10-K 1 umh10k123103.txt FORM 10-K Form 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ___________ to___________ Commission File Number 0-13130 United Mobile Homes, Inc. (Exact name of registrant as specified in its charter) Maryland 22-1890929 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification number) 3499 Route 9, Suite 3C, Freehold, New Jersey 07728 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (732) 577- 9997 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock $.10 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No ____ Based upon the assumption that directors and executive officers of the registrant are not affiliates of the registrant, the aggregate market value of the voting stock of the registrant held by nonaffiliates of the registrant at June 30, 2003 was $118,649,528. Presuming that such directors and executive officers are affiliates of the registrant, the aggregate market value of the voting stock of the registrant held by nonaffiliates of the registrant at June 30, 2003 was $89,070,503. The number of shares outstanding of issuer's common stock as of March 1, 2004 was 8,273,139 shares. Documents Incorporated by Reference: - Exhibits incorporated by reference are listed in Part IV; Item (a) (3). PART I ITEM I - BUSINESS General Development of Business United Mobile Homes, Inc. (the Company) owns and operates twenty-six manufactured home communities containing 6,129 sites. The communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. Effective January 1, 1992, the Company elected to be taxed as a real estate investment trust (REIT) under Sections 856-860 of the Internal Revenue Code. (the Code), and intends to maintain its qualification as a REIT in the future. As a qualified REIT, with limited exceptions, the Company will not be taxed under Federal and certain state income tax laws at the corporate level on taxable income that it distributes to its shareholders. For special tax provisions applicable to REITs, refer to Sections 856 860 of the Code. The Company is subject to franchise taxes in some of the states in which the Company owns property. The Company was incorporated in the state of New Jersey in 1968. On September 29, 2003, the Company changed its state of incorporation from New Jersey to Maryland. The reincorporation was approved by the Company's shareholders at the Company's annual meeting on August 14, 2003. The reincorporation was accomplished by the merger of the Company with and into its wholly-owned subsidiary, United Mobile Homes, Inc., a Maryland corporation, (United Maryland), which was the surviving corporation in the merger. As a result of the merger, each outstanding share of the Company's Class A common stock, $.10 par value per share, was converted into one share of common stock, $.10 par value per share of United Maryland common stock. In addition, each outstanding option to purchase New Jersey Common Stock was converted into the right to purchase Maryland Common Stock upon the same terms and conditions as immediately prior to the Merger. The Company's 1994 Stock Option Plan, as amended, was assumed by United Maryland. The conversion of the New Jersey Common Stock into Maryland Common Stock occurred without an exchange of certificates. Accordingly, certificates formerly representing shares of New Jersey Common Stock are now deemed to represent the same number of shares of Maryland Common Stock. Prior to the Merger, United Maryland had no assets or liabilities, other than nominal assets or liabilities. As a result of the Merger, United Maryland acquired all of the assets and all of the liabilities and obligations of the Company. The Merger was accounted for as if it were a "pooling of interests" rather than a purchase for financial reporting and related purposes, with the result that the historical accounts of the Company and United Maryland have been combined for all periods presented. United Maryland, has the same business, properties, directors, management, status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, and principal executive offices as United Mobile Homes, Inc., a New Jersey corporation. -2- ITEM I - BUSINESS, (CONT'D.) Background Monmouth Capital Corporation, a publicly-owned Small Business Investment Corporation, that had owned approximately 66% of the Company's stock, spun off to its shareholders in a registered distribution three shares of United Mobile Homes, Inc. for each share of Monmouth Capital Corporation. The Company in 1984 and 1985 issued additional shares through rights offerings. The Company has been in operation for thirty-five years, the last eighteen of which have been as a publicly-owned corporation. Narrative Description of Business The Company operates as part of a group of three public companies (all REITs) which includes United Mobile Homes, Inc., Monmouth Capital Corporation, and Monmouth Real Estate Investment Corporation (the affiliated companies). Some general and administrative expenses are allocated between the three affiliated companies based on use or services provided. The Company currently has approximately 100 employees. Allocations of salaries and benefits are made between the affiliated companies based on the amount of the employees' time dedicated to each affiliated company. The Company's primary business is the ownership and operation of manufactured home communities - leasing manufactured home spaces on a month-to-month basis to private manufactured home owners. The Company also leases homes to residents, and through its wholly-owned taxable REIT subsidiary, sells homes to residents and prospective residents of our communities. A manufactured home community is designed to accommodate detached, single family manufactured housing units, which are produced off-site by manufacturers and delivered by truck to the site. Such dwellings, referred to as manufactured homes (which should be distinguished from travel trailers), are manufactured in a variety of styles and sizes. Manufactured homes, once located, are rarely transported to another site; typically, a manufactured home remains on site and is sold by its owner to a subsequent occupant. This transaction is commonly handled through a broker in the same manner that a more traditional single-family residence is sold. Each owner of a manufactured home leases the site on which the home is located from the Company. Manufactured homes are being accepted by the public as a viable and economically attractive alternative to common stick- built single-family housing. During the past five years, approximately one-fifth of all single-family homes built and sold in the nation have been manufactured homes. The size of a modern manufactured home community is limited, as are other residential communities, by factors such as geography, topography, and funds available for development. Generally, modern manufactured home communities contain buildings for recreation, green areas, and other common area facilities, which, as distinguished from resident owned manufactured homes, are the property of the community owner. In addition to such general -3- ITEM I - BUSINESS, (CONT'D.) improvements, certain manufactured home communities include recreational improvements such as swimming pools, tennis courts and playgrounds. Municipal water and sewer services are available to some manufactured home communities, while other communities supply these facilities on site. The housing provided by the manufactured home community, therefore, includes not only the manufactured dwelling unit (owned by the resident), but also the physical community framework and services provided by the manufactured home community. The community manager interviews prospective residents, ensures compliance with community regulations, maintains public areas and community facilities and is responsible for the overall appearance of the community. The manufactured home community, once fully occupied, tends to achieve a stable rate of occupancy. The cost and effort in moving a home once it is located in a community encourages the owner of the manufactured home to resell the manufactured home rather than to remove it from the community. This ability to produce relatively predictable income, together with the location of the community, its condition and its appearance, are factors in the long-term appreciation of the community. Effective April 1, 2001, the Company, through its wholly- owned taxable REIT subsidiary, UMH Sales and Finance, Inc. (S&F), began to conduct manufactured home sales, and financing of these sales, in its communities. Inherent in the operation of a manufactured home community is site vacancies. S&F was established to fill these vacancies and potentially enhance the value of the communities. Additional information about the Company can be found on the Company's website which is located at www.umh.com. The Company's filings with the Securities and Exchange Commission are made available through a link on the Company's website or by calling Investor Relations. Investment and Other Policies of the Company The Company may invest in improved and unimproved real property and may develop unimproved real property. Such properties may be located throughout the United States. In the past, it has concentrated on the northeast. The Company has no restrictions on how it finances new manufactured home communities. It may finance communities by purchase money mortgages or other financing, including first liens, wraparound mortgages or subordinated indebtedness. In connection with its ongoing activities, the Company may issue notes, mortgages or other senior securities. The Company intends to use both secured and unsecured lines of credit. The Company may issue securities for property, however, this has not occurred to date, and it may repurchase or reacquire its shares from time to time if, in the opinion of the Board of Directors, such acquisition is advantageous to the Company. The Company also invests in both debt and equity securities of other REITs. The Company from time to time may purchase these securities on margin when the interest and dividend yields exceed the cost of funds. The securities portfolio, to the extent not pledged to secure borrowing, provides the Company with liquidity and additional income. Such securities -4- ITEM I - BUSINESS, (CONT'D.) are subject to risk arising from adverse changes in market rates and prices, primarily interest rate risk relating to debt securities and equity price risk relating to equity securities. At December 31, 2003 and 2002, the Company had $31,096,211 and $32,784,968, respectively, of securities available for sale. Included in these securities are Preferred Stock and Debt securities of $16,249,188 and $3,438,000, respectively, at December 31, 2003, and $18,012,877 and $2,297,125, respectively, at December 31, 2002. The unrealized gain on securities available for sale at December 31, 2003 and 2002 amounted to $5,308,195 and $3,988,429, respectively. Property Maintenance and Improvement Policies It is the policy of the Company to properly maintain, modernize, expand and make improvements to its properties when required. The Company anticipates that renovation expenditures with respect to its present properties during 2004 will be consistent with 2003 expenditures, which amounted to approximately $2,000,000. It is the policy of the Company to maintain adequate insurance coverage on all of its properties; and, in the opinion of the Company, all of its properties are adequately insured. Risk Factors Real Estate Industry and Competition Risks The Company's investments are subject to the risks generally associated with the ownership of real property, including the uncertainty of cash flow to meet fixed obligations, adverse changes in national economic conditions, changes in the relative popularity (and thus the relative price) of the Company's real estate investments when compared to other investments, adverse local market conditions due to changes in general or local economic conditions or neighborhood values, changes in interest rates and in the availability of mortgage funds, costs and terms of mortgage funds, the financial conditions of residents and sellers of properties, changes in real estate tax rates and other operating expenses (including corrections of potential environmental issues as well as more stringent governmental regulations regarding the environment), governmental rules and fiscal policies including possible proposals for rent controls, as well as expenses resulting from acts of God, uninsured losses and other factors which are beyond the control of the Company. The Company's investments are primarily in rental properties and are subject to the risk or inability to attract or retain residents with a consequent decline in rental income as a result of adverse changes in local real estate markets or other factors. The Company competes for manufactured home community investments with numerous other real estate entities, such as individuals, corporations, REITs and other enterprises engaged in real estate activities, possibly including certain affiliates of the Company. In many cases, the competing concerns may be larger and better financed than the Company, making it difficult for the Company to secure new manufactured home community investments. Competition among private and institutional purchasers of manufactured home community investments has increased substantially in recent years, with resulting increases in the purchase price paid for manufactured home communities and consequent higher fixed costs. -5- ITEM I - BUSINESS, (CONT'D.) Governmental Regulations Local zoning and use laws, environmental statutes and other governmental requirements may restrict expansion, rehabilitation and reconstruction activities. These regulations may prevent the Company from taking advantage of economic opportunities. Legislation such as the Americans with Disabilities Act may require the Company to modify its properties. Future legislation may impose additional requirements. No prediction can be made as to what requirements may be enacted or what changes may be implemented to existing legislation. Rent control affects only two of the Company's manufactured home communities which are in New Jersey and has resulted in a slower growth of earnings from these properties. Environmental Liability Risks Current and former real estate owners and operators may be required by law to investigate and clean up hazardous substances released at the properties they own or operate or have owned or operated. They may be liable to the government or to third parties for property damage, investigation costs and cleanup costs. Contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral. There is no way of determining at this time the magnitude of any potential liability to which the Company may be subject arising out of unknown environmental conditions or violations with respect to the properties it owns. Environmental laws today can impose liability on a previous owner or operator of a property that owned or operated the property at a time when hazardous or toxic substances were disposed of, or released from, the property. A conveyance of the property, therefore, does not relieve the owner or operator from liability. The Company is not aware of any environmental liabilities relating to its properties which would have a material adverse effect on its business, assets, or results of operations. However, no assurance can be given that environmental liabilities will not arise in the future. The Company owns and operates 11 manufactured home communities which either have their own wastewater treatment facility, water distribution system, or both. At these locations, the Company is subject to compliance of monthly, quarterly and yearly testing for contaminants as outlined by the individual state's Department of Environmental Protection Agencies. Currently, the Company is not subject to radon or asbestos monitoring requirements. Insurance Considerations The Company generally maintains insurance policies related to its business, including casualty, general liability and other policies covering business operations, employees and assets. The Company may be required to bear all losses that are not adequately covered by insurance. Although management believes that the Company's insurance programs are adequate, no assurance can be given that the Company will not incur losses in excess of its insurance coverage, or that the Company will be able to obtain insurance in the future at acceptable levels and reasonable cost. -6- ITEM I - BUSINESS, (CONT'D.) Financing Risks The Company finances a portion of its investments through debt. This debt creates risks, including a) rising interest rates on floating rate debt; b) failure to repay or refinance existing debt as it matures, which may result in forced disposition of assets on disadvantageous terms; c) refinancing terms less favorable than the terms of the existing debt; and d) failure to meet required payments of principal and/or interest. Amendment of Business Policies The Board of Directors determines the growth, investment, financing, capitalization, borrowing, REIT status, operating and distribution policies. Although the Board of Directors has no present intention to amend or revise any of these policies, these policies may be amended or revised without notice to shareholders. Accordingly, shareholders may not have control over changes in Company policies. Other Risks The market value of our Common Stock could decrease based on the Company's performance and market perception and conditions. The market value of the Company's Common Stock may be based primarily upon the market's perception of the Company's growth potential and current and future cash dividends, and may be secondarily based upon the real estate market value of the Company's underlying assets. The market price of the Company's Common Stock is influenced by the dividend on the Company's Common Stock relative to market interest rates. Rising interest rates may lead potential buyers of the Company's Common Stock to expect a higher dividend rate, which would adversely affect the market price of our Common Stock. In addition, rising interest rates would result in increased expense, thereby adversely affecting cash flow and the Company's ability to service our indebtedness and pay dividends. There are restrictions on the transfer of the Company's Common Stock. To maintain the Company's qualification as a REIT under the Internal Revenue Code of 1986 (the Code), no more than 50% in value of the Company's outstanding capital stock may be owned, actually or by attribution, by five or fewer individuals, as defined in the Code to also include certain entities, during the last half of a taxable year. Accordingly, the Company's charter and bylaws contain provisions restricting the transfer of the Company's Common Stock. The Company's earnings are dependent, in part, upon the performance of our investment portfolio. As permitted by the Code, management invests in and owns securities of other real estate investment trusts. To the extent that the value of those investments declines or those investments do not provide a return, the Company's earnings could be adversely affected. The Company is subject to restrictions that may impede management's ability to effect a change in control. Certain provisions contained in the Company's charter and bylaws, and certain provisions of Maryland law may have the effect of discouraging a third party from making an acquisition proposal for us and thereby inhibit a change in control. -7- ITEM I - BUSINESS, (CONT'D.) The Company may fail to qualify as a REIT. If the Company fails to qualify as a REIT, the Company will not be allowed to deduct distributions to stockholders in computing our taxable income and will be subject to Federal income tax, including any applicable alternative minimum tax, at regular corporate rates. In addition, the Company might be barred from qualification as a REIT for the four years following disqualification. The additional tax incurred at regular corporate rates would reduce significantly the cash flow available for distribution to stockholders and for debt service. Furthermore, the Company would no longer be required to make any distributions to the Company's stockholders as a condition to REIT qualification. Any distributions to stockholders that otherwise would have been subject to tax as capital gain dividends would be taxable as ordinary income to the extent of the Company's current and accumulated earnings and profits. Corporate distributees, however, may be eligible for the dividends received deduction on the distributions, subject to limitations under the Code. To qualify as a REIT, and to continue to qualify as a REIT, the Company must comply with certain highly technical and complex requirements. The Company cannot be certain it has complied, and will always be able to comply, with these requirements. In addition, facts and circumstances that may be beyond the Company's control may affect the Company's ability to continue to qualify as a REIT. The Company cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to the Company's qualification as a REIT or with respect to the Federal income tax consequences of qualification. The Company believes that it has qualified as a REIT since its inception and intends to continue to qualify as a REIT. However, the Company cannot assure you that the Company is qualified or will remain qualified. The Company may be unable to comply with the strict income distribution requirements applicable to REITs. To obtain the favorable tax treatment associated with qualifying as a REIT, among other requirements, the Company is required each year to distribute to its stockholders at least 90% of its REIT taxable income. The Company will be subject to corporate income tax on any undistributed REIT taxable income. In addition, we will incur a 4% nondeductible excise tax on the amount by which our distributions in any calendar year are less than the sum of (i) 85% of our ordinary income for the year, (ii) 95% of our capital gain net income for the year, and (iii) any undistributed taxable income from prior years. The Company could be required to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT (and to avoid corporate income tax and the 4% excise tax), even if conditions were not favorable for borrowing. Notwithstanding the Company's status as a REIT, the Company is subject to various Federal, state and local taxes on our income and property. For example, the Company will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains, provided, however, that properly designated undistributed capital gains will effectively avoid taxation at the stockholder level. The Company may also have to pay some state income or franchise taxes because not all states treat REITs in the same manner as they are treated for Federal income tax purposes. -8- ITEM I - BUSINESS, (CONT'D.) Number of Employees On March 1, 2004, the Company had approximately 100 employees, including Officers. During the year, the Company hires approximately 20 part-time and full-time temporary employees as lifeguards, grounds keepers and for emergency repairs. -9- ITEM 2 - PROPERTIES United Mobile Homes, Inc. is engaged in the ownership and operation of manufactured home communities located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. The Company owns twenty-six manufactured home communities containing 6,129 sites. The following is a brief description of the properties owned by the Company: 2003 Current Rent Number of Average Per Name of Community Sites Occupancy Month Per Site Allentown 414 84% $278 4912 Raleigh-Millington Road Memphis, TN 38128 Brookview Village 133 77% $334 Route 9N Greenfield Center, NY 12833 Cedarcrest 283 99% $397 1976 North East Avenue Vineland, NJ 08360 Cranberry Village 201 91% $377 201 North Court Cranberry Township, PA 16066 Cross Keys Village 133 88% $254 Old Sixth Avenue Road, RD #1 Duncansville, PA 16635 D & R Village 244 93% $356 Route 146, RD 13 Clifton Park, NY 12065 Fairview Manor 276 94% $399 2110 Mays Landing Road Millville, NJ 08332 Forest Park Village 252 86% $327 724 Slate Avenue Cranberry Township, PA 16066 Heather Highlands 457 64% $245 109 S. Main Street Pittston, PA 18640 Highland Estates 269 95% $386 60 Old Route 22 Kutztown, PA 19530 Kinnebrook 212 89% $376 201 Route 17B Monticello, NY 12701 Lake Sherman Village 210 94% $300 7227 Beth Avenue, SW Navarre, OH 44662 -10- 2003 Current Rent Number of Average Per Name of Community Sites Occupancy Month Per Site Laurel Woods 220 75% $210 1943 St. Joseph Street Cresson, PA 16630 Memphis Mobile City 168 88% $244 3894 N. Thomas Street Memphis, TN 38127 Oxford Village 224 100% $432 2 Dolinger Drive West Grove, PA 19390 Pine Ridge Village 137 88% $344 147 Amy Drive Carlisle, PA 17013 Pine Valley Estates 218 79% $250 700 Pine Valley Estates Apollo, PA 15613 Port Royal Village 427 73% $277 400 Patterson Lane Belle Vernon, PA 15012 River Valley Estates 214 95% $227 2066 Victory Road Marion, OH 43302 Sandy Valley Estates 364 94% $275 801 First, Route #2 Magnolia, OH 44643 Southwind Village 250 97% $282 435 E. Veterans Highway Jackson, NJ 08527 Spreading Oaks Village 153 93% $202 7140-29 Selby Road Athens, OH 45701 Waterfalls Village 202 96% $359 3450 Howard Road Hamburg, NY 14075 Woodland Manor 150 42% $250 338 County Route 11, Lot 165 West Monroe, NY 13167 Woodlawn Village 157 98% $500 Route 35 Eatontown, NJ 07724 Wood Valley 161 94% $228 1493 N. Whetstone River Road Caledonia, OH 43314 -11- ITEM 2 - PROPERTIES (CONT'D.) Occupancy rates are stable with little year-to-year changes once the community is filled (generally 90% or greater occupancy). It is the Company's experience that, once a home is set up in the community, it is seldom moved. The home if sold, is sold on-site to a new owner. Residents generally rent sites on a month-to-month basis. Some residents have one-year leases. Southwind Village and Woodlawn Village (both in New Jersey) are the only communities subject to local rent control laws. There are 17 sites at Sandy Valley which are under a consent order with the Federal Government. This order provides that, as these sites become vacant, they cannot be reused. As of December 31, 2003, all of these sites were vacant. The restrictions on use were known at the time of purchase, and the item is not material to the operation of Sandy Valley Estates. In connection with the operation of its 6,129 sites, the Company operates approximately 500 rental units. These are homes owned by the Company and rented to residents. The Company engages in the rental of manufactured homes primarily in areas where the communities have existing vacancies. The rental homes produce income on both the home and for the site which might otherwise be non-income producing. The Company sells the older rental homes when the opportunity arises. The Company has approximately 800 sites in various stages of engineering/construction. Due to the difficulties involved in the approval and construction process, it is difficult to predict the number of sites which will be completed in a given year. Significant Properties The Company operates approximately $79,000,000 (at original cost) in manufactured home properties. These consist of 26 separate manufactured home communities and related equipment and improvements. There are 6,129 sites in the 26 communities. No one community constitutes more than 10% of the total assets of the Company. Port Royal Village with 427 sites, Sandy Valley Estates with 364 sites, Cedarcrest with 283 sites, Fairview Manor with 276 sites, Highland Estates with 269 sites, Allentown with 414 sites and Heather Highlands with 457 sites are the larger properties. Heather Highlands historically has an average of 65% to 70% occupancy. The property continues to produce positive cash flow. Mortgages on Properties The Company has mortgages on various properties. The maturity dates of these mortgages range from the year 2004 to 2018. Interest varies from fixed rates of 4.625% to 7.5% and a variable rate of prime+1/2%. The aggregate balances of these mortgages total $44,222,675 at December 31, 2003. (For additional information, see Part IV, Item 15(a) (1) (vi), Note 5 of the Notes to Consolidated Financial Statements - Notes and Mortgages Payable). -12- ITEM 3 - LEGAL PROCEEDINGS Legal proceedings are incorporated herein by reference and filed as Part IV, Item 15(a)(1)(vi), Note 13 of the Notes to Consolidated Financial Statements - Legal Matters. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fourth quarter of 2003 to a vote of security holders through the solicitation of proxies or otherwise. -13- PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's shares are traded on the American Stock Exchange (symbol UMH). The per share range of high and low quotes for the Company's stock for each quarterly period is as follows: 2003 2002 2001 HIGH LOW HIGH LOW HIGH LOW First Quarter 14.49 12.64 12.50 11.77 12.75 9.63 Second Quarter 16.85 13.84 13.85 12.15 12.35 10.65 Third Quarter 16.50 14.14 13.50 12.25 11.95 10.50 Fourth Quarter 17.70 14.75 13.54 12.22 12.50 10.25 On March 1, 2004, the closing price of the Company's stock was $16.81. As of December 31, 2003, there were approximately 1,000 shareholders of the Company's common stock based on the number of record owners. For the years ended December 31, 2003, 2002 and 2001, total distributions paid by the Company amounted to $7,118,101 or $.9050 per share ($.5603 taxed as ordinary income and $.3447 taxed as a long-term capital gain), $6,568,295 or $.8650 per share ($.6738 taxed as ordinary income and $.1912 taxed as a long term capital gain), and $5,980,540 or $.8025 per share (all taxed as ordinary income), respectively. It is the Company's intention to continue distributing quarterly dividends. On January 14, 2004, the Company declared a dividend of $.2325 per share to be paid on March 15, 2004 to shareholders of record on February 17, 2004. Future dividend policy will depend on the Company's earnings, capital requirements, financial condition, availability and cost of bank financing and other factors considered relevant by the Board of Directors. -14- ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, (CONT'D.) Equity Compensation Plan Information The following table summarizes information, as of December 31, 2003, relating to equity compensation plans of the Company (including individual compensation arrangements) pursuant to which equity securities of the Company are authorized for issuance. Number of Securities Number of Remaining Securities Weighted- Available for to be average Future Issuance Issued Upon Exercise Under Equity Exercise of Price of Compensation Plans Outstanding Outstanding (excluding Options, Options, Securities Plan Warrants Warrants reflected in Category and Rights and Rights column (a)) (a) (b) (c) ________ ________ ________ ________ Equity Compensation Plans Approved by Security Holders 306,000 $11.17 1,436,000 Equity Compensation Plans not Approved by Security Holders N/A N/A N/A _______ _______ _________ Total 306,000 $11.17 1,436,000 ======= ======= ========= -15- ITEM 6 - SELECTED FINANCIAL DATA The following table sets forth selected financial and other information for the Company as of and for each of the years in the five year period ended December 31, 2003. This table should be read in conjunction with all of the financial statements and notes thereto included elsewhere herein.

December 31, 2003 2002 2001 2001 1999 _____ _____ _____ _____ _____ Operating Data: TotalRevenues $33,790,503 $29,423,893 $26,882,399 $20,644,731 $18,807,085 Total Expenses 25,719,333 23,576,227 21,303,647 15,418,042 14,248,985 Gain (Loss) on Sales of Investment Property and Equipment 55,888 664,546 (28,264) (37,318) (1,964) Net Income 8,127,058 6,512,212 5,550,488 5,189,371 4,556,136 Net Income Per Share - Basic 1.03 .86 .74 .71 .63 Diluted 1.02 .85 .74 .71 .63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash Flow Data: Net Cash Provided by Operating Activities $4,420,150 $6,747,943 $4,277,851 $7,171,086 $6,770,625 Net Cash Provided (Used) by Investing Activities 326,610 (7,076,423) (11,027,374) (4,068,797) (12,032,660) Net Cash Provided (Used) by Financing Activities (3,840,868) 1,099,628 6,918,095 (2,427,680) 5,154,277 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance Sheet Data: Total Assets $94,310,212 $89,026,506 $80,334,844 $62,945,597 $58,575,312 Mortgages Payable 44,222,675 43,321,884 38,652,025 32,055,839 30,419,153 Shareholders' Equity 39,099,776 29,736,417 27,964,534 22,839,426 21,391,307 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Data: Average Number of Shares Outstanding 7,858,888 7,600,266 7,457,636 7,339,684 7,252,774 Funds from Operations* $10,980,239 $9,319,106 $8,263,308 $7,845,528 $7,010,633 Cash Dividends Per Share .9050 .8650 .8025 .7575 .75

-16- ITEM 6 - SELECTED FINANCIAL DATA, (CONT'D.) *Funds from Operations (FFO) is defined as net income excluding gains (or losses) from sales of depreciable assets, plus depreciation. FFO should be considered as a supplemental measure of operating performance used by real estate investment trust (REITs). FFO excludes historical cost depreciation as an expense and may facilitate the comparison of REITs which have different cost bases. The items excluded from FFO are significant components in understanding and assessing the Company's financial performance. FFO (1) does not represent cash flow from operations as defined by generally accepted accounting principles; (2) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (3) is not an alternative to cash flow as a measure of liquidity. FFO, as calculated by the Company, may not be comparable to similarly entitled measures reported by other REITs. The Company's FFO is calculated as follows: 2003 2002 2001 2000 1999 _____ _____ _____ _____ _____ Net Income $8,127,058 $6,512,212 $5,550,488 $5,189,371 $4,556,136 (Gain) Loss on Sales of Assets (55,888) (3,546) 28,264 37,318 1,946 Depreciation Expense 2,909,069 2,810,440 2,684,556 2,618,839 2,452,533 __________ __________ _________ __________ __________ FFO (1) $10,980,239 $9,319,106 $8,263,308 $7,845,528 $7,010,633 ========== ========== ========== ========== ========== (1) Includes gain on sale of land of $661,000 in 2002. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto elsewhere herein. The Company is a real estate investment trust (REIT). The Company's primary business is the ownership and operation of manufactured home communities - leasing manufactured home spaces on a month-to-month basis to private manufactured home owners. The Company also leases homes to residents and, through, its taxable REIT subsidiary, sells homes to residents and prospective residents of our communities. The Company owns twenty-six communities containing 6,129 sites. The communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. The Company's revenue primarily consists of rental and related income from the operation of the manufactured home communities. Revenues also include sales of manufactured homes, interest and dividend income and gain on sales of securities available for sale. See PART I, Item 1. Business for a more complete discussion of the economic and industry-wide factors relevant to the Company, the Company's lines of business and principal products and services, and the opportunities, challenges and risks on which the Company is focused. -17- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) Significant Critical Accounting Policies and Estimates The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the Company's financial statements. Actual results may differ from these estimates under different assumptions or conditions. Significant accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions. Management believes the following significant accounting policies are affected by our more significant judgments and estimates used in the preparation of the Company's financial statements. For a detailed description of these and other accounting policies, see Note 2 in the notes to the Company's consolidated financial statements included in this Form 10-K. Management has discussed each of these significant accounting policies with the Audit Committee of the Board of Directors. Real Estate Investments The Company applies Financial Accounting Standards Board Statement No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets", (Statement 144) to measure impairment in real estate investments. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis without interest) from a rental property is less than its historical net cost basis. These expected future cash flows consider factors such as future operating income, trends and prospects as well as the effects of leasing demand, competition and other factors. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. For properties to be disposed of, an impairment loss is recognized when the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property measured at the time there is a commitment to sell the property and/or it is actively being marketed for sale. A property to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Subsequent to the date that a property is held for disposition, depreciation expense is not recorded. Securities Available for Sale Investments in non-real estate assets consist primarily of marketable equity securities. Management reviews our marketable securities for impairment on an annual basis, or when events or circumstances occur. If a decline in fair value is determined to be other than temporary, an impairment charge is recognized in earnings and the cost basis of the individual security shall be written down to fair value as the new cost basis. Management's evaluation includes consideration of events that may be attributable to the unrealized loss, including, among other things, the credit-worthiness of the issuer, length of time that a security had a continuous unrealized loss, and the financial position of the issuing company. -18- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) Other Estimates are used when accounting for the allowance for doubtful accounts, potentially excess and obsolete inventory and contingent liabilities, among others. These estimates are susceptible to change and actual results could differ from these estimates. The effects of changes in these estimates are recognized in the period they are determined. Revenue and Expense 2003 vs. 2002 Rental and related income increased from $20,140,691 for the year ended December 31, 2002 to $20,954,274 for the year ended December 31, 2003 primarily due to the acquisition of a new community in 2003 and rental increases to residents. During 2003, the Company was able to obtain an average rent increase of approximately 4%. Occupancy as well as the ability to increase rental rates directly affect revenues. The Company has experienced a slight decrease in occupancy of approximately 1% from 87% in 2002. The Company has faced many challenges in filling vacant homesites. Relatively low interest rates have made site-built housing more accessible. Attractive apartment rental deals have also contributed to the increased vacancies. Some of the Company's vacancies are the result of expansions in progress. The Company is also evaluating further expansion at selected communities in order to increase the number of available sites. Sales of manufactured homes increased from $5,538,202 for the year ended December 31, 2002 to $6,758,168 for the year ended December 31, 2003. Cost of sales of manufactured homes increased from $4,657,988 for the year ended December 31, 2002 to $5,360,554 for the year ended December 31, 2003. Selling expenses increased from $1,040,005 for the year ended December 31, 2002 to $1,255,773 for the year ended December 31, 2003. These fluctuations are directly attributable to the fluctuations in sales. Income from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) increased from a loss of $159,791 for the year ended December 31, 2002 to a profit of $141,841 for the year ended December 31, 2003. The Company has been experiencing an increase in sales volume as well as an increase in gross margin. The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities. Interest and dividend income increased from $2,867,142 in 2002 to $3,260,261 in 2003. This was primarily as a result of a higher average balance of securities available for sale during 2003. Gains on sales of securities available for sale increased from $794,950 in 2002 to $2,698,724 in 2003. This increase was primarily the result of the Company's decision to take advantage of the rise in price of the securities portfolio. The Company has also experienced an increase in redemptions on the preferred stock holdings by the issuers. These securities were redeemed at par. -19- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) Community operating expenses increased from $9,457,214 for the year ended December 31, 2002 to $10,305,372 for the year ended December 31, 2003 primarily as a result of the acquisition of a new community in 2003 and increased real estate taxes, professional fees and personnel costs, including health insurance. General and administrative expenses increased from $2,184,045 in 2002 to $2,589,275 in 2003 primarily as a result of an increase in professional fees relating to growth of corporate offices, staff and reorganization in Maryland. Interest expense decreased from $3,314,335 in 2002 to $3,190,490 in 2003. This was primarily as a result of a decrease in loans payable. The Company has also extended the Waterfalls Village mortgage and the D&R Village mortgage and reduced those rates from over 7% to 4.625%. The balance of these mortgages amounted to $2,632,734 and $3,044,969 at December 31, 2003, respectively. Interest capitalized on construction in progress amounted to $145,800 and $162,600 for 2003 and 2002, respectively. Depreciation expense and amortization of financing costs remained relatively stable. Gain on sales of investment property and equipment decreased from $664,546 in 2002 to $55,888 in 2003 primarily due to the sale of vacant land at a gain of $661,000 in 2002. For the year ended December 31, 2003, the Company reported net income of $8,127,058 as compared to net income of $6,512,212 for the year ended December 31, 2002. The Company is currently experiencing modest inflation. Modest inflation is believed to have a favorable impact on the Company's financial performance. With modest inflation, the Company believes that it can increase rents sufficiently to match increases in operating expenses. High rates of inflation (more than 10%) could result in an inability to raise rents to meet rising costs and could create political problems such as the imposition of rent controls. 2002 vs. 2001 Rental and related income increased from $19,291,611 for the year ended December 31, 2001 to $20,140,691 for the year ended December 31, 2002 primarily due to the acquisition of a new community in 2001 and rental increases to residents. During 2002, the Company was able to obtain an average rent increase of approximately 3%. Overall occupancy rates are satisfactory with eight manufactured home communities experiencing vacancies over ten percent. Some of these vacancies are the result of expansions. The Company is also evaluating further expansion at selected communities in order to increase the number of available sites. Some of these communities are in various stages of expansion. Effective April 1, 2001, the Company, through its wholly- owned taxable subsidiary, UMH Sales and Finance, Inc. (S&F), began to conduct manufactured home sales in its communities. This company was established to enhance the occupancy of the communities. Sales of manufactured homes, other income, cost of sales of manufactured homes and selling expenses are directly related to this operation. -20- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) Interest and dividend income increased from $2,188,430 in 2001 to $2,867,142 in 2002 due to purchases of securities available for sale during 2001 and 2002. Gains on sales of securities available for sale increased from $530,324 in 2001 to $794,950 in 2002. Community operating expenses increased from $9,004,164 for the year ended December 31, 2001 to $9,457,214 for the year ended December 31, 2002 primarily as a result of the acquisition of a new community in the later part of 2001 and increased insurance expense and personnel costs. General and administrative expenses increased from $2,015,685 in 2001 to $2,184,045 in 2002 primarily as a result of an increase in personnel costs. Interest expense increased from $2,825,894 in 2001 to $3,314,335 in 2002. This was primarily as a result of a higher average principal balance outstanding. Interest capitalized on construction in progress amounted to $162,600 and $146,000 for 2002 and 2001, respectively. Depreciation expense increased from $2,684,556 for the year ended December 31, 2001 to $2,810,440 for the year ended December 31, 2002 primarily as a result of the acquisition of a new community in the later part of 2001 and the completion of certain projects. Amortization of financing costs increased from $87,748 in 2001 to $112,200 in 2002 due to recent refinancing. Gain (loss) on sales of investment property and equipment increased from a loss of $28,264 in 2001 to a gain of $664,546 in 2002 primarily due to the sale of vacant land at a gain of $661,000. For the year ended December 31, 2002, the Company reported net income of $6,512,212 as compared to net income of $5,550,488 for the year ended December 31, 2001. Off-Balance Sheet Arrangements and Contractual Obligations The following is a summary of the Company's contractual obligations as of December 31, 2003: Contractual Less than More than Obligations Total 1 year 1-3 years 3-5 years 5 years Mortgages Payable $44,222,675 $3,495,890 $11,060,769 $15,366,900 $14,299,116 Operating Lease Obligations 192,000 144,000 48,000 Retirement Benefits 897,050 897,050 Purchase of Communities 3,512,000 3,512,000 _________ _________ _________ _________ _________ Total $48,823,725 $7,151,890 $11,108,769 $15,366,900 $15,196,166 ========== ========= ========== ========== ========== -21- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) Mortgages payable represents the principal amounts outstanding by scheduled maturity. The interest rates on these mortgages are fixed rates ranging from 4.625% to 7.5% and a variable rate of prime plus 1/2%. The above table does not include the Company's obligation under short-term borrowings as described in Note 5 of the Notes to Consolidated Financial Statements. Operating lease obligations represent a lease, with a related party, for the Company's corporate offices. The lease is for a five-year term with monthly lease payments of $12,000. The Company is also responsible for its proportionate share of real estate taxes and common area maintenance. Retirement benefits represent post-retirement benefits that are not funded and therefore will be paid from the assets of the Company. Purchase of communities represent the purchase price of Bishop's Mobile Home Court and Whispering Pines Community in Somerset Township, Pennsylvania. This purchase was completed on March 1, 2004 (See Note 16 of the Notes to Consolidated Financial Statements). Liquidity and Capital Resources The Company uses funds for real estate acquisitions, real property improvements, amortization of debt incurred in connection with such acquisitions and improvements, purchase of inventory of manufactured homes and investment in debt and equity securities of other REITs. The Company generates funds through cash flow from properties, sales of manufactured homes and its securities portfolio, mortgages on properties and increases in shareholder investments. The Company has liquidity available from a combination of short and long-term sources. The Company currently has mortgages payable totaling $44,222,675 secured by fourteen communities and loans payable totaling $7,840,962 primarily secured by investment securities and inventory of manufactured homes. The Company has a $2,000,000 line of credit with Fleet Bank, none of which was utilized at December 31, 2003. The Company believes that its 26 communities have market values in excess of historical cost. Management believes that this provides significant additional borrowing capacity. Net cash provided by operating activities increased from $4,277,851 in 2001 to $6,747,943 in 2002 and decreased to $4,420,150 in 2003. Cash flow was primarily used for capital improvements, payment of dividends, purchases of securities available for sale, purchase of inventory of manufactured homes, loans to customers for the sales of manufactured homes, purchases of manufactured home communities and expansion of existing communities. The Company meets maturing mortgage obligations by using a combination of cash flow and refinancing. The dividend payments were primarily made from cash flow from operations. In addition to normal operating expenses, the Company requires cash for additional investments in manufactured home communities, capital improvements, purchase of manufactured homes for rent, scheduled mortgage amortization and dividend distributions. The Company also invests in debt and equity securities of other REITs for liquidity and additional income. The Company from time to time may purchase these securities on margin when there is an adequate yield spread. The margin loan at December 31, 2003 totaled -22- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) approximately $6,700,000. During 2003, the Company's securities portfolio decreased by approximately $1,700,000 primarily due to sales of approximately $11,500,000, partially offset by purchases of approximately $8,500,000 and a change in the unrealized gain of approximately $1,300,000. During 2003, the Company recognized a portion of the substantial unrealized gains in the security portfolio. The securities portfolio at December 31, 2003 has experienced an increase in value from cost of approximately 21%, however, there are no assurances such increases will continue. The Company estimates that in 2004 it will purchase approximately 25 manufactured homes to be used as rentals for a total cost of $500,000. Management believes that these manufactured homes will each generate approximately $300 per month in rental income in addition to lot rent. Once rental homes reach 10 years old, the Company generally sells them. Capital improvements include amounts needed to meet environmental and regulatory requirements in connection with the manufactured home communities that provide water or sewer service. Excluding expansions, the Company is budgeting approximately $1,000,000 in capital improvements for 2004. The Company's only significant commitments and contractual obligations relate to retirement benefits and the lease on its corporate offices as described in Note 9 to the Consolidated Financial Statements. The Company has a Dividend Reinvestment and Stock Purchase Plan (Plan), which provides for the reinvestment of dividends and for monthly optional cash payments of not less than $500 per payment nor more than $1,000 unless a request for waiver has been accepted by the Company. During 2003, amounts received, including dividends reinvested of $1,744,096, amounted to $5,729,083. During 2003, the Company paid $7,118,101, including dividends reinvested. The success of the Plan resulted in a substantial improvement in the Company's liquidity and capital resources in 2003. The Company has undeveloped land which it could develop over the next several years. The Company is also exploring the utilization of vacant land for town houses. The Company continues to analyze the highest and best use of its vacant land, and uses it accordingly. The Company believes that funds generated from operations, together with the financing and refinancing of its properties, will be adequate to meet its needs over the next several years. Recent Accounting Pronouncements FASB Interpretation No. 46, Consolidation of Variable Interest Entities "FIN 46" was issued in January 2003 and was reissued as FASB Interpretation No. 46 (revised December 2003) (FIN 46R). For public entities, FIN 46 or FIN 46R is applicable to all special-purpose entities (SPEs) in which the entity holds a variable interest no later than the end of the first reporting period ending after December 15, 2003, and immediately to all entities created after January 31, 2003. The effective dates of FIN 46R vary depending on the type of reporting enterprise and the type of entity that the enterprise is involved with. FIN 46 and FIN 46R may -23- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. FIN 46 and FIN 46R provides guidance on the identification of entities controlled through means other than voting rights. FIN 46 and FIN 46R specifies how a business enterprise should evaluate its involvement in a variable interest entity to determine whether to consolidate that entity. A variable interest entity must be consolidated by its primary beneficiary if the entity does not effectively disperse risks or rewards among the parties involved. Conversely, effective dispersion of risks among the parties involved requires that a company that previously consolidated a special purpose entity, upon adoption of FIN 46 or FIN 46R, to deconsolidate such entity. Management believes that this interpretation will not have a material impact on the Company's consolidated financial statements. In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, with some exceptions, and for hedging relationships designated after June 30, 2003. The guidance should be applied prospectively. Management believes that this Statement will not have a material impact on the Company's consolidated financial statements. In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. On October 29, 2003, the FASB voted to indefinitely defer certain provisions of this statement relating to non- controlling (minority) interests in finite-like entities. Management believes that this Statement will not have a material impact on the Company's consolidated financial statements. Safe Harbor Statement This Form 10-K contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "may", "will", "expect", "believe", "anticipate", "should", "estimate", and similar expressions -24- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONT'D.) identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and finance performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors relating to the Company's operations and business environment which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: (i) changes in the general economic climate; (ii) increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; (iii) changes in government laws and regulations affecting manufactured housing communities; and (iv) the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. ITEM 7A -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company's real estate investment portfolio and operations. The Company's interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the Company borrows primarily at fixed rates. The following table sets forth information as of December 31, 2003, concerning the Company's debt obligations, including principal cash flow by scheduled maturity, weighted average interest rates and estimated fair value. Variable Long- Fixed Rate Average Rate term Carrying Interest Carrying Total Debt Value Rate Value Long-Term Debt _________ ______ _________ ___________ 2004 $ 3,495,890 7.00% $ 3,495,890 2005 9,411,641 7.50% 9,411,641 2006 1,649,128 6.38% 1,649,128 2007 3,859,421 6.39% 3,859,421 2008 11,507,479 4.90% 11,507,479 Thereafter 10,859,177 6.85% $3,439,939 14,299,116 __________ _________ __________ Total $40,782,736 $3,439,939 $44,222,675 ========== ========= ========== Fair Value $41,157,177 $3,439,939 $44,597,116 ========== ========= ========== The Company has assessed the market risk for its variable rate long-term debt and believes that a 1% increase in the prime rate would result in an approximate $35,000 increase in interest expense based on $3,500,000 of variable rate long-term debt outstanding at December 31, 2003. -25- ITEM 7A -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONT'D.) The Company also has approximately $7.8 million in variable rate debt due on demand. This debt primarily consists of $6.7 million margin loans secured by marketable securities, and a $1.1 million inventory financing loan. The interest rates on these loans range from 2.75% to 8% at December 31, 2003. The carrying value of the Company's variable rate debt approximates fair value at December 31, 2003. The Company also invests in both debt and equity securities of other REITs and is primarily exposed to equity price risk from adverse changes in market rates and conditions. All securities are classified as available for sale and are carried at fair value. The Company has no significant interest rate risk relating to debt securities as they are short-term in nature. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data listed in Part IV, Item 15(a)(1) are incorporated herein by reference. The following is the Unaudited Selected Quarterly Financial Data: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) THREE MONTHS ENDED 2003 March 31 June 30 September 30 December 31 ____ ________ ________ ___________ ___________ Total Revenues $7,751,172 $8,289,471 $8,834,105 $8,915,755 Total Expenses 5,954,998 6,353,329 6,533,466 6,877,540 Net Income 1,802,476 1,967,394 2,313,737 2,043,451 Net Income per Share - Basic .24 .25 .29 .25 Diluted .23 .25 .29 .25 2002 March 31 June 30 September 30 December 31 _____ ________ ________ ___________ ___________ Total Revenues $7,069,357 $7,490,084 $7,883,991 $6,980,461 Total Expenses 5,220,940 5,965,387 6,382,832 6,007,068 Net Income 1,851,744 1,520,345 1,493,901 1,646,222 Net Income per Share- Basic .25 .20 .19 .22 Diluted .24 .20 .19 .22 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -26- ITEM 9A - CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective. The Company's Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. -27- PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following are the Directors and Executive Officers of the Company as of December 31, 2003. Present Position with the Company; Business Experience During Past Five Director Name Age Years; Other Directorships Since ____ ___ _______________________________ _______ Ernest V. 85 Secretary/Treasurer (1984 to 1969 Bencivenga present) and Director. Financial Consultant (1976 to present); Treasurer and Director (1961 to present) and Secretary (1967 to present) of Monmouth Capital Corporation, an affiliate of the Company; Treasurer and Director (1968 to present) Monmouth Real Estate Investment Corporation, an affiliate of the Company. Anna T. Chew 45 Vice President and Chief Financial 1995 Officer (1995 to present) and Director. Vice President (2001 to present) and Director (1994 to present) of Monmouth Capital Corporation, an affiliate of the Company; Certified Public Accountant; Controller (1991 to present) and Director (1993 to present) of Monmouth Real Estate Investment Corporation, an affiliate of the Company. Charles P. 66 Director. Director (1970 to present) 1969 Kaempffer of Monmouth Capital Corporation, an affiliate of the Company; Director (1974 to present) of Monmouth Real Estate Investment Corporation, an affiliate of the Company; Vice Chairman and Director (1996 to present) of Community Bank of New Jersey. Eugene W. Landy 70 Chairman of the Board (1995 to 1969 present), President (1969 to 1995) and Director. Attorney at Law; Chairman of the Board (2001 to present), President and Director (1961 to present) of Monmouth Capital Corporation, an affiliate of the Company; President and Director (1968 to present) of Monmouth Real Estate Investment Corporation, an affiliate of the Company. Eugene W. Landy is the father of Samuel A. Landy. Samuel A. Landy 43 President (1995 to present), Vice 1992 President (1991-1995) and Director. Attorney at Law; Director (1994 to present) of Monmouth Capital Corporation, an affiliate of the Company; Director (1989 to present) of Monmouth Real Estate Investment Corporation, an affiliate of the Company. Samuel A. Landy is the son of Eugene W. Landy. -28- ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, (CONT'D.) Present Position with the Company; Business Experience During Past Director Name Age Five Years; Other Directorships Since ____ ___ _______________________________ _______ James E. 63 Director. Attorney at Law; General 2001 Mitchell Partner, Mitchell Partners, L.P. (1979 to present); President, Mitchell Capital Management, Inc. (1987 to present). Richard H. Molke 77 Director. Vice President (1984 to 1986 1998) of Remsco, Associates, Inc., a construction firm. Eugene 70 Director. Director (2001 to 1977 Rothenberg present) of Monmouth Capital Corporation, an affiliate of the Company. Retired physician. Robert G. 77 Director. Director (1963 to 1969 Sampson present) of Monmouth Capital Corporation, an affiliate of the Company; Director (1968 to 2001) of Monmouth Real Estate Investment Corporation, an affiliate of the Company; General Partner (1983 to present) of Sampco, Ltd., an investment group. Audit Committee The Company's Board of Directors has determined that at least one member of the Audit Committee is a financial expert. Delinquent Filers There have been no delinquent filers pursuant to Item 405 of regulation S-K, to the best of management's knowledge. Code of Ethics The Company has adopted the Code of Business Conduct and Ethics (the Code of Ethics). The Code of Ethics can be found at the Company's website at www.umh.com, as well as attached to this filing at Exhibit 14. -29- ITEM 11 - EXECUTIVE COMPENSATION Summary Compensation Table. The following Summary Compensation Table shows compensation paid by the Company for services rendered during 2003, 2002 and 2001 to the Chairman of the Board, President and Vice President. There were no other executive officers whose aggregate cash compensation exceeded $100,000: Name and Annual Compensation Principal Position Year Salary Bonus All Other Options Eugene W. Landy 2003 $150,000 $ - $35,776 (1) -0- Chairman of the 2002 150,000 - 17,276 (1) -0- Board 2001 150,000 - 15,076 (1) -0- Samuel A. Landy 2003 $299,250 $54,862 $23,085 (2) 25,000 President 2002 285,000 14,961 21,585 (2) 25,000 2001 224,615 25,704 21,028 (2) 25,000 Anna T. Chew 2003 $177,200 $16,194 $19,631 (3) 10,000 Vice President 2002 160,488 16,194 19,000 (3) 10,000 2001 145,898 15,631 17,646 (3) 10,000 (1) Represents Directors' fees, legal fees and fringe benefits. (2) Represents Directors' fees, fringe benefits and discretionary contributions by the Company to the Company's 401(k) Plan allocated to an account of the named executive officer. (3) Represents Directors' fees and discretionary contributions by the Company to the Company's 401(k) Plan allocated to an account of the named executive officer. Stock Option Plan. On August 14, 2003, the shareholders approved and ratified the Company's 2003 Stock Option Plan (the 2003 Plan) authorizing the grant to officers and key employees of options to purchase up to 1,500,000 shares of common stock. All options are exercisable one year from the date of grant. The option price shall not be below the fair market value at date of grant. If options granted under the 2003 Plan expire or terminate for any reason without having been exercised in full, the Shares subject to, but not delivered under, such options shall become available for additional option grants under the 2003 Plan. This Plan replaced the Company's 1994 Stock Option Plan which, pursuant to its terms, terminated December 31, 2003. -30- ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.) The following table sets forth, for the executive officers named in the Summary Compensation Table, information regarding individual grants of stock options made during the year ended December 31, 2003: Potential Realized Value at Assumed Annual Price Rates for Option Options Granted to Per Expiration Terms Name Granted Employees Share Date 5% 10% ______ ______ ______ ______ ______ ______ ______ Samuel A.Landy 25,000 39% $16.92 08/18/11 $145,082 $401,210 Anna T. Chew 10,000 16% $15.00 08/25/11 $ 71,618 $171,538 The following table sets forth for the executive officers named in the Summary Compensation Table, information regarding stock options outstanding at December 31, 2003: Value of Number of Unexercised Unexercised Options Shares Value Options at Year-End At Year-End Name Exercised Realized Exercisable/Unexercisable Exercisable/Unexercisable Eugene W. Landy 25,000 $ 85,500 50,000/ -0- $438,000/ $ -0- Samuel A. Landy 25,000 $137,945 100,000/ 25,000 $686,624/ $ 2,250 Anna T. Chew 20,000 $130,275 30,000/ 10,000 $193,300/ $20,100 Compensation of Directors. The Directors receive a fee of $1,500 for each Board meeting attended, and an additional fixed annual fee of $10,000, payable $2,500 quarterly. Directors appointed to house committees receive $150 for each meeting attended. Those specific committees are Compensation Committee, Audit Committee and Stock Option Committee. Employment Contracts. On December 14, 1993, the Company and Eugene W. Landy entered into an Employment Agreement under which Mr. Landy receives an annual base compensation of $150,000 (as amended) plus bonuses and customary fringe benefits, including health insurance, participation in the Company's 401(k) Plan, stock options, five weeks' vacation and use of an automobile. Additionally, there may be bonuses voted by the Board of Directors. The Employment Agreement is terminable by either party at any time subject to certain notice requirements. On severance of employment by the Company, Mr. Landy will receive severance of $450,000, payable $150,000 on severance and $150,000 on the first and second anniversaries of severance. In the event of disability, Mr. Landy's compensation will continue for a period of three years, payable monthly. On retirement, Mr. Landy will receive a pension of $50,000 a year for ten years, payable in monthly installments. In the event of death, Mr. Landy's designated beneficiary will receive $450,000, $100,000 thirty days after death and the balance one year after death. The Employment Agreement automatically renews each year for successive one-year periods. -31- ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.) Effective January 1, 2002, the Company and Samuel A. Landy entered into a three-year Employment Agreement under which Mr. Samuel Landy receives an annual base salary of $285,000 for 2002, $299,250 for 2003 and $314,212 for 2004 plus bonuses and customary fringe benefits. Bonuses are at the discretion of the Board of Directors and are based on certain guidelines. Mr. Samuel Landy will also receive four weeks vacation, use of an automobile, and stock options for 25,000 shares in each year of the contract. On severance by the Company or disability, Mr. Samuel Landy is entitled to one year's salary. Effective January 1, 2003, the Company and Anna T. Chew entered into a three-year Employment Agreement. Ms. Chew will receive an annual base salary of $177,200 for 2003, plus bonuses and customary fringe benefits. Each year Ms. Chew will receive a 10% increase in her base salary. On severance by the Company, Ms. Chew is entitled to an additional one year's salary. In the event of disability, her salary shall continue for a period of two years. Report of Board of Directors on Executive Compensation Overview and Philosophy The Company has a Compensation Committee consisting of two independent outside Directors. This Committee is responsible for making recommendations to the Board of Directors concerning executive compensation. The Compensation Committee takes into consideration three major factors in setting compensation. The first consideration is the overall performance of the Company. The Board believes that the financial interests of the executive officers should be aligned with the success of the Company and the financial interests of its shareholders. Increases in funds from operations, the enhancement of the Company's equity portfolio, and the success of the Dividend Reinvestment and Stock Purchase Plan all contribute to increases in stock prices thereby maximizing shareholders' return. The second consideration is the individual achievements made by each officer. The Company is a small real estate investment trust (REIT). The Board of Directors is aware of the contributions made by each officer and makes an evaluation of individual performance based on their own familiarity with the officer. The final criteria in setting compensation is comparable wages in the industry. In this regard, the REIT industry maintains excellent statistics. Evaluation Mr. Eugene Landy is under an employment agreement with the Company. His base compensation under this contract is $150,000 per year. (The Summary Compensation Table for Mr. Eugene Landy shows a salary of $150,000 and $35,776 in director's fees, fringe benefits and legal fees). -32- ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.) The Committee also reviewed the progress made by Mr. Samuel A. Landy, President, including funds from operations which increased by approximately 18%. Mr. Samuel Landy is under an employment agreement with the Company. His base compensation under this contract is $299,250 for 2003. Mr. Samuel Landy also received bonuses totaling $54,862. These bonuses were primarily based upon his meeting certain performance goals as outlined in his employment agreement. Compensation Committee: Richard H. Molke Eugene Rothenberg COMPARATIVE STOCK PERFORMANCE. The line graph compares the total return of the Company's common stock for the last five years to the NAREIT ALL REIT Total Return Index published by the National Association of Real Estate Investment Trust (NAREIT) and to the S&P 500 Index for the same period. The total return reflects stock price appreciation and dividend reinvestment for all three comparative indices. The information herein has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness is guaranteed. 1998 1999 2000 2001 2002 2003 ____ ____ ____ ____ ____ ____ United Mobile Homes, Inc. 100 84 106 146 174 231 NAREIT All REIT 100 94 118 136 143 198 S & P 500 100 121 110 97 76 97 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists information with respect to the beneficial ownership of the Company's Shares as of December 31, 2003 by: - each person known by the Company to beneficially own more than five percent of the Company's outstanding Shares; - the Company's directors; -33- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, (CONT'D.) - the Company's executive officers; and - all of the Company's executive officers and directors as a group. Unless otherwise indicated, the person or persons named below have sole voting and investment power and that person's address is c/o United Mobile Homes, Inc., Juniper Business Plaza, 3499 Route 9 North, Suite 3-C, Freehold, New Jersey 07728. In determining the number and percentage of Shares beneficially owned by each person, Shares that may be acquired by that person under options exercisable within 60 days of December 31, 2003 are deemed beneficially owned by that person and are deemed outstanding for purposes of determining the total number of outstanding Shares for that person and are not deemed outstanding for that purpose for all other shareholders. Amount and Nature Percentage Name and Address of Beneficial of Shares of Beneficial Owner Ownership(1) Outstanding(2) Ernest V. Bencivenga 30,318(3) * Anna T. Chew 113,392(4) 1.38% Charles P. Kaempffer 32,425(5) * Eugene W. Landy 1,027,432(6)(12) 12.51% Samuel A. Landy 381,170(7) 4.61% James E. Mitchell 170,322(8) 2.09% Richard H. Molke 109,656(9) 1.34% Eugene D. Rothenberg 81,419(10) 1.00% Robert G. Sampson 130,589(11) 1.60% Directors and Officers as a Group 2,076,723(12) 24.87% * Less than 1% -34- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, (CONT'D.) (1) Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the Company believes that the persons named in the table have sole voting and investment power with respect to all Shares listed. (2) Based on the number of Shares outstanding on December 31, 2003 which was 8,164,830 Shares. (3) Includes (a) 9,095 shares owned by Mr. Bencivenga's wife, (b) 9,183 shares held in Mr. Bencivenga's 401(k) Plan, and (c) 5,000 shares issuable upon exercise of stock options. Excludes 5,000 shares issuable upon exercise of a stock option, which stock option is not exercisable until August 25, 2004. (4) Includes (a) 77,377 shares owned jointly with Ms. Chew's husband, (b) 6,015 shares held in Ms. Chew's 401(k) Plan, and (c) 30,000 shares issuable upon exercise of stock options. Excludes 10,000 shares issuable upon exercise of a stock option, which stock option is not exercisable until August 25, 2004. (5) Includes (a) 2,000 shares owned by Mr. Kaempffer's wife, and (b) 30,425 shares held in the Charles P. Kaempffer Defined Benefit Pension Plan of which Mr. Kaempffer is Trustee with power to vote. (6) Includes (a) 84,468 shares owned by Mr. Landy's wife, (b) 172,608 shares held by Landy Investments, Ltd. for which Mr. Landy has power to vote, (c) 93,212 shares held in the Landy & Landy Profit Sharing Plan of which Mr. Landy is a Trustee with power to vote, (d) 57,561 shares held in the Landy & Landy Pension Plan of which Mr. Landy is a Trustee with power to vote, (e) 50,000 shares held in the Eugene W. Landy Charitable Legal Annuity Trust, a charitable trust for which Mr. Landy has power to vote, (f) 5,000 shares held in the Eugene W. Landy and Gloria Landy Family Foundation, a charitable trust for which Mr. Landy has power to vote, and (g) 50,000 shares issuable upon exercise of stock options. Excludes 217,068 shares held by Mr. Landy's adult children in which he disclaims any beneficial interest. (7) Includes (a) 26,927 shares owned jointly with Mr. Landy's wife, (b) 28,229 shares in custodial accounts for Mr. Landy's minor children under the NJ Uniform Transfers to Minors Act in which he disclaims any beneficial interest but has power to vote, (c) 10,105 shares in the Samuel Landy Limited Partnership, (d) 10,105 shares held in Mr. Landy's 401(k) Plan, and (e) 100,000 shares issuable upon exercise of stock options. Excludes 25,000 shares issuable upon exercise of a stock option, which stock option is not exercisable until August 25, 2004. (8) Includes 135,354 shares held by Mitchell Partners in which Mr. Mitchell has a beneficial interest. (9) Includes 50,563 shares owned by Mr. Molke's wife. (10) Includes 56,878 shares held by Rothenberg Investments, Ltd. in which Dr. Rothenberg has a beneficial interest. -35- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, (CONT'D.) (11) Includes 48,492 shares held by Sampco Ltd. in which Mr. Sampson has a beneficial interest. (12) Excludes 30,200 shares (.37%) owned by Monmouth Real Estate Investment Corporation. Eugene W. Landy owns beneficially approximately 4.14% of Monmouth Real Estate Investment Corporation. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Certain relationships and related party transactions are incorporated herein by reference to Part IV, Item 15(a)(1)(vi), Note 9 of the Notes to Consolidated Financial Statements - Related Party Transactions. ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES KPMG LLP served as the Company's independent auditors for the years ended December 31, 2003 and 2002. The following are the fees billed by KPMG in connection with services rendered: 2003 2002 ____ ____ Audit Fees $ 46,000 $ 39,500 Audit-Related Fees -0- -0- Tax Fees 47,250 47,250 All Other Fees -0- -0- _________ _________ Total Fees $ 93,250 $ 86,750 ======= ======= Audit fees include professional services rendered by KPMG LLP for the audit of the Company's annual financial statements and reviews of financial statements included in the Company's quarterly reports on Form 10-Q. Tax fees include professional services rendered by KPMG LLP for the preparation of the Company's federal and state corporate tax returns and supporting schedules as may be required by the Internal Revenue Service and applicable state taxing authorities. Tax fees also include other work directly affecting or supporting the payment of taxes, including planning and research of various tax issues. Audit Committee Pre-Approval Policy The Audit Committee has adopted a policy for the pre- approval of audit and permitted non-audit services provided by the Company's principal independent accountants. The policy requires that all services provided by KPMG LLP to the Company, including audit services, audit-related services, tax services and other services, must be pre-approved by the Committee. The pre-approval requirements do not prohibit day-to-day normal tax consulting services, where each individual matter will not exceed $5,000 and in the aggregate will not exceed $25,000 for 2003 and 2004. -36- PART IV ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON Form 8-K The following Financial Statements are filed (a)(1) as part of this report. Page(s) (i) Independent Auditors' Report 40 Consolidated Balance Sheets as of December 31, 41 (ii) 2003 and 2002 Consolidated Statements of Income for the (iii) years ended December 31, 2003, 2002, and 2001 42 Consolidated Statements of Shareholders' (iv) Equity for the years ended December 31, 2003, 43-44 2002 and 2001 Consolidated Statements of Cash Flows for the (v) years ended December 31, 2003, 2002 and 2001 45 (vi) Notes to Consolidated Financial Statements 46-60 (a)(2) The following Financial Statement Schedule for the years ended December 31, 2003, 2002 and 2001 is filed as part of this report (i) Schedule III - Real Estate and Accumulated 61 Depreciation All other schedules are omitted for the reason that they are not required, are not applicable, or the required information is set forth in the financial statements or notes thereto. -37- ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON Form 8-K (a) (3) The Exhibits set forth in the following index of Exhibits are filed as part of this Report. Exhibit No. Description ___________ ___________ (12) Agreement and Plan of Merger dated as of June 23, 2003. (incorporated by reference from the Company's Definitive Proxy Statement as filed with the Securities Exchange Commission on July 10, 2003). (3) Articles of Incorporation and By-Laws: (3.1) Articles of Incorporation of United Mobile Homes, Inc., a Maryland corporation (incorporated by reference from the Company's Definitive Proxy Statement as filed with the Securities Exchange Commission on July 10, 2003). (3.2) Bylaws of United Mobile Homes, Inc. (incorporated by reference from the Company's Definitive Proxy Statement as filed with the Securities Exchange Commission on July 10, 2003). (10) Material Contracts: (10.1) 2003 Stock Option Plan (incorporated by reference from the Company's Definitive Proxy Statement as filed with the Securities Exchange Commission on July 10, 2003). (10.2) 401(k) Plan Document and Adoption Agreement effective April 1, 1992 (incorporated by reference from the Company's 1992 Form 10-K as filed with the Securities Exchange Commission on March 9, 1993). (10.3) Employment contract with Mr. Eugene W. Landy dated December 14, 1993 (incorporated by reference from the Company's 1993 Form 10-K as filed with the Securities Exchange Commission on March 28, 1994). (10.4) Employment contract with Mr. Ernest V. Bencivenga dated November 9, 1993 (incorporated by reference from the Company's 1993 Form 10-K as filed with the Securities Exchange Commission on March 28, 1994). (10.5) Employment contract with Mr. Samuel A. Landy effective January 1, 2002 (incorporated by reference from the Company's 2002 Form 10-K as filed with the Securities Exchange Commission on March 28, 2003. (10.6) Employment contract with Ms. Anna T. Chew effective January 1, 2003. (14) Code of Business Conduct and Ethics. -38- Exhibit No. Description ___________ ___________ (21) Subsidiaries of the Registrant: The Company operates through nine wholly-owned multiple Subsidiaries carrying on the same line of business. The parent company of these subsidiaries is the Registrant. The line of business is the operation of manufactured home communities. (23) Consent of KPMG LLP. (31.1) Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. (31.2) Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. (32) Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (b) Reports of Form 8-K - Form 8-K was filed on October 2, 2003 to report that the Company changed its state of incorporation from New Jersey to Maryland. -39- INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders United Mobile Homes, Inc.: We have audited the consolidated financial statements of United Mobile Homes, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Mobile Homes, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Short Hills, New Jersey /s/ KPMG LLP March 5, 2004 -40- UNITED MOBILE HOMES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002 ________________________________________

ASSETS 2003 2002 _____ _____ INVESTMENT PROPERTY AND EQUIPMENT Land $ 6,927,971 $ 6,850,970 Site and Land Improvements 59,202,516 56,437,044 Buildings and Improvements 2,790,612 2,748,600 Rental Homes and Accessories 9,581,123 8,798,433 __________ __________ Total Investment Property 78,502,222 74,835,047 Equipment and Vehicles 4,664,006 3,919,983 __________ __________ Total Investment Property and Equipment 83,166,228 78,755,030 Accumulated Depreciation (37,660,693) (34,969,453) __________ __________ Net Investment Property and Equipment 45,505,535 43,785,577 __________ __________ OTHER ASSETS Cash and Cash Equivalents 3,244,871 2,338,979 Securities Available for Sale 31,096,211 32,784,968 Inventory of Manufactured Homes 3,635,954 2,775,459 Notes and Other Receivables, net 7,338,580 4,800,969 Unamortized Financing Costs 407,401 403,663 Prepaid Expenses 559,594 422,323 Land Development Costs 2,522,066 1,714,568 __________ __________ Total Other Assets 48,804,677 45,240,929 __________ __________ TOTAL ASSETS $94,310,212 $89,026,506 ========== ========== - LIABILITIES AND SHAREHOLDERS' EQUITY - LIABILITIES: MORTGAGES PAYABLE $44,222,675 $43,321,884 __________ __________ OTHER LIABILITIES Accounts Payable 655,648 956,663 Loans Payable 7,840,962 12,358,965 Accrued Liabilities and Deposits 1,988,525 2,141,636 Tenant Security Deposits 502,626 510,941 __________ __________ Total Other Liabilities 10,987,761 15,968,205 __________ __________ Total Liabilities 55,210,436 59,290,089 __________ __________ SHAREHOLDERS' EQUITY: Common Stock - $.10 par value per share, 20,000,000 and 15,000,000 shares authorized 8,557,130 and 8,063,750 shares issued and 8,164,830 and 7,671,450 shares outstanding as of December 31, 2003 and 2002, respectively 855,713 806,375 Excess Stock - $.10 par value per share, 3,000,000 shares authorized, no shares issued or outstanding -0- -0- Additional Paid-In Capital 36,304,626 29,411,328 Accumulated Other Comprehensive Income 5,308,195 3,988,429 Undistributed Income (Accumulated Deficit) 341,164 (667,793) Treasury Stock at Cost (392,300 shares at December 31, 2003 and 2002) (3,709,922) (3,709,922) Notes Receivable from Officers (8,000 shares at December 31, 2002) -0- (92,000) __________ __________ Total Shareholders' Equity 39,099,776 29,736,417 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $94,310,212 $89,026,506 ========== ==========

See Accompanying Notes to Consolidated Financial Statements -41- UNITED MOBILE HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 _____________________________________________________

2003 2002 2001 _____ _____ _____ REVENUES: Rental and Related Income $20,954,274 $20,140,691 $19,291,611 Sales of Manufactured Homes 6,758,168 5,538,202 4,766,189 Interest and Dividend Income 3,260,261 2,867,142 2,188,430 Gain on Sales of Securities Available for Sale 2,698,724 794,950 530,324 Other Income 119,076 82,908 105,845 __________ __________ __________ Total Revenues 33,790,503 29,423,893 26,882,399 __________ __________ __________ EXPENSES: Community Operating Expenses 10,305,372 9,457,214 9,004,164 Cost of Sales of Manufactured Homes 5,360,554 4,657,988 3,930,666 Selling Expenses 1,255,773 1,040,005 754,934 General and Administrative 2,589,275 2,184,045 2,015,685 Interest Expense 3,190,490 3,314,335 2,825,894 Depreciation Expense 2,909,069 2,810,440 2,684,556 Amortization of Financing Costs 108,800 112,200 87,748 __________ __________ __________ Total Expenses 25,719,333 23,576,227 21,303,647 __________ __________ __________ Income Before Gain (Loss) on Sales of Investment Property and Equipment 8,071,170 5,847,666 5,578,752 Gain (Loss) on Sales of Investment Property and Equipment 55,888 664,546 (28,264) __________ __________ __________ Net Income $8,127,058 $6,512,212 $5,550,488 ========== ========== ========== Net Income Per Share - Basic $ 1.03 $ .86 $ .74 ========== ========== ========== Diluted $ 1.02 $ .85 $ .74 ========== ========== ========== Weighted Average Shares Outstanding: Basic 7,858,888 7,600,266 7,457,636 ========== ========== ========== Diluted 7,942,459 7,677,200 7,496,371 ========== ========== ==========

See Accompanying Notes to Consolidated Financial Statements -42- UNITED MOBILE HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 _______________________________________________________

Accumulated Additional Other Common Stock Issued Paid-In Comprehensive Number Amount Capital Income/(Loss) _________ _________ __________ __________ Balance December 31, 2000 7,711,141 $771,114 $26,026,006 $(490,795) Common Stock Issued with the DRIP* 163,491 16,349 1,669,682 -0- Common Stock Issued through the Exercise of Stock Options 14,000 1,400 143,725 -0- Distributions -0- -0- (430,052) -0- Net Income -0- -0- -0- -0- Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 4,031,796 Purchase of Treasury Stock -0- -0- -0- -0- __________ _________ __________ _________ Balance December 31, 2001 7,888,632 788,863 27,409,361 3,541,001 Common Stock Issued with the DRIP* 135,418 13,542 1,641,407 -0- Common Stock Issued through the Exercise of Stock Options 39,700 3,970 416,643 -0- Distributions -0- -0- (56,083) -0- Net Income -0- -0- -0- -0- Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 447,428 Purchase of Treasury Stock -0- -0- -0- -0- __________ _________ __________ __________ Balance December 31, 2002 8,063,750 806,375 29,411,328 3,988,429 Common Stock Issued with the DRIP* 378,380 37,838 5,691,245 -0- Common Stock Issued through the Exercise of Stock Options 115,000 11,500 1,174,400 -0- Distributions -0- -0- -0- -0- Payments on Notes Receivable from Officers -0- -0- -0- -0- Stock Compensation Expense -0- -0- 27,653 -0- Net Income -0- -0- -0- -0- Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 1,319,766 __________ _________ __________ __________ Balance December 31, 2003 8,557,130 $855,713 $36,304,626 $5,308,195 ========== ========= ========== ==========

*Dividend Reinvestment and Stock Purchase Plan See Accompanying Notes to Consolidated Financial Statements -43- UNITED MOBILE HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 _______________________________________________________

Undistributed Income Notes (Accumulated Treasury Receivable Comprehensive Deficit) Stock From Officers Income __________ __________ __________ __________ Balance December 31, 2000 $(667,793) $(2,799,106) $ -0- Common Stock Issued with the DRIP* -0- -0- -0- Common Stock Issued through the Exercise of Stock Options -0- -0- -0- Distributions (5,550,488) -0- -0- Net Income 5,550,488 -0- -0- $5,550,488 Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 4,031,796 Purchase of Treasury Stock -0- (307,792) -0- __________ _________ __________ _________ Balance December 31, 2001 (667,793) (3,106,898) -0- $9,582,284 ========= Common Stock Issued with the DRIP* -0- -0- -0- Common Stock Issued through the Exercise of Stock Options -0- -0- (92,000) Distributions (6,512,212) -0- -0- Net Income 6,512,212 -0- -0- $6,512,212 Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 447,428 Purchase of Treasury Stock -0- (603,024) -0- __________ __________ __________ __________ Balance December 31, 2002 (667,793) (3,709,922) (92,000) $6,959,640 ========== Common Stock Issued with the DRIP* -0- -0- -0- Common Stock Issued through the Exercise of Stock Options -0- -0- -0- Distributions (7,118,101) -0- -0- Payments on Notes Receivable from Officers -0- -0- 92,000 Stock Compensation Expense -0- -0- -0- Net Income 8,127,058 -0- -0- $8,127,058 Unrealized Net Holding Gains on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- 1,319,766 _________ _________ __________ _________ Balance December 31, 2003 $ 341,164 $(3,709,922) $ -0- $9,446,824 ========= ========= ========== =========

*Dividend Reinvestment and Stock Purchase Plan. See Accompanying Notes to Consolidated Financial Statements -44- UNITED MOBILE HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 _______________________________________________________

2003 2002 2001 ______ ______ ______ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $8,127,058 $6,512,212 $5,550,488 Depreciation 2,909,069 2,810,440 2,684,556 Amortization of Financing Costs 108,800 112,200 87,748 Stock Compensation Expense 27,653 -0- -0- Gain on Sales of Securities Available for Sale Transactions (2,698,724) (794,950) (530,324) (Gain) Loss on Sales of Investment Property & Equipment (55,888) (664,546) 28,264 Changes in Operating Assets and Liabilities - Inventory of Manufactured Homes (860,495) 7,206 (2,782,665) Notes and Other Receivables, net (2,537,611) (1,509,614) (1,376,909) Prepaid Expenses (137,271) (308,643) 1,953 Accounts Payable (301,015) 120,075 497,414 Accrued Liabilities and Deposits (153,111) 430,404 88,960 Tenant Security Deposits (8,315) 33,159 28,366 __________ __________ __________ Net Cash Provided by Operating Activities 4,420,150 6,747,943 4,277,851 __________ __________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Manufactured Home Community (918,000) -0- (2,503,126) Purchase of Investment Property and Equipment (3,155,336) (2,640,164) (2,199,133) Proceeds from Sales of Investment Property and Equipment 394,254 1,698,262 352,494 Additions to Land Development Costs (1,701,555) (509,679) (816,899) Purchase of Securities Available for Sale (8,528,110) (9,360,375) (9,858,324) Proceeds from Sales of Securities Available for Sale 14,235,357 3,735,533 3,997,614 __________ __________ __________ Net Cash Provided (Used) by Investing Activities 326,610 (7,076,423) (11,027,374) __________ __________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 3,500,000 6,862,500 7,525,000 Net Proceeds from (Payments on) Short-Term Borrowings (4,518,003) 1,666,282 5,053,213 Principal Payments of Mortgages and Loans (2,599,209) (2,192,641) (928,814) Financing Costs on Debt (112,538) (48,756) (274,128) Proceeds from Issuance of Common Stock 3,984,987 -0- -0- Proceeds from Exercise of Stock Options 1,185,900 271,113 145,125 Collection on Notes Receivable from Officers 92,000 57,500 -0- Dividends Paid (5,374,005) (4,913,346) (4,294,509) Purchase of Treasury Stock -0- (603,024) (307,792) __________ __________ __________ Net Cash (Used) Provided by Financing Activities (3,840,868) 1,099,628 6,918,095 NET INCREASE IN CASH 905,892 771,148 168,572 CASH & CASH EQUIVALENTS - BEGINNING 2,338,979 1,567,831 1,399,259 __________ __________ __________ CASH & CASH EQUIVALENTS - END $ 3,244,871 $2,338,979 $1,567,831 ========== ========== ==========

See Accompanying Notes to Consolidated Financial Statements -45- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST United Mobile Homes, Inc. (the Company) owns and operates twenty-six manufactured home communities containing 6,129 sites. The communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. The Company has elected to be taxed as a real estate investment trust (REIT) under Sections 856-860 of the Internal Revenue Code (the Code), and intends to maintain its qualification as a REIT in the future. As a qualified REIT, with limited exceptions, the Company will not be taxed under Federal and certain state income tax laws at the corporate level on taxable income that it distributes to its shareholders. For special tax provisions applicable to REITs, refer to Sections 856 860 of the Code. The Company is subject to franchise taxes in some of the states in which the Company owns property. The Company was incorporated in the state of New Jersey in 1968. On September 29, 2003, the Company changed its state of incorporation from New Jersey to Maryland. The reincorporation was approved by the Company's shareholders at the Company's annual meeting on August 14, 2003. The reincorporation was accomplished by the merger of the Company with and into its wholly-owned subsidiary, United Mobile Homes, Inc., a Maryland corporation, (United Maryland), which was the surviving corporation in the merger. As a result of the merger, each outstanding share of the Company's Class A common stock, $.10 par value per share, was converted into one share of common stock, $.10 par value per share of United Maryland common stock. In addition, each outstanding option to purchase New Jersey Common Stock was converted into the right to purchase Maryland Common Stock upon the same terms and conditions as immediately prior to the Merger. The Company's 1994 Stock Option Plan, as amended, was assumed by United Maryland. The conversion of the New Jersey Common Stock into Maryland Common Stock occurred without an exchange of certificates. Accordingly, certificates formerly representing shares of New Jersey Common Stock are now deemed to represent the same number of shares of Maryland Common Stock. Prior to the Merger, United Maryland had no assets or liabilities, other than nominal assets or liabilities. As a result of the Merger, United Maryland acquired all of the assets and all of the liabilities and obligations of the Company. The Merger was accounted for as if it were a "pooling of interests" rather than a purchase for financial reporting and related purposes, with the result that the historical accounts of the Company and United Maryland have been combined for all periods presented. United Maryland, has the same business, properties, directors, management, status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, and principal executive offices as United Mobile Homes, Inc., a New Jersey corporation. -46- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS - The Company owns and operates twenty-six manufactured home communities containing 6,129 sites. The communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. These manufactured home communities are listed by trade names as follows: MANUFACTURED HOME COMMUNITY LOCATION __________________________ ________ Allentown Memphis, Tennessee Brookview Village Greenfield Center, New York Cedarcrest Vineland, New Jersey Cranberry Village Cranberry Township, Pennsylvania Cross Keys Village Duncansville, Pennsylvania D& R Village Clifton Park, New York Fairview Manor Millville, New Jersey Forest Park Village Cranberry Township, Pennsylvania Heather Highlands Inkerman, Pennsylvania Highland Estates Kutztown, Pennsylvania Kinnebrook Monticello, New York Lake Sherman Village Navarre, Ohio Laurel Woods Cresson, Pennsylvania Memphis Mobile City Memphis, Tennessee Oxford Village West Grove, Pennsylvania Pine Ridge Village Carlisle, Pennsylvania Pine Valley Estates Apollo, Pennsylvania Port Royal Village Belle Vernon, Pennsylvania River Valley Estates Marion, Ohio Sandy Valley Estates Magnolia, Ohio Southwind Village Jackson, New Jersey Spreading Oaks Village Athens, Ohio Waterfalls Village Hamburg, New York Woodlawn Manor West Monroe, New York Woodlawn Village Eatontown, New Jersey Wood Valley Caledonia, Ohio Effective April 1, 2001, the Company, through its wholly- owned taxable REIT subsidiary, UMH Sales and Finance, Inc., (S&F), began to conduct manufactured home sales and the financing of these sales in its communities. Inherent in the operation of manufactured home communities is site vacancies. S&F was established to fill these vacancies and potentially enhance the value of the communities. BASIS OF PRESENTATION - The Company's subsidiaries are all 100% wholly-owned. The consolidated financial statements of the Company include all of these subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have a majority or minority interest in any other Company, either consolidated or unconsolidated. -47- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.) USE OF ESTIMATES - In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as contingent assets and liabilities as of the dates of the consolidated balance sheets and revenue and expenses for the years then ended. Actual results could differ significantly from these estimates and assumptions. INVESTMENT PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are carried at cost. Depreciation for Sites and Building (15 to 27.5 years) is computed principally on the straight-line method over the estimated useful lives of the assets. Depreciation of Improvements to Sites and Buildings, Rental Homes and Equipment and Vehicles (3 to 27.5 years) is computed principally on the straight-line method. Land Development Costs are not depreciated until they are put in use, at which time they are capitalized as Sites or Site Improvements. Interest Expense pertaining to Land Development Costs are capitalized. Maintenance and Repairs are charged to income as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in the current year's results of operations. If there is an event or change in circumstances that indicates that the basis of an investment property may not be recoverable, management assesses the possible impairment of value through evaluation of the estimated future cash flows of the property, on an undiscounted basis, as compared to the property's current carrying value. If a property is determined to be impaired, it will be recorded at fair value. UNAMORTIZED FINANCING COSTS - Legal fees and loan processing fees for mortgages are being amortized over the life of the related debt. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include certificates of deposit and bank repurchase agreements with maturities of 90 days or less. SECURITIES AVAILABLE FOR SALE - The Company's securities consist primarily of debt securities and common and preferred stock of other REITs. These securities are all publicly-traded and purchased on the open market or through dividend reinvestment plans. These securities are classified as available-for-sale and are carried at fair value based upon quoted market prices. Gains or losses on the sale of securities are based on identifiable cost and are accounted for on a trade date basis. Unrealized holding gains and losses are excluded from earnings and reported as a separate component of Shareholders' Equity until realized. A decline in the market value of any security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. Any impairment is charged to earnings and a new cost basis for the security established. INVENTORY OF MANUFACTURED HOMES - Inventory of manufactured homes is valued at the lower of cost or market value and is determined by the specific identification method. All inventory is considered finished goods. NOTES AND OTHER RECEIVABLES - The Company's notes receivable primarily consists of installment loans collateralized by manufactured homes with principal and interest payable monthly. Interest rates on these loans range from 6.36% to 13%. Maturity is approximately 15 -48- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.) years. The Company evaluates the recoverability of its receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. The collectibility of loans is measured based on the present value of the expected future cash flow discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. At December 31, 2003 and 2002, the reserve for uncollectible notes receivables was $485,900 and $232,500, respectively. The provision for uncollectible notes receivables was $274,618 and $199,300, respectively. Charge-offs amounted to $21,218 and $-0-, respectively. REVENUE RECOGNITION - The Company derives its income primarily from the rental of manufactured home sites. The Company also owns approximately 500 rental units which are rented to residents. Rental and related income is recognized on the accrual basis. Sale of manufactured homes is recognized on the full accrual basis when certain criteria are met. These criteria include the following: (a) initial and continuing payment by the buyer must be adequate: (b) the receivable, if any, is not subject to future subordination; (c) the benefits and risks of ownership are substantially transferred to the buyer; and (d) the Company does not have a substantial continued involvement with the home after the sale. Alternatively, when the foregoing criteria are not met, the Company recognizes gains by the installment method. Interest income on loans receivable is not accrued when, in the opinion of management, the collection of such interest appears doubtful. NET INCOME PER SHARE - Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period (7,858,888, 7,600,266 and 7,457,636 in 2003, 2002 and 2001, respectively). Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding plus the weighted-average number of net shares that would be issued upon exercise of stock options pursuant to the treasury stock method (7,942,459, 7,677,200 and 7,496,371 in 2003, 2002 and 2001, respectively) (See Note 6). Options in the amount of 83,571, 76,934 and 38,735 for 2003, 2002, and 2001, respectively, are included in the diluted weighted average shares outstanding. STOCK OPTION PLANS - Prior to January 1, 2003 the Company's stock option plan was accounted for under the intrinsic value based method as prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". As such, compensation expense was recorded on the date of grant only if the current market price on the underlying stock exceeded the exercise price. The Company adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation" on January 1, 2003. Under the prospective method of adoption selected by the Company under the provisions of SFAS No. 148. "Accounting for Stock Based Compensation, Transition and Disclosure", compensation costs of $27,653 have been recognized in 2003, as follows: -49- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.) 2003 2002 2001 _____ _____ _____ Net income prior to compensation expense for grants in 2003 $8,154,711 $6,512,212 $5,550,488 Compensation expense recognized 27,653 -0- -0- __________ __________ __________ Net income as reported 8,127,058 6,512,212 5,550,488 Compensation expenses if the fair value method had been applied to grants in 2002 and 2001 8,815 45,036 63,861 __________ __________ __________ Net Income Pro forma $8,118,243 $6,467,176 $5,486,627 ========== ========== ========== Net Income Per Share - As Reported Basic $ 1.03 $ .86 $ .74 Diluted 1.02 .86 .74 Net Income Per Share - Pro Forma Basic $ 1.03 $ .85 $ 74 Diluted 1.02 .84 .73 See Note 6 for the assumptions used to calculate compensation expense. TREASURY STOCK - Treasury stock is accounted for under the cost method. OTHER COMPREHENSIVE INCOME - Comprehensive income consists of net income and net unrealized gains or losses on securities available for sale and is presented in the consolidated statements of shareholders' equity. RECLASSIFICATION - Certain amounts in the financial statements for the prior years have been reclassified to conform to the statement presentation for the current year. NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT On May 15, 2003, the Company acquired Woodland Manor (formerly Northway Manor), a manufactured home community located in West Monroe, New York. This community consists of 150 manufactured sites, of which 65 are currently occupied. This community was purchased from MSCI 1998-CF1 West Monroe, LLC, an unrelated entity, for a purchase price, including closing costs, of approximately $918,000. On October 1, 2002, the Company sold its vacant land consisting of 65 acres in Chester County, Pennsylvania. Net proceeds from the sale amounted to approximately $1,385,000, resulting in a realized gain of $661,000. -50- NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT, (CONT'D.) The following is a summary of accumulated depreciation by major classes of assets: December 31, 2003 December 31, 2002 ____________ ____________ Site and Land Improvements $30,001,381 $28,022,091 Buildings and Improvements 1,688,413 1,599,404 Rental Homes and Accessories 2,768,670 2,466,630 Equipment and Vehicles 3,202,229 2,881,328 ____________ ____________ Total Accumulated Depreciation $37,660,693 $34,969,453 ========== ========== NOTE 4 - SECURITIES AVAILABLE FOR SALE The Company's securities available for sale consist primarily of debt securities and common and preferred stock of other REITs. The Company does not own more than 10% of the outstanding shares of any of these securities, nor does it have controlling financial interest. The following is a summary of securities available for sale at December 31, 2003 and 2002: 2003 2002 Market Market Cost Value Cost Value ____ _____ ____ ______ Equity Securities: Monmouth Real Estate Investment Corporation * (745,250 and 738,942 shares at December 31, 2003 and 2002, respectively) $4,532,874 $6,476,218 $4,404,622 $5,113,476 Monmouth Capital Corporation * (78,910 and 73,575 shares at December 31, 2003 and 2002, respectively) 260,161 519,225 230,864 255,304 Preferred Stock 14,199,142 16,249,188 15,599,262 18,012,877 Other Equity Securities 3,554,641 4,413,580 6,320,593 7,106,186 Monmouth Capital Corporation * Convertible Debentures 1,000,000 1,000,000 -0- -0- Other Debt Securities (maturing in 2009) 2,241,198 2,438,000 2,241,198 2,297,125 __________ __________ __________ __________ $25,788,016 $31,096,211 $28,796,539 $32,784,968 ========== ========== ========== ========== *Related entity - See Note 9 -51- NOTE 4 - SECURITIES AVAILABLE FOR SALE, (CONT'D.) Gross unrealized gains on debt securities amounted to $196,802 and $55,927 as of December 31, 2003 and 2002, respectively. Gross unrealized gains on equity securities amounted to $5,111,393 and $4,033,203 as of December 31, 2003 and 2002, respectively. Gross unrealized losses on equity securities amounted to $-0- and $100,701 as of December 31, 2003 and 2002, respectively. During the years ended December 31, 2003, 2002 and 2001, the Company received proceeds of $14,235,357, $3,735,533, and $3,997,614 on sales or redemptions of securities available for sale, respectively. Gross gains on these sales of securities amounted to $2,757,737, $823,573 and $737,417, respectively. Gross losses on these sales of securities amounted to $59,013, $28,623 and $74,144, respectively. During the year ended December 31, 2001, the Company also realized a loss of $132,949 due to a writedown to fair value of securities available for sale which was considered other than temporarily impaired. Dividend income for the years ended December 31, 2003, 2002 and 2001 amounted to $2,342,095 $2,376,286 and $1,910,909, respectively. Interest income for the years ended December 31, 2003, 2002 and 2001 amounted to $918,166, $490,856 and $277,521, respectively. NOTE 5 - LOANS AND MORTGAGES PAYABLE LOANS PAYABLE The Company purchases securities on margin. The margin loan interest rate at December 31, 2003 and 2002 was 2.75% and 3%, respectively and is due on demand. At December 31, 2003 and 2002, the margin loan amounted to $6,747,818 and $9,165,645, respectively, and is secured by investment securities with a market value of $31,096,211 and $32,784,968, respectively. The Company has a $2,000,000 revolving credit agreement with Transamerica Commercial Finance Corporation (Transamerica) to finance inventory purchases. The interest rates range from prime (with a minimum of 6%) for each advance to prime plus 2% after one year. This agreement originally terminated April 25, 2003, but automatically renews on an annual basis. Advances under this line of credit were secured by the manufactured homes for which the advances were made. As of December 31, 2003 and 2002, the amount outstanding with Transamerica was $1,074,550 and $908,340, respectively. The Company also has miscellaneous loans payable for equipment and vehicles and inventory totaling $18,594 and $284,980 at December 31, 2003 and 2002, respectively. UNSECURED LINE OF CREDIT The Company has a $2,000,000 unsecured line of credit with Fleet Bank, none of which was utilized at December 31, 2003. The interest rate on this line of credit is prime. This line of credit expires on June 15, 2004. The balance outstanding on this line at December 31, 2002 was $2,000,000. -52- NOTE 5 - LOANS AND MORTGAGES PAYABLE, (CONT'D.) MORTGAGES PAYABLE The following is a summary of mortgages payable at December 31, 2003 and 2002: Interest Property Due Date Rate 2003 2002 ________ ________ ________ ________ ________ Allentown 12/01/11 6.36% $5,576,541 $5,675,439 Cranberry Village 08/01/08 5.17% 2,242,222 2,309,000 D & R Village 05/01/08 4.625% 3,044,969 3,188,122 Fairview Manor 07/27/07 6.39% 3,859,421 3,960,632 Forest Park Village 08/01/08 5.17% 3,587,554 3,694,400 Heather Highlands 08/28/18 Prime+1/2% 3,439,939 -0- Laurel Woods 10/10/06 6.38% 1,649,128 1,695,862 Port Royal Village 04/01/12 7.36% 5,282,636 5,330,337 Sandy Valley 03/01/04 7% 3,495,890 3,615,247 Waterfalls Village 01/01/08 4.625% 2,632,734 2,762,313 Various (4 properties) 12/01/05 7.5% 9,411,641 11,090,532 __________ __________ TOTAL MORTGAGES PAYABLE $44,222,675 $43,321,884 ========== ========== At December 31, 2003 and 2002, mortgages are collateralized by real property with a carrying value of $47,105,448 and $40,409,176, respectively, before accumulated depreciation and amortization. Interest costs amounting to $145,800 and $162,600 and $146,000 were capitalized during 2003, 2002 and 2001, respectively, in connection with the Company's expansion program. RECENT FINANCING On June 20, 2002, the Company took down the additional $1,500,000 on the Fairview Manor mortgage. The total balance of $4,000,000 was converted to a fixed rate mortgage with an interest rate of 6.39%. This mortgage is due July 27, 2007. On March 28, 2002, the Company obtained a $5,362,500 mortgage with Prudential Mortgage Capital Company. This mortgage is at an interest rate of 7.36% for a ten-year term with a thirty year amortization schedule. This loan is secured by Port Royal Village. Effective January 1, 2003, the Company extended the Waterfalls Village mortgage for an additional five years. The interest rate was reset to 4.625%. Effective May 1, 2003, the Company extended the D&R Village mortgage for an additional five years. The interest rate was reset to 4.625%. -53- NOTE 5 - LOANS AND MORTGAGES PAYABLE, (CONT'D.) On August 28, 2003, the Company obtained a $3,500,000 mortgage loan with First National Community Bank, located in Dunmore, PA. This mortgage payable is due on August 28, 2018 with an interest rate of prime plus 1/2% (with a minimum rate of 4 1/2 % and a maximum rate of 7 1/2%), for the first seven years. Effective August 28, 2010, the interest rate will be prime plus 1% (but not more than 3% greater than the prime rate on August 28, 2010). This loan is secured by Heather Highlands Mobile Home Park in Pittston, PA. Effective October 1, 2003, the Company extended the Cranberry Village mortgage and the Forest Park Village mortgage to August 1, 2008. The interest rate was reset to a fixed rate of 5.17%. The aggregate principal payments of all mortgages payable are scheduled as follows: 2004 $5,265,495 2005 9,740,535 2006 2,651,671 2007 4,547,078 2008 9,648,491 Thereafter 12,369,405 __________ Total $44,222,675 ========== NOTE 6 - EMPLOYEE STOCK OPTIONS On August 14, 2003, the shareholders approved and ratified the Company's 2003 Stock Option Plan (the 2003 Plan) authorizing the grant to officers and key employees of options to purchase up to 1,500,000 shares of common stock. All options are exercisable one year from the date of grant. The option price shall not be below the fair market value at date of grant. If options granted under the 2003 Plan expire or terminate for any reason without having been exercised in full, the Shares subject to, but not delivered under, such options shall become available for additional option grants under the 2003 Plan. This Plan replaced the Company's 1994 Stock Option Plan which, pursuant to its terms, terminated December 31, 2003. The Company adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation" on January 1, 2003. During the year ended December 31, 2003, eleven employees were granted 64,000 options. The fair value of those options was approximately $83,000 based on assumptions noted below and is being amortized over the 1-year vesting period. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighed-average assumptions used for grants in the following years: 2003 2002 2001 _____ _____ _____ Dividend yield 6.14% 6.75% 8% Expected 19% 13% 25% volatility Risk-free Interest Rate 3.91% 3.40% 4.29% Expected lives 8 8 5 -54- NOTE 6 - EMPLOYEE STOCK OPTIONS, (CONT'D.) A summary of the status of the Company's stock option plans as of December 31, 2003, 2002 and 2001 and changes during the years then ended are as follows: Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ______ _______ _______ _______ _______ _______ Outstanding at Beginning of year 388,000 $10.28 440,200 $10.44 433,500 $10.45 Granted 64,000 15.75 68,000 12.73 62,700 10.49 Exercised (115,000) 10.31 (39,700) 10.59 (14,000) 10.37 Expired (31,000) 12.66 (80,500) 13.06 (42,000) 10.68 _______ _______ _______ Outstanding at end of year 306,000 11.17 388,000 10.28 440,200 10.44 ======= ======= ======= Options exercisable at end of year 242,000 320,000 377,500 ======= ======= ======= Weighted- average fair value of options granted During the year 1.30 .35 1.18 ======= ======= ======= The following is a summary of stock options outstanding as of December 31, 2003: Date of Number of Number of Option Expiration Grant Employees Shares Price Date ________ ________ ________ ________ 01/05/95 2 75,000 8.25 01/05/05 09/28/99 2 10,000 8.8125 09/28/04 01/06/00 1 25,000 9.0625 01/06/05 07/17/00 4 22,000 8.50 07/17/05 01/02/01 1 25,000 10.3125 01/02/06 10/04/01 5 24,000 10.60 10/04/09 01/04/02 1 25,000 12.95 01/04/10 06/20/02 10 36,000 12.60 06/20/10 08/18/03 1 25,000* 16.92 08/18/11 08/25/03 10 39,000* 15.00 08/25/11 ________ 306,000 ======== * Unexercisable -55- NOTE 6 - EMPLOYEE STOCK OPTIONS, (CONT'D.) During the year ended December 31, 2003, eleven employees exercised their stock options and purchased 115,000 shares for a total of $1,185,900. During 2002, 13,000 shares for a total of $149,500 were exercised through the issuance of notes receivable from officers. These notes receivable were at an interest rate of 5%, mature on June 25, 2007 and were collateralized by the underlying common shares. The balance of these notes receivable at December 31, 2002 amounted to $92,000, collateralized by 8,000 shares. These notes receivable were fully repaid at December 31, 2003. As of December 31, 2003, there were 1,436,000 shares available for grant under the 2003 plan. NOTE 7 - TREASURY STOCK During the year ended December 31, 2002, the Company purchased 46,000 shares, of its own stock for a total cost of $603,024. NOTE 8 - 401(K) PLAN Any full-time employees who are over 21 years old and have completed one year of service (as defined) are eligible for the Company's 401(k) Plan (Plan). Under this Plan, an employee may elect to defer his/her compensation (up to a maximum of $12,000, annually adjusted) and have it contributed to the Plan. Employer contributions to the Plan are at the discretion of the Company. During 2003, 2002 and 2001, the Company made matching contributions to the Plan of up to 50% of the first 6% of employee salary. This amounted to $37,961, $42,411 and $48,243 in 2003, 2002 and 2001, respectively. NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS The Company operates as part of a group of three public companies (all REITs) which includes the Company, Monmouth Real Estate Investment Corporation (MREIC) and Monmouth Capital Corporation (MCC), (collectively the affiliated companies). Some general and administrative expenses are allocated between the affiliated companies based on use or services provided. Allocations of salaries and benefits are made based on the amount of the employees' time dedicated to each affiliated company. There are five Directors of the Company who are also Directors and shareholders of MREIC and there are seven Directors of the Company who are also Directors and shareholders of MCC. TRANSACTIONS WITH MONMOUTH REAL ESTATE INVESTMENT CORPORATION During 2003, 2002 and 2001, the Company purchased shares of MREIC common stock primarily through its Dividend Reinvestment and Stock Purchase Plan (See Note 4). During 2003, the Company sold 50,000 shares of MREIC and recorded a gain on sale of $131,727. -56- NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS, (CONT'D.) TRANSACTIONS WITH MONMOUTH CAPITAL CORPORATION AND SUBSIDIARY During 2003, 2002 and 2001, the Company purchased shares of MCC common stock primarily through its Dividend Reinvestment and Stock Purchase Plan (See Note 4). Prior to April 1, 2001, MCC, through its wholly-owned subsidiary sold and financed the sales of manufactured homes. MCC paid the Company market rent on sites where MCC had a home for sale. Total site rental income from MCC amounted to $33,370 for the year ended December 31, 2001. Effective April 1, 1996 through April 1, 2001, MCC leased space from the Company to be used as sales lots, at market rates, at most of the Company's communities. Total rental income relating to these leases amounted to $38,370 for the year ended December 31, 2001. During 2001, the Company had approximately $49,000 of rental homes that were sold to MCC at book value. During 2003, 2002 and 2001, the Company purchased from MCC at its cost, 4, 2 and 3 homes, respectively totaling $78,195, $43,181 and $47,953, respectively to be used as rental homes. On March 30, 2001, the Company also purchased at carrying value all of the remaining inventory of MCC. This amounted to $2,261,624. The Company also assumed the inventory financing of $1,833,871. During 2003, the Company financed/refinanced certain loans on sales made by MCC to third parties. The total amount financed amounted to $307,746 during 2003. On October 23, 2003, the Company invested $1,000,000 in the Convertible Debenture Private Placement Offering of MCC (the MCC Debenture). The MCC Debenture pays interest at 8% and is convertible into 166,667 shares of Common Stock of MCC at any time prior to redemption or maturity. The MCC debenture is due in 2013. SALARY, DIRECTORS', MANAGEMENT AND LEGAL FEES During the years ended December 31, 2003, 2002 and 2001, salary, Directors' fees, legal fees and fringe benefits to Mr. Eugene W. Landy and the law firm of Landy & Landy amounted to $185,776, $167,276 and $165,076, respectively. OTHER MATTERS The Company has employment agreements with certain executive officers, which in addition to base compensation, bonuses and fringe benefits, provides for specified retirement benefits. The Company has accrued these benefits over the terms of the agreements. Amounts accrued under these agreements were $780,058 and $817,058 at December 31, 2003 and 2002, respectively. -57- NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS, (CONT'D.) In August, 1999, the Company entered into a lease for its corporate offices. The lease is for a five-year term at market rates with monthly lease payments of $12,000, plus its proportionate share of real estate taxes and common area maintenance. The lessor of the property is owned by certain officers and directors of the Company. The lease payments and the resultant lease term commenced on May 1, 2000. Approximately 50% of the monthly lease payment of $12,000, plus its proportionate share of real estate taxes and common area maintenance is reimbursed by other related entities utilizing the leased space (MREIC and MCC). NOTE 10 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The Company has a Dividend Reinvestment and Stock Purchase Plan (DRIP). Under the terms of the DRIP, shareholders who participate may reinvest all or part of their dividends in additional shares of the Company at approximately 95% of the market price. Shareholders may also purchase additional shares at approximately 95% of their market price by making optional cash payments. Generally, dividend reinvestments and purchases of shares are made quarterly on March 15, June 15, September 15 and December 15. Effective June 24, 1998, the Company amended the Dividend Reinvestment and Stock Purchase Plan. Shareholders were no longer able to purchase additional shares by making optional cash payments. The dividend reinvestment feature of the Plan remained unchanged. On March 19, 2003, the Company amended the Dividend Reinvestment and Stock Purchase Plan to provide for monthly optional cash payments of not less than $500 per payment nor more than $1,000 unless a request for waiver has been accepted by the Company. Amounts received, including dividends reinvested of $1,744,096, $1,654,949 and $1,686,031, respectively, and shares issued in connection with the DRIP for the years ended December 31, 2003, 2002 and 2001 were as follows: 2003 2002 2001 Amounts Received/Dividends Reinvested $5,729,083 $1,654,949 $1,686,031 Number of Share Issued 378,380 135,418 163,491 NOTE 11 - DISTRIBUTIONS The following gross distributions, including dividends reinvested, were paid to shareholders during the three years ended December 31, 2003, 2002 and 2001: 2003 2002 2001 Per Per Per Quater Ended Amount Share Amount Share Amount Share _______ _______ _______ _______ _______ _______ March 31 $1,710,236 $ .2225 $1,602,74 $.2125 $1,442,387 $.1950 June 30 1,742,618 .2250 1,705,309 .2150 1,466,787 .1975 September 30 1,797,855 .2275 1,581,064 .2175 1,494,309 .2000 December 31 1,867,392 .2300 1,679,176 .2200 1,577,057 .2100 _________ _______ _________ ______ _________ ______ $7,118,101 $ .9050 $6,568,295 $.8650 $5,980,540 $.8025 ========= ======== ========= ====== ========= ====== -58- NOTE 11 - DISTRIBUTIONS, (CONT'D.) For the years ended December 31, 2003, 2002 and 2001, total distributions paid by the Company amounted to $7,118,101 or $.9050 per share, $6,568,295 or $.8650 per share, and $5,980,540 or $.8025 per share, respectively. These amounts do not include the discount on shares purchased through the Company's Dividend Reinvestment and Stock Purchase Plan. NOTE 12 - FEDERAL INCOME TAXES The Company elected to be taxed as a REIT. As the Company has distributed all of its income currently, no provision has been made for Federal income or excise taxes for the years ended December 31, 2003, 2002 and 2001. For the year ended December 31, 2003, S&F has accrued $50,000 in federal and state income taxes which has been included in general and administrative expenses. NOTE 13 - CONTINGENCIES AND LEGAL MATTERS The Company is under an investigation by the Environmental Protection Agency regarding its operation of its wastewater treatment facility at one community. The Company's wastewater treatment facilities are operated by licensed operators and supervised by a professional engineer. Management does not believe that this matter will have a material adverse effect on its business, assets, or results of operations. The Company is subject to claims and litigation in the ordinary course of business. Management does not believe that any such claim or litigation will have a material adverse effect on the business, assets, or results of operations of the Company. NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company is required to disclose certain information about fair values of financial instruments, as defined in SFAS No. 107, "Disclosures About Fair Value of Financial Instruments". Limitations Estimates of fair value are made at a specific point in time, based upon, where available, relevant market prices and information about the financial instrument. Such estimates do not include any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. All of the Company's securities available for sale have quoted market prices. However, for a portion of the Company's other financial instruments, no quoted market value exists. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates. -59- NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS, (CONT'D.) The fair value of cash and cash equivalents and notes receivables approximates their current carrying amounts since all such items are short-term in nature. The fair value of securities available for sale is based upon quoted market values. The fair value of variable rate mortgages payable and loans payable approximate their current carrying amounts since such amounts payable are at approximately a weighted-average current market rate of interest. For 2003, the fair and carrying value of fixed rate mortgages payable amounted to $41,157,177 and $40,782,736, respectively. For 2002, the fair and carrying values of fixed rate mortgages payable amounted to $43,543,545 and $43,321,884, respectively. The fair value of mortgages payable is based upon discounted cash flows at current market rates for instruments with similar remaining terms. NOTE 15 - SUPPLEMENTAL CASH FLOW AND COMPREHENSIVE INCOME INFORMATION Cash paid during the years ended December 31, 2003, 2002 and 2001 for interest was $3,336,290, $3,476,935 and $2,971,894, respectively. During the years ended December 31, 2003, 2002 and 2001, land development costs of $894,057, $697,627 and $954,585, respectively were transferred to investment property and equipment and placed in service. During the years ended December 31, 2003, 2002 and 2001, the Company had dividend reinvestments of $1,744,096, $1,654,949 and $1,686,031, respectively which required no cash transfers. The following are the reclassification adjustments related to securities available for sale included in Other Comprehensive Income: 2003 2002 2001 ____ ____ ____ Unrealized holding gains arising during the year $4,018,490 1,242,378 $4,562,120 Less: reclassification adjustment for gains realized in income (2,698,724) (794,950) (530,324) _________ ________ ________ Net unrealized gains $1,319,766 $447,428 $4,031,796 ========== ========= ========== NOTE 16 - SUBSEQUENT EVENTS On March 1, 2004, the Company acquired Bishop's Mobile Home Court and Whispering Pines Community, in Somerset Township, Pennsylvania. Bishop's Mobile Home Court is an existing family community consisting of 124 sites, located next to Whispering Pines Community, a 55-and-older community consisting of 15 existing home sites and an additional 60 acres for expansion. The Company will rename Bishop's Mobile Home Court as Somerset Estates. The total purchase price was approximately $3,500,000. The Company obtained a $2,000,000 mortgage with Somerset Trust Company which matures on February 26, 2019. The interest rate is fixed at 5.25% for three years and is adjusted every three years based upon the three-year Treasury rate plus 3.25%. -60- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2003

Column A Column B Column C Column D Initial Cost Site, Land & Capitalization Building Subsequent to Description Encumbrances Land Improvements Acquisition ________ ________ ________ ________ ________ Memphis, TN 5,576,541 250,000 2,569,101 1,381,338 Greenfield Center,NY -0- 37,500 232,547 2,280,765 Vineland, NJ (3) 320,000 1,866,323 859,405 Duncansville PA -0- 60,774 378,093 518,978 Cranberry Township, PA 2,242,222 181,930 1,922,931 284,296 Clifton Park, NY 3,044,969 391,724 704,021 1,213,716 Apollo, PA -0- 670,000 1,336,600 783,027 Cranberry Township, PA 3,587,554 75,000 977,225 1,155,274 Millville, NJ 3,859,421 216,000 1,166,517 4,590,478 Kutztown, PA -0- 145,000 1,695,041 4,615,674 Inkerman, PA 3,439,939 572,500 2,151,569 2,682,705 Monticello, NY -0- 235,600 1,402,572 1,955,031 Navarre, OH -0- 290,000 1,457,673 777,904 Cresson, PA 1,649,128 432,700 2,070,426 268,100 Memphis, TN -0- 78,435 810,477 1,483,001 West Grove, PA (3) 175,000 990,515 943,718 Carlisle, PA -0- 37,540 198,321 1,055,360 Belle Vernon, PA 5,282,636 150,000 2,491,796 2,901,503 Marion, OH -0- 236,000 785,293 2,405,907 Athens, OH -0- 67,000 1,326,800 257,311 Magnolia, OH 3,495,890 270,000 1,941,430 1,821,429 Jackson, NJ (3) 100,095 602,820 1,289,561 Hamburg, NY 2,632,734 424,000 3,812,000 243,735 West Monroe, NY -0- 77,000 841,000 225,199 Eatontown, NJ (3) 157,421 280,749 206,397 Caledonia, OH 260,000 1,753,206 611,997 ________ ________ _________ ________ 34,811,034 $5,911,219 $35,765,046 $36,811,809 ========= ========= ========= Various 9,411,641 (3) ________ $44,222,675 ==========

-61A- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2003

Column A Column E (1) (2) Column F (1) Gross Amount at Which Carried at 12/31/03 Site, Land & Building Accumulated Description Land Improvements Total Depreciation ___________ _______ ___________ ______ __________ Memphis, TN 250,000 3,950,439 4,200,439 2,923,121 Greenfield Center, NY 122,865 2,427,947 2,550,812 1,155,342 Vineland, NJ 408,206 2,637,522 3,045,728 1,952,876 Duncansville PA 60,774 897,071 957,845 593,224 Cranberry Township, PA 181,930 2,207,227 2,389,157 1,818,226 Clifton Park, NY 391,724 1,917,737 2,309,461 1,057,064 Apollo, PA 670,000 2,119,627 2,789,627 628,621 Cranberry Township, PA 75,000 2,132,499 2,207,499 1,737,443 Millville, NJ 631,137 5,341,858 5,972,995 1,927,628 Kutztown, PA 404,239 6,051,476 6,455,715 1,711,316 Inkerman, PA 572,500 4,834,274 5,406,774 1,607,714 Monticello,NY 318,472 3,274,731 3,593,203 1,459,140 Navarre, OH 290,000 2,235,577 2,525,577 1,223,537 Cresson, PA 432,700 2,338,526 2,771,226 181,026 Memphis, TN 78,435 2,293,478 2,371,913 1,369,663 West Grove, PA 175,000 1,934,233 2,109,233 1,491,330 Carlisle, PA 145,473 1,145,748 1,291,221 742,511 Belle Vernon, PA 150,000 5,393,299 5,543,299 3,294,815 Marion, OH 236,000 3,191,200 3,427,200 1,339,964 Athens, OH 67,000 1,584,111 1,651,111 414,091 Magnolia, OH 270,000 3,762,859 4,032,859 2,403,091 Jackson, NJ 100,095 1,892,381 1,992,476 1,526,910 Hamburg, NY 424,000 4,055,735 4,479,735 871,137 West Monroe, NY 77,000 1,066,199 1,143,199 23,583 Eatontown, NJ 135,421 509,146 644,567 379,648 Caledonia, OH 260,000 2,365,203 2,625,203 611,295 _________ _________ _________ _________ 6,927,971 $71,560,103 $78,488,074 $34,444,316 ========= ========= ========= ==========

-61B- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2003

Column A Column G Column H Column I ________ ________ ________ ________ Date of Date Depreciable Description Construction Acquired Life ___________ ____________ ________ ___________ Memphis, TN prior to 1980 1986 3 to 27.5 Greenfield prior to 1970 1977 3 to 27.5 Center, NY Vineland, NJ 1973 1986 3 to 27.5 Duncansville, PA 1961 1979 3 to 27.5 Cranberry 1974 1986 5 to 27.5 Township, PA Clifton Park, NY 1972 1978 3 to 27.5 Apollo, PA prior to 1980 1995 5 to 27.5 Cranberry prior to 1980 1982 3 to 27.5 Township, PA Millville, NJ prior to 1980 1985 3 to 27.5 Kutztown, PA 1971 1979 5 to 27.5 Inkerman, PA 1970 1992 5 to 27.5 Monticello, NY 1972 1988 5 to 27.5 Navarre, OH prior to 1980 1987 5 to 27.5 Cresson, PA prior to 1980 2001 5 to 27.5 Memphis, TN 1955 1985 3 to 27.5 West Grove, PA 1971 1974 5 to 27.5 Carlisle, PA 1961 1969 3 to 27.5 Belle Vernon, PA 1973 1983 3 to 27.5 Marion, OH 1950 1986 3 to 27.5 Athens, OH prior to 1980 1996 5 to 27.5 Magnolia, OH prior to 1980 1985 5 to 27.5 Jackson, NJ 1969 1969 3 to 27.5 Hamburg, NY prior to 1980 1997 5 to 27.5 West Monroe, NY prior to 1980 2003 5 to 27.5 Eatontown, NJ 1964 1978 3 to 27.5 Caledonia, OH prior to 1980 1996 5 to 27.5

-61C-

/----------FIXED ASSETS-----------/ (1) Reconciliation: 12/31/03 12/31/02 12/31/01 Balance - Beginning of Year $74,820,899 $73,015,447 $68,265,859 __________ __________ __________ Additions: Acquisitions 918,000 -0- 2,503,126 Improvements 3,220,960 2,952,693 2,710,384 Depreciation -0- -0- -0- __________ __________ __________ Total Additions 4,138,960 2,952,693 5,213,510 __________ __________ __________ Deletions 471,785 1,147,241 463,922 __________ __________ __________ Balance - End of Year $78,488,074 $74,820,899 $73,015,447 ========== ========== ==========

/-----ACCUMULATED DEPRECIATION-----/ Reconciliation: 12/31/03 12/31/02 12/31/01 Balance - Beginning of Year $32,073,978 $29,763,492 $ 27,526,792 __________ __________ __________ Additions: Acquisitions -0- -0- -0- Improvements -0- -0- -0- Depreciation 2,494,445 2,433,867 2,360,623 __________ __________ __________ Total Additions 2,494,445 2,433,867 2,360,623 __________ __________ __________ Deletions 124,107 123,381 123,923 __________ __________ __________ Balance - End of Year $34,444,316 $32,073,978 $ 29,763,492 ========== ========== ==========

(2) The aggregate cost for Federal tax purposes approximates historical cost. (3) Represents one mortgage note payable secured by four properties. -61D- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED MOBILE HOMES, INC. BY: /s/Eugene W. Landy EUGENE W. LANDY Chief Executive Officer Dated: March 8, 2004 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Title Date /s/Eugene W. Landy Chief Executive March 8, 2004 EUGENE W. LANDY Officer and Director /s/Samuel A. Landy President and March 8, 2004 SAMUEL A. LANDY Director /s/Anna T. Chew Vice President and March 8, 2004 ANNA T. CHEW Chief Financial Officer and Director /s/Ernest V. Secretary/Treasurer March 8, 2004 Bencivenga and ERNEST V. BENCIVENGA Director /s/Charles P. Director March 8, 2004 Kaempffer CHARLES P. KAEMPFFER /s/James Mitchell Director March 8, 2004 JAMES MITCHELL /s/Richard H. Molke Director March 8, 2004 RICHARD H. MOLKE /s/Eugene Rothenberg Director March 8, 2004 EUGENE ROTHENBERG /s/Robert G. Sampson Director March 8, 2004 ROBERT G. SAMPSON -62-