FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996

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

COMMISSION FILE NUMBER: 1-11718

MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its Charter)

MARYLAND 36-3857664
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)

(312) 474-1122
(Registrant's telephone number, including area code)

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 ( )

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

24,692,308 SHARES OF COMMON STOCK AS OF APRIL 30, 1996.

MANUFACTURED HOME COMMUNITIES, INC.

TABLE OF CONTENTS

PART I - FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

INDEX TO FINANCIAL STATEMENTS
Page

Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995.................................. 3

Consolidated Statements of Operations for the quarters ended March 31, 1996 and 1995.................... 4

Consolidated Statements of Cash Flows for the quarters ended March 31, 1996 and 1995.................... 5

Notes to Consolidated Financial Statements.............................................................. 6

ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................................... 10

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings................................................................................. 15

ITEM 6. Exhibits and Reports on Form 8-K.................................................................. 15

MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

1996 1995
-------- --------

ASSETS
Investment in rental property:
Land............................................................... $132,483 $127,229
Land improvements.................................................. 345,677 328,667
Buildings and other depreciable property........................... 87,380 87,059
-------- --------
565,540 542,955
Accumulated depreciation........................................... (60,036) (56,403)
-------- --------
Net investment in rental property............................... 505,504 486,552
Cash and cash equivalents............................................. 712 760
Short-term investments (at cost, which approximates market)........... 4,092 1,682
Notes receivable...................................................... 15,105 15,010
Investment in and advances to affiliates.............................. 11,245 10,987
Rents receivable...................................................... 871 935
Deferred financing costs, net......................................... 3,000 3,268
Prepaid expenses and other assets..................................... 3,245 3,430
Due from affiliates................................................... 441 501
-------- --------
Total assets....................................................... $544,215 $523,125
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable............................................. $198,541 $199,066
Line of credit..................................................... 31,000 12,900
Accounts payable and accrued expenses.............................. 10,904 8,759
Accrued interest payable........................................... 1,264 1,258
Rents received in advance and security deposits.................... 4,658 1,792
Distributions payable.............................................. 8,350 7,998
Due to affiliates.................................................. 409 547
-------- --------
Total liabilities............................................... 255,126 232,320
-------- --------
Commitments and contingencies
Minority interests.................................................... 29,104 29,305
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value
10,000,000 shares authorized; none issued....................... --- ---
Common stock, $.01 par value
50,000,000 shares authorized; 24,778,016 and
24,502,877 shares issued and 24,668,288 and 24,393,149 shares
outstanding for 1996 and 1995, respectively..................... 247 244
Paid-in capital.................................................... 293,304 288,533
Treasury stock, 109,728 shares of common stock..................... (1,987) (1,987)
Employee notes..................................................... (6,237) (1,565)
Distributions in excess of accumulated earnings.................... (25,342) (23,725)
-------- --------
Total stockholders' equity...................................... 259,985 261,500
-------- --------
Total liabilities and stockholders' equity......................... $544,215 $523,125
======== ========

The accompanying notes are an integral part of the financial statements.

MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

1996 1995
------- -------

REVENUES
Base rental income............................... $22,465 $21,163
Utility and other income......................... 2,299 2,219
Equity in income of affiliates................... 105 167
Interest income.................................. 600 579
------- -------
Total revenues................................ 25,469 24,128
------- -------
EXPENSES
Property operating and maintenance............... 6,897 6,918
Real estate taxes................................ 2,010 1,917
Property management.............................. 1,184 1,297
Corporate expenses............................... 971 1,322
Interest:
Interest incurred............................. 3,926 4,272
Amortization of deferred financing cost....... 268 814
Depreciation..................................... 3,656 3,590
------- -------
Total expenses................................... 18,912 20,130
------- -------
Income before allocation to minority interests... 6,557 3,998

(Income) allocated to minority interests......... (650) (400)
------- -------
Net income....................................... $ 5,907 $ 3,598
======= =======
Net income per weighted average common share
outstanding................................... $ .24 $ .15
======= =======
Distributions declared
per common share outstanding.................. $ .305 $ .295
======= =======
Weighted average common shares outstanding....... 24,664 24,331
======= =======

The accompanying notes are an integral part of the financial statements.

MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

1996 1995
------- -------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 5,907 $ 3,598
Adjustments to reconcile net income to
cash provided by operating activities:
Income allocated to minority interests........................ 650 400
Depreciation and amortization expense......................... 3,924 4,404
Equity in income of affiliates................................ (105) (167)
Decrease in rents receivable.................................. 64 293
Decrease (increase) in prepaid expenses and other assets...... 104 (177)
Increase in accounts payable and accrued expenses............. 2,013 2,347
Increase in rents received in advance and security deposits... 2,866 2,950
------- -------
Net cash provided by operating activities......................... 15,423 13,648
------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments, net........................... (2,410) (4,986)
(Contributions to) distributions from affiliates.................. (153) 10
Collection of principal payments on notes receivable.............. 46 1,552
Acquisition of rental properties.................................. (21,456) (600)
Improvements:
Improvements - corporate...................................... --- (354)
Improvements - rental properties.............................. (646) (774)
Site development costs........................................ (506) (499)
------- -------
Net cash used in investing activities............................. (25,125) (5,651)
------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options....................... 39 71
Distributions to common stockholders and minority interests....... (8,000) (8,007)
Treasury stock acquired........................................... --- (1,987)
Collection of principal payments on employee notes................ 20 2,021
Proceeds from line of credit...................................... 18,600 ---
Repayments on mortgage notes payable and line of credit........... (1,025) (328)
Debt issuance costs and other..................................... 20 (19)
------- -------
Net cash provided by (used in) financing activities............... 9,654 (8,249)
------- -------
Net (decrease) in cash and cash equivalents.......................... (48) (252)
Cash and cash equivalents, beginning of period....................... 760 1,924
------- -------
Cash and cash equivalents, end of period............................. $ 712 $ 1,672
======= =======

SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest............................. $ 3,920 $ 4,211
======= =======

The accompanying notes are an integral part of the financial statements.

MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PRESENTATION:

These unaudited Consolidated Financial Statements of Manufactured Home
Communities, Inc., a Maryland corporation, and its subsidiaries (collectively,
the "Company"), have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the financial statements and notes thereto included in the Company's 1995
Annual Report on Form 10-K. The following Notes to Consolidated Financial
Statements highlight significant changes to the Notes included in the 1995
Annual Report on Form 10-K and present interim disclosures as required by the
SEC. The accompanying Consolidated Financial Statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation of the
interim financial statements. All such adjustments are of a normal and
recurring nature. Certain reclassifications have been made to the prior
periods' financial statements in order to conform with current period
presentation.

NOTE 1 - COMMON STOCK AND RELATED TRANSACTIONS

On April 12, 1996, the Company paid a $.305 per share distribution for the
quarter ended March 31, 1996 to stockholders of record on March 29, 1996.

On January 2, 1996, certain members of management of the Company each
entered into subscription agreements with the Company to acquire 270,000 shares
of the Company's common stock at $17.375 per share. The Company allowed these
individuals to tender notes (the "1996 Employee Notes") in exchange for their
shares. The 1996 Employee Notes accrue interest at 5.91%, mature on January 2,
2005, and are recourse against the employees in the event the pledged shares
are insufficient to repay the obligations.

NOTE 2 - RENTAL PROPERTY

On February 28, 1996, the Company acquired Waterford, located near
Wilmington, Delaware, for a purchase price of approximately $21 million. The
acquisition was funded with an $18.6 million borrowing under the Company's line
of credit with a bank and approximately $2.4 million of working capital.
Waterford consists of 621 developed sites and 110 expansion sites; the cost of
completing the expansion sites will be paid by the seller.

As of April 30, 1996, the Company had contracts outstanding to acquire
certain manufactured housing communities which are subject to satisfactory
completion of the Company's due diligence review. The Company is actively
seeking to acquire additional communities and currently is engaged in
negotiations relating to the possible acquisition of a number of communities.

Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets To Be Disposed Of"
("SFAS No. 121") is effective for fiscal years beginning after December 15,
1995. The Company evaluates rental properties for impairment when conditions
exist which may indicate that it is probable that the sum of expected future
cash flows (undiscounted) from a rental property are less than its carrying
value. Upon determination that a permanent impairment has occurred, rental
properties are reduced to fair value. For the quarter ended March 31, 1996,
permanent impairment conditions did not exist at any of the Company's
properties.

MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - NOTES RECEIVABLE

At March 31, 1996 and December 31, 1995, notes receivable consisted of the
following (amounts in thousands):

1996 1995
------- -------

$2.0 million note receivable with monthly principal and interest
payments at 9.0%, maturing on 6/10/2003........................... $ 1,726 $ 1,768

$1.2 million purchase money notes with monthly principal and
interest payments at 7%, maturing on 4/30/2001.................... 1,170 1,174

$10 million leasehold mortgage loan with interest accruing at a
stated rate of 12.5% with a pay rate of 8.25%, maturing on
9/1/2013.......................................................... 10,676 10,558

$1.9 million note receivable with monthly interest payments at
prime plus 1.6%, maturing on 4/15/2000............................ 1,533 1,510
------- -------

Total notes receivable............................................ $15,105 $15,010
======= =======

NOTE 4 - LONG-TERM BORROWINGS

At March 31, 1996 and December 31, 1995, long-term borrowings consisted of
the following (amounts in thousands):

1996 1995
-------- --------

$100.0 million mortgage note payable with monthly interest only
payments at LIBOR plus 1.05%, maturing on 3/3/98 (a)................... $100,000 $100,000

First mortgage loan with monthly principal and interest payments at
7.40%, maturing on 3/1/2004........................................... 8,731 8,767

Purchase money note with structured principal and interest payments
at an imputed rate of 7.38%, maturing on 7/13/2004.................... 1,334 1,516

First mortgage loan with monthly principal and interest payments at a
rate of 7.48%, maturing on 8/1/2004................................... 24,780 24,859

$65.0 million first mortgage loan with monthly principal and interest
payments at 8%, maturing on 8/18/2001................................. 63,696 63,924
-------- --------
Total collateralized borrowings....................................... 198,541 199,066

$50.0 million line of credit at LIBOR plus 2% (b)..................... 31,000 12,900
-------- --------
Total long-term borrowings............................................ $229,541 $211,966
======== ========

MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LONG-TERM BORROWINGS (CONTINUED)

(a) In December 1995, the Company entered into an agreement fixing the London
Interbank Offered Rate ("LIBOR") on the $100.0 million mortgage note payable
(the "Mortgage Debt") at 5.24% effective January 10, 1996 through January 10,
1997. The value of this agreement is impacted by changes in the market rate of
interest. Had the agreement been entered into on March 31, 1996, the
applicable LIBOR swap rate would have been 5.39%. Each 0.01% increase or
decrease in the applicable swap rate for this agreement increases or decreases
the value of the agreement entered into by the Company versus its current value
by approximately $9,000.

The Company has an interest rate cap for the term of the Mortgage Debt
which eliminates exposure to increases in LIBOR over 6%, plus 1.05%. In
connection with the agreement effective January 10, 1996, discussed above, the
Company sold a portion of the interest rate cap related to 1996 and recorded a
non-cash loss of approximately $650,000 in the fourth quarter of 1995. As of
March 31, 1996, the fair market value of the interest rate cap was
approximately $705,000 as compared to book value of $762,000.

In July 1995 the Company entered into an interest rate swap agreement (the
"Swap") beginning at the maturity of the Mortgage Debt fixing LIBOR on the
refinancing of the Mortgage Debt at 6.4% for the period 1998 through 2003. The
cost of the Swap consisted only of legal costs which were deemed immaterial.
In the event that the Company does not refinance the Mortgage Debt, the risk
associated with the Swap is that the Company would be obligated to perform its
obligations under the terms of the Swap or would have to pay to terminate the
Swap. In either event, the impact of such transaction would be reflected in
the Company's statement of operations. The value of the Swap is impacted by
changes in the market rate of interest. Had the Swap been entered into on
March 31, 1996, the applicable LIBOR swap rate would have been 6.69%. Each
0.01% increase or decrease in the applicable swap rate for the Swap increases
or decreases the value of the Swap entered into by the Company versus its
current value by approximately $38,000.

(b) On May 7, 1996, the Company amended the credit agreement increasing the
$50.0 million line of credit to $100.0 million at LIBOR plus 1.375% and
extended the maturity date to August 17, 1998. In addition, the fee on the
average unused amount was reduced to .15% of such amount from .25%. The
Company paid a $200,000 loan fee which is being amortized over the remaining
period of the amended agreement.

As of March 31, 1996, the carrying value of the property collateralizing the
long-term borrowings was approximately $458 million.

MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - STOCK OPTIONS

Pursuant to the Amended and Restated 1992 Stock Option and Stock Award
Plan (the "Plan") as discussed in Note 12 to the 1995 Annual Report on Form
10-K, certain officers, directors, key employees and consultants have been
offered the opportunity to acquire shares of common stock of the Company
through stock options ("Options"). During the quarter ended March 31, 1996,
Options for 3,000 shares of common stock were exercised.

In 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). Under the
provisions of SFAS No. 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". SFAS No. 123 requires that companies electing to continue
using the intrinsic value method must make pro-forma disclosures of net income
and earnings per share as if the fair-value-based method of accounting had been
applied.

The Company elected to continue to account for stock-based compensation
using the intrinsic value method. As such, SFAS No. 123 did not have an impact
on the Company's first quarter results of operations or financial position. The
pro-forma information required by SFAS No. 123 will be included in the
footnotes to the Company's 1996 year-end consolidated financial statements.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

There have been no new or significant developments related to the
commitments and contingencies that were discussed in the 1995 Annual Report on
Form 10-K.

NOTE 7 - SUBSEQUENT EVENTS

On May 9, 1996, the Company funded a recourse real estate loan for
$6,050,000 to the partnership which owns Candlelight Village, located in
Columbus, Indiana. The loan has an interest rate of 9.5%, 9.75% and 10% for
the first, second and third years of the loan, respectively, which interest is
payable monthly. Interest and principal are guaranteed by the general partner
of the partnership which owns Candlelight. The loan matures May 8, 1999 at
which time the Company has the option to purchase Candlelight Village.
Candlelight Village consists of 512 sites and 73 expansion sites. For
financial accounting purposes, the Company expects to account for the loan as
an investment in real estate.

MANUFACTURED HOME COMMUNITIES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The following is a discussion of the interim results of operations,
financial condition and liquidity and capital resources of the Company for the
three months ended March 31, 1996 compared to the corresponding period in 1995.
It should be read in conjunction with the Consolidated Financial Statements
and Notes thereto included herein and the 1995 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THREE MONTHS ENDED
MARCH 31, 1995

Since March 31, 1995, the gross investment in rental property has
increased from $543 million to $566 million as of March 31, 1996 due to the
acquisition of Waterford on February 28, 1996, partially offset by the sale of
two properties in 1995. The total number of sites has increased from 25,839 as
of March 31, 1995 to 26,284 as of March 31, 1996.

The following table summarizes certain weighted average occupancy
statistics for the quarters ended March 31, 1996 and 1995. "Core Portfolio"
represents an analysis of properties owned during both periods of comparison.

Core Portfolio Total Portfolio
----------------------- ------------------------
1996 1995 1996 1995
------- ------- ------- -------

Total sites 25,553 25,352 25,797 25,839
Occupied sites 24,008 23,651 24,208 24,004
Occupancy % 94.0% 93.3% 93.3% 92.9%
Monthly base rent per site $309.29 $294.65 $309.34 $296.65

Base rental income ($22.5 million) increased $1.3 million or 6.1%. For
the Core Portfolio, base rental income increased approximately $1.4 million or
6.6%, reflecting a 5.0% increase in base rental rates and a 1.6% increase
related to occupancy. Base rental income at Waterford was approximately
$189,000 for the quarter ended March 31, 1996. Partially offsetting this
increase was a $257,000 decrease in base rental income resulting from the sale
of two properties in 1995.

The increase in monthly base rent per site reflected annual rent increases
which went into effect in the first quarter of 1996 at approximately 72% of the
properties, as well as annual rent increases that occurred in the last nine
months of 1995. The 0.8% increase in occupied sites for the total portfolio
was due to improved occupancy in the Southeastern Region's expansion
communities and increased occupancy in the Rocky Mountain Region at a majority
of the properties, partially offset by a decrease in occupied sites in the
Western Region as a result of the sale in 1995 of Catalina.

MANUFACTURED HOME COMMUNITIES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Utility and other income ($2.3 million) increased $80,000 or 3.6%
primarily due to increased other income at a majority of the properties.

Interest income ($600,000) increased $21,000 or 3.6%, primarily due to
interest earned on the $1.9 million of notes receivable funded by the Company
in April 1995 and the 1996 Employee Notes granted on January 2, 1996, partially
offset by a decrease in interest earned on short-term investments. Short-term
investments had average balances for the quarters ended March 31, 1996 and 1995
of approximately $3.4 million and $7.8 million, respectively, which earned
interest income at an effective rate of 5.4% and 4.4% per annum, respectively.
As of March 31, 1996, the Company had cash and cash equivalents and short- term
investments of $4.8 million.

Property operating and maintenance expenses ($6.9 million) decreased
$21,000 or 0.3%. The decrease was primarily due to a decrease in property
payroll of approximately $335,000, partially offset by an increase in utility
expense of approximately $191,000 and an increase in insurance and other
expenses of approximately $154,000. Property operating and maintenance
expenses represented 27.1% of total revenues in 1996 and 28.7% in 1995.

Real estate taxes ($2 million) increased $93,000 or 4.9% due to the
expected increase in assessed values at certain properties in 1996. Real
estate taxes represented 7.9% of total revenues in both 1996 and 1995.

Property management expenses ($1.2 million) decreased $113,000 or 8.7%.
The decrease was primarily due to a decrease in management company payroll of
approximately $462,000. In late March 1995, the Company closed certain of its
regional offices and reduced staffing at others which decreased management
company payroll. Partially offsetting this decrease was the one-time receipt
in 1995 of a $281,000 termination fee related to certain fee-managed contracts
and a $68,000 decrease in other property management company expenses. Property
management expenses represented 4.6% of total revenues in 1996 and 4.7% in
1995.

Corporate expenses ($971,000) decreased $351,000 or 26.6%. The decrease
was due to: (i) decreased professional fees of approximately $137,000
resulting from the write-off in the first quarter of 1995 of legal due
diligence and related costs associated with acquisitions which did not
materialize, and (ii) decreased public company costs. Corporate expenses
represented 3.8% of total revenues in 1996 and 4.4% in 1995.

Interest expense ($3.9 million) decreased by $346,000 or 8.1%. The
decrease was due to lower weighted average outstanding debt balances during the
period, as well as a decrease in the effective interest rate. The weighted
average outstanding debt balances for the quarters ended March 31, 1996 and
1995 were $218.0 million and $226.6 million, respectively. The effective
interest rates were 7.2% and 7.54%, respectively. Interest expense represented
15.4% of total revenues in 1996 and 17.7% in 1995.

MANUFACTURED HOME COMMUNITIES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

In December 1995, the Company entered into an agreement fixing the LIBOR
rate on the Mortgage Debt at 5.24% effective January 10, 1996 through January
10, 1997. The value of this agreement is impacted by changes in the market
rate of interest. Had the agreement been entered into on March 31, 1996, the
applicable LIBOR swap rate would have been 5.39%. Each 0.01% increase or
decrease in the applicable swap rate for this agreement increases or decreases
the value of the agreement entered into by the Company versus its current value
by approximately $9,000.

In July 1995 the Company entered into the Swap beginning at the maturity
of the Mortgage Debt fixing LIBOR on the refinancing of the Mortgage Debt at
6.4% for the period 1998 through 2003. The cost of the Swap consisted only of
legal costs which were deemed immaterial. In the event that the Company does
not refinance the Mortgage Debt, the risk associated with the Swap is that the
Company would be obligated to perform its obligations under the terms of the
Swap or would have to pay to terminate the Swap. In either event, the impact
of such transaction would be reflected in the Company's statement of
operations. The value of the Swap is impacted by changes in the market rate of
interest. Had the Swap been entered into on March 31, 1996, the applicable
LIBOR swap rate would have been 6.69%. Each 0.01% increase or decrease in the
applicable swap rate for the Swap increases or decreases the value of the Swap
entered into by the Company versus its current value by approximately $38,000.

On May 7, 1996, the Company amended it credit agreement on the $50.0
million line of credit ("Credit Facility") increasing the Credit Facility to
$100.0 million at LIBOR plus 1.375% and extended the maturity date to August
17, 1998. In addition, the fee on the average unused amount was reduced to
.15% of such amount. The Company borrowed an additional $2.0 million and $5.0
million under the Credit Facility in April and May 1996, respectively.

Amortization of deferred financing costs ($268,000) decreased $546,000 or
67% primarily due to the write-off in 1995 of approximately $385,000 of loan
costs related to the $50 million line of credit with General Electric Credit
Corp. which expired in March 1995. Amortization of deferred financing costs
represented 1.1% of total revenues in 1996 and 3.4% in 1995.

Depreciation expense ($3.7 million) increased $66,000 or 1.8%.
Depreciation expense on corporate assets was approximately $96,000 and $83,000
for the quarters ended December 31, 1995 and 1994, respectively. Depreciation
expense represented 14.4% of total revenues in 1996 and 14.9% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased by $48,000 when compared to December
31, 1995. The major components of this decrease were the acquisition of
Waterford, payment of distributions, purchase of short-term investments, and
improvements to rental properties, partially offset by the $18.6 million
borrowing under the line of credit and increased cash provided by operating
activities.

MANUFACTURED HOME COMMUNITIES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Net cash provided by operating activities increased $1.8 million from
$13.6 million for the quarter ended March 31, 1995 compared to $15.4 million
for the same period in 1996. This increase reflected a $2.2 million increase
in Funds From Operations ("FFO"), as discussed below, and decreased accounts
payable accruals.

FFO was defined by the National Association of Real Estate Investment
Trusts ("NAREIT") in March 1995 as net income (computed in accordance with
generally accepted accounting principles ["GAAP"]), before allocation to
minority interests, plus real estate depreciation and after adjustments for
significant non-recurring items, if any. In the first quarter of 1996, the
Company adopted this new definition of FFO which is effective for periods
ending after December 31, 1995. Prior to this adoption, FFO was defined as
income before allocation to minority interests plus certain non-cash items,
primarily depreciation and amortization. Funds available for distribution
("FAD") is defined as FFO less non-revenue producing capital expenditures and
amortization payments on mortgage loan principal. The Company believes that
FFO and FAD are useful to investors as a measure of the performance of an
equity REIT because, along with cash flows from operating activities, financing
activities and investing activities, they provide investors an understanding of
the ability of the Company to incur and service debt and to make capital
expenditures. FFO and FAD in and of themselves do not represent cash generated
from operating activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indication of the Company's
performance or to net cash flows from operating activities as determined by
GAAP as a measure of liquidity and are not necessarily indicative of cash
available to fund cash needs.

The following table presents a calculation of FFO and FAD for the quarters
ended March 31, 1996 and 1995:

March 31,
1996 1995
------- -------

Computation of funds from operations:
Income before allocation to minority interests........ $ 6,557 $ 3,998
Depreciation on real estate assets................. 3,560 3,507
Amortization of non-recurring items................ --- 385
------- -------
Funds from operations................................. $10,117 $ 7,890 (a)
======= =======
Computation of funds available for distribution:
Funds from operations................................. $10,117 $ 7,890 (a)
Non-revenue producing improvements -
rental properties............................... (646) (774)
------- -------
Funds available for distribution...................... $ 9,471 $ 7,116
======= =======

(a) FFO for the quarter ended March 31, 1995 has been restated pursuant to
the new definition of FFO adopted by the Company for periods ending after
December 31, 1995.

MANUFACTURED HOME COMMUNITIES, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Net cash used in investing activities increased $19.5 million from $5.7
million for the quarter ended March 31, 1995 to $25.1 million for the quarter
ended March 31, 1996 due to the acquisition of Waterford, partially offset by a
decrease in the purchase of short-term investments. On February 28, 1996, the
Company acquired Waterford, located near Wilmington, Delaware, for a purchase
price of approximately $21 million. The acquisition was funded with an $18.6
million borrowing under the Company's line of credit and approximately $2.4
million of working capital. Waterford consists of 621 developed sites and 110
expansion sites; the cost of developing the expansion sites will be paid by the
seller.

Capital expenditures for improvements were approximately $1.2 million for
the quarter ended March 31, 1996 compared to $1.6 million for the quarter ended
March 31, 1995. Of the $1.2 million, approximately $646,000 represented
improvements to existing sites. The Company anticipates spending approximately
$2.6 million on improvements to existing sites during the remainder of 1996.
The Company believes these improvements are necessary in order to increase
and/or maintain occupancy levels and maximize rental rates charged to new and
renewing residents. The remaining $506,000 represented costs to develop
expansion sites at certain of the Company's properties. The Company is
currently developing an additional 105 sites which should be available for
occupancy in 1996.

Net cash provided by (used in) financing activities increased $17.9
million from $(8.2) million for the quarter ended March 31, 1995 to $9.7
million for the quarter ended March 31, 1996 primarily due to the $18.6 million
borrowing under the line of credit for the acquisition of Waterford.

Distributions to common stockholders and minority interests remained
relatively stable at $8 million for the quarters ended March 31, 1996 and 1995.
On January 12, 1996, the Company paid a $0.295 per share distribution for the
fourth quarter of 1995 to stockholders of record on December 29, 1995. On
April 12, 1996, the Company paid a $0.305 per share distribution for the first
quarter of 1996 to stockholders of record on March 29, 1996. Return of capital
on a GAAP basis was $0.065 for the first quarter of 1996.

The Company expects to meet its short-term liquidity requirements,
including its distributions, generally through its working capital, net cash
provided by operating activities and availability under the existing line of
credit. The Company expects to meet certain long-term liquidity requirements
such as scheduled debt maturities, property acquisitions and capital
improvements by long-term collateralized and uncollateralized borrowings
including its existing line of credit and the issuance of debt securities or
additional equity securities in the Company, in addition to working capital.

MANUFACTURED HOME COMMUNITIES, INC.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The discussion in Note 6 of Notes to Consolidated Financial
Statements is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

10.1 Amendment No. 2 to MHC Operating Limited Partnership
Amended and Restated Partnership Agreement dated
February 15, 1996

10.2 Form of Subscription Agreement between the Company and
certain members of management of the Company

10.3 Form of Secured Promissory Note payable to the Company
by certain members of management of the Company

10.4 Form of Pledge Agreement between the Company and
certain members of management of the Company

27 Financial Data Schedule

(b) Reports on Form 8-K:

Form 8-K dated February 28, 1996, filed March 15, 1996, relating to
Item 5 - "Other Events - Acquisition or Disposition Assets" on
the acquisition of Waterford.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

MANUFACTURED HOME COMMUNITIES, INC.

BY: \s\ Thomas P. Heneghan
------------------------------------------
Thomas P. Heneghan
Vice President and Chief Financial Officer
(a duly authorized officer and Chief
Accounting Officer of the Company)

DATE: May 9, 1996