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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



(Mark One)

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



For the fiscal year ended December 31, 2003

or

| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission File Number: 0-23270



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Dominion Homes, Inc.

(Exact name of registrant as specified in its charter)



|                                                                                  |  |                                                
|--------------------------------------------------------------------------------- |  | -----------------------------------------------
|Ohio (State or other jurisdiction of incorporation or organization)               |  | 31-1393233 (I.R.S. Employer Identification No.)
|                                                                                  | 
|5000 Tuttle Crossing Blvd., Dublin, Ohio (Address of principal executive offices) |  | 43016-5555 (Zip Code)                          



Registrants
telephone number, including area code: 614-356-5000



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



Securities registered pursuant to Section 12(g) of the Act: common shares
without par value



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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 10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer.    Yes   x    No ̈



The aggregate market value of our common shares held by non-affiliates was $84,555,453 on June 30, 2003.



As of March 12, 2004, there were 8,220,465 common shares outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of our Definitive Proxy Statement for the 2004 Annual Meeting of Shareholders are incorporated by reference in Part
III.



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TABLE OF CONTENTS



PART I



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|           |  | Page                                                                                          
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|Item 1.    |  | Business                                                                                       |  | 1 
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|Item 2.    |  | Properties                                                                                     |  | 10
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|Item 3.    |  | Legal Proceedings                                                                              |  | 11
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|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                            |  | 12
|          
|PART II   
|           |  |                                                                                               
|Item 5.    |  | Market for Registrants Common Equity and Related Shareholder Matters                          |  | 12
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|Item 6.    |  | Selected Consolidated Financial and Operating Data                                             |  | 12
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|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 14
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|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                     |  | 31
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|Item 8.    |  | Financial Statements and Supplementary Data                                                    |  | 33
|           |  |                                                                                               
|Item 9.    |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosures          |  | 56
|           |  |                                                                                               
|Item 9A.   |  | Controls and Procedures                                                                        |  | 56
|          
|PART III  
|           |  |                                                                                               
|Item 10.   |  | Directors and Executive Officers of the Registrant                                             |  | 56
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|Item 11.   |  | Executive Compensation                                                                         |  | 56
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|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |  | 57
|           |  |                                                                                               
|Item 13.   |  | Certain Relationships and Related Transactions                                                 |  | 57
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|Item 14.   |  | Principal Accountant Fees and Services                                                         |  | 57
|          
|PART IV   
|           |  |                                                                                               
|Item 15.   |  | Exhibits, Financial Statement Schedules, and Reports of Form 8-K                               |  | 57
|          
|Signatures

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PART I



|Item 1. | BUSI
NESS
|------- | ---------



All references to we, us, and our, Dominion, or the Company in this Annual Report on Form 10-K mean Dominion Homes, Inc. and its consolidated subsidiaries, except
where it is made clear that the term only means the parent company.



Overview



We are a leading builder of
high-quality homes in Central Ohio and Louisville, Kentucky. We are expanding our presence in Kentucky by entering the Lexington market and expect to begin selling homes in Lexington during the second quarter of 2004 and to begin delivering homes
there during the fourth quarter of 2004. Our customer-driven focus targets entry-level and move-up home buyers. We offer a variety of homes that are differentiated by price, size, standard features and available options. Our homes range in price
from approximately $100,000 to more than $350,000 and in size from approximately 1,000 to 3,500 square feet.



We trace our homebuilding roots to 1952 when Donald A. Borror, our Chairman Emeritus, built his first home in Columbus, Ohio. Donald Borror and the Borror
family grew the homebuilding business, and operated it as part of the homebuilding and related divisions of BRC Properties Inc. (BRC). We were organized as an Ohio corporation in October 1993 under the name Borror Corporation in
anticipation of our initial public offering, which we completed in March 1994. In connection with the initial public offering, we acquired from BRC, our predecessor company and our largest shareholder, its homebuilding operations. BRC is primarily
owned and controlled by the Borror family. In May 1997, we changed our name to Dominion Homes, Inc.



Our principal corporate offices are located at 5000 Tuttle Crossing Blvd., Dublin, Ohio 43016. The telephone number of our principal corporate offices is
(614) 356-5000 and our web site address is www.dominionhomes.com.



Our
Markets



We presently build homes in Central Ohio and
Louisville, Kentucky. We announced our entry into the Lexington, Kentucky market in late 2003 and expect to begin delivering homes in the Lexington, Kentucky market in the fourth quarter 2004. Our markets have diverse economic and employment bases
with steady population growth over the last 10 years. We believe we are the largest homebuilding company in both Central Ohio and Louisville, Kentucky, based on the number of new homes delivered.



In 2003, we delivered approximately 32% of all new homes in the Central Ohio
market. Columbus is the capital of Ohio, the county seat of Franklin County and the largest city in Ohio. The Columbus Metropolitan Statistical Area (the Columbus MSA) has a population of approximately 1.7 million. As of December 2003,
the unemployment rate in the Columbus MSA was 4.1% and the national average was 5.7%. Columbus is the home of The Ohio State University. In addition, a number of notable organizations have their headquarters in Central



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Ohio, including Honda of America Manufacturing, Inc., American Electric Power Company, Inc., The Limited, Inc.,
Nationwide Insurance Company, Wendys International, Inc., Battelle Memorial Institute, The Scotts Company and Cardinal Health, Inc. The Columbus MSA includes Franklin, Pickaway, Madison, Fairfield, Delaware, Licking, Union and Morrow County.
We build homes in all of these counties, except Morrow County.



In 1998, we expanded our operations into Louisville, Kentucky. The Louisville Metropolitan Statistical Area (the Louisville MSA) has a population of approximately 1.0 million. As of December 2003, the unemployment rate in the
Louisville MSA was 4.5%. Louisville is the home of the University of Louisville and the headquarters for major corporations such as Humana, Inc., Yum! Brands, Inc. and KFC Corporation. Other major employers in Louisville include GE Appliance, Ford
Motor Company and United Parcel Service, Inc. The Louisville MSA consists of Jefferson, Oldham, Bullitt, Trimble, Nelson, Meade, Spencer, Shelby and Henry Counties in Kentucky and Harrison, Floyd, Clark and Washington Counties in Southern Indiana.
We are presently building homes in Jefferson and Oldham counties and expect to begin building homes in Shelby and Clarke counties during 2004.



In the fourth quarter of 2003, we announced our expansion into Lexington, Kentucky. We chose Lexington because of its strong economy, its proximity to our
existing operations in Louisville and our ability to share many systems and personnel in developing communities and building homes in both of our Kentucky locations. The Lexington Metropolitan Statistical Area (the Lexington MSA) has a
population of approximately 486,000. At December 31, 2003, the unemployment rate in the Lexington MSA was 3.5%. Lexington is the home of the University of Kentucky, Toyota Motor Manufacturing and Lexmark International.



Our Products



We focus on providing high-quality, affordably priced single-family homes primarily for entry-level and first-time move-up
home buyers. We currently offer three distinct series of homes, which are differentiated by price, size, standard features and available options.



| | · | Independence SeriesOur Independence Series, a neo-traditional housing concept, targets entry-level home buyers. We offer nine home designs in this series ranging
in price from approximately $100,000 to $170,000 and in size from approximately 1,000 to 1,800 square feet. This series consists of detached, single-family homes located in communities with relatively narrow streets, garage access through alleys in
the rear and the look, feel and privacy of homes in older, traditional neighborhoods. We have established Independence Series communities both as single-family homes in condominium communities and as fee-simple communities under provisions of the
City of Columbus zoning code for traditional neighborhood developments. These communities maximize our land use and can be developed more efficiently at reduced costs. Our Independence Series has expanded the potential customer base that can
afford our homes. Based on currently available financing, homes in our Independence Series can be purchased by qualified purchasers having annual incomes as low as $25,000.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Celebration SeriesOur Celebration Series, which is our most popular series of homes, targets entry-level and first-time move-up home buyers. We offer 24 single-family
traditional home designs in this series ranging in price from approximately $150,000 to
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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$220,000 and in size from approximately 1,200 to 2,300 square feet. Homes in our Celebration Series are
efficiently designed and incorporate many popular features that are typically offered as options by our competitors. Standardizing these features results in efficiencies that lower the overall cost of our homes and provides us with a competitive
price advantage.



| | · | Tradition SeriesOur Tradition Series, with styles ranging from contemporary to traditional designs, targets move-up home buyers. We offer 13 single-family home designs
in our Tradition Series ranging in price from approximately $200,000 to more than $350,000 and in size from approximately 2,200 to 3,500 square feet. These home designs incorporate many semi-custom features and offer a variety of options from which
to choose.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We also regularly experiment with new
types of homes and communities that are aimed at expanding our target markets.



Community Development



The community
development process generally consists of two phases: (1) land acquisition and development, and (2) home construction.



Land Acquisition and Development.One of our key strengths is our ability to identify and economically acquire land to be developed for our
homebuilding operations. We are the developer of approximately 90% of the communities in which we build homes. This practice enables us to: (1) improve our profit margins by reducing the cost of finished lots, (2) maintain an adequate supply of
finished lots to meet market demand, (3) control the details of development in order to create a distinctive look and feel in our communities, and (4) streamline and coordinate the construction process.



We believe that our understanding of our homebuilding markets gives us an
advantage in identifying and acquiring unimproved land with good market potential. In considering the suitability of unimproved land for development, we review factors such as: (1) availability of existing community services such as sewers, water,
gas and electricity, (2) estimated costs of development, (3) the quality of surrounding school systems, (4) population growth patterns, (5) proximity to developed residential and retail areas, (6) employment growth rates, (7) anticipated absorption
rates for new housing, and (8) availability of transportation.



To limit our risk, we generally attempt to control land through the use of option and contingent purchase contracts when purchasing land. These contingent purchase contracts condition our obligation to purchase land subject to our review
and approval of such matters as zoning, utilities, soil and subsurface conditions, environmental and wetland conditions, title matters, economic feasibility of development and other property-related criteria. We generally do not acquire unimproved
land until necessary environmental studies and zoning permits have been obtained and the land is served by utilities. Our engineering and design professionals plan and engineer the land and oversee the construction of streets, sewers, water and
drainage facilities and other improvements to meet our specifications. In developing land, we are required by some municipalities and other governmental authorities to provide letters of credit or performance bonds to secure performance of our
obligations to install sewers, streets and other improvements.



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Through our control of the development process, from the design of each community entryway to the
placement of streets and amenities, we create a distinctive look and feel in each of our communities. We generally complete the sale of homes in our communities in time periods that range from three to five years from first to last sale, with
smaller communities generally taking less time to complete than larger communities. Certain large communities can take more than five years to complete. In addition, we typically incorporate an association of the homeowners to ensure the continued
maintenance of the common areas after the community is developed.



We selectively enter into joint ventures with other homebuilders to own and develop communities. Development costs of the joint ventures generally are funded by the participants. The participants in the joint ventures acquire substantially
all of the developed lots. At December 31, 2003, we were actively participating in 12 joint ventures.



Land inventory that we own consists of either (1) land titled in our name or (2) our pro rata share of land titled in the name of one of our joint
ventures. Land inventory that we control consists of land that we have committed to purchase or have the right to acquire under contingent purchase or option contracts. We expect that a portion of our contingent contracts will not be executed for
various reasons. We continually review our land inventory and contingent contracts to determine which contracts are reasonably likely to result in an executed land purchase.



The following table sets forth an estimate of our land inventory as of December 31, 2003 and includes only land under
contingent contracts which we believe are reasonably likely to result in an executed land purchase:



|                 |  |               |  |                        |  |                                |  |                     
|---------------- |  | ------------- |  | ---------------------- |  | ------------------------------ |  | --------------------
|Land Inventory   |  | Finished Lots |  | Lots Under Development |  | Unimproved Land Estimated Lots |  | Total Estimated Lots
|Land we own:     |  |               |  |                        |  |                                |  |                     
|Central Ohio     |  | 1,367         |  | 1,246                  |  | 5,379                          |  | 7,992               
|Kentucky         |  | 245           |  | 384                    |  | 1,105                          |  | 1,734               
|Land we control: |  |               |  |                        |  |                                |  |                     
|Central Ohio     |  |              |  |                       |  | 9,780                          |  | 9,780               
|Kentucky         |  |              |  |                       |  | 1,674                          |  | 1,674               
|                 |  |               |  |                        |  |                                |  |                     
|Total            |  | 1,612         |  | 1,630                  |  | 17,938                         |  | 21,180              
|                 |  |               |  |                        |  |                                |  |                     



Home Construction.To further improve our building efficiency and to better control our supply and cost of raw materials, we operate our own lumber and construction products distribution centers. The distribution centers enable us to provide just-in-time delivery
of materials to our Central Ohio job sites, and to purchase high-quality lumber products and other building materials, including shingles, doors and windows, directly from mills and wholesalers at more attractive prices than are available to many of
our competitors. We occasionally purchase lumber for delayed delivery to ensure adequate supply and predictable costs. Substantially all of the lumber and other building materials maintained at our distribution centers are for our own use. In
addition to buying and delivering building materials, most of the floor trusses used in our Central Ohio homes are manufactured at our primary distribution center.



We act as the general contractor for the construction of our homes. Our construction superintendents, together with the
construction managers to whom they report, monitor



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construction, coordinate the activities of subcontractors and suppliers, maintain quality and cost controls, and monitor
compliance with zoning and building codes. We use subcontractors to minimize our employment cost, equipment and building supply inventory. This practice also increases our ability to respond to changes in the demand for housing. We have longstanding
business relationships with many of our subcontractors. These relationships, combined with our building volume, year-round construction schedule, and efficient home designs, have enabled us to negotiate favorable agreements with our subcontractors
and allow us to better control the costs of skilled labor.



We
maintain information and administrative systems to support our construction operations. These systems allow us to control construction costs by providing us the information necessary to monitor subcontractor performance and expenditures on each
home. Subcontracted work is authorized by work orders. The cost of deviations from the work order must be approved for payment by our construction superintendents and we investigate significant cost variances. These information systems also
integrate our sales reporting, contract management and material distribution systems into the construction process.



Our general practice is to start construction of a Celebration or Tradition Series home when we have obtained an executed sales contract. However, we
selectively start construction of a limited number of homes in these series without a sales contract in anticipation of seasonal demand and to attract customers, such as corporate transferees, who need homes in 60 to 90 days. Also, our Independence
Series homes production method dictates that we start a limited number of these homes without a sales contract. We normally obtain sales contracts on these inventory homes early in the construction process. An inventory home is also created
when a sales contract is cancelled after construction has commenced, generally because the purchaser has not satisfied a contingency. At December 31, 2003, we had 248 inventory homes in various stages of construction, compared to 164 inventory homes
at December 31, 2002. We also start the foundation of homes on a strategic and selective basis during the fall and early winter in order to moderate the effects of weather on the building process. These foundations are not included in the number of
inventory homes we report.



Marketing StrategyThe Best of
Everything®



We market our customer-driven focus as The Best of Everything.
As part of this philosophy, we build affordable homes with high-quality materials and construction practices, and we provide our home buyers with a high level of customer service.



Marketing and Sales.We have an extensive targeted marketing plan, which includes advertising by broadcast,
newspapers, magazines, direct mail and billboards. Our advertising typically emphasizes the quality of our homes, the location of our communities, the brand name components used in our homes, the wide variety of our home styles and the longevity of
the Company. We believe these factors differentiate our products and reinforce our Dominion Homes-The Best of Everything® brand awareness program. According to a third party survey conducted during 2003, over 97% of Central Ohio respondents recognized the Dominion Homes®brand.



We conduct our home sales from more than 50 furnished model homes located throughout Central Ohio and Louisville, Kentucky, and from two Dominion
HomeStores® in



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Central Ohio. The two Dominion HomeStores® primarily focus on sales through the realtor community and last year generated more than $111.5 million in sales. We
encourage independent realtor participation in the home sales process because realtors often introduce our homes to customers who might not otherwise consider purchasing a new home.



We employ approximately 60 trained sales representatives. Our sales representatives are trained to fully explain the
features and benefits of our homes, the available mortgage financing opportunities and the construction process. Our sales representatives are also trained to help the buyer determine which home design best suits his or her needs. We devote
significant attention to the continued training of our sales representatives to assure high levels of professionalism and product knowledge. Our sales representatives are Company employees and are compensated on a commission-only basis. We believe
that the use of an in-house sales staff allows for a more knowledgeable sales presentation and enables us to communicate a consistent message to our customers.



During 2003, we built a second central Ohio office building that includes our customer care and sales center. We are one of the first of the larger
homebuilders in the country to combine, in a single location, all of the homebuilding operations that directly interact with customers. These operations include sales services, showroom and decorating services, mortgage services and title and
closing services. We expect that, by combining these operations in one location, we will provide a more effective and satisfying home buying experience for our customers.



Occasionally, we use promotional and sales incentives, such as discounts on the purchase price of our homes, to market our
products. We also offer discounts to previous purchasers of our homes, our vendors, our own employees and select companies through our Best Benefit program.



Quality Homes and Communities. Our more than 50 communities offer customers a wide-range of choices in neighborhood
features, such as schools, bicycle and jogging trails, walking paths, park areas, playgrounds and swimming facilities. We believe that our homes have more standard features than any competitor selling at comparable prices in our markets. Every
Dominion Home includes a front porch, maintenance-free exterior, two-car garage, cathedral ceiling, air conditioning, all major kitchen appliances and fully sodded yard. We use nationally recognized and industry leading brand name components in
constructing our homes. These components include Andersen®wood windows, the
Kohler®family of bathroom and kitchen fixtures, Trane®natural gas furnaces, Armstrong®flooring, General Electric®appliances, Wilsonart®decorative laminate and Aristokraft®cabinets.



As part of our Gold Medal quality
assurance program, every home we build undergoes eight separate inspections by our construction personnel. As part of this program, members of our senior management also inspect randomly selected homes on a monthly basis. We offer a comprehensive
warranty program that features a two-year warranty covering the roof, windows, doors and all mechanical elements of our homes, including the heating, plumbing and electrical systems. We also offer a 30-year warranty covering all major structural
components. The structural warranty on each home is automatically transferred to subsequent owners of the home. We also transfer to our customers all warranties provided by manufacturers and suppliers.



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Customer Financing.Through our mortgage financing services subsidiary, Dominion Homes Financial
Services, Ltd. (DHFS), we assist virtually all of our customers in obtaining mortgages to finance the purchase of their homes. We do not provide mortgage financing to our customers and, consequently, do not bear the interest rate and
market risks associated with making mortgage loans. Our services include loan application counseling and processing. Since the inception of DHFS, we have used an agent to identify and negotiate the placement of mortgages with third party mortgage
lenders. Effective in March of 2004, we expect that we will end our relationship with this agent and that DHFS will expand its services to identify and negotiate the placement of mortgages to third party mortgage lenders. Our expanded mortgage
services are expected to offer our customers additional mortgage programs, a better home buying experience and increase our earnings from DHFS. DHFS will not, itself, provide mortgage financing to our customers. In 2003, DHFS provided mortgage
financing services for approximately 2,700 of our customers, representing approximately 88% of our closings. The average mortgage amount was approximately $165,000. DHFS generated revenues of approximately 2.5% of the total loan volume.



We offer to our customers a number of attractive loan options that include
interest rate buy downs and payment of the customers loan origination fees, rate commitment fees, discount points and some closing fees. We currently offer several no money down programs to purchasers of our Independence and
Celebration Series homes. These no money down programs are provided through several non-profit corporations and are permitted by the U.S. Department of Housing and Urban Development. These no money down programs allow a home
buyer to receive gift funds from the non-profit corporation to be used as a down payment. We are obligated to make a contribution to the non-profit corporation that is slightly larger than the amount of the gift to the home buyer. We aggressively
market these no money down programs because they enable us to sell homes to entry-level home buyers who otherwise would not have the down payment necessary to qualify for mortgage financing. A significant percentage of our home buyers in
2003 participated in one of the no money down programs.



The majority of our homes are financed under Federal Housing Administration (FHA) or Department of Veteran Affairs (VA) mortgage programs. In comparison to conventional financing, FHA and VA financing generally allow
customers to purchase homes with a higher percentage of their income directed toward housing expenses and with lower down payments. FHA and VA financing rules are also generally more flexible in the amount of points and closing costs that the seller
may pay. During 2003, approximately 72% of our closings involved government insured financing. At January 1, 2004, the maximum dollar amount for FHA mortgages was $208,801 in the Columbus MSA, $180,405 in the Louisville MSA and $160,176 in the
Lexington MSA.



We sell our homes using standard sales
contracts. These contracts generally require the home buyer to make a $500 deposit when the contract is signed and to pay the balance of the cash down payment at the start of construction. Our no money down programs require an initial
deposit of $250 when the contract is executed and a second $250 deposit when the home buyers loan is approved. Both of these deposits are returned to the home buyer upon the successful closing of the home.



Customer Communication. Our website provides an additional means to
market our products and communicate with our customers. Through our website, a potential home buyer can



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take virtual tours of models and search our home inventory by specifying size, location, amenities and price.
Additionally, a home buyer can submit mortgage applications online to our mortgage financing services subsidiary. Our website allows our home buyers to communicate with their sales representatives and construction superintendents, and to monitor
construction progress.



Most of our closings are performed by
our affiliated title insurance agencies. Alliance Title Agency, Ltd. (Alliance) provides title insurance for most of our home closings in Central Ohio. Alliance is an Ohio limited liability company of which we own 49.9%, the maximum
percentage allowed under Ohio law. Our wholly-owned subsidiary, Alliance Title Agency of Kentucky, LLC, a Kentucky limited liability company, began providing title insurance for our Louisville, Kentucky home closings in early 2002, and will provide
title insurance for our Lexington, Kentucky home closings.



We
believe that maintaining affiliated title insurance agencies facilitates quick and convenient closings. The title insurance agency personnel are trained to have a basic understanding of our home construction process and The Best of
Everything marketing strategy. We also believe that having affiliated title insurance agencies and a mortgage financing services subsidiary enhances communication between these entities and the Company.



After a home closing, we survey our home buyers twice and invite them to
complete a questionnaire that rates their home buying experience. This survey includes rating their sales representative, construction superintendent, decorating consultant and loan counselor. The questionnaires also provide other information
regarding the home buyers building experience. We use the information obtained from these questionnaires to refine our product offerings.



Value Engineering. We have enhanced The Best of Everything marketing strategy through our innovative approach to home design and
construction. We use streamlined architectural designs with more standard features and amenities than are normally found in new homes at comparable prices. This approach enables us to use standard-sized building materials and reduces construction
deviations and change orders. On an ongoing basis, we work closely with our vendors to further refine and standardize our building material needs, enabling us to realize additional cost and supply efficiencies. This focus on the design and
construction process allows us to deliver affordably priced homes with more consistent quality and shorter construction times.



Our design work is performed by our architectural department. Each home design is value engineered for greater efficiency in the building process and to
lower the cost to the home buyer. On an ongoing basis, the architectural department uses its knowledge of our markets and feedback from our home buyers to create new designs and modify existing designs to keep pace with changing consumer tastes and
preferences. The architectural department uses computers and computer graphics that provide flexibility in creating new designs, modifying existing designs and accurately estimating the materials required for any particular design.



Growth Opportunities



We believe that there are opportunities for continued growth in our Central Ohio and Kentucky markets. We continue to
identify and economically acquire property to provide lots for



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future homebuilding. Through the introduction of affordably priced product offerings, such as our Independence Series, we
intend to continue to expand the potential customer base that can afford our homes. We believe that the entry-level and move-up buyer markets have the potential to provide a consistent, stable demand for our homes.



We also continually evaluate opportunities to expand into new markets. We
consider expansion opportunities through either creating a start-up operation or acquiring an existing homebuilding company. In evaluating new markets, we consider many of the following factors:



| | · | Potential for economies of scale. Our expansion strategy targets those markets where we believe significant growth opportunities exist. Our operating strategy emphasizes
efficiencies derived from economies of scale, which ultimately requires a substantial commitment of capital. Therefore, pursuant to our expansion strategy, we consider entering markets where we believe that the opportunity for growth justifies the
commitment of capital and presents the possibility of achieving operating efficiencies.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | A highly fragmented homebuilder market. We characterize a highly fragmented homebuilder market as one having numerous homebuilders, but with no more than one homebuilder
controlling greater than 10% of the market share. Highly fragmented markets present reduced barriers to entry and the opportunity to quickly assume a leading market share.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | A relatively stable and diverse economy. The Central Ohio and Louisville and Lexington, Kentucky economies are characterized by relatively stable economic growth and diverse
economic and employment bases. We believe this type of economy produces a more predictable demand for homes.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Demographics similar to our current markets. We primarily target entry-level and first-time move-up home buyers. Substantial portions of the potential home buyers in our
current markets are in these segments of the home buying population. By continuing to target these segments of the home buying market, we believe we can replicate the success we have achieved in our current markets.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Compatibility with our existing product offerings. Our expansion strategy targets markets with homes that are compatible with our existing product offerings. We believe that
introducing our existing homes into new markets will reduce the risks inherent in offering new home designs and will help us attain the construction efficiencies that result from our standardized home designs.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Intellectual Property



We have obtained federal registrations for the service marks Dominion Homes®, The Best of Everything®, The Dominion HomeStore®and Dominion Homes Financial Services®. We have obtained or applied for design patents on many of our homes. We also either have



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obtained or applied for copyright registrations for both the architectural plans and the architectural works for
virtually all of the homes that we build.



Employees



On December 31, 2003, we employed 628 individuals, which included 567
employees (including four part-time employees) in Central Ohio and 61 employees (including 1 part-time) in Louisville, Kentucky. We employed 194 individuals in construction, 22 in warranty, 166 in sales and marketing, 76 in the lumber and building
materials distribution center, 23 in land development, 27 in mortgage services and 120 in management, professional services, administrative or clerical positions. Our employees are not represented by labor unions or covered by collective bargaining
agreements. We believe our relationships with our employees and subcontractors are generally good.



Other Information



Information regarding seasonality, our practices regarding working capital items and backlog orders is contained in this Form 10-K under the heading Managements Discussion and Analysis of Financial Condition and Results of
Operations. Information regarding the availability of labor and raw materials, competition and governmental regulations affecting our business is contained in the discussion under Managements Discussion and Analysis of Financial
Condition and Results of OperationsBusiness Risks  Material or labor shortages can adversely affect our business; The homebuilding industry is highly competitive; and, Our business is subject to substantial government regulation which
could cause delays, increase costs, and restrict or prohibit homebuilding activity in certain regions.



We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under
the Securities Exchange Act of 1934 (the Exchange Act). The public may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including
us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.



We also make available at our Internet website, http://www.dominionhomes.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
SEC.



|Item 2. | PROPERTIES
|------- | ----------



We lease
from BRC our two corporate offices in Central Ohio. The first building is approximately 40,000 gross square feet (37,557 net rentable square feet) and the lease commenced January 1, 1998. The lease has a term of twelve years, a triple net rental
rate of $12.00 per square foot and provides for two options to renew for periods of five years each at



---

then-current market rates. The rental rate for the building was established by an MAI appraiser commissioned by a
committee comprised solely of independent members of our Board of Directors, and confirmed in a review by a second MAI appraiser.



During 2002, we purchased land and contracted to build a second corporate office building. On October 31, 2003, we sold this building to BRC for its
approximate cost of $4.5 million and leased it back. This second office building is approximately 35,000 gross square feet (33,260 net rentable square feet) and the lease commenced November 1, 2003. The lease has a term of fifteen years and a triple
net rental rate per square foot of $12.58 for the first five years, $13.18 for the second five years and $13.83 for the last five years. The lease also provides for two options to renew for periods of five years each at then-current market rates.
The terms of the sale and leaseback were negotiated based on bids from multiple third parties, reviewed by an MAI appraiser and approved by a committee comprised solely of independent members of our Board of Directors.



During 2003, we leased from BRC an aggregate of 15,750 square feet of
commercial space in Central Ohio. We used this space for our decorating center, centralized sales office and mortgage financing services company. The weighted average lease rate was $11.20 a square foot. A committee comprised solely of independent
members of our Board of Directors approved each of the leases after review of a report by an independent MAI appraiser. During November 2003, the staff and activities in this space moved into our new corporate office building.



During 2003, we leased from a non-affiliated third party 7,658 square feet of
office space while completing our second corporate office building. The lease ended December 31, 2003. We also have short-term leases of warehouse space in Central Ohio with non-affiliated third parties of 1,200 square feet and 25,000 square feet
for storing model furnishings and building material, respectively.



We lease approximately 6,400 square feet of commercial space in Louisville, Kentucky from a non-affiliated party for our Louisville, Kentucky offices and approximately 4,800 square feet of commercial office space from a non-affiliated third
party for our Lexington, Kentucky offices.



We own a
distribution center, which is located on approximately six acres in Columbus, Ohio. The facility includes nine buildings, constructed of steel, wood or concrete block and contains approximately 75,000 square feet of space.



From time to time, we participate in a program with a non-affiliated party to
sell and lease back our model homes. At December 31, 2003, we leased eleven model homes under this program on a month to month basis. All of these leases were originated prior to 2003.



|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------



We are involved in various legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. In the opinion of our management, there are no currently pending proceedings that will have a material
adverse effect on our financial condition or results of operations.



---

|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



No matters were submitted to a vote of security holders during the fourth quarter of 2003.



PART II



|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
|------- | ---------------------------------------------------------------------



Our common shares are traded on the NASDAQ National Market under the symbol DHOM. The following table sets forth, for the periods indicated,
the high and low closing prices for our common shares, as reported by the NASDAQ National Market.



|                                       |  |              |       |     |   |      
|-------------------------------------- |  | ------------ | ----- | --- | - | -----
|                                       |  | Sales Prices
|Calendar Year Ending December 31, 2004 |  | High         |       | Low
|First Quarter (Through March 12, 2004) |  | $            | 39.34 |     | $ | 28.01
|                                       |  |              |       |     |   |      
|                                       |  |             
|Calendar Year Ending December 31, 2003 |  | High         |       | Low
|First Quarter                          |  | $            | 15.00 |     | $ | 11.49
|Second Quarter                         |  | $            | 25.60 |     | $ | 13.75
|Third Quarter                          |  | $            | 28.75 |     | $ | 21.42
|Fourth Quarter                         |  | $            | 34.80 |     | $ | 26.99
|                                       |  |             
|Calendar Year Ending December 31, 2002 |  | High         |       | Low
|First Quarter                          |  | $            | 19.35 |     | $ | 15.01
|Second Quarter                         |  | $            | 25.95 |     | $ | 17.64
|Third Quarter                          |  | $            | 21.46 |     | $ | 15.50
|Fourth Quarter                         |  | $            | 16.73 |     | $ | 12.89



On March 12, 2004, the
last sale price of our common shares, as reported by the NASDAQ National Market, was $36.38 per share, and there were approximately 220 holders of record of our common shares.



We have never paid any cash dividends on our common shares. From time to time, our Board of Directors evaluates the
desirability of paying cash dividends. The future payment and amount of cash dividends will depend upon our financial condition and results of operations, applicable loan covenants and other factors deemed relevant by our Board of Directors. The
provisions of our existing bank credit facility limit the amount of cash dividends that we may pay during any calendar year to 50% of net income after taxes for such year.



|Item 6. | SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
|------- | --------------------------------------------------



The following table sets forth our selected consolidated financial and operating data as of the dates and for the periods indicated. This table should be
read together with Managements



---

Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements,
including the Notes thereto, appearing elsewhere in this Form 10-K.



|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|------------------------------------------------------- |  | --------------------------------------------- | --------- | ---- | - | --------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                        |  | Year Ended December 31,                      
|                                                        |  | 2003                                          |           | 2002 |   | 2001      |  | 2000 |           | 1999
|                                                        |  | (dollars in thousands, except per share data)
|Consolidated Statements of Operations Data              |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Revenues                                                |  | $                                             | 563,464   |      | $ | 491,706   |  | $    | 395,701   |      | $ | 326,415   |  | $ | 277,577  
|Cost of real estate sold                                |  |                                               | 428,508   |      |   | 376,753   |  |      | 305,430   |      |   | 261,081   |  |   | 224,474  
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Gross profit                                            |  |                                               | 134,956   |      |   | 114,953   |  |      | 90,271    |      |   | 65,334    |  |   | 53,103   
|Selling, general and administrative                     |  |                                               | 74,006    |      |   | 64,492    |  |      | 52,491    |      |   | 40,808    |  |   | 33,601   
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Income from operations                                  |  |                                               | 60,950    |      |   | 50,461    |  |      | 37,780    |      |   | 24,526    |  |   | 19,502   
|Interest expense                                        |  |                                               | 7,903     |      |   | 8,675     |  |      | 11,667    |      |   | 9,125     |  |   | 6,024    
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Income before income taxes                              |  |                                               | 53,047    |      |   | 41,786    |  |      | 26,113    |      |   | 15,401    |  |   | 13,478   
|Provision for income taxes                              |  |                                               | 21,229    |      |   | 17,291    |  |      | 10,987    |      |   | 6,342     |  |   | 5,460    
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Net income                                              |  | $                                             | 31,818    |      | $ | 24,495    |  | $    | 15,126    |      | $ | 9,059     |  | $ | 8,018    
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Basic earnings per share                                |  | $                                             | 4.01      |      | $ | 3.36      |  | $    | 2.38      |      | $ | 1.42      |  | $ | 1.27     
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                              |  | $                                             | 3.94      |      | $ | 3.28      |  | $    | 2.30      |      | $ | 1.39      |  | $ | 1.23     
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Weighted average shares-basic                           |  |                                               | 7,931,600 |      |   | 7,282,900 |  |      | 6,351,343 |      |   | 6,363,131 |  |   | 6,318,148
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Weighted average shares-diluted                         |  |                                               | 8,076,174 |      |   | 7,457,985 |  |      | 6,575,026 |      |   | 6,496,720 |  |   | 6,495,796
|                                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|                                                        |  |                                               |           |      |  
|Consolidated Balance Sheet Data (at period end)         |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Real estate inventories                                 |  | $                                             | 326,809   |      | $ | 262,855   |  | $    | 230,024   |      | $ | 184,474   |  | $ | 159,180  
|Total assets                                            |  | $                                             | 356,142   |      | $ | 287,737   |  | $    | 254,546   |      | $ | 201,193   |  | $ | 174,059  
|Long term obligations                                   |  | $                                             | 140,178   |      | $ | 115,485   |  | $    | 133,869   |      | $ | 108,804   |  | $ | 97,058   
|Shareholders equity                                    |  | $                                             | 166,061   |      | $ | 132,981   |  | $    | 81,567    |      | $ | 67,888    |  | $ | 58,730   
|                                                        |  |                                               |           |      |  
|Operating Data (unaudited)                              |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Homes (in units)                                        |  |                                               |           |      |   |           |  |      |           |      |   |           |  |   |          
|Sales contracts, net of cancellations                   |  |                                               | 3,071     |      |   | 2,577     |  |      | 2,309     |      |   | 1,785     |  |   | 1,680    
|Closings                                                |  |                                               | 3,070     |      |   | 2,591     |  |      | 2,054     |      |   | 1,798     |  |   | 1,641    
|Backlog at period end                                   |  |                                               | 1,019     |      |   | 1,018     |  |      | 1,032     |      |   | 777       |  |   | 790      
|Aggregate sales value of homes in backlog at period end |  | $                                             | 198,940   |      | $ | 194,176   |  | $    | 201,211   |      | $ | 153,921   |  | $ | 140,220  



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|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
|------- | ------------------------------------------------------------------------------------



Overview



We are a leading builder of high-quality homes in Central Ohio (primarily the Columbus Metropolitan Statistical Area) and Louisville, Kentucky. In late
2003, we expanded our presence in Kentucky by entering the Lexington market. Our customer-driven focus targets entry-level and move-up home buyers. We offer a variety of homes that are differentiated by price, size, standard features and available
options. Our homes range in price from approximately $100,000 to more than $350,000 and in size from approximately 1,000 to 3,500 square feet.



Our net income for 2003 increased 29.9% to a record $31.8 million, or $3.94 per diluted share, from $24.5 million, or $3.28 per diluted share, for 2002.
The positive operating results are due in part to the continued development of our entry level or Independence Series, which we introduced in 2001. In 2003, closings from our Independence Series homes increased to over 30% of our total closings
versus approximately 15% in 2002. Our market share in Central Ohio, based on new homes delivered, has increased to 32% in 2003 from 28% in 2002 and the majority of the increase was due to the expansion of the Independence Series.



Also during 2003, the percentage of closings generated by our Louisville,
Kentucky division increased from approximately 10% in 2002 to approximately 15% in 2003. We continue to expand our investment in this market and expect to see continued growth.



The weighted average number of diluted shares outstanding during the twelve months ended December 31, 2003 increased 8% to
8,076,174 from 7,457,985 shares during the twelve months ended December 31, 2002 due to the full year impact of our secondary public offering completed in June 2002. On February 10, 2003, we announced that our Board of Directors had authorized the
repurchase of up to 250,000 of our common shares. The repurchase plan ended on December 31, 2003. During the first quarter of 2003, we purchased 147,500 common shares at an aggregate purchase price of $1.8 million.



In 2004, we intend to continue our three-point growth strategy, which is to:
(1) increase market share in Central Ohio, (2) begin sales in Lexington, Kentucky and expand our overall market share in Kentucky, and (3) review new markets for potential expansion.



Central Ohio is our strongest market providing over 75% of our closings. We expect to add additional communities during 2004
in order to expand this market.



We opened our Louisville,
Kentucky operations in 1998 and, while 2003 closing information is not yet available, we believe that we have become the largest single family homebuilder in this market. In late 2003, we expanded into the Lexington, Kentucky market. We expect to
begin selling homes in Lexington during the second quarter of 2004 and to have our first closings in the fourth quarter of 2004. As with our other markets, our goal is to become the dominant homebuilder in Lexington, Kentucky.



In evaluating potential new markets, we look for a market that has many of
the following characteristics: (1) a potential for economies of scale, (2) a highly



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fragmented homebuilder market, (3) a relatively stable and diverse economy, (4) demographics similar to our current
markets, and (5) compatibility with our existing product offerings.



Effective December 3, 2003, we expanded and extended our unsecured credit facility. The facility was expanded from $175 million to $250 million and the maturity date was extended through May 2007. We intend to use this expanded credit
facility to fund our growth.



The year 2004 will be a
transition year for Dominion Homes. During 2003, the Company sold out of several of its communities faster than anticipated due to strong demand for our products combined with an attractive interest rate environment. During 2003, we also experienced
delays in the development of replacement communities due to municipalities becoming more restrictive. As a result, the number of communities at December 31, 2003 in which we were actively selling homes was comparable to the number at December 31,
2002. Through expansion into Lexington, Kentucky and the development of new communities in Central Ohio and Louisville, Kentucky, we expect to increase our number of new communities by up to 35% by the end of 2004. Barring a significant change in
market conditions, we anticipate a marginal increase in earnings in 2004 and a significant increase in year end backlog, which we expect will put the Company in a position for strong earnings growth in 2005.



Business Risks



We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 (the PSLRA). This Annual Report on Form 10-K contains various forwardlooking statements within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the
forward-looking words anticipate, estimate, project, believe, intend, expect, hope or similar words. These statements discuss future expectations, contain
projections regarding future developments, operations or financial conditions, or state other forward-looking information. These forward-looking statements involve various important risks, uncertainties and other factors which could cause our actual
results for 2004 and beyond to differ materially from those expressed in the forward-looking statements. Included among such important risks, uncertainties and other factors are the following:



We are particularly affected by changes in national and local economic,
business and other conditions. Our financial position and results from operations are affected by changes and cycles in national and local economic, business and other conditions, most of which are beyond our control. These conditions include:



| |  | short and long term interest rates;
| | - | -----------------------------------



| |  | changes in governmental regulations;
| | - | ------------------------------------



| |  | employment levels;
| | - | ------------------



| |  | availability and affordability of mortgage financing for home buyers;
| | - | ---------------------------------------------------------------------



| |  | availability and cost of building lots;
| | - | ---------------------------------------



| |  | availability and cost of materials and labor;
| | - | ---------------------------------------------



| |  | fluctuating lumber prices and shortages;
| | - | ----------------------------------------



| |  | adverse weather conditions and natural disasters;
| | - | -------------------------------------------------



| |  | consumer confidence and housing demand;
| | - | ---------------------------------------



---

| |  | competitive overbuilding;
| | - | -------------------------



| |  | changing demographics;
| | - | ----------------------



| |  | cost overruns;
| | - | --------------



| |  | changes in tax laws;
| | - | --------------------



| |  | changes in local government fees; and
| | - | -------------------------------------



| |  | availability and cost of rental property and resale prices of existing homes.
| | - | -----------------------------------------------------------------------------



In addition, domestic terrorist attacks and the threat or the involvement of the United States in international armed conflict may also adversely
affect general economic conditions, consumer confidence and the homebuilding markets.



Interest rate increases or changes in federal lending programs could adversely affect sales of our homes. Virtually all purchasers of our homes finance their purchase through third party lenders who offer conventional, FHA and VA
mortgage financing. A material increase in mortgage interest rates or unfavorable changes to these lending programs would adversely affect the ability of prospective home buyers, particularly our targeted entry-level home buyers, to obtain mortgage
financing. We also depend upon the availability and cost of mortgage financing for buyers of the current homes owned by potential purchasers of our homes. Prior to purchasing our homes, some of our home buyers must sell their current homes, and
these sales depend on the availability and cost of mortgage financing. In addition, because the majority of our home buyers use FHA mortgage financing, a material reduction in the scope or funding of FHA mortgage programs could have a material
adverse effect on our sales.



In particular, a substantial
number of our home buyers use down payment assistance programs, which allow home buyers to receive gift funds from non-profit corporations to be used as a down payment. At one time, HUD proposed rules which would have prohibited the use of gift fund
programs in conjunction with FHA-insured mortgage loans. HUD subsequently withdrew these proposed rules, but has continued to increase its regulation of gift fund programs. If HUD were to prohibit or make materially unfavorable changes to the use of
gift fund programs, we would expect to offer, as we have in the past, a different type of down payment program. There can be no assurance, however, that any such replacement program would be as attractive to home buyers as the programs offered today
and that our sales would not suffer.



Our business is subject to substantial
government regulation which could cause delays, increase costs, and restrict or prohibit homebuilding activity in certain regions. We are subject to substantial local, state and Federal requirements concerning zoning, resource protection,
building design and construction, and similar matters. These requirements include local regulations, which impose restrictive zoning and density requirements to limit the number of homes that can eventually be built within the boundaries of a
particular location. Particularly in the case of local political subdivisions, anti-growth sentiments can lead to ballot measures that can interfere with or impede our ability to develop land or build homes. Candidates for local office who favor
restrictions on growth and development are being elected with greater frequency in certain communities in which the Company conducts business. Restrictive measures can also affect construction activities, including construction materials, which must
be used in home construction, as well as sales activities and other dealings with home buyers. We also must obtain licenses, permits and approvals from various governmental agencies for our development activities, the granting of which are beyond
our control. Obtaining acceptable



---

zoning and overcoming objections of neighborhood groups and citizen activists is becoming more difficult, time consuming
and expensive. There can be no assurance that these issues will not adversely affect the Company in the future.



We also are subject to a variety of local, state and Federal requirements concerning the protection of health and the environment. The particular
environmental laws, which apply to any given project, vary greatly according to the project site and the present and former uses of the property. These environmental laws may result in delays and cause us to incur substantial compliance costs,
including substantial expenditures for pollution and water quality control. These laws may prohibit or severely restrict development in certain environmentally sensitive regions. In an effort to avoid major environmental issues in our developments,
we have a general practice of requiring environmental reports from qualified, independent professionals and resolution of identified environmental issues prior to purchasing land. However, there is no assurance that we will not incur material
liabilities relating to the removal of toxic wastes or other environmental matters affecting land we have acquired.



Building moratoria may result in periodic delays or may preclude us from developing certain projects. These moratoria generally result from insufficient
water supplies or sewer facilities, delays in utility hookups, inadequate road capacity, environmental concerns, school system overcrowding or financial difficulties, or anti-growth sentiment within a specific market area or community. Time-limited
moratoria or restrictions on zoning changes, building permit issuance and extensions of utilities in certain areas have been adopted by several communities in which the Company develops land and builds homes, and similar restrictive measures have
been considered by other communities in which the Company conducts business. These moratoria can occur before or after we start our operations and without notice or recourse.



Our success depends on the availability of undeveloped land that is suitable for our development.We currently are the developer in
approximately 90% of the communities in which we are build homes. Therefore, our short and long-term financial success depends and will continue to depend on our ability to acquire land, adjust our strategy for purchasing land, address changing
market conditions and develop communities successfully. We commit substantial financial and managerial resources to acquire land and develop the streets, utility services and other infrastructure before any revenue is generated from the community.
We may acquire and develop land upon which we cannot, or choose not to, build or sell homes. The market value of undeveloped land and building lots fluctuates. We also build some homes before we obtain non-cancelable sale contracts for those homes.
We may have to hold these unsold inventory homes for an indefinite time prior to a sale. In addition, because market prices fluctuate, we may have to sell inventory homes at a loss.



Adverse weather conditions may prevent or delay the construction of homes and reduce the number of home sales. Poor weather
conditions can hinder our construction and development activities, and thereby increase the cost of constructing our homes and delay the closing of our homes and our recognition of revenue from such closings. In addition, in cases of prolonged
severe weather, potential home buyers may delay or forgo the purchase of a home.



Delays in construction of our homes could cause mortgage commitments to expire. Delays in the construction of a home could cause the mortgage commitment to expire and could require



---

us, if mortgage interest rates have increased, to pay significant amounts to the mortgage lender to extend the original
mortgage interest rates.



We are significantly leveraged and depend on the
availability of financing.We incur significant up-front expenditures for land acquisition, development and construction costs. We have traditionally financed these costs with bank borrowings, internally-generated funds and joint venture
arrangements. Although we have not in recent years experienced problems in obtaining financing, we cannot be sure that continued financing will be available to us in the future, or that any financing available to us will be on favorable terms. Our
ability to make payments of principal or interest on, or to refinance our indebtedness, will depend on our future operating performance and successful execution of our business strategy.



We operate in a limited number of geographic areas.Our operations include Central Ohio and Louisville, Kentucky, and we have
recently entered the Lexington, Kentucky market. Our lack of geographic diversity means that adverse general economic or weather conditions in one or more of these markets could have a material adverse impact on our operations.



Our expansion strategies may adversely effect our operations. We continually evaluate
opportunities to expand into new markets, whether through acquisitions or start-up operations. Any expansion strategy involves many risks. New markets may prove to be less stable than our current markets and may result in delays, problems and
expenses not typically encountered in our current markets. Regulations in various states may prohibit or impede us from using some of our community development strategies, such as those utilized with the Independence Series, that require condominium
or other high density housing. We may fail to identify suitable acquisition candidates or complete acquisitions on acceptable terms. The magnitude, timing and nature of acquisitions will depend upon various factors, including the availability of
suitable acquisition candidates, financial resources and skilled employees to manage the acquired companies, the negotiation of acceptable terms, and general economic and business conditions. The likelihood of our success in establishing start-up
operations also depends on similar factors, including identification of suitable start-up markets, availability of financial resources and skilled employees and subcontractors, and general economic and business conditions. In addition, start-up
operations may require significant lead-time before they generate sufficient revenues to be profitable. Expansion through acquisitions or start-up operations will require substantial attention from our management team. The diversion of
managements attention, as well as any other difficulties that may be encountered in the transition and integration process, could have a material adverse effect on our operations.



Our new product offerings may not be attractive to customers.We continue to introduce new home designs and new community concepts as
part of our product offerings. There are significant risks that we may not accurately predict the tastes or preferences of potential home buyers. A failure to predict these tastes or preferences could have a material adverse effect on our sales.



The loss of certain key personnel could adversely effect our
operations. We have several key executive officers, the loss or prolonged absence of whom could have an adverse effect on our operations. In particular, the loss of the services or prolonged absence of Douglas Borror, our Chairman and Chief
Executive Officer, or Jon Donnell, our President and Chief Operating Officer, could have a material adverse effect on our operations. Our future success will depend



---

on our continued ability to attract and retain highly skilled and qualified personnel, of which there can be no
assurance.



Our operating results vary on a quarterly basis. Our
business is significantly affected by changes in economic cycles, and our revenues and earnings vary with the level of general economic activity in the markets where we build homes. We historically have experienced, and expect to continue to
experience, variability in revenues and reported earnings on a quarterly basis. A significant percentage of our sales contracts are executed during the first and second quarters of the year. Closing on a home occurs approximately three to six months
after the date of the sales contract but, with weather and other delays, may take longer. We do not recognize any revenue on the sale of a home until the closing occurs. As a result, we historically have experienced higher closings and revenues
during the second half of the year.



We are subject to warranty claims
arising in the ordinary course of business that could be costly. As a homebuilder, we are subject to construction defect and home warranty claims arising in the ordinary course of business. These claims are common in the homebuilding industry
and can be costly. We provide warranties on our homes for periods as long as thirty years. In the event that we experience greater warranty claims than we anticipate, we could incur significant expenses which could affect future earnings.



Litigation related to construction defects could adversely affect our
business.Litigation related to construction defects has increased significantly in recent years. The homebuilding industry has experienced both an increase in the number of individual claims for construction defects as well as increased costs
of insuring against such claims.



Our financial results are subject to
inflation and other cost increases. We are not always able to reflect all cost increases in the prices of our homes because competitive pressures and other factors sometimes require us to maintain or discount those prices. While we attempt to
maintain costs with subcontractors from the date a sales contract with a customer is accepted until the date construction is completed, we may incur unanticipated costs which cannot be passed on to the customer.



Material or labor shortages can adversely affect our business. During periods of
increased construction activity, the homebuilding industry has faced shortages in the availability of skilled labor. Waiting for skilled labor to become available may result in construction delays. The use of less skilled labor to satisfy a skilled
labor shortage may cause quality standards to suffer. Increases in the demand for skilled labor also can result in increases in the cost of skilled labor. The principal raw materials used in the homebuilding industry are lumber, brick and concrete
as well as plumbing and electrical supplies. While these materials are generally available from a variety of sources, they are subject to periodic price fluctuations. In particular, the homebuilding industry has experienced occasional lumber
shortages which produced significant price increases. Because we may not be able to pass on to our customers price increases in raw materials or labor, future price increases in these items could have a material adverse effect on our operating
margins and earnings.



The homebuilding industry is highly competitive.
We compete in each of our geographic markets with national, regional and local homebuilders, some of which have greater financial, marketing, land acquisition and sales resources than we do. We compete not only for home



---

buyers, but also for desirable properties, financing, raw materials and skilled labor. We also compete with the resale
market for existing homes, which some home buyers may prefer over new homes. Additionally, there are many other national and regional homebuilders, many of which have greater financial, marketing, land acquisition and sales resources than we do,
that do not currently have a significant presence in our current markets. A concerted effort by these homebuilders to enter or expand their current operations in our markets could have a material adverse effect on our sales.



Covenants in our bank credit facility restrict our ability to engage in certain
activities. Our bank credit facility imposes restrictions on our operations and activities. Some of the more significant restrictions limit:



| |  | the amount we may borrow under the bank credit facility based upon borrowing base limitations;
| | - | ----------------------------------------------------------------------------------------------



| |  | maintenance of interest coverage, net worth and leverage ratios;
| | - | ----------------------------------------------------------------



| |  | the amount of our uncommitted land holdings and unzoned land purchases;
| | - | -----------------------------------------------------------------------



| |  | the amount that we may borrow outside of the bank credit facility and the amount of contingent obligations that we can assume;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | the amount we may invest in homebuilding operations in markets other than Central Ohio or Kentucky;
| | - | ---------------------------------------------------------------------------------------------------



| |  | speculative and model home inventory;
| | - | -------------------------------------



| |  | leases; and
| | - | -----------



| |  | the payment of dividends.
| | - | -------------------------



Application of critical accounting policies requires management to make certain estimates and assumptions that may impact our future financial results. In preparing our financial statements, management is
required to make certain estimates and assumptions that affect the annual and quarterly reported amounts of assets, liabilities, revenues and expenses, and disclosures about contingent assets and liabilities. Our actual results could be different
from these estimates and assumptions. Some of our more critical accounting policies include:



| |  | reserves to reduce our real estate inventories to net realizable values;
| | - | ------------------------------------------------------------------------



| |  | estimates for construction costs for homes closed;
| | - | --------------------------------------------------



| |  | reserves for the estimated warranty cost of homes;
| | - | --------------------------------------------------



| |  | estimates of the costs to complete land development;
| | - | ----------------------------------------------------



| |  | estimates of the annualized capitalization rate for indirect overhead and other expenses;
| | - | -----------------------------------------------------------------------------------------



| |  | estimates of self-insured workers compensation claims; and
| | - | -----------------------------------------------------------



| |  | estimates of the annual effective tax rate in interim periods.
| | - | --------------------------------------------------------------



Seasonality and Variability in Quarterly Results



We experience significant seasonality and quarter-to-quarter variability in our homebuilding activity. Typically, closings and related revenues increase
in the second half of the year. We believe this seasonality reflects the tendency of home buyers to shop for a new home in the spring with the goal of closing in the fall or winter. Weather conditions can also accelerate or delay the scheduling of
closings.



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The following table sets forth certain data for each of our last eight quarters:



|                   |  |                |  |                  |  |            |  |                      
|------------------ |  | -------------- |  | ---------------- |  | ---------- |  | ---------------------
|Three Months Ended |  | Revenues       |  | Sales Contracts1 |  | Closings   |  | Backlog At Period End
|                   |  | (in thousands) |  | (in units)       |  | (in units) |  | (in units)           
|Mar. 31, 2002      |  | $  98,378      |  | 717              |  | 518        |  | 1,231                
|June 30, 2002      |  | $133,162       |  | 625              |  | 702        |  | 1,154                
|Sept. 30, 2002     |  | $139,360       |  | 605              |  | 724        |  | 1,035                
|Dec. 31, 2002      |  | $120,806       |  | 630              |  | 647        |  | 1,018                
|Mar. 31, 2003      |  | $103,985       |  | 863              |  | 569        |  | 1,312                
|June 30, 2003      |  | $139,974       |  | 904              |  | 764        |  | 1,452                
|Sept. 30, 2003     |  | $153,188       |  | 718              |  | 844        |  | 1,326                
|Dec. 31, 2003      |  | $166,317       |  | 586              |  | 893        |  | 1,019                

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|1 | Net of cancellations.
|- | ---------------------



At December 31, 2003, the aggregate sales value of homes in backlog was $198.9 million compared to $194.2 million at December 31, 2002. At December 31,
2003, the average sales price of homes in backlog was $195,231 compared to $190,743 at December 31, 2002.



Results of Operations



The following table sets forth, for the periods indicated, certain items from our Consolidated Statements of Operations expressed as percentages of total revenues, as well as certain operating data:



|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                       |  | Year Ended December 31, |        
|                                                                       |  | 2003                    |         |   | 2002 |   |         | 2001 | 
|Consolidated Statements of Operations Data                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Revenues                                                               |  |                         | 100.0   | % |      |   | 100.0   | %    |  |   | 100.0   | %
|Cost of real estate sold                                               |  |                         | 76.0    |   |      |   | 76.6    |      |  |   | 77.2    |  
|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Gross profit                                                           |  |                         | 24.0    |   |      |   | 23.4    |      |  |   | 22.8    |  
|Selling, general and administrative                                    |  |                         | 13.2    |   |      |   | 13.1    |      |  |   | 13.3    |  
|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Income from operations                                                 |  |                         | 10.8    |   |      |   | 10.3    |      |  |   | 9.5     |  
|Interest expense                                                       |  |                         | 1.4     |   |      |   | 1.8     |      |  |   | 2.9     |  
|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Income before income taxes                                             |  |                         | 9.4     |   |      |   | 8.5     |      |  |   | 6.6     |  
|Provision for income taxes                                             |  |                         | 3.8     |   |      |   | 3.5     |      |  |   | 2.8     |  
|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income                                                             |  |                         | 5.6     | % |      |   | 5.0     | %    |  |   | 3.8     | %
|                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating Data (unaudited)                                             |  |                         |         |   |      |   |         |      |  |   |         |  
|Homes:                                                                 |  |                         |         |   |      |   |         |      |  |   |         |  
|Sales contracts, net of cancellations                                  |  |                         | 3,071   |   |      |   | 2,577   |      |  |   | 2,309   |  
|Closings                                                               |  |                         | 3,070   |   |      |   | 2,591   |      |  |   | 2,054   |  
|Backlog at period end                                                  |  |                         | 1,019   |   |      |   | 1,018   |      |  |   | 1,032   |  
|Average sales price of homes closed during the period (in thousands)   |  | $                       | 180     |   |      | $ | 185     |      |  | $ | 189     |  
|Average sales price of homes in backlog at period end (in thousands)   |  | $                       | 195     |   |      | $ | 191     |      |  | $ | 195     |  
|Aggregate sales value of homes in backlog at period end (in thousands) |  | $                       | 198,940 |   |      | $ | 194,176 |      |  | $ | 201,211 |  



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We include a home in sales contracts when a home buyer signs our standard sales contract,
which requires a deposit and generally has no contingencies other than for buyer financing or for the sale of an existing home, or both. We recognize revenue and cost of real estate sold at the time of closing. Closings or
deliveries occur when we deliver the deed to the home buyer and we receive payment for the home. We include a home in backlog when a home buyer signs our standard sales contract, but the closing has not occurred as of the end
of the period.



Homes included in sales contracts
in the foregoing table are net of cancellations. Most cancellations occur when home buyers cannot qualify for financing. While most cancellations occur prior to the start of construction, some cancellations occur during the construction process. The
cancellation rates for homes in backlog as of December 31, 2002, 2001, and 2000 were 17.4%, 11.6%, and 15.3%, respectively.



We annually incur a substantial amount of indirect construction costs, which are essentially fixed in nature. For purposes of quarterly financial
reporting, we capitalize these costs to real estate inventories based on the ratio of estimated annual indirect costs to direct construction costs to be incurred. Thus, variations in construction activity cause fluctuations in interim and annual
gross profits.



2003 Compared to 2002



Revenues.Our revenues for 2003 increased by 14.6% to $563.5 million
from the delivery of 3,070 homes compared to revenues for 2002 of $491.7 million from the delivery of 2,591 homes. This $71.8 million increase in revenues was primarily due to the delivery of 479 more homes. As expected, the average price of homes
delivered in 2003 decreased 2.9% or $5,300 to $179,800 from $185,100 in 2002. The lower average price of delivered homes in 2003 was the result of closing a larger percentage of our entry-level series of homes.



Included in revenues are other revenues, consisting principally of fees from
the Companys mortgage financing services subsidiary. During 2003, these other revenues increased 2.6% to $11.9 million from $11.6 million for 2002. We expect that the changes we are making in our mortgage financing services subsidiary will
increase these other revenues in the future.



Gross
Profit. Our gross profit for 2003 increased by 17.4% to $135.0 million from $115.0 million for 2002. The primary reason for the 2003 increase in gross profit was the larger number of homes delivered during 2003.



Selling, General and Administrative Expenses. Our selling, general and
administrative expenses for 2003 increased by 14.7% to $74.0 million from $64.5 million for 2002. The primary reasons for the increase in selling, general and administrative expenses for 2003 were higher variable costs associated with delivering
more homes. These higher variable costs included variable incentive compensation, sales commissions, advertising expenses and administrative expenses related to the mortgage financing services subsidiary.



Interest Expense. Our interest expense for 2003 decreased by 8.9% to
$7.9 million from $8.7 million for 2002, as a result of a lower average borrowing rate. The average revolving line of credit borrowings outstanding were $112.5 million and $117.4 million for 2003 and 2002,



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respectively. The weighted average rate of interest under the revolving line of credit was 5.9% for 2003 compared to 6.2%
for 2002.



Provision for Income Taxes. Our income tax
expense for 2003 increased to $21.2 million from $17.3 million for 2002. The Companys annual effective tax rate decreased to 40.0% for 2003, from 41.4% for 2002 due to implementation of various tax planning strategies.



2002 Compared to 2001



Revenues.Our revenues for 2002 increased by 24.3% to $491.7 million from the delivery of 2,591 homes compared to
revenues for 2001 of $395.7 million from the delivery of 2,054 homes. This $96.0 million increase in revenues was primarily due to the delivery of 537 more homes resulting from an overall improvement in build times in all series of homes. Included
in the 2,054 homes delivered in 2001 were 15 homes, with a sales value of $2.2 million that we sold to unaffiliated third parties and leased back for use as model homes and sales offices. We did not sell and leaseback any homes in 2002. As expected,
the average price of homes delivered in 2002 decreased 2.1% or $4,000 to $185,100 from $189,100 in 2001. The lower average price of delivered homes in 2002 was the result of closing a larger percentage of our new entry-level series of homes.



Included in revenues are other revenues, consisting
principally of fees from the Companys mortgage financing services subsidiary. During 2002, these other revenues increased by 61.1% to $11.6 million from $7.2 million for 2001.



Gross Profit. Our gross profit for 2002 increased by 27.3% to $115.0 million from $90.3 million for 2001. The primary
reasons for the 2002 increase in gross profit were the larger number of homes delivered during 2002, the reduced cost associated with mortgage financing contributions due to falling interest rates and increased mortgage financing service fees.



Selling, General and Administrative Expenses. Our
selling, general and administrative expenses for 2002 increased by 22.9% to $64.5 million from $52.5 million for 2001. The primary reasons for the increase in selling, general and administrative expenses for 2002 were the higher sales commissions
associated with the sale of more homes, payment of higher compensation due to improved profits and general and administrative expenses of our mortgage financing services subsidiary.



Interest Expense. Our interest expense for 2002 decreased by 25.6% to $8.7 million from $11.7 million for 2001, as a
result of the reduction of debt from our sale of common shares and a lower average borrowing rate. The average revolving line of credit borrowings outstanding were $117.4 million and $126.4 million for 2002 and 2001, respectively. The weighted
average rate of interest under the revolving line of credit was 6.2% for 2002 compared to 7.7% for 2001.



Provision for Income Taxes. Our income tax expense for 2002 increased to $17.3 million from $11.0 million for 2001. The Companys estimated
annual effective tax rate decreased to 41.4% for 2002, from 42.1% for 2001.



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Liquidity and Capital Resources



Historically, our capital needs have depended on sales volume, asset turnover, land acquisition and inventory levels. Our
traditional sources of capital have been internally generated cash, bank borrowings and seller financing. At times, we also have sold our common shares in the public market. We have incurred indebtedness in the past and expect to incur indebtedness
in the future to fund our operations and our investment in land. We expect the cash flow from our sales in backlog and funds from our Senior Unsecured Revolving Credit Facility to allow us to meet our short-term cash obligations. The primary reasons
that we could require additional capital are an expansion in our existing markets, expansion into new markets, expansion of our mortgage subsidiary, or a purchase of a homebuilding company. We believe that our current borrowing capacity and
anticipated cash flows from operations are sufficient to meet our liquidity needs for the foreseeable future.



Sources and Uses of Cash

For the Three Year Period Ended December 31, 2003



During 2003, we generated $46.7 million of cash flow from operations before
expenditures on real estate inventories. Our real estate inventories increased by $55.4 million because homes under construction increased by $14.9 million and land and land development and other costs increased by $40.5 million. We invested
significantly in land and land development in order to replace communities that had sold out earlier than anticipated, to expand our presence in Louisville, Kentucky and to enter the Lexington, Kentucky market. We used cash from operations together
with borrowings under our bank credit facility to finance the increase in real estate inventories.



During 2002, we generated $29.0 million of cash flow from operations before expenditures on real estate inventories. We also raised approximately $27.4
million in cash from the sale of 1,503,900 common shares, and we used this cash to reduce debt under our bank credit facility. Our real estate inventories increased by $33.7 million because homes under construction increased by $10.7 million and
land and land development and other costs increased by $23.0 million. We used cash from operations together with borrowings under our bank credit facility to finance the increase in real estate inventories.



During 2001, we generated $27.7 million of cash flow from operations before
expenditures on real estate inventories. Our real estate inventories increased by $43.2 million because homes under construction grew by $25.1 million and land and land development and other costs increased by $18.1 million. We used cash from
operations together with borrowings under our bank credit facility to finance the increase in real estate inventories.



Real Estate Inventories



Our real estate inventories at December 31, 2003 increased $63.9 million to $326.8 million compared to $262.9 million at December 31, 2002. Real estate
inventories include land and land development costs, homes under construction and other building materials. As of December 31, 2003, land and land development costs increased to $205.5 million from $157.2 million as of December 31, 2002, homes
under construction increased to $117.3 million from $102.5 million on December 31, 2002 and other building material inventories increased to $3.9



---

million from $3.2 million as of December 31, 2002. Our land and land development costs increased principally due to the
increased number of sales communities.



We develop
approximately 90% of the communities in which we build homes and generally do not purchase land for resale. We attempt to maintain a land inventory that is sufficient to meet our anticipated lot needs for the next three to six years. At
December 31, 2003, we owned lots or land that we estimate could be developed into 9,726 lots, including 1,734 lots in Louisville, Kentucky.



At December 31, 2003, we controlled, through option agreements or contingent contracts, land that we estimate could be developed into 11,454 additional
lots, including 1,674 lots in Louisville, Kentucky. We hold additional contingent agreements for land that may allow us to develop additional lots that are not included in these totals. However, based on our land review process, we have concluded
that it is unlikely that all of the contingencies contained in these other agreements will be satisfied in the near future. Consequently, we did not consider these contingent agreements when estimating the total amount of land or number of lots that
we potentially may control. The option agreements that we determined were more than likely to have the contingencies satisfied expire at various dates through 2009. During 2003, we exercised options to purchase lots or unimproved land that could be
developed into 5,263 lots, including 1,452 lots in Louisville, Kentucky. We decide whether to exercise any particular option or otherwise acquire additional land based upon our assessment of a number of factors, including our existing land inventory
at the time, the status of purchase contingencies and our evaluation of the future demand for our homes.



On December 31, 2003, we had 248 single family inventory homes, including 25 in Louisville, Kentucky, in various stages of construction, representing an
aggregate investment of $18.0 million, compared to 164 single family inventory homes, including 17 in Louisville, Kentucky, in various stages of construction, representing an aggregate investment of $14.9 million on December 31, 2002. We do not
include inventory homes in sales or backlog.



Contractual Obligations



Notes Payable Banks. On December 3, 2003, we
entered into a Second Amended and Restated $250.0 million Senior Unsecured Revolving Credit Facility (the Facility). The Facility amends and restates the previous Amended and Restated Credit Agreement dated December 31, 2001. The
Facility was amended to increase the amount of the Facility to $250.0 million from $175.0 million and to extend the maturity date to May 31, 2007 from May 31, 2005. Several of the loan restrictions were also changed to reflect our growth and to
allow us additional flexibility in our operations. As of December 31, 2003, we were in compliance with the Facility covenants and had $91.4 million available under the Facility, after adjustment for borrowing base limitations. Borrowing availability
under the Facility could increase, depending on our use of the proceeds of borrowings under the Facility.



The Facility provides for a variable rate of interest on our borrowings. The variable rate is the three month LIBOR rate plus a margin based on our
interest coverage ratio that ranges from 1.75% to 2.5% and is determined quarterly. The margin was 1.75% during 2003. In order to reduce the risks caused by interest rate fluctuations, we have entered into interest rate swap



---

contracts that fix the interest rate on a portion of our borrowings under the Facility. The weighted average interest
rates for borrowings under the Facility for the years ended December 31, 2003 and 2002 were 5.9% and 6.2%, respectively. These rates include the cost of our interest rate swaps. Interest rates for 2003 decreased compared to 2002 due to a lower
average borrowing rate. Additional information regarding the interest rate swap contracts we have entered into is set forth under the heading Quantitative and Qualitative Disclosures About Market Risk in Item 7A below. For a more
detailed description of the Facility, including restrictions on our business activities, see Note 7 Note Payable, Banks to the Consolidated Financial Statements included herein.



Seller Financing. We purchased land for development that was partially financed with seller provided term debt that
has an outstanding balance of $8.5 million at December 31, 2003.



Capital and Operating Leases.We believe the best use of our Facility is to finance direct investments in our homebuilding operations. Assets that support our homebuilding operations are generally financed through capital and
operating lease obligations. These assets include office facilities, model homes, vehicles and equipment. We analyze each lease and determine whether the lease is a capital lease, in which case the asset and related obligation is included on our
balance sheet, or an operating lease, in which case the asset and obligation is not included on our balance sheet. We do not retain a residual financial interest in leased assets. Our capital lease obligations were $2.4 million at December 31, 2003.
We believe our operating leases are properly classified as off balance sheet transactions. Our minimum rental commitment under such non-cancelable operating leases was $14.8 million at December 31, 2003. For further information on our leases, see
Note 9 Operating Lease Commitments and Note 12 Related Party Transactions to the Consolidated Financial Statements included herein.



During 2003, we vacated commercial space that we leased and moved into our new office building. The commercial space had a lease obligation of
approximately $300,000 at December 31, 2003. We recognized an expense of $155,000 related to the remaining lease obligation, net of estimated sublease rental income. We also recognized an impairment loss of approximately $440,000 related to the
abandonment of leasehold improvements in connection with the termination of these leases.



Land Purchase Commitments.On December 31, 2003, we had non-cancelable obligations to purchase residential lots and unimproved land at an aggregate cost of $1.5 million. We intend to purchase this land over the
next year.



The following is a summary of our contractual
obligations at December 31, 2003 (in thousands):



|                                   |  |                        |         |                 |   |          |  |           |       |              |   |         |  |   |      
|---------------------------------- |  | ---------------------- | ------- | --------------- | - | -------- |  | --------- | ----- | ------------ | - | ------- |  | - | -----
|                                   |  | Payments Due by Period
|                                   |  | Total                  |         | Less than1 year |   | 1-3years |  | 4-5 years |       | After 5years
|Term obligations:                  |  |                        |         |                 |   |          |  |           |       |              |   |         |  |   |      
|Note payable, banks                |  | $                      | 129,220 |                 | $ |         |  | $         |      |              | $ | 129,220 |  | $ |     
|Term debt                          |  |                        | 8,526   |                 |   | 4,143    |  |           | 3,533 |              |   | 850     |  |   |     
|Capital lease obligations          |  |                        | 2,432   |                 |   | 1,450    |  |           | 949   |              |   | 33      |  |   |     
|Operating leases                   |  |                        | 14,828  |                 |   | 3,153    |  |           | 3,990 |              |   | 2,136   |  |   | 5,549
|Land purchase commitments          |  |                        | 1,536   |                 |   | 1,536    |  |           |      |              |   |        |  |   |     
|                                   |  |                        |         |                 |   |          |  |           |       |              |   |         |  |   |      
|Total contractual cash obligations |  | $                      | 156,542 |                 | $ | 10,282   |  | $         | 8,472 |              | $ | 132,239 |  | $ | 5,549
|                                   |  |                        |         |                 |   |          |  |           |       |              |   |         |  |   |      



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Off Balance Sheet Arrangements



Performance Bonds and Irrevocable Letters of Credit.We are liable for performance bonds of $42.4 million and
irrevocable letters of credit of $5.2 million at December 31, 2003. These instruments were issued to municipalities and other individuals to ensure performance and completion of certain land development activities and as collateral for contingent
land purchase commitments. We do not anticipate incurring any liability with respect to these instruments.



Variable Interest Entities.We selectively enter into joint ventures with other homebuilders to own and develop communities. Through the creation
of joint venture partnerships and limited liability companies, these joint ventures engage in land development activities for the purpose of developed lot distribution to partners in the entity. These partners in the joint ventures acquire
substantially all of the lots developed by the joint ventures and fund the development costs in proportion to their equity interests. We receive our percentage interest in the lots developed in the form of capital distributions. Our equity interest
in these joint ventures varies from 33% to 50%. These joint ventures generally do not hold debt securities, except for seller requested financing arrangements upon purchasing the land for the joint ventures. In certain cases, we may be liable under
debt commitments within the particular joint venture. As of December 31, 2003, we were party to one joint venture that finances its own development activities. We have guaranteed the obligations under the joint ventures loan agreement up to
$1.2 million, representing our one-half interest. At December 31, 2003, the joint venture had $298,000 in loans outstanding and the portion guaranteed by us was $149,000. We have determined that our land development joint ventures do not qualify as
variable interest entities that would require consolidation in our financial statements. See Note 6 Land Development Joint Ventures to the Consolidated Financial Statements included herein.



In managing our land inventories, we enter into land option and contingent
purchase contracts with third parties to acquire unimproved land and developed lots, which may qualify as variable interest entities.These contracts may be with individual land owners or entities that hold land for sale and generally require
us to pay refundable or non-refundable deposits or letters of credit. We have determined that certain of these contracts are with variable interest entities. Our analysis of these entities indicates that we are not the primary beneficiary, as
defined in FIN 46R, of the land option contracts or contingent purchase contracts, and, therefore, we do not intend to consolidate any of them in our financial statements. We do not have legal title to the land subject to these contracts and our
maximum exposure to loss is limited to option deposits of approximately $3.7 million at December 31, 2003.



We continually evaluate our land option and contingent purchase contracts to purchase unimproved land and developed lots. Cancelable obligations consist
of options under which we have the right, but not the obligation, to purchase land and contingent purchase contracts under which our obligation to purchase land is subject to the satisfaction of zoning, utility, environmental, title or other
contingencies. On December 31, 2003, we had $112.6 million of cancelable contractual obligations for which we had determined it is reasonably likely that we will execute the land or lot purchase. Our good faith deposits on these contracts were $2.1
million at December 31, 2003. Assuming that the contingencies are actually satisfied and that no other significant obstacles to development arise, we expect to purchase most of the residential lots and unimproved land that are subject to these
cancelable contractual obligations. We expect to fund our land acquisition and development obligations from internally generated cash and



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from the borrowing capacity under our Facility. We are in the process of evaluating an additional $76.9 million of
cancelable contractual obligations for which we have not yet determined whether it is reasonably likely that we will execute the land or lot purchase. On December 31, 2003, good faith deposits on these contracts were $1.6 million.



We own a 49.9% interest in an unconsolidated title insurance agency that
provides closing services for our homes. Our maximum exposure to loss in this entity is limited to the amount invested, which is approximately $244,000 at December 31, 2003. We have determined that this entity is a variable interest entity requiring
consolidation effective in the first quarter of 2004. We do not expect the consolidation to have a significant impact on our consolidated financial position or results of operations.



In 1997, we entered into an agreement with an unaffiliated third party to sell and lease back certain model homes. At
December 31, 2003, we had eleven model homes subject to month-to-month leases under this agreement. We have determined that these leases are not with a variable interest entity and rental obligations are properly classified as operating leases
in our schedule of contractual obligations.



During 2003, we
built an office building that was sold to BRC on October 31, 2003 and leased back for a term of fifteen years. We have no residual financial interest in properties leased from BRC. We analyzed this transaction and other leasing arrangements with BRC
and determined that BRC was not a variable interest entity requiring consolidation in our financial statements.



The following is a summary of our commercial commitments under off balance sheet arrangements at December 31, 2003 (in thousands):



|                              |  |                                            |         |                 |   |           |  |          |        |              |   |       |  |   |   
|----------------------------- |  | ------------------------------------------ | ------- | --------------- | - | --------- |  | -------- | ------ | ------------ | - | ----- |  | - | --
|                              |  | Amount of Commitment Expiration Per Period
|                              |  | TotalAmountsCommitted                      |         | Less than1 year |   | 1-3 years |  | 4-5years |        | After 5years
|Other commercial commitments: |  |                                            |         |                 |   |           |  |          |        |              |   |       |  |   |   
|Letters of credit             |  | $                                          | 5,225   |                 | $ | 5,093     |  | $        | 132    |              | $ |      |  | $ |  
|Performance bonds             |  |                                            | 42,388  |                 |   | 19,557    |  |          | 22,646 |              |   | 107   |  |   | 78
|Guarantees                    |  |                                            | 149     |                 |   | 149       |  |          |       |              |   |      |  |   |  
|Cancelable land contracts     |  |                                            | 112,568 |                 |   | 91,363    |  |          | 13,859 |              |   | 7,346 |  |   |   
|                              |  |                                            |         |                 |   |           |  |          |        |              |   |       |  |   |   
|Total commercial commitments  |  | $                                          | 160,330 |                 | $ | 116,162   |  | $        | 36,367 |              | $ | 7,453 |  | $ | 78
|                              |  |                                            |         |                 |   |           |  |          |        |              |   |       |  |   |   



Inflation and Other Cost Increases



We are not always able to reflect all of our cost
increases in the prices of our homes because competitive pressures and other factors sometimes require us to maintain or discount those prices. While we attempt to maintain costs with subcontractors from the date a sales contract with a customer is
accepted until the date construction is completed, we may incur unanticipated costs which cannot be passed on to the customer. For example, delays in construction of a home can cause the mortgage commitment to expire and can require us, if mortgage
interest rates have increased, to pay significant amounts to the mortgage lender to extend the original mortgage interest rate. In addition, during periods of high construction



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activities, we may incur additional costs to obtain subcontractors when certain trades are not readily available, which
additional costs can result in lower gross profits. Periods of rapid price increases can result in lower gross profits.



Recently Issued Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation
of Variable Interest Entities an interpretation of ARB No. 51. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements,to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 explains how to identify a variable
interest entity and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46 requires existing unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among the parties involved. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an
interest after that date.



In December 2003, the FASB issued
FASB Interpretation No. 46R (FIN 46R), which supercedes FIN 46. FIN 46R must be adopted no later than the end of the first interim or annual reporting period ending after March 15, 2004, for variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.



We have evaluated our interests in land development joint ventures, land option contracts, sale and leaseback arrangements and Alliance Title Agency, Ltd. (Alliance) for possible variable interests
acquired before February 1, 2003. Alliance provides title insurance for most of our home closings in Ohio and is an Ohio limited liability company of which we own 49.9%, the maximum allowable under Ohio law. Based on our evaluation, we anticipate
that we will consolidate Alliance for the purposes of FIN 46R effective in the first quarter of 2004, but that we will not consolidate the land development joint ventures or entities with which we have land option contracts. Sale and leaseback
arrangements are not with variable interest entities and therefore are appropriately accounted for as operating leases. We have determined that we are not the primary beneficiary, as defined in FIN 46R, of the land option contracts and therefore
have not consolidated any of our option contracts entered into after January 31, 2003. Consolidation of Alliance is not expected to have a significant impact on our consolidated financial position or results of operations.



In May 2003, the FASB issued SFAS No. 150 (SFAS No. 150),
Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 generally requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 applies to three types of freestanding financial instruments, other than outstanding shares.
One type is mandatory redeemable shares, which the issuing company is obligated to buy back in exchange for cash or assets; a second type of financial instrument subject to SFAS No. 150 includes put



---

options and forward purchase contracts that require or may require the issuer to buy back some of its shares in exchange
for cash or other assets; the third type of financial instrument subject to SFAS No. 150 is obligations that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly to a variable such as a market index, or
varies inversely with the value of the issuers shares. We do not currently have any financial instruments within the scope of SFAS No. 150.



On November 7, 2003, the FASB issued FASB Staff Position No. FAS 150-3 FSP 150-3, Effective Date for Mandatorily Redeemable Financial
Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FAS 150. FSP 150-3 defers the measurement provisions of FAS 150 for mandatorily redeemable noncontrolling interests created on or before
November 5, 2003 for an indefinite period.



Critical Accounting Policies



The foregoing Managements Discussion and Analysis
of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, including the related Notes, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing
basis, we evaluate our estimates including those related to real estate inventories, warranty obligations, and construction costs for homes closed. We base these estimates on historical trends and experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.



We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our Consolidated
Financial Statements:



| |  | Reserves to reduce our real estate inventories to net realizable value are recorded using several factors, including managements plans for future operations, recent operating
results and projected cash flows. These projected cash flows reflect assumptions related to expected future demand and market conditions. The adequacy of our reserves could be materially affected by changes in market conditions.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Estimates for construction costs for homes closed are recorded in the period when the related home is closed. These estimates are based on detailed budgets for each home and
historical experience and trends. If actual costs change, significant variances may be encountered.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Reserves for the estimated cost of homes under warranty are recorded in the period in which the related home is closed and are based on historical experience and trends in actual
warranty costs. Should actual warranty experience change, revisions to the estimated warranty liability would be required.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Estimates for the costs to complete land development are recorded upon completion of the related land development project. Estimates for land and land development costs are
allocated to development phases based on the total number of lots expected to be
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

developed within each community and are based on detailed budgets for the land development project and
historical experience and trends. If actual costs or the total number of lots developed changes, significant variances may be encountered.



| | · | Estimates for capitalized overhead and interest costs are recorded in real estate inventories for interim financial reporting purposes. Annualized capitalization rates for indirect
overhead and interest are determined by estimating the total current year projected development costs, indirect construction costs, interest, closings and ending inventory. If actual costs, closings or inventory levels change, significant variances
to quarterly results may be encountered.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Self-insurance accruals are made for certain claims associated with workers compensation and medical benefits. These accruals include estimates that may be based on
assumptions about historical loss development factors and actual benefit costs. Differences in estimates and assumptions could result in an accrual requirement materially different from the calculated amounts.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We record income tax liabilities utilizing known obligations and estimates of potential obligations. A deferred tax asset or liability is recognized whenever there are future tax
effects from existing temporary differences and tax credit carryforwards. We record a valuation allowance to reduce deferred tax assets to the balance that is more likely than not to be realized. We use an estimate of the annual effective tax rate
at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. If circumstances change, our estimated annual effective tax rate could change, creating variances in
quarterly results.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



As of December 31, 2003, we were a party to nine interest rate swap contracts with an aggregate notional amount of $110 million, as reflected in the table
below. We enter into swap contracts to minimize earnings fluctuations caused by interest rate volatility associated with our variable rate debt. The swap contracts allow us to have variable rate borrowings and to select the level of fixed rate debt
for the Company as a whole. Under the swap contracts, we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate amounts calculated by reference to an agreed notional amount. Our intention is
to maintain approximately 50% of our debt on a fixed interest rate basis. At any time, this percentage may be more or less depending on specific circumstances. At December 31, 2003, our level of fixed rate debt under the Facility, after considering
the effect of the interest rate swaps, was 85%. In early 2004, $30 million of interest rate swaps matured and our outstanding borrowings increased, primarily due to the purchases of land for development. The combination of these two events caused
our level of fixed rate debt to return to the 50% range. We do not enter into derivative financial instrument transactions for speculative purposes. The swap contracts are more fully described below:



---

|                |  |                |  |                |  |           
|--------------- |  | -------------- |  | -------------- |  | ----------
|Notional Amount |  | Start Date     |  | Maturity Date  |  | Fixed Rate
|$20 million     |  | Dec. 14, 2000  |  | Jan. 12, 2004  |  | 5.98%     
|$20 million     |  | Jan. 12, 2001  |  | Jan. 12, 2005  |  | 5.58%     
|$10 million     |  | Mar. 8, 2001   |  | Mar. 8, 2004   |  | 5.16%     
|$10 million     |  | Sept. 12, 2001 |  | Sept. 12, 2004 |  | 4.54%     
|$10 million     |  | Oct. 23, 2002  |  | Oct. 4, 2005   |  | 3.16%     
|$10 million     |  | May 9, 2003    |  | April 3, 2008  |  | 3.01%     
|$10 million     |  | May 9, 2003    |  | May 3, 2008    |  | 3.04%     
|$10 million     |  | Oct. 24, 2003  |  | Oct. 2, 2006   |  | 2.85%     
|$10 million     |  | Oct. 24, 2003  |  | Jan. 2, 2007   |  | 2.87%     



The following table
presents descriptions of the financial instruments and derivative instruments that we held at December 31, 2003. For the liabilities, the table presents principal calendar year cash flows that exist by maturity date and the related average interest
rate. For the interest rate derivatives, the table presents the notional amounts and expected interest rates that exist by contractual dates. Interest on our variable rate liabilities is LIBOR plus a variable margin ranging from 1.75% to 2.50%. Cash
flows for interest on $110 million of the variable rate liabilities subject to interest rate derivatives is the contractual average pay rate plus the variable margin (1.75% at December 31, 2003). The notional amount is used to calculate the
contractual payments to be exchanged under the contract. The fair value of the variable rate liabilities at December 31, 2003 and 2002 was $129.2 million and $111.0 million, respectively. The fair value of the derivatives at December 31, 2003 was a
liability of $1.9 million and at December 31, 2002 a liability of $4.2 million. We do not expect a loss to be realized because we expect to retain the swap contracts to maturity. All dollar amounts are in thousands.



|                          |  |      |        |   |      |   |        |      |  |   |        |   |  |       |         |   |      |   |         |   |  |   |         |  
|------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ----- | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                          |  |      |        |   |      |   |        |      |  |   |        |   |  | TOTAL |        
|                          |  | 2004 |        |   | 2005 |   |        | 2006 |  |   | 2007   |   |  | 2003  |         |   | 2002 |  
|                          |  |      |        |   |      |  
|Liabilities               |  |      |        |   |      |   |        |      |  |   |        |   |  |       |         |   |      |   |         |   |  |   |         |  
|Variable rate             |  |      |        |   |      |   |        |      |  |   |        |   |  | $     | 129,220 |   |      | $ | 129,220 |   |  | $ | 111,070 |  
|Average interest rate     |  |      |        |   |      |   |        |      |  |   |        |   |  |       | 5.91    | % |      |   | 5.91    | % |  |   | 6.18    | %
|                          |  |      |        |   |      |  
|Interest Rate Derivatives |  |      |        |   |      |   |        |      |  |   |        |   |  |       |         |   |      |   |         |   |  |   |         |  
|Notional amount           |  | $    | 70,000 |   |      | $ | 40,000 |      |  | $ | 30,000 |   |  | $     | 20,000  |   |      | $ | 110,000 |   |  | $ | 80,000  |  
|Average pay rate          |  |      | 3.42   | % |      |   | 2.94   | %    |  |   | 2.97   | % |  |       | 3.03    | % |      |   | 4.02    | % |  |   | 5.06    | %
|Average receive rate      |  |      | 1.22   | % |      |   | 1.21   | %    |  |   | 1.22   | % |  |       | 1.25    | % |      |   | 1.23    | % |  |   | 1.82    | %



---

|Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



The Independent Auditors Report of PricewaterhouseCoopers LLP and the Consolidated Financial Statements of the Company as of December 31, 2003 and 2002, and for each of the years in the three-year period ended
December 31, 2003, follow.



REPORT OF INDEPENDENT AUDITORS



To the Board of Directors

and Shareholders

of Dominion Homes, Inc.



In our opinion, the
accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders equity and of cash flows present fairly, in all material respects, the financial position of Dominion Homes, Inc. and its
subsidiaries (the Company) at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



/s/    PricewaterhouseCoopers LLP



Columbus, Ohio

January 24, 2004



---

Dominion Homes, Inc.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)



|                                    |  |                         |           |      |   |           |  |   |          
|----------------------------------- |  | ----------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                    |  | Year ended December 31,
|                                    |  | 2003                    |           | 2002 |   | 2001     
|                                    |  |                         |          
|Revenues                            |  | $                       | 563,464   |      | $ | 491,706   |  | $ | 395,701  
|Cost of real estate sold            |  |                         | 428,508   |      |   | 376,753   |  |   | 305,430  
|                                    |  |                         |           |      |   |           |  |   |          
|Gross profit                        |  |                         | 134,956   |      |   | 114,953   |  |   | 90,271   
|Selling, general and administrative |  |                         | 74,006    |      |   | 64,492    |  |   | 52,491   
|                                    |  |                         |           |      |   |           |  |   |          
|Income from operations              |  |                         | 60,950    |      |   | 50,461    |  |   | 37,780   
|Interest expense                    |  |                         | 7,903     |      |   | 8,675     |  |   | 11,667   
|                                    |  |                         |           |      |   |           |  |   |          
|Income before income taxes          |  |                         | 53,047    |      |   | 41,786    |  |   | 26,113   
|Provision for income taxes          |  |                         | 21,229    |      |   | 17,291    |  |   | 10,987   
|                                    |  |                         |           |      |   |           |  |   |          
|Net income                          |  | $                       | 31,818    |      | $ | 24,495    |  | $ | 15,126   
|                                    |  |                         |           |      |   |           |  |   |          
|Earnings per share                  |  |                         |           |      |   |           |  |   |          
|Basic                               |  | $                       | 4.01      |      | $ | 3.36      |  | $ | 2.38     
|                                    |  |                         |           |      |   |           |  |   |          
|Diluted                             |  | $                       | 3.94      |      | $ | 3.28      |  | $ | 2.30     
|                                    |  |                         |           |      |   |           |  |   |          
|Weighted average shares outstanding |  |                         |           |      |   |           |  |   |          
|Basic                               |  |                         | 7,931,600 |      |   | 7,282,900 |  |   | 6,351,343
|                                    |  |                         |           |      |   |           |  |   |          
|Diluted                             |  |                         | 8,076,174 |      |   | 7,457,985 |  |   | 6,575,026
|                                    |  |                         |           |      |   |           |  |   |          



The accompanying notes
are an integral part of the Consolidated Financial Statements.



---

Dominion Homes, Inc.

Consolidated Balance Sheets

(In thousands, except share information)



|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                                                                                   |  | December 31, |        
|                                                                                                                                                                                                                                   |  | 2003         |         |   | 2002 |  
|ASSETS                                                                                                                                                                                                                             |  |              |         |   |      |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                          |  | $            | 5,025   |   |      | $ | 4,121   |  
|Accounts receivable                                                                                                                                                                                                                |  |              |         |   |      |   |         |  
|Trade                                                                                                                                                                                                                              |  |              | 217     |   |      |   | 283     |  
|Due from financial institutions for residential closings                                                                                                                                                                           |  |              | 2,316   |   |      |   | 2,714   |  
|Real estate inventories                                                                                                                                                                                                            |  |              |         |   |      |   |         |  
|Land and land development costs                                                                                                                                                                                                    |  |              | 205,543 |   |      |   | 157,165 |  
|Homes under construction                                                                                                                                                                                                           |  |              | 117,319 |   |      |   | 102,450 |  
|Other                                                                                                                                                                                                                              |  |              | 3,947   |   |      |   | 3,240   |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total real estate inventories                                                                                                                                                                                                      |  |              | 326,809 |   |      |   | 262,855 |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Prepaid expenses and other                                                                                                                                                                                                         |  |              | 7,220   |   |      |   | 3,404   |  
|Deferred income taxes                                                                                                                                                                                                              |  |              | 5,781   |   |      |   | 6,901   |  
|Property and equipment, at cost                                                                                                                                                                                                    |  |              | 18,538  |   |      |   | 16,617  |  
|Less accumulated depreciation                                                                                                                                                                                                      |  |              | (9,764  | ) |      |   | (9,158  | )
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total property and equipment                                                                                                                                                                                                       |  |              | 8,774   |   |      |   | 7,459   |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total assets                                                                                                                                                                                                                       |  | $            | 356,142 |   |      | $ | 287,737 |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                               |  |              |         |   |      |   |         |  
|Accounts payable                                                                                                                                                                                                                   |  | $            | 17,765  |   |      | $ | 7,231   |  
|Deposits on homes under contract                                                                                                                                                                                                   |  |              | 2,034   |   |      |   | 2,314   |  
|Accrued liabilities                                                                                                                                                                                                                |  |              | 30,104  |   |      |   | 29,726  |  
|Note payable, banks                                                                                                                                                                                                                |  |              | 129,220 |   |      |   | 111,070 |  
|Term debt                                                                                                                                                                                                                          |  |              | 10,958  |   |      |   | 4,415   |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total liabilities                                                                                                                                                                                                                  |  |              | 190,081 |   |      |   | 154,756 |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Commitments and contingencies                                                                                                                                                                                                      |  |              |         |   |      |   |         |  
|Shareholders equity                                                                                                                                                                                                               |  |              |         |   |      |   |         |  
|Common shares, without stated value, 12,000,000 shares authorized, 8,430,761 shares issued and 8,211,250 shares outstanding on December 31,
2003 and 8,273,211 shares issued and 8,202,691 shares outstanding on December 31, 2002 |  |              | 66,890  |   |      |   | 61,799  |  
|Deferred compensation                                                                                                                                                                                                              |  |              | (5,107  | ) |      |   | (1,784  | )
|Retained earnings                                                                                                                                                                                                                  |  |              | 108,264 |   |      |   | 76,446  |  
|Accumulated other comprehensive loss                                                                                                                                                                                               |  |              | (1,132  | ) |      |   | (2,460  | )
|Treasury stock, at cost (219,511 and 70,520 shares at December 31, 2003 and 2002, respectively)                                                                                                                                    |  |              | (2,854  | ) |      |   | (1,020  | )
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total shareholders equity                                                                                                                                                                                                         |  |              | 166,061 |   |      |   | 132,981 |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  
|Total liabilities and shareholders equity                                                                                                                                                                                         |  | $            | 356,142 |   |      | $ | 287,737 |  
|                                                                                                                                                                                                                                   |  |              |         |   |      |   |         |  



The accompanying notes
are an integral part of the Consolidated Financial Statements.



---

Dominion Homes, Inc.

Consolidated Statements of Changes in Shareholders Equity

(In thousands)



|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|-------------------------------------------------------- |  | ------------ | --------- | --------------------- | - | ----------- | ---------------- |  | ------------------------------------------ | ------ | - | ------------- | - | ------- | ----- | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                         |  | CommonShares |           | Deferred Compensation |   |             | RetainedEarnings |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | TreasuryStock |   |         | Total |  
|                                                         |  |              | Liability |                       |   | TrustShares |                  |  |                                            |        |  
|Balance, December 31, 2000                               |  | $            | 31,611    |                       | $ | 928         |                  |  | $                                          | (1,304 | ) |               | $ | 36,825  |       |   |        |   |  | $ | (172   | ) |  | $ | 67,888  |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Cumulative effect of adopting accounting principle       |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       | $ | 94     |   |  |   |        |   |  |   | 94      |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Balance, January 1, 2001, as adjusted                    |  |              | 31,611    |                       |   | 928         |                  |  |                                            | (1,304 | ) |               |   | 36,825  |       |   | 94     |   |  |   | (172   | ) |  |   | 67,982  |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Net income                                               |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   | 15,126  |       |   |        |   |  |   |        |   |  |   | 15,126  |  
|Unrealized hedging loss, net of deferred taxes of $1,255 |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   | (1,824 | ) |  |   |        |   |  |   | (1,824  | )
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive income                                     |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 13,302  |  
|Shares awarded and redeemed                              |  |              | 239       |                       |   | (308        | )                |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | (69     | )
|Shares distributed from Trust for deferred compensation  |  |              |           |                       |   | (138        | )                |  |                                            | 138    |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Deferred compensation                                    |  |              |           |                       |   | 352         |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 352     |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2001                               |  |              | 31,850    |                       |   | 834         |                  |  |                                            | (1,166 | ) |               |   | 51,951  |       |   | (1,730 | ) |  |   | (172   | ) |  |   | 81,567  |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Net income                                               |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   | 24,495  |       |   |        |   |  |   |        |   |  |   | 24,495  |  
|Unrealized hedging loss, net of deferred taxes of $511   |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   | (730   | ) |  |   |        |   |  |   | (730    | )
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive income                                     |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 23,765  |  
|Shares awarded and redeemed                              |  |              | 2,598     |                       |   | (1,631      | )                |  |                                            |        |   |               |   |         |       |   |        |   |  |   | (848   | ) |  |   | 119     |  
|Issuance of common shares                                |  |              | 27,351    |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 27,351  |  
|Shares distributed from Trust for deferred compensation  |  |              |           |                       |   | (326        | )                |  |                                            | 326    |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Deferred compensation                                    |  |              |           |                       |   | 484         |                  |  |                                            | (305   | ) |               |   |         |       |   |        |   |  |   |        |   |  |   | 179     |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2002                               |  |              | 61,799    |                       |   | (639        | )                |  |                                            | (1,145 | ) |               |   | 76,446  |       |   | (2,460 | ) |  |   | (1,020 | ) |  |   | 132,981 |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Net income                                               |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   | 31,818  |       |   |        |   |  |   |        |   |  |   | 31,818  |  
|Unrealized hedging gain, net of deferred taxes of ($995) |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   | 1,328  |   |  |   |        |   |  |   | 1,328   |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Comprehensive income                                     |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 33,146  |  
|Shares awarded and redeemed                              |  |              | 5,091     |                       |   | (4,604      | )                |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   | 487     |  
|Shares repurchased                                       |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   | (1,834 | ) |  |   | (1,834  | )
|Shares distributed from Trust for deferred compensation  |  |              |           |                       |   | (115        | )                |  |                                            | 115    |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Deferred compensation                                    |  |              |           |                       |   | 1,485       |                  |  |                                            | (204   | ) |               |   |         |       |   |        |   |  |   |        |   |  |   | 1,281   |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  
|Balance, December 31, 2003                               |  | $            | 66,890    |                       | $ | (3,873      | )                |  | $                                          | (1,234 | ) |               | $ | 108,264 |       | $ | (1,132 | ) |  | $ | (2,854 | ) |  | $ | 166,061 |  
|                                                         |  |              |           |                       |   |             |                  |  |                                            |        |   |               |   |         |       |   |        |   |  |   |        |   |  |   |         |  



The accompanying notes
are an integral part of the Consolidated Financial Statements.



---

Dominion Homes, Inc.

Consolidated Statements of Cash Flows

(In thousands)



|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                          |  | Year Ended December 31, |         
|                                                                          |  | 2003                    |          |   | 2002 |   |          | 2001 | 
|Cash flows from operating activities:                                     |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income                                                                |  | $                       | 31,818   |   |      | $ | 24,495   |      |  | $ | 15,126   |  
|Adjustments to reconcile net income to cash used in operating activities: |  |                         |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                             |  |                         | 4,271    |   |      |   | 3,645    |      |  |   | 2,514    |  
|Reserve for real estate inventories                                       |  |                         | 480      |   |      |   | 1,797    |      |  |   | 1,378    |  
|Issuance of common shares for compensation                                |  |                         | 59       |   |      |   | 30       |      |  |   | 26       |  
|Deferred income taxes                                                     |  |                         | 125      |   |      |   | (525     | )    |  |   | (1,643   | )
|Changes in assets and liabilities:                                        |  |                         |          |   |      |   |          |      |  |   |          |  
|Accounts receivable                                                       |  |                         | 464      |   |      |   | (115     | )    |  |   | (1,856   | )
|Real estate inventories                                                   |  |                         | (55,365  | ) |      |   | (33,697  | )    |  |   | (43,178  | )
|Prepaid expenses and other                                                |  |                         | (3,513   | ) |      |   | 520      |      |  |   | 318      |  
|Accounts payable                                                          |  |                         | 10,534   |   |      |   | (2,252   | )    |  |   | 3,675    |  
|Deposits on homes under contract                                          |  |                         | (280     | ) |      |   | (370     | )    |  |   | 880      |  
|Accrued liabilities                                                       |  |                         | 2,769    |   |      |   | 1,773    |      |  |   | 7,263    |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in operating activities                                     |  |                         | (8,638   | ) |      |   | (4,699   | )    |  |   | (15,497  | )
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash flows from investing activities:                                     |  |                         |          |   |      |   |          |      |  |   |          |  
|Purchase of property and equipment                                        |  |                         | (8,358   | ) |      |   | (861     | )    |  |   | (1,879   | )
|Proceeds from sale of property                                            |  |                         | 4,521    |   |      |   |          |      |  |   |          |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in investing activities                                     |  |                         | (3,837   | ) |      |   | (861     | )    |  |   | (1,879   | )
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash flows from financing activities:                                     |  |                         |          |   |      |   |          |      |  |   |          |  
|Payments on note payable, banks                                           |  |                         | (465,793 | ) |      |   | (420,602 | )    |  |   | (334,016 | )
|Proceeds from note payable, banks                                         |  |                         | 483,943  |   |      |   | 400,161  |      |  |   | 359,826  |  
|Payments on term debt                                                     |  |                         | (1,163   | ) |      |   | (1,341   | )    |  |   | (4,254   | )
|Payment of deferred financing fees                                        |  |                         | (839     | ) |      |   | (713     | )    |  |   | (271     | )
|Payments on capital lease obligations                                     |  |                         | (1,363   | ) |      |   | (883     | )    |  |   | (301     | )
|Proceeds from issuance of common shares                                   |  |                         | 428      |   |      |   | 27,440   |      |  |   | 77       |  
|Common shares repurchased                                                 |  |                         | (1,834   | ) |      |   |         |      |  |   | (172     | )
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by financing activities                                 |  |                         | 13,379   |   |      |   | 4,062    |      |  |   | 20,889   |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Net change in cash and cash equivalents                                   |  |                         | 904      |   |      |   | (1,498   | )    |  |   | 3,513    |  
|Cash and cash equivalents, beginning of year                              |  |                         | 4,121    |   |      |   | 5,619    |      |  |   | 2,106    |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents, end of year                                    |  | $                       | 5,025    |   |      | $ | 4,121    |      |  | $ | 5,619    |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Supplemental disclosures of cash flow information:                        |  |                         |          |   |      |   |          |      |  |   |          |  
|Interest paid (net of amounts capitalized)                                |  | $                       | 3,034    |   |      | $ | 5,602    |      |  | $ | 2,173    |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Income taxes paid                                                         |  | $                       | 21,942   |   |      | $ | 16,685   |      |  | $ | 11,435   |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Supplemental disclosures of non-cash activities:                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Land acquired with seller financing                                       |  | $                       | 9,069    |   |      | $ | 931      |      |  | $ | 3,750    |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  
|Capital lease obligations                                                 |  | $                       |         |   |      | $ | 3,350    |      |  | $ | 60       |  
|                                                                          |  |                         |          |   |      |   |          |      |  |   |          |  



The accompanying notes
are an integral part of the Consolidated Financial Statements.



---

Notes to the Consolidated Financial Statements



|1. | Business Operations and Basis of Presentation:
|-- | ----------------------------------------------



Dominion Homes, Inc. (the Company) is a homebuilder with operations in Central Ohio and Louisville and Lexington, Kentucky. The Company was
incorporated in October 1993 in anticipation of its initial public offering of common shares in March 1994. Prior to the initial public offering, the homebuilding operations were part of BRC Properties Inc. (BRC), formerly known as
Borror Realty Company. BRC was incorporated in 1946 and started building homes in 1976. Donald Borror, the Companys Chairman Emeritus of the Board, traces his homebuilding experience to the first home he built in 1952. BRC owned 3,908,424
common shares of the Company, or 47.6% of its outstanding common shares, at December 31, 2003.



On November 16, 1999, Dominion Homes, Inc. formed Dominion Homes Financial Services, Ltd. (DHFS) to provide mortgage-financing services, primarily to its customers. DHFS became operational in second
quarter 2000 and by the end of 2000 provided mortgage-financing services to most of the Companys customers. On December 30, 1999, the Company formed Dominion Homes of Kentucky, Ltd. (DHK) to own and operate the Companys
homebuilding operations in Kentucky. In 2002, the Company created Dominion Homes Structural Warranty Company (DHSW) to insure its exposures to structural warranty commitments. DHFS is an Ohio limited liability company, DHK is a Kentucky
limited partnership, and DHSW is an Ohio limited liability company. Each of these entities is wholly owned by the Company. The accompanying Consolidated Financial Statements include the accounts of the Company, DHFS, DHK, and DHSW. Inter-company
transactions are eliminated in consolidation.



|2. | Summary of Significant Accounting Policies:
|-- | -------------------------------------------



Cash and Cash Equivalents: For purposes of the consolidated statements of cash flows, all highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents. Included in cash and cash equivalents is approximately $1,200,000 which is required to be maintained under laws governing the operation of DHSW.



Real Estate Inventories: Real estate inventories are recorded at cost.
Land and land development costs are allocated to development phases based on the total number of lots expected to be developed within each subdivision. As each development phase is completed, land development costs, including capitalized interest
and real estate taxes, are then allocated to individual lots. Homes under construction include land development costs, construction costs, capitalized interest and indirect costs related to development and construction activities. Indirect costs
that do not relate to development and construction activities, including general and administrative expenses, are charged to expense as incurred. Other inventories consist primarily of lumber and building supplies.



Management evaluates the recoverability of its real estate inventories using
several factors including, but not limited to, managements plans for future operations, recent operating results and projected cash flows. The Company recognized an impairment loss of



---

approximately $480,000, $1,797,000 and $1,378,000 on real estate inventories for the years ended December 31, 2003, 2002
and 2001, respectively.



Property and Equipment:
Depreciation and amortization are recognized on the straight-line method at rates adequate to amortize costs over the estimated useful lives of the applicable assets. The estimated useful lives of the assets range from three to forty years. Property
and equipment includes assets subject to capital leases with a cost of $5,430,000 at December 31, 2003 and December 31, 2002 and accumulated amortization of $4,074,000 and $3,108,000 at December 31, 2003 and 2002, respectively. Depreciation and
amortization expense was $2,522,000, $2,946,000, and $1,591,000 for the years ended December 31, 2003, 2002 and 2001, respectively.



Maintenance, repairs and minor renewals are charged to expense as incurred while major renewals and betterments are capitalized and amortized. The asset
cost and accumulated depreciation for assets sold or retired is removed, and any resulting gain or loss is reflected in operations.



The Company assesses the impairment of property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset
may not be recoverable from its future undiscounted cash flows. If it is determined that an impairment has occurred, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value. In 2003,
the Company recognized an impairment loss of approximately $440,000 related to the abandonment of leasehold improvements in connection with the termination of leases.



Earnings Per Share: Basic earnings per common share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding during each period. Diluted earnings per common share computations include common share equivalents, when dilutive. Common share equivalents include stock options and
restricted common shares. Restricted common shares are included in common share equivalents when performance contingencies are achieved.



Warranty Costs: The Company provides a two-year limited warranty on materials and workmanship and a thirty-year warranty against major structural
defects. An estimated amount of warranty cost is provided for each home at the date of closing based on historical warranty experience. Warranty expense was $3,206,000, $3,877,000 and $3,351,000 for the years ended December 31, 2003, 2002 and 2001,
respectively. Accrued warranty cost was $3,990,000 and $3,998,000 at December 31, 2003 and 2002, respectively.



A reconciliation of the changes in the warranty liability for the years ending December 31, are as follows:



|                                                                             |  |      |            |   |      |   |            |  
|---------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                             |  | 2003 |            |   | 2002 |  
|Balance at the beginning of the period                                       |  | $    | 3,998,000  |   |      | $ | 2,568,000  |  
|Accruals for warranties issued during the period                             |  |      | 1,870,000  |   |      |   | 1,851,000  |  
|Accruals related to pre-existing warranties (including changes in estimates) |  |      | 1,336,000  |   |      |   | 2,026,000  |  
|Settlements made (in cash or in kind) during the period                      |  |      | (3,214,000 | ) |      |   | (2,447,000 | )
|                                                                             |  |      |            |   |      |   |            |  
|Balance at the end of the period                                             |  | $    | 3,990,000  |   |      | $ | 3,998,000  |  
|                                                                             |  |      |            |   |      |   |            |  



---

Income Taxes: The Company records income taxes on the liability method. This method requires the
recognition of deferred income taxes for the tax effect of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as determined by tax regulations based on enacted tax rates.



Revenue Recognition on Sales of Real Estate: The Company recognizes
revenues from the sale of homes, including fees earned for mortgage financing services, at the time it conveys title to the buyer. Accounts receivable due from financial institutions represent payments to be received on completed closings. Gains on
sales of model homes subject to leasing arrangements are deferred and recognized over the term of the lease.



Unearned premiums:Premiums received related to structural warranties are deferred and amortized over the period of expected losses. Such periods
are determined through consideration of industry norms and the Companys actual historical experience.



Capitalization of Interest: The Company capitalizes the cost of interest related to construction costs incurred during the construction period of
homes and land development costs incurred while development activities on undeveloped land are in process. The summary of total interest is as follows:



|                                                   |  |                         |            |   |      |   |            |      |  |   |            |  
|-------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                   |  | Year Ended December 31, |           
|                                                   |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Interest incurred                                  |  | $                       | 7,536,000  |   |      | $ | 8,339,000  |      |  | $ | 10,869,000 |  
|Interest capitalized                               |  |                         | (4,966,000 | ) |      |   | (4,921,000 | )    |  |   | (6,626,000 | )
|                                                   |  |                         |            |   |      |   |            |      |  |   |            |  
|Interest expensed directly                         |  |                         | 2,570,000  |   |      |   | 3,418,000  |      |  |   | 4,243,000  |  
|Previously capitalized interest charged to expense |  |                         | 5,333,000  |   |      |   | 5,257,000  |      |  |   | 7,424,000  |  
|                                                   |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                   |  |                         |           
|Total interest expense                             |  | $                       | 7,903,000  |   |      | $ | 8,675,000  |      |  | $ | 11,667,000 |  
|                                                   |  |                         |            |   |      |   |            |      |  |   |            |  
|                                                   |  |                         |           
|Capitalized interest in ending inventory           |  | $                       | 3,108,000  |   |      | $ | 3,475,000  |      |  | $ | 3,811,000  |  
|                                                   |  |                         |            |   |      |   |            |      |  |   |            |  



Deferred Costs:
Fees and costs incurred in connection with financing agreements are capitalized as other assets and amortized over the terms of the respective agreements. Amortization expense was $536,000, $752,000 and $629,000 for the years ended December 31,
2003, 2002 and 2001 respectively.



Advertising Costs:
The Company expenses advertising costs when incurred. Advertising expense was $5,809,000, $4,592,000 and $4,404,000 for the years ended December 31, 2003, 2002 and 2001, respectively.



Stock-Based Compensation:The Company has elected to follow the intrinsic value method to account for compensation
expense related to the award of stock options and to furnish the pro forma disclosures required under SFAS No. 123, Accounting for Stock-Based Compensation. Because the Companys stock option awards are granted at prices not less
than the fair-market value of the shares at the date of grant, no compensation expense is recognized for these awards. Compensation expense related to restricted share awards is determined at the date of grant and adjusted for changes in the fair
value of the restricted shares until the performance criteria are met. Compensation expense is recorded as unearned compensation expense and amortized over the vesting period of the restricted share awards. The unearned



---

compensation expense related to such awards was $5.3 million at December 31, 2003 and is reflected as a reduction of
shareholders equity.



Had compensation cost for stock
options been determined based on the fair value of awards at the grant dates, the Companys net income and earnings per share for the years ended December 31, 2003, 2002 and 2001, would have been reduced to the pro forma amounts indicated
below:



|                                                                                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                           |  | Year Ended December 31, |           
|                                                                                                           |  | 2003                    |            |   | 2002 |   |            | 2001 | 
|Net income, as reported                                                                                    |  | $                       | 31,818,000 |   |      | $ | 24,495,000 |      |  | $ | 15,126,000 |  
|Add stock based compensation expense included in reported net income, net of related tax effects           |  |                         | 703,000    |   |      |   | 140,000    |      |  |   | 108,000    |  
|Deduct stock-based compensation expense determined using the fair value method, net of related tax effects |  |                         | (839,000   | ) |      |   | (310,000   | )    |  |   | (298,000   | )
|                                                                                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Pro forma net income                                                                                       |  | $                       | 31,682,000 |   |      | $ | 24,325,000 |      |  | $ | 14,936,000 |  
|                                                                                                           |  |                         |            |   |      |   |            |      |  |   |            |  
|Earnings per share                                                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic as reported                                                                                          |  | $                       | 4.01       |   |      | $ | 3.36       |      |  | $ | 2.38       |  
|Basic pro forma                                                                                            |  | $                       | 3.99       |   |      | $ | 3.34       |      |  | $ | 2.35       |  
|Diluted as reported                                                                                        |  | $                       | 3.94       |   |      | $ | 3.28       |      |  | $ | 2.30       |  
|Diluted pro forma                                                                                          |  | $                       | 3.92       |   |      | $ | 3.26       |      |  | $ | 2.27       |  



The weighted average
fair value of options granted during 2003, 2002 and 2001 was $14.36, $11.73 and $7.50, respectively. In determining the pro forma amount of stock-based compensation, the fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions: no dividend yield; expected volatility of 60% in 2003, 50% in 2002 and 50% in 2001; risk-free interest rates of 4.8%, 4.6% and 5.2% for 2003, 2002 and 2001,
respectively; and an expected life of 6 years.



Segment
Information:The Companys homebuilding operations, which are conducted in Ohio and Kentucky, have similar characteristics including the product offerings, pricing and margins and as such, have been aggregated. The Companys mortgage
operations directly support its core homebuilding operations and services to outside parties are rare. Therefore, the mortgage operations and the homebuilding operations have been aggregated into one reportable segment  the homebuilding
segment.



Utilization of Estimates: The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America 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.



Reclassifications: Certain prior year amounts have been reclassified
to conform to the 2003 presentation.



---

Recently Issued Accounting Pronouncements:



In January 2003, the Financial Accounting Standards Board (the
FASB) issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entitiesan interpretation of ARB No. 51. FIN 46 clarifies the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements,to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46
requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. FIN 46 applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.



In December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R), which supercedes FIN 46. FIN 46R must be adopted no later than the
end of the first interim or annual reporting period ending after March 15, 2004, for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.



The Company has evaluated its interests in land development joint ventures,
land option contracts, sales and leaseback arrangements and Alliance Title Agency, Ltd. (Alliance) for possible variable interests acquired before February 1, 2003. With respect to land development joint ventures, the Company has
determined that the joint ventures do not qualify as variable interest entities that would require consolidation in its financial statements. With respect to land option contracts, the Company has determined that in certain instances these contracts
are with variable interest entities but the Company is not the primary beneficiary and therefore will not require consolidation of the variable interest entity. The Company has also determined that its sale and leaseback arrangements are not with
variable interest entities and therefore are appropriately accounted for as operating leases. Alliance provides title insurance for most of the Companys home closings in Ohio and is an Ohio limited liability company of which the Company owns
49.9%, the maximum allowable under Ohio law. On the basis of this evaluation, the Company anticipates that it will consolidate Alliance for the purposes of FIN 46R effective in the first quarter of 2004. Consolidation of Alliance is not expected to
have a significant impact on the Companys consolidated financial position or results of operations.



In May 2003, the FASB issued SFAS No. 150 (SFAS No. 150), Accounting for Certain Financial Instruments With Characteristics of Both
Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 generally requires that an issuer classify a
financial instrument that is within its scope as a liability. SFAS No. 150 applies to three types of freestanding financial instruments, other than outstanding shares. One type is mandatory redeemable shares, which the issuing company is obligated
to buy back in exchange for cash or assets; a second type includes put options and forward purchase contracts that require or may require the issuer to buy back some of its shares in exchange for cash or other assets; the third type is obligations
that can be settled with shares, the monetary value of which is fixed, ties solely or predominantly to a variable such as a market index, or varies inversely with the value of



---

the issuers shares. The Company does not currently have any financial instruments within the scope of SFAS No. 150.



On November 7, 2003, the FASB issued FASB Staff Position No. FAS 150-3
(FSP 150-3), Effective Date for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FAS 150. FSP 150-3 defers the measurement provisions of
FAS 150 for mandatorily redeemable noncontrolling interests created on or before November 5, 2003 for an indefinite period.



|3. | Related Entity:
|-- | ---------------



Alliance was created in order to provide title insurance to the Companys customers and third parties and to facilitate the closing of the
Companys homes. The Company owns 49.9% of the title insurance agency and reports its investment using the equity method of accounting. The Company recognized $918,000, $499,000 and $553,000 as its share of the earnings from this investment for
2003, 2002, and 2001, respectively. The Companys investment in the title insurance company was $244,000 and $110,000 at December 31, 2003 and 2002, respectively, and is included in other assets in the accompanying consolidated balance sheets.



|4. | Earnings Per Share:
|-- | -------------------



A reconciliation of weighted average common shares used in basic and diluted earnings per share calculations is as follows:



|                                |  |           |  |           |  |          
|------------------------------- |  | --------- |  | --------- |  | ---------
|                                |  | 2003      |  | 2002      |  | 2001     
|Weighted average sharesbasic   |  | 7,931,600 |  | 7,282,900 |  | 6,351,343
|Common share equivalents        |  | 144,574   |  | 175,085   |  | 223,683  
|                                |  |           |  |           |  |          
|Weighted average sharesdiluted |  | 8,076,174 |  | 7,457,985 |  | 6,575,026
|                                |  |           |  |           |  |          



As of December 31,
2003, 2002 and 2001 there were 13,484, 2,346, and 1,033 options, respectively, which were antidilutive and have been excluded from the respective diluted earnings per share calculations above. During the first quarter of 2003, the Company
repurchased 147,500 common shares.



|5. | Land Purchase Commitments:
|-- | --------------------------



Purchase contracts for residential lots and unimproved land in Central, Ohio and Louisville, Kentucky at December 31, 2003 and 2002 were:



|                              |  |      |           |   |      |   |           |  
|----------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                              |  | 2003 |           |   | 2002 |  
|                              |  |     
|Number of expected lots       |  |      | 79        |   |      |   | 1,316     |  
|                              |  |     
|Purchase price                |  | $    | 1,536,000 |   |      | $ | 7,049,000 |  
|Less deposits or guarantees   |  |      | (150,000  | ) |      |   | (875,000  | )
|                              |  |      |           |   |      |   |           |  
|Net land purchase commitments |  | $    | 1,386,000 |   |      | $ | 6,174,000 |  
|                              |  |      |           |   |      |   |           |  



---

On December 31, 2003, the Company had non-cancelable obligations to purchase residential lots and
unimproved land at an aggregate cost of $1.5 million. The Company intends to purchase this land during 2004. On December 31, 2003, the Company also had cancelable obligations to purchase residential lots and unimproved land. Cancelable contractual
obligations consist of options under which the Company has the right, but not the obligation, to purchase land or developed lots and contingent purchase contracts under which its obligation to purchase land is subject to the satisfaction of zoning,
utility, environmental, title or other contingencies. On December 31, 2003, the Company had $112.6 million of cancelable contractual obligations for which the Company determined it is reasonably likely that it will execute the land or lot purchase.
Good faith deposits on these contracts were $2.1 million at December 31, 2003. Assuming that the contingencies are actually satisfied and that no other significant obstacles to development arise, the Company expects to purchase most of the
residential lots and unimproved land that are subject to these cancelable contractual obligations. At December 31, 2003, the Company was in the process of evaluating an additional $76.9 million of cancelable contractual obligations for which it has
not yet determined whether it is reasonably likely that it will execute the land or lot purchase. On December 31, 2003, good faith deposits on these contracts were $1.6 million. Good faith deposits are charged to earnings when the Company determines
it will not execute the purchase of the residential lots or unimproved land.



Cancelable contracts for which the Company has determined that it is reasonably likely that it will execute the land or lot purchase in the following years:



|                    |  |                      |            
|------------------- |  | -------------------- | -----------
|Year                |  | Cancelable Contracts
|2004                |  | $                    | 91,363,000 
|2005                |  |                      | 7,210,000  
|2006                |  |                      | 6,649,000  
|2007                |  |                      | 1,994,000  
|2008 and thereafter |  |                      | 5,352,000  
|                    |  |                      |            
|                    |  | $                    | 112,568,000
|                    |  |                      |            



|6. | Land Development Joint Ventures:
|-- | --------------------------------



The Company has equity interests, generally ranging from 33% to 50%, in joint venture partnerships and limited liability corporations that are engaged in
land development activities. The Company accounts for these investments using the equity method. Development costs of the joint ventures generally are funded by the participants. The participants in the joint ventures acquire substantially all of
the developed lots and fund the development costs in proportion to their equity interests. The Company evaluates the recoverability of its investments in joint ventures using the same criteria as for other real estate inventories. The Companys
investment in joint ventures, which is included in land and land development costs, was $14,056,000 and $13,529,000 at December 31, 2003 and 2002, respectively.



In certain cases, the Company may be liable under debt commitments within a particular joint venture. At December 31, 2003, the Company was party to
one joint venture that financed its own development activities. The Company has guaranteed this joint ventures loan agreement up to $1.2 million, representing its one-half interest in this joint venture. This joint ventures development
activity is expected to last approximately one to two more years, by which time the



---

developed lots will have been distributed to the Company and the other joint venture partners and the Companys
guarantee terminated. At December 31, 2003, this joint venture had $298,000 in loans outstanding and the portion subject to the Companys guaranty was $149,000.



Summary financial information representing 100% of joint venture assets, liabilities and equity as of December 31, 2003 and
2002, are set forth below:



|                                       |  |      |            |      |   |           
|-------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                       |  | 2003 |            | 2002
|Land and land under development        |  | $    | 34,579,000 |      | $ | 37,051,000
|Other assets                           |  |      | 1,383,000  |      |   | 1,421,000 
|                                       |  |      |            |      |   |           
|Total assets                           |  | $    | 35,962,000 |      | $ | 38,472,000
|                                       |  |      |            |      |   |           
|                                       |  |     
|Liabilities                            |  | $    | 3,870,000  |      | $ | 4,622,000 
|Partners equity                       |  |      | 30,092,000 |      |   | 33,850,000
|                                       |  |      |            |      |   |           
|Total liabilities and partners equity |  | $    | 35,962,000 |      | $ | 38,472,000
|                                       |  |      |            |      |   |           



The revenues, expenses
and net income or loss from joint ventures are not material to the Companys results of operations.



|7. | Note Payable, Banks:
|-- | --------------------



On December 3, 2003, the Company entered into a $250,000,000 Second Amended and Restated Credit Agreement evidencing the Companys Senior Unsecured
Revolving Credit Facility (the Facility) that terminates on May 31, 2007. The Facility amends and restates the previous Amended and Restated Credit Agreement dated December 31, 2001. The Facility was amended to increase the amount of the
Facility to $250,000,000 from $175,000,000 and to extend the termination date to May 31, 2007 from May 31, 2005. Several of the restrictive covenants were also changed to reflect the growth of the Company and to allow the Company additional
flexibility in its operations.



As of December 31, 2003 the
Facility, as amended, contained the following significant provisions: (1) a limit on aggregate borrowings and letters of credit to the lesser of $250,000,000 or the availability under the borrowing base; (2) the Company has the option to use a
combination of either of the following methods to price the revolving line of credit: (a) the banks prime rate of interest or (b) a Eurodollar rate of interest plus a variable margin that ranges from 1.75% to 2.50%; (3) with certain
exceptions, other borrowings may not exceed the aggregate principal sum of $25,000,000 plus up to $25,000,000 mortgage warehouse financing (4) the Company may not become liable for contingent liabilities, with certain exceptions; (5) the Company may
not exceed $10,000,000 of annual operating lease rentals; (6) the Company may not acquire in excess of $10,000,000 of its own shares; (7) the Company may not pay dividends during any calendar year in excess of fifty percent of its consolidated net
income after taxes for such year; (8) the Company may not change its chief executive officer or its chief operating officer; (9) the Company is restricted from making certain investments, loans and advances, principally $2,000,000 to its mortgage
subsidiary, $2,000,000 to purchasers of land owned by the Company and $2,000,000 to insurance subsidiaries; (10) the Company must maintain a tangible net worth of not less than $110,000,000 plus 50% percent of annual net income after taxes beginning
with the fiscal year ending December 31, 2003; (11) the Company has agreed to maintain the following ratios: (a) total liabilities to tangible net worth



---

(leverage ratio) of not greater than 2.25 to 1.00 at all times, (b) a ratio of uncommitted land holdings to tangible net
worth not greater than 1.75 to 1.00 at all times, (c) interest coverage ratio of not less than 2.25 to 1.00 determined quarterly and based upon the preceding twelve months; (12) the Company may not purchase land not zoned for residential development
in excess of $15,000,000; (13) the Company may not permit: (a) the value of its speculative inventory homes to exceed $30,000,000, (b) its fall foundation inventories to exceed 275 homes or $12,000,000 and (c) its model homes to exceed $8,500,000;
(14) the Company may not incur a loss in any five consecutive quarters; (15) the Company may not, without lender approval, exceed the aggregate sum of $25,000,000 for investments outside of its existing markets, and the Company may not invest more
than $15,000,000 in any start up market outside of its existing markets; (16) the Company has agreed to enter into interest rate contracts in the notional amount of fifty percent of the outstanding borrowings in the event the Eurodollar
rate (without regard to the variable margin) becomes 8.50% per annum or greater.



The Facility provides for a variable rate of interest on its borrowings. In order to reduce the risks caused by interest rate fluctuations, the Company has entered into interest rate swap contracts that fix the
interest rate on a portion of its borrowings under the Facility. The Companys intention is to maintain a fixed rate of interest at approximately 50% of its outstanding borrowings. However, market conditions and timing affect the Companys
ability to maintain this balance between fixed and variable interest rates. As of December 31, 2003, the Company had fixed the interest rate on 85%, or $110,000,000, of bank borrowings using interest rate swap contracts. See Note 10 Derivative
Instruments and Hedging Activities to the Consolidated Financial Statements for further information regarding interest rate swap contracts.



As of December 31, 2003, the Company was in compliance with the Facility covenants and had $91,400,000 available under the Facility, after adjustment for
borrowing base limitations. Borrowing availability could increase, depending on the use of proceeds of borrowings under the Facility. Amounts outstanding under the Facility and its predecessor credit facility referred to above were $129,220,000 and
$111,070,000 as of December 31, 2003 and 2002, respectively.



The Company had $5,225,000 in irrevocable letters of credit and $42,388,000 of performance bonds outstanding at December 31, 2003. The letters of credit and performance bonds were issued to municipalities and other individuals to ensure
performance and completion of certain land development activities and as collateral for land purchase commitments. The Company does not anticipate incurring any liabilities with respect to the letters of credit and performance bonds.



Information regarding the bank borrowings is summarized as follows:



|                                                     |  |      |             |   |      |   |             |      |  |   |             |  
|---------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                     |  | 2003 |             |   | 2002 |   |             | 2001 | 
|Borrowings outstanding:                              |  |      |             |   |      |   |             |      |  |   |             |  
|Maximum amount                                       |  | $    | 131,851,000 |   |      | $ | 143,270,000 |      |  | $ | 138,652,000 |  
|Average amount                                       |  | $    | 112,456,000 |   |      | $ | 117,448,000 |      |  | $ | 126,418,000 |  
|Weighted average daily interest rate during the year |  |      | 5.9         | % |      |   | 6.2         | %    |  |   | 7.7         | %
|Interest rate at December 31                         |  |      | 5.2         | % |      |   | 6.4         | %    |  |   | 7.6         | %



---

|8. | Term Debt:
|-- | ----------



Term debt consisted of the following as of December 31:



|                                                                                                                                                                                                                          |  |      |            |      |   |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------
|                                                                                                                                                                                                                          |  | 2003 |            | 2002
|Mortgage notes due at various dates through December 2007 at interest rates ranging from 1.5% to 10.0%, collateralized by land with a book
value of $12,200,000 and $600,000 at December 31, 2003 and 2002, respectively. |  | $    | 8,526,000  |      | $ | 621,000  
|Capital lease obligations due in installments through June 2007                                                                                                                                                           |  |      | 2,432,000  |      |   | 3,794,000
|                                                                                                                                                                                                                          |  |      |            |      |   |          
|Total term debt                                                                                                                                                                                                           |  | $    | 10,958,000 |      | $ | 4,415,000
|                                                                                                                                                                                                                          |  |      |            |      |   |          



Term debt matures in
years subsequent to December 31, 2003 as follows:



|                                   |  |           |           |               |   |           |       |  |   |            |  
|---------------------------------- |  | --------- | --------- | ------------- | - | --------- | ----- |  | - | ---------- | -
|                                   |  | Term Debt |           | CapitalLeases |   |           | Total | 
|2004                               |  | $         | 4,143,000 |               | $ | 1,559,000 |       |  | $ | 5,702,000  |  
|2005                               |  |           | 3,533,000 |               |   | 874,000   |       |  |   | 4,407,000  |  
|2006                               |  |           |          |               |   | 300,000   |       |  |   | 300,000    |  
|2007                               |  |           | 850,000   |               |   | 23,000    |       |  |   | 873,000    |  
|                                   |  |           |           |               |   |           |       |  |   |            |  
|                                   |  |           | 8,526,000 |               |   | 2,756,000 |       |  |   | 11,282,000 |  
|Less amounts representing interest |  |           |          |               |   | (324,000  | )     |  |   | (324,000   | )
|                                   |  |           |           |               |   |           |       |  |   |            |  
|                                   |  | $         | 8,526,000 |               | $ | 2,432,000 |       |  | $ | 10,958,000 |  
|                                   |  |           |           |               |   |           |       |  |   |            |  



|9. | Operating Lease Commitments:
|-- | ----------------------------



Rent expense charged to operations is primarily for model homes, vehicles, equipment and office facilities, including month-to-month leases and non-cancelable
commitments. Rent expense amounted to $3,135,000, $3,401,000, and $3,516,000 for the years ended December 31, 2003, 2002 and 2001, respectively. See Note 12 Related Party Transactions to the Consolidated Financial Statements for additional
information.



Minimum rental commitments due under
non-cancelable operating leases are as follows:



|               |  |                |           
|-------------- |  | -------------- | ----------
|Year           |  | MinimumRentals
|2004           |  | $              | 3,153,000 
|2005           |  |                | 2,325,000 
|2006           |  |                | 1,666,000 
|2007           |  |                | 1,135,000 
|2008 and after |  |                | 6,549,000 
|               |  |                |           
|               |  | $              | 14,828,000
|               |  |                |           



---

|10. | Derivative Instruments and Hedging Activities:
|--- | ----------------------------------------------



The Companys interest rate risk management strategy uses derivative instruments to minimize earnings fluctuations caused by interest rate volatility
associated with variable rate debt. The derivative financial instruments used to meet our risk management objectives are interest rate swaps (the Contracts) . The Company seeks to maintain the notional amount of the Contracts at
approximately 50% of its outstanding debt.



The Company has
designated its Contracts as cash flow hedges. Changes in the fair value of the Contracts are recognized in other comprehensive income or loss until such time as the Contracts mature or are terminated. Other comprehensive income or loss is reflected
as a component of shareholders equity in the accompanying consolidated balance sheets. Effective January 1, 2001, the Company adopted Statements of Financial Accounting Standards No. 133 and No. 138, Accounting for Derivative Instruments
and Hedging Activities. Since adoption, there have been no gains or losses recognized in earnings for hedge ineffectiveness or due to excluding a portion of the value from measuring effectiveness.



The fair value of the Contracts is principally impacted by fluctuations in
interest rates. During 2003, the Company recognized an unrealized after-tax gain of $1,328,000 and has recorded an accrued pre-tax liability of $1,903,000 related to these Contracts at December 31, 2003. The Company does not expect this accrued
liability to be realized because the Company expects to retain the Contracts to maturity. Future fluctuations in interest rates will cause unrealized gains or losses to occur and such amounts will be adjusted through other comprehensive income or
loss as long as the effectiveness of the hedge is maintained.



The Company formally documents relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking the hedging transactions. An assessment is made at the hedging
transactions inception, and on an ongoing basis, to determine whether the derivatives that are used in hedging transactions are effective in offsetting changes in cash flows of hedged items. The Company believes the Contracts have been
effective in achieving the risk management objectives and will continue to be effective for the remaining term of the Contracts. Hedge effectiveness is measured at least quarterly based on the relative change in fair value between the Contracts and
the hedged item over time. Any change in fair value resulting from ineffectiveness, as defined by SFAS 133, is recognized immediately in earnings. For the twelve months ended December 31, 2003, no gain or loss has been recognized in earnings as no
amount of the cash flow hedges have been determined to be ineffective.



Should it be determined that a Contract is not effective or that it has ceased to be an effective hedge, the Company will discontinue hedge accounting prospectively. This will occur when (1) offsetting changes in the fair value of cash
flows of the hedged items is no longer effective; (2) the derivative expires or is sold, terminated, or exercised; or (3) management determines that designation of the Contract as a hedged instrument is no longer appropriate. When hedge accounting
is discontinued because a Contract qualifying as a cash flow hedge is liquidated or sold prior to maturity, the gain or loss on the Contract at the time of termination remains in accumulated other comprehensive income or loss and is recognized as an
adjustment to interest expense over the original contract term. In all other situations in which hedge



---

accounting is discontinued, the derivative will be carried at its fair value on the balance sheet, with changes in its
fair value recognized in current earnings.



Interest rate swaps
outstanding at December 31, 2003 consisted of the following:



|                |  |                |  |                |  |           
|--------------- |  | -------------- |  | -------------- |  | ----------
|Notional Amount |  | Start Date     |  | Maturity Date  |  | Fixed Rate
|$20,000,000     |  | Dec. 14, 2000  |  | Jan. 12, 2004  |  | 5.98%     
|$20,000,000     |  | Jan. 12, 2001  |  | Jan. 12, 2005  |  | 5.58%     
|$10,000,000     |  | Mar. 8, 2001   |  | Mar. 8, 2004   |  | 5.16%     
|$10,000,000     |  | Sept. 12, 2001 |  | Sept. 12, 2004 |  | 4.54%     
|$10,000,000     |  | Oct. 23, 2002  |  | Oct. 4, 2005   |  | 3.16%     
|$10,000,000     |  | May 9, 2003    |  | April 3, 2008  |  | 3.01%     
|$10,000,000     |  | May 9, 2003    |  | May 3, 2008    |  | 3.04%     
|$10,000,000     |  | Oct. 24, 2003  |  | Oct. 2, 2006   |  | 2.85%     
|$10,000,000     |  | Oct. 24, 2003  |  | Jan. 2, 2007   |  | 2.87%     



The fixed interest
rates noted for the above interest rate swaps do not include a variable margin that the Company also pays that is based on the Companys Interest Coverage Ratio. The variable margin ranges from 1.75% to 2.50% and is determined quarterly. The
variable margin was 1.75% for 2003. The fair value of the interest rate swap contracts was a liability of $1,903,000 at December 31, 2003.



|11. | Income Taxes:
|--- | -------------



The provision for income taxes consists of the following for the years ended December 31:



|                   |  |      |            |      |   |            |      |  |   |            |  
|------------------ |  | ---- | ---------- | ---- | - | ---------- | ---- |  | - | ---------- | -
|                   |  | 2003 |            | 2002 |   |            | 2001 | 
|Currently payable: |  |      |            |      |   |            |      |  |   |            |  
|Federal            |  | $    | 17,136,000 |      | $ | 13,750,000 |      |  | $ | 9,767,000  |  
|State and local    |  |      | 3,968,000  |      |   | 4,066,000  |      |  |   | 2,863,000  |  
|                   |  |      |            |      |   |            |      |  |   |            |  
|                   |  |      | 21,104,000 |      |   | 17,816,000 |      |  |   | 12,630,000 |  
|Deferred:          |  |      |            |      |   |            |      |  |   |            |  
|Federal            |  |      | 101,000    |      |   | (409,000   | )    |  |   | (1,309,000 | )
|State              |  |      | 24,000     |      |   | (116,000   | )    |  |   | (334,000   | )
|                   |  |      |            |      |   |            |      |  |   |            |  
|                   |  |      | 125,000    |      |   | (525,000   | )    |  |   | (1,643,000 | )
|                   |  |      |            |      |   |            |      |  |   |            |  
|Income tax expense |  | $    | 21,229,000 |      | $ | 17,291,000 |      |  | $ | 10,987,000 |  
|                   |  |      |            |      |   |            |      |  |   |            |  



---

The components of the net deferred tax asset at December 31 are as follows:



|                                                           |  |      |           |   |      |   |           |  
|---------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                           |  | 2003 |           |   | 2002 |  
|Assets:                                                    |  |      |           |   |      |   |           |  
|Accrued expenses                                           |  | $    | 4,583,000 |   |      | $ | 4,906,000 |  
|Unrealized hedging loss                                    |  |      | 771,000   |   |      |   | 1,766,000 |  
|Deferred gain                                              |  |      | 172,000   |   |      |   | 200,000   |  
|Valuation reserves                                         |  |      | 383,000   |   |      |   | 183,000   |  
|                                                           |  |      |           |   |      |   |           |  
|Gross deferred tax assets                                  |  |      | 5,909,000 |   |      |   | 7,055,000 |  
|                                                           |  |      |           |   |      |   |           |  
|Liabilities:                                               |  |      |           |   |      |   |           |  
|Property and equipment                                     |  |      | (70,000   | ) |      |   | (96,000   | )
|Other                                                      |  |      | (58,000   | ) |      |   | (58,000   | )
|                                                           |  |      |           |   |      |   |           |  
|Gross deferred tax liabilities                             |  |      | (128,000  | ) |      |   | (154,000  | )
|                                                           |  |      |           |   |      |   |           |  
|Net deferred income taxes as recorded on the balance sheet |  | $    | 5,781,000 |   |      | $ | 6,901,000 |  
|                                                           |  |      |           |   |      |   |           |  



A reconciliation of
the statutory federal income tax rate and the Companys effective tax rate is summarized below for the years ended December 31:



|                                              |  |      |   |  |      |   |  |      |  
|--------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                              |  | 2003 |   |  | 2002 |   |  | 2001 |  
|Statutory income tax rate                     |  | 34.0 | % |  | 34.0 | % |  | 34.0 | %
|Permanent differences                         |  | 0.3  | % |  | 0.8  | % |  | 0.7  | %
|State and local taxes, net of federal benefit |  | 5.0  | % |  | 6.4  | % |  | 7.2  | %
|Other                                         |  | 0.7  | % |  | 0.2  | % |  | 0.2  | %
|                                              |  |      |   |  |      |   |  |      |  
|Effective income tax rate                     |  | 40.0 | % |  | 41.4 | % |  | 42.1 | %
|                                              |  |      |   |  |      |   |  |      |  



|12. | Related Party Transactions:
|--- | ---------------------------



The Company leases from BRC two corporate offices in Central Ohio. The first building is approximately 40,000 gross square feet (37,557 net rentable
square feet) and the lease commenced January 1, 1998. The lease has a term of twelve years, a triple net rental rate of $12.00 per square foot and provides for two options to renew for periods of five years each at then-current market rates. The
rental rate for the building was established by an MAI appraiser commissioned by the Affiliated Transaction Review Committee of the Companys Board of Directors, and confirmed in a review by a second MAI appraiser. Lease expense was $451,000
for the years ended December 31, 2003, 2002 and 2001.



The
second building is approximately 35,000 gross square feet (33,260 net rentable square feet) and the lease commenced November 1, 2003. The lease has a term of fifteen years and a triple net rental rate per square foot of $12.58 for the first five
years, $13.18 for the second five years and $13.83 for the last five years. The lease also provides for two options to renew for periods of five years each at then-current market rates. During 2002, the Company purchased land and contracted to build
this second corporate office building. On October 31, 2003, the Company sold the corporate office building to BRC for $4.5 million and leased it back. The sales price approximated the cost of the land and building. The terms of the sale and
leaseback were negotiated based on bids from multiple third parties, reviewed by an MAI appraiser and approved by committee comprised solely of independent members of the Companys Board of



---

Directors. Lease expense was $70,000 for the two months the building was in service during 2003.



During 2003, the Company leased from BRC an aggregate of 15,750 square feet
of commercial space in Central, Ohio. The Company used this space for the decorating center, centralized sales office and mortgage financing services company. The weighted average lease rate was $11.20 a square foot. A committee comprised solely of
independent members of the Companys Board of Directors approved each of the leases after review of a report by an independent MAI appraiser. During November 2003, the staff and activities in this space moved into a new corporate office
building. As of January 1, 2004, the remaining lease obligation for the commercial space was approximately $300,000. In 2003, the Company recorded an expense of $155,000 related to the remaining lease obligation, net of anticipated sublease rental
income. Lease expense was $230,000, $237,000 and $162,000 for the years ended December 31, 2003, 2002 and 2001, respectively.



BRC paid the Company $8,000 in 2003, $10,000 in 2002, $12,500 in 2001, for miscellaneous services performed by Company personnel.



The Company acquired printing services from a printing company principally
owned by members of the Borror family. Such services aggregated $114,536, $142,651, and $137,326 for the years ended December 31, 2003, 2002 and 2001, respectively.



|13. | Retirement Plan:
|--- | ----------------



The Company offers a retirement plan, intended to meet the requirements of Section 401(k) of the Internal Revenue Code, which covers substantially all
employees after one year of service. The Company matches 100% of the first 3% and 50% of the next 2% of employee voluntary deferrals of compensation. The Companys contributions to the plan amounted to $988,000, $671,000 and $607,000 for the
years ended December 31, 2003, 2002 and 2001, respectively.



|14. | Compensation Plans:
|--- | -------------------



Equity-Based Compensation



In March 1994, the Company adopted the Dominion Homes, Inc. Incentive Stock Plan (the 1994 Plan). The 1994 Plan reserved 850,000 common shares for issuance. The Company granted incentive stock options, non-qualified stock
options, restricted common shares and common shares representing 761,461 issued or issuable common shares during the ten years the 1994 Plan was in existence.



In May 2003, the Company adopted the Dominion Homes, Inc. 2003 Stock Option and Incentive Equity Plan (the 2003 Plan). The 2003 Plan is
administered by the Compensation Committee of the Board of Directors, and provides for grants of performance awards of common shares, restricted common shares, incentive stock options, non-qualified stock options and stock appreciation rights for
the purpose of attracting, motivating and retaining employees and eligible directors. The 2003 Plan provides for discretionary grants to employees of the Company and annual non-discretionary stock option grants to purchase 2,500 shares of stock to
each non-employee director. A maximum of 500,000 common shares have been reserved for issuance



---

under the 2003 Plan. During any single plan year, a plan participant may not be granted Stock Appreciation Rights
affecting more than 50,000 shares allocated to the 2003 Plan. The 2003 Plan provides that grants shall include certain terms and conditions and be subject to certain restrictions as provided for under applicable provisions of the Internal Revenue
Code and federal securities laws.



Grants of options to
purchase common shares are subject to vesting schedules at twenty percent a year, for options granted prior to July 1, 2003 and thirty-three percent a year for options granted after June 30, 2003, have an exercise price that is equal to the fair
market value of common shares on the grant date (110% of the fair market value for 10% shareholders), and must be exercised within ten years of the grant date (five years for 10% shareholders). Vesting is accelerated in the event of a change in
control as defined in the 1994 Plan and the 2003 Plan.



A
summary of the Companys stock options as of December 31, 2003, 2002 and 2001, respectively, and changes during the years then ended is presented below:



|                                   |  |         |   |      |                              |       |        |          |   |                              |   |        |  |         |                              |  |   |      
|---------------------------------- |  | ------- | - | ---- | ---------------------------- | ----- | ------ | -------- | - | ---------------------------- | - | ------ |  | ------- | ---------------------------- |  | - | -----
|                                   |  | 2003    |   | 2002 |                              | 2001 
|Fixed Options Price                |  | Shares  |   |      | WeightedAverageExercisePrice |       | Shares |          |   | WeightedAverageExercisePrice |   | Shares |  |         | WeightedAverageExercisePrice
|Outstanding at beginning of year   |  | 170,100 |   |      | $                            | 5.83  |        | 402,600  |   |                              | $ | 4.65   |  | 410,600 |                              |  | $ | 4.64 
|Granted                            |  | 117,500 |   |      | $                            | 23.51 |        | 7,500    |   |                              | $ | 22.05  |  | 7,500   |                              |  | $ | 10.40
|Cancelled or forfeited             |  |        |   |      |                              |      |        | (500     | ) |                              | $ | 4.75   |  | (15,500 | )                            |  | $ | 7.19 
|Exercised                          |  | (58,500 | ) |      | $                            | 7.26  |        | (239,500 | ) |                              | $ | 4.35   |  |        |                              |  |   |     
|                                   |  |         |   |      |                              |       |        |          |   |                              |   |        |  |         |                              |  |   |      
|Outstanding at end of year         |  | 229,100 |   |      | $                            | 14.52 |        | 170,100  |   |                              | $ | 5.83   |  | 402,600 |                              |  | $ | 4.65 
|                                   |  |         |   |      |                              |       |        |          |   |                              |   |        |  |         |                              |  |   |      
|Options exercisable at end of year |  | 118,100 |   |      | $                            | 6.21  |        | 158,100  |   |                              | $ | 5.68   |  | 390,600 |                              |  | $ | 4.45 
|                                   |  |         |   |      |                              |       |        |          |   |                              |   |        |  |         |                              |  |   |      



The following table
summarizes information about fixed stock options outstanding at December 31, 2003:



|            |  |                          |  |                    |  |                                             |  |                   
|----------- |  | ------------------------ |  | ------------------ |  | ------------------------------------------- |  | ------------------
|Year Issued |  | Range of Exercise Prices |  | Number Outstanding |  | Weighted Average Remaining Contractual Life |  | Number Exercisable
|1995        |  | $4.50                    |  | 32,000             |  | 2 Years                                     |  | 32,000            
|1996        |  | $3.25                    |  | 31,600             |  | 3 Years                                     |  | 31,600            
|1997        |  | $4.75                    |  | 25,000             |  | 4 Years                                     |  | 25,000            
|1998        |  | $13.00                   |  | 2,500              |  | 5 Years                                     |  | 2,500             
|1999        |  | $7.50-$8.50              |  | 20,500             |  | 6 Years                                     |  | 14,500            
|2001        |  | $10.33                   |  | 2,500              |  | 8 Years                                     |  | 2,500             
|2002        |  | $22.05                   |  | 5,000              |  | 9 Years                                     |  | 5,000             
|2003        |  | $17.34-24.24             |  | 110,000            |  | 10 Years                                    |  | 5,000             
|            |  |                          |  |                    |  |                                             |  |                   
|            |  |                          |  | 229,100            |  |                                             |  | 118,100           
|            |  |                          |  |                    |  |                                             |  |                   



Restricted common
shares issued pursuant to the 1994 Plan and the 2003 Plan are not fully vested until performance and employment criteria are met. Restricted common shares issued prior to August 1, 2002 require the Companys adjusted net worth to exceed
$100,000,000 and restricted common shares issued after August 1, 2002 require the Companys adjusted net worth to exceed $175,000,000. In each case, the employee must remain with the Company for five years from the date of issuance. In October
2003, the Company issued restricted common



---

shares that will vest in three years and after achievement of a book value per share of $30. Holders of restricted common
shares are entitled to vote and receive dividends.



A summary
of the Companys restricted common shares issued is as follows:



|                               |  |                 |  |              
|------------------------------ |  | --------------- |  | -------------
|Year Issued                    |  | Number ofShares |  | VestingPeriod
|2000                           |  | 30,000          |  | 5 years      
|2001                           |  | 30,000          |  | 5 years      
|2002                           |  | 100,000         |  | 5 years      
|2003                           |  | 95,000          |  | 3 years      
|                               |  |                 |  |              
|Total restricted common shares |  | 255,000         |  |              
|                               |  |                 |  |              



The Company recognized
compensation expense related to restricted common shares of $1,176,000, $234,000 and $181,000 for the years ending December 31, 2003, 2002 and 2001, respectively. The deferred compensation liability, reflected as a reduction of shareholders
equity, related to restricted common shares was $5,308,000 and $1,879,000 at December 31, 2003 and 2002.



Executive Deferred Compensation



In December 1994, the Company adopted a non-qualified Executive Deferred Compensation Plan for directors and certain executives. Under this plan, participants may elect to defer a portion of their compensation (up to 20% of total base and
bonus for employees and 100% of director fees). At December 31 of each year, the Company provides a matching contribution of 25% of the amount deferred in a given year by a participant, provided that the Companys matching contribution will not
exceed $2,500 in any year. The Companys contribution vests in 20% increments over a five-year period, subject to accelerated vesting upon a change in control as defined in the Executive Deferred Compensation Plan. As originally adopted,
contributions were to be converted into theoretical common shares and adjusted in future periods based on the market value of the common shares, similar to stock appreciation rights. On October 29, 1997, the Board of Directors approved an Amended
and Restated Executive Deferred Compensation Plan under which contribution and matching amounts are used by the trustee to acquire common shares in the open market. These common shares are held and voted by the trustee pursuant to a Rabbi Trust
Agreement.



The Company recognized compensation expense related
to Executive Deferred Compensation Plan of $140,000, $179,000 and $199,000 for the years ending December 31, 2003, 2002 and 2001, respectively. The deferred compensation liability, reflected as a reduction of shareholders equity, related to
restricted common shares was $1,435,000 and $1,240,000 at December 31, 2003 and 2002. The deferred compensation liability and related common shares held in the rabbi trust are adjusted to the market value quarterly.



Split Dollar Plan



In July 1999, the Company entered into split dollar agreements (the Split Dollar Plan) that provided life
insurance benefits to certain employees in the event that certain performance and employment criteria were met. Participating employees were provided with a death benefit



---

during employment, together with a retirement benefit upon retirement at or after age 55 (or, if sooner, upon a
change in control of the Company), provided (a) the employee shall have then completed ten years of service with the Company following implementation of the agreement, (b) the Company shall have attained adjusted shareholders
equity of $100,000,000, and (c) the employee shall have complied with the provisions of the noncompetition covenant for one year following retirement. Under the terms of the Split Dollar Plan, each participating employee paid a portion of the policy
premiums; the remainder of the premiums were paid by the Company in cash.



During 2001, the Company determined it was probable that adjusted shareholders equity would likely exceed $100,000,000 during the term of employee participation in the plan. Accordingly, the Company began to
accrue a pro rata share of the total estimated benefit of $4,959,000 over the minimum ten-year term of participation required to earn the benefit. Amounts expensed under these agreements during 2002 and 2001 were $328,000 and $350,000, respectively.
If for any reason, the above criteria are not met or adjusted shareholders equity does not exceed $100,000,000, any accrued benefits will be recognized as income at that time.



In December of 2002, the Company discontinued the split dollar plan arrangement and each of the participating employees
assigned all of his or her interest in the employees life insurance policy to the Company in exchange for the Companys agreement to provide the employee with a death benefit equal to the face value of the life insurance policy, should
the employee die during the course of his or her employment, and a payment in cash equivalent to the portion of the premiums which the participants had personally paid.



Supplemental Executive Retirement Plan



Effective January 1, 2003, the Company established a non-qualified Supplemental Executive Retirement Plan (the SERP) that provides retirement
benefits to covered employees. The employee may qualify for the retirement benefits under the SERP if they terminate employment (other than because of death) (1) after participating in the plan for at least 10 years, (2) after the Companys net
worth exceeds $100,000,000 or a higher amount as specified in their participation agreement, (3) retire after age 55, (4) is terminated by the Company without cause as defined in the plan, (5) terminates voluntarily but for good reason as defined in
the plan, or (6) there is a change in control as defined in the plan. The amount of the benefit is determined on account balances established for each covered employee to which the Company makes a discretionary annual credit.



Upon a participant satisfying the qualification requirements, the Company
will make a lump sum distribution to the participant equal to the value of their account. The Company has expensed $329,000 related to the SERP for the year ended December 31, 2003. Amounts accrued under the SERP were $1,006,000 at December 31,
2003.



The Company has purchased cost recovery life insurance
on the lives of the participants in the SERP. The Company is the sole owner and beneficiary of such policies. The amount of the coverage is designed to provide sufficient revenues to cover all costs of the SERP if assumptions made as to policy
earnings are realized. As of December 31, 2003 and 2002, the cash surrender value of these policies was $1,879,000 and $1,097,000, respectively.



---

|15. | Contingencies:
|--- | --------------



The Company is involved in various legal proceedings, most of which arise in the ordinary course of business and some of which are covered by insurance.
In the opinion of the Companys management, none of the claims relating to such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.



|16. | Quarterly Financial Data (Unaudited)
|--- | ------------------------------------

| | (in thousands except per share amounts)
| | ---------------------------------------



|                            |  |               |         |         |   |              |  |             |         |  |   |        
|--------------------------- |  | ------------- | ------- | ------- | - | ------------ |  | ----------- | ------- |  | - | -------
|                            |  | Quarter Ended
|                            |  | March 31      |         | June 30 |   | September 30 |  | December 31
|Revenues:                   |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 103,985 |         | $ | 139,974      |  | $           | 153,188 |  | $ | 166,317
|2002                        |  | $             | 98,378  |         | $ | 133,162      |  | $           | 139,360 |  | $ | 120,806
|Gross profit:               |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 24,939  |         | $ | 33,456       |  | $           | 36,697  |  | $ | 39,864 
|2002                        |  | $             | 22,936  |         | $ | 29,297       |  | $           | 32,706  |  | $ | 30,014 
|Income before income taxes: |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 7,931   |         | $ | 13,738       |  | $           | 15,279  |  | $ | 16,099 
|2002                        |  | $             | 6,995   |         | $ | 10,741       |  | $           | 12,303  |  | $ | 11,747 
|Net income:                 |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 4,838   |         | $ | 8,215        |  | $           | 9,137   |  | $ | 9,628  
|2002                        |  | $             | 4,071   |         | $ | 6,295        |  | $           | 7,227   |  | $ | 6,902  
|Basic earnings per share:   |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 0.61    |         | $ | 1.04         |  | $           | 1.16    |  | $ | 1.21   
|2002                        |  | $             | 0.63    |         | $ | 0.96         |  | $           | 0.90    |  | $ | 0.86   
|Diluted earnings per share: |  |               |         |         |   |              |  |             |         |  |   |        
|2003                        |  | $             | 0.59    |         | $ | 1.03         |  | $           | 1.13    |  | $ | 1.19   
|2002                        |  | $             | 0.62    |         | $ | 0.94         |  | $           | 0.89    |  | $ | 0.84   

|
|



---

|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None.



|Item 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



With the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this Report. Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of the end of
the period covered by this Report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that information required to be disclosed by the Company under the Exchange Act is (1) recorded, processed,
summarized and reported, within the time periods specified within the Securities and Exchange Commissions rules and forms; and (2) accumulated and communicated to management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.



In addition, no change has occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
during the quarter ended December 31, 2003, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART III



|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------



In accordance with General Instruction G(3), the information contained under the captions Proposal 1 - Election Of Directors,
Information about our Executive Officers and Compensation Matters, Report of the Audit Committee, Information Concerning our Board of Directors and Corporate Governance Matters, and Section 16(A)
Beneficial Ownership Reporting Compliance in the Companys definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2004, to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by reference.



|Item 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



In accordance with General Instruction G(3), the information contained under the caption Information about our Executive Officers and Compensation Matters, Information Concerning our Board of Directors and Corporate
Governance Matters  Compensation of Directors in the Companys definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2004, to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by reference. Neither the Report of the Compensation Committee of the Companys Board of Directors on executive compensation nor the share price
performance graph included in the Companys definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2004 shall be deemed to be incorporated herein by reference.



---

|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



In accordance with General Instruction G(3), the information contained under the captions Voting Rights and Principal Shareholders, and
Information about our Executive Officers and Compensation Matters  Equity Compensation Plan Information in the Companys definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 12, 2004, to
be filed with the Securities and Exchange Commission pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by reference.



|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



In accordance with General Instruction G(3), the information contained under the caption Certain Relationships and Related Transactions in the Companys definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2004, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by reference.



|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



In accordance with General Instruction G(3), the information contained under the caption Selection of Auditors in the Companys definitive Proxy Statement for the Annual Meeting of
Shareholders to be held May 12, 2004, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, is incorporated herein by reference.



|Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
|-------- | ----------------------------------------------------------------



|(a) | (1) Financial Statements.
|--- | -------------------------



The Consolidated Financial Statements filed as part of this Annual Report on Form 10-K are the balance sheets of the Registrant as of December 31, 2003
and 2002, and the related statements of operations, changes in shareholders equity and cash flows for each of the three years in the period ended December 31, 2003, together with the notes thereto.



(2) Financial Statement Schedules.



There are no financial statement schedules required to be filed with this
Annual Report on Form 10-K.



(3) Exhibits.



Exhibits filed with this Annual Report on Form 10-K are attached hereto.
For a list of such exhibits, see Index to Exhibits.

|(b) | Reports on Form 8-K.
|--- | --------------------

We filed the following
current reports on Form 8-K during the three months ended December 31, 2003:



---

(1) Form 8-K dated October 1, 2003, pursuant to Items 7 and 9, in connection with our October 1, 2003
press release announcing our expansion into Lexington, Kentucky.



(2) Form 8-K dated October 8, 2003, pursuant to Items 7, 9 and 12, in connection with our October 8, 2003 press release announcing our operating results for the quarter ended September 30, 2003.



(3) Form 8-K dated October 23, 2003, pursuant to Items 7 and 9, in connection
with our October 23, 2003 press release announcing the timing of our third quarter earnings and conference call.



(4) Form 8-K dated October 27, 2003, pursuant to Items 7, 9 and 12, in connection with our October 27, 2003 press release announcing our financial results
for the third quarter ended September 30, 2003.



|(c) | Exhibits.
|--- | ---------



Exhibits filed with this Annual Report on Form 10-K are attached hereto. For a list of such exhibits, see Index to Exhibits.



|(d) | Financial Statement Schedules.
|--- | ------------------------------



There are no financial statement schedules required to be filed with this Annual Report on Form 10-K.



---

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.



|                     |  |  |  |                      |  |                                                        
|-------------------- |  |  |  | -------------------- |  | -------------------------------------------------------
|Date: March 15, 2004 |  |  |  | Dominion Homes, Inc.
|                     |  |  | 
|                     |  |  |  | By:                  |  | /s/    Douglas G. Borror                               
|                     |  |  |  |                      |  |                                                        
|                     |  |  |  |                      |  | Douglas G. Borror, Chairman and Chief Executive
Officer



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



|                                               |  |                                                                                                                          |  |               
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --------------
|Signature                                      |  | Title                                                                                                                    |  | Date          
|                                               |  |                                                                                                                         
|/s/    Donald A. Borror*Donald A. Borror       |  | Chairman Emeritus                                                                                                        |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Douglas G. BorrorDouglas G. Borror      |  | Chairman and Chief Executive Officer (Principal Executive Officer)                                                       |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Jon M. Donnell*Jon M. Donnell           |  | President, Chief Operating Officer and Director                                                                          |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Peter J. OHanlon*Peter J. OHanlon     |  | Senior Vice PresidentFinance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    David S. Borror*David S. Borror         |  | Corporate Executive Vice President and Director                                                                          |  | March 15, 2004
|                                               |  |                                                                                                                         
|Pete A. Klisares                               |  | Director                                                                                                                 |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Gerald E. Mayo*Gerald E. Mayo           |  | Director                                                                                                                 |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Carl A. Nelson, Jr.*Carl A. Nelson, Jr. |  | Director                                                                                                                 |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    Zuheir Sofia*Zuheir Sofia               |  | Director                                                                                                                 |  | March 15, 2004
|                                               |  |                                                                                                                         
|/s/    C. Ronald Tilley*C. Ronald Tilley       |  | Director                                                                                                                 |  | March 15, 2004

|     |  |                                    
|---- |  | -----------------------------------
|     | 
|*By: |  | /s/    Douglas G. Borror           
|     |  |                                    
|     |  | Douglas G. Borror, Attorney-in-fact



---

INDEX TO EXHIBITS



|            |  |                                                                                                                                                                         |  |                                                                                                                                                                                                                    
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                             |  | Location                                                                                                                                                                                                           
|2.1         |  | Corporate Exchange and Subscription Agreement dated January 20, 1994, between Borror Corporation and Borror Realty Company.                                             |  | Incorporated by reference to Exhibit 2.1 to the Companys Registration Statement on Form S-1 (File No. 33-74298) as filed with the Commission on January 21, 1994 and as amended on
March 2, 1994 (The Form S-1).
|            |  |                                                                                                                                                                        
|2.2         |  | Form of First Amendment to Corporate Exchange and Subscription Agreement.                                                                                               |  | Incorporated by reference to Exhibit 2.2 to Form S-1.                                                                                                                                                              
|            |  |                                                                                                                                                                        
|3.1(a)      |  | Amended and Restated Articles of Incorporation of Dominion Homes, Inc. as filed with the Ohio Secretary of State on March 4, 1994.                                      |  | Incorporated by reference to Exhibit 4(a)(1) to the Companys Registration Statement on Form S-8 (File No. 333-26817) as filed with the Commission on May 9, 1997 (the 1997 Form
S-8).                           
|            |  |                                                                                                                                                                        
|3.1(b)      |  | Certificate of Amendment to Amended and Restated Articles of Incorporation of Dominion Homes, Inc. as filed with the Ohio Secretary of State on May 7, 1997.            |  | Incorporated by reference to Exhibit 4(a)(2) of the 1997 Form S-8.                                                                                                                                                 
|            |  |                                                                                                                                                                        
|3.1(c)      |  | Amended and Restated Articles of Incorporation of Dominion Homes, Inc. reflecting amendments through May 7, 1997 (for purposes of Commission reporting compliance only) |  | Incorporated by reference to Exhibit 4(a)(3) of the 1997 Form S-8.                                                                                                                                                 
|            |  |                                                                                                                                                                        
|3.2         |  | Amended and Restated Code of Regulations of Dominion Homes, Inc.                                                                                                        |  | Incorporated by reference to Exhibit 3.2 to the Companys June 30, 2000 Form 10-Q (File No. 0-23270).                                                                                                              
|            |  |                                                                                                                                                                        
|4.          |  | Specimen of Stock Certificate of Dominion Homes, Inc.                                                                                                                   |  | Incorporated by reference to Exhibit 2.2 to the Companys Form 8-A/A as filed with the Commission on April 30, 2003 (File No. 0-23270)                                                                             



---

|      |  |                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                            
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------
|10.1  |  | Shareholder Agreement dated January 20, 1994 between Borror Corporation and Borror Realty Company.                                                                                                                                                                                                                                         |  | Incorporated by reference to Exhibit 10.4 to Form S-1.                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.2* |  | Dominion Homes, Inc. Incentive Stock Plan as amended December 5, 1995 and May 7, 1997.                                                                                                                                                                                                                                                     |  | Incorporated by reference to Exhibit 4(c) of the 1997 Form S-8.                                            
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.3* |  | Amendment to Dominion Homes, Inc. Incentive Stock Plan dated July 29, 1998.                                                                                                                                                                                                                                                                |  | Incorporated by reference to Exhibit 10.29 to the Companys June 30, 1998 Form 10-Q (File No. 0-23270).    
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.4* |  | Incentive Stock Option Agreement dated January 4, 1995 between Borror Corporation and Robert A. Meyer, Jr. (which agreement is substantially the same as Incentive Stock Option Agreements entered
into between the Company and other employees to whom options were granted on January 4, 1995 under the Companys Incentive Stock Plan). |  | Incorporated by reference to Exhibit 10.4 to the Companys December 31, 2000 Form 10- K (File No. 0-23270).
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.5* |  | Incentive Stock Option Agreement dated July 1, 1997 between Dominion Homes, Inc. and Robert A. Meyer, Jr. (which agreement is substantially the same as Incentive Stock Option Agreements entered
into between the Company and other employees to whom options were granted on July 1, 1997 under the Companys Incentive Stock Plan).     |  | Incorporated by reference to Exhibit 10.5 to the Companys December 31, 2000 Form 10-K (File No. 0-23270). 
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.6* |  | Stock Option Agreement dated May 21, 1998 between Dominion Homes, Inc. and Pete A. Klisares (which agreement is substantially the same as Stock Option Agreements entered into between the Company
and its other outside, independent directors, Gerald E. Mayo and C. Ronald Tilley).                                                     |  | Incorporated by reference to Exhibit 10.22 to the Companys June 30, 1998 Form 10-Q (File No. 0-23270).    
|      |  |                                                                                                                                                                                                                                                                                                                                           
|10.7* |  | Stock Option Agreement dated April 29, 1999 between Dominion Homes, Inc. and Pete A. Klisares (which agreement is the same as Stock Option Agreements entered into between the Company and its
other outside, independent directors, Gerald E. Mayo and C. Ronald Tilley).                                                                 |  | Incorporated by reference to Exhibit 10.2 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).     



---

|       |  |                                                                                                                                                                                                                                                                                                                          |  |                                                                                                            
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------
|10.8*  |  | Stock Option Agreement dated April 27, 2000 between Dominion Homes, Inc. and Pete A. Klisares (which Agreement is substantially the same as Stock Option Agreements entered into between the
Company and its other outside, independent directors, Gerald Mayo and C. Ronald Tilley).                                    |  | Incorporated by reference to Exhibit 10.37 to the Companys December 31, 2000 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.9*  |  | Stock Option Agreement dated May 3, 2001 between Dominion Homes, Inc. and Pete A. Klisares (which Agreement is substantially the same as Stock Option Agreements entered into between the Company
and its other outside, independent directors, Gerald E. Mayo and C. Ronald Tilley.                                     |  | Incorporated by reference to Exhibit 10.2 to the Companys September 30, 2001 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.10* |  | Stock Option Agreement dated May 2, 2002 between Dominion Homes, Inc. and Pete A. Klisares (which Agreement is substantially the same as Stock Option Agreements entered into between the Company
and its other outside, independent directors, Gerald E. Mayo and C. Ronald Tilley).                                    |  | Incorporated by reference to Exhibit 10.3 to the Companys March 31, 2002 Form 10-Q (File No. 0-23270).    
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.11* |  | Stock Option Agreement dated May 7, 2003 between Dominion Homes, Inc. and Pete A. Klisares (which Agreement is substantially the same as Stock Option Agreements entered into between the Company
and its other outside, independent directors, Gerald E. Mayo, Carl A. Nelson, Jr., Zuheir Sofia and C. Ronald Tilley). |  | Incorporated by reference to Exhibit 10.1 to the Companys June 30, 2003 Form 10-Q (File No. 0-23270).     
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.12* |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Karl E. Billisits.                                                                                                                                                                                                                            |  | Incorporated by reference to Exhibit 10.1 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.13  |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Stephan M. George.                                                                                                                                                                                                                            |  | Incorporated by reference to Exhibit 10.2 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                                                                                                                                                                                                                                         
|10.14  |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Jack L. Mautino.                                                                                                                                                                                                                              |  | Incorporated by reference to Exhibit 10.3 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).



---

|       |  |                                                                                                        |  |                                                                                                            
|------ |  | ------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------
|10.15  |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Robert A. Meyer, Jr.        |  | Incorporated by reference to Exhibit 10.4 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                       
|10.16  |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Peter J. OHanlon.          |  | Incorporated by reference to Exhibit 10.5 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                       
|10.17  |  | Stock Option Agreement dated July 1, 2003 between Dominion Homes, Inc. and Lori M. Steiner.            |  | Incorporated by reference to Exhibit 10.6 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                       
|10.18* |  | Restricted Stock Agreement dated September 1, 2000 between Dominion Homes, Inc. and Karl E. Billisits. |  | Incorporated by reference to Exhibit 10.11 to the Companys December 31, 2002 Form 10-K (File No. 0-23270) 
|       |  |                                                                                                       
|10.19* |  | Restricted Stock Agreement dated May 17, 2001 between Dominion Homes, Inc. and Jack L. Mautino.        |  | Incorporated by reference to Exhibit 10.16 to the Companys December 31, 2001 Form 10-K (File No. 0-23270).
|       |  |                                                                                                       
|10.20* |  | Restricted Stock Agreement dated August 1, 2002 between Dominion Homes, Inc. and Tad E. Lugibihl.      |  | Incorporated by reference to Exhibit 10.2 to the Companys September 30, 2002 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                       
|10.21* |  | Restricted Stock Agreement dated August 1, 2002 between Dominion Homes, Inc. and Loribeth Steiner.     |  | Incorporated by reference to Exhibit 10.1 to the Companys September 30, 2002 Form 10-Q (File No. 0-23270).
|       |  |                                                                                                       
|10.22* |  | Restricted Stock Agreement dated October 22, 2002 between Dominion Homes, Inc. and Douglas G. Borror.  |  | Incorporated by reference to Exhibit 10.15 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|       |  |                                                                                                       
|10.23* |  | Restricted Stock Agreement dated October 22, 2002 between Dominion Homes, Inc. and Jon M. Donnell.     |  | Incorporated by reference to Exhibit 10.16 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).



---

|       |  |                                                                                                                         |  |                                                                                                            
|------ |  | ----------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                        
|10.24* |  | Restricted Stock Agreement dated October 22, 2002 between Dominion Homes, Inc. and Peter J. OHanlon.                   |  | Incorporated by reference to Exhibit 10.17 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.25  |  | Restricted Stock Agreement dated October 22, 2003 between Dominion Homes, Inc. and Douglas G. Borror.                   |  | Filed herewith.                                                                                            
|       |  |                                                                                                                        
|10.26  |  | Restricted Stock Agreement dated October 22, 2003 between Dominion Homes, Inc. and David S. Borror.                     |  | Filed herewith.                                                                                            
|       |  |                                                                                                                        
|10.27  |  | Restricted Stock Agreement dated October 22, 2003 between Dominion Homes, Inc. and Jon M. Donnell.                      |  | Filed herewith.                                                                                            
|       |  |                                                                                                                        
|10.28* |  | Amended Employment Agreement dated December 29, 2000 between Dominion Homes, Inc. and Jon M. Donnell.                   |  | Incorporated by reference to Exhibit 10.13 to the Companys December 31, 2000 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.29* |  | Amendment to Amended Employment Agreement dated December 20, 2002 between Dominion Homes, Inc. and Jon M. Donnell.      |  | Incorporated by reference to Exhibit 10.19 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.30* |  | Amended Employment Agreement dated December 29, 2000 between Dominion Homes, Inc. and Robert A. Meyer, Jr.              |  | Incorporated by reference to Exhibit 10.14 to the Companys December 31, 2000 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.31* |  | Amendment to Amended Employment Agreement dated December 20, 2002 between Dominion Homes, Inc. and Robert A. Meyer, Jr. |  | Incorporated by reference to Exhibit 10.21 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.32* |  | Amended Employment Agreement dated December 29, 2000 between Dominion Homes, Inc. and Peter J. OHanlon.                |  | Incorporated by reference to Exhibit 10.15 to the Companys December 31, 2000 Form 10-K (File No. 0-23270).
|       |  |                                                                                                                        
|10.33* |  | Amendment to Amended Employment Agreement dated December 20, 2002 between Dominion Homes, Inc. and Peter J. OHanlon.   |  | Incorporated by reference to Exhibit 10.23 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).



---

|       |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                 
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.34* |  | Dominion Homes, Inc. Amended and Restated Executive Deferred Compensation Plan dated December 20, 2002.                                                                                                                                                                                                                                                                                |  | Incorporated by reference to Exhibit 4(a) to the Companys Post-Effective Amendment No. 2 to Registration Statement on Form S-8 as filed with the Commission on May 6, 2003 (file No.
333-40051)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.35* |  | Split Dollar Life Insurance Agreement dated July 11, 1999 between Dominion Homes, Inc. and Douglas G. Borror (which agreement is substantially the same as Split Dollar Life Insurance Agreements
entered into between the Company and other executive officers of the Company except for life insurance values)                                                                       |  | Incorporated by reference to Exhibit 10.1 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.36* |  | Dominion Homes, Inc. Endorsement Split Dollar Agreement dated December 20, 2002 between Dominion Homes, Inc. and Douglas G. Borror (which agreement is substantially the same as Endorsement Split
Dollar Agreements entered into between the Company and other executive officers of the Company except as to each executive officers death benefit and cash consideration received) |  | Incorporated by reference to Exhibit 10.27 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.37* |  | Dominion Homes, Inc. Supplemental Executive Retirement Plan effective January 1, 2003.                                                                                                                                                                                                                                                                                                 |  | Incorporated by reference to Exhibit 10.28 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|10.38* |  | Dominion Homes, Inc. Notice of Participation of Douglas G. Borror for the Supplemental Executive Retirement Plan (which notice is substantially the same as notices of participation of
the other executive officers of the Company except for initial and annual employer contributions)                                                                                              |  | Incorporated by reference to Exhibit 10.29 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                       
|0.39*  |  | Dominion Homes, Inc. Incentive Growth Plan effective as of May 1, 2002.                                                                                                                                                                                                                                                                                                                |  | Incorporated by reference to Exhibit 10.2 to the Companys March 31, 2002 Form 10-Q (File No. 0-23270).                                                                                         



---

|      |  |                                                                                                                                                                     |  |                                                                                                            
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                    
|10.40 |  | Dominion Homes, Inc. 2003 Stock Option and Incentive Equity Plan effective as of May 7, 2003.                                                                       |  | Incorporated by reference to Exhibit 10.2 to the Companys June 30, 2003 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                                                                    
|10.41 |  | Decorating Center Lease Agreement dated January 4, 1994 between Borror Corporation and Borror Realty Company, as amended by addendum No. 1, effective July 1, 1994. |  | Incorporated by reference to Exhibit 10.12 to the Companys December 31, 1994 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                                                                    
|10.42 |  | First Amendment to Lease Agreement dated March 19, 1996 between Borror Realty Company and Borror Corporation.                                                       |  | Incorporated by reference to Exhibit 10.21 to the Companys March 31, 1995 Form 10-Q (File No. 0-23270).   
|      |  |                                                                                                                                                                    
|10.43 |  | Lease dated December 29, 1997 as amended by Addendum dated February 2, 1998, between Borror Realty Company and Dominion Homes, Inc.                                 |  | Incorporated by reference to Exhibit 10.21 to the Companys December 31, 1997 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                                                                    
|10.44 |  | Office Sublease Agreement dated July 31, 1998, between Dominion Homes, Inc. and Alliance Title Agency, Ltd.                                                         |  | Incorporated by reference to Exhibit 10.31 to the Companys June 30, 1998 Form 10-Q (File No. 0-23270).    
|      |  |                                                                                                                                                                    
|10.45 |  | Assignment and Assumption of Lease dated June 24, 1999 by and among Rommy K. Chung, Dominion Homes, Inc. and BRC Properties Inc. (formerly The Borror Corporation). |  | Incorporated by reference to Exhibit 10.3 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                                                                    
|10.46 |  | Lease dated March 1, 1994 between The Borror Corporation and Rommy K. Chung.                                                                                        |  | Incorporated by reference to Exhibit 10.4 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                                                                    
|10.47 |  | Assignment and Assumption of Lease dated June 24, 1999 by and among Dao Q. Nguyen, Dominion Homes, Inc., and BRC Properties Inc. (formerly Borror Realty Company).  |  | Incorporated by reference to Exhibit 10.5 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                                                                    
|10.48 |  | Lease dated November 12, 1997 between Borror Realty Company and Thomas M. Nguyen and assigned on October 2, 1998 to Dao Q. Nguyen.                                  |  | Incorporated by reference to Exhibit 10.6 to the Companys June 30, 1999 Form 10-Q (File No. 0-23270).     



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|      |  |                                                                                                                             |  |                                                                                                            
|----- |  | --------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                            
|10.49 |  | Lease dated September 29, 1999 between BRC Properties Inc. and Dominion Homes, Inc.                                         |  | Incorporated by reference to Exhibit 10.9 to the Companys September 30, 1999 Form 10-Q (File No. 0-23270).
|      |  |                                                                                                                            
|10.50 |  | Lease dated April 30, 2001 between FGSC, LLC and Dominion Homes of Kentucky, LTD. for office space in Louisville, Kentucky. |  | Incorporated by reference to Exhibit 10.1 to the Companys June 30, 2001 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                            
|10.51 |  | Lease dated November 30, 2001 between BRC Properties Inc. and Dominion Homes Financial Services, Ltd.                       |  | Incorporated by reference to Exhibit 10.33 to the Companys December 31, 2001 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                            
|10.52 |  | Office Lease Agreement dated August 21, 2002 between Dominion Homes, Inc. and Precision Equities, Ltd.                      |  | Incorporated by reference to Exhibit 10.4 to the Companys September 30, 2002 Form 10-Q (File No. 0-23270).
|      |  |                                                                                                                            
|10.53 |  | Real Estate Purchase Agreement dated August 27, 2002 between Dominion Homes, Inc. and Crafton Properties, Inc.              |  | Incorporated by reference to Exhibit 10.5 to the Companys September 30, 2002 Form 10-Q (File No. 0-23270).
|      |  |                                                                                                                            
|10.54 |  | Real Estate Purchase Agreement dated November 7, 2002 between Dominion Homes, Inc. and ASC Real Estate Development, L.L.C.  |  | Incorporated by reference to Exhibit 10.44 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                            
|10.55 |  | Real Estate Purchase Contract dated July 21, 2003 between Dominion Homes and BRC Properties Inc.                            |  | Incorporated by reference to Exhibit 10.3 to the Companys June 30, 2003 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                            
|10.56 |  | Lease Agreement dated July 21, 2003 between Dominion Homes, Inc. and BRC Properties Inc.                                    |  | Incorporated by reference to Exhibit 10.4 to the Companys June 30, 2003 Form 10-Q (File No. 0-23270).     
|      |  |                                                                                                                            
|10.57 |  | First Modification of Lease dated October 31, 2003 between Dominion Homes, Inc and BRC Properties Inc.                      |  | Incorporated by reference to Exhibit 10.8 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270).



---

|      |  |                                                                                                                                                                                                                                                                            |  |                                                                                                             
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                                                                                           
|10.58 |  | Lease Agreement dated September 26, 2003 between RML Construction, LLP and Dominion Homes of Kentucky, LTD for office space in Lexington, Kentucky                                                                                                                         |  | Incorporated by reference to Exhibit 10.7 to the Companys September 30, 2003 Form 10-Q (File No. 0-23270). 
|      |  |                                                                                                                                                                                                                                                                           
|10.59 |  | Abbreviated Form of Agreement dated December 5, 2002 between Dominion Homes, Inc. and the Daimler Group.                                                                                                                                                                   |  | Incorporated by reference to Exhibit 10.45 to the Companys December 31, 2002 Form 10-K (File No. 0-23270). 
|      |  |                                                                                                                                                                                                                                                                           
|10.60 |  | Sublease Agreement dated September 22, 2003 between Dominion Homes, Inc. and Dominion Homes Financial Services, LTD.                                                                                                                                                       |  | Filed herewith.                                                                                             
|      |  |                                                                                                                                                                                                                                                                           
|10.61 |  | Sublease Agreement dated November 22, 2003 between Dominion Homes, Inc. and Alliance Title Agency, LTD.                                                                                                                                                                    |  | Filed herewith.                                                                                             
|      |  |                                                                                                                                                                                                                                                                           
|10.62 |  | Agreement For Services dated November 5, 1999 between Homebuilders Financial Network, Inc. and Dominion Homes, Inc.                                                                                                                                                        |  | Incorporated by reference to Exhibit 10.10 to the Companys September 30, 1999 Form 10-Q (File No. 0-23270).
|      |  |                                                                                                                                                                                                                                                                           
|10.63 |  | Amended and Restated Credit Agreement dated December 31, 2001 among Dominion Homes, Inc., The Huntington National Bank, as Administrative Agent and Issuing Bank, and the Lenders listed
therein.                                                                          |  | Incorporated by reference to Exhibit 10.35 to the Companys December 31, 2001 Form 10-K (File No. 0-23270). 
|      |  |                                                                                                                                                                                                                                                                           
|10.64 |  | First Amendment to Amended and Restated Credit Agreement dated June 10, 2002 among Dominion Homes, Inc., The Huntington National Bank, as Administrative Agent and Issuing Bank, and the Lenders
listed therein.                                                           |  | Incorporated by reference to Exhibit 10.3 to the Companys June 30, 2002 Form 10-Q (File No. 0-23270).      
|      |  |                                                                                                                                                                                                                                                                           
|10.65 |  | Consent Agreement dated August 20, 2002 among Dominion Homes, Inc., The Huntington National Bank, as Administrative Agent and Issuing Bank, and the Lenders listed therein modifying the operating
lease covenants contained in the Amended and Restated Credit Agreement. |  | Incorporated by reference to Exhibit 10.3 to the Companys September 30, 2002 Form 10-Q (File No. 0-23270). 



---

|      |  |                                                                                                                                                                                                               |  |                                                                                                            
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                              
|10.66 |  | Second Amendment to Amended and Restated Credit Agreement dated December 31, 2002 among The Huntington National Bank, as Administrative Agent and Issuing Bank, and the Lenders listed
therein.               |  | Incorporated by reference to Exhibit 10.50 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                                                                                                              
|10.67 |  | Third Amendment to Amended and Restated Credit Agreement dated February 13, 2003 among The Huntington National Bank, as Administrative Agent, Lead Arranger and Issuing Bank, and the Lenders
listed therein. |  | Incorporated by reference to Exhibit 10.51 to the Companys December 31, 2002 Form 10-K (File No. 0-23270).
|      |  |                                                                                                                                                                                                              
|10.68 |  | Second Amended and Restated Credit Agreement dated December 3, 2003 among The Huntington National Bank, Administrative Agent and Issuing Bank, and the Lenders listed therein.                                |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|14    |  | Code of Business Conduct and Ethics                                                                                                                                                                           |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|21    |  | Subsidiaries.                                                                                                                                                                                                 |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|23    |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                        |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|24    |  | Power of Attorney.                                                                                                                                                                                            |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|31.1  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                       |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|31.2  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                       |  | Filed herewith.                                                                                            
|      |  |                                                                                                                                                                                                              
|32    |  | Certification pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                          |  | Filed herewith.                                                                                            

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|* | Indicates management contracts, compensatory plans or other arrangements.
|- | -------------------------------------------------------------------------