<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-K

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

                   For the fiscal year ended December 31, 1999

                                       OR

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from ___ to ___.

                          Commission File Number 1-9885

                             Legend Properties, Inc.
             (Exact name of Registrant as specified in its charter)

         Delaware                                             36-3465359
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                              Identification No.)

3755 7th Terrace, Suite 301, Vero Beach, Florida                  32960
 (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code           (561) 778-0180

                                                         Name of each exchange
Title of each Class                                       on which registered

Shares of Common Stock                                           None
Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X    NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10K. [ ]

Shares of common stock outstanding as of March 31, 2000: 6,290,874. The
Registrants shares are not listed on an exchange or included in the NASDAQ
quotation system. There is no established public trading market for the shares
and the volume of trades in the secondary market does not permit the
determination of the aggregate market value of the Registrants shares of common
stock held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

                      See Exhibit index located on page 28
<PAGE>   2
                                TABLE OF CONTENTS

                                     PART 1
<TABLE>
<CAPTION>

<S>                                                                     <C>
ITEM 1. DESCRIPTION OF BUSINESS                                            1

ITEM 2. PROPERTIES                                                         6

ITEM 3. LEGAL PROCEEDINGS                                                  6

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                7

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED
        SHAREHOLDER MATTERS                                                8

ITEM 6. SELECTED FINANCIAL DATA                                            9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS                               10

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        21

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA          21

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE                               21

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT               22

ITEM 11. EXECUTIVE COMPENSATION                                           23

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT                                                       25

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   26

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
         ON FORM 8-K                                                      28

                                   SIGNATURES
</TABLE>
<PAGE>   3
                                     PART I

ITEM 1.DESCRIPTION OF BUSINESS

BUSINESS OPERATIONS

The Registrant, Legend Properties, Inc., formerly known as Banyan Mortgage
Investment Fund (the Company or Legend), is the surviving corporation from the
December 31, 1996 merger (the Merger) of Banyan Mortgage Investment Fund
(Banyan) and RGI U.S. Holdings, Inc. (RGI/US). The Company is organized as a
corporation under the laws of the State of Delaware, pursuant to a Restated
Certificate of Incorporation filed December 31, 1996.

As of December 31, 1999, Holdings owns approximately 80% of the outstanding
common shares of the Company. On October 15, 1999 the Company received a
proposal from Holdings for the merger of the Company with a wholly-owned
subsidiary of Holdings. The Company's Board of Directors established a special
committee to evaluate and consider the proposal. On January 6, 2000 the Board of
Directors approved a merger and the Company and Holdings executed a Merger
Agreement where Holdings will acquire all of the outstanding shares, not
currently held by Holdings, for $0.50 per share in cash. The merger is subject
to, among other things, approval by the shareholders and compliance with all
applicable regulatory and governmental requirements.

The Company was originally established to invest primarily in (i) short-term
loans, junior mortgage loans, wraparound mortgage loans and first mortgage loans
on income-producing properties and (ii) construction loans, pre-development
loans and land loans. In response to defaults on loans made by the Company to
its borrowers, in February 1990, the Company suspended making new loans, except
for advances of additional funds under circumstances which it deemed necessary
to preserve the value of existing collateral, including instances where the
Company foreclosed upon or taken title, directly or indirectly to the
collateral. At the time of the Merger, the Company controlled the ownership of a
2,227-acre parcel located in Charles County, Maryland (Chapman's Landing), a
2,685-acre development located in Prince William County, Virginia (Southbridge)
and a 565-acre parcel located in Monterey County, California (Laguna Seca
Ranch). The Laguna Seca Ranch and Chapman's Landing projects were sold in
December 1997 and October 1998, respectively.

RGI/US was a Washington corporation and until the Merger, was a wholly-owned
subsidiary of RGI Holdings, Inc. (Holdings) which is an indirect majority-owned
subsidiary of Aker RGI ASA, a Norwegian investment company with interests in
cement and building materials, oil and gas technology, seafoods and other
industries. At the time of the Merger, RGI/US, through various subsidiaries,
owned, developed and operated the following real estate: (i) Grand Harbor, a
772-acre residential golf community located in Vero Beach, Florida; (ii) Oak
Harbor, a 116-acre retirement community also located in Vero Beach, Florida
which includes the Royal Palm Convalescent Center, a skilled nursing care
facility licensed for 72 beds and (iii) a 164,724 square foot shopping center
located in Lynnwood, Washington (the Lynnwood Center). The Lynnwood Center was
sold in November 1997.

The Company's strategy is to realize and enhance the market potential of its
remaining assets. The Company currently controls approximately 2,700 acres of
land in a master planned community (Southbridge), a residential golf community
(Grand Harbor) and a retirement community (Oak Harbor). During September 1999,
the Company sold the Ashburn Corporate Center (Ashburn), a commercial business
park development. The Company had acquired the front parcel of the project
earlier in the year.

Legend is a diversified real estate development and operating company engaged in
three primary business activities: real estate development and sales, club
operations and patient services. The Company operates other ancillary operations
that provide support services to its primary business activities but these
ancillary operations are not material enough to be considered a primary business
activity.

         Real Estate Development and Sales

The Real Estate Development and Sales activity is responsible for land planning,
entitlements, land development, construction, and the sale of land parcels and
finished homes.

Southbridge includes a mix of commercial and residential land uses including
single-family, townhouse and apartment/condominium units and office, retail and
industrial/flex space. The Company is attempting to enhance the value of this
project through land use, entitlement and zoning modifications and selective
development. Such activities take into account local zoning, political and
market conditions. The Company anticipates primarily

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<PAGE>   4
developing commercial sites and residential housing lots for sale to third
parties but also pursues opportunities to sell undeveloped parcels or enter into
joint ventures, or whole or partial bulk sales.

Grand Harbor and Oak Harbor include primarily finished lots upon which the
Company, through a general contractor, builds a variety of housing types and
styles including villas, cottages, duplex and condominiums for sale to third
parties. The Company also pursues outright lot sales.

         Club Operations

The Club Operations activity is responsible for the management and operations of
the club facilities.

Grand Harbor operates the Grand Harbor Golf and Beach Club which includes a
clubhouse, two 18-hole golf courses, swimming and tennis facilities, and an
ocean front beach club.

Oak Harbor operates the Oak Harbor Club which includes a clubhouse and a 9-hole
golf course.

         Patient Services

The Patient Services activity is responsible for the management and operations
of the assisted living and skilled care nursing facilities.

Oak Harbor operates Somerset House (assisted living facility) and Royal Palm
Convalescent Center (skilled care nursing facility).

Following is a narrative describing Legend's core assets. The project business
plans explained below are subject to numerous risks and uncertainties which are
more fully described in Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Factors Affecting Legend's
Business Plan." If the Company is unable to secure the necessary financing or
capital to meet its future needs, the project business plans will likely be
materially revised, which may have a material adverse effect on the Company's
financial condition and results of operations. (See Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources.")

DESCRIPTION OF PROJECTS

Grand Harbor. Grand Harbor is a 772-acre gated residential golf community,
located along the Indian River in Vero Beach, Florida, with two 18-hole
championship golf courses and waterfront access with a marina containing 144
slips available for lease. The residences at Grand Harbor are clustered in
individual islands affording a view of the surrounding golf courses and scenic
waterways. Development of Grand Harbor began in 1987 and continued until 1990
when the Resolution Trust Corporation acquired the property and most development
and construction activities were terminated. In 1991, affiliates of RGI/US
acquired the project, completed the development of the marina and constructed
the clubhouse facilities and continued the residential development. At December
31, 1999 the Company owned approximately 300 acres.

Grand Harbor offers two 18-hole championship golf courses: a Harbor Course
designed by Pete Dye and a River Course designed by Joe Lee. The 28,000 square
foot clubhouse, which serves both courses, also serves as a social center for
Grand Harbor residents. Grand Harbor maintains 24-hour access control, together
with a variety of amenities, including an on-site swimming facility and eight
clay tennis courts and an off-site oceanfront beach club. Grand Harbor and Oak
Harbor collectively received zoning entitlements for the development of a
maximum of 2,688 residential units. The Company's business plan, however,
contemplates the development of 1,196 residential units at Grand Harbor and 322
residential units at Oak Harbor (see below). The Company believes this plan best
maximizes the value of these parcels based on existing and anticipated market
conditions, even though these parcels are zoned for greater density. If market
conditions change, the Company can increase, to a certain extent, the proportion
of multi-family homes to be developed under existing zoning.

Grand Harbor currently offers single-family detached homes, duplexes and
low-rise condominiums with sales prices ranging from approximately $200,000 to
$1,100,000 with sizes ranging from 1,600 to over 5,000 square feet. Previously,
golf course and riverfront lots were available at sales prices ranging from
$165,000 to over $500,000. Through December 31, 1999, 746 residences had been
sold and an additional 33 contracted for sale for delivery in

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<PAGE>   5
early or mid 2000. Based on the current development plan, approximately 417
additional residences are planned for Grand Harbor. Grand Harbor has received
governmental approvals for approximately 725,000 square feet of commercial space
on 60 acres. In early 1998, a 20-acre parcel was sold for a luxury apartment
project.

Grand Harbor currently derives revenue from the construction and sale of
single-family detached homes, duplexes, condominiums and individual lots; the
operation of club facilities; the rental of marina docks and the operation of a
harbor facility. In conjunction with offering residential units for sale, Grand
Harbor offers four (4) types of equity memberships in the Grand Harbor Golf and
Beach Club: (i) full memberships for $40,000; (ii) golf and tennis memberships
for $20,000; (iii) tennis memberships for $10,000; and (iv) social memberships
for $7,500. Upon the completion of sale of the equity memberships, Grand Harbor
will turn over management and control of the Grand Harbor Golf and Beach Club to
its members.

There are several residential communities located within Vero Beach that compete
with Grand Harbor in terms of location, quality, and/or price, including but not
limited to Windsor, Orchid Island Golf & Beach Club, and Indian River Club.
While these communities offer many of the same amenities as Grand Harbor such as
an oceanfront beach club and a gated community, many do not offer boating
access, a completed golf clubhouse, or have a limited product choice.

Oak Harbor. Oak Harbor is a 116-acre luxury country club retirement community,
located along the Indian River in Vero Beach, Florida. On-site amenities include
the 36,000 square foot clubhouse, a 24,900 square foot assisted living facility
with 24 private suites and a nine-hole golf course designed by Joe Lee. The
clubhouse contains a community hall, arts and crafts room, hobby shop, game
room, library and fitness center. Oak Harbor provides the opportunity to own a
home within a community that offers on-site health care and a Club that offers a
wide range of daily services designed to make life easier for residents. Oak
Harbor Club members receive daily meals, transportation, housekeeping, social
activities and access to optional health care. A discussion of Oak Harbor's
zoning entitlements is included under "Grand Harbor". At December 31, 1999 the
Company owned approximately 100 acres.

Oak Harbor offers condominiums and single-family homes ranging in price from
$250,000 to $635,000 and ranging in size from 1,178 to 2,850 square feet. All
residences have emergency call systems and trained health professionals are
available 24 hours a day to handle emergencies. Three levels of health care,
including skilled nursing, assisted living and home health care, are options
available to Oak Harbor residents at an additional cost above the monthly Club
dues described below.

-        Oak Harbor Club

         Membership in the Oak Harbor Club requires an initial $25,000 club
         deposit. Upon the re-sale of an Oak Harbor residence, the $25,000 club
         deposit is refundable subject to the new owner becoming a Club member
         and paying the deposit. In addition, there is an initiation fee equal
         to ten percent (10%) of the purchase price of the residence. This fee
         may be deferred until the residence is resold, but will then equal 10%
         of the greater of the initial purchase price or the sale price of the
         residence. (Currently, this initiation fee is waived for the first 125
         Club members.) The Oak Harbor Club is a non-equity club and Oak Harbor
         will not turn over management and control to its members. Monthly dues,
         ranging from $1,800 for a single person to $2,320 for a couple, include
         among other things, one meal per day, local transportation around Oak
         Harbor and Vero Beach, weekly housekeeping and linen service, Club
         activities, green fees on Oak Harbor's private nine-hole golf course,
         and 24-hour emergency response service.

-        Royal Palm Convalescent Center

         The off-site Royal Palm Convalescent Center is a skilled care nursing
         facility licensed for 72 beds, which is currently configured for 50
         beds in private and semi-private rooms. Royal Palm is a private
         facility, which does not accept Medicaid or Medicare patients and has
         received a Superior Rating the past 16 consecutive years from the
         Florida Department of Health and Rehabilitative Services.

         Daily rates range from approximately $159 for a semi-private room to
         $219 for a private suite. As of December 31, 1999, 37 beds were
         occupied (74%).

-        Somerset House


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<PAGE>   6
         The on-site Somerset House is one of the finest assisted living
         facilities in the United States. Initially constructed with 24 private
         suites with patios situated in private courtyards, the facility is
         designed as a "mini-clubhouse" versus the institutional style
         facilities prevalent in many communities. The facility's design allows
         expansion to up to 64 suites. The main building includes the common
         living, dining and kitchen facilities as well as the examination,
         consultation and home health care offices. The 24 private suites are
         located in a separate wing behind the main building. Each suite is 406
         square feet and contains living, dining and kitchen facilities. A
         centrally located nurse's station is staffed 24 hours a day by nursing
         staff to provide assistance as needed.

         Daily rates range from $84 for Oak Harbor Club members to $135 for
         non-members. As of December 31, 1999 there were 8 suites occupied
         (33%).

Oak Harbor's current development plan is for a total of 322 residences
consisting of villas, cottages and condominium units. As of December 31, 1999,
93 residences have been sold and an additional 14 residences were under contract
for sale for delivery in early or mid 2000. Residential sales are subject to a
non-refundable deposit of 20% of the sales price but are typically subject to
cancellation by the purchaser under specified circumstances, such as the
purchaser becoming incapable of independent living, or death. Although Oak
Harbor is a retirement community, all residents must be capable of independent
living at the time they join the Oak Harbor Club.

There are two competing lifecare communities located within a 35-mile radius of
Oak Harbor. Indian River Estates, located in Vero Beach, and Sandhill Cove,
located 32 miles south in Stuart, Florida. Both target a lower demographic
prospect than Oak Harbor, have smaller average units than those offered by Oak
Harbor, and do not offer home ownership to their residents.

Southbridge. Southbridge is a 2,685 acre mixed use master planned community
located along the Potomac River in Prince William County, Virginia,
approximately 24 miles south of Washington, D.C. Southbridge is located within
close proximity to the major employment centers of Washington, D.C. The current
development plan is for approximately 5,400 single-family detached homes,
townhomes, garden apartments and condominiums as well as 4 million square feet
of commercial space including office, flex-tech and retail. The project is
anticipated to be built in phases over the next 15 - 20 years and will offer
residents an assortment of amenities including a public 18 hole championship
golf course, three clubhouse facilities with pools and tennis courts and a town
center overlooking the Potomac River. At December 31, 1999 the Company owned
approximately 2,300 acres.

Southbridge is divided into seven phases; only the first of which has had sales
to date. Phase I is zoned for 2,376 residential units and 280,000 square feet of
commercial space. Although approved for 2,376 residential units, the Company's
current development plan anticipates development of 1,822 units, which the
Company believes maximizes the underlying value of the property based on
existing and anticipated market conditions. The Company can modify its
development plans within the limitations of the existing zoning in response to
changes in market conditions.

Southbridge offers builders different residential lot products as follows:
<TABLE>
<CAPTION>

                     STYLE                              LOT SIZE
                     -----                            -----------
<S>                                                   <C>
                     Garden Apartments                        N/A
                     Condominiums                             N/A
                     Townhomes                                N/A
                     Carriage                            5,000 SF
                     Cottage                             6,000 SF
                     Village                             8,000 SF
                     Country                            10,000 SF
                     Estate                             20,000 SF
</TABLE>

As of December 31, 1999, 792 residential lots have been sold and an additional
436 lots were under contract with 5 homebuilders for deliveries over the next
several years. Of the 436 lots under contract, 70 single-family lots are
developed and ready for delivery and 166 single-family lots are currently under
development. Anticipated quarterly deliveries range from 22 to 30 lots. The
Company continues to negotiate with other builders for additional residential
lots sales contracts. Future engineering and development of residential lots
will be timed to satisfy contractual requirements and anticipated market
demands.


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<PAGE>   7
In November 1998, the Company formed Potomac Heritage Homes to construct and
sell single family homes at various price points within Southbridge. Potomac
Heritage's function is to compliment residential lot sale efforts. In early
2000, the Company ceased the operations of Potomac Heritage Homes and has one
completed home available for sale.

The housing industry in the Greater Washington D.C. region is highly
competitive. In the Company's local Washington D.C. market, there are numerous
land developers, homebuilders and private interests with which the company
competes to attract homebuilders and qualified buyers. The Company competes
primarily on the basis of price, location, product and the level of amenities
provided within the community.

OPERATING SEGMENTS

See the Notes to Consolidated Financial Statements.

OTHER INFORMATION

Development and construction activities performed in the State of Florida are
not seasonal, however development and construction activities performed in the
State of Virginia are affected by inclement weather, with the majority of the
development and construction work occurring between the months of March and
November. As it relates to sales activities, the majority of revenues recorded
related to sales in the State of Florida occur between the months of October and
May, while revenues related to sales occurring in the State of Virginia are
recorded more evenly throughout the year.

As of December 31, 1999, the Company had 350 employees including two executive
officers.

The Company reviews and monitors compliance with federal, state and local
provisions which have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1999, the Company did not incur a
material amount for capital expenditures for environmental matters nor does it
anticipate making any material expenditures for environmental matters for the
year ending December 31, 2000.

Certain statements in this Annual Report that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Discussions containing forward-looking statements
may be found in this section and in the sections headed "Legal Proceedings,"
"Market for the Registrant's Shares and Related Shareholder Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Without limiting the foregoing, words such as "anticipates,"
"expects," "intends," "plans" and similar expressions are intended to identify
forward-looking statements. These statements are subject to a number of risks
and uncertainties (See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors Affecting Legends Business Plan.")
Actual results could differ materially from those projected in the
forward-looking statements. The Company undertakes no obligation to update these
forward-looking statements to reflect future events or circumstances.


                                       5
<PAGE>   8
ITEM 2.  PROPERTIES

As of December 31, 1999, the Company owned interests in three properties. Below
is a brief description of property interests owned by the Company:
<TABLE>
<CAPTION>

        Name, Location and                Approx.               Date
         Type of Property                   Size              Acquired                      Description
-----------------------------------     -------------      ---------------    ----------------------------------------
<S>                                     <C>                <C>                <C>
Grand Harbor                             300 acres            6/91(1)         a 100% interest in a corporation
Vero Beach, FL                                                                which owns the subject property
Residential Development and Club
Facilities

Oak Harbor                               100 acres            6/91(1)         a 100% interest in a corporation
Vero Beach, FL                                                                which owns the subject property
Residential Development, Club and
Patient Services Facilities

Southbridge                             2,300 acres             5/91          a 100% interest in general partnerships
Prince William County, VA                                                     which own the subject property
Land Development
</TABLE>

(1) The acquisition date represents the date the property was acquired by RGI/US
or affiliates. RGI/US merged with and into the Company effective December 31,
1996.

ITEM 3.  LEGAL PROCEEDINGS

Ashburn Corporate Center

During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in
the Circuit Court of Loudoun County against Atlantic Research Corporation (ARC)
which was amended during November 1998. Legend was seeking specific performance
under a real estate sales contract to purchase approximately 28 acres in Loudoun
County, Virginia (the Front Parcel) and any other relief the court would grant.
During the first quarter of 1999, Legend and ARC reached an agreement concerning
the real estate sales contract that resulted in Legend's acquisition of the
Front Parcel (see Note 4 of the Notes to Consolidated Financial Statements). As
a result, the litigation was withdrawn and dismissed in the second quarter of
1999.

Laguna Seca Ranch

On December 14, 1998, a Legend subsidiary, BMIF Monterey County Corp., filed a
complaint against New Cities Development Group, Bates Properties, Inc., New
Cities Development Company, Deregt Development, Inc., Rancho Monterey, L.L.C.
(collectively New Cities), Old Republic Title Company and David Bohen
(collectively Old Republic) in the United States District Court, Northern
District of California, San Jose Division.

During 1997, Legend sold a property known as the Laguna Seca Ranch to New Cities
with Legend retaining a house with certain surrounding property known as Lot 40
together with certain access easements to the nearest public right-of-way. New
Cities agreed, as part of the sale, to establish a separate legal parcel for Lot
40 subsequent to the sale. As part of the sale, Legend agreed to cooperate and
share equally in certain costs with New Cities in negotiating an agreement
concerning water service to the property with California-American Water Company
(Cal-Am). Pursuant to this, Legend agreed to post $200,000 in an interest
bearing escrow account held by Old Republic to pay any necessary amounts due
from Legend in consummating an agreement with Cal-Am. An agreement was reached
with Cal-Am on March 20, 1998 to provide the water needs, and Legend agreed with
New Cities to contribute $60,000 out of the escrow to defray certain costs. On
August 28, 1998 Cal-Am withdrew from its commitment. Subsequently, Old Republic
released the $200,000 escrow with interest to New Cities.

Legend claimed that New Cities breached certain implied covenants in refusing to
negotiate and consummate the agreement with Cal-Am, that New Cities failed to
establish Lot 40 as a separate parcel, and that Old Republic wrongly released
the funds in escrow to New Cities. Legend was seeking to recover $140,000 plus
interest on the escrow, that

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<PAGE>   9
New Cities convey Lot 40, that New Cities pay approximately $75,000 of costs
incurred by Legend for negotiating the agreement with Cal-Am and other damages.

During the first quarter of 2000, Legend and the defendants reached a settlement
on all matters whereby New Cities agreed to pay Legend $100,000, net of $5,887
for the reimbursement of utilities and services, related to the settlement for
the water services agreement and convey Lot 40 to Legend. Legend agreed to pay
New Cities $119,743 for certain development costs associated with Lot 40 and to
remove the Lis Pendens from Lot 40.

The Company is not aware of any other material pending legal proceedings as of
March 31, 2000.

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

There were no matters submitted to a vote of stockholders during the fourth
quarter of the year ended December 31, 1999.


                                       7
<PAGE>   10
                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS

There is no established public trading market for the Company's shares of common
stock. The Company has not declared cash dividends on its common stock since the
year ended December 31, 1989, nor does the Company anticipate the declaration of
any such dividends in the near future. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for further details.

At March 31, 2000, there were 8,656 record holders of the Company's shares of
common stock. Holdings owns approximately 80% of the outstanding common shares
of the Company.


                                       8
<PAGE>   11
ITEM 6.  SELECTED FINANCIAL DATA

For financial reporting purposes, the December 31, 1996 Merger of Banyan and
RGI/US was treated as a recapitalization of RGI/US, with RGI/US as the acquirer
of Banyan. Accordingly, the historical consolidated financial statements of
Legend and the selected financial data presented below for 1995 and 1996 are
those of RGI/US.
<TABLE>
<CAPTION>

                                                             For the Year Ended December 31,
                             -------------------------------------------------------------------------------------------------
                                  1999                 1998                 1997              1996 (2)             1995
                             ----------------     ----------------     ---------------     ---------------    ----------------
<S>                          <C>                  <C>                  <C>                 <C>                <C>
Cash and Cash
Equivalents                  $     2,902,359      $     4,446,864      $   12,732,681      $    1,529,898     $     578,906
                             ===============      ===============      ==============      ==============     =============
Investment in Real
Estate (1)                   $    75,806,841      $    82,873,914      $  103,857,159      $  128,834,222     $  21,984,169
                             ===============      ===============      ==============      ==============     =============
Properties Owned at
December 31 (1)                            3                    4                   4                   6                 3
                             ===============      ===============      ==============      ==============     =============
Total Assets                 $   127,688,960      $   147,558,291      $  162,870,552      $  184,110,129     $  40,555,418
                             ===============      ===============      ==============      ==============     =============

Notes Payable to Banks
and Others                   $    21,587,213      $    40,722,737      $   60,411,332      $   86,700,617     $  23,288,065
                             ===============      ===============      ==============      ==============     =============

Payables to Related
Parties                      $    88,661,961      $    84,744,478      $   72,893,927      $   47,609,097     $  25,728,682
                             ===============      ===============      ==============      ==============     =============
Total Revenues               $    74,976,482      $    75,733,456      $   55,627,898      $   36,623,291     $   2,088,247
                             ===============      ===============      ==============      ==============     =============
Income Tax Benefit           $     9,331,542      $         --         $       --          $        --        $        --
                             ===============      ===============      ==============      ==============     =============
Net Loss                     $    (3,313,919)     $  (12,136,973)      $ (14,505,906)      $  (2,153,583)     $ (4,069,032)
                             ===============      ===============      ==============      ==============     =============
Net Loss Per Share of
Common Stock  - basic
and diluted (3)              $        (0.53)      $        (1.93)      $       (2.31)      $        (.49)     $       (.93)
                             ===============      ===============      ==============      ==============     =============
</TABLE>


(1)      "Investments in Real Estate" and "Properties Owned at December 31"
         include investments in Grand Harbor and Oak Harbor through December 31,
         1995.

(2)      Effective January 1, 1996, Grand Harbor Associates, Inc. (a
         wholly-owned subsidiary of Legend), a 45% owner of the Grand Harbor and
         Oak Harbor projects (the Projects), acquired an additional 45% interest
         in the Projects. Additionally, effective December 31, 1996, RGI/US
         merged with Banyan. Both of these business combinations were accounted
         for under the purchase method of accounting, wherein the purchase price
         was allocated to the assets acquired and liabilities assumed based upon
         their relative fair values. The accounts of these acquired companies
         have been included in the consolidated financial statements of Legend
         from the acquisition dates.

(3)      For the years ended December 31, 1999 and 1998 there were 6,290,874
         shares outstanding. For the years ended December 31, 1997, 1996 and
         1995 the weighted average number of shares outstanding was 6,286,322,
         4,392,163 and 4,386,983, respectively, due to the recapitalization of
         RGI/US on December 31, 1996 and the sale of 34,130 shares in 1996.


                                       9
<PAGE>   12
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

Legend Properties, Inc., formerly known as Banyan Mortgage Investment Fund (the
Company or Legend), is the surviving corporation from the December 31, 1996
merger (the Merger) of Banyan Mortgage Investment Fund (Banyan) with RGI U.S.
Holdings, Inc. (RGI/US). For financial reporting purposes, the Merger was
treated as a recapitalization of RGI/US, with RGI/US as the acquirer of Banyan.
As of December 31, 1996, the historical consolidated financial statements of
RGI/US became those of Legend Properties, Inc.

As of December 31, 1999, Holdings owns approximately 80% of the outstanding
common shares of the Company. On October 15, 1999 the Company received a
proposal from Holdings for the merger of the Company with a wholly-owned
subsidiary of Holdings. The Company's Board of Directors established a special
committee to evaluate and consider the proposal. On January 6, 2000 the Board of
Directors approved a merger and the Company and Holdings executed a Merger
Agreement where Holdings will acquire all of the outstanding shares, not
currently held by Holdings, for $0.50 per share in cash. The merger is subject
to, among other things, approval by the shareholders and compliance with all
applicable regulatory and governmental requirements.

Since its merger in December 1996, Legend has focused its management efforts and
financial resources on its core assets on the East Coast. Non-core assets,
including a 565-acre land parcel (Laguna Seca Ranch) located in California and a
164,724 square foot retail shopping center located in the state of Washington
(Lynnwood Center), were sold during 1997 for approximately $33 million. During
October 1998, Legend sold the Chapman's Landing project to the State of Maryland
and an environmental group for a total sales price of $28.5 million. During
September 1999, the Company sold the Ashburn Corporate Center to an unaffiliated
third party for approximately $15.2 million. The Company had acquired the front
parcel of the project earlier in the year.

Legend is currently focused on continuing the development of infrastructure,
amenities, residential land parcels and residential units at Grand Harbor, Oak
Harbor and Southbridge consistent with approved zoning and development plans. At
Southbridge, Legend intends to rezone the future phases of the project to allow
continuation of its development plan. As Southbridge is still in the initial
stages of development, where major investments in infrastructure improvements
are required to realize the market potential, significant financial resources
have been committed to infrastructure and land parcel improvements. The
Company's ability to fully implement its business plan is dependent on, among
other things, securing long-term and short-term financing related to the
developments on acceptable terms. There can be no assurances that the Company
will be able to obtain the necessary financing on acceptable terms, if at all.
See "Factors Affecting Legend's Business Plan" below.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has utilized internally generated funds, third party
borrowings and loans from Holdings and affiliated entities to fund its
construction and development activities, and ongoing operating expenses.
Deferral of interest due to Holdings pursuant to the terms of the loan
agreements has also allowed the Company to maintain and preserve its liquidity
and capital resources.

During the year ended December 31, 1999 the Company utilized existing cash and
cash equivalents, net sales proceeds from the sale of the Ashburn Corporate
Center and third party borrowings to fund its development, construction and
operating activities. The Company borrowed $3,750,000 from Holdings on a
short-term basis which was repaid, along with accrued interest. In addition, a
$1,743,682 principal payment was also repaid to Holdings.

During 2000, the Company contemplates continued expenditures for the development
of residential lots and construction of residential homes at Grand Harbor, Oak
Harbor and Southbridge, so that finished units and lots will be available during
2000 and beyond to satisfy existing real estate sales contracts. For Grand
Harbor and Oak Harbor, the Company anticipates utilizing existing construction
lines for the majority of the construction financing and securing additional
construction lines from existing external lenders for the remainder. At
Southbridge, the Company must arrange for development financing.

As of December 31, 1999, the Company's debt obligations, including payables to
related parties of $88,661,961, totaled $110,249,174 of which $5,803,953 matures
during 2000. None of these maturities relates to loans from

                                       10
<PAGE>   13
Holdings. In addition to the debt maturities under existing financings, as noted
above, the Company requires additional financings to advance its business plan.
As of December 31, 1999, the Company had $2,902,359 of cash and cash
equivalents, which will not be sufficient to fund these obligations.

The Company expects to meet its existing debt obligations that mature during
2000 by the renewal and extension of existing construction lines, and internally
generated funds from real estate sales and operations. Based on alternatives
available, Management believes that sufficient funds will be available to meet
its obligations during 2000. If sufficient funds are not available from the
above sources, the Company anticipates delaying certain interest payments as
allowed under the debt agreements. The Company also has available, if needed, a
$5 million credit facility from Holdings, which was unused at December 31, 1999.

For future construction and development activities, the Company anticipates
utilizing existing construction lines or securing additional construction lines
or development financing as noted above. Once construction lines or development
financing are secured, they are typically renewed on an annual basis.

There can be no assurance that the Company will be able to secure the necessary
future construction and development financing to implement its plan or that, if
available, the terms and conditions will be acceptable to the Company. If the
Company is unable to secure the necessary additional financing or capital when
needed, the plans for its projects will likely be materially revised, which
would have a material adverse effect on the Company's financial condition and
results of operations. See "Factors Affecting Legend's Business Plan".

For each of Legend's projects, cash flow generated from operations can differ
substantially from reported earnings, depending on the status of the development
cycle. At Southbridge, which is in the initial stages of development,
significant cash outlays are required for, among other things, land
acquisitions, processing zoning and other regulatory approvals, construction of
amenities, major roadways, infrastructure and debt service. Since a significant
part of these initial expenditures is capitalized, income reported for financial
statement purposes during the initial years may significantly exceed operating
cash flow. At Grand Harbor and Oak Harbor, which have completed the initial
stages of development, operating cash flow can exceed earnings reported for
financial statement purposes, since the initial expenditures, which were
incurred in a prior period and capitalized, are now being included as expenses.

1999 compared to 1998

Legend's cash and cash equivalents balance at December 31, 1999 and 1998, was
$2,902,359 and $4,446,864, respectively. The decrease is attributable to cash
used in financing activities of $23,320,522, which is partially offset by cash
provided by operating and investing activities of $13,233,674 and $8,542,343,
respectively.

Cash Flows from Operating Activities: For the year ended December 31, 1999,
operating activities provided cash of $13,233,674.

Cash provided by operations in 1999 was primarily due to the following:

-        A net $14,983,248 reduction in inventory and assets held for sale.
         Assets held for sale decreased a net $7,916,175 million resulting from
         the sale of Ashburn. Real estate inventory decreased a net $7,067,073
         million, due to unit and lot sales of 60, 28 and 135 at Grand Harbor,
         Oak Harbor and Southbridge, respectively, which reduced real estate
         inventory by $33,052,315. This decrease was offset by additional
         development and construction activities totaling $25,985,242.

-        Related party interest expense of $7,513,708 that was accrued but not
         paid during 1999. This accrued interest was capitalized into the loan
         balance on December 31, 1999 in accordance with the terms of the
         related loan agreements.

-        Deferred tax benefit of $4,573,900 that was recorded but not paid in
         1999, related to the income tax benefit anticipated to be realized
         by the utilization of the Company's 1999 operating loss.

-        Depreciation and amortization of $2,075,836 that resulted primarily
         from fixed asset depreciation for Grand Harbor and Oak Harbor and loan
         cost amortization.

Partially offset by the following:

-        A net loss of $3,313,919 that was caused principally by substantial
         interest expense, corporate overhead, including severance and
         relocation costs of $850,000, and operating losses at Oak Harbor and
         Southbridge. These were partially offset by operating profits at Grand
         Harbor and Ashburn and the income tax benefit

                                       11
<PAGE>   14
         recorded. Grand Harbor's operating profit resulted primarily from
         residential unit sales which more than offset the losses generated from
         club operations. Ashburn's operating profit resulted primarily from the
         gain from the sale of the Ashburn Corporate Center. Sales at Oak Harbor
         and Southbridge exceeded prior years but were not sufficient for the
         projects to cover their overhead, and in the case of Oak Harbor, the
         losses generated by the club and assisted living operations.

-        An increase in accounts and notes receivable and other assets of
         $2,113,928 and a decrease in accounts payable and other notes and
         liabilities of $1,337,371 during 1999. The increase in other assets is
         primarily attributable to the recording of a related party receivable
         representing the income tax benefit realized from the utilization of
         the Company's 1998 operating loss. Fluctuations in these accounts are
         generally due to the timing of the collection of accounts and notes
         receivable and the payment of certain liabilities, including trade
         payables, advances from customers and prepaid expenses. These
         fluctuations can vary significantly from period to period depending on
         the timing of sale closing, and development and construction
         activities. Due to the nature of Legend's business, significant
         fluctuations in operating assets and liabilities are not considered
         unusual.


Cash Flows from Investing Activities: The Company generated $8,542,343 from
investing activities during 1999. Certain deposits that were held as collateral
against a bank loan were released and used to pay down that debt pursuant to a
renegotiated loan agreement. Customer deposits also declined as a result of
sales activity which, when combined with the collateral release, resulted in a
decline in restricted cash and investments of $8,415,490. Proceeds from the sale
of property and equipment totaled $830,062, which results primarily from the
sale of a condominium unit held by the Company in Grand Harbor. These changes
were partially offset by the purchase of $703,209 of property and equipment.

Cash Flows from Financing Activities: For the year ended December 31, 1999,
Legend utilized net cash in financing activities in the amount of $23,320,522,
primarily for the repayment of $34,009,795 and $7,741,661 of unaffiliated and
related party debt, respectively, partially offset by proceeds from borrowings
of $14,874,271 from unaffiliated parties and $3,750,000 from related parties.

The Company borrowed $14,874,271 from unaffiliated parties, primarily at Grand
Harbor ($10,948,516) and Oak Harbor ($3,094,070) under existing construction
lines, to fund construction and development costs. Debt repayments to
unaffiliated parties totaled $34,009,795 (Grand Harbor $13,183,277, Oak Harbor
$11,334,354, Southbridge $2,980,000 and Ashburn $5,940,000). These funds were
generated from the sale of residential units and club memberships, the release
of the collateral deposit discussed above, the sale of the Ashburn Corporate
Center and existing cash sources. In addition, the Company borrowed $3,750,000
from Holdings, which was used to pay $2,248,279 of maturing related party debt
and a portion of external debt. This advance along with accrued interest and an
additional $1,743,382 principal payment on another piece of the related party
debt was repaid with the proceeds from the Ashburn sale.

1998 compared to 1997

Legend's cash and cash equivalents balance at December 31, 1998, and December
31, 1997, was $4,446,864 and $12,732,681, respectively. The decrease is
attributable to cash used in investing and financing activities of $4,578,762
and $13,998,293, respectively, which is partially offset by cash provided by
operating activities of $10,291,238.

Cash Flows from Operating Activities: For the year ended December 31, 1998,
operating activities provided cash of $10,291,238.

Cash provided by operations in 1998 was primarily due to the following:

-        A net $13,067,070 reduction in inventory and assets held for sale
         resulting from the sale of Chapman's Landing that was partially offset
         by the acquisition of Ashburn for approximately $7.9 million. In
         addition, development activities continued at Southbridge, which also
         offset the inventory decline related to the Chapman's Landing sale.
         Total land acquisition, development and construction activities were
         $36,561,117. This was offset by an aggregate inventory reduction of
         $49,628,187, due to the Chapman's Landing sale and unit or lot sales of
         64, 22, and 63 at Grand Harbor, Oak Harbor and Southbridge,
         respectively.


                                       12
<PAGE>   15
-        Related party interest expense of $5,853,716 that was accrued but not
         paid during 1998. This accrued interest was capitalized into the loan
         balance on December 31, 1998 in accordance with the terms of the
         related loan agreements.

-        Depreciation and amortization of $2,977,467 that resulted primarily
         from fixed asset depreciation for Grand Harbor and Oak Harbor and loan
         cost amortization.

-        An increase in accounts payable and other notes and liabilities of
         $4,662,756 offset by an increase in accounts and notes receivable and
         other assets of $4,132,798 during 1998. Fluctuations in these accounts
         are generally due to the timing of the payment of certain liabilities,
         including trade payables, advances from customers, prepaid expenses,
         and the collection of accounts and notes receivable. These fluctuations
         can vary significantly from period to period depending on the timing of
         sale closing, and development and construction activities. Due to the
         nature of Legend's business, significant fluctuations in operating
         assets and liabilities are not considered unusual.

Partially offset by the following:

-        A net loss of $12,136,973 that was caused principally by substantial
         interest expense, corporate overhead and operating losses at Oak
         Harbor, Ashburn and Southbridge. These were partially counterbalanced
         by operating profits at Grand Harbor and the gain from the sale of
         Chapman's Landing. Sales at Oak Harbor were less than expected in 1998
         and lower than 1997. Ashburn incurred certain costs associated with
         holding and marketing the property during the period it has been held
         for sale without any compensating revenues. Southbridge experienced
         delays in developing lots due to an extremely wet winter and spring in
         the Washington, DC area, and closed fewer lots than expected. Grand
         Harbor's operating profits resulted primarily from the sale of a
         20-acre parcel of raw land and better than expected residential unit
         sales.


Cash Flows from Investing Activities: Legend used $4,578,762 in investing
activities during 1998. The majority of this was the result of $3,787,322
increase in restricted cash and investments, that arose chiefly from the growth
of customer sales deposit cash at Grand Harbor as the backlog has expanded from
12 to 39 units between December 31, 1997 and 1998. The remainder of the increase
relates to $791,440 in purchases of property and equipment during 1998.

Cash Flows from Financing Activities: For the year ended December 31, 1998,
Legend utilized net cash in financing activities in the amount of $13,998,293
primarily for the repayment of $41,258,127 of external debt, partially offset by
proceeds from borrowings of $21,569,532 from external parties and $6,000,000
from related parties.

The Company borrowed $21,569,532 from external parties that was mainly used at
Grand Harbor ($11,698,130) and Oak Harbor ($3,931,402) to fund construction and
development costs. Additional funds were borrowed at Ashburn Corporate Center
($5,940,000) to finance the acquisition of the first parcel as was previously
described. Debt repayments to external parties totaled $41,258,127 (Corporate
$996,220, Grand Harbor $23,642,961 and Oak Harbor $16,618,946). These funds were
generated from the sale of Chapman's Landing (described earlier), sale of
residential units and club memberships, and existing cash sources. Moreover, the
Company borrowed $6,000,000 from Holdings, which was used to pay off existing
external debt and fund construction and development activities, and ongoing
operations.


                                       13
<PAGE>   16
RESULTS OF OPERATIONS

Results of operations for the year ended December 31,1999 include the
consolidated revenues and expenses of Grand Harbor, Oak Harbor, Southbridge and
Ashburn. Results of operations for the year ended December 31,1998 include the
consolidated revenues and expenses of Grand Harbor, Oak Harbor, Southbridge,
Ashburn and Chapman's Landing. Results of operations for the year ended December
31,1997 consist of the consolidated revenues and expenses for Grand Harbor, Oak
Harbor, Southbridge, Chapman's Landing, Laguna Seca Ranch and the Lynnwood
Center. The 1999 change was the sale of Ashburn in September, 1999 while 1998
changes were the acquisition of Ashburn in March 1998 and the sale of Chapman's
Landing in October 1998. The 1997 changes were the sales of the Laguna Seca
Ranch and the Lynnwood Center in November and December 1997, respectively.
Accordingly, the 1999, 1998 and 1997 results of operations are not comparable.

1999 compared to 1998

Total revenues dropped $756,974 between 1998 and 1999 due to a decrease in real
estate sales revenues which was partially offset by increases in club
operations, patient services and other revenues. These changes are discussed in
further detail below.

Real estate sales revenues decreased $2,982,020 in 1999 as compared to 1998, as
a result of a decrease in revenues from the bulk sale of properties. During
1998, Chapman's Landing was sold for $28.5 million while in 1999 Ashburn was
sold for $15.2 million. In addition, a 20-acre land parcel was also sold during
1998 at Grand Harbor for $1.9 million yielding a net decrease of $15.2 million
in bulk sales revenue. This decline was substantially offset by increases in
unit and/or lot sales at Grand Harbor ($24,413,833), Oak Harbor ($11,142,766)
and Southbridge ($5,895,581).

Grand Harbor's real estate sales totaled 60 units in 1999 versus 64 units in
1998 (which included 10 resale units). The average sales price was approximately
$436,000 in 1999 compared to $365,000 for 1998. At Oak Harbor, 28 units were
sold during 1999 as opposed to 22 units during 1998, at an average sales price
of approximately $382,000 in 1999 compared to $390,000 in 1998. Sales prices
range from $200,000 to $1,100,000 at Grand Harbor and $250,000 to $635,000 at
Oak Harbor. Accordingly average unit sales prices may fluctuate dramatically
from period to period depending upon factors such as the unit type and location
of the product sold.

At Southbridge, lot sales increased from 63 in 1998 to 135 in 1999. The increase
from 1998 to 1999 occurred primarily because additional sections were opened in
1999 and certain sections had a full year of deliveries in 1999 versus a partial
year in 1998. The average Southbridge lot sale price for 1999 was $42,000, which
is comparable to the 1998 average of $40,500.

The Company's backlog at December 31, 1999 was as follows:
<TABLE>
<CAPTION>
                                                                   CONTRACT
                                                    UNITS           VALUE
                                                 ---------      -------------
<S>                                              <C>            <C>
                         Grand Harbor                   33      $  17,126,137
                         Oak Harbor                     14          6,390,600
                         Southbridge                   436         21,033,500
                                                 ---------      -------------
                                                       483      $  44,550,237
                                                 =========      =============
</TABLE>


Club memberships increased between 1998 and 1999 as a result of the continued
progress in the sales and development activities at both Grand Harbor and Oak
Harbor, and was the chief component in the rise in club operations revenue.

Patient services revenues increased slightly in 1999 as compared to 1998 due to
slightly higher patient levels.

Total operating costs and expenses rose $619,942. This is mainly due to an
increase in club operating costs partially offset by a decrease in cost of real
estate sales.

Real estate sales expense decreased in 1999 from 1998 by $686,378 primarily due
to the $10.5 million decrease in the costs associated with the bulk sale of
property ($13.3 million in 1999 for Ashburn versus $23.8 million in 1998 for
Chapman's Landing and the 20-acre Grand Harbor land parcel). The decrease was
almost completely offset by the increase in the overall number of units sold and
changes in unit type, which were described previously. The gross

                                       14
<PAGE>   17
margin as a percentage of real estate sales revenues was 21% (24% excluding
Ashburn) as compared to 24% for 1998 (26% excluding Chapman's Landing and the
sale of a 20-acre land parcel at Grand Harbor). The slight decline in the
average gross margin is attributable to an increase in the number of Southbridge
units in the total, which generate a lower gross margin versus Grand Harbor and
Oak Harbor. Gross margins by project, excluding bulk land sales, are comparable
for 1999 and 1998. Even so, gross margins realized on the sale of residential
units at Grand Harbor and Oak Harbor can fluctuate significantly from period to
period depending upon the type and location of the product sold.

Club operation expenses increased in 1999 over 1998 mainly in response to the
growth in club operation revenues.

Selling, general and administrative costs declined slightly in 1999 as compared
to 1998 due to a reduction in professional fees from better management of those
relationships and reductions in real estate taxes and homeowner association
subsidies resulting from the general sales progress of the projects. Also
contributing to the decline was the elimination of operating expenses for
Chapman's Landing in 1999 since the project was sold during 1998. These cost
reductions were almost completely offset by the onetime expense of $850,000 for
severance and relocation costs in 1999.

Patient services costs and expenses increased slightly in 1999 as compared to
1998 which is attributable to higher patient levels.

Net other expense decreased $868,428 between 1999 and 1998 primarily due to a
decline in external debt interest expense, offset by an increase in related
party debt interest expense and a drop in interest income. The interest expense
decline resulted from a net reduction in outstanding external debt. Reductions
in cash and cash equivalents available for short-term investment account for
most of the decline in interest income between 1999 and 1998.

Income tax benefit generated in 1999 was $9,331,542 versus $0 in 1998. The 1999
income tax benefit resulted from the realized and anticipated to be realized
utilization of the Company's 1998 and 1999 operating losses by an affiliated
consolidated tax group, pursuant to a new Tax Sharing and Allocation Agreement
which has an effective date retroactive to January 1, 1998.

These changes yielded a decrease in the net loss of $8,823,054 (a net loss for
1999 of $3,313,919 or $0.53 per share, as compared to $12,136,973 or $1.93 per
share for 1998).

1998 compared to 1997

Total revenues rose $20,105,558 between 1997 and 1998. This is mainly because of
increases in real estate revenues, and to a lesser extent improvements in club
operating revenues. These are discussed in further detail below.

Real estate sales revenues grew $21,623,393 between 1997 and 1998 primarily as a
result of increases in revenues from the bulk sale of properties. During 1997,
Laguna Seca was sold for approximately $12.8 million whereas Chapman's Landing
was sold in 1998 for $28.5 million. Moreover, a 20-acre land parcel was sold
during 1998 at Grand Harbor for $1.9 million yielding a net increase of $17.6
million in bulk sales revenue. The remainder of the change relates to a net
increase in unit and lot sales at Grand Harbor ($5,609,412 increase), Oak Harbor
($3,081,529 decrease) and Southbridge ($1,380,989 increase).

Grand Harbor's real estate sales rose to 64 units in 1998 from 44 units in 1997
resulting from improved marketing strategies and the overall health of the US
economy. The average sales price was approximately $407,000 in 1997 compared
with nearly $365,000 for 1998. At Oak Harbor, 22 units were sold during 1998 as
opposed to 30 units during 1997 for an approximate average sales price of
$390,000 for both 1998 and 1997. Oak Harbor completed its first 24-unit
condominium during March 1997, and at that time had a majority of those units
under contract. These units closed soon thereafter, which substantially
increased sales for 1997 over 1998. Sales prices range from $165,000 to
$1,100,000 at Grand Harbor, and $250,000 to $635,000 at Oak Harbor. Accordingly
average unit sales prices may fluctuate dramatically from period to period
depending upon factors such as the unit type and location of the product sold.

At Southbridge, lot sales increased from 12 in 1997 to 63 in 1998. This occurred
despite poor weather (in particular excessive rain) in the Washington, DC area
during the winter and spring of 1998, which stalled lot development activity.
The rise from 1997 to 1998 occurred primarily because sales for 1997 were
restrained due to delays in

                                       15
<PAGE>   18
development activity. This was caused by the previously discussed Merger and
attendant litigation. The average Southbridge lot revenue for 1998 was $40,500,
which is comparable to the 1997 average of $42,500.

Club memberships increased between 1997 and 1998 as a result of the continued
progress in the sales and development activities at both Grand Harbor and Oak
Harbor, and was the chief component in the rise in club operations revenue. The
rental revenue for 1997 relates to the Lynnwood Center, which was sold during
1997.

Accordingly, there is no such comparable revenue item for 1998.

Total operating costs and expenses rose $17,516,156. This is mainly due to
increased real estate sales expenses and club operating costs, net of a decrease
in selling, general and administrative expenses.

A $15.0 million rise in the costs associated with the bulk sale of property
($23.8 million in 1998 for Chapman's Landing and the 20-acre Grand Harbor land
parcel versus $8.8 million during 1997 for Laguna Seca) was primarily
responsible for the $18,284,255 increase in real estate sales expenses between
1997 and 1998. The balance of the increase relates mainly to the growth in the
overall number of units sold and changes in unit type, which were described
previously. The gross margin as a percentage of real estate sales revenues was
24% for 1998 (26% excluding Chapman's Landing and the sale of a 20-acre land
parcel at Grand Harbor) as compared to 28% for 1997 (27% excluding Laguna Seca).
The gross margins excluding bulk land sales are comparable for 1998 and 1997.
Even so, gross margins realized on the sale of residential units at Grand Harbor
and Oak Harbor can fluctuate significantly from period to period depending upon
the type and location of the product sold.

Club operation expenses increased in 1998 over 1997 mainly in response to the
growth in club operation revenues. Selling, general and administrative costs for
1997 included expenses for relocating the corporate offices and certain costs
for litigation associated with the merger and expenses for settling lawsuits
raised in connection with the merger. Accordingly, the 1997 costs include
certain "onetime" costs that were not repeated in 1998. Moreover, these costs
fell between 1997 and 1998 as real estate taxes and homeowner association
subsidies declined with the general sales progress of the projects. This was
coupled with reductions in professional fees from better management of those
relationships and other similar factors. The total effect was a $2,851,007
reduction in selling, general and administrative costs between 1997 and 1998.

Net other expense decreased $32,247 between 1997 and 1998 primarily due to a
decline in interest expense, offset by a drop in interest income. The interest
expense decline resulted from a net reduction in external debt. Reductions in
cash and cash equivalents available for short-term investment account for most
of the decline in interest income between 1997 and 1998.

These changes yielded a decrease in the net loss of $2,368,933 (a net loss for
1998 of $12,136,973 or $1.93 per share, as compared to $14,505,906 or $2.31 per
share for 1997).



                                       16
<PAGE>   19
FACTORS AFFECTING LEGEND'S BUSINESS PLAN

         In addition to the other information contained in this Annual Report,
the following factors should be considered carefully:

Interest Rates

         Legend's business and financial condition may be affected during
inflationary periods as a result of the higher costs and interest rates that
accompany these cycles. High inflation and interest rates push financing and
construction costs upward, which may adversely impact the Company's operations.
Moreover, housing demand typically declines during such periods because
financing is difficult, and at times impossible, for potential buyers to obtain
on acceptable terms, thereby depressing demand for the Company's products.

Substantial Debt Obligations

         As of December 31, 1999 the Company's outstanding notes payable to
banks and others aggregated $21,587,213, of which $5,803,953 matures in 2000,
$6,696,620 in 2001 and $9,086,640 in 2002 and thereafter. Additionally, as of
December 31, 1999 payables to related parties totaled $88,661,961, which matures
in 2003. As of December 31, 1999 the Company had $2,902,359 of cash and cash
equivalents, which will not be sufficient to fund these obligations.

There can be no assurance that the Company will be able to obtain the necessary
construction and development financing to implement its plan or that, if
available, the terms and conditions will be acceptable to the Company. If the
Company is unable to secure the necessary additional financing or capital when
needed, the plans for its projects will likely be materially revised, which
would have a material adverse effect on the Company's financial condition and
results of operations.

         Legend's ability to service its debts and other obligations when they
become due will also depend on various factors affecting its properties, such as
operating expenses and construction schedules, which, in turn, may be adversely
affected by general and local economic conditions. Certain expenditures, such as
loan payments and real estate taxes are typically fixed obligations and are not
necessarily decreased by adverse events affecting revenues generated by the
properties. Therefore, expenditures for developing properties may exceed the
income derived from the sale of lots or homes and Legend would have to obtain
funds from other sources to operate and maintain a property in order to protect
its investment.

Need for Additional Capital

         Funds from operations and proceeds from the sale of assets will not be
sufficient to allow Legend to complete its business plans for its remaining
properties. There can be no assurance that additional capital will be available
to Legend or that, if available, the terms and conditions will be acceptable to
Legend or will not be dilutive to Legend's stockholders. A failure to secure
additional capital when needed would have a material adverse effect on Legend's
results of operation and financial condition.

Real Estate Investment Risks

         Real property investments are subject to certain risks that are not
always susceptible to prediction or control. The cash flow generated by, and
capital appreciation realized from, real property investments may be adversely
affected by the national and regional economic climate (which, in turn, may be
adversely impacted by plant closings, industry slow downs, income tax rates,
interest rates, demographic changes and other factors), local real estate
conditions (such as oversupply of, or reduced demand for rental space or housing
in the area), the attractiveness of the properties, zoning and other regulatory
restrictions, competition from other land developers or developments, increased
operating costs (including maintenance costs, insurance premiums and real estate
taxes), perceptions by tenants or potential buyers of the safety, convenience
and attractiveness of the property and the willingness of the owner of the
property to provide capable management and adequate maintenance. In light of the
foregoing factors, there can be no assurance that Legend's properties will be
salable at a price or prices sufficient to recover costs.

         The cash flow generated by, or capital appreciation from, real property
investments may also be adversely impacted by changes in governmental
regulations, zoning or tax laws, potential environmental or other legal
liabilities and

                                       17
<PAGE>   20
changes in interest rates. Real estate investments, particularly development
properties, are also relatively illiquid and, therefore, Legend's ability to
vary its portfolio promptly in response to changes in economic or other
conditions will in all likelihood be limited. In the event Legend is forced to
sell a property, Legend may sustain a loss due to the inherent lack of liquidity
in such an investment.

Development and Construction Activities

Development and construction activities are subject to numerous risks including
delays in construction, certain of which (for example, acts of God, labor
strikes or shortages of supplies) may not be controllable, and quality of
construction, which depends upon a number of factors including the professional
capabilities of the contractor(s), site constraints, adherence to plans and
specifications, adequacy of supervision, and the financial ability of the
developer to bear any unanticipated additional costs of construction. Similarly,
development and construction activities generally require various governmental
and other approvals and permits, the issuance or granting of these is not
certain. There can be no assurance Legend will be able to secure all
entitlements and permits necessary to complete the development and construction
of each of its properties. Further, these activities require the expenditure of
funds on, and the devotion of management's time to, projects which may not be
completed or which, if completed, may not be completed on time or on budget.
Likewise, financing may not be available on favorable terms, if at all, for
development and construction projects and delays in completing development and
construction could result in increases in debt service costs.

Legend currently provides, and will continue to provide, certain warranties with
respect to the quality of the construction of the homes built at Grand Harbor
and Oak Harbor. In addition, Florida law requires homebuilders to provide for
certain additional warranties that cannot be disclaimed, regardless of whether
there are actual deficiencies in the quality of materials used or the
construction of the homes built at Grand Harbor and Oak Harbor. The cost of
settling, or the failure to settle, any presently unasserted claims in the
future may have a material adverse effect on Legend's future results of
operations and financial condition.

Lack of Geographic Diversification

The Southbridge property is located in close proximity to Washington, D.C.
Similarly, Grand Harbor and Oak Harbor are both located in close proximity to
Vero Beach, Florida. Economic weakness or recession in either of these two
areas, or the occurrence of other adverse circumstances could have a material
adverse effect on Legend's results of operation and financial condition.

Government Regulation

Land Use and Zoning. Federal, state and local regulations may be promulgated
which restrict or curtail certain uses of land or existing structures or require
renovation or alteration of these structures. Any restrictions on the
anticipated development of the Company's properties could affect the market for
and price of the lots or homes and prevent or delay sales. Furthermore,
obtaining any additional permits or other consents of local governments for
development of properties may require public hearings and meetings with public
officials and community groups. There can be no assurance that some or all of
the entitlements relating to the Company's properties will not be revoked or
modified in the future. From time to time, governmental entities have imposed
limitations on the development of certain areas. In addition, it may be
difficult or impossible to modify existing zoning to respond to changing market
conditions in order to increase the realizable value of the property. Any
revocation or modification, or refusal to modify existing entitlements, could
have a material adverse effect on the Company's results of operations and
financial condition.

Environmental Matters. Under various federal, state and local laws, ordinances
and regulations, an owner, operator, manager or developer of real estate may be
liable for the cost of removing or remediating certain hazardous or toxic
substances (including asbestos containing materials) on, under or in real estate
owned, operated, managed or developed. These enactments often impose liability
without regard to whether the owner, operator, manager or developer knew of, or
was responsible for, the presence of the hazardous or toxic substances. The cost
of any required remediation and the accompanying liability is generally not
limited under these enactments and could exceed the value of the property or the
aggregate assets of the owner, operator, manager or developer. The presence of
hazardous or toxic substances, or the failure to properly remediate these
substances, may adversely affect an owner's ability to sell or rent the
property, or to borrow money using the property as collateral. In addition,
liability may be imposed for releasing asbestos containing materials into the
air. In connection with owning and operating its

                                       18
<PAGE>   21
properties, Legend may be potentially liable for these costs. Legend does not
maintain insurance for any of these potential environmental liabilities and does
not anticipate securing any such insurance in the foreseeable future.

Americans With Disabilities Act. Under the Americans with Disabilities Act of
1990 (the "ADA"), all public accommodations must comply with certain federal
requirements related to access and use by disabled persons. These requirements
became effective in 1992. The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities" but generally requires
making buildings accessible to people with disabilities. Noncompliance with
these requirements could result in the imposition of fines by the federal
government or an award of damages to private litigants. Management believes that
Legend is substantially in compliance with federal requirements related to
access and use by disabled persons.

Healthcare Regulations. Healthcare operations in the State of Florida are
subject to varying degrees of regulation and licensing by health or social
service agencies and other regulatory authorities. Changes in the laws or new
interpretations of existing laws can have a significant effect on methods and
costs of doing business. Currently, no federal rules explicitly define or
regulate assisted living. In addition, the Royal Palm Convalescent Center does
not accept Medicare or Medicaid reimbursement. However, federal, state or local
laws or regulatory procedures which might adversely affect assisted living
businesses could be expanded or imposed and changes to licensing and
certification standards could have a material adverse effect on Legend's results
of operations and financial condition.

Book Value Not Reflective of Current Realizable Value

Legend currently evaluates the carrying value of its real property and other
assets on an ongoing basis relying on a number of factors, including operating
results, business plans, budgets and economic projections. In addition, Legend
considers non-financial data such as continuity of personnel, changes in the
operating environment, competitive information, market trends and client and
business relationships. The future value of these assets is subject to numerous
contingencies, including the completion of construction and development. A
change in any or all of these factors could result in an impairment in value of
Legend's assets and the realizable value could differ significantly from the
current carrying value of these assets.

Bankruptcy Risks

If Legend defaulted on its indebtedness, it may be required to restructure its
financial affairs under the Federal Bankruptcy Code or seek some other type of
relief. A restructuring or other reorganization under the Bankruptcy Code or
otherwise may result in the stockholders losing their entire interest in the
Company.

Issuance of Preferred Stock or Common Stock

Legend's board of directors has the authority to issue preferred stock in one or
more series or classes with such designations, preferences and rights and such
qualifications, limitations or restrictions as determined by the board. The
issuance of preferred stock or common stock could have a dilutive or other
material adverse effect on the holders of Legend's shares of common stock.

Shares Available for Future Sale

As of December 31, 1999, Holdings owns approximately 80% of Legend's outstanding
shares of common stock. These shares are subject to resale restrictions but a
portion may, in certain circumstances, be registered for sale. Sales of a
substantial number of these shares of common stock in the public market or the
perception that sales occur could adversely affect the market price of the
common stock and Legend's ability to raise capital in the future.

Dividend Policy

The Company has not paid cash dividends since the first quarter of 1990 and does
not contemplate paying cash dividends until it generates sustainable cash flow
in excess of its capital needs. There can be no assurance that Legend will ever
generate sufficient cash flow to pay dividends to its stockholders. Moreover,
certain of Legend's loan agreements prohibit the payment of dividends. If Legend
issues preferred stock with a dividend, the stockholders' right to receive
dividends, if any, will be subordinated to that of the holders of preferred
stock.

                                       19
<PAGE>   22
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to market risks associated with interest rate changes on
the debt used to fund its construction, development, and operating activities.
The Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flow and to lower overall borrowing
costs. The Company uses a mixture of fixed rate debt, interest rate swap
agreements, and offsetting financial instruments such as annuity contracts to
mitigate this risk. The Company does not enter into other derivative financial
instruments for speculative purposes.

The Company's interest rate risk is monitored by management. The table below
presents the principal amounts, weighted-average interest rates and fair values
required to evaluate the expected cash flows of the Company under debt and
related agreements and its sensitivity to interest rate changes at December 31,
1999.
<TABLE>
<CAPTION>
                                                                                                                        Fair
       (in millions)                 2000        2001        2002         2003        2004   Thereafter    Total       Value
                                     ----        ----        ----         ----        ----   -----------    -----       -----
<S>                                 <C>         <C>          <C>         <C>          <C>    <C>            <C>         <C>
Fixed rate debt                      0.4         0.4          0.3         0.4          0.4       2.5          4.4         4.4
Average interest rate                5.8%        5.8%         5.7%        5.7%         5.6%      5.5%

Variable rate LIBOR debt             0.1         0.2          0.2        34.5          0.0       0.0         35.0        35.0
Average interest rate                8.9%        8.9%         8.9%        8.9%         0.0%      0.0%

Variable rate prime debt             3.2         3.6          0.0        57.5          0.0       0.0         64.3        64.3
Average interest rate               10.3%       10.4%         0.0%       10.5%         0.0%      0.0%

Variable rate bank cost of
funds debt                           2.1         2.5          1.9         0.0          0.0       0.0          6.5         6.5
Average interest rate                8.7%        8.7%         8.7%        0.0%         0.0%      0.0%
</TABLE>


The table incorporates those exposures that exist as of December 31, 1999, and
does not consider those exposures or positions which could arise after that
date. As a result, the Company's cost of funds with respect to interest rate
fluctuations will depend on the exposures that arise after December 31, 1999,
the Company's hedging strategy during that period and interest rates.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Consolidated Financial Statements on Page F-1 of this Report for
financial statements and financial statement schedules, where applicable.

See Item 6, "Selected Financial Data," for the supplemental financial
information specified by Item 302 of Regulation S-K.

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

Not Applicable


                                       20
<PAGE>   23
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The directors and the executive officers of the Company as of March 31,
         2000 are:

         Walter E. Auch, Sr.          Director
         Helge Lund                   Director
         Jan Petter Storetvedt        Director, Chairman of the Board
         Robert M. Ungerleider        Director
         Fred E. Welker, III          Director
         Peter J. Henn                President and Chief Executive Officer
         Robert B. Cavoto             Vice President, Chief Financial Officer
                                      and Assistant Secretary

Walter E. Auch, Sr., age 79, was the Chairman and Chief Executive Officer of the
Chicago Board of Options Exchange from 1979 to 1986. Prior to that time, he was
Executive Vice President, Director and a member of the executive committee of
Paine Webber. Mr. Auch is a Director of Pimco L.P., Brinson Partners Funds,
Advisors Series Trust, Smith Barney Concert Series Funds, Smith Barney Trak
Fund, Nicholas Applegate Funds, Fort Dearborn Fund, Semele Group, Inc. and BSRT
Management Corp. and a Trustee of Banyan Strategic Realty Trust, Hillsdale
College and the Arizona Heart Institute. Mr. Auch has been a director of the
Company since 1988.

Helge Lund, age 37, is presently Chief Operating Officer of Aker RGI ASA. Prior
to his appointment Mr. Lund was Executive Vice President of Aker RGI ASA,
responsible for Investments since January 1999. Mr. Lund is a graduate of the
Norwegian School of Economics and Business Administration and has an MBA from
INSEAD in France. He serves as a director for Aker Maritime ASA, Constructor
Dexion Group PLC, Atlas Stord AS and Polynor Partners AS. Mr. Lund has been a
director of the Company since March 1999.

Jan Petter Storetvedt, age 44, is presently Senior Vice President, Investments
Real Estate of Aker RGI ASA. Since March 1997, he has served as chairman of the
board of Avantor ASA. From December 1991 to March 1997, he served as President,
Chief Executive Officer and Director of Avantor ASA, a Norwegian publicly traded
real estate company. Mr. Storetvedt has been Chairman of the Board of the
Company since June 1997.

Robert M. Ungerleider, age 58, is presently the President of Pilot Books, a book
publisher located in Greenport, New York, and practices law with and is of
counsel to the firm of Felcher, Fox & Litner P.C., in New York, New York. He has
founded, developed and sold a number of start-up ventures including Verifone
Finance, an equipment leasing business, SmartPage, a paging service company and
Financial Risk Underwriting Agency, Inc., an insurance agency specializing in
financial guarantee transactions. Prior to these endeavors, Mr. Ungerleider
practiced real estate and corporate law for ten years. Mr. Ungerleider received
his B.A. Degree from Colgate University and his Law Degree from Columbia
University Law School. Mr. Ungerleider has been a director of the Company since
1988.

Fred E. Welker, III, age 52, has been the President of Realty Financial
Advisors, Inc., a real estate investment banking firm, since January 1993. From
1982 to 1992, Mr. Welker was the Executive Vice President for the Southeast
Regional Office of Sonnenblick-Goldman Company, a real estate investment banking
firm. From 1981 to 1982, Mr. Welker was Vice President-Joint Ventures for
American Savings & Loan Association, and from 1976 to 1981 he was a commercial
loan officer with First Federal of Broward (merged with Glendale Federal). Mr.
Welker has been a director of the Company since January 1997.

Peter J. Henn, age 39, has been President and Chief Executive Officer of the
Company since March 1999. Prior to his appointment, Mr. Henn was Vice President,
General Counsel and Secretary of the Company since November 1997. Since March
1994, Mr. Henn has represented certain of the Company's Florida subsidiaries and
provided real estate closing and escrow services to the company as President of
Harbor Title & Escrow Company. Mr. Henn received his B.A. and M.A. in Economics
from Florida Atlantic University and his J.D. from the University of Miami
School of Law.

Robert B. Cavoto, age 39, has been Vice President, Chief Financial Officer and
Assistant Secretary of the Company since November 1997. During 1997, prior to
this appointment, Mr. Cavoto was a financial consultant to LPI Development,
Inc., a subsidiary of the Company. From 1991 to 1997, he was an Asset Manager
with Banyan Management Corp., and was responsible for entitlement, development,
financing and disposition activities for a

                                       21
<PAGE>   24
portfolio of mixed-use and residential land developments. From 1988 to 1991, Mr.
Cavoto was Vice President of finance for a real estate company. Prior to that he
was a manager in KPMG LLP's real estate practice. Mr. Cavoto received his B.S in
accounting from Northern Illinois University and is a Certified Public
Accountant.

ITEM 11. EXECUTIVE COMPENSATION

A.       DIRECTOR COMPENSATION

The Directors are paid an annual fee of $15,000, payable quarterly, plus $875
for each board or audit committee meeting attended in person and $250 an hour
for any of these meetings attended via telephonic conference call. In addition,
each Director is reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board. The three Directors not associated with Aker RGI ASA were
paid an additional fee of $10,000 for serving on the Special Committee that was
established to evaluate and consider the merger proposal from Holdings (see Note
14 of Notes to the Consolidated Financial Statements).

B.       EXECUTIVE COMPENSATION

Salary Compensation Table. The following information is furnished with respect
to Executive Officers whose compensation for the year ended December 31, 1999
exceeded $100,000:
<TABLE>
<CAPTION>
                                                                                Annual Compensation
                                                                   ----------------------------------------------
           Name and Principal Position                 Year          Salary           Bonus          All Other
                                                                                                   Compensation
  -----------------------------------------------    ---------     -----------      -----------    --------------
<S>                                                  <C>           <C>              <C>            <C>
  Peter J. Henn                                        1999        $212,680          $88,333            N/a
  President and Chief Executive Officer (1)            1998           n/a              n/a              N/a
                                                       1997           n/a              n/a              N/a


  Robert B. Cavoto,                                    1999        $115,000          $15,000            N/a
  Vice President, Chief Financial Officer and          1998        $105,000          $30,000          $11,078
  Assistant Secretary                                  1997             n/a            n/a              n/a
</TABLE>


(1)  Mr. Henn has served as President and Chief Executive Officer of the Company
     since March 1999. During 1998 and 1997, Mr. Henn was compensated under a
     Legal Services Agreement between the Company and the law firm of Peter J.
     Henn, P.A. The Legal Services Agreement provided, among other things, that
     the Company would pay $210,000 for legal services provided to the Company
     for the fiscal year ending December 31, 1999 and that Harbor Title & Escrow
     would continue to provide title insurance, as required, at the minimum
     title insurance rates allowed under Florida law.

C.       EXECUTIVE AND DIRECTORS' STOCK OPTION PLAN

On June 25, 1993, the Company's stockholders approved and adopted the 1993
Executive and Directors' Stock Option Plan (the "Plan"). The Plan grants the
Board of Directors the authority to issue up to 40,000 shares (adjusted for the
stock split) of the Company's common stock for stock option awards. The Plan
consists of an Executive Option Grant Program and a Director Option Grant
Program. Under the Director Option Grant Program, each Director holding office
on the tenth business day after adjournment of the annual meeting automatically
receives an option to acquire 1,000 shares. Options granted vest 50% upon the
first anniversary of the date of the grant and 50% upon the second anniversary
of the date of the grant and expire ten years from the date of the grant. The
exercise price for the options granted in July 1997, January 1997 (1996 Annual
Meeting), 1995, 1994 and 1993 is $4.50, $7.75, $15.64, $17.19 and $15.64 per
share, respectively.

The Board administers the Executive Option Grant Program and has the authority
to determine, among other things, the individuals to be granted executive
options, the exercise price at which shares may be acquired, the number of
shares subject to each option and the exercise period of each option. The Board
is also authorized to construe and interpret the Executive Option Grant Program
and to prescribe additional terms and conditions of exercise in option

                                       22
<PAGE>   25
agreements and provide the form of option agreement to be utilized with the
Executive Option Grant Program. No Director is eligible to receive options under
the Executive Option Grant Program.

Options granted under the Plan are not transferable except by will or by the
laws of descent and distribution, and are exercisable during an optionee's
lifetime only by the optionee or the appointed guardian or legal representative
of the optionee. Upon the: (a) death or permanent and total disability of an
optionee; or (b) retirement in accord with the Company's retirement practices,
then any unexercised options to acquire shares will be exercisable at any time
within one year in the case of (a) and ninety days in the case of (b) (but in no
case beyond the expiration date specified in the Option Agreement). If, while
unexercised options remain outstanding under the Plan, the Company ceases to be
a publicly traded company, or if the Company merges with another entity or a
similar event occurs, all options outstanding under the Plan shall immediately
become exercisable at that time.

The Plan requires the optionee to pay, at the time of exercise, for all shares
acquired on exercise in cash, shares or, in the case of the Executive Option
Grant Program, other forms of consideration acceptable to the Board.

If the Company declares a stock dividend, splits its stock, combines or
exchanges its shares, or engages in any other transactions which results in a
change in capital structure such as a merger, consolidation, dissolution,
liquidation or similar transaction, the Board may adjust or substitute, as the
case may be, the number of shares available for options under the Plan, the
number of shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any
other characteristics of the options as the Board deems necessary to equitably
reflect the effects of those changes on the option holders.

Pursuant to the Plan, the Board granted an aggregate 14,440 options thru
December 31, 1996. Pursuant to the Company's Merger on December 31, 1996 which
resulted in a change in control (as defined in the Merger agreement),
substantially all stock options issued to the executive officers and various
employees of Banyan Management Corp. under the Executive Option Grant Program
became fully vested and exercisable until December 31, 1997. None of these
options were exercised and have been cancelled.

The exercise prices as well as the number of shares issuable on any options
granted prior to the Merger have been adjusted to give effect to the Company's
25 to 1 reverse stock-split as approved by its stockholders.

Options granted after December 31, 1996 (other than which have been described
above) under the Executive Option Grant Program will be exercisable and vested
in installments as follows: (1) 33.3% of the number of shares commencing on the
first anniversary of the date of grant; (ii) an additional 33.3% of the shares
commencing on the second anniversary of the date of the grant; and (iii) an
additional 33.4% of shares commencing on the third anniversary of the date of
grant. Options for all shares as granted under the Director Option Grant Program
will be exercisable and vest as follows: (i) 50.0% of the number of shares
commencing on the first anniversary of the date of grant; and (ii) an additional
50.0% of the number of shares commencing on the second anniversary of the date
of grant. The Board is granted discretion to determine the term of each Option
granted under the Executive Option Grant Program, but in no event will the term
exceed ten years and one day from the date of grant.

There were no stock options granted to or exercised by any present or former
executive officer during the years ended December 31, 1999 and 1998.


                                       23
<PAGE>   26
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following entity is known by the Company (based on filings on Schedule 13d)
to be the beneficial owner of more than five percent (5%) of the outstanding
shares of common stock of the Company as of March 31, 2000.
<TABLE>
<CAPTION>

                                        Name and Address of                      Amount of                   Percent
      Title of Class                      Beneficial Owner                 Beneficial Ownership            of Interest
---------------------------     -------------------------------------     ------------------------     --------------------
<S>                             <C>                                       <C>                          <C>
Shares of Common                 RGI Holdings, Inc. and affiliates               5,057,646                     80%
Stock, $0.01 par value              2025 First Avenue, Suite 830
                                     Seattle, Washington 98121
</TABLE>

The following table sets forth the ownership interest and shares owned directly
or indirectly by the directors and principal officers of the Company as of March
31, 2000:
<TABLE>
<CAPTION>
                                        Name and Address of                        Amount of                  Percent
      Title of Class                      Beneficial Owner                 Beneficial Ownership (1)         of Interest
----------------------------    -------------------------------------     ----------------------------    -----------------
<S>                             <C>                                       <C>                             <C>
Shares of Common                       Robert M. Ungerleider                     1,560 Shares               Less than 1%
Stock, $0.01 par value

Shares of Common                     All Directors and Officers                  1,560 Shares               Less than 1%
Stock, $0.01 par value                    of the Company,
                                       as a group (7 persons)
</TABLE>

(1)      excludes 8,340 options granted to acquire shares at prices ranging from
         $7.74 to $28.125 per share which have vested.


                                       24
<PAGE>   27
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of certain relationships and other significant
transactions with related parties during 1999 and outstanding intercompany
balances as of December 31, 1999 and 1998:

Consulting and Other Fees

The Company paid the law firm of Peter J. Henn, P.A. $56,875 during the fiscal
year ending December 31, 1999 for legal services under the Legal Services
Agreement prior to his appointment as President and Chief Executive Officer.

Receivables

As of December 31, 1999 the Company has included in other assets a $4,757,642
receivable from Resource Group International, Inc. (RGI), the parent company of
Holdings, related to a income tax benefit realized from the utilization of the
Company's 1998 operating loss. The income tax benefit is derived from the
Company's inclusion in an affiliated consolidated tax group, of which RGI is
the common parent, pursuant to a new Tax Sharing and Allocation Agreement.

Payables
<TABLE>
<CAPTION>

Payables to related parties consist of the following at December 31:                    1999                 1998
                                                                                     -----------          ------------
<S>                                                                                  <C>                  <C>
         Mortgage note payable to Holdings with interest payable quarterly at
         LIBOR plus 2.5%. Principal payments equal to 20% of Southbridge and 50%
         of other collateral sales revenues is payable quarterly with the
         balance due April 1, 2003. The debt is secured by certain real estate
         inventory and property. Unpaid interest will be capitalized
         into the principal balance annually.                                        $31,238,050            30,649,872

         Mortgage note payable to Holdings with interest at Prime plus 2% and
         partially secured by certain real estate inventory. Interest and
         principal are payable quarterly after certain other debt payments,
         provided that a $4.5 million cash reserve remains. Quarterly principal
         payments are equal to 80% of the defined net cash flow for Southbridge,
         Grand Harbor, and Oak Harbor with the balance due April 1, 2003. Unpaid
         interest will be capitalized into the principal
         balance annually.                                                            38,525,416           35,024,632

         Unsecured note payable to RGI, Inc. with interest at Prime plus 2%.
         Principal and interest is payable on the same terms, but after payments
         on the Mortgage note payable discussed immediately above with the
         remainder due April 1, 2003. Unpaid interest will be
         capitalized into the principal balance annually.                             18,503,058            16,821,696

         Unsecured note payable to Holdings, interest at Prime plus 2%.
         Principal and interest due June 1, 1999.                                           -                2,248,278
         Other                                                                           395,437                     -
                                                                                     -----------          ------------
                                                                                     $88,661,961            84,744,478
                                                                                     ===========          ============
</TABLE>

Holdings has provided to the Company a $5 million credit facility to provide
sufficient working capital to fund ongoing development, construction and
operating activities. The credit facility provides for interest at Prime plus
2%, matures on April 1, 2003 and is secured by certain real estate inventory and
property. The fundings purpose and repayment terms are to be agreed upon prior
to drawing on this facility.

Indemnity


                                       25
<PAGE>   28
Aker RGI ASA, the indirect parent of Holdings, has provided an indemnity, to a
maximum of $15,000,000, to the bonding company for development bonds at
Southbridge, of which an aggregate total of approximately $13.5 million was
outstanding at December 31, 1999.


                                       26
<PAGE>   29
                                     PART IV

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

         (a)      Exhibits:

Exhibit No.

3.1      --      Amended and Restated Certificate of Incorporation of
                 Registrant.(1)

3.2      --      Bylaws of Registrant, as amended and restated as of July 1,
                 1996.(2)

10.1     --      Edward F. Podboy's Employment Contract dated March 31, 1998.
                 (3)

10.2     --      Credit Agreements, Notes and Warrants between Registrant and
                 Morgens Waterfall, Vintiadis & Co. Inc.(4)

10.3     --      Loan Modification Agreement, dated as of May 20, 1996, by and
                 between Registrant and RGI Holdings, Inc. (SoGen Loan).(5)

10.4     --      Loan Modification Agreement, dated as of May 21, 1996, by and
                 between Registrant and RGI Holdings, Inc. (Morgens Loan).(5)

10.5     --      Registration Rights Agreement, dated as of May 21, 1996, by and
                 between Registrant and RGI Holdings, Inc.(5)

10.6     --      Second Stipulation and Agreement of Settlement, signed
                 September 17, 1997, In Re: Banyan Mortgage Investment Fund
                 Shareholders Litigation. (6)

21.1     --      Subsidiaries of the Registrant.

27.1     --      Financial Data Schedule.

99.1     --      Form of Director Stock Option Agreements dated July 1, 1993,
                 July 24, 1994 and July 7, 1995.(7)

99.2     --      Form of Executive Stock Option Agreements dated July 1, 1993,
                 January 12, 1994 and February 8, 1995.(7)


(1)    Incorporated by reference to the Registrant's Report on Form 10-K for the
       year ended December 31, 1996.

(2)    Incorporated by reference to the Registrant's Report on Form 10-Q for the
       quarter ended June 30, 1996.

(3)    Incorporated by reference to the Registrant's Report on Form 10-K for the
       year ended December 31, 1997.

(4)    Incorporated by reference to Exhibits 10(a) through 10(n) to the
       Registrant's Report on Form 10-K for the year ended December 31, 1994.

(5)    Incorporated by reference to the Registrant's Report on Form 8-K dated
       May 20, 1996.

(6)    Incorporated by reference to the Registrant's Report on Form 10-Q for the
       quarter ended September 30, 1997.

(7)    Incorporated by reference to the Registrant's Report on Form 10-K for the
       year ended December 31, 1995.

         (b)      Reports on Form 8-K:

       The following reports on Form 8-K were filed during the quarter ended
       December 31,1999:

                 Current Report on Form 8-K filed on October 20, 1999 disclosed
                 the sale of the Ashburn Corporate Center to a non-affiliated
                 third party.

                 Current Report on Form 8-K filed on October 25, 1999 disclosed
                 the receipt of a proposal for the merger of the Company with a
                 wholly owned subsidiary of Holdings.


                                       27
<PAGE>   30
                                   SIGNATURES

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

                                               LEGEND PROPERTIES, INC.

                                               By:  /s/ Peter J. Henn
                                                  -----------------------------
                                                    Peter J. Henn, President,
April 14, 2000                                      Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

By:/s/ Peter J. Henn                              Date:    April 14, 2000
   -----------------------------
    Peter J. Henn, President,
    Chief Executive Officer

By:/s/Robert B. Cavoto                            Date:    April 14, 2000
   -----------------------------
    Robert B. Cavoto,
    Chief Financial Officer, Vice President
    and Assistant Secretary

By:/s/Walter E. Auch, Sr.                         Date:    April 14, 2000
   -----------------------------
    Walter E. Auch, Sr., Director

By:/s/Helge Lund                                  Date:    April 14, 2000
   -----------------------------
    Helge Lund, Director

By:/s/Jan Petter Storetvedt                       Date:    April 14, 2000
   -----------------------------
    Jan Petter Storetvedt, Director

By:/s/Robert M. Ungerleider                       Date:    April 14, 2000
   -----------------------------
    Robert M. Ungerleider, Director

By:/s/Fred E. Welker, III                         Date:    April 14, 2000
   -----------------------------
    Fred E. Welker, III, Director


                                       28
<PAGE>   31

                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                        PAGES
                                                                      ----------
<S>                                                                   <C>
Independent Auditors' Report .....................................           F-2

Consolidated Balance Sheets at December 31, 1999 and 1998.........           F-3

Consolidated Statements of Operations For the Years Ended
     December 31, 1999, 1998 and 1997.............................           F-4

Consolidated Statements of Stockholders' Equity (Deficit)
     For the Years Ended December 31, 1999, 1998 and 1997.........           F-5

Consolidated Statements of Cash Flows For the Years Ended
     December 31, 1999, 1998 and 1997.............................     F-6 - F-7

Notes to Consolidated Financial Statements........................    F-8 - F-25
</TABLE>


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


                                      F-1
<PAGE>   32
                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Legend Properties, Inc.:


We have audited the accompanying consolidated balance sheets of Legend
Properties, Inc. (a subsidiary of RGI Holdings, Inc.) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the years
in the three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the management of Legend Properties, Inc.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Legend Properties,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.


                                                KPMG LLP


West Palm Beach, FL
April 12, 2000


                                      F-2
<PAGE>   33
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        December 31,
--------------------------------------------------------------------------------------------------------------
                                                                                   1999            1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                <C>
                                   Assets

Real estate inventory                                                          $   75,806,841      82,873,914

Asset held for sale                                                                      --         7,916,175
Cash and cash equivalents                                                           2,902,359       4,446,864
Restricted cash and investments                                                    10,602,370      19,017,860
Accounts and notes receivable                                                       3,106,856       1,491,267
Property and equipment, net                                                        22,869,703      24,645,281
Intangibles, net of accumulated amortization of  $1,733,331 in 1999 and
     $1,052,895 in 1998                                                             1,446,007       1,646,542
Other assets, net of accumulated amortization of $3,808,433 in 1999 and
     $3,646,481 in 1998                                                            10,954,824       5,520,388
                                                                               -------------------------------

                                                                               $  127,688,960     147,558,291
                                                                               ===============================

                     Liabilities and Stockholders' Equity

Notes payable to banks and others                                              $   21,587,213      40,722,737
Payables to related parties                                                        88,661,961      84,744,478
Accounts payable                                                                    3,354,368       3,033,693
Other notes and liabilities                                                        12,785,204      14,443,250
                                                                               -------------------------------
                                                                                  126,388,746     142,944,158
                                                                               -------------------------------

Stockholders' equity :
     Common stock, $.01 par value. Authorized 10,000,000 shares; 6,311,678
         shares issued and 6,290,874 shares outstanding at December 31,
         1999 and 1998                                                                 63,117          63,117
     Additional paid-in capital                                                    44,171,103      44,171,103
     Accumulated deficit                                                          (42,812,690)    (39,498,771)
     Treasury stock, 20,804 shares at cost at December 31, 1999 and 1998             (121,316)       (121,316)
                                                                               -------------------------------

Total stockholders' equity                                                          1,300,214       4,614,133
Commitments and contingencies
--------------------------------------------------------------------------------------------------------------

                                                                               $  127,688,960     147,558,291
==============================================================================================================
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       F-3
<PAGE>   34
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------------------------
                                                                        1999               1998              1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                 <C>              <C>
Revenues:
     Real estate sales                                              $  62,236,880        65,218,900       43,595,507
     Club operations                                                    7,159,132         5,953,105        5,344,575
     Patient service                                                    2,755,349         2,600,866        2,718,014
     Rent                                                                    -                 -           2,186,157
     Other                                                              2,825,121         1,960,585        1,783,645
                                                                    -----------------------------------------------------

                          Total revenues                               74,976,482        75,733,456       55,627,898
                                                                    -----------------------------------------------------

Operating costs and expenses:
     Real estate sales                                                 48,941,809        49,628,187       31,343,932
     Club operations                                                    7,962,199         7,291,432        6,364,169
     Patient service                                                    2,074,879         1,919,183        1,521,292
     Rental operations                                                       -                 -             359,325
     Other                                                              2,271,702         1,417,681          612,207
     Selling, general and administrative                               15,323,065        15,414,245       18,265,252
     Depreciation and amortization                                      1,809,525         2,092,509        1,780,904
                                                                    -----------------------------------------------------

                         Total operating costs and expenses            78,383,179        77,763,237       60,247,081
                                                                    -----------------------------------------------------

Operating loss                                                         (3,406,697)       (2,029,781)      (4,619,183)
                                                                    -----------------------------------------------------

Other income (expenses):
     Interest income                                                      623,951           944,800        1,386,920
     Interest income, related party                                          -                 -              73,339
     Interest expense, including loan cost amortization                (2,249,319)       (5,596,055)      (7,503,319)
     Interest expense, related party                                   (7,733,829)       (5,853,716)      (4,823,954)
     Other, net                                                           120,433           397,779          727,575
                                                                    -----------------------------------------------------

                         Net other expense                             (9,238,764)      (10,107,192)     (10,139,439)
                                                                    -----------------------------------------------------

Loss before minority interests and income tax benefit                 (12,645,461)      (12,136,973)     (14,758,622)

Minority interests in loss of consolidated subsidiaries                      -                 -             252,716
                                                                    -----------------------------------------------------

Loss before income tax benefit                                        (12,645,461)      (12,136,973)     (14,505,906)

Income tax benefit                                                      9,331,542              -                -
                                                                    -----------------------------------------------------

Net loss                                                            $  (3,313,919)      (12,136,973)     (14,505,906)
                                                                    =====================================================

Net loss per share = basic and diluted                              $        (.53)            (1.93)           (2.31)
                                                                    =====================================================

Weighted average number of common shares outstanding                    6,290,874         6,290,874        6,286,322
=========================================================================================================================
</TABLE>

See accompanying notes to the consolidated financial statements.


                                      F-4
<PAGE>   35
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                           COMMON STOCK            ADDITIONAL                                            TOTAL
                                     -------------------------      PAID-IN        ACCUMULATED         TREASURY      STOCKHOLDERS'
                                       SHARES       PAR VALUE       CAPITAL          DEFICIT            STOCK       EQUITY (DEFICIT)
                                     ----------    -----------    ------------     ------------     ------------     ------------
<S>                                  <C>           <C>            <C>              <C>              <C>             <C>
Balances at December 31, 1996         6,277,548    $    62,776    $ 43,793,708     $(12,855,892)    $    (11,316)    $ 30,989,276

    Purchase of fractional shares          --             --           (22,267)            --               --            (22,267)
    Repurchase of shares                   --             --              --               --           (110,000)        (110,000)
    Sale of stock                        34,130            341         399,662             --               --            400,003
    Net loss                               --             --              --        (14,505,906)            --        (14,505,906)
                                     ----------    -----------    ------------     ------------     ------------     ------------

Balances at December 31, 1997         6,311,678         63,117      44,171,103      (27,361,798)        (121,316)      16,751,106

    Net loss                               --             --              --        (12,136,973)            --        (12,136,973)
                                     ----------    -----------    ------------     ------------     ------------     ------------

Balance at December 31, 1998          6,311,678         63,117      44,171,103      (39,498,771)        (121,316)       4,614,133

       Net loss                            --             --              --         (3,313,919)            --         (3,313,919)
                                     ----------    -----------    ------------     ------------     ------------     ------------

Balance at December 31, 1999          6,311,678    $    63,117    $ 44,171,103     $(42,812,690)    $   (121,316)    $  1,300,214
                                     ==========    ===========    ============     ============     ============     ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   36
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
                                                                                    1999            1998            1997
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>               <C>              <C>
Cash flows from operating activities:
     Net loss                                                                  $ (3,313,919)     (12,136,973)     (14,505,906)
     Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities:
              Depreciation and amortization of intangible assets                  1,809,525        2,092,509        1,780,904
              Loanamortization                                                      266,311          884,958        1,424,591
              Gain on sale of assets held for sale                                     --               --           (195,076)
              Related party interest expense not paid                             7,513,708        5,853,716        4,721,217
              Related party interest income not collected                              --               --            (72,537)
              Deferred tax benefit                                               (4,573,900)            --               --
              Minority interests in loss                                               --               --           (252,716)
              Change in certain assets and liabilities:
                    Decrease in real estate inventory                             7,067,073       20,983,245          906,677
                    Decrease (increase) in assets held for sale                   7,916,175       (7,916,175)       8,301,604
                    Increase in accounts and notes receivable and other
                     assets                                                      (2,113,928)      (4,132,798)        (541,903)
                    Increase (decrease) in accounts payable and other notes
                     And liabilities                                             (1,337,371)       4,662,756       (5,504,042)
                                                                               ------------     ------------     ------------

                Net cash provided by (used in) operating activities              13,233,674       10,291,238       (3,937,187)
                                                                               ------------     ------------     ------------

Cash flows from investing activities:
     Decrease (increase) in restricted cash and investments                       8,415,490       (3,787,322)       7,260,767
     Purchase of property and equipment                                            (703,209)        (791,440)      (6,297,341)
     Loans to related parties                                                          --               --            (20,000)
     Collection of loans to related parties                                            --               --            398,434
     Proceeds from sale of property and equipment                                   830,062             --               --
     Proceeds from assets held for sale                                                --               --         19,436,029
                                                                               ------------     ------------     ------------

                Net cash provided by (used in) investing activities               8,542,343       (4,578,762)      20,777,889
                                                                               ------------     ------------     ------------


Cash flows from financing activities:
     Proceeds from notes payable to bank and others                              14,874,271       21,569,532       19,653,062
     Repayment of notes payable to bank and others                              (34,009,795)     (41,258,127)     (45,942,347)
     Proceeds from loans from related parties                                     3,750,000        6,000,000       20,702,720
     Repayment of loans from related parties                                     (7,741,661)          (3,165)        (139,107)
     Payment of loan fees                                                          (193,337)        (306,533)        (179,983)
     Repurchase of common and fractional shares                                        --               --           (132,267)
     Sale of common shares                                                             --               --            400,003
                                                                               ------------     ------------     ------------

                Net cash used in financing activities                           (23,320,522)     (13,998,293)      (5,637,919)
                                                                               ------------     ------------     ------------

Net (decrease) increase  in cash and cash equivalents                            (1,544,505)      (8,285,817)      11,202,783

Cash and cash equivalents at beginning of year                                    4,446,864       12,732,681        1,529,898
                                                                               ------------     ------------     ------------

Cash and cash equivalents at end of year                                       $  2,902,359        4,446,864       12,732,681
                                                                               ============     ============     ============
</TABLE>

                                                            (Continued)

See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>   37
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
-------------------------------------------------------------------------------------------------------------------
                                                                                1999         1998          1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>           <C>
Supplemental Disclosure of Cash Flow Information -
     Cash paid during the year for interest, net of amount capitalized of
        $950,124 in 1999, $1,137,447 in 1998 and $903,978 in 1997            $1,282,799     4,699,226     5,811,516
                                                                             ==========    ==========    ==========

Supplemental Schedule of Noncash Investing and Financing Transactions:
     Purchase of minority interest in exchange for cancellation of a note
         receivable and accrued interest                                     $     --            --       1,681,584
                                                                                                         ==========

===================================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>   38
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

   (1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         DESCRIPTION OF BUSINESS

         Legend Properties, Inc. (the Company or Legend) formerly known as
         Banyan Mortgage Investment Fund (Banyan), is the surviving corporation
         from the December 31, 1996 merger (the Merger) with RGI U.S. Holdings,
         Inc. (RGI/US) (see Note 2). Prior to the Merger, RGI/US was a
         wholly-owned subsidiary of RGI Holdings, Inc. (Holdings). As of
         December 31, 1999, Holdings owns approximately 80 percent of the
         outstanding common shares of Legend.

         As of December 31, 1999, Legend owns, operates and develops real estate
         through its wholly owned subsidiaries as follows:

                  -        Grand Harbor Associates, Inc. (GHA) was formed as a
                           holding company in 1991 and owns a 100 percent
                           interest in Grand Harbor Property Holdings, Inc.
                           (GHPH) and a 100 percent interest in Oak Harbor
                           Property Holdings, Inc., Quality Life Services, Inc.
                           and Quality Life Services, Ltd. (collectively, OHPH).
                           GHA's original 45 percent interest was increased by
                           acquiring an additional 45 percent on January 2, 1996
                           and the remaining 10 percent interest on July 2,
                           1997.

                           GHPH includes nine corporations and seven limited
                           partnerships and was formed in 1991 to acquire and
                           develop a 772 acre residential golf community in
                           Indian River County, Florida. Grand Harbor (the
                           development) is planned for 1,196 mid to high-end
                           residential units. The development has numerous
                           amenities and facilities, including golf and beach
                           clubs, two 18-hole championship golf courses, tennis
                           courts and a marina.

                           OHPH includes eight corporations and a limited
                           partnership and was formed in 1993 to develop a 116
                           acre senior retirement community in Indian River
                           County, Florida, with an on-site assisted living
                           facility. In 1994, an off-site skilled nursing
                           facility was acquired.

                  -        VMIF/Anden Southbridge Venture and VMIF/Anden Wayside
                           Venture (for financial reporting purposes, acquired
                           on December 31, 1996 as part of the merger with
                           Banyan (see Note 2)), were formed in 1991 to hold and
                           develop Southbridge, a 2,685 acre master planned
                           community in Prince William County, Virginia planned
                           for approximately 5,400 residential units, 4,000,000
                           square feet of non-residential uses (including
                           office, R&D, commercial, industrial, and other
                           similar uses) and an 18 hole golf course.


         During 1999, 1998 and 1997, Legend disposed of the following operating
         and development properties:

                  -        Ashburn Corporate Center, LC (ACCLC) an 82% owned
                           subsidiary, was formed in March 1998 to hold and
                           develop the Ashburn Corporate Center, a 116-acre
                           commercial business park development project in
                           Loudoun County, Virginia planned for office and
                           flex/tech uses. During 1999, the Company sold the
                           Ashburn Corporate Center for $15.2 million.

                  -        VMIF Charles County Venture, a wholly owned
                           subsidiary, (for financial reporting purposes,
                           acquired on December 31, 1996 as part of the merger
                           with Banyan (see Note 2)) was formed in 1991 to hold
                           and develop Chapman's Landing, a 2,227 acre master
                           planned community in Charles County, Maryland.
                           Chapman's Landing was sold during October 1998 for
                           $28.5 million.

                  -        BMIF Monterey County Corp., a wholly owned
                           subsidiary, (for financial reporting purposes,
                           acquired on December 31, 1996 as part of the merger
                           with Banyan (see


                                      F-8
<PAGE>   39
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements


                           Note 2)) was formed to hold and develop a 565-acre
                           land parcel in Monterey County, California known as
                           the Laguna Seca Ranch (Laguna). During 1997, the
                           Company sold Laguna for $12.8 million.

                  -        American Property Investments, Inc. (API) was formed
                           for the purpose of acquiring, renovating and
                           operating the Lynnwood Shopping Center in Lynnwood,
                           Washington (acquired in November 1987). In November
                           1997, API sold Lynnwood Center for $20.1 million.

         BASIS OF PRESENTATION

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

         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.

         The Company computes cost of sales and relieves property under
         development (a component of real estate inventory) based on the ratio
         of current year and estimated future costs to current year and
         estimated future sales. Actual results could differ from these
         estimates.

         REAL ESTATE INVENTORY

         Real estate inventory is recorded at cost, reduced for impairment
         losses, if any. Inventoried costs consist of land (including any
         related legal, engineering and other acquisition costs) common
         improvements, amenities, construction in progress and completed
         residential units. Interest, real estate taxes and other carrying costs
         are capitalized only for discrete parcels or units undergoing active
         development. The costs of common improvements are allocated to discrete
         parcels or units based on relative sales values or specific
         identification.

         The Company reviews its real estate inventory for impairment where
         events or changes in circumstances indicate that the carrying amount of
         the assets may not be recoverable. Recoverability of assets to be held
         and used is measured by comparing the carrying amount of an asset to
         future or anticipated net cash flows generated by the asset. If such
         assets are deemed to be impaired, the impairment is recognized by
         measuring the difference between the carrying amount of the assets and
         its fair value.

         ASSETS HELD FOR SALE

         Assets held for sale are reported at the lower of the carrying amount
         or fair value less costs to sell.


                                      F-9
<PAGE>   40
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         CASH AND CASH EQUIVALENTS

         Cash and cash equivalents consist of cash, demand deposits with banks
         and highly liquid investments with maturity dates of three months or
         less at the date of acquisition.

         RESTRICTED CASH AND INVESTMENTS

         Restricted cash includes customer deposits and various escrow accounts
         with local governments and others related to the completion of certain
         development of $5,168,410 and $7,007,417, and cash held in bank as loan
         collateral of $1,057,046 and $7,341,731 at December 31, 1999 and 1998,
         respectively.

         Restricted investments include an irrevocable trust consisting of three
         annuities totaling $4,376,914 and $4,668,712 at December 31, 1999 and
         1998, respectively, which is solely to provide security for payment on
         a note payable. The annuity contracts will fully satisfy the note
         through annual principal and interest payments.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Significant additions and
         improvements are capitalized while repairs and maintenance are expensed
         as incurred. Interest charges related to assets developed or
         constructed for use in operations are capitalized during the
         construction period. Depreciation and amortization are provided using
         the straight-line method over the following estimated useful lives:

                Buildings and improvements         31 - 39 years
                Furniture and fixtures               3 - 7 years
                Land Improvements                       15 years
                Marina                                  15 years

         INTANGIBLES

         Intangibles include goodwill and a non-compete agreement. Goodwill,
         which represents the excess of the purchase price over fair value of
         net assets acquired, is amortized using the straight-line method for
         periods from thirteen and a half to fifteen years. The recoverability
         of goodwill is assessed by comparing estimated undiscounted future
         operating cash flows over the remaining amortization period to the
         current net asset balance. If impairment is identified, any loss is
         measured based on projected discounted future operating cash flows
         using a discount rate reflecting Legend's average cost of funds. The
         non-compete agreement is amortized using the straight-line method over
         a period of fifteen years, the term of the agreement.

         OTHER ASSETS

         Included among other assets are deferred loan costs that are amortized
         using the straight-line method over the term of the related debt.

         STOCK-BASED COMPENSATION

         In October 1995, the FASB issued Statement of Financial Accounting
         Standards No. 123, "Accounting for Stock Based Compensation" (Statement
         123). This standard allows the use of either the fair value based
         method described in Statement 123 or the intrinsic value based method
         prescribed by APB Opinion No. 25, Accounting for Stock Issued to
         Employees." ("APB 25") The Company has elected to continue accounting
         for stock based compensation under the APB 25 method and disclose the
         pro forma impact of Statement 123.


                                      F-10
<PAGE>   41
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         DEPOSITS

         Included in other liabilities are customer deposits on real estate
         sales, rental and club memberships of $6,667,812 and $7,765,853 at
         December 31, 1999 and 1998, respectively. The real estate sales and
         rental deposits are held in restricted bank accounts, which were
         $3,719,814 and $5,470,785 at December 31, 1999 and 1998, respectively.
         Among these are certain associate member deposits that will be refunded
         at the end of the related term or upon cancellation by the member.


         REVENUE RECOGNITION

         Revenues on retail sales of real estate are recorded upon the closing
         and transfer of title to the buyer, whereas rental revenue is
         recognized over the respective tenant lease terms (1 to 30 years) using
         the straight-line method. Sales of equity memberships in the Grand
         Harbor Golf and Beach Club (Club) are included in real estate sales.
         Club assets at Grand Harbor are an amenity which is charged to the cost
         of real estate sales sold based on real estate sold. Membership dues
         for Grand Harbor are billed on an annual basis and recognized as
         revenue ratably over the year.


         INCOME TAXES

         The Company utilizes the asset and liability method of accounting for
         income taxes. Under the asset and liability method, deferred income
         taxes are recognized for the tax consequences of temporary differences
         by applying enacted statutory rates applicable to future years to
         differences between the financial statement carrying amounts and the
         tax basis of existing assets and liabilities. Changes in tax rates that
         effect deferred tax assets and liabilities are taken into income during
         the period that includes the enactment date. Deferred income tax assets
         are reduced by a valuation allowance when, in the opinion of
         management, it is likely that some portion or all of the deferred
         income tax assets will not be realized.

         For tax purposes, the Company is included in an affiliated
         consolidated tax group, of which Resource Group International Inc. is
         the common parent, pursuant to a new Tax Sharing and Allocation
         Agreement.

         ADVERTISING COSTS

         Costs of advertising, promotion and marketing are generally charged to
         operations as incurred. These expenses were $2,664,880 in 1999,
         $2,431,072 in 1998 and $2,395,134 in 1997.

         SEGMENT INFORMATION

         The company adopted Statement of Financial Accounting Standards No.
         131, "Disclosures about Segments of an Enterprise and Related
         Information" (SFAS No. 131) in 1998. This statement establishes
         standards for the reporting of information about operating segments in
         annual and interim financial statements and requires restatement of
         prior year information. Operating segments are defined as components of
         an enterprise for which separate financial information is available
         that is evaluated regularly by the chief operating decision maker(s) in
         deciding how to allocate resources and in assessing performance. SFAS
         No. 131 also requires disclosures about products and services,
         geographic areas and major customers. The adoption of SFAS No. 131 did
         not affect results of operations or financial position but did affect
         the disclosure of segment information, as presented in Note 14.

         NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued Statement of Financial Accounting
         Standards No. 133, "Accounting for Derivative Instruments and Hedging
         Activities" ("Statement 133"). The effective date for Statement 133 was
         delayed by Statement of Financial Accounting Standards No. 137,
         "Accounting for Derivative Instruments and Hedging Activities -
         deferral of the effective date of FASB No. 133"("Statement 137"), to
         fiscal years beginning after June 15, 2000. Statement 133 establishes
         accounting and reporting standards for derivative instruments,
         including certain derivative instruments embedded in other contracts,
         and for hedging activities. It requires that an entity recognize all
         derivatives as either assets or liabilities in the statement of
         financial position and measure those instruments at fair value. It is
         currently anticipated that the Company will adopt Statement 133 on
         January 1, 2001, and that the statement will not have a significant
         financial statement impact upon adoption.


                                      F-11
<PAGE>   42
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         RECLASSIFICATIONS

         Certain amounts in prior years consolidated financial statements have
         been reclassified to conform to the 1999 presentation.



(2)      LIQUIDITY

         As of December 31, 1999, the Company's debt obligations, including
         payables to related parties of $88,661,961 (see Note 6), totaled
         $110,249,174 of which $5,803,953 matures by December 31, 2000. None of
         these maturities relate to payables to Holdings. In addition to the
         debt maturities under existing financings, the Company requires
         additional financing to advance its business plan. As of December 31,
         1999, the Company had $2,902,359 of cash and cash equivalents, which
         will not be sufficient to fund these obligations.

         The company expects to meet its existing debt obligations that mature
         during 2000 by the renewal and extension of existing construction
         lines, and internally generated funds from real estate sales and
         operations. Based on alternatives available, management believes that
         sufficient funds will be available to meet its obligations during 2000.
         If sufficient funds are not available from the above sources, the
         Company anticipates delaying certain interest payments to Holdings as
         allowed under the debt agreements. The Company also has available, if
         needed, a $5 million credit facility from Holdings, which was unused at
         December 31, 1999.


(3)      ACQUISITIONS

         Certain business combinations consummated during 1997 and 1996 were
         accounted for under the purchase method of accounting, wherein the
         purchase price was allocated to the assets acquired and liabilities
         assumed based upon their relative fair values. Results of operations
         for these acquired companies have been included in the consolidated
         financial statements from the acquisition dates.

         BANYAN MORTGAGE INVESTMENT FUND

         On April 12, 1996, an Agreement and Plan of Merger was executed among
         RGI/US, Holdings and Banyan.

         Effective December 31, 1996, RGI/US was merged with and into Banyan.
         Banyan's certificate of incorporation was amended to convert each
         twenty-five shares of Banyan's issued and outstanding common stock into
         one issued and outstanding share (Reverse Split). Additionally, the
         name of Banyan was changed to Legend Properties, Inc. After giving
         effect to the Reserve Split, all outstanding shares of RGI/US were
         converted into 4,386,986 shares of Banyan's common stock. For
         accounting purposes, the merger was treated as a recapitalization of
         RGI/US, with RGI/US as the acquirer of Banyan for $22,175,403.


         GRAND HARBOR PROPERTY HOLDINGS, INC., AND OAK HARBOR PROPERTY HOLDINGS,
         INC.

         On January 2, 1996, GHA, a 45 percent general partner in GHPH and OHPH,
         purchased Southmortgage Finance Co., a holding company for certain bank
         debt (the proceeds of which were loaned to GHPH), and an additional 45
         percent interest in GHPH, OHPH and Harbor Title and Escrow Co. Ltd.
         (collectively, the Acquired Companies). Harbor Title and Escrow Co.
         Ltd. provides title and escrow service for GHPH and OHPH. The Acquired
         Companies were purchased from Andlinger Properties Capital L.P. for
         cash consideration of $52,237 and a promissory note of $996,220.


                                      F-12
<PAGE>   43
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         In July 1997, GHA acquired the remaining 10 percent of the Acquired
         Companies. The Acquired Companies were purchased from Grand Harbor
         Development Company (GHDC), a corporation majority owned by Don
         Proctor, in exchange for the cancellation of a note receivable of
         $1,462,770 plus accrued interest of $218,814, payable to GHA from GHDC.
         Don Proctor is the majority shareholder of Proctor Construction
         Company, which has an exclusive contract to provide development and
         construction services at Grand Harbor and Oak Harbor. Mr. Proctor was
         an officer of GHPH until his resignation in June 1997.


                                      F-13
<PAGE>   44
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

(4)      REAL ESTATE INVENTORY AND ASSET HELD FOR SALE

         REAL ESTATE INVENTORY

         Real estate inventory consisted of the following at December 31, 1999:

<TABLE>
<CAPTION>
                                               Initial cost to Legend            Cost Adjustments
                                             ---------------------------     -------------------------
    Name, approximate size         Encum-                  Building and                  Building and
       Type and location          brances       Land       Improvements         Land     Improvements
-----------------------------    ---------   -----------   -------------     ---------   -------------
<S>                              <C>         <C>           <C>               <C>         <C>
Grand Harbor, 300-acre           Note 5
residential development in       (G-J)
Vero Beach, FL                               $ 9,059,365         -              -          16,642,981

Oak Harbor, 100-acre             Note 5
residential development in       (C-F)
Vero Beach, FL                                 3,494,372         -              -           9,687,223

Southbridge, 2,300-acre          Note 5(A)
mixed use land development in    Note 6
Prince William County, VA        (A-B)        20,397,886        7,146,670       -           9,497,544
                                             --------------------------------------------------------

                                             $32,951,623        7,146,670       -          35,827,748
                                             ========================================================
</TABLE>


<TABLE>
<CAPTION>
                                                             Valuation
                                                           adjustment and
                                             Building       accumulated
                                               And          depreciation                       Date of        Date
       Description             Land        improvements   and amortization     Total (a)     Construction   Acquired
---------------------------------------------------------------------------------------------------------------------
<S>                         <C>            <C>            <C>                 <C>            <C>            <C>
Grand Harbor, 300-acre
residential development
in Vero Beach, FL           $ 9,059,365     16,642,981        (119,200)       25,583,146          (b)         03/91

Oak Harbor, 100-acre
residential development
in Vero Beach, FL             3,494,372      9,687,223            -           13,181,595          (b)         05/91

Southbridge, 2300-acre
mixed use land
development in Prince
 William County, VA          20,397,886     16,644,214            -           37,042,100          (b)         12/96
                           --------------------------------------------------------------
                            $32,951,623     42,974,418        (119,200)       75,806,841
                           ==============================================================
</TABLE>


                                      F-14
<PAGE>   45
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         a)       Reconciliation of real estate inventory for the years ended
                  December 31:

<TABLE>
<CAPTION>
                                                               1999              1998               1997
         -----------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>               <C>
         Balance at beginning of year                     $  82,873,914       103,857,159       128,834,222
         -----------------------------------------------------------------------------------------------------
         Reallocation of purchase price Banyan                     -                  -             415,869
         Net dispositions through sale                      (33,052,315)      (47,425,324)      (47,784,281)
         Acquisitions                                              -                  -           1,260,019
         Net additions                                       25,985,242        26,442,079        21,250,530
         Valuation adjustment                                      -                  -            (119,200)
         -----------------------------------------------------------------------------------------------------

         Balance at end of year                           $  75,806,841        82,873,914       103,857,159
         =====================================================================================================
</TABLE>

         b)       Properties are currently at various stages of development and
                  entitlement. The build-out of the projects is expected to
                  continue for periods ranging from 5-20 years under the current
                  development plans.

         ASSET HELD FOR SALE

         At December 31, 1998, Asset Held for Sale represents the carrying value
         of the Ashburn Corporate Center. On April 19, 1999, Ashburn Front Five
         LLC, a wholly owned subsidiary of the Company, acquired the second
         parcel of the Ashburn Corporate Center which comprises nearly 28 acres
         for an approximate purchase price of $4,300,000. In Management's view,
         the acquisition of the additional parcel was necessary to facilitate
         the disposition of the entire Ashburn Corporate Center.

         In April 1999, the Company executed a contract for the sale of the
         entire project to an unrelated third party. In accordance with the
         contract, the purchaser deposited a $100,000 non-refundable deposit
         into escrow. Subsequently, the purchaser was unwilling to move forward
         with the closing so in June 1999 the Company, in accordance with the
         contract, terminated the contract and received the $100,000 deposit.
         The deposit was recorded as other income in the Company's consolidated
         financial statements.

         On September 27, 1999, the Company, through its majority owned
         subsidiaries, Ashburn Corporate Center, LC and Ashburn Front Five, LLC,
         sold the land and related improvements of the Ashburn Corporate Center
         to Catapult Ventures LLC, an unrelated third party.

         The sales price of the property was $15,150,000 (before closing costs
         of approximately $790,000.) The Company used a portion of the proceeds
         to repay existing mortgage notes of $5,940,000 (see Note 6 (K)) and
         related party debts of $3,750,000 on the credit facility advance from
         Holdings and $1,743,682 on additional Holdings debt. The sale resulted
         in a gain for financial reporting purposes of approximately $2,000,000.


                                      F-15
<PAGE>   46
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

(5)      PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost and consist of the following
         at December 31:

<TABLE>
<CAPTION>
                                                                                  1999          1998
                  -----------------------------------------------------------------------------------------
<S>                                                                         <C>                 <C>
                  Marina                                                    $    2,683,471       2,683,471
                  Buildings and improvements                                    14,124,773      14,602,202
                  Furniture, fixtures and equipment                              7,433,063       7,225,351
                  Depreciable land improvements                                  2,014,677       2,014,677
                  -----------------------------------------------------------------------------------------

                                                                                26,255,984      26,525,701

                  Less accumulated depreciation and amortization                 8,129,706       6,623,845
                  -----------------------------------------------------------------------------------------

                                                                                18,126,278      19,901,856

                  Land (including golf course land)                              4,743,425       4,743,425
                  -----------------------------------------------------------------------------------------

                                                                            $   22,869,703      24,645,281
                  =========================================================================================
</TABLE>


(6)      NOTES PAYABLE TO BANKS AND OTHERS

         Notes payable to banks and others consists of the following at December
         31:

<TABLE>
<CAPTION>
         (Reference to note 3)                                                        1999           1998
         -----------------------------------------------------------------------------------------------------
<S>                                                                               <C>               <C>
         (A)      Note payable to others, interest only payable monthly at
                  12 percent, principal due April 20, 1999, secured by
                  certain real estate inventory.                                  $       -          2,950,000

         (B)      Note payable to bank, interest payable monthly at prime
                  rate plus 1.0 percent (9.50 percent at December 31,
                  1999); principal is due during 2000.                                 259,521            -

         (C)      Note payable to others, interest at 6.34 percent, due in
                  annual installments of $600,000, including interest
                  through July 1, 2009.  Secured by annuity contracts.               4,345,780       4,650,912

         (D)      Notes payable to banks, interest payable monthly at the
                  banks' cost of funds rate (not to exceed the LIBOR rate
                  plus .50 percent) plus 2.25 percent (8.7113 percent at
                  December 31, 1999); principal payments of $786,597,
                  $969,000 and $692,712 due in 2000, 2001 and 2002,
                  respectively.  Secured by second mortgages on certain              2,448,309       3,048,309
                  real estate inventory and property.

         (E)      Notes payable to banks, interest payable monthly at
                  LIBOR plus 2.50 percent and prime rate plus 1.0 percent
                  (8.66 percent to 9.50 percent at December 31, 1999);
                  principal payments of $887,361, $160,143, $177,519 and
                  $3,326,698 due in 2000, 2001, 2002 and 2003,
                  respectively. Secured
                  by first mortgages on certain real estate inventory,               4,551,721      11,433,815
                  certain property and equipment.

         (F)      Construction revolving line of credit, interest payable
                  monthly at the prime rate plus 1 percent (9.50 percent
                  at December 31, 1999), due December 2000. Secured by
                  first mortgages on certain real estate inventory,
                  certain property and equipment.  Total advances are not              845,163       1,287,663
                  to exceed $16,000,000.
</TABLE>


                                      F-16
<PAGE>   47
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements


<TABLE>
<S>                                                                               <C>               <C>
         (G)      Notes payable to bank, interest payable monthly at the
                  bank's cost of funds rate (not to exceed the LIBOR rate
                  plus .50 percent) plus 2.25 percent (8.7113 percent at
                  December 31, 1999); principal payments of $1,283,395,
                  $1,581,000 and $1,207,288 due in 2000, 2001 and 2002,
                  respectively.  Secured by first and second mortgages on            4,071,683       4,741,701
                  certain real estate inventory.

         (H)      Notes payable to banks, interest payable monthly at the
                  prime rate (8.50 percent at December 31, 1999);
                  principal is due November 2000. Secured by a first
                  mortgage on
                  certain real estate inventory.                                       371,698       1,732,588


         (I)      Construction revolving lines of credit payable to banks:
                  principal payments of $1,022,549 and $3,611,986 due
                  October 2000 and December 2001, respectively. Interest
                  payable monthly at the prime rate (8.50 percent at
                  December 31, 1999). Secured by a first mortgage on                 4,634,535       4,743,556
                  certain property.  Total advances are not to exceed
                  $16,000,000.

         (J)      Notes payable to others, interest at 7.50 percent to 9.0
                  percent; principal and interest due during 1999.
                  secured by a first mortgage on certain real estate                      -             91,000
                  inventory.

         (K)      Note payable to others, interest due monthly at 18%,
                  principal due September 6, 1999. Secured by a first
                  mortgage on
                  assets held for sale.                                                   -          5,940,000


         (L)      Other                                                                 58,803         103,193
                                                                                   -----------      ----------
                                                                                   $21,587,213      40,722,737
--------------------------------------------------------------------------------------------------------------
</TABLE>


         Scheduled principal maturities of notes payable to banks and others at
         December 31, 1999 are as follows:

<TABLE>
<S>                                                 <C>
                  2000                              $  5,803,953
                  2001                                 6,696,620
                  2002                                 2,447,661
                  2003                                 3,719,841
                  2004                                   414,927
                  Thereafter                           2,504,211
                  -----------------------------------------------
                                                    $ 21,587,213
                  ===============================================
</TABLE>

         In conjunction with the acquisition of Royal Palm Convalescent Center
         by OHPH in June 1994, an irrevocable trust consisting of three
         annuities was established for the sole purpose of providing security
         for payments due on the note payable to others (see (C)). The annuity
         contracts totaled $4,225,298 and $4,512,127 at December 31, 1999 and
         1998, respectively, plus accrued interest receivable of $151,616 and
         $156,585, and will fully satisfy the annual principal and interest
         payments of $600,000 under the note payable through maturity on July 1,
         2009.


                                      F-17
<PAGE>   48
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

   (7)   RELATED PARTY TRANSACTIONS

         The following is a summary of other significant transactions and
         accounts with related parties during 1999, 1998 and 1997 and as of
         December 31, 1999 and 1998:

         RECEIVABLES

         As of December 31, 1999 the Company has included in other assets a
         $4,757,642 receivable from RGI, Inc., the parent company of Holdings,
         related to the utilization of the benefit of a deferred tax asset
         recorded by the Company. The benefit is derived from the Company's
         inclusion in RGI, Inc.'s consolidated tax return.

         PAYABLES

         Payables to related parties consist of the following at December 31:

<TABLE>
<CAPTION>
                                                                                      1999             1998
                                                                                  ------------      ----------
<S>                                                                               <C>               <C>
         (Reference to note 3)
         (A)   Mortgage note payable to Holdings with interest payable
               quarterly at LIBOR plus 2.5%. Principal payments equal
               to 20% of Southbridge and 50% of other collateral sales
               revenues is payable quarterly with the balance due April
               1, 2003. The debt is secured by certain real estate
               inventory and property.  Unpaid interest will be capitalized
               into the principal balance annually.                               $ 31,238,050      30,649,872

         (B)   Mortgage note payable to Holdings with interest at
               Prime plus 2% and secured by certain real estate
               inventory.  Interest and principal are payable
               quarterly after certain other debt payments
               provided that a $4.5 million cash reserve
               remains.  Quarterly principal payments are equal
               to 80% of the defined net cash flow for
               Southbridge, Grand Harbor, and Oak Harbor with
               the balance due April 1, 2003.  Unpaid interest
               will be capitalized into the principal balance                       38,525,416      35,024,632
               annually.

         (C)   Unsecured note payable to RGI, Inc. with interest at
               Prime plus 2%. Principal and interest is payable on the
               same terms, but after payments on the Mortgage note
               payable discussed immediately above with the remainder
               due April 1, 2003. Unpaid interest will be capitalized
               into the principal
               balance annually.                                                    18,503,058      16,821,696

         (D)   Unsecured note payable to Holdings, interest at Prime
               plus 2%.  Principal and interest due June 1, 1999.                         -          2,248,278


         (E)      Other                                                                395,437            -
                                                                                  ------------      ----------

                                                                                  $ 88,661,961      84,744,478
         =====================================================================================================
</TABLE>


         The entire $88,661,961 related party payable (principal and accrued
         interest) is due on April 1, 2003.


                                      F-18
<PAGE>   49
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         Holdings has provided to the Company a $5 million credit facility to
         provide sufficient working capital to fund ongoing development,
         construction and operating activities. The credit facility provides for
         interest at Prime plus 2%, matures on April 1, 2003 and is secured by
         certain real estate inventory and property. Funding purpose and
         repayment terms are to be agreed upon prior to drawing on this
         facility.

         On May 18, 1999, the Company borrowed $3,750,000 under the $5 million
         credit facility with Holdings. Funds from the $3,750,000 advance were
         used to repay a $2,248,279 unsecured note payable to Holdings which
         matured on June 1, 1999 and to repay a portion of a $2,950,000 note
         payable to an unrelated third party.

         On September 29, 1999, the $3,750,000 advance plus accrued interest was
         repaid to Holdings. In addition, the Company made an additional
         $1,743,682 principal payment to Holdings pursuant to the Company's
         agreement with Holdings. Funds for the repayments were generated by the
         sale of the Ashburn Corporate Center, as discussed in Note 3.


         INDEMNITY

         Aker RGI ASA, the indirect parent of Holdings, has provided an
         indemnity, to a maximum of $15,000,000, to the bonding company for
         development bonds at Southbridge, of which an aggregate total of
         approximately $13,500,000 was outstanding at December 31, 1999.


         CONSTRUCTION AGREEMENT

         Prior to December 31, 1999, Proctor Construction Company (Proctor)
         provided all development and construction services at Grand Harbor and
         Oak Harbor since Legend acquired the projects. Donald C. Proctor is the
         majority shareholder of Proctor, and an affiliate of Mr. Proctor owned
         10 percent of GHPH and OHPH (the corporations that own Grand Harbor and
         Oak Harbor, see Note 2). This exclusive contract was effective through
         December 31, 1999, with fees equal to the cost of the work, a 7 percent
         overhead charge and a 5 percent profit fee, half of which was payable
         to GHPH and OHPH. There can be no assurance that Legend purchased these
         services at prevailing market rates.


                                      F-19
<PAGE>   50
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

 (8)     INCOME TAXES

         Income tax benefit attributable to loss from continuing operations
         consists of:


<TABLE>
<CAPTION>
                                              Current       Deferred       Total
<S>                                        <C>             <C>            <C>
         Year ended December 31, 1999:
                US federal                 $(4,757,642)    (4,573,900)    (9,331,542)
                State and local                   -              -              -

         Year ended December 31, 1998:
                US federal                        -              -              -
                State and local                   -              -              -
                                           ============    ===========    ===========
</TABLE>


         Income benefit attributable to loss from continuing operations was
         $9,331,542 and $0 for the years ended December 31, 1999 and December
         31, 1998, respectively, and differed from the amount computed by
         applying the US federal income tax rate of 34 percent to pretax income
         from continuing operations as a result of the following:


<TABLE>
<CAPTION>
                                                                                 1999                 1998
<S>                                                                          <C>                  <C>
         Computed "expected" tax benefit
         Increase (reduction) in income taxes                                $(4,299,457)          (4,126,571)
             Resulting from:
             State and local income taxes, net of
                 Federal income tax benefit                                     (493,173)            (473,341)
             Change in the beginning-of-the-year Balance of the valuation
                 allowance For deferred tax assets allocated To income tax
                 benefit                                                     (12,247,900)           3,711,000
             Change in Valuation allowance due to
                 Election to treat loss carryover as
                 Expiring                                                     12,451,570                 -
             Amount attributable to benefit received
                 Due to prior year loss utilized by
                 Parent company                                               (4,757,642)                -
             Permanent items, primarily due
                 Due to meals and entertainment, etc.                               -                 467,212
             Other                                                                15,060              421,700
                                                                             ------------         ------------
             Total                                                           $(9,331,542)                -
                                                                             ============         ============
</TABLE>

         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and deferred tax liabilities at
         December 31, 1999 and 1998 are presented below:

<TABLE>
<CAPTION>
                                                                                     1999                 1998
<S>                                                                             <C>                  <C>
         Deferred tax assets:
             Real estate inventory and assets held for sale                      $20,492,000           20,488,000
             Deferred income                                                         245,000              270,000
             Net operating loss carryforwards                                     12,685,000           20,324,000
             Organization and loan fees                                              771,000              849,000
             Other                                                                     -                  176,000
                                                                                 -----------          -----------
         Total gross deferred tax assets                                          34,193,000           42,107,000
         Less valuation allowance                                                 28,702,100           40,950,000
                                                                                 -----------          -----------
</TABLE>


                                      F-20
<PAGE>   51
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                     1999               1998
                                                     ----               ----
<S>                                             <C>                <C>
         Net deferred tax asset                   5,490,900          1,157,000

         Deferred tax liabilities:
             Property and equipment                 523,000            516,000
             Inventory                              354,000               -
             Other                                   40,000            641,000
                                                 ----------         ----------
             Gross deferred liabilities             917,000          1,157,000
                                                 ----------         ----------
         Net deferred tax asset                   4,573,900               -
                                                 ==========         ==========
</TABLE>

         The net deferred tax asset of $4,573,900 is recorded in other assets at
         December 31, 1999.

         The valuation allowance for deferred tax assets as of January 1, 1999
         was $40,950,000. The net change in the total valuation allowance for
         the year ended December 31, 1999 was a decrease of $12,247,900. In
         assessing the realizability of deferred tax assets, management
         considers whether it is more likely than not that some portion or all
         of the deferred tax assets will not be realized. The ultimate
         realization of deferred tax assets is dependent upon the generation of
         future taxable income during the periods in which those temporary
         differences become deductible. Management considers the scheduled
         reversal of the deferred assets and liabilities, projected future
         taxable income and the planning strategies in making this assessment.
         Based upon the historical taxable income and projections for future
         taxable income over the periods which the deferred tax assets are
         deductible, management believes it is more likely than not that Legend
         will realize the benefits of these deductible differences, net of
         existing valuation allowances at December 31, 1999. The amount of the
         deferred tax asset considered realizable, however, could be reduced in
         the near term if estimates of future taxable income during the
         carryforward periods are reduced.

         A receivable from Legend's parent company, representing the tax benefit
         obtained by the utilization of its 1998 operating loss, has been
         established in 1999 in accordance with a new tax sharing agreement used
         by the consolidated group which has an effective date retroactive to
         January 1, 1998. (see Note 7)

         As of December 31, 1999, Legend has a net operating loss carryforward
         of approximately $33,500,000 which substantially expires in 2000, 2001,
         2002 and 2003. This excludes net operating losses which were previously
         elected to be treated as expiring under Internal Revenue Code
         Regulation Section 1.1502-32(b)(4).


   (9)   FAIR VALUE OF FINANCIAL INSTRUMENTS

         Legend's financial instruments include cash, restricted cash,
         receivables, accounts payable, and short-term and long-term borrowings.
         In general, Legend believes that the fair value of these financial
         instruments approximates their carrying amounts based upon their
         short-term nature or upon current market indicators, such as prevailing
         interest rates available to the Company for similar instruments.

         Legend's financial instruments also include restricted investments,
         consisting of an irrevocable trust fund containing three annuities,
         established to provide the annual payments required on the note payable
         to others (see Note 5(c)). The annual distributions from the annuities
         fully satisfy the interest and principal payments of the note payable.
         Moreover, these annuities cannot be surrendered and, therefore, have no
         cash value. Because the restricted investments and the note payable are
         inextricably linked, the fair value of each is considered to be the
         carrying amounts reported in the balance sheet.


  (10)   CONCENTRATION OF ASSETS


                                      F-21
<PAGE>   52
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         The majority of Legend's assets are real estate holdings which are
         subject to possible fluctuating economic conditions. Such fluctuations
         can have a significant impact on the market values, which in turn could
         limit the potential recovery of the properties' carrying values.



  (11)   STOCK OPTION PLAN

         The Company has granted stock options under the Executive and
         Directors' Stock Option Plan (the Plan) which was approved on June 25,
         1993. The Plan grants the Board of Directors the authority to issue up
         to 40,000 shares of the Company's common stock for stock option awards.
         The Plan consists of an Executive Option Grant Program and a Director
         Option Grant Program. Options issued under the Executive Option Grant
         Program vest over a three-year period. Options issued under the
         Director Option Grant Program vest over a two-year period. All options
         granted lapse ten years from the date of grant.

         The following is a summary of stock option activity:

<TABLE>
<CAPTION>
                                              Option price       Number of shares
         -------------------------------------------------------------------------
<S>                                         <C>                  <C>
         Balance at December 31, 1996       $11.69 to $28.13         25,280

         Granted                              $4.50 to $7.75          9,300

         Forfeited                           $4.50 to $28.13        (20,500)
         -------------------------------------------------------------------------

         Balance at December 31, 1997        $4.50 to $17.19         14,080

         Granted                                    -                  -
         -------------------------------------------------------------------------

         Balance at December 31, 1998        $4.50 to $17.19         14,080

         Granted                                    -                  -
         -------------------------------------------------------------------------

         Balance at December 31, 1999        $4.50 to $17.19         14,080
         =========================================================================
</TABLE>


         At December 31, 1999, the number of options exercisable was 14,080. The
         Company has adopted the disclosure-only provisions of SFAS No. 123,
         Accounting for Stock-Based Compensation. Accordingly, the Company
         applies Accounting Principles Board Opinion No. 25 in accounting for
         the Plan and therefore no compensation cost has been recognized for the
         Plan.

         An insignificant amount of compensation cost would have been recorded
         had compensation cost for the Company's stock options been determined
         based upon the fair value at the grant date consistent with the
         methodology prescribed under SFAS No. 123.


 (12)    EMPLOYEE BENEFIT PLAN

         The Company sponsors a defined contribution plan that provides
         employees of the Company an opportunity to accumulate funds for their
         retirement. Employees are eligible to join the plan if they are at
         least 21 years of age, have completed one year of service with the
         Company, and worked a minimum of 1,000 hours. The Company matches the
         contributions of participating employees on the basis of the
         percentages specified in the plan. Company matching contributions to
         the plan were approximately $53,000, $47,000 and $83,000 in 1999, 1998
         and 1997, respectively.

  (13)   COMMITMENTS & CONTINGENCIES


                                      F-22
<PAGE>   53
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         LEASES

         The Company is obligated under various leases covering office space and
         equipment. Minimum payments under these leases are:

<TABLE>
<CAPTION>
         Fiscal Year                                         Operating
         --------------------------------------------------------------
<S>                                                          <C>
          2000                                               $ 237,225
          2001                                                 189,715
          2002                                                  39,013
          2003                                                  14,031
          2004                                                   1,862
         --------------------------------------------------------------
                  Total minimum lease payments               $ 475,596
         --------------------------------------------------------------
</TABLE>

         Rent expense was $307,221, $228,445 and $259,363 for years 1999, 1998
         and 1997, respectively.

LEGAL PROCEEDINGS

         Ashburn Corporate Center

         During August 1998, Legend filed a lawsuit and a memorandum of Lis
         Pendens in the Circuit Court of Loudoun County against Atlantic
         Research Corporation (ARC), which was amended during November 1998.
         Legend was seeking specific performance under a real estate sales
         contract and any other relief the court would offer. During the first
         quarter of 1999, Legend and ARC reached an agreement concerning the
         real estate sales contract which resulted in Legends acquisition of the
         second parcel in ACC (see Note 3). As a result, the litigation was
         withdrawn and dismissed in the second quarter of 1999.


         Laguna Seca Ranch

         On December 14, 1998, a Legend subsidiary, BMIF Monterey County Corp.,
         filed a complaint against New Cities Development Group, Bates
         Properties, Inc., New Cities Development Company, Deregt Development,
         Inc., Rancho Monterey, L.L.C. (collectively New Cities), Old Republic
         Title Company and David Bohen (collectively Old Republic) in the United
         States District Court, Northern District of California, San Jose
         Division.

         During 1997, Legend sold the Laguna Seca Ranch to New Cities with
         Legend retaining a house with certain surrounding property known as Lot
         40 together with certain access easements to the nearest public right
         of way. New Cities agreed, as part of the sale, to establish a separate
         legal parcel for Lot 40 subsequent to the sale. As part of the sale,
         Legend agreed to cooperate and share equally in certain costs with New
         Cities in negotiating an agreement concerning water service to the
         property with California-American Water Company (Cal-Am). Pursuant to
         this, Legend agreed to post $200,000 in an interest bearing escrow held
         by Old Republic to pay any necessary amounts due from Legend in
         consummating an agreement with Cal-Am. An agreement was reached with
         Cal-Am on March 20, 1998 to provide the water needs, and Legend agreed
         with New Cities to contribute $60,000 out of the escrow to defray
         certain costs. On August 28, 1998 Cal-Am withdrew from its commitment.
         Subsequently, Old Republic released the $200,000 escrow with interest
         to New Cities.

         Legend claimed that New Cities breached certain implied covenants in
         refusing to negotiate and consummate the agreement with Cal-Am, that
         New Cities failed to establish Lot 40 as a separate parcel, and that
         Old Republic wrongly released the funds in escrow to New Cities. Legend
         was seeking to recover $140,000 plus interest on the escrow, that New
         Cities convey Lot 40, that New Cities pay approximately $75,000 of
         costs incurred by Legend for negotiating the agreement with Cal-Am, and
         other damages.

         During the first quarter of 2000, Legend and the defendants reached a
         settlement on all matters whereby New Cities agreed to pay Legend
         $100,000, net of $5,887 for the reimbursement of utilities and
         services, related to the settlement for water service agreement and
         convey Lot 40 to Legend. Legend agreed to pay


                                      F-23
<PAGE>   54
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

         New Cities $119,743 for certain development costs associated with Lot
         40 and to remove the Lis Pendens from Lot 40.

         General Legal Matters

         The Company is subject to various lawsuits arising in the ordinary
         course of business. The Company is of the opinion that the outcome of
         any such lawsuits will not have a material adverse effect on its
         operations.

(14)     PURCHASE OFFER

         On October 15, 1999, the Company announced that it received a proposal
         from Holdings for the merger of the Company with a wholly-owned
         subsidiary of Holdings. Pursuant to the offer, Holdings would acquire
         all of the outstanding shares of the Company's common stock not
         currently held by Holdings, for $0.13 per share in cash. Holdings holds
         approximately 80% of the Company's common stock.

         The Company's Board of Directors established a special committee to
         evaluate and consider the proposal. The proposed merger is subject to,
         among other things, (i) the execution of a definitive merger agreement,
         containing customary terms, (ii) approval of the transaction by the
         Company's special committee, Board of Directors and shareholders, (iii)
         compliance with all applicable regulatory and governmental requirements
         and (iv) receipt of an opinion from the special committee's financial
         advisor that the consideration to be received by the public
         shareholders is fair from a financial point of view.

         On January 6, 2000, the Company's Board of Directors and Holdings
         executed a definitive merger agreement where Holdings will acquire all
         of the outstanding shares, not currently held by Holdings, for $0.50
         per share in cash. The transaction is anticipated to close during the
         second quarter of 2000.


(15)     OPERATING SEGMENTS

         Legend's reportable operating segments are distinct operations that
         service differing markets. The real estate segment consists of the
         development, construction and sales activities for all of the Legend
         properties. The club operations consist of the clubhouse and related
         activities for Grand Harbor and Oak Harbor. Patient services includes
         the Royal Palm Convalescent Center which offers skilled nursing care,
         and the Somerset House Assisted Living Facility.

         The accounting policies for the reportable segments are the same as
         those described in Note 1. Internal interest is charged at rates
         similar to those charged on the payables to related parties. Summarized
         information concerning the reportable segments is presented in the
         following table.


<TABLE>
<CAPTION>
                                                                                Other,
                                   Real           Club          Patient     Corporate and
                                  Estate       Operations      Services     Eliminations(1)    Total
                                 ---------     ----------      ---------    ---------------  ---------
<S>                              <C>           <C>             <C>          <C>              <C>
($000 omitted)

1999
Revenues                         $  62,237          7,159          2,756          2,825         74,977
Operating costs and expenses       (59,157)        (9,480)        (3,532)        (6,214)       (78,383)
Other income/(expenses)             (8,231)          --             (277)         8,600             92
Net income (loss) before
    Minority interest            $  (5,151)        (2,321)        (1,053)         5,211         (3,314)
                                 =========      =========      =========      =========      =========

Total assets                        86,425         13,199         14,717         13,348        127,689

Capital expenditures             $     424             90              0            189            703
                                 =========      =========      =========      =========      =========
</TABLE>


                                      F-24
<PAGE>   55
                    LEGEND PROPERTIES, INC. AND SUBSIDIARIES
                      (A SUBSIDIARY OF RGI HOLDINGS, INC.)

                   Notes to Consolidated Financial Statements

<TABLE>
<S>                              <C>                <C>            <C>            <C>           <C>
1998
Revenues                         $  65,219          5,953          2,601          1,960         75,733
Operating costs and expenses       (61,202)        (9,485)        (3,455)        (3,621)       (77,763)
Other income/(expenses)             (8,790)        (1,151)          (301)           135        (10,107)
                                 ---------      ---------      ---------      ---------      ---------
Net income (loss) before
    Minority interest            $  (4,773)        (4,683)        (1,155)        (1,526)       (12,137)
                                 =========      =========      =========      =========      =========

Total assets                       113,101         13,684         15,523          5,250        147,558
Capital expenditures             $     338            160           (135)           429            792
                                 =========      =========      =========      =========      =========

1997
Revenues                         $  43,596          5,345          2,718          3,969         55,628
Operating costs and expenses       (44,916)        (8,499)        (2,736)        (4,096)       (60,247)
Other income / (expenses)          (10,452)          (711)          (127)         1,150        (10,140)
                                 ---------      ---------      ---------      ---------      ---------
Net income (loss) before
   Minority interest             $ (11,772)        (3,865)          (145)         1,023        (14,759)
                                 =========      =========      =========      =========      =========

Total assets                       120,192         14,487         15,622         12,570        162,871
Capital expenditures             $   1,042            958          3,840            457          6,297
                                 =========      =========      =========      =========      =========
</TABLE>

(1)  Other includes other segments, which were not reportable in 1999 and 1998.
     These other segments were not reported in earlier periods since they were
     disposed of prior to 1998 and it was impractical to report separately.


                                      F-25