<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              --------------

                                 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 March 31, 1999

                                       OR

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

For the transition period from _______________ to _______________

Commission File No.  0-20614


                           THE ROTTLUND COMPANY, INC.
             (Exact name of registrant as specified in its charter)
             MINNESOTA                                  41-1228259
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)

                             3065 CENTRE POINTE ROAD
                           ROSEVILLE, MINNESOTA 55113
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:  (651) 638-0500

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

Securities registered pursuant to Section 12(g) of the
Act:  Common Stock, par value $.10

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, 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.  /X/

The aggregate market value of voting stock held by nonaffiliates of the
registrant as of June 18, 1999 was approximately $6,750,000.

As of June 18, 1999, there were 5,804,283 shares of Common Stock of the
registrant issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.

    DOCUMENT INCORPORATED                                    PART OF FORM 10-K
    Proxy Statement for 1999 Annual Meeting of Shareholders      Part III
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                 FORM 10-K INDEX

<TABLE>
<CAPTION>
                                                                                                                PAGE

<S>                                                                                                             <C>
PART I............................................................................................................1
     Item 1. BUSINESS.............................................................................................1
     Item 2. PROPERTIES...........................................................................................7
     Item 3. LEGAL PROCEEDINGS....................................................................................7
     Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING FOURTH QUARTER OF FISCAL YEAR.............7

PART II...........................................................................................................8
     Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.................................8
     Item 6. SELECTED FINANCIAL DATA AND STATISTICAL COMPARISON...................................................9
     Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION...............10
     Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................13
     Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................13
     Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES...............13

PART III.........................................................................................................29
     Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................29
     Item 11. EXECUTIVE COMPENSATION.............................................................................29
     Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................29
     Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................30

PART IV..........................................................................................................30
     Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...................................30

</TABLE>

<PAGE>

                                     PART I

ITEM 1.    BUSINESS

GENERAL

         The Rottlund Company, Inc. ("Rottlund" or the "Company"), through
its subsidiaries, designs, builds and markets attached and detached townhomes
and condominiums, and detached single family homes in the Minneapolis-St.
Paul, Minnesota, Des Moines, Iowa, Indianapolis, Indiana, Southern New Jersey
and Naples-Ft. Myers, Orlando and Tampa, Florida metropolitan areas. Rottlund
was founded in 1973, and until 1993, all of the Company's developments were
located in the Minneapolis-St. Paul market where Rottlund has maintained the
largest market share of any builder in nine of the last ten years.
Nationally, Rottlund ranks as the ninth largest attached, for sale,
homebuilder and has been ranked in among the top 100 homebuilders since 1991.
During the year ended March 31, 1994 ("fiscal 1994") the Company began home
building operations in Naples-Ft. Myers, Florida and Des Moines, Iowa and,
during the first quarter of the year ended March 31, 1995 ("fiscal 1995"),
began home building operations in Indianapolis, Indiana and Orlando and
Tampa, Florida and during the year ended March 31, 1996 ("fiscal 1996") the
Company acquired certain assets and assumed certain liabilities of Kevin
Scarborough, Inc., a residential homebuilder operating in Southern New
Jersey. All references to the Company contained herein, unless the context
indicates otherwise, include its wholly owned subsidiaries Rottlund Homes of
Iowa, Inc., Rottlund Homes of Florida, Inc., Rottlund Homes of Indiana, Inc.,
Rottlund Homes of New Jersey, Inc., and Rottlund Homes of Indiana Limited
Partnership.

         As of March 31, 1999, the Company owned or controlled through
options over 2,300 home sites in communities under development and land for
the development of over 3,500 additional planned home sites in proposed
communities.

         The Company's homes are sold primarily through its own staff of
sales personnel. The Company markets its homes to a wide range of buyers,
emphasizing high quality construction and customer satisfaction. Its
promotional efforts include advertisements in newspapers and other printed
media, radio and television, illustrated brochures, billboards, on-site
displays and model homes. Purchasers of the Company's homes are given the
opportunity to select, at additional cost, various optional amenities such as
upgraded carpet, fireplaces, varied interior and exterior color schemes,
lighting and upgraded appliances. The Company offers a diverse product line
ranging from townhomes to single-family homes at prices generally ranging
from $80,000 to $300,000. The average price of the Company's homes delivered
in fiscal 1999 was approximately $156,000.

         The Company has focused on the implementation of a Product
Leadership Strategy as reflected by the diversity of its product offerings.
This strategy has been paramount in its quest to maintain its No. 1 market
leadership position in the Minneapolis-St. Paul market. Management believes
that the Company's Product Leadership Strategy has also provided a
competitive advantage in the Des Moines and Southern New Jersey markets.
Rottlund's Product Leadership Strategy emphasizes the Company's design
capabilities, enabling it to offer quality homes at all price levels at which
the Company competes. The Company markets its homes to a wide range of buyers
including entry level, first and second time move-up, active adults and
retirees. Furthermore, management believes the Company has been particularly
effective marketing to non-traditional families, such as single parent
households. Product offerings such as attached villas and townhomes have been
designed with specific amenities to fill the needs of these unique market
niches while maintaining the affordability required by single parents. Other
attached, for sale communities use design characteristics, such as enhanced
security features, that appeal to single female buyers and have enabled
Rottlund to secure increased market share in this growing niche.

OPERATING STRATEGY

         Set forth below are the major elements of the Company's operating
strategy:

                                        1

<PAGE>


         MARKETS. The Minneapolis-St. Paul metropolitan area has been the
Company's primary market and has accounted for the majority of revenues since
the Company's inception. The Company has built and delivered more homes in
this market over the last five years than has any other home builder. The
Company's marketing strategy in the Minneapolis-St. Paul market has been to
establish itself as a name brand builder. Management believes this strategy
has helped Rottlund to build and deliver more homes in this market than any
other builder during the last five years. The Company presently accounts for
approximately 4.0% of all homes sold in this market. The Company does not
presently intend to increase its share of the Minneapolis-St. Paul market,
but rather to expand its operations in the Des Moines, Iowa, Indianapolis,
Indiana, Southern New Jersey and Naples-Ft. Myers, Tampa, and Orlando,
Florida markets. Rottlund is implementing its name brand builder strategy in
these markets.

         PRODUCTS. The Company markets its homes to a wide range of buyers,
including entry level, move-up and retirees. Accordingly, the Company offers
a number of home styles and price ranges at various locations. The Company's
product offerings include villas, townhomes and detached single family homes.
Sales prices presently range from approximately $80,000 to $300,000, and the
average sales price of homes being delivered during fiscal 1999 was
approximately $156,000. Management believes the Company's ability and
willingness to build homes in accordance with home buyers' needs will enable
the Company to continue to grow. Management believes that the Company's
long-standing strategy of product diversification enables it to respond
rapidly to changing market conditions and the cyclical nature of the
home-building industry.

         COST CONTROL. The Company controls the cost of construction through
the efficient design of its homes and favorable pricing from subcontractors
due to the high volume of work performed for the Company. Rottlund uses an
advanced, industry-specific management information system to control
construction costs. This system allows the Company to monitor subcontractor
performance and expenditures for each home built. All subcontracted work is
authorized through the generation of purchase orders which are approved for
payment by the Company's on-site construction supervisors upon completion of
work. Any additional costs require authorization through the issuance of
variance purchase orders which require reporting of the reason for the
variance and measures taken to eliminate further variances. This strategy
permits the Company to monitor gross margins on each individual home from the
time a purchase agreement is signed through the building process to closing.
The Company requires all subcontractors to perform all home construction and
site improvement work on a fixed price basis. In addition, management
continually monitors selling, general and administrative expenses in an
effort to control overhead and improve efficiency.

         INVENTORY MANAGEMENT. Two of the major risks in the home-building
industry are excessive home site inventory and inventory of completed homes.
The Company attempts to reduce its vulnerability to these risks by (i)
acquiring control of improved home sites through option contracts which allow
the Company to build homes with relatively minimal capital expenditures and
limited risks, (ii) acquiring land for development with seller financing,
(iii) acquiring land through purchase agreements on a nonrecourse basis which
enables the Company to obtain necessary governmental approvals before the
acquisition of the land (generally, the down payment on a land purchase or
option agreement will be returned to the Company if all approvals are not
obtained, although pre-development costs may not be recoverable), (iv)
beginning construction of a single family home only after execution of a
sales contract, receipt of satisfactory earnest money and, where applicable,
a tentative mortgage approval, and (v) controlling the number of finished
homes held in inventory.

LAND ACQUISITION AND DEVELOPMENT

         The Company generally follows a policy of acquiring options to
purchase land for future community developments. The Company attempts to
acquire land with a minimum cash investment and the maximum degree of
purchase money financing that the Company is able to obtain from sellers. The
purchase money financing and purchase agreements are generally on a
nonrecourse basis, thereby limiting the Company's financial exposure to the
amounts invested in property and predevelopment costs. This policy may raise
the cost of land the Company acquires somewhat, but significantly reduces
risk to the Company. In addition, this policy allows the Company to obtain
necessary development approvals prior to acquisition of land.


                                       2

<PAGE>

         The Company's purchase agreements are typically subject to numerous
conditions including, but not limited to, the Company's ability to obtain
necessary zoning and other governmental approvals for the proposed
development. The Company believes it has been successful in obtaining local
governmental approvals through proactive interaction with neighborhood and
citizen groups. The Company maintains a policy of holding neighborhood
meetings to gain support for its development activities. During the initial
municipal approval process, the Company confirms the availability of
utilities, conducts environmental reviews, arranges acquisition development
and financing, and completes its marketing construction feasibility studies.
As a result, the Company is generally able to begin marketing immediately
after closing the land purchase. This results in reduced carrying costs and
increased liquidity for future development opportunities.

         The Company has been able to acquire control of improved single
family detached home sites through option contracts which enables the Company
to build in an area if it purchases a specified number of home sites each
month. Contracts of this nature enable the Company to begin offering homes
for sale in a new community with relatively minimal capital expenditures and
limited risk. Accordingly, the Company has adopted a strategy of acquiring
control of single family detached home sites through option contracts when
appropriate opportunities exist which meet the Company's marketing strategy.
The Company expects the availability of such contracts to satisfy the
majority of the Company's requirements for detached single family home sites.
Due to the product-specific nature of the Company's attached home sites, the
Company expects limited opportunities for option contracts for this portion
of its developed home site requirements. Accordingly, the continuation of the
Company's development activities to satisfy its land inventory requirements
will depend upon its continued ability to locate, enter into contracts to
acquire, obtain governmental approvals for, obtain acquisition and
development financing for, consummate the acquisition of, and improve,
suitable parcels of land.

                  AVAILABLE HOME SITE INVENTORY (ALL CITIES)

         The following table sets forth information with respect to the
Company's available lot inventory by state as of March 31, 1999.

<TABLE>
<CAPTION>
                                                      Homes Under Construction
                                Total    -------------------------------------------------  Unsold Sites Available
Market                        Available      Sold (1)        Models       Inventory (2)     for Future Construction
------                        ---------      --------        ------       -------------     -----------------------
<S>                           <C>            <C>             <C>          <C>               <C>
Minnesota..................       982            290             13              93                  586
Florida....................       725            115              4              28                  578
Iowa.......................       350             85              9              26                  270
Indiana....................       266             38              8              16                  204
New Jersey.................       626             89              0               6                  531
                                -----            ---             --             ---                -----
Total......................     2,949            567             34             179                2,169
                                =====            ===             ==             ===                =====
</TABLE>

----------------------
(1) Under contract and under construction but not yet closed.
(2) Inventory are homes which are unsold that are completed or in various stages
    of construction.

         Although the Company does not purchase land for speculation, the
Company has and will purchase land with the intent of selling home sites
within developments to other builders. Additionally, the Company has
attempted to manage the risk of home building in particular areas through
cooperation with other builders, such as Centex Homes Corporation, by
building in the same subdivision. This arrangement provides for a diversity
of types of homes in the Company's communities and the advantages of joint
marketing.

         Rottlund strives to maintain a supply of developed home sites to
meet anticipated homebuilding requirements for not more than 24 months. As of
March 31, 1999 the Company had an aggregate of 2,169 home sites available for
future construction which represents approximately a 14-month supply based on
actual deliveries anticipated in fiscal 2000. The Company believes there is
an adequate supply of undeveloped land in all metropolitan areas where it
conducts business to maintain adequate home site inventories.

                                       3

<PAGE>

         Detached single family homes sold by the Company are marketed to
move-up and entry-level buyers. Move-up homes are sold in the $170,000 to
$300,000 price range while entry level homes are sold in the $110,000 to
$160,000 price range. Detached single family homes are offered by the Company
in a variety of floor plans and exterior styles with two, three and four
bedrooms, two or more bathrooms and a two-car attached garage.

         The Company also offers attached product lines which offer a variety
of floor plans and provide for certain options. Entry-level townhomes are
sold in the $70,000 to $105,000 price range, and the balance of townhome
sales are sold in the $100,000 to $200,000 price range. The Company believes
that the fastest growing segments of the home buying market are singles and
couples without children. The Company has adopted a strategy to capture these
segments by developing expertise in the design, marketing, financing and
construction of alternative or attached housing types which appeal to these
segments.

         Contracts for the sale of homes are at fixed retail prices. The
prices at which homes are offered have generally increased from time to time
during the sellout period for each community and in response to cost
increases, however, there can be no assurance that sales prices will increase
in the future.

         All of the attached home communities are governed by a homeowner's
association (the "Association"). The Company, acting as declarant, is
responsible for the management of the Association until 75% of the homes
within the Association are closed.

         The Company's line of homes is designed to promote efficient use of
space and materials to minimize construction costs and time, thereby
maximizing the value of the homes in the marketplace. The Company is
continually developing new home designs to replace or augment existing home
designs in an effort to assure that the Company's homes are responsive to
current consumer preferences and are unique in the marketplace. In order to
respond to consumer preferences the Company relies primarily upon its
internal marketing department to analyze information gathered from buyer
profiles, focus groups, exit interviews at model sites, telephone surveys and
demographic data bases. For new designs, the Company has engaged a number of
unaffiliated architectural firms in addition to its in-house architectural
staff. All home designs are copyrighted by the Company. The Company does not
license its home designs to other builders and vigorously pursues infringers.

         The Company expends considerable effort in developing a design and
marketing concept for each of its communities. This includes determination of
product line, layout of streets, layout of individual home sites or
structures and overall community design. The communities have attractive
entrances with distinctive signage and landscaping. The Company recognizes
the importance of the sense of "neighborhood" and strives to create this
feeling within its communities to preserve and enhance the investment of its
home buyers.

CONSTRUCTION

         Rottlund acts as the general contractor for the construction of its
residential communities. The Company's construction supervisors monitor the
construction of each home, participate in design and building decisions,
coordinate the activities of subcontractors and suppliers, maintain quality
and cost controls and monitor compliance with zoning and building codes.

         The Company maintains a strategy of subcontracting all home
construction at a fixed cost basis. The Company believes this strategy limits
its financial exposure during downturns in the housing market. All
subcontracted work is authorized by purchase orders which require approval
for payment by the construction supervisor upon completion. Any additional
costs require authorization through the issuance of variance purchase orders.
All variances require reporting of the reason therefor, and measures taken to
eliminate further variances.

         Subcontractors typically are retained by the Company for a specific
time period or project pursuant to a contract which obligates the
subcontractor to complete its duties at a fixed price. Contracts with the
Company's subcontractors and material suppliers are entered into after
competitive bidding during predetermined time periods or on a project by
project basis.

                                       4

<PAGE>

         The construction of detached single family homes is generally tied
to home buyer sales contracts to minimize the costs and risks of completed
but unsold inventory.

         Construction time for each home is tied to a construction schedule
established for each of the Company's home types. Variances from the schedule
are infrequent but may occur due to weather conditions or availability of
labor, materials and supplies. The Company's line of homes is designed to
promote efficient use of space and materials to minimize construction costs
and time. The Company's construction schedules are typically from three to
six months.

         The personnel of the Company's corporate headquarters are
responsible for architectural design, home site planning, accounting and
closing, among other responsibilities. The Company's management information
system is designed to monitor the progress of each home built by the Company,
from acceptance of a sales contract to delivery of a completed home to the
buyer. At any time after contract acceptance the Company can provide the home
buyer with the construction status of its home and the anticipated delivery
date.

         The Company historically has maintained its construction schedule
throughout the entire year, despite seasonal climate changes in the
Minneapolis-St. Paul and Des Moines metropolitan areas. However, additional
winter construction charges are incurred due to propane heating costs, frost
ripping charges, utility construction charges and special footing designs.
The Company is also required to put into escrow at closing amounts to cover
items which cannot be installed in the winter which may include driveways,
sidewalks and air conditioning.

MARKETING AND SALES

         In Minnesota, Indiana, New Jersey and Florida, the Company sells its
homes through commissioned employees who work from sales offices in model
homes located in each Rottlund community. In addition, the Company cooperates
with outside independent brokers on approximately 33% of all of its sales.
The Company utilizes independent realtors for home sales in Iowa. In all
instances, Company sales employees assist prospective buyers through the home
buying process by providing information on the Company's line of homes,
pricing, options and upgrades, mortgage financing, warranties, construction,
and information regarding the Company itself. The Company provides a Home
Buyer's Guide to all prospective customers. The Home Buyer's Guide highlights
the steps and process of buying a new home in an effort to accurately set the
expectations of the Company's customers. Sales personnel are trained by the
Company and attend periodic meetings where they are updated on current
financing, construction schedules, marketing and advertising plans.

         Rottlund has adopted a strategy of becoming a "name brand" builder
in the Minneapolis-St. Paul market. This strategy has been implemented
through its visible support of public television, Fraser Community Services
and other community organizations. Rottlund also advertises through
newspaper, radio, TV and a billboard campaign. In its expansion to new
markets, the Company over time will attempt to utilize this same strategy of
advertising to increase customer awareness of the Company's products. In
order to respond to consumer preferences, the Company relies upon its
internal marketing department to analyze information which is gathered from
buyer profiles, focus groups, exit interviews at model sites, telephone
surveys, and demographic data bases. The Company's comprehensive marketing
program also includes direct mail, participation in home tour events and use
of fully merchandised model homes. Management believes model homes play an
important role in demonstrating the functional use of space in the Company's
homes and in allowing prospective buyers to experience the emotional aspects
of the home buying process. The Company attempts to create attractive model
homes and chooses interior merchandising for each type of home based upon the
lifestyles of targeted customers.

         The Company builds a portion of its homes under the guidelines and
specifications of the Federal Housing Administration (FHA) and the Veterans
Administration (VA), thereby providing eligible prospective buyers the added
benefit of the availability of FHA/VA-insured mortgages. The Company may also
from time to time help its customers secure below market interest rates by
contributing points to buy-down the existing mortgage rates.

                                       5

<PAGE>

CUSTOMER SERVICE AND QUALITY CONTROL

         Rottlund is committed to providing a high level of customer service
as an important component of its competitive strategy. The Company, through
its on-site team of a sales representative and a construction supervisor
maintains personalized contact with its customers.

         The Company's construction supervisors follow an inspection process
on each home the Company builds. This process is followed to ensure each home
meets or exceeds the Company's performance standards for its homes.

         Upon completion of construction of each home and prior to closing,
an employee of the Company's Customer Care Department conducts a quality
control inspection of the completed home. From this inspection, a list is
created which sets forth those areas which do not meet the Company's
performance standards and require correction by the contract builder. Also
prior to closing, the Customer Care Department accompanies the buyer on a
customer orientation of their home to demonstrate the proper use and care of
the home including the mechanical equipment and other components of the home.
At the customer orientation, the buyer is also familiarized with the service
warranty process following closing on its home.

         The Company's Customer Care Department handles all service and
warranty requests following the closing of each home. Management believes the
participation of Customer Care personnel prior to and after closing reduces
post-closing service costs, fosters the Company's reputation for service, and
ultimately leads to the building of a referral base of business.

         The Company provides all home owners with a one-year comprehensive
warranty and a two-year warranty on all mechanical systems and provides, from
an unaffiliated insurance company, a ten-to fifteen-year structural warranty.

COMPETITION AND MARKET FACTORS

         The development and sale of residential properties is highly
competitive and fragmented. The Company competes on the basis of a number of
interrelated factors, including location, product design, perceived value,
price and reputation in the marketplace with a number of national home
builders and numerous local builders. The Company's homes must also compete
with resale of existing homes and available rental housing. Management
believes Rottlund's primary competitive advantages are based upon the
following strengths: (i) product innovation, (ii) offering homes with the
highest perceived value, (iii) product diversification which enables the
Company to offer homes to all segments of the population, (iv) marketing
programs and community involvement programs which have established Rottlund
as a "name brand" builder in the Minneapolis-St. Paul market, (v) the
location of its communities, and (vi) its reputation for superior customer
service and quality.

         Rottlund maintains a strong position in its markets due in part to
product innovation. The Company's ability to respond to the changing needs of
home buyers has allowed it to continue to grow despite declining demand for
previously popular products. The Company continuously examines its markets to
determine if certain housing needs are not being met and attempts to design
and build homes to meet such needs. Management believes this is one of the
primary reasons for its long-term success. The Company's years of experience
provide it with expertise in the area of design, construction and financing
of attached housing. The Company believes that this experience is especially
important in the attached home market which is subject to stricter regulation
than the detached home market.

         The housing industry is cyclical and affected by consumer confidence
levels, prevailing economic conditions and interest rate levels. Other
factors affecting the industry include increases in construction costs,
increases in costs associated with home ownership such as property taxes,
changes in consumer preferences and demographic trends. The Company believes
its experience provides a sound understanding of the nature of the industry
which enables it to base its strategic planning on such cyclical conditions.

                                        6

<PAGE>

EMPLOYEES

         As of March 31, 1999, the Company employed 275 persons, 80 as
on-site sales personnel, 91 involved in construction, 22 as customer care
personnel, 22 as product development personnel and 60 as executive,
administrative and clerical personnel. The Company's employees are not
covered by a collective bargaining agreement and the Company believes its
relationships with its employees are good.

GOVERNMENTAL REGULATION

         The Company's business is subject to regulation by a variety of
state and federal laws and regulations relating to, among other things,
advertising, charging, collection of state sales and use taxes, zoning and
product safety. While the Company believes it is presently in material
compliance with such regulations, in the event that it should be determined
that the Company is not in compliance with all such laws and regulations, the
Company could become subject to cease and desist orders, injunctive
proceedings, civil fines and other penalties.

ITEM 2.    PROPERTIES

         The Company's principal offices are located at 3065 Centre Pointe
Road, Roseville, Minnesota 55113. The offices total 10,000 square feet, and
are leased from an unrelated party through March 31, 2006, at a base annual
rent of $94,000. Various computer equipment and office furniture are also
leased by the Company.

ITEM 3.    LEGAL PROCEEDINGS

         The Company is not currently a party to any material pending legal
proceedings. From time to time the Company may become involved in routine
litigation incidental to its business.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING FOURTH
          QUARTER OF FISCAL YEAR

         There were no matters submitted to a vote of the Company's
shareholders during the three-month period ended March 31, 1999.

                                        7

<PAGE>

                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS

         On February 19, 1998, the Company's Common Stock was listed on the
American Stock Exchange ("AMEX") under the symbol "RH". Also on that date,
the Company's Common Stock ceased trading on the NASDAQ National Market
System.

         The following table sets forth the range of high and low sale prices
for the Company's Common Stock for each of the fiscal quarters of the two
years ended March 31, 1998 and 1999.

STOCK QUOTATIONS

<TABLE>
<CAPTION>
                                                          HIGH     LOW
<S>                                                     <C>      <C>
Fiscal 1999
     First Quarter...................................    4 7/8    3 3/4
     Second Quarter..................................    4 5/8    3 5/8
     Third Quarter...................................    4 1/2        3
     Fourth Quarter..................................    5 3/4        4

Fiscal 1998
     First Quarter...................................    5 1/4    4 1/4
     Second Quarter..................................    5 1/4    4 1/2
     Third Quarter...................................    4 3/4    3 1/8
     Fourth Quarter..................................    4 3/4    3

</TABLE>

         As of June 18, 1999, the Company had approximately 150 holders of
record of its Common Stock.

         The transfer agent for the Company's Common Stock is Norwest Bank
Minnesota, N.A., 161 North Concord Exchange, South St. Paul, Minnesota,
55075-0738, telephone: (651) 450-4064.

         The Company has not paid any dividends on its Common Stock since its
initial public offering in October 1992 and expects that for the foreseeable
future it will follow a policy of retaining earnings in order to finance the
continued development of its business. Payment of dividends is within the
discretion of the Company's Board of Directors and will depend upon the
earnings, capital requirements and operating and financial condition of the
Company, among other factors. In addition, the terms of the Company's 9.42%
Senior Notes Due December 1, 2004 and the 12.11% Senior Notes Due December 1,
2003 contain restrictions on the ability of the Company to pay dividends. The
Company has not made any sales of restricted stock during the previous three
fiscal years.

                                        8

<PAGE>


ITEM 6.    SELECTED FINANCIAL DATA AND STATISTICAL COMPARISON

         The following table sets forth selected financial data with respect
to the Company for the periods indicated. This information should be read in
conjunction with the Financial Statements and related notes appearing
elsewhere herein and "Management's Discussion and Analysis of Results of
Operations and Financial Conditions." The Company's Statement of Operations
and Balance Sheet data as of and for each of the years set forth below have
been derived from financial statements which have been audited by Arthur
Andersen LLP, independent public accountants.


<TABLE>
<CAPTION>
                                               1999        1998        1997         1996        1995
                                               ----        ----        ----         ----        ----
                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND UNIT DATA)
<S>                                           <C>        <C>         <C>          <C>        <C>

STATEMENT OF OPERATIONS DATA:
   Net sales................................  $252,675    $160,830    $180,457     $131,583   $116,520
   Cost of sales............................   215,074     139,284     156,332      110,589     96,344
                                              --------    --------    --------     --------   --------
   Gross profit.............................    37,601      21,546      24,125       20,994     20,176
   Selling, general and administrative
   expenses.................................    26,112      20,541      19,569       13,671     13,307
   Write-down of land(1)                             -          -        1,500            -          -
                                              --------    -------     --------     --------   --------
   Operating income.........................    11,489       1,005       3,056        7,323      6,869
   Interest expense.........................     2,714       2,018         958          153        295
                                              --------    --------    --------     --------   --------
   Income (loss) before provision (benefit)
   for income taxes.........................     8,775     (1,013)       2,098        7,170      6,574
   Provision (benefit) for income taxes.....     3,598       (415)         862        2,928      2,695
                                              --------    --------    --------     --------   --------
     Net income (loss)......................  $  5,177    $  (598)    $  1,236     $  4,242   $  3,879
                                              ========    ========    ========     ========   ========

   Basic earnings (loss) per share..........  $    .90    $ (0.10)    $   0.22     $   0.75   $   0.69
                                              ========    ========    ========     ========   ========
   Diluted earnings (loss) per share........  $    .90    $ (0.10)    $   0.22     $   0.74   $   0.68
                                              ========    ========    ========     ========   ========
   Weighted average shares outstanding......     5,773      5,745        5,735        5,749      5,661
                                              ========    ========    ========     ========   ========

OPERATING DATA:
   Number of home sales closed..............     1,684       1,092       1,346        1,187      1,003
   Average sales price......................  $    156    $    146    $    134     $    111   $    116
                                              ========    ========    ========     ========   ========

BALANCE SHEET DATA:
   Inventories and properties held for
   development or sale......................  $ 70,042    $ 74,379    $ 81,825     $ 74,650   $ 60,450
   Total assets.............................    89,365      88,281      96,234       83,756     68,549
   Notes and mortgage notes payable.........    38,467      47,907      54,137       40,584     33,746
   Shareholders' equity.....................  $ 31,598    $ 26,315    $ 26,819     $ 25,396   $ 21,033

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

(1)       The Company recorded a noncash write-down of land development costs and
          finished lots at development sites in Florida and Indiana in fiscal
          1997. See Note 1 of the Notes to Consolidated Financial Statements.

</TABLE>

                                        9

<PAGE>




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

GENERAL

         The following table sets forth, for the periods indicated, unit
activity, average sales price and revenue from home sales:


<TABLE>
<CAPTION>
                                                    YEARS ENDED MARCH 31,
                                       1999                1998                1997
                                   ------------        ------------       ------------
<S>                                <C>                <C>                 <C>
Homes closed:
   Single family...........                 688                 431                397
   Multi-family............                 936                 661                949
Average sales price:
   Single family...........        $    180,000        $    186,000       $    199,000
   Multi-family............             138,000             122,000            107,000
Net sales:
   Single family...........        $123,700,000        $ 80,370,000       $ 79,083,000
   Multi-family............         128,975,000          80,460,000        101,374,000
                                   ------------        ------------       ------------
Total net sales                    $252,675,000        $160,830,000       $180,457,000
                                   ============        ============       ============

</TABLE>


         The following table sets forth the Company's backlog (homes under
contract but not closed):

<TABLE>
<CAPTION>

      MARCH 31                         NUMBER OF HOMES         SALES VALUE
      --------                         ---------------         -----------
      <S>                              <C>                     <C>
      1999.........................          567                 $99,562,000
      1998.........................          631                 $98,380,000
      1997.........................          409                 $60,908,000

</TABLE>


         The Company estimates that the period between receipt of sales
contracts and delivery of completed homes to the purchasers is generally four
to six months. The Company's backlog historically tends to increase between
January and April. Trends in the Company's backlog are subject to change from
period to period based upon economic conditions including consumer confidence
levels, interest rates and the availability of mortgages.

RESULTS OF OPERATIONS

         YEAR ENDED MARCH 31, 1999 COMPARED TO YEAR ENDED MARCH 31, 1998

         The Company's home sales increased $91.8 million or 57% during
fiscal 1999 as compared to fiscal 1998 as a result of a 48.6% increase in the
number of homes closed and a 3.2% increase in the average sales price of
homes closed. This increase was due to an overall increase in prices for
homes sold by the Company.

         Gross profit increased by $16.1 million or 75% during fiscal 1999 as
compared to fiscal 1998. The gross profit margin increased to 14.9% during
fiscal 1999 as compared to 13.4% in fiscal 1998. The increase in gross profit
was primarily due to strength in the overall homebuilding industry combined
with higher revenues which decreased fixed costs as a percentage of revenue.

         Selling, general and administrative expenses increased by $5.6
million to $26.1 million in fiscal 1999 from $20.5 million in fiscal 1998. As
a percentage of net sales, selling, general and administrative expenses
decreased to 10.3% in fiscal 1999 from 12.8% in fiscal 1998. This decrease
was primarily due to the increase in home sales during fiscal 1999.

                                        10

<PAGE>

         Interest expense was $2.7 million in fiscal 1999 as compared to $2.0
million in fiscal 1998. The increase in interest expense is primarily due to
an increase in borrowings under the Company's revolving credit facility used
to fund the increased level of business activity. The Company capitalizes
certain interest costs for land development and includes such capitalized
interest in cost of sales when the related homes are delivered to purchasers.
Total interest incurred by the Company was approximately $5.2 million for
fiscal 1999 and $5.1 million for fiscal 1998.

         The Company's tax rate was approximately 41% in fiscal 1999 and 1998
which reflects the federal statutory rate plus the effect of state taxes, net
of federal benefit.

         Net income increased from a net loss of $598,000 in fiscal 1998 to a
net gain of $5,177,000 in fiscal 1999. This increase was primarily due to the
increase in home sales during fiscal 1999.

         YEAR ENDED MARCH 31, 1998 COMPARED TO THE YEAR ENDED MARCH 31, 1997

         The Company's home sales decreased $19.6 million or 11% during
fiscal 1998 as compared to fiscal 1997 as a result of a 18.9% decrease in the
number of homes closed which was partially offset by a 9% increase in the
average sales price of homes closed. The decrease in the number of homes
closed was principally due to delays in opening new communities for sales in
New Jersey, Minneapolis and Iowa which resulted in those projected closings
being pushed to fiscal 1999. This also accounts for a portion of the increase
in backlog at March 31, 1998.

         Gross profit decreased by $2.6 million or 11% during fiscal 1998 as
compared to fiscal 1997. Gross profit margins remained constant at 13% during
both years. The decrease in gross profit was primarily due to the decrease in
home sales during fiscal 1998.

         Selling, general and administrative expenses increased by $972,000
to $20.5 million in fiscal 1998 from $19.6 million in fiscal 1997. As a
percentage of net sales, selling, general and administrative expenses
increased to 12.8% in fiscal 1998 from 10.8% in fiscal 1997. This increase
was primarily due to the decrease in home sales during fiscal 1998.

         Interest expense was $2.0 million in fiscal 1998 as compared to
$958,000 in fiscal 1997. The increase in interest expense is primarily due to
the Company terminating capitalizing interest on a piece of commercial land
that it has held for approximately ten years. This land is currently for sale
and has a book value of about $9.0 million. The Company capitalizes certain
interest costs for land development and includes such capitalized interest in
cost of sales when the related homes are delivered to purchasers.
Accordingly, total interest incurred by the Company was approximately $5.1
million for fiscal 1998 and $5.2 million for fiscal 1997.

         The Company's tax rate was approximately 41% in fiscal 1998 and 1997
which reflects the federal statutory rate plus the effect of state taxes, net
of federal benefit.

         Net income decreased from $1.2 million in fiscal 1997 to a net loss
of $598,000 in fiscal 1998. This decrease was primarily due to the decrease
in home sales, increased interest expense and a slight increase in selling,
general and administrative expenses for which the Company invested in
increased advertising and overhead to fund an expected increase in home sales
in fiscal 1999 as witnessed by the large increase in backlog at March 31,
1998.

LIQUIDITY AND CAPITAL RESOURCES

         Cash flows provided by operating activities increased $7.6 million
from $4.4 million in fiscal 1998 to $12.0 million in fiscal 1999. This
increase was primarily due to increased income. Cash flows used for investing
activities were not significant. Cash flows used for financing activities
increased by $3.2 million from $6.1 million in fiscal 1998 to $9.3 million in
fiscal 1999.

         Cash flows provided by (used for) operating activities increased
$14.2 million from ($9.8) million in fiscal 1997 to $4.4 million for fiscal
1998. This increase was primarily due to decreased investments in residential
housing completed

                                        11

<PAGE>


and under construction resulting from the decrease in sales activity,
combined with the lower level of inventory homes at March 31, 1998. Cash
flows used for investing activities were not significant. Cash flows provided
by (used for) financing activities decreased by $19.9 million from $13.7
million in fiscal 1997 to ($6.1) million in fiscal 1998. This decrease was
primarily due to reduced borrowings under the company's revolving credit
facility to finance the lower levels of land inventory and residential
housing completed and under construction.

         The Company's financing needs depend primarily upon sales volume,
asset turnover, land acquisition and inventory balances. In December 1994,
the Company issued $25 million of 12.11% Senior Notes payable and in February
1996, the Company issued an additional $10 million of 9.42% Senior Notes
payable (collectively referred to as the "Senior Notes"). Proceeds were used
to retire certain mortgage notes payable and for working capital purposes.
Principal and interest payments of approximately $552,000 are due monthly
through December 2003.

         At March 31, 1999, the Company also had a $30.0 million unsecured
revolving credit facility from a commercial lender. Borrowings under this
facility totaled $10.3 million at March 31, 1999. The Company believes that
amounts available under its existing borrowing arrangements (assuming
extensions and renewals of debt in the ordinary course of business) and
amounts generated from operations will provide funds adequate for its
home-building activities and debt service. The Company had no significant
commitments as of March 31, 1999 requiring the use of funds.

         Due to lower than expected financial results for the fiscal year
ended March 31, 1998, the Company was not in compliance with certain
financial covenants under both its Senior Note agreements and its revolving
credit facility. All of the Company's lenders agreed to waive the violations
and in addition the agreements were amended. The Company will pay an
additional $100,000 principal per month amortization on the Senior Notes for
the remaining life of the notes.

         The Company has generally been able to secure financing for its
acquisition, development and construction activities, and management believes
that such arrangements will continue to be available on terms satisfactory to
the Company. There can be no assurance, however, that continued financing for
land acquisitions will be available or, if available, will be on terms
satisfactory to the Company.

INFLATION AND EFFECTS OF CHANGING PRICES

         Real estate and residential housing prices are affected by
inflation, which can cause increases in the price of land, raw materials and
subcontracted labor. Unless such costs are recovered through higher sales
prices, gross profit margins will decrease. As interest rates increase,
construction and financing costs, as well as the cost of borrowing funds,
also increase which can result in lower gross profits. High mortgage interest
rates would make it more difficult for the Company's customers to qualify for
home mortgage loans. These factors have a much more significant effect on the
Company's operations than does seasonality, in part because homes can be
constructed year-round.

YEAR 2000 CONSIDERATIONS

         Management believes that the Company's core selling and construction
operations are largely unautomated and would continue uninterrupted even in
the event of Year 2000 problems. As for accounting and administration, the
Company has already upgraded its software, which has been tested and found to
be Year 2000 compliant.

         The manufacturer of the computer system on which Rottlund central
accounting and management information systems resides has certified that its
hardware and operating system software are Year 2000 compliant. The Company's
applications software has been tested in the course of normal maintenance.
Equipment and software peripheral to Rottlund's central system are being
tested for Year 2000 compliance. Any replacements or upgrades required are
expected to be complete by mid-1999.

                                        12

<PAGE>


         The cost and timing of upgrades to hardware and software corrections
are not deemed to be materially different than normally scheduled upgrades.
Expenditures to date and future expenditures are not expected to exceed
$100,000.

         Management's contingency plans, which are intended to enable the
Company to continue to operate normally, include performing some procedures
manually, changing suppliers, if necessary, and repairing or obtaining
replacement systems.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's short-term borrowings and long-term debt
obligations.

         The Company's credit facility carries interest rate risk that is
generally related to the federal funds rate. If that rate were to change
while the Company was borrowing under the facility, interest expense would
increase or decrease accordingly. As of March 31, 1999, there was $10.3
million under this facility.

         The Company has no earnings or cash flow exposure due to market risks
on its Senior Notes payable as a result of the fixed-rate nature of the debt.
However, interest rate changes would affect the fair market value of the debt.
At March 31, 1999, the Company had fixed rate debt of $26.7 million maturing
in December 2003.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements of the Company as of March 31, 1999 and
1998 and for the years then ended together with the Report of Independent
Public Accountants are included in this Form 10-K on the pages indicated
below.



              THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

              INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                               Page
<S>                                                                                                            <C>
Report of Independent Public Accountants..................................................................       14

Consolidated Balance Sheets as of March 31, 1999 and 1998.................................................       15

Consolidated Statements of Operations for the Years Ended March 31, 1999, 1998 and 1997...................       16

Consolidated Statements of Shareholders' Equity for the Years Ended March 31, 1999, 1998 and 1997.........       17

Consolidated Statements of Cash Flows for the Years Ended March 31, 1999, 1998 and 1997...................       18

Notes to Consolidated Financial Statements................................................................       19

</TABLE>

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

         None.

                                        13

<PAGE>

                               ARTHUR ANDERSEN LLP


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To The Rottlund Company, Inc.:

We have audited the accompanying consolidated balance sheets of The Rottlund
Company, Inc. (a Minnesota corporation) and Subsidiaries as of March 31, 1999
and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Rottlund Company, Inc.
and Subsidiaries as of March 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1999, in conformity with generally accepted accounting
principles.

                                                          ARTHUR ANDERSEN LLP



Minneapolis, Minnesota,
   May 12, 1999

                                        14

<PAGE>








                    THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

                            Consolidated Balance Sheets

                                   As of March 31

                       (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                                                     1999        1998
                                                                                   -------     -------
<S>                                                                                <C>         <C>
                                          ASSETS

CASH AND CASH EQUIVALENTS                                                          $ 6,558      $ 4,247

ESCROW AND OTHER RECEIVABLES                                                         2,607        2,520

LAND, DEVELOPMENT COSTS AND FINISHED LOTS                                           46,315       47,247

RESIDENTIAL HOUSING COMPLETED AND UNDER CONSTRUCTION                                23,727       27,132

PROPERTY AND EQUIPMENT, net                                                            941        1,251

DEFERRED INCOME TAXES                                                                1,605        1,164

OTHER ASSETS, net                                                                    7,612        4,720
                                                                                   -------      -------
                                                                                   $89,365      $88,281
                                                                                   -------      -------
                                                                                   -------      -------
                           LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
   Revolving credit facility                                                       $10,285      $15,010
   Senior notes payable                                                             26,731       30,925
   Mortgage notes payable                                                            1,451        1,972
   Accounts payable                                                                  8,905       11,553
   Accrued liabilities                                                               6,132        2,506
   Income taxes payable                                                              4,263            -
                                                                                   -------      -------
               Total liabilities                                                    57,767       61,966
                                                                                   -------      -------
                                                                                   -------      -------

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY:
   Preferred stock, $.10 par value, 10,000 shares authorized;
      none issued                                                                        -            -
   Common stock, $.10 par value, 40,000 shares authorized; 5,773 and
      5,745 shares issued and outstanding                                              143          141
   Paid-in capital                                                                  11,851       11,747
   Retained earnings                                                                19,604       14,427
                                                                                   -------      -------
               Total shareholders' equity                                           31,598       26,315
                                                                                   -------      -------
                                                                                   $89,365      $88,281
                                                                                   -------      -------
                                                                                   -------      -------

</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

                                        15

<PAGE>

                   THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                          For the Years Ended March 31

                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                  1999          1998           1997
                                                                                --------      --------       --------
<S>                                                                             <C>           <C>            <C>
NET SALES                                                                       $252,675      $160,830       $180,457

COST OF SALES                                                                    215,074       139,284        156,332
                                                                                --------      --------       --------
               Gross profit                                                       37,601        21,546         24,125

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                      26,112        20,541         19,569

WRITE-DOWN OF LAND                                                                     -             -          1,500
                                                                                --------      --------       --------
               Operating income                                                   11,489         1,005          3,056

INTEREST EXPENSE                                                                   2,714         2,018            958
                                                                                --------      --------       --------
               Income (loss) before provision (benefit) for income taxes           8,775        (1,013)         2,098

PROVISION (BENEFIT) FOR INCOME TAXES                                               3,598          (415)           862
                                                                                --------      --------       --------
               Net income (loss)                                                $  5,177      $   (598)      $  1,236
                                                                                --------      --------       --------
                                                                                --------      --------       --------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                                     $   0.90      $  (0.10)      $   0.22
                                                                                --------      --------       --------
                                                                                --------      --------       --------


</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                        16

<PAGE>



                 THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

               Consolidated Statements of Shareholders' Equity

                         For the Years Ended March 31

                                (In Thousands)


<TABLE>
<CAPTION>
                                                          Common Stock
                                                      --------------------        Paid-In      Retained
                                                      Shares        Amount        Capital      Earnings          Total
                                                      ------        ------        -------      ---------        -------
<S>                                                   <C>           <C>           <C>          <C>              <C>
BALANCE, March 31, 1996                               5,683         $134            $11,473      $13,789        $25,396
   Net income                                             -            -                  -        1,236          1,236
   Stock issued under employee stock purchase plan       22            3                125            -            128
   Stock options exercised                               11            1                 58            -             59
                                                      -----         ----            -------      -------        -------
BALANCE, March 31, 1997                               5,716          138             11,656       15,025         26,819
   Net loss                                               -            -                  -         (598)          (598)
   Stock issued under employee stock purchase plan       29            3                 91            -             94
                                                      -----         ----            -------      -------        -------
BALANCE, March 31, 1998                               5,745          141             11,747       14,427         26,315
   Net income                                             -            -                  -        5,177          5,177
   Stock issued under employee stock purchase plan       28            2                104            -            106
                                                      -----         ----            -------      -------        -------
BALANCE, March 31, 1999                               5,773         $143            $11,851      $19,604        $31,598
                                                      -----         ----            -------      -------        -------
                                                      -----         ----            -------      -------        -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                        17

<PAGE>


                THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

                   Consolidated Statements of Cash Flows

                        For the Years Ended March 31

                               (In Thousands)

<TABLE>
<CAPTION>
                                                                                       1999        1998         1997
                                                                                     -------     -------      -------
<S>                                                                                  <C>         <C>          <C>
OPERATING ACTIVITIES:
   Net income (loss)                                                                 $ 5,177     $  (598)     $ 1,236
   Adjustments to reconcile net income (loss) to net cash provided by
     (used for) operating activities-
         Depreciation and amortization                                                   790         626          479
         Write-down of land                                                                -           -        1,500
         Deferred income taxes                                                          (441)        186         (833)
         Change in operating items:
            Escrow and other receivables                                                 (87)     (1,008)         483
            Land, development costs and finished lots                                    932       1,989       (1,797)
            Residential housing completed and under construction                       3,405       5,457       (6,878)
            Other assets                                                              (3,002)     (1,012)      (1,457)
            Accounts payable                                                          (2,648)      2,264       (1,475)
            Accrued liabilities                                                        3,626      (1,573)         158
            Income taxes payable                                                       4,263      (1,910)      (1,181)
                                                                                     -------     -------      -------
               Net cash provided by (used for) operating activities                   12,015       4,421       (9,765)
                                                                                     -------     -------      -------
INVESTING ACTIVITIES:
   Purchase of property and equipment, net                                              (370)     (1,054)        (383)
   Other                                                                                   -           -          (13)
                                                                                     -------     -------      -------
               Net cash used for investing activities                                   (370)     (1,054)        (396)
                                                                                     -------     -------      -------
FINANCING ACTIVITIES:
   Proceeds from (repayments of) revolving credit facility, net                       (4,725)       (175)      14,685
   Repayments of senior notes payable                                                 (4,194)     (2,943)      (1,132)
   Proceeds from issuance of mortgage notes payable                                    1,094         174        5,205
   Repayments of mortgage notes payable                                               (1,615)     (3,286)      (5,205)
   Proceeds from stock options exercised                                                   -           -           59
   Proceeds from stock issued under employee stock purchase plan                         106          94          128
                                                                                     -------     -------      -------
               Net cash provided by (used for) financing activities                   (9,334)     (6,136)      13,740
                                                                                     -------     -------      -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   2,311      (2,769)       3,579

CASH AND CASH EQUIVALENTS:
   Beginning of year                                                                   4,247       7,016        3,437
                                                                                     -------     -------      -------
   End of year                                                                       $ 6,558     $ 4,247      $ 7,016
                                                                                     -------     -------      -------
                                                                                     -------     -------      -------
SUPPLEMENTAL CASH FLOW INFORMATION:
      Cash paid for interest, net of amounts capitalized                             $ 2,714     $2,025      $   906
                                                                                     -------     -------      -------
                                                                                     -------     -------      -------
      Cash paid for income taxes                                                     $     -     $2,022      $ 2,948
                                                                                     -------     -------      -------
                                                                                     -------     -------      -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                        18

<PAGE>

       THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements

                 March 31, 1999 and 1998


1.    BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

The Rottlund Company, Inc. (a Minnesota corporation) and its subsidiaries,
collectively referred to as the Company, are engaged in the design,
construction, marketing and sale of residential real estate. The Company's
primary developments are in Minnesota, with additional development sites in
Iowa, Florida, Indiana and New Jersey; accordingly, the Company's operations
can be impacted significantly by the residential real estate market
conditions in each of these geographic areas.

During fiscal year 1998, the Company disposed of a wholly owned subsidiary
which was engaged in the business of originating residential mortgage loans
as a correspondent for various mortgage banking companies. Through the date
of disposal, such mortgage activity was not significant. The reserves the
Company established in fiscal year 1997 were adequate to cover the costs the
Company incurred to dispose of this subsidiary.

The Company has generally been able to secure financing for its acquisition,
development and construction activities, and management believes that such
arrangements will continue to be available on terms satisfactory to the
Company. However, there can be no assurance that continued financing for land
acquisitions will be available or, if available, will be on terms
satisfactory to the Company.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
The Rottlund Company, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

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

REVENUE RECOGNITION

Revenue from sales of properties is recognized upon a formal closing and
conveyance of title to the buyer. Escrow receivables represent funds held in
escrow because the Company is obligated to perform minor activities
subsequent to a formal closing. Customer earnest money deposits received
under binding purchase agreements are reflected as accrued liabilities until
a formal closing.

                                        19

<PAGE>


CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. As of March 31,
1999 and 1998, approximately $900,000 and $811,000, respectively, of cash and
cash equivalents was restricted for customer earnest money deposits.

LAND, DEVELOPMENT COSTS AND FINISHED LOTS

Direct costs related to land development, including land acquisition costs,
improvement and construction costs for clearing and grading, roads and
utility systems, architectural, surveying, engineering and legal fees, and
real estate taxes, are capitalized as costs of land. The Company also
capitalizes interest incurred in connection with land held for development up
to the point it is deemed fully realizable upon sale. Interest of
approximately $2,400,000, $2,942,000 and $4,196,000 was capitalized in fiscal
years 1999, 1998 and 1997, respectively. Aggregate development costs are
allocated to finished lots and charged to cost of sales upon a formal closing
and conveyance of title to the buyer.

During fiscal year 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be recoverable, and that impairment losses be recorded on long-lived
assets when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Prior to the adoption of SFAS No. 121, inventories were
recorded at the lower of cost or net realizable value for each parcel or
subdivision. Under SFAS No. 121, inventories to be held and used are stated
at cost unless a subdivision is determined to be impaired, in which case the
impaired inventories are written down following the provisions of SFAS No.
121. Write-downs of impaired inventories are recorded as adjustments to the
cost basis of the respective inventory.

The Company recorded a noncash write-down of land, development costs and
finished lots at development sites in Florida and Indiana of $1,500,000 in
fiscal year 1997. The impairment was determined by the Company's management
based on decreases in the market value of the sites as well as development
costs which were in excess of management's original estimates. Management
determined the fair value of these development sites based on various
methods, including discounted cash flow projections and evaluations of
comparable market prices of land, as appropriate. The write-down for
impairment of long-lived assets was calculated in accordance with the
requirements of SFAS No. 121, but was not necessitated by the implementation
of SFAS No. 121. Had the Company not adopted SFAS No. 121, a similar
write-down would have been required.

The estimation process involved in determining if assets have been impaired
and in determining fair value is inherently uncertain since it requires
estimates of current market yields, as well as future events and conditions.
Such future events and conditions include economic and market conditions, as
well as the availability of suitable financing to fund development and
construction activities. The realization of the estimates applied to the
Company's real estate projects is dependent upon future uncertain events and
conditions and, accordingly, the actual timing and amounts realized by the
Company may differ materially from the estimated fair values, as described
herein.

                                        20

<PAGE>

RESIDENTIAL HOUSING COMPLETED AND UNDER CONSTRUCTION

Residential housing completed and under construction represents the direct
costs of construction of single-family and multifamily home projects,
excluding land costs. Residential housing is valued at the lower of cost or
estimated fair value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Additions and major renewals are
capitalized, while maintenance and repairs are charged to expense as
incurred. Depreciation is provided using accelerated methods, principally
over three to five years for model home furnishings and five to seven years
for furniture and equipment. Accumulated depreciation totaled $878,000 and
$780,000 as of March 31, 1999 and 1998, respectively.

OTHER ASSETS

Other assets consists primarily of the excess of the purchase price paid for
business acquisitions over the net assets acquired, deferred financing costs
and deposits for the option to acquire land. The excess of the purchase price
paid for business acquisitions over the net assets acquired is being
amortized over 20 years, with accumulated amortization of $220,000 and
$147,000 as of March 31, 1999 and 1998, respectively. Deferred financing
costs are amortized over the lives of the respective financing agreements,
with accumulated amortization of $163,000 and $125,000 as of March 31, 1999
and 1998, respectively. Deposits for the option to acquire land are
capitalized as land, development costs and finished lots at the time of
exercise or are charged to expense upon expiration.

INCOME TAXES

The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using currently enacted tax rates.

PRODUCT WARRANTY

The Company warrants its residential housing for periods of 10 and 15 years.
The Company purchases insurance coverage for periods after two years.
Warranty costs are estimated at the time of sale and adjusted annually to
reflect ultimate experience. Product warranty costs are included in cost of
sales in the accompanying consolidated statements of operations.

ADVERTISING

The Company's advertising expense amounted to $1,848,000, $2,316,000 and
$1,795,000 in fiscal years 1999, 1998 and 1997, respectively.

NET EARNINGS (LOSS) PER SHARE

The Company adopted SFAS No. 128, "Earnings per Share," effective December
31, 1997. As a result, all prior periods presented have been restated to
conform to the provisions of SFAS No. 128, which requires presentation of
basic and diluted earnings per share. Basic earnings per share is computed by
dividing net income available to common shareholders by the

                                        21

<PAGE>


weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed under the treasury stock method and is
calculated to reflect the dilutive effect of the Company's stock option
plans. A reconciliation of these amounts is as follows (in thousands, except
per share and antidilutive stock options data):


<TABLE>
<CAPTION>

                                                                       1999          1998         1997
                                                                     -------       -------      -------
<S>                                                                  <C>           <C>          <C>
            Net income (loss)                                        $ 5,177       $  (598)     $ 1,236
                                                                     -------       -------      -------
                                                                     -------       -------      -------
            Weighted average number of common
              shares outstanding:
                  Basic                                                5,773         5,745        5,712
            Dilutive effect of stock options                               -             -           23
                                                                     -------       -------      -------
            Common and potential common
              shares outstanding:
                  Diluted                                              5,773         5,745        5,735
                                                                     -------       -------      -------
                                                                     -------       -------      -------
            Basic earnings (loss) per share                          $  0.90       $ (0.10)     $  0.22
                                                                     -------       -------      -------
                                                                     -------       -------      -------
            Diluted earnings (loss) per share                        $  0.90       $ (0.10)     $  0.22
                                                                     -------       -------      -------
                                                                     -------       -------      -------
            Antidilutive stock options                               838,102       535,102      484,734
                                                                     -------       -------      -------
                                                                     -------       -------      -------

</TABLE>


Stock options were antidilutive because they had an exercise price greater
than the average market price during the year or due to the net loss.

The adoption of SFAS No. 128 had no effect on the Company's previously
reported earnings per share (EPS) for fiscal year 1997.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," and SOP 98-5, "Reporting on
the Costs of Start-up Activities." Additionally, SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," were issued in
1998. The Company adopted these pronouncements in fiscal year 1999 as
required. The adoptions did not have a material effect on the Company's
financial position or results of operations.

2.   DEBT:

REVOLVING CREDIT FACILITY

In March 1998, the Company entered into an unsecured revolving credit
agreement (the Credit Facility) with a group of banks that provides
borrowings of up to $30 million, of which $5 million may be used for letters
of credit. Borrowings under the Credit Facility are subject to a borrowing
base calculation based on a defined percentage of land, development costs,
finished lots and the working capital of the Company. Borrowings under the
Credit Facility bear interest at the federal funds rate plus 0.5% (8.25% as
of March 31, 1999). As of March 31, 1999, borrowings outstanding under the
Credit Facility's line of credit totaled $10,285,000, and

                                        22

<PAGE>


$19,715,000 was available for borrowing under the calculation described
above. The Credit Facility expires in March 2002.

During fiscal years 1999, 1998 and 1997, the maximum balance outstanding
under current and former revolving credit facilities was $21,835,000,
$20,860,000 and $16,585,000, and the average balance was $18,151,000,
$12,359,000 and $9,507,000, respectively. The weighted average interest rate
during such years was 8.7%, 9.5% and 8.9%, respectively. The carrying amount
of borrowings outstanding under the Credit Facility as of March 31, 1999 and
1998 approximates its fair value due to its current maturities and/or
variable interest rates.

SENIOR NOTES PAYABLE

In December 1994, the Company issued $25 million of 12.1% senior notes
payable, and in February 1996, the Company issued an additional $10 million
of 9.4% senior notes payable (collectively, the Senior Notes). Proceeds were
used to retire certain mortgage notes payable and for working capital
purposes. During fiscal year 1999, the Company paid an additional 0.5% of
interest on each of the senior notes. Subsequent to March 31, 1999, the rates
returned to their original rates (12.1% and 9.4%). Monthly payments of
varying amounts are due on the Senior Notes through December 2003. As of
March 31, 1999 and 1998, the fair value of the Senior Notes was approximately
$28,914,000 and $32,800,000, respectively.

MORTGAGE NOTES PAYABLE

Mortgage notes payable are primarily for the acquisition and development of
land, with fixed interest rates ranging from 8.0% to 9.0% and variable
interest rates at prime plus 1.0%. These nonrecourse notes are collateralized
by land, with a carrying cost of approximately $3,813,000 as of March 31,
1999, and mature at various dates through December 2001. The carrying amounts
of mortgage notes payable approximate their fair value due to their current
maturities and/or variable interest rates.

Scheduled annual maturities of the Senior Notes and mortgage notes payable as
of March 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>

          Fiscal Year                                   Amount
          -----------                                  -------
<S>                                                    <C>
            2000                                       $ 6,077
            2001                                         5,455
            2002                                         5,948
            2003                                         6,371
            2004                                         4,331
                                                       -------
                                                       $28,182
                                                       -------
                                                       -------

</TABLE>

The Senior Notes and the Credit Facility contain various restrictive
covenants including, among others, certain financial covenants relating to
minimum consolidated tangible net worth and earnings levels, as well as
funding, borrowing base requirements, payment of dividends and maximum land
and construction limitations. The Company was in compliance with all
financial covenants as of March 31, 1999.

                                        23

<PAGE>


Additionally, the Company has a separate agreement that provides letters of
credit. As of March 31, 1999 outstanding letters of credit totaled $1,600,000.

3.   INCOME TAXES:

The following summarizes the provision (benefit) for income taxes for the
years ended March 31 (in thousands):

<TABLE>
<CAPTION>
                                                  1999        1998      1997
                                                 ------      -----     ------
<S>                                              <C>         <C>       <C>
        Current:
           Federal                               $3,575      $(606)    $1,346
           State                                    464          5        349
        Deferred                                   (441)       186       (833)
                                                 ------      -----     ------
        Provision (benefit) for income taxes     $3,598      $(415)    $  862
                                                 ------      -----     ------
                                                 ------      -----     ------
</TABLE>

The components of deferred income taxes consist of the following as of March
31 (in thousands):

<TABLE>
<CAPTION>
                                                              1999      1998
                                                             ------    ------
<S>                                                          <C>       <C>
       Inventory                                             $  904    $  606
       Warranty reserves                                        396       144
       Other accrued liabilities                                171        93
       State--net operating loss carryforward                     -       191
       Other                                                    134       130
                                                             ------    ------
       Deferred income tax asset                             $1,605    $1,164
                                                             ------    ------
                                                             ------    ------

</TABLE>

A reconciliation of the Company's statutory federal income tax rate to the
effective tax rate is as follows for the years ended March 31:

<TABLE>
<CAPTION>

                                                  1999        1998      1997
                                                 ------      -----     ------
<S>                                              <C>         <C>       <C>

     Statutory federal rate                        34.0%      34.0%     34.0%
     State income taxes, net of federal benefit     6.0        6.0       5.8
     Other                                          1.0        1.0       1.3
                                                 ------      -----     ------
     Effective tax rate                            41.0%      41.0%     41.1%
                                                 ------      -----     ------
                                                 ------      -----     ------
</TABLE>


4.   EMPLOYEE STOCK PLANS:

STOCK OPTION PLANS

The Company has a stock option plan (the Plan) which provides for the
granting of options to designated employees, nonemployees and consultants of
the Company to purchase up to an aggregate of 1,300,000 shares of common
stock at an exercise price not less than the fair market value of the common
stock on the dates the options are granted. The options become exercisable in
equal amounts over a five-year period from the date of grant and expire ten
years

                                        24

<PAGE>


from the date of grant. Certain options granted during fiscal year 1999 have
a vesting period of seven years, yet are accelerated if certain financial
targets are met each year.

The Company also has a director stock option plan (DSOP), pursuant to which
100,000 shares of common stock have been reserved for the granting of stock
options to the Company's outside directors. Under the DSOP, the Company
granted initial options for the purchase of 1,000 shares to each of the two
outside directors and thereafter will grant stock options for the purchase of
1,000 additional shares of common stock annually for each year of continued
service on the board. Each option is granted at fair market value on the date
of grant and is exercisable for a period of four years, commencing one year
after the date of grant.

The following table summarizes activity in the stock option plans:

<TABLE>
<CAPTION>

                                                                                           Weighted
                                                                                            Average
                                                                       Number of Shares    Exercise
                                                                     -------------------
                                                                     The Plan      DSOP     Price
                                                                     -------      ------    -----
<S>                                                                  <C>          <C>      <C>
            Balance, March 31, 1996                                  428,340       5,000    $6.59
               Granted                                               166,196       2,000     5.38
               Exercised                                             (10,420)          -     5.62
               Canceled                                               (8,480)     (3,000)    5.87
                                                                     -------      ------    -----
            Balance, March 31, 1997                                  575,636       4,000     6.26
               Canceled                                              (40,534)          -     6.37
                                                                     -------      ------    -----
            Balance, March 31, 1998                                  535,102       4,000     5.55
               Granted                                               303,000       2,000     4.56
                                                                     -------      ------    -----
            Balance, March 31, 1999                                  838,102       6,000    $5.31
                                                                     -------      ------    -----
                                                                     -------      ------    -----
            Options exercisable as of March 31, 1999                 456,179       6,000    $5.96
                                                                     -------      ------    -----
                                                                     -------      ------    -----
            Shares available for future grants                       442,998      90,000
                                                                     -------      ------
                                                                     -------      ------

</TABLE>

Shares outstanding under the stock option plans as of March 31, 1999 have
exercise prices ranging from $4.00 to $8.53 and a weighted average remaining
contractual life of 7.9 years.

                                        25

<PAGE>


The Company follows the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company has
elected to continue to account for its stock option plans under the
provisions of APB Opinion No. 25, under which no compensation costs have been
recognized. Because the measurement provisions of SFAS No. 123 have not been
applied to options granted prior to April 1, 1995, the resulting pro forma
compensation costs may not be representative of those to be expected in
future years. Had compensation costs for these plans been recorded at fair
value consistent with the provisions of SFAS No. 123, the Company's net
income (loss) and earnings (loss) per share would have been as follows:

<TABLE>
<CAPTION>
                                                                      1999        1998
                                                                     ------      -----
<S>                                                                  <C>         <C>
            Net income (loss) (in thousands):
               As reported                                           $5,177      $(598)
               Pro forma                                              4,959       (713)

            Basic and diluted earnings (loss) per share:
               As reported                                           $ 0.90      $(.10)
               Pro forma                                               0.86       (.12)

</TABLE>


The weighted average fair value of stock options granted in fiscal 1999 was
$1.72.

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model. The following assumptions were used to
estimate the fair value of options granted in the fiscal years (no options
were granted in 1998):

<TABLE>
<CAPTION>

                                                    1999               1997
                                                -----------        -----------
<S>                                             <C>                <C>
            Risk-free interest rate             4.33%-6.74%        5.97%-6.11%
            Expected life                       5-10 years         5-10 Years
            Expected volatility                 42%                34%-36%
            Expected dividend yield             None               None

</TABLE>



EMPLOYEE STOCK PURCHASE PLAN

The Company sponsors an employee stock purchase plan (the Purchase Plan). A
total of 250,000 shares of common stock are reserved for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees to purchase
common stock at 85% of the lower fair market value of the common stock at
certain dates. During the years ended March 31, 1999, 1998 and 1997, employee
contributions of approximately $106,000, $94,000 and $128,000, respectively,
were used to purchase common stock under the terms of the Purchase Plan.

5.   RETIREMENT SAVINGS PLAN:

The Company sponsors a 401(k) profit-sharing plan which covers all employees
over the age of 20 1/2 years who elect to participate. The Company may, at
its discretion, make contributions to the 401(k) plan. All plan contributions
vest in equal installments over a five-year period. The Company contributed
$191,000, $80,000 and $83,000 to the 401(k) plan in fiscal years 1999, 1998
and 1997, respectively.

                                        26

<PAGE>


6.   COMMITMENTS AND CONTINGENCIES:

LETTERS OF CREDIT AND BONDS

Letters of credit are issued by banks, and bonds are issued by insurance
companies on behalf of the Company during the ordinary course of business, as
required by certain development agreements with municipalities. As of March
31, 1999, the Company had outstanding letters of credit totaling $1,600,000
and outstanding bonds totaling $5,000,000.

LITIGATION

The Company is party to certain claims arising in the ordinary course of
business. In the opinion of management, based upon the advice of legal
counsel, the outcomes of such claims are not expected to be material to the
Company's financial position, results of operation or cash flows.

LEASES

The Company is obligated under various noncancelable operating leases for
office facilities and certain equipment. Rental expense under these
agreements, excluding leaseback of model homes, was approximately $728,000,
$714,000 and $866,000 in fiscal years 1999, 1998 and 1997, respectively.

Future minimum lease payments required under noncancelable operating lease
agreements are as follows (in thousands):

<TABLE>
<CAPTION>

          Fiscal Year                                    Amount
          -----------                                    ------
<S>                                                     <C>
            2000                                         $  604
            2001                                            413
            2002                                            274
            2003                                            231
            2004                                            205
            Thereafter                                      312
                                                         ------
                                                         $2,039
                                                         ------
                                                         ------
</TABLE>

During fiscal years 1999 and 1998, the Company entered into three agreements
for the sale and leaseback of 21 and 10, respectively, of its model homes in
Minnesota and New Jersey for approximately $3,602,000 and $1,400,000,
respectively, which resulted in the recognition of an approximately $518,000
gain in fiscal year 1999. The lease term on the individual model homes is
month-to-month, and rental expense for fiscal year 1999 was approximately
$335,000.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with certain members of
management which expire on January 31, 2000. The agreements provide for,
among other things, compensation and benefits, termination of employment,
severance payments and the employment term under a change in control.

                                        27

<PAGE>

7.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

The following is a condensed summary of quarterly results of operations for
fiscal years 1999 and 1998 (in thousands, except per share data):


<TABLE>
<CAPTION>

                                                                 Basic and
                                                                  Diluted
                                                       Net       Earnings
                                          Gross       Income    (Loss) Per
                           Net Sales      Profit      (Loss)      Share
                           ---------      -------     ------    ----------
<S>                        <C>            <C>         <C>       <C>
Fiscal year 1999:
   First quarter           $ 51,355       $ 6,870     $  347     $ 0.06
   Second quarter            63,782         9,700      1,318       0.23
   Third quarter             58,786         8,729      1,023       0.18
   Fourth quarter            78,752        12,302      2,489       0.43
                           --------       -------     ------     ------
                           $252,675       $37,601     $5,177     $ 0.90
                           --------       -------     ------     ------
                           --------       -------     ------     ------
Fiscal year 1998:
   First quarter           $ 42,704       $ 6,076     $  454     $ 0.08
   Second quarter            41,674         5,642         94       0.02
   Third quarter             32,008         4,082       (732)     (0.13)
   Fourth quarter            44,444         5,746       (414)     (0.07)
                           --------       -------     ------     ------
                           $160,830       $21,546     $ (598)    $(0.10)
                           --------       -------     ------     ------
                           --------       -------     ------     ------
</TABLE>

                                        28

<PAGE>

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding the directors of the Company is incorporated
herein by reference to the descriptions set forth under the caption "Election
of Directors" in the Proxy Statement for Annual Meeting of Shareholders to be
held September 10, 1998 (the "1998 Proxy Statement"). Set forth below are the
names, ages and positions of the executive officers of the Company.

<TABLE>

<S>                            <C>     <C>
       David H. Rotter          52     President, Secretary and Director
       Bernard J. Rotter        56     Vice President, Treasurer and Director
       Todd M. Stutz            41     Executive Vice President and Director
       John J. Dierbeck, III    53     Executive Vice President and Director
       Lawrence B. Shapiro      43     Chief Financial Officer and Director

</TABLE>

         The officers of the Company are elected annually and serve at the
discretion of the Board of Directors. None of the Company's officers is
employed pursuant to a written employment contract.

BACKGROUND OF EXECUTIVE OFFICERS

         DAVID H. ROTTER is a founder of the Company and has been a member of
its Board of Directors since its inception. He served as the Company's Vice
President for 1973 through March 1990 and has served as its President from
April 1990 through the present. He has also served as the Company's secretary
since its inception. He is the brother of Bernard J. Rotter.

         BERNARD J ROTTER has served as a Director, Vice President and
Treasurer of the Company since July 1984. He is the brother of David H.
Rotter.

         TODD M. STUTZ was elected a Director of the Company in August 1992
and has served as Executive Vice President since June 1991. He joined the
Company in April 1989 and served as its Land Development Manager until June
1991. Between April 1980 and March 1989 he was employed by the Housing and
Redevelopment Authority of the City of Columbia Heights, Minnesota as
Executive Director.

         JOHN J. DIERBECK, III was elected Executive Vice President in May
1996. He was elected a Director of the Company in August 1992. He served as
the Company's sales manager for more than five years prior to becoming an
Executive Vice President.

         LAWRENCE B. SHAPIRO was elected Chief Financial Officer and a
Director of the Company in August 1992. Prior to that time, he served as the
Company's Controller.

ITEM 11.   EXECUTIVE COMPENSATION

         Information regarding executive compensation is incorporated herein
by reference to the information set forth under the caption "Executive
Compensation" in the 1999 Proxy Statement.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information regarding security ownership of certain beneficial
owners and management of the Company is incorporated herein by reference to
the information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 1999 Proxy Statement.

                                        29

<PAGE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information regarding certain relationships and related transactions
with the Company is incorporated herein by reference to the information set
forth under the caption "Certain Transactions" in the 1999 Proxy Statement.

                              PART IV

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

       (a)      DOCUMENTS FILED WITH THIS REPORT.

                (1)      See index to consolidated financial statements on
                         page 13 of this report.

                (2)      All supplemental schedules are omitted because of the
                         absence of conditions under which they are required
                         or because the information is shown in the
                         Consolidated Financial Statements or notes thereto.

       (b)      REPORTS ON FORM 8-K. During the quarter ended March 31, 1999,
                the Company filed no reports on Form 8-K with the Securities
                and Exchange Commission.

       (c)      EXHIBITS

<TABLE>
<CAPTION>

Exhibit
Number       Description
-------      -----------
<S>          <C>
3.1          The Company's Restated Articles of Incorporation.(1)
3.2          The Company's Bylaws.(1)
10.1         The Rottlund Company, Inc. 1992 Stock Option Plan.(1)
10.2         The Rottlund Company, Inc. 1992 Director Stock Option Plan.(1)
10.3         The Rottlund Company, Inc. Employee Stock Purchase Plan.(1)
10.4         Form of Shareholders Agreement.(1)
10.5         Note Agreement, dated as of December 2, 1994, by and among the Company
             and the purchasers listed therein.(2)
10.6         Note Agreement, dated as of February 15, 1996, by and among the Company
             and the purchasers listed therein.(3)
10.7         Letter Amendment, dated December 30, 1996, by and among the Company and
             the note purchasers listed therein.(5)
10.8         Waiver and Amendment, dated March 31, 1997, by and among the Company
             and the note purchasers listed therein.(5)
10.9         Waiver and Amendment, dated December 31, 1997, by and among the Company
             and the note purchasers listed therein.(5)
10.10        Waiver and Amendment, dated as of March 31, 1998, by and among the Company and the note
             purchasers listed therein.(5)
10.11        Credit Facility, dated October 23, 1996 with First National Bank of Boston.(4)
10.12        First Modification of Credit Agreement, dated November 19, 1996.(5)
10.13        Second Modification of Credit Agreement, dated December 24, 1996.(5)
10.14        Third Modification of Credit Agreement, dated January 18, 1997.(5)
10.15        Fourth Modification of Credit Agreement, dated June 25, 1997.(5)
10.16        Fifth Modification of Credit Agreement, dated January 15, 1998.(5)
10.17        Sixth Modification of Credit Agreement, dated July 10, 1998.(5)
10.18        Employment Agreement with John J. Dierbeck, dated February 1, 1999.
10.19        Change in Control Agreement with John J. Dierbeck, dated February 1, 1999.

                                        30

<PAGE>

10.20        Employment Agreement with Todd M. Stutz, dated February 1, 1999.
10.21        Change in Control Agreement with Todd M. Stutz, dated February 1, 1999.
10.22        Employment Agreement with Lawrence B. Shapiro, dated February 1, 1999.
10.23        Change in Control Agreement with Lawrence B. Shapiro, dated February 1, 1999.
11           Computation of Per Share Earnings.
22           Subsidiaries of the Company.
23           Consent of Arthur Andersen LLP.
27.1         Financial Data Schedule.

------------------------
(1)  Incorporated by reference to the Company's Registration Statement on
     Form S-1, Registration No. 33-51726 (the "Form S-1").
(2)  Incorporated by reference to the Company's filing on Form 10-K for the year
     ended March 31, 1995.
(3)  Incorporated by reference to the Company's filing on Form 10-K for the year
     ended March 31, 1996.
(4)  Incorporated by reference to the Company's filing on Form 10-Q for the
     three month period ending December 31, 1996.
(5)  Incorporated by reference to the Company's filing on Form 10-K for the year
     ended March 31, 1998.

</TABLE>

                                        31

<PAGE>

                                   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.



                                                     THE ROTTLUND COMPANY.  INC.
Dated:  June 25, 1999
                                                     By /s/ David H. Rotter
                                                        ------------------------
                                                           David H. Rotter
                                                     PRESIDENT, CHIEF EXECUTIVE
                                                     OFFICER AND DIRECTOR


         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/ David H. Rotter      President, Chief Executive Officer    June 25, 1999
--------------------------  and Director
     David H. Rotter


  /s/ Bernard J. Rotter     Vice President, Treasurer and         June 25, 1999
--------------------------  Chairman of the Board
    Bernard J. Rotter


/s/ John J. Dierbeck, III   Executive Vice President and          June 25, 1999
--------------------------  Director
  John J. Dierbeck, III


 /s/ Lawrence B. Shapiro    Chief Financial Officer and           June 25, 1999
--------------------------  Director (Principal Financial
   Lawrence B. Shapiro      and Accounting Officer)


    /s/ Todd M. Stutz       Executive Vice President and          June 25, 1999
--------------------------  Director
      Todd M. Stutz


--------------------------  Director
       Dennis Doyle


--------------------------  Director
      Scott D. Rued


                                        32

<PAGE>



                                    EXHIBIT INDEX


<TABLE>
<CAPTION>


Exhibit No.                Exhibit
-----------                -------
<S>                  <C>
  10.18              Employment Agreement with John J. Dierbeck

  10.19              Change in Control Agreement of John J. Dierbeck

  10.20              Employment Agreement with Todd M. Stutz

  10.21              Change in Control Agreement of Todd M. Stutz

  10.22              Employment Agreement with Lawrence B. Shapiro

  10.23              Change in Control Agreement of Lawrence B. Shapiro

  11                 Computation of Per Share Earnings

  22                 Subsidiaries of The Rottlund Company, Inc.

  23                 Consent of Arthur Andersen LLP

  27.1               Financial Data Schedule


</TABLE>


                                        33