                           Walter C. Bowen
                                           President, Chief Executive Officer
                                           and Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the following persons in the capacities indicated have signed this
report below on the 30th day of March, 1998.

           Signature                                   Title
           ---------                                   -----

WALTER C. BOWEN                        President, Chief Executive Officer,
----------------------------------     Chairman of the Board and Director
Walter C. Bowen                        (Principal Executive Officer)


STEVEN L. GISH                         Chief Financial Officer, Treasurer,
----------------------------------     Assistant Secretary and Director
Steven L. Gish                         (Principal Financial and Accounting
                                       Officer)


PETER J. BRIX                          Director
----------------------------------
Peter J. Brix


STEPHEN A. GREGG                       Director
----------------------------------
Stephen A. Gregg


DANA J. O'BRIEN                        Director
----------------------------------
Dana J. O'Brien


MARVIN S. HAUSMAN, M.D.                Director
----------------------------------
Marvin S. Hausman, M.D.


GARY R. MAFFEI                         Director
----------------------------------
Gary R. Maffei


MARTHA L. ROBINSON
----------------------------------     Director
Martha L. Robinson


<PAGE>
                                 EXHIBIT INDEX

Exhibit   Description
Number    Page Number
------    -----------

(1)3.1    Restated Articles of Incorporation, as amended effective
          December 13, 1996.

(2)3.2    Restated Bylaws, as amended effective December 12, 1996.

(1)4.1    See Article II of Exhibit 3.1 and Articles I and VI of
          Exhibit 3.2.

(1)10.1   Lease Agreement between the Company and Regency Park
          Apartments Limited Partnership.

(1)10.2   Lease Agreement between the Company and the Bowen-Gionet
          Joint Venture.

(1)10.3   Employment Agreement between the Company and Walter C. Bowen.

(1)10.4   Employment Agreement between the Company and James W. Ekberg.

(1)10.5   Employment Agreement between the Company and Eric W. Jacobsen.

(1)10.6   Employment Agreement between the Company and Steven L. Gish.

(1)10.7   Employment Agreement between the Company and Gregory Roderick.

(1)10.8   Restrictive Covenant Agreement between the Company and
          Walter C. Bowen.

(1)10.9   Restrictive Covenant Agreement between the Company and
          James W. Ekberg.

(1)10.10  Restrictive Covenant Agreement between the Company and
          Eric W. Jacobsen.

(1)10.11  Restrictive Covenant Agreement between the Company and
          Steven L. Gish.

(1)10.12  Restrictive Covenant Agreement between the Company and
          Gregory Roderick.

(5)10.13  1995 Stock Incentive Plan, as amended effective December 4,
          1997.

(1)10.14  Form of Incentive Stock Option Agreement.

(1)10.15  Form of Nonqualified Stock Option Agreement.

(1)10.16  Administrative Services Agreement among the Company and
          certain of the Bowen companies.

(1)10.17  Indemnity Agreement between the Company and Walter C. Bowen.

(1)10.18  Indemnity Agreement between the Company and James W. Ekberg.

(1)10.19  Indemnity Agreement between the Company and Eric W. Jacobsen.

(1)10.20  Indemnity Agreement between the Company and Steven L. Gish.

(1)10.21  Regulatory Agreement by and between the Company (as assignee)
          and the Oregon Housing and Community Services Department
          ("OHCS").

(1)10.22  Form of First Amendment to Regulatory Agreement between the
          Company and OHCS.

(1)10.23  Management Agreement regarding Park Place.

(1)10.24  Subordination and Attornment Agreement with The Canada Life
          Assurance Company regarding Regency Park.

(1)10.25  Promissory Note from the Company to Sunshine Villa, Inc.

(1)10.26  Note from the Company to United States National Bank of
          Oregon.

(1)10.27  Line of Credit Instrument between the Company and United
          States National Bank of Oregon.

(2)10.28  Letter of Understanding, effective as of March 8, 1996,
          between the Company, Dr. Marvin S. Hausman, and Northwest
          Medical Research Partners.

(2)10.29  Employment Agreement, effective as of March 20, 1996, between
          David R. Gibson and the Company

(2)10.30  Restrictive Covenant Agreement, effective as of March 20,
          1996, between David R. Gibson and the Company

(3)10.32  Preferred Stock and Warrant Agreement between Prudential
          Private Equity Investors III, L.P. ("PPEI") and the Company
          dated as of December 16, 1996.

(3)10.33  Stockholders Agreement among the Company, PPEI, and Walter C.
          Bowen dated as of December 16, 1996.

(3)10.34  Registration Agreement between the Company and PPEI dated as
          of December 16, 1996.

(3)10.35  Stock Purchase Warrant in favor of PPEI for 200,000 Shares of
          Common Stock.

(3)10.36  First Amendment to Lease between the Company and Regency Park
          Apartments Limited Partnership dated December 16, 1996.

(3)10.37  Second Amendment to Lease between the Company and Sterling
          Park, L.L.C. dated December 16, 1996.

(3)10.38  Form of Indemnity Agreement between the Company and directors.

(4)16     Letter from Coopers & Lybrand L.L.P.

(5)21     List of Subsidiaries.

(5)23.1   Consent of Coopers & Lybrand L.L.P.

(5)23.2   Consent of KPMG Peat Marwick LLP.

(5)27.1   Financial Data Schedule

(5)27.2   Restated Financial Data Schedule

-----------

(1)  Incorporated by reference to Exhibits to the Company's Registration
     Statement on Form S-1, effective December 20, 1995 (Registration No.
     33-96912).

(2)  Incorporated by reference to Exhibits to the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 1995.

(3)  Incorporated by reference to Exhibits to the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 1996.

(4)  Incorporated by reference to the Exhibit to the Company's Form 8-K dated
     December 29, 1997.

(5)  Filed herewith.