LIBERTY TAX CREDIT PLUS III LP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

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

For the fiscal year ended March 31, 2000
OR

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

Commission File Number 0-24656

LIBERTY TAX CREDIT PLUS III L.P.
--------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-3491408
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

625 Madison Avenue, New York, New York 10022
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 421-5333

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Limited Partnership Interests and Beneficial Assignment Certificates
(Title of Class)

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

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

DOCUMENTS INCORPORATED BY REFERENCE
None

Index to exhibits may be found on page 187

Page 1 of 201

PART I

Item 1. Business.

GENERAL

Liberty Tax Credit Plus III L.P. (the "Partnership") is a limited partnership
which was formed under the laws of the State of Delaware on November 17, 1988.
The General Partners of the Partnership are Related Credit Properties III L.P.,
a Delaware limited partnership (the "Related General Partner"), and Liberty GP
III Inc., a Delaware corporation (the "Liberty General Partner"). The general
partner of the Related General Partner is Related Credit Properties III Inc., a
Delaware corporation. On November 25, 1997, an affiliate of the Related General
Partner, purchased 100% of the stock of the Liberty General Partner (the
"Transfer"). In addition to the Transfer, by acquiring the stock of the Liberty
General Partner, an affiliate of the Related General Partner also acquired the
Liberty General Partner's general partner interest in Liberty Associates IV
L.P., the special limited partner of the Partnership. Pursuant to the
Partnership's Amended and Restated Partnership Agreement, the consent of the
limited partners was not required to approve the Transfer. In connection with
the Transfer, the Partnership paid to the Liberty General Partner the accrued
asset management fees owed to the Liberty General Partner in the aggregate
amount of $737,750.

On May 2, 1989, the Partnership commenced a public offering (the "Offering") of
Beneficial Assignment Certificates ("BACs") representing assignments of limited
partnership interests in the Partnership ("Limited Partnership Interests").

As of March 30, 1990, (the date on which the Partnership held the final closing
of the sale of BACs and on which the Offering was terminated), the Partnership
had received $139,101,500 of gross proceeds of the Offering from 9,082
investors.

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Rehabilitation Tax Credit") ("Rehabilitation Projects"; and
together with the Apartment Complexes, the"Properties"). Some of the Apartment
Complexes benefit from one or more other forms of federal or state housing
assistance. The Partnership's investment in each Local Partnership represents
from 27% to 98% of the Partnership's interests in the Local Partnership. As of
March 31, 2000, approximately $109,000,000 (not including acquisition fees) of
net proceeds have been invested in 62 Local Partnerships. The Partnership does
not anticipate making any additional investments. See Item 2, Properties, below.

Liberty Associates IV, L.P. ("Liberty Associates") is the Special Limited
Partner in all 62 Local Partnerships. Liberty Associates has certain rights and
obligations in its role as Special Limited Partner which permit this affiliate
of the registrant to exercise control over the management and policies of the
subsidiaries.

-2-

The Partnership has been formed to invest primarily in low-income Apartment
Complexes that are eligible for the Housing Tax Credit enacted in the Tax Reform
Act of 1986. Some Apartment Complexes may also be eligible for Historic
Rehabilitation Tax Credits ("Historic Complexes"). The investment objectives of
the Partnership are to:

1. Entitle qualified BACs holders to substantial Housing Tax Credits over the
period of the Partnership's entitlement to claim such Tax Credits (for each
Property, generally ten years from the date of investment or, if later, the date
the Property is placed in service; referred to herein as the "Credit Period")
with respect to each Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the Properties and
provide distributions of sale or refinancing proceeds upon the disposition of
the Properties.

4. Provide cash distributions when available from the operations of the
Properties, current taxes on which are expected to be substantially deferred.

5. Allocate passive losses to individual BACs holders to offset passive income
that they may realize from rental real estate investments and other passive
activities, and allocate passive losses to corporate BACs holders to offset
business income.

One of the Partnership's objectives is to entitle qualified BACs holders to
Housing Tax Credits over the Credit Period. Each of the Local Partnerships in
which the Partnership has acquired an interest has been allocated by the
relevant state credit agency the authority to recognize Tax Credits during the
Credit Period provided that the Local Partnership satisfies the rent
restriction, minimum set-aside and other requirements for recognition of the Tax
Credits at all times during the 15-year period commencing at the beginning of
the Credit Period. Once a Local Partnership has become eligible to recognize Tax
Credits, it may lose such eligibility and suffer an event of "recapture" if (1)
the Partnership ceases to meet qualification requirements , (2) there is a
decrease in the qualified basis of the Projects, or (3) there is a reduction in
the taxpayer's interest in the Project at any time during the 15-year Compliance
Period that began with the first tax year of the Credit Period. None of the
Local Partnerships in which the Partnership has acquired an interest has
suffered an event of recapture.

The Partnership continues to meet its primary objective of generating Housing
Tax Credits; approximately $19,534,000, $19,584,000 and $19,632,000, during the
tax years 1999, 1998 and 1997 respectively.

The Partnership also continues to meet its objective of allocating passive
losses to individual BACs holders to offset passive income that they may realize
from rental real estate investments and other passive activities, and allocating
passive losses to corporate BACs holders to offset business income.

Cash distributions received from the Local Partnerships have been relatively
immaterial. Management does not expect that the distributions received from the
Local Partnerships will be sufficient to permit cash distributions to BACs
holders. The Partnership does not anticipate providing cash distributions to
BACs holders in circumstances other than refinancings or sales.

There can be no assurance that the Partnership will achieve its investment
objectives.

Certain subsidiaries are subject to HUD restrictions which limit annual cash
distributions to partners and restrict the subsidiaries from selling or
otherwise liquidating their assets during the period that the agreement with HUD
is in existence, without HUD's approval.

-3-

In order for certain subsidiaries to qualify for the Section 421A Program, and
the Inclusionary Zoning Program they are subject to certain requirements by
local authorities as to the level of rent that may be charged to tenants, the
tenants' incomes, the obligation to operate the property in accordance with rent
stabilization guidelines, and restrictions on the rate at which housing units
may be released from such guidelines.

Also, certain subsidiary partnerships obtain grants from local authorities to
fund construction costs of the properties and in order to qualify must maintain
the low-income nature of the property, among other provisions.

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally; however, no more than
20% of the properties are located in any single state. There are also
substantial risks associated with owning properties receiving government
assistance, for example the possibility that Congress may not appropriate funds
to enable the U.S. Department of Housing and Urban Development ("HUD") to make
rental assistance payments. HUD also restricts annual cash distributions to
partners based on operating results and a percentage of the owner's equity
contribution. The Partnership cannot sell or substantially liquidate its
investments in subsidiary partnerships during the period that the subsidy
agreements are in existence, without HUD's approval. Furthermore, there may not
be market demand for apartments at full market rents when the rental assistance
contracts expire.

COMPETITION
The real estate business is highly competitive and substantially all of the
Properties acquired and to be acquired by the Partnership are subject to active
competition from similar properties in their respective vicinities. In addition,
various other limited partnerships may, in the future, be formed by the General
Partners and/or their affiliates to engage in businesses which may be
competitive with the Partnership.

EMPLOYEES
The Partnership does not have any direct employees. All services are performed
for the Partnership by its General Partners and their affiliates. The General
Partners receive compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Partnership reimburses the General Partners
and certain of their affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance
with the Partnership's Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement").

Item 2. Properties.

The Partnership holds a 98% limited partnership interest in 61 Local
Partnerships and a 26.46% limited partnership interest in 1 Local Partnership
(the other 71.54% limited partnership interest is held by an affiliate of the
Partnership with the same management); together these 62 Local Partnerships own
66 apartment complexes. Set forth below is a schedule of these Local
Partnerships including certain information concerning their respective Apartment
Complexes (the "Local Partnership Schedule"). Further information concerning
these Local Partnerships and their Properties, including any encumbrances
affecting the properties, may be found in Item 14. Schedule III.

-4-

Local Partnership Schedule
--------------------------
% of Units Occupied at May 1,
Name and Location ----------------------------------
(Number of Units) Date Acquired 2000 1999 1998 1997 1996
- ----------------- ------------- ---- ---- ---- ---- ----

C.V. Bronx Associates, L.P./
Gerald Gardens
Bronx, NY (121) June 1989 98 98 97 97 97
Michigan Rural Housing
Limited Partnership
Michigan (192)(*) September 1989 90 94 98 97 89
Jefferson Limited Partnership
Schreveport, LA (69) December 1989 96 93 100 94 99
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI (36) October 1989 100 100 97 94 100
RBM Associates/Spring Garden
Philadelphia, PA (8) December 1989 89 100 100 100 100
Glenbrook Associates
Atglen, PA (35) November 1989 100 97 100 100 100
Affordable Flatbush Associates
Brooklyn, NY (30) December 1989 100 93 100 97 100
Barclay Village II, LTD.
Chambersburg, PA (87) November 1989 97 98 95 100 100
1850 Second Avenue Associates, L.P.
New York, NY (48) October 1989 100 100 100 100 100
R.P.P. Limited Dividend Housing/
River Place
Detroit, MI (301) November 1989 98 98 98 95 97
Williamsburg Residential II, L.P.
Wichita, KS (50) November 1989 64 90 76 74 92
West 104th Street Associates L.P.
New York, NY (56) December 1989 100 100 100 98 100
Meredith Apartments, LTD.
Salt Lake City, UT (22) August 1989 91 100 100 100 100
Ritz Apartments, LTD.
Salt Lake City, UT (30) August 1989 90 100 100 93 100
Ashby Apartments, LTD.
Salt Lake City, UT (27) August 1989 85 96 93 96 96
South Toledo Associates, LTD.
Toledo, OH (18) January 1990 100 94 94 94 100
Dunlap School Venture
Philadelphia, PA (35) January 1990 100 97 97 100 92
Philipsburg Elderly Housing
Associates
Philipsburg, PA (103) February 1990 96 97 97 98 99
Franklin Elderly Housing
Associates
Franklin, PA (89) February 1990 100 100 99 99 99
Wade D. Mertz Elderly Housing
Associates
Sharpsville, PA (103) February 1990 98 100 98 98 99

-5-

Local Partnership Schedule
--------------------------
(continued)
-----------
% of Units Occupied at May 1,
Name and Location ----------------------------------
(Number of Units) Date Acquired 2000 1999 1998 1997 1996
- ----------------- ------------- ---- ---- ---- ---- ----

Lancashire Towers Associates
Limited Partnership
Cleveland, OH (240) February 1990 92 96 100 98 100
Northwood Associates Limited
Partnership
Toledo, OH (176) February 1990 97 94 95 96 97
Brewery Renaissance Associates
Middletown, NY (53) February 1990 96 98 94 98 98
Brandywine Court Associates, L.P.
Jacksonville, FL (52) November 1989 90 92 94 98 94
Art Apartments Associates
Philadelphia, PA (30) March 1990 90 100 100 97 83
The Village at Carriage Hills, LTD.
Clinton, TN (48) March 1990 100 96 100 100 100
Mountainview Apartments, LTD.
Newport, TN (34) March 1990 100 97 100 100 100
The Park Village, Limited
Jackson, MS (24) March 1990 100 100 100 100 100
River Oaks Apartments, LTD.
Oneonta, AL (35) March 1990 97 97 94 100 100
Forrest Ridge Apartments, LTD.
Forrest City, AR (25) March 1990 100 100 100 100 100
The Hearthside Limited Dividend
Housing Association Limited
Partnership
Portage, MI (101) March 1990 91 100 97 99 98
Redemptorist Limited Partnership
New Orleans, LA (126) March 1990 91 94 95 95 98
Manhattan A Associates
New York, NY (99) April 1990 98 98 99 97 97
Broadhurst Willows, L.P.
New York, NY (129) April 1990 95 97 97 92 96
Weidler Associates Limited
Partnership
Portland, OR (52) May 1990 98 100 100 100 98
Gentle Pines-West Columbia
Associates, L.P.
Columbia, SC (150) June 1990 89 98 97 100 99
Lake Forest Estates II, LTD.
Livingston, AL (32) June 1990 100 100 97 100 100
Las Camelias Limited Partnership
Rio Piedras, PR (166) June 1990 92 97 97 100 100
WPL Associates XXIII
Portland, OR (48) July 1990 90 97 96 92 97
Broadway Townhouses L.P.
Camden, NJ (175) July 1990 100 100 100 100 100

-6-

Local Partnership Schedule
--------------------------
(continued)
-----------
% of Units Occupied at May 1,
Name and Location ----------------------------------
(Number of Units) Date Acquired 2000 1999 1998 1997 1996
- ----------------- ------------- ---- ---- ---- ---- ----

Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR (67) August 1990 97 100 96 100 100
Citrus Meadows Apartments, LTD.
Brandenton, FL (200) July 1990 92 88 94 96 94
Sartain School Venture
Philadelphia, PA (35) August 1990 100 91 100 98 89
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL (176) September 1990 99 100 100 100 100
Holly Hill, LTD.
Greenville, TN (46) October 1990 100 98 100 100 100
Mayfair Apartments LTD.
Morristown, TN (48) October 1990 100 96 100 100 100
Foxcroft Apartments LTD.
Troy, AL (48) October 1990 100 98 100 98 98
Canterbury Apartments, LTD.
Indianola, MS (48) October 1990 100 98 90 90 100
Cutler Canal III Associates, LTD.
Miami, FL (262) October 1990 99 98 96 94 95
Jefferson Place L.P.
Olathe, KS (352) October 1990 98 97 95 96 93
Callaway Village, LTD.
Clinton, TN (46) November 1990 100 93 100 100 100
Commerce Square Apartments
Associates L.P.
Smyrna, DE (80) December 1990 96 96 95 100 95
West 132nd Development
Partnership
New York, NY (40) December 1990 97 100 100 95 88
Site H Development Co.
Brooklyn, NY (11) December 1990 100 93 100 100 100
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA (78) December 1990 94 97 96 94 97
Diamond Phase II Venture
Philadelphia, PA (32) December 1990 91 100 100 97 91
Bookbindery Associates
Philadelphia, PA (41) December 1990 95 100 93 98 98
The Hamlet, LTD.
Boynton Beach, FL (240) December 1990 95 89 97 93 98
Stop 22 Limited Partnership
Santurce, PR (153) December 1990 99 99 99 100 100
Knob Hill Apartments, LTD.
Greenville, TN (48) December 1990 100 100 100 100 100
Conifer James Street Associates
Syracuse, NY (73) December 1990 97 79 91 92 92

-7-

Local Partnership Schedule
--------------------------
(continued)
-----------
% of Units Occupied at May 1,
Name and Location ----------------------------------
(Number of Units) Date Acquired 2000 1999 1998 1997 1996
- ----------------- ------------- ---- ---- ---- ---- ----

Longfellow Heights Apartments, L.P.
Kansas City, MO (104) March 1991 99 94 95 98 98

(*) Consists of five apartment complexes located throughout Michigan.

Generally, the General Partners required in connection with the Partnership's
investments in Local Partnerships that the general partners of the Local
Partnerships ("Local General Partners") undertake an obligation to fund
operating deficits (up to a stated maximum amount) of the Local Partnership
during a limited period of time following rent stabilization ("Guarantee
Period"). In each case, the operating deficits have been funded by Operating
Loans which will not bear interest and will be repaid only out of 50% of
available cash flow or out of available net sale or refinancing proceeds. The
gross amount of the Operating Deficit Guarantees aggregate approximately
$18,700,000, of which approximately $17,300,000 had expired as of March 31,
2000. In cases where the General Partners deem it appropriate, the obligations
of a Local General Partner under the Operating Deficit and/or Rent-Up Guarantees
are secured by letters of credit and/or cash escrow deposits.

The Tax Credits are available for a ten-year period which commences when the
property is occupied by qualified tenants. However, the annual Tax Credit
available in the year in which the Apartment Complex was first occupied by
qualified tenants must be prorated based upon the months remaining in the year
after the Apartment Complex was placed in service. The amount of the annual Tax
Credit not available in the first year will be available in the eleventh year.
In certain cases, the Partnership acquired its interest in a Local Partnership
after the Local Partnership had placed its Apartment Complex in service. In
these cases, the Partnership was allocated Tax Credits only beginning in the
month following the month in which the Partnership acquired its interest. In
addition, Tax Credits allocated in any prior period may not be claimed by the
Partnership. The Partnership has also acquired Local Partnership Interests in
which some of the Local Partnerships owning historic complexes qualifies for the
Historic Rehabilitation Tax Credit. The amount of the Historic Rehabilitation
Tax Credit is generally 20% of qualified rehabilitation expenditures and is
available in its entirety in the year the rehabilitated building is placed in
service or, under certain circumstances, in the year in which the rehabilitation
expenditure is made.

All leases are generally for periods not exceeding one to two years and no
tenant occupies more than 10% of the rentable square footage.

Rent from commercial tenants (to which average rental per square foot applies)
comprise less than 5% of the rental revenues of the Partnership. Maximum rents
for the residential units are determined annually by HUD and reflect
increases/decreases in consumer price indexes in various geographic areas.
Market conditions, however determine the amount of rent actually charged.

Management continuously reviews the physical state of the properties and
suggests to the respective Local General Partner budget improvements, which are
generally funded from cash flow from operations or release of replacement
reserve escrows.

Management annually reviews the insurance coverage of the properties and
believes such coverage is adequate.

-8-

See Item 1, Business, above for the general competitive conditions to which the
properties described above are subject.

Real estate taxes are calculated using rates and assessed valuations determined
by the township or city in which the property is located. Such taxes have
approximated 1% of the aggregate cost of the properties as shown in Schedule III
to the financial statements.

Item 3. Legal Proceedings.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.

The Partnership has issued 27,820.3 Limited Partnership Interests, each
representing a $5,000 capital contribution to the Partnership, for aggregate
Gross Proceeds of $139,101,500. All of the issued and outstanding Limited
Partnership Interests have been issued to Liberty Credit Assignor III Inc. (the
"Assignor Limited Partner"), which has in turn issued 139,101.5 BACs to the
purchasers thereof for an aggregate purchase price of $139,101,500. Each BAC
represents all of the economic and virtually all of the ownership rights
attributable to one-fifth of a Limited Partnership Interest held by the Assignor
Limited Partner. BACs may be converted into Limited Partnership Interests at no
cost to the holder (other than the payment of transfer costs not to exceed
$100), but Limited Partnership Interests so acquired are not thereafter
convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on any
established trading market. The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partners have imposed limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely affect
the ability of an investor to liquidate his or her investment quickly. It is
expected that such procedures will remain in effect until such time, if ever, as
further revision of the Revenue Act of 1987 may permit the Partnership to lessen
the scope of the restrictions.

As of May 15, 2000, the Partnership has approximately 9,041 registered holders
of an aggregate of 139,101.5 BACs.

All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $2,000, are held by the two General Partners.

Certain subsidiaries are subject to HUD restrictions which limit annual cash
distributions to partners and restrict the subsidiaries from selling or
otherwise liquidating their assets during the period that the agreement with HUD
is in existence, without HUD's approval.

-9-

Pursuant to the terms of the Partnership Agreement there are no material
restrictions that restrict the ability of the Partnership to make distributions.

However, the Partnership has made no distributions to the BACs holders as of
March 31, 2000. The Partnership does not anticipate providing cash distributions
to its BACs holders other than from net refinancing or sales proceeds.

-10-

Item 6. Selected Financial Data.

The information set forth below presents selected financial data of the
Partnership from the last five fiscal years. Additional financial information is
set forth in the audited financial statements in Item 8 hereof.

Year Ended March 31,
---------------------------------------------------------------------------------------

OPERATIONS 2000 1999 1998 1997 1996
- ---------- ------------ ------------ ------------ ------------ -----------

Revenues $ 35,444,349 $ 36,122,840 $ 33,735,906 $ 33,542,935 $33,211,908
Operating expenses (51,605,028) (51,078,523) (50,778,124) (48,902,130) (49,134,034)
Loss on impairment of
assets 0 0 0 (20,083,101) 0
------------ ------------ ------------ ------------ -----------
Loss before minority
interest and extraordi-
nary gain (16,160,679) (14,955,683) (17,042,218) (35,442,296) (15,922,126)
Minority interest in loss
of subsidiary partner-
ships 214,105 259,094 154,367 156,523 153,662
Extraordinary item-
forgiveness on indebt-
edness income 0 0 1,045,627 0 0
------------ ------------ ------------ ------------ -----------
Net loss $(15,946,574) $(14,696,589) $(15,842,224) $(35,285,773) $(15,768,464)
============ ============ ============ ============ ===========
Net loss - limited partners $(15,787,108) $(14,549,623) $(15,683,802) $(34,932,915) $(15,610,779)
============ ============ ============ ============ ===========
Net loss per BAC $ (113.49) $ (104.60) $ (112.75) $ (251.13) $ (112.23)
============ ============ ============ ============ ===========

Year Ended March 31,
--------------------
FINANCIAL POSITION 2000 1999 1998 1997 1996
- ------------------ ------------ ------------ ------------ ------------ ------------

Total assets $235,131,327 $245,335,047 $256,800,296 $268,870,640 $302,121,868
============ ============ ============ ============ ===========
Total liabilities $272,523,628 $266,334,183 $262,594,185 $258,746,588 $257,205,366
============ ============ ============ ============ ===========
Minority interest $ 1,226,088 $ 1,672,679 $ 2,181,337 $ 2,257,054 $ 1,763,731
============ ============ ============ ============ ===========
Total partners' (deficit) capital $(38,618,389) $(22,671,815) $ (7,975,226) $ 7,866,998 $ 43,152,771
============ ============ ============ ============ ===========

During the years ended March 31, 1996 through 2000, total assets decreased
primarily due to depreciation and loss on impairment of assets (for the year
ended March 31, 1997), partially offset by net addition to property and
equipment. During the years ended March 31, 1996 through 2000, total liabilities
increased primarily due to the accrual of principal and interest payments at one
of the Local Partnerships along with the increase in obligations at the
remaining Local Partnerships.

CASH DISTRIBUTION

The Partnership has made no distributions to the BACs holders as of March 31,
2000.

-11-

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

LIQUIDITY AND CAPITAL RESOURCES

Through March 31, 2000, the Partnership has invested approximately $109,000,000
(not including acquisition fees) of net proceeds in 62 Local Partnerships of
which approximately $306,000 remains to be paid (which includes approximately
$282,000 held in escrow).

During the year ended March 31, 2000, the Partnership's primary source of funds
included (i) working capital reserves and (ii) cash distributions from the
operations of the Local Partnerships.

For the year ended March 31, 2000, cash and cash equivalents of the Partnership
and its 62 consolidated subsidiary partnerships increased by approximately
$863,000. This increase was primarily attributable to cash provided by operating
activities ($3,629,000) and a net decrease in cash held in escrow for investing
($603,000) which exceeded acquisition of property and equipment ($1,384,000),
net repayments on mortgage notes ($1,524,000), a net decrease in due to local
general partners and affiliates ($198,000) and a decrease in capitalization of
consolidated subsidiaries attributable to minority interest ($232,000). Included
in the adjustments to reconcile the net loss to cash provided by operations is
depreciation and amortization in the amount of $12,208,000 and an increase in
due to debt guarantor in the amount of $2,736,000.

The Partnership has a working capital reserve of approximately $529,000 at March
31, 2000.

The Partnership is not expected to have access to additional sources of
financing, and in particular will not have the ability to assess BAC holders for
additional capital contributions to provide capital if needed by the
Partnership. Accordingly, if circumstances arise that cause a Local Partnership
to require capital in addition to that contributed by the Partnership and any
equity of the Local General Partner, the only sources from which such capital
needs will be able to be satisfied (other than the limited reserves available at
the partnership level) will be additional third party debt financing (which may
not be available if, as expected, the property owned by the Local Partnership is
already substantially leveraged or, as in the case of the New York program
properties, the incurrence of third party debt is not permitted) or additional
equity contributions of the Local General Partner or other equity sources (which
could adversely affect the Partnership's interest in operating cash flow and/or
proceeds of sale or refinancing of the property and result in adverse tax
consequences to the BAC holders). There can be no assurance that any of such
sources would be readily available in sufficient proportions to fund the capital
requirements of the Local Partnerships in question, particularly if the residual
value of a property is uncertain. If sources are not available, the Local
Partnership would risk foreclosure on its property if it was unable to
renegotiate the terms of its first mortgage and any other debt with the lenders
thereof. The risks associated with the need of the Local Partnership to
refinance their underlying first mortgage debt are exacerbated by the
probability that the term of certain favorable assistance programs from which a
Local Partnership may benefit will expire prior to the end of the compliance
period with respect to such Local Partnership's property.

Cash distributions received from the Local Partnerships remain relatively
immaterial. These distributions, as well as the working capital reserves
referred to above, will be used towards the future operating expenses of the
Partnership. During the years ended March 31, 2000, 1999 and 1998, the amounts
received from operations of the Local Partnerships approximated $151,000,
$161,000 and $226,000, respectively.

-12-

The Partnership has negotiated Operating Deficit Guarantee Agreements with all
Local Partnerships, in which the Local General Partners have agreed to fund
operating deficits for a specified period of time. The terms of the Operating
Deficit Guarantee Agreements vary for each Local Partnership, with the maximum
dollar amounts to be funded for a specified period of time, generally three
years, commencing at rent stabilization. The gross amount of the Operating
Deficit Guarantees aggregate approximately $18,700,000 of which approximately
$17,300,000 had expired as of March 31, 2000. As of March 31, 2000 and 1999,
approximately $3,720,000 and $4,655,000, respectively, has been funded by the
Local General Partners to meet such obligations. All operating deficit
guarantees expire within the next year. Management does not expect their
expiration to have a material impact on liquidity, based on prior years'
fundings.

Partnership management fees owed to the General Partners amounted to
approximately $4,192,000 and $2,758,000 were accrued and unpaid at March 31,
2000 and 1999. Without the General Partners' continued accrual and without
payment of certain fees and expense reimbursements, the Partnership will not be
in a position to meet its obligations. The General Partners have continued
allowing the accrual without payment of these amounts but are under no
obligation to continue to do so.

For a discussion of contingencies affecting certain Local Partnerships, see
Results of Operations of Certain Local Partnerships below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
Local Partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way. However, the Partnership's loss of its investment
in a Local Partnership will eliminate the ability to generate future Tax Credits
from such Local Partnership and may also result in recapture of Tax Credits if
the investment is lost before the expiration of the Credit Period.

Except as described above, management is not aware of any trends or events,
commitments or uncertainties, which have not otherwise been disclosed, that will
or are likely to impact liquidity in a material way. Management believes the
only impact would be for laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining properties in the portfolio may be experiencing upswings. However, the
geographic diversifications of the portfolio may not protect against a general
downturn in the national economy. The Partnership has fully invested the
proceeds of its offering in 62 Local Partnerships, all of which fully have their
Tax Credits in place. The Tax Credits are attached to the project for a period
of ten years and are transferable with the property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
property, the remaining Tax Credits would transfer to the new owner; thereby
adding significant value to the property on the market, which are not included
in the financial statement carrying amount.

RESULTS OF OPERATIONS

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future opera-

-13-

tions and sale of the property on an undiscounted basis are below depreciated
cost. At that time property investments themselves are reduced to estimated fair
value (generally using discounted cash flows) when the property is considered to
be impaired and the depreciated cost exceeds estimated fair value. Through March
31, 2000, the Partnership has recorded approximately $20,083,000 as a loss on
impairment of assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. There are no assets classified as property and equipment-held for
sale through March 31, 2000.

The following is a summary of the results of operations of the Partnership for
the years ended March 31, 2000, 1999 and 1998 ("Fiscal 1999", "Fiscal 1998" and
"Fiscal 1997", respectively).

The majority of the Local Partnerships' income continues to be in the form of
rental income, with the corresponding expenses (excluding loss on impairment of
assets) being divided among operations, depreciation, and mortgage interest.

The net loss for the 1999, 1998 and 1997 Fiscal Years totaled $15,946,574,
$14,696,589 and $15,842,224, respectively.

1999 VS. 1998

Rental income increased approximately 2% for the year ended March 31, 2000 as
compared to corresponding period in 1999 primarily due to rental rate increases.

Other income decreased approximately $1,176,000 for the year ended March 31,
2000 as compared to corresponding period in 1999 primarily due to a decrease at
one Local Partnership due to a real estate settlement in the prior year which
reduced the accrued interest owed on prior year delinquent taxes and a decrease
at a second Local Partnership due to the reversal, in the prior year, of the
excess reserve established to cover the maximum exposure of the disputed
property tax assessments.

Total expenses remained fairly consistent with an increase of approximately 1%
for the year ended March 31, 2000 as compared to the corresponding period in
1999.

1998 VS. 1997

Rental income increased approximately 3% for the year ended March 31, 1999 as
compared to the corresponding period in 1998 primarily due to rental rate
increases.

Other income increased approximately $1,355,000 for the year ended March 31,
1999 as compared to the corresponding period in 1998 primarily due to the
following increases at four Local Partnerships. There was an increase at one
Local Partnership due to the receipt of insurance proceeds resulting from a roof
warranty. The increase at the second Local Partnership is due to a rebate from
signing a new cable contract and termination fees resulting from early
cancellation of rental leases. The increase at the third Local Partnership
resulted from a real estate tax settlement which reduced the accrued interest
owed on prior year delinquent taxes. The increase at the fourth Local
Partnership resulted from the reversal of the excess reserve established to
cover the maximum exposure of disputed property tax assessments.

Total expenses, excluding real estate taxes, remained fairly consistent with an
increase of approximately 3% for the year ended March 31, 1999 as compared to
the corresponding period in 1998.

-14-

Real estates taxes decreased approximately $1,236,000 for the year ended March
31, 1999 as compared to the corresponding period in 1998 primarily due to the
write-off of accrued real estate taxes due to a settlement of prior year taxes
owed at one Local Partnership.

RESULTS OF OPERATIONS OF CERTAIN LOCAL PARTNERSHIPS

R.P.P. LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP ("RIVER PLACE")
River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $29,305,000 at December 31, 1999. River Place has been unable
to generate sufficient cash flows to meet a majority of its required principal
and interest payments under the loans. River Place's debt guarantor, General
Retirement System of the City of Detroit ("GRS"), entered into an agreement with
the Authority to purchase these loans upon occurrence of certain events. GRS has
declared River Place in default under its obligation to make the required
payments. During 1996, GRS agreed to waive its right of foreclosure under the
mortgages, unless certain events occur, through February 1, 2006. GRS has made
advances for debt service and has incurred certain fees relating to these loans
totaling $34,817,045 including accrued interest on such advances at a rate of
15%. Such amount is included in the amount due to debt guarantor on the balance
sheet.

Management anticipates that River Place will be unable to make all of the
required debt service payments during 2000. However, there is no guarantee that
GRS, or any other persons, will continue to make these payments on behalf of
River Place. These items raise substantial doubt about River Place's ability to
continue as a going concern.

The financial statements of River Place have been prepared assuming that River
Place will continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Partnership's investment in River Place has been written down to zero by prior
years' losses and the minority interest balance was $882,750 at both March 31,
2000 and 1999. The net loss after minority interest for River Place amounted to
approximately $3,822,000, $3,185,000 and $3,648,000 for the years ended March
31, 2000, 1999 and 1998, respectively.

L.I.H. CHESTNUT ASSOCIATES, L.P. ("CHESTNUT")
Chestnut has sustained recurring losses from operations. At December 31, 1999,
Chestnut had not made certain payments required under the terms of the mortgage
loan and, as a result, is in default. Chestnut's continued existence is
dependent on its resolution of the default under the mortgage loan. These items
raise substantial doubt about Chestnut's ability to continue as a going concern.
The financial statements for Chestnut do not include any adjustments that might
result from the outcome of this uncertainty. The General Partner of Chestnut is
in discussion with the first mortgagee and Chestnut's limited partners
(including the Partnership) in an attempt to resolve the default. The
Partnership's investment in Chestnut has been written down to zero by prior
years' losses and the minority interest balance was $1,147,092 at both March 31,
2000 and 1999. The net loss after minority interest for Chestnut amounted to
approximately $470,000, $463,000 and $476,000 for the years ended March 31,
2000, 1999 and 1998, respectively.

WILLIAMSBURG RESIDENTIAL II, L.P. ("WILLIAMSBURG II")
In November 1996, the general partner of Williamsburg II stopped making the
mortgage note payments which constituted an event of default. On January 1,
1997, the general partner was replaced.

-15-

A Reinstatement and Modification Agreement dated July 24, 1997, and effective
March 1, 1997 was entered into between Williamsburg II and Federal National
Mortgage Association ("FNMA"). Terms of the agreement include: 1. Interest only
on the loan for 36 months. 2. Replacement reserve escrow payments waived during
1997. 3. Net operating income is to be turned over to the loan servicer monthly.
4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 to be deposited into a debt service escrow account for the mutual
benefit of Williamsburg II and Williamsburg Residential, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment, the debt service
escrow account is drawn upon. At both December 31, 1999 and 1998, balances in
the two entities accounts totaled $0.

The Partnership has advanced Williamsburg II the necessary funds to keep the
mortgage and escrows current during 1999 and 1998 and is expected to continue to
do so during 2000. As of March 31, 2000, the Partnership has advanced
approximately $471,000 to Williamsburg II. The advances do not bear interest and
are short-term in nature.

The Partnership's investment in Williamsburg II had been written down to zero by
prior years' losses and the minority interest balance was approximately $330,000
and $332,000 at March 31, 2000 and 1999, respectively. Williamsburg II's net
loss after minority interest amounted to approximately $148,000, $213,000 and
$172,000 for the years ended March 31, 2000, 1999 and 1998, respectively.

JEFFERSON LIMITED PARTNERSHIP ("JEFFERSON")
At December 31, 1999 and 1998, Jefferson's current liabilities exceeded its
current assets by over $27,000 and $25,000, respectively. Although this
condition could raise substantial doubt about Jefferson's ability to continue as
a going concern, such doubt is alleviated by the fact that $14,040 and $21,220
of current liabilities at December 31, 1999 and 1998, respectively, are to
related parties which do not intend to pursue payment beyond Jefferson's ability
to pay.

Accordingly, management believes that Jefferson has the ability to continue as a
going concern for at least one year from December 31, 1999. The Partnership's
investment in Jefferson was approximately $518,000 and $668,000 at March 31,
2000 and 1999, respectively, and the minority interest balance was $0 at each
date. The net loss after minority interest for Jefferson amounted to
approximately $149,000, $132,000, and $140,000 for the years ended March 31,
2000, 1999 and 1998, respectively.

AFFORDABLE FLATBUSH ASSOCIATES ("AFFORDABLE FLATBUSH")
In order for Affordable Flatbush to qualify for the federal low-income tax
credits, it must meet certain rental income restrictions. The rental and income
restrictions must be adhered to for a 15-year compliance period. During 1996,
the Department of Housing Preservation and Development ("HPD") audited
Affordable Flatbush's compliance with the rental and income restrictions of
section 42 of the Internal Revenue Code. HPD concluded in its audit report that
Affordable Flatbush was not in compliance within the guidelines as set forth in
the Internal Revenue Code for certain units of the project and consequently, the
basis of the property for purposes of computing the low income housing tax
credits should be reduced by an amount which approximates 88% of such basis.
Affordable Flatbush management is contesting the findings by HPD and,
consequently, has computed the low income tax credits for 1999 as if there was
no reduction in the basis of the property.

-16-

OTHER SUBSIDIARY PARTNERSHIPS

Four of the subsidiary partnerships are leasing the land on which the Projects
are located for terms ranging from 28 to 99 years. At December 31, 1999, the
subsidiary partnerships were committed to minimum annual rentals on the
noncancelable leases aggregating $155,130 for each of the next five years, and
$3,944,123 in total, thereafter.

OTHER

The Partnership's investment in the Local Partnerships is subject to the risks
incident to management and ownership of improved real estate. The Partnership's
investments also could be adversely affected by poor economic conditions, which,
could increase vacancy levels, rental payment defaults, and operating expenses,
any or all of which could threaten the financial viability of one or more of the
Local Partnerships.

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These risks stem from governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low and
moderate-income tenants may pay as rent; the possibility that Congress may not
appropriate funds to enable HUD to make the rental assistance payments it has
contracted to make; and that when the rental assistance contracts expire there
may not be market demand for apartments at full market rents in a Local
Partnership's Apartment Complex.

The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs, for example, for such items as fuel,
utilities and labor. However, continued inflation should allow for appreciated
values of the Local Partnerships' Apartment Complexes over a period of time as
rental revenues and replacement costs continue to increase.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

-17-

Item 8. Financial Statements and Supplementary Data.

Sequential
Page
----------

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 19

Consolidated Balance Sheets at March 31, 2000 and 1999 162

Consolidated Statements of Operations for the Years Ended
March 31, 2000, 1999 and 1998 163

Consolidated Statements of Changes in Partners' (Deficit)
Capital for the Years Ended March 31, 2000, 1999 and 1998 164

Consolidated Statements of Cash Flows for the Years Ended
March 31, 2000, 1999 and 1998 165

Notes to Consolidated Financial Statements 167

-18-

INDEPENDENT AUDITORS' REPORT

To the Partners of
Liberty Tax Credit Plus III L.P. and Subsidiaries
(A Delaware Limited Partnership)

We have audited the consolidated balance sheets of Liberty Tax Credit Plus III
L.P. and Subsidiaries (a Delaware Limited Partnership) (the "Partnership") as of
March 31, 2000 and 1999, and the related consolidated statements of operations,
changes in partners' (deficit) capital, and cash flows for the years ended March
31, 2000, 1999 and 1998 (the 1999, 1998 and 1997 Fiscal Years, respectively).
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of 61
(Fiscal 1999, 1998 and 1997) subsidiary partnerships whose losses aggregated
$12,717,054, $11,808,044 and $48,514,709 of the Partnership's net loss for the
1999, 1998 and 1997 Fiscal Years, respectively, and whose assets constituted 96%
and 95% of the Partnership's assets at March 31, 2000 and 1999, respectively,
presented in the accompanying consolidated financial statements. The financial
statements of these 61 subsidiary partnerships were audited by other auditors
whose reports thereon have been furnished to us and our opinion expressed
herein, insofar as it relates to the amounts included for these subsidiary
partnerships, is based solely upon the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, based upon our audits, and the reports of the other auditors
referred to above, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial position
of Liberty Tax Credit Plus III L.P. and Subsidiaries at March 31, 2000 and 1999,
and the results of their operations and their cash flows for the years ended
March 31, 2000, 1999 and 1998, in conformity with generally accepted accounting
principles.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant
contingencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going concern.
These subsidiary partnerships have been unable to generate sufficient cash flow
to pay their mortgage obligations. The two subsidiary partnerships' net losses
aggregated $4,291,565 (Fiscal 1999), $3,647,759 (Fiscal 1998) and $4,124,102
(Fiscal 1997), and their assets aggregated $22,472,739 and $23,096,175 at March
31, 2000 and 1999, respectively. Management's plans in regard to these matters
are also described in Note 10(a). The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
May 26, 2000

-19-

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
C.V. Bronx Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of C.V. Bronx Associates, L.P.
(a Delaware limited partnership) as of December 31, 1999 and 1998, and the
related statements of income (loss), changes in partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of C.V. Bronx Associates, L.P. as
of December 31, 1999 and 1998 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 1, 2000

-20-

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
C.V. Bronx Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of C.V. Bronx Associates, L.P.
(a Delaware limited partnership) as of December 31, 1998 and 1997, and the
related statements of income (loss), changes in partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of C.V. Bronx Associates, L.P. as
of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
January 29, 1999

-21-

[Letterhead of THEO CARSON & ASSOCIATES]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Michigan Rural Housing Limited Partnership

I have audited the accompanying balance sheets of Michigan Rural Housing Limited
Partnership (a Michigan partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audits.

I have conducted the audits in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that the audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Michigan Rural Housing Limited
Partnership as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Theo C. Carson & Associates
Kalamazoo, Michigan
February 14, 2000

-22-

[Letterhead of THEO CARSON & ASSOCIATES]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Michigan Rural Housing Limited Partnership

I have audited the accompanying balance sheets of Michigan Rural Housing Limited
Partnership (a Michigan partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audits.

I have conducted the audits in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that the audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Michigan Rural Housing Limited
Partnership as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Theo C. Carson & Associates
Kalamazoo, Michigan
February 6, 1999

-23-

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT

To the Partners
Jefferson Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheets of Jefferson Limited Partnership
at December 31, 1999 and December 31, 1998, and the related statements of
income, partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of
Jefferson Limited Partnership at December 31, 1999 and December 31, 1998, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

Our audits were made primarily for the purpose of forming an opinion on the
basic financial statements for the years ended December 31, 1999 and December
31, 1998 taken as a whole. The supplementary Schedule 1 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
February 8, 2000

-24-

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT

To the Partners
Jefferson Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheets of Jefferson Limited Partnership
at December 31, 1998 and December 31, 1997, and the related statements of
income, partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of
Jefferson Limited Partnership at December 31, 1998 and December 31, 1997, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

Our audits were made primarily for the purpose of forming an opinion on the
basic financial statements for the years ended December 31, 1998 and December
31, 1997 taken as a whole. The supplementary Schedule 1 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
February 4, 1999

-25-

[Letterhead of PAUL DAMIANO]

INDEPENDENT AUDITORS' REPORT

To the Partners
Inter-Tribal Indian Village Housing Development Associates, L.P.
(A Limited Partnership)
Providence, RI

We have audited the accompanying balance sheet of Project No. HIP010 of
Inter-Tribal Indian Village Housing Development Associates, L.P. (a limited
partnership) as of December 31, 1999, and the related statements of loss and
changes in partners' equity (capital deficiency) and cash flows for the year
then ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Project No. HIP010 as of December
31, 1999 and the results of its operations and the changes in partners' equity
(capital deficiency) and cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, , we have also issued a report dated January 18, 2000 on our
consideration of Inter-Tribal Indian Village Housing Development Associates,
L.P.'s internal control and reports dated January 18, 2000 on its compliance
with specific requirements applicable to major RIHMFC programs, specific
requirements applicable to Fair Housing and Non-Discrimination, and specific
requirements applicable to nonmajor RIHMFC program transactions.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken an a whole. The supporting information included in
the report shown on pages 13-17 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Project No. HIP010. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/ Paul Damiano CPA PC
Lincoln, Rhode Island
January 18, 2000

-26-

[Letterhead of PAUL DAMIANO]

INDEPENDENT AUDITORS' REPORT

To the Partners
Inter-Tribal Indian Village Housing Development Associates, L.P.
(A Limited Partnership)
Providence, RI

We have audited the accompanying balance sheet of Project No. HIP010 of
Inter-Tribal Indian Village Housing Development Associates, L.P. (a limited
partnership) as of December 31, 1998, and the related statements of loss and
changes in partners' equity (capital deficiency) and cash flows for the year
then ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Project No. HIP010 as of December
31, 1998 and the results of its operations and the changes in partners' equity
(capital deficiency) and cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, , we have also issued a report dated January 25, 1999 on our
consideration of Inter-Tribal Indian Village Housing Development Associates,
L.P.'s internal control and reports dated January 25, 1999 on its compliance
with specific requirements applicable to major RIHMFC programs, specific
requirements applicable to Fair Housing and Non-Discrimination, and specific
requirements applicable to nonmajor RIHMFC program transactions.

-27-

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken an a whole. The supporting information included in
the report shown on pages 13-17 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Project No. HIP010. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/ Paul Damiano CPA PC
Lincoln, Rhode Island
January 25, 1999

-28-

[Letterhead of PAUL DAMIANO]

INDEPENDENT AUDITORS' REPORT

To the Partners
Inter-Tribal Indian Village Housing Development Associates, L.P.
(A Limited Partnership)
Providence, RI

We have audited the accompanying balance sheet of Project No. HIP010 of
Inter-Tribal Indian Village Housing Development Associates, L.P. (a limited
partnership) as of December 31, 1997, and the related statements of loss and
changes in partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the project's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Project No. HIP010 as of December
31, 1997 and the results of its operations and the changes in partners' equity
and cash flows for the year then ended in conformity with generally accepted
accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken an a whole. The supporting information included in
the report shown on pages 14-18 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Project No. HIP010. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken an a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 1998 on our consideration of Inter-Tribal Indian Village
Housing Development Associates, L.P.'s internal controls and a report dated
January 23, 1998 on its compliance with laws and regulations.

/s/ Paul Damiano CPA
Lincoln, RI
January 23, 1998

-29-

[ZINER, KENNEDY & LEHAN LLP. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
RBM Associates

We have audited the accompanying balance sheets of RBM Associates (a
Pennsylvania limited partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RBM Associates as of December
31, 1999 and 1998, and the results of its operations, changes in partners'
equity and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Quincy, Massachusetts
January 15, 2000

-30-

[ZINER & COMPANY, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
RBM Associates

We have audited the accompanying balance sheets of RBM Associates (a
Pennsylvania limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RBM Associates as of December
31, 1998 and 1997, and the results of its operations, changes in partners'
equity and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Ziner & Company, P.C.
Boston, Massachusetts
January 15, 1999

-31-

[Letterhead of McKONLY & ASBURY LLP]

INDEPENDENT AUDITOR'S REPORT

The Partners of
Glenbrook Associates
Lancaster, Pennsylvania

Rural Housing Service
Allentown, Pennsylvania

We have audited the accompanying balance sheets of Glenbrook Associates (a
limited partnership) as of December 31, 1999 and 1998, and the related
statements of income, partners' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glenbrook Associates at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 19, 2000 on our consideration of Glenbrook Associates' internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts, and grants.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages 17
and 20 is presented for the purpose of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.

/s/ McKonly & Asbury, LLP
Harrisburg, Pennsylvania
January 19, 2000

-32-

[Letterhead of McKONLY & ASBURY LLP]

INDEPENDENT AUDITOR'S REPORT

The Partners of
Glenbrook Associates
Lancaster, Pennsylvania

Rural Housing Service
Allentown, Pennsylvania

We have audited the accompanying balance sheets of Glenbrook Associates (a
limited partnership) as of December 31, 1998 and 1997, and the related
statements of income, partners' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glenbrook Associates at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 19, 1999 on our consideration of Glenbrook Associates' internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts, and grants.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages 16
and 17 is presented for the purpose of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.

/s/ McKonly & Asbury
Harrisburg, Pennsylvania
January 19, 1999

-33-

[Letterhead of J.R. LUPO, P.A. CPA]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Affordable Flatbush Associates
(A New York Limited Partnership)

We have audited the accompanying balance sheet of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1999 and December 31, 1998,
and the related statements of operations, changes in partners' capital, and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1999 and December 31, 1998,
and the results of its operations and its cash flows for the year then ended,
in conformity with generally accepted accounting principles.

/s/ J.R. Lupo
Verona, New Jersey
February 27, 2000

-34-

[Letterhead of M.L. BERGER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Affordable Flatbush Associates
(A New York Limited Partnership)

We have audited the accompanying balance sheet of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1997, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ M.L. Berger & Company
New York, New York
February 21, 1998

-35-

[Letterhead of WESSEL & COMPANY]

INDEPENDENT AUDITOR'S REPORT

January 20, 2000

To the Partners of
Barclay Village II, Ltd.

We have audited the accompanying balance sheets of Barclay Village II, Ltd.
(a limited partnership) PHFA No. R-0039-8F as of December 31, 1999 and 1998,
and the related statements of operations, changes in partners' capital, and
cash flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards issued by the Comptroller General
of the United States and Pennsylvania Housing Finance Agency regulations.
Those standards and regulations 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Barclay Village II, Ltd.,
PHFA No. R-0039-8F, as of December 31, 1999 and 1998, and the results of its
operations, changes in partners' capital, and cash flows for the years then
ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards the Consolidated Audit Guide
for Auditing of HUD Programs issued by the U.S. Department of Housing and
Urban Development and the Pennsylvania Housing Finance Agency regulations, we
have also issued a report dated January 20, 2000, on our consideration of
Barclay Village II, Ltd.'s internal control, and reports dated January 20,
2000, on its compliance with specific requirements applicable to major HUD
Programs, Pennsylvania Housing Finance Agency regulations, and Specific
Requirements applicable to Fair Housing and Nondiscrimination.

/s/ Wessel & Company
Certified Public Accountants
Johnstown, Pennsylvania

-36-

[Letterhead of WESSEL & COMPANY]

INDEPENDENT AUDITOR'S REPORT

January 28, 1999

To the Partners of
Barclay Village II, Ltd.

We have audited the accompanying balance sheets of Barclay Village II, Ltd. (a
limited partnership) PHFA No. R-0039-8F as of December 31, 1998 and 1997, and
the related statements of operations, changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States and Pennsylvania Housing Finance Agency regulations. Those
standards and regulations 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Barclay Village II, Ltd., PHFA
No. R-0039-8F, as of December 31, 1998 and 1997, and the results of its
operations, changes in partners' capital, and cash flows for the years then
ended in conformity with generally accepted accounting principles.

In accordance with Govemment Auditing Standards the Consolidated Audit Guide for
Auditing of HUD Programs issued by the U.S. Department of Housing and Urban
Development and the Pennsylvania Housing Finance Agency regulations, we have
also issued a report dated January 28, 1999, on our consideration of Barclay
Village II, Ltd.'s internal control, and reports dated January 28, 1999, on its
compliance with specific requirements applicable to major HUD Programs,
Pennsylvania Housing Finance Agency regulations, and Specific Requirements
applicable to Fair Housing and Nondiscrimination.

As described in Note 8 to the financial statements, the Partners' Capital has
been restated, as of December 31, 1997, to reflect a prior period adjustment to
accrued interest.

/s/ Wessel & Company
Certified Public Accountants
Johnstown, Pennsylvania

-37-

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
1850 Second Avenue
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of 1850 Second Avenue
Associates, L.P. (a Delaware limited partnership) as of December 31, 1999 and
1998, and the related statements of income (loss), changes in partners' capital
(deficit), and cash flows for the years then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1850 Second Avenue Associates,
L.P. as of December 31, 1999 and 1998 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 8, 2000

-38-

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
1850 Second Avenue
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of 1850 Second Avenue
Associates, L.P. (a Delaware limited partnership) as of December 31, 1998 and
1997, and the related statements of income (loss), changes in partners' capital
(deficit), and cash flows for the years then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1850 Second Avenue Associates,
L.P. as of December 31, 1998 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 12, 1999

-39-

[Ernst & Young Letterhead]

Report of INDEPENDENT Certified Public Accountants

Partners
R.P.P. Limited Dividend Housing
Association Limited Partnership

We have audited the accompanying balance sheets of R.P.P. Limited Dividend
Housing Association Limited Partnership (the Partnership) as of December 31,
1999 and 1998, and the related statements of operations, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R.P.P. Limited Dividend Housing
Association Limited Partnership at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 7, the
Partnership has been unable to generate sufficient cash flow to meet its debt
service requirements and is in default under those obligations. These conditions
raise substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.

/s/ Ernst & Young LLP
West Palm Beach, Florida
March 6, 2000

-40-

Report of INDEPENDENT Certified Public Accountants

Partners
R.P.P. Limited Dividend Housing
Association Limited Partnership

We have audited the accompanying balance sheets of R.P.P. Limited Dividend
Housing Association Limited Partnership (the Partnership) as of December 31,
1998 and 1997, and the related statements of operations, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R.P.P. Limited Dividend Housing
Association Limited Partnership at December 31, 1998 and 1997, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 7, the
Partnership has been unable to generate sufficient cash flow to meet its debt
service requirements and is in default under those obligations. These conditions
raise substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.

/s/ Ernst & Young LLP
West Palm Beach, Florida
January 26, 1999

-41-

[Letterhead of CHESSER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

Partners
Williamsburg Residential II, L.P.
New York, New York

We have audited the accompanying balance sheet of Williamsburg Residential II,
L.P. as of December 31, 1999 and 1998, and the related statements of operations,
changes in partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Williamsburg Residential II,
L.P. as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Chesser & Company, P.A.
Wichita, Kansas
February 17, 2000

-42-

[Letterhead of CHESSER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

Partners
Williamsburg Residential II, L.P.
New York, New York

We have audited the accompanying balance sheet of Williamsburg Residential II,
L.P. as of December 31, 1998 and 1997, and the related statements of operations,
changes in partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Williamsburg Residential II,
L.P. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Chesser & Company, P.A.
Wichita, Kansas
February 23, 1999

-43-

[Letterhead of J.R. LUPO, P.A. CPA]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
West 104th Street Associates, L.P.
(a Delaware Limited Partnership)

We have audited the accompanying balance sheet of West 104th Street
Associates, L.P. (a Delaware Limited Partnership) as of December 31, 1999 and
December 1998, and the related statements of operations, changes in partners'
capital, and cash flows for the years then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 104th Street Associates,
L.P. at December 31, 1999 and December 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ J.R. Lupo
Verona, New Jersey
February 27, 2000

-44-

[Letterhead of M.L BERGER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
West 104th Street Associates, L.P.
(a Delaware Limited Partnership)

We have audited the accompanying balance sheet of West 104th Street Associates,
L.P. (a Delaware Limited Partnership) as of December 31, 1997, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 104th Street Associates,
L.P. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

/s/ M.L. Berger & Company
New York, New York
February 20, 1998

-45-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Meredith Apartments, Ltd.

We have audited the accompanying balance sheet of Meredith Apartments, Ltd. (a
Limited Partnership) as of December 31, 1999 and 1998 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Meredith Apartments, Ltd. at
December 31, 1999 and 1998, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 13, 2000

-46-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Meredith Apartments, Ltd.

We have audited the accompanying balance sheet of Meredith Apartments, Ltd. (a
Limited Partnership) as of December 31, 1998 and 1997 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Meredith Apartments, Ltd. at
December 31, 1998 and 1997, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 15, 1999

-47-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ritz Apartments, Ltd.

We have audited the accompanying balance sheet of Ritz Apartments, Ltd. (a
Limited Partnership) as of December 31, 1999 and 1998 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ritz Apartments, Ltd. at
December 31, 1999 and 1998, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 11, 2000

-48-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ritz Apartments, Ltd.

We have audited the accompanying balance sheet of Ritz Apartments, Ltd. (a
Limited Partnership) as of December 31, 1998 and 1997 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ritz Apartments, Ltd. at
December 31, 1998 and 1997, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 20, 1999

-49-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ashby Apartments, Ltd.

We have audited the accompanying balance sheet of Ashby Apartments, Ltd. (a
Limited Partnership) as of December 31, 1999 and 1998 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ashby Apartments, Ltd. at
December 31, 1999 and 1998, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 11, 2000

-50-

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ashby Apartments, Ltd.

We have audited the accompanying balance sheet of Ashby Apartments, Ltd. (a
Limited Partnership) as of December 31, 1998 and 1997 and the related statements
of operations, changes in partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ashby Apartments, Ltd. at
December 31, 1998 and 1997, and the results of its operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

/s/ Lake, Hill & Myers
Salt Lake City, Utah
January 13, 1999

-51-

[Letterhead of DAUBY O'CONNOR & ZALESKI]

Independent Auditors' Report

To the Partners of
South Toledo Associates, Ltd.
Toledo, Ohio

We have audited the accompanying balance sheet of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1999, and the related
statements of profit and loss (HUD Form 92410), changes in partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1999, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 7, 2000, on our consideration of the Partnership's internal
controls and a report dated January 7, 2000, on its compliance with laws and
regulations.

The accompanying supplementary information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.

/s/ Dauby O'Connor & Zaleski, LLC
Certified Public Accountants
Carmel, Indiana
January 7, 2000

-52-

[Letterhead of DAUBY O'CONNOR & ZALESKI]

Independent Auditors' Report

To the Partners of
South Toledo Associates, Ltd.
Toledo, Ohio

We have audited the accompanying balance sheet of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1998, and the related
statements of profit and loss (HUD Form 92410), changes in partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 7, 1999, on our consideration of the Partnership's internal
controls and a report dated January 7, 1999, on its compliance with laws and
regulations.

The accompanying supplementary information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.

/s/ Dauby O'Connor & Zaleski, LLC
Certified Public Accountants
Carmel, Indiana
January 7, 1999

-53-

[Letterhead of DAUBY O'CONNOR & ZALESKI]

Independent Auditors' Report

To the Partners of
South Toledo Associates, Ltd.
Toledo, Ohio

We have audited the accompanying balance sheet of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1997, and the related
statements of profit and loss (HUD Form 92410), changes in partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Toledo Associates, Ltd.
(an Ohio Limited Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 6, 1998, on our consideration of the Partnership's internal
controls and a report dated January 6, 1998, on its compliance with laws and
regulations.

The accompanying supplementary information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.

/s/ Dauby O'Connor & Zaleski, LLC
Certified Public Accountants
Indianapolis, Indiana
January 6, 1998

-54-

[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Dunlap School Venture

We have audited the accompanying balance sheets of Dunlap School Venture (a
Pennsylvania Limited Partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dunlap School Venture at
December 31, 1999 and 1998, and the results of its operations, changes in
partners' equity and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Quincy, Massachusetts
January 16, 2000

-55-

[ZINER & COMPANY, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Dunlap School Venture

We have audited the accompanying balance sheets of Dunlap School Venture (a
Pennsylvania Limited Partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dunlap School Venture at
December 31, 1998 and 1997, and the results of its operations, changes in
partners' equity and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner & Company, P.C.
Boston, Massachusetts
January 13, 1999

-56-

[Letterhead of BAKER NEWMAN & NOYES]

INDEPENDENT AUDITORS' REPORT

To The Partners of Philipsburg Elderly Housing Associates
(A Maine Limited Partnership)

We have audited the accompanying balance sheets of Philipsburg Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0210-8E, as of
December 31, 1999 and 1998, and the related statements of profit and loss,
changes in partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Philipsburg Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0210-8E, as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued our
reports dated January 20, 2000 on our consideration of internal controls over
financial reporting of Philipsburg Elderly Housing Associates (A Maine Limited
Partnership) and on our tests of its compliance with certain provisions of laws
and regulations.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included on
pages 16 - 23 is presented for purposes of additional analysis and is not a
required part of the basic financial statements of the Partnership, but is
supplementary information required by the Pennsylvania Housing Finance Agency
(PHFA). Such information has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Baker Newman & Noyes
Limited Liability Company
Portland, Maine
January 20, 2000

-57-

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

To The Partners
Philipsburg Elderly Housing Associates
(A Limited Partnership)
PHFA #R-0210-8E

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Philipsburg Elderly Housing
Associates as of December 31, 1997 and 1996, and the related statements of
income and expense, changes in partners' capital and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards,
and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Philipsburg Elderly Housing
Associates at December 31, 1997 and 1996, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 30, 1998, on our
consideration of Philipsburg Elderly Housing Associates' internal control and
reports dated January 30, 1998, on its compliance with laws and regulations,
specific requirements applicable to major HUD programs, and specific
requirements applicable to Fair Housing and Nondiscrimination.

Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 19 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Company, LLC
West Hartford, Connecticut
January 30, 1998

-58-

[Letterhead of BAKER NEWMAN & NOYES]

INDEPENDENT AUDITORS' REPORT

To The Partners of Franklin Elderly Housing Associates
(A Maine Limited Partnership)

We have audited the accompanying balance sheets of Franklin Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0383-8E, as of
December 31, 1999 and 1998, and the related statements of profit and loss,
changes in partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audits 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Franklin Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0383-8E, as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued our
reports dated January 27, 2000 on our consideration of internal controls over
financial reporting of Franklin Elderly Housing Associates (A Maine Limited
Partnership) and on our tests of its compliance with certain provisions of laws
and regulations.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included on
pages 16 - 23 is presented for purposes of additional analysis and is not a
required part of the basic financial statements of the Partnership, but is
supplementary information required by the Pennsylvania Housing Finance Agency
(PHFA). Such information has been subjected to the auditing procedures applied
in our audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Baker Newman & Noyes
Limited Liability Company
Portland, Maine
January 27, 2000

-59-

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

To The Partners
Franklin Elderly Housing Associates
(A Limited Partnership)
PHFA #R-0383-8E

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Franklin Elderly Housing
Associates as of December 31, 1997 and 1996, and the related statements of
income and expense, changes in partners' capital and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Franklin Elderly Housing
Associates at December 31, 1997 and 1996, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 20, 1998 on our
consideration of Franklin Elderly Housing Associates' internal control and
reports dated January 20, 1998 on its compliance with laws and regulations,
specific requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Nondiscrimination.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 19 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Company, LLC
West Hartford, Connecticut
January 20, 1998

-60-

[Letterhead of BAKER NEWMAN & NOYES]

INDEPENDENT AUDITORS' REPORT

To The Partners of Wade D. Mertz Elderly Housing Associates
(A Maine Limited Partnership)

We have audited the accompanying balance sheet of Wade D. Mertz Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0488-8E, as of
December 31, 1999 and 1998, and the related statements of profit and loss,
changes in partners' capital and cash flows for the year sthen ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audits 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wade D. Mertz Elderly Housing
Associates (A Maine Limited Partnership), PHFA Project Number R-0488-8E, as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued our
reports dated January 22, 2000 on our consideration of internal controls over
financial reporting of Wade D. Mertz Elderly Housing Associates (A Maine Limited
Partnership) and on our tests of its compliance with certain provisions of laws
and regulations.

-61-

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included on
pages 16 - 23 is presented for purposes of additional analysis and is not a
required part of the basic financial statements of the Partnership, but is
supplementary information required by the Pennsylvania Housing Finance Agency
(PHFA). Such information has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Baker Newman & Noyes
Limited Liability Company
Portland, Maine
January 22, 2000

-62-

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

To The Partners
Wade D. Mertz Elderly Housing Associates
(A Limited Partnership)
PHFA #R-0488-8E

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Wade D. Mertz Elderly Housing
Associates, as of December 31, 1997 and 1996, and the related statements of
income and expense, changes in partners' capital and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards,
and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wade D. Mertz Elderly Housing
Associates at December 31, 1997 and 1996, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 30, 1998, on our
consideration of Wade D. Mertz Elderly Housing Associates' internal control and
reports dated January 30, 1998, on its compliance with laws and regulations,
specific requirements applicable to major HUD programs, and specific
requirements applicable to Fair Housing and Nondiscrimination.

Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 19 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Company, LLC
West Hartford, Connecticut
January 30, 1998

-63-

[Letterhead of BICK FREDMAN & CO]

Independent Auditors' Report

The General and Limited Partners
Lancashire Towers Associates Limited Partnership
Cleveland, Ohio

We have audited the accompanying balance sheets of Lancashire Towers Associates
Limited Partnership (An Ohio Limited Partnership) as of December 31, 1999 and
1998, and the related statement of operations, partners' capital (deficit) and
cash flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lancashire Towers Associates
Limited Partnership's as of December 31, 1999 and 1998, and the results of its
operations and cash flows for the years then ended, in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 3, 2000 on our
consideration of Lancashire Towers Associates Limited Partnership's internal
control and reports dated February 3, 2000 on its compliance with specific
requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Non-Discrimination, and specific requirements
applicable to nonmajor HUD program transactions.

/s/ Bick Fredman & Co
Cleveland, Ohio
February 3, 2000

-64-

[Letterhead of BICK FREDMAN & CO]

Independent Auditors' Report

The General and Limited Partners
Lancashire Towers Associates Limited Partnership
Cleveland, Ohio

We have audited the accompanying balance sheets of Lancashire Towers Associates
Limited Partnership (An Ohio Limited Partnership) as of December 31, 1998 and
1997, and the related statement of operations, partners' capital and cash flows
for the years then ended. These financial statements are the responsibility of
the Project's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lancashire Towers Associates
Limited Partnership's as of December 31, 1998 and 1997, and the results of its
operations and cash flows for the years then ended, in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 1, 1999 on our
consideration of Lancashire Towers Associates Limited Partnership's internal
control and reports dated February 1, 1999 on its compliance with specific
requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Non-Discrimination, and specific requirements
applicable to nonmajor HUD program transactions.

/s/ Bick Fredman & Co
Cleveland, Ohio
February 1, 1999

-65-

[INSERO, KASPERSKI, CIACCIA & CO. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Northwood Associates Limited Partnership
Toledo, Ohio

We have audited the accompanying balance sheets - regulatory basis of Northwood
Associates Limited Partnership, HUD Project #042-44050-LDP, as of December 31,
1999 and 1998 and the related statements of changes in partners' equity -
regultory basis, operations - regulatory basis, and cash flows regulatory basis
for the years then ended. These financial statements are the responsibility of
the Project's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. 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.

As described in Note 1, the Project's policy is to prepare its financial
statements on the basis of accounting practices prescribed or permitted by U.S.
Department of Housing and Urban Development. These practices differ in some
respects from generally accepted accounting principles. Accordingly, the
accompanying financial statements are not intended to present financial position
and results of operations in conformity with generally accepted accounting
principles. This report is intended solely for filing with regulatory agencies
and is not intended for any other purpose.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northwood Associates Limited
Partnership as of December 31, 1999 and 1998, and the results of its operations,
changes in partners' equity, and cash flows for the years then ended on the
basis of accounting described in Note 1.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 31, 2000, on our
consideration of Northwood Associates Limited Partnership's internal control,
and reports dated January 31, 2000, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to Fair
Housing and Non-Discrimination.

Respectfully Submitted,

/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Certified Public Accountants
Rochester, New York
January 31, 2000

-66-

[INSERO, KASPERSKI, CIACCIA & CO. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Northwood Associates Limited Partnership
Toledo, Ohio

We have audited the accompanying balance sheets of Northwood Associates Limited
Partnership, HUD Project #042-44050-LDP, as of December 31, 1998 and 1997 and
the related statements of changes in partners' equity, operations, and cash
flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northwood Associates Limited
Partnership as of December 31, 1998 and 1997, and the results of its operations,
changes in partners' equity, and cash flows for the years then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 10, 1999, on our
consideration of Northwood Associates Limited Partnership's internal control,
and reports dated February 10, 1999, on its compliance with specific
requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Non-Discrimination.

Respectfully Submitted,

/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Certified Public Accountants
Rochester, New York
February 10, 1999

-67-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Brewery Renaissance Associates, L.P.

We have audited the accompanying balance sheets of Brewery Renaissance
Associates, L.P. as of December 31, 1999 and 1998, and the related statements of
operations, partners' equity and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brewery Renaissance Associates,
L.P. as of December 31, 1999 and 1998, and the results of its operations, the
changes in partners' equity and cash flows for the years then ended, in
conformity with generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 14, 2000

-68-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Brewery Renaissance Associates, L.P.

We have audited the accompanying balance sheets of Brewery Renaissance
Associates, L.P. as of December 31, 1998 and 1997, and the related statements of
operations, partners' equity and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brewery Renaissance Associates,
L.P. as of December 31, 1998 and 1997, and the results of its operations, the
changes in partners' equity and cash flows for the years then ended, in
conformity with generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 20, 1999

-69-

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

The Partners
Brandywine Court Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Brandywine Court Associates,
L.P. (A Limited Partnership), HUD Project No. 063-94015, as of December 31, 1999
and 1998 and the related statements of profit and loss, Partners' capital and
cash flows for the year ended December 31, 1999. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brandywine Court Associates,
L.P. (A Limited Partnership), HUD Project No. 063-94015, as of December 31, 1999
and 1998, and the results of its operations, changes in its Partners' capital,
and its cash flows for the year ended December 31, 1999, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

-70-

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 19, 2000 on our
consideration of Brandywine Court Associates, L.P.'s (A Limited Partnership),
HUD Project No. 063-94015, internal control and reports dated January 19, 2000
on its compliance with specific requirements applicable to major HUD program,
specific requirements applicable to nonmajor HUD program transactions and
specific requirements applicable to fair housing and non-discrimination.

/s/ Asher & Company, Ltd.
Philadelphia, Pennsylvania
January 19, 2000

-71-

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

The Partners
Brandywine Court Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Brandywine Court Associates,
L.P. (A Limited Partnership), HUD Project No. 063-94015, as of December 31, 1998
and 1997 and the related statements of profit and loss, Partners' capital and
cash flows for the year ended December 31, 1998. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brandywine Court Associates,
L.P. (A Limited Partnership), HUD Project No. 063-94015, as of December 31, 1998
and 1997, and the results of its operations, changes in its Partners' capital,
and its cash flows for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

-72-

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 16, 1999 on our
consideration of Brandywine Court Associates, L.P.'s (A Limited Partnership),
HUD Project No. 063-94015, internal control and reports dated January 16, 1999
on its compliance with specific requirements applicable to major HUD program,
specific requirements applicable to nonmajor HUD program transactions and
specific requirements applicable to fair housing and non-discrimination.

/s/ Asher & Company, Ltd.
Philadelphia, Pennsylvania
January 19, 1999

-73-

[Letterhead of J.H. WILLIAMS & CO., LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Art Apartments Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Art Apartments Associates (a
Limited Partnership) as of December 31, 1999 and 1998 and the related statements
of (loss), changes in partners' equity (deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Art Apartments Associates (a
Limited Partnership) at December 31, 1999 and 1998, and the results of its
operations, changes in partners' equity and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
Kingston, Pennsylvania
February 3, 2000

-74-

[Letterhead of J.H. WILLIAMS & CO., LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Art Apartments Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Art Apartments Associates (a
Limited Partnership) as of December 31, 1998 and 1997 and the related statements
of (loss), changes in partners' equity (deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Art Apartments Associates (a
Limited Partnership) at December 31, 1998 and 1997, and the results of its
operations, changes in partners' equity and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
Kingston, Pennsylvania
February 4, 1999

-75-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
The Village at Carriage Hills, Ltd.
Clinton, Tennessee

We have audited the accompanying balance sheets of The Village at Carriage Hills
Ltd., a limited partnership, RHS Project No.: 48-001-630980039 as of December
31, 1999 and 1998, and the related statements of operations, partners' deficit
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Village at Carriage Hills,
Ltd., RHS Project No.: 48-001-630980039 as of December 31, 1999 and 1998, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 26, 2000 on our consideration of The Village at Carriage Hills,
Ltd.'s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 26, 2000

-76-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
The Village at Carriage Hills, Ltd.
Clinton, Tennessee

We have audited the accompanying balance sheets of The Village at Carriage Hills
Ltd., a limited partnership, RHS Project No.: 48-001-630980039 as of December
31, 1998 and 1997, and the related statements of operations, partners' deficit
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Village at Carriage Hills,
Ltd., RHS Project No.: 48-001-630980039 as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 24, 1999 on our consideration of The Village at Carriage Hills,
Ltd.'s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 24, 1999

-77-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mountainview Apartments, Ltd.
Clinton, Tennessee

We have audited the accompanying balance sheets of Mountainview Apartments,
Ltd., a limited partnership, RHS Project No.: 48-015-63097225 as of December 31,
1999 and 1998, and the related statements of operations, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mountainview Apartments, Ltd.,
RHS Project No.: 48-015-63097225 as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 26, 2000 on our consideration of Mountainview Apartments, Ltd.'s,
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 26, 2000

-78-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mountainview Apartments, Ltd.
Clinton, Tennessee

We have audited the accompanying balance sheets of Mountainview Apartments,
Ltd., a limited partnership, RHS Project No.: 48-015-63097225 as of December 31,
1998 and 1997, and the related statements of operations, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mountainview Apartments, Ltd.,
RHS Project No.: 48-015-63097225 as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 25, 1999 on our consideration of Mountainview Apartments, Ltd.'s,
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 25, 1999

-79-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
The Park Village, Limited
Jackson, Mississippi

We have audited the accompanying balance sheets of The Park Village, Limited, a
limited partnership, as of December 31, 1999 and 1998, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted the audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Park Village, Limited, as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on page 10
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 23, 1998

-80-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
The Park Village, Limited
Jackson, Mississippi

We have audited the accompanying balance sheets of The Park Village, Limited, a
limited partnership, as of December 31, 1998 and 1997, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted the audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Park Village, Limited, as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 11 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the audit procedures applied in the audit of the basic financial
statements and, in our opinion is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 24, 1999

-81-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
River Oaks Apartments, Ltd.
Oneonta, Alabama

We have audited the accompanying balance sheets of River Oaks Apartments, Ltd.,
a limited partnership, RHS Project No.: 01-005-630988076 as of December 31, 1999
and 1998, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of River Oaks Apartments, Ltd.,
RHS Project No.: 01-005-630988076 as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 16, 2000 on our consideration of River Oaks Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 16, 2000

-82-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
River Oaks Apartments, Ltd.
Oneonta, Alabama

We have audited the accompanying balance sheets of River Oaks Apartments, Ltd.,
a limited partnership, RHS Project No.: 01-005-630988076 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of River Oaks Apartments, Ltd.,
RHS Project No.: 01-005-630988076 as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 16, 1999 on our consideration of River Oaks Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 16, 1999

-83-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Forrest Ridge, Ltd.
Forrest City, Arkansas

We have audited the accompanying balance sheets of Forrest Ridge Apartments,
Ltd., a limited partnership, RHS Project No.: 03-062-630899211 as of December
31, 1999 and 1998, and the related statements of operations, partners' capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Forrest Ridge Apartments, Ltd.,
RHS Project No.: 03-062-630899211 as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 12, 2000 on our consideration of Forrest Ridge Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 12, 2000

-84-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Forrest Ridge, Ltd.
Forrest City, Arkansas

We have audited the accompanying balance sheets of Forrest Ridge Apartments,
Ltd., a limited partnership, RHS Project No.: 03-062-630899211 as of December
31, 1998 and 1997, and the related statements of operations, partners' capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Forrest Ridge Apartments, Ltd.,
RHS Project No.: 03-062-630899211 as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 24, 1999 on our consideration of Forrest Ridge Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 24, 1999

-85-

[Letterhead of SCHOONOVER BOYER GETTMAN AND ASSOCIATES]

INDEPENDENT AUDITORS' REPORT

The Partners
The Hearthside Limited Dividend
Housing Association Limited Partnership
(a Michigan limited partnership)

We have audited the accompanying balance sheets of The Hearthside Limited
Dividend Housing Association Limited Partnership, (a Michigan limited
partnership) as of December 31, 1999 and 1998, and the related statements of
income (loss), partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

In our opinion, the financial statements mentioned above present fairly, in all
material respects, the financial position of The Hearthside Limited Dividend
Housing Association Limited Partnership as of December 31, 1999 and 1998, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.

/s/ Schoonover Boyer Gettman & Associates
Columbus, Ohio
January 28, 2000

-86-

[Letterhead of SCHOONOVER BOYER GETTMAN AND ASSOCIATES]

INDEPENDENT AUDITORS' REPORT

The Partners
The Hearthside Limited Dividend
Housing Association Limited Partnership
(a Michigan limited partnership)

We have audited the accompanying balance sheets of The Hearthside Limited
Dividend Housing Association Limited Partnership, (a Michigan limited
partnership) as of December 31, 1998 and 1997, and the related statements of
income (loss), partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

In our opinion, the financial statements mentioned above present fairly, in all
material respects, the financial position of The Hearthside Limited Dividend
Housing Association Limited Partnership as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.

/s/ Schoonover Boyer Gettman & Associates
Columbus, Ohio
January 22, 1999

-87-

[Letterhead of PAILET, MEUNIER AND LeBLANC, L.L.P.]

INDEPENDENT AUDITORS' REPORT

To the Partners
of Redemptorist Limited Partnership
New Orleans, Louisiana

We have audited the accompanying balance sheets of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1999 and 1998, and
the related statements of income, changes in partners' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1999 and 1998, and
the results of its operations, changes in partners' equity, and cash flows for
the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 2, 2000, on our
consideration of Redemptorist Limited Partnership's internal control, and
reports dated February 2, 2000, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to
Affirmative Fair Housing.

/s/ Pailet, Meunier and LeBlanc, L.L.P.
Metairie, Louisiana
February 2, 2000

-88-

[Letterhead of PAILET, MEUNIER AND LeBLANC, L.L.P.]

INDEPENDENT AUDITORS' REPORT

To the Partners
of Redemptorist Limited Partnership
New Orleans, Louisiana

We have audited the accompanying balance sheets of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1998 and 1997, and
the related statements of income, changes in partners' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1998 and 1997, and
the results of its operations, changes in partners' equity, and cash flows for
the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 9, 1999, on our
consideration of Redemptorist Limited Partnership's internal control, and
reports dated February 9, 1999, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to
Affirmative Fair Housing.

/s/ Pailet, Meunier and LeBlanc, L.L.P.
Metairie, Louisiana
February 9, 1999

-89-

[Letterhead of SATTY, LEVINE & CIACCO, CPAs, P.C.]

To the Partners
MANHATTAN A ASSOCIATES
(A LIMITED PARTNERSHIP)
New York, New York

We have audited the accompanying balance sheet of Manhattan A Associates (A
Limited Partnership) as of December 31, 1999 and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion of these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MANHATTAN A ASSOCIATES as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information on page nine is presented for purposes of additional analysis and is
not a required part of the basic financial statements of Manhattan A Associates.
Such information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly stated in
all material respects in relation to the basic financial statements taken as a
whole.

/s/ Satty, Levine & Ciacco, CPAs, P.C.
Jericho, New York
February 29, 2000

-90-

[Letterhead of LEVINE GREENBERG & COMPANY]

To the Partners
MANHATTAN A ASSOCIATES
(A LIMITED PARTNERSHIP)
105 West 128 Street
New York, New York 10029

Gentlemen:

We have audited the accompanying balance sheet of Manhattan A Associates (A
Limited Partnership) as of December 31, 1998 and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion of these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MANHATTAN A ASSOCIATES (a
Limited Partnership) as of December 31, 1998 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Levine, Greenberg & Company
Certified Public Accountant
Hewlett, New York
February 24, 1999

-91-

[Letterhead of LEVINE GREENBERG & COMPANY]

To the Partners
MANHATTAN A ASSOCIATES
(A LIMITED PARTNERSHIP)
105 West 128 Street
New York, New York 10029

Gentlemen:

We have audited the accompanying balance sheet of Manhattan A Associates (A
Limited Partnership) as of December 31, 1997 and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion of these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MANHATTAN A ASSOCIATES (a
Limited Partnership) as of December 31, 1997 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Levine, Greenberg & Company
Certfied Public Accountant
Hewlett, New York
February 9, 1998

-92-

[Letterhead of GREGG ASSOCIATES

INDEPENDENT AUDITORS' REPORT

To the Partners
of Weidler Associates Limited Partnership
Portland, Oregon

We have audited the accompanying balance sheets of Weidler Associates Limited
Partnership as of December 31, 1999, and the related statements of operations,
changes in partners' capital, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Weidler Associates Limited Partnership as
of December 31, 1998, were audited by other auditors, whose report dated
February 12, 1999 expressed an unqualified opinion on those statements.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Weidler Associates Limited
Partnership as of December 31, 1999, and the results of its operations, changes
in partners' capital, and its cash flows for the years then ended in conformity
with generally accepted accounting principles.

GREGG ASSOCIATES, PC

/s/ David R. Gregg
David R. Gregg
Certified Public Accountant
Portland, Oregon
February 14, 2000

-93-

[Letterhead of GERALD V. GERRITZ, JR. P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
of Weidler Associates Limited Partnership

I have audited the accompanying balance sheets of Weidler Associates Limited
Partnership as of December 31, 1998 and 1997, and the related statements of
operations, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Weidler Associates Limited
Partnership as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Gerald V. Gerritz, Jr., CPA, P.C.
Portland, Oregon
February 12, 1999

-94-

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

The Partners
Gentle Pines - West Columbia Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Gentle Pines - West Columbia
Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as of
December 31, 1999 and 1998, and the related statements of profit and loss,
Partners' capital and cash flows for the year ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gentle Pines - West Columbia
Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as of
December 31, 1999 and 1998, and the results of its operations, changes in its
Partners' capital, and its cash flows for the year ended December 31, 1999 in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 17, 2000 on our
consideration of Gentle Pines - West Columbia Associates, L.P.'s (A Limited
Partnership), HUD Project No. 054-36627, internal control and reports dated
January 17, 2000 on its compliance with specific requirements applicable to
major HUD programs and specific requirements applicable to fair housing and
non-discrimination.

/s/ Asher & Company, Ltd
Philadelphia, Pennsylvania
January 17, 2000

-95-

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

The Partners
Gentle Pines - West Columbia Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Gentle Pines - West Columbia
Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as of
December 31, 1998 and 1997, and the related statements of profit and loss,
Partners' capital and cash flows for the year ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gentle Pines - West Columbia
Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as of
December 31, 1998 and 1997, and the results of its operations, changes in its
Partners' capital, and its cash flows for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 1, 1999 on our
consideration of Gentle Pines - West Columbia Associates, L.P.'s (A Limited
Partnership), HUD Project No. 054-36627, internal control and reports dated
February 1, 1999 on its compliance with specific requirements applicable to
major HUD programs and specific requirements applicable to fair housing and
non-discrimination.

/s/ Asher & Company, Ltd
Philadelphia, Pennsylvania
February 1, 1999

-96-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lake Forest Estates II, Ltd.
Livingston, Alabama

We have audited the accompanying balance sheets of Lake Forest Estates II, Ltd.,
a limited partnership, RHS Project No.: 01-060-630996944 as of December 31, 1999
and 1998, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lake Forest Estates II, Ltd.,
RHS Project No.: 01-060-630996944 as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 26, 2000 on our consideration of Lake Forest Estates II, Ltd.,
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 26, 2000

-97-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lake Forest Estates II, Ltd.
Livingston, Alabama

We have audited the accompanying balance sheets of Lake Forest Estates II, Ltd.,
a limited partnership, RHS Project No.: 01-060-630996944 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lake Forest Estates II, Ltd.,
RHS Project No.: 01-060-630996944 as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 25, 1999 on our consideration of Lake Forest Estates II, Ltd.,
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 25, 1999

-98-

[Letterhead of AMILCAR TORRES RIVERA, CPA]

INDEPENDENT AUDITORS' REPORT

To the Partners
Las Camelias Limited Partnership

I have audited the accompanying balance sheets of Las Camelias Limited
Partnership as of December 31, 1999 and 1998, and the related statements of
loss, changes in Partner's capital and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards
which require that I 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 statements presentation. I believe that my
audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Las Camelias Limited Partnership as
of December 31, 1999 and 1998, and the result of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Las Camelias Limited Partnership rent income from subsidies is approximately 83%
of total partnership revenues. As disclosed in Note 1-A, one of the three
Housing Assistance Payment (HAP) Contracts expired on February 28, 1999.

/s/ Amilcar Torres Rivera, CPA
San Juan, Puerto Rico
Stamp #1598370 of the Puerto Rico Society of CPA's was affixed to the original.
February 1, 2000

-99-

[Letterhead of AMILCAR TORRES RIVERA, CPA]

INDEPENDENT AUDITORS' REPORT

To the Partners
Las Camelias Limited Partnership

I have audited the accompanying balance sheets of Las Camelias Limited
Partnership as of December 31, 1998 and 1997, and the related statements of
loss, changes in Partner's equity and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards
which require that I 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 statements presentation. I believe that my
audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Las Camelias Limited Partnership as
of December 31, 1998 and 1997, and the result of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ Amilcar Torres Rivera, CPA
San Juan, Puerto Rico
Stamp #1545213 of the Puerto Rico Society of CPA's was affixed to the original.
January 29, 1999

-100-

[Letterhead of DAVID W. SCOTT, CPA, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
WPL Associates XXIII Limited Partnership
522 NW 23rd, Suite 200
Portland, Oregon
97201

We have audited the accompanying balance sheet of WPL Associates XXIII Limited
Partnership, as of December 31, 1999, and the related statements of operations,
changes in partnerships' capital, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WPL Associates XXIII Limited
Partnership at December 31, 1999, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

/s/ David W. Scott, CPA, P.C.
Portland, Oregon
February 15, 2000

-101-

[Letterhead of DAVID W. SCOTT, CPA, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
WPL Associates XXIII Limited Partnership
522 NW 23rd, Suite 200
Portland, Oregon 97201

We have audited the accompanying balance sheet of WPL Associates XXIII Limited
Partnership, as of December 31, 1998, and the related statements of operations,
changes in partnerships' capital, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WPL Associates XXIII Limited
Partnership at December 31, 1998, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

/s/ David W. Scott, CPA, P.C.
Portland, Oregon
February 16, 1999

-102-

[Letterhead of DAVID W. SCOTT, CPA, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
WPL Associates XXIII Limited Partnership
522 NW 23rd, Suite 200
Portland, Oregon 97201

We have audited the accompanying balance sheet of WPL Associates XXIII Limited
Partnership, as of December 31, 1997, and the related statements of operations,
changes in partnerships' capital, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WPL Associates XXIII Limited
Partnership at December 31, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

/s/ David W. Scott, CPA, P.C.
Portland, Oregon
February 4, 1998

-103-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

We have audited the accompanying balance sheet of Broadway Townhouses L.P. as of
December 31, 1999, and the related statements of operations, partners' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Broadway Townhouses L.P. as of
December 31, 1999, and the results of its operations, the changes in partners'
equity (deficit) and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 24 through 28
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated
January 19, 2000 on our consideration of Broadway Townhouses L.P.'s internal
control and on its compliance with specific requirements applicable to major
HUD programs and fair housing and non-discrimination.

/s/ Reznick Fedder & Silverman
Lead Auditor: Robert J. Denmark
Bethesda, Maryland
Taxpayer Identification Number: 52-1088612
January 19, 2000

-104-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

We have audited the accompanying balance sheet of Broadway Townhouses L.P. as of
December 31, 1998, and the related statements of operations, partners' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Broadway Townhouses L.P. as of
December 31, 1998, and the results of its operations, the changes in partners'
equity (deficit) and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 24 through 27
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 22,
1999 on our consideration of Broadway Townhouses L.P.'s internal control and on
its compliance with specific requirements applicable to major HUD programs and
fair housing and non-discrimination.

/s/ Reznick Fedder & Silverman
Lead Auditor: Lester A. Kanis
Bethesda, Maryland
Taxpayer Identification Number: 52-1088612
January 22, 1999

-105-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

We have audited the accompanying balance sheet of Broadway Townhouses L.P. as of
December 31, 1997, and the related statements of profit and loss (on HUD Form
No. 92410), partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Broadway Townhouses L.P. as of
December 31, 1997, and the results of its operations, the changes in partners'
equity and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 23 through 27
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 27,
1998 on our consideration of Broadway Townhouses L.P.'s internal control and on
its compliance with specific requirements applicable to major HUD programs, fair
housing and non-discrimination, and laws and regulations applicable to the
financial statements.

/s/ Reznick Fedder & Silverman
Audit Principal: Lester A. Kanis
Bethesda, Maryland
Federal Employer Identification Number: 52-1088612
January 27, 1998

-106-

[Letterhead of HECTOR M. LOPEZ CERTIFIED PUBLIC ACCOUNTANT]

INDEPENDENT AUDITORS' REPORT

To the Partners
Puerto Rico Historic Zone Limited Dividend Partnership

I have audited the accompanying balance sheet of Puerto Rico Historic Zone
Limited Dividend Partnership as of December 31, 1999, and the related statements
of operations, partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Puerto Rico Historic Zone Limited
Dividend Partnership as of December 31, 1999, and the results of its operations,
the changes in partners' equity and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

My audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 20 through 24
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in my opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

-107-

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," I have also issued reports dated
February 18, 2000, on my consideration of Puerto Rico Historic Zone Limited
Dividend Partnership's internal control and on its compliance with specific
requirements applicable to major HUD programs, and fair housing and
non-discrimination.

/s/ Hector M. Lopez
The Stamp No. 1623825 was adhered to the original of this report.
Taxpayer Identification Number: 050-36-4320
San Juan, Puerto Rico
February 18, 2000

-108-

[Letterhead of SANTIAGO, RILEY & REZNICK]

INDEPENDENT AUDITORS' REPORT

To the Partners
Puerto Rico Historic Zone Limited Dividend Partnership

We have audited the accompanying balance sheet of Puerto Rico Historic Zone
Limited Dividend Partnership as of December 31, 1998, and the related statements
of operations, partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Puerto Rico Historic Zone
Limited Dividend Partnership as of December 31, 1998, and the results of its
operations, the changes in partners' equity and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 20 through 24
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated
January 29, 1999, on our consideration of Puerto Rico Historic Zone Limited
Dividend Partnership's internal control and on its compliance with specific
requirements applicable to major HUD programs, and fair housing and
non-discrimination.

/s/ Santiago, Riley & Reznick
Lead Auditor: William T. Riley, Jr.
San Juan, Puerto Rico
Taxpayer Identification Number: 66-0432841
[1520212]
Seal
January 29, 1999

-109-

[Letterhead of SANTIAGO, RILEY & REZNICK]

INDEPENDENT AUDITORS' REPORT

To the Partners
Puerto Rico Historic Zone Limited Dividend Partnership

We have audited the accompanying balance sheet of Puerto Rico Historic Zone
Limited Dividend Partnership as of December 31, 1997, and the related statements
of profit and loss (on HUD Form No. 92410), partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

As described in Note F, the Partnership had not accrued the local administrative
fee since the inception of the limited partnership agreement. The Partnership
restated its 1996 financial statements and recorded a prior period adjustment
for the previous years to reflect the change in the accrued local administrative
fee.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Puerto Rico Historic Zone
Limited Dividend Partnership as of December 31, 1997, and the results of its
operations, the changes in partners' equity and cash flows for the year then
ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 19 through 23
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

-110-

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated March 6,
1998, on our consideration of Puerto Rico Historic Zone Limited Dividend
Partnership's internal control and on its compliance with specific requirements
applicable to major HUD programs, fair housing and non-discrimination, and laws
and regulations applicable to the financial statements.

/s/ Santiago, Riley & Reznick
Audit Principal: William T. Riley, Jr.
San Juan, Puerto Rico
Federal Employer Identification Number: 66-0432841
[1481349]
Seal
March 6, 1998

-111-

[Letterhead of CABLISH, GENTILE & GAY

INDEPENDENT AUDITORS' REPORT

To the Partners
Citrus Meadows Apartments, Ltd.
Bradenton, Florida

We have audited the accompanying balance sheet of Citrus Meadows Apartments,
Ltd., FHA Project No. 067-36654 (a limited partnership) (the Partnership), as of
December 31, 1999, and the related statements of changes in partners equity
(deficit), profit and loss, partners' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards,
Government Auditing Standards, issued by the Comptroller General of the United
States and the Consolidated Audit Guide for Audits of HUD Programs, issued by
the U.S. Department of Housing and Urban Development, Office of Inspector
General, in August 1997. 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citrus Meadows Apartments, Ltd.
at December 31, 1999 and the results of its operations, cash flows and changes
in partners' equity (deficit) for the year then ended in conformity with
generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The supporting information included in the
financial statements (shown on pages 12 through 17) are presented for the
purposes of additional analysis and are not a required part of the basic
financial statements of Citrus Meadows Apartment, Ltd. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly presented in all material respects in
relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued reports
dated February 7, 2000 on our consideration of Citrus Meadows Apartments, Ltd.'s
internal controls and on its compliance with laws and regulations applicable to
the basic financial statements. In accordance with the Consolidated Audit Guide,
we have also issued reports dated February 7, 2000, on major HUD programs, and
the nonmajor HUD program.

/s/ Cablish, Gentile & Gay, CPA
BRADENTON, FLORIDA
February 7, 2000

-112-

[Letterhead of CHRISTOPHER, SMITH, GENTILE, LEONARD & BRISTOW, P.A.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Citrus Meadows Apartments, Ltd.
Bradenton, Florida

We have audited the accompanying balance sheet of Citrus Meadows Apartments,
Ltd., FHA Project No. 067-36654 (a limited partnership) (the Partnership), as of
December 31, 1998, and the related statements of changes in partners equity
(deficit), profit and loss, partners' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards,
Government Auditing Standards, issued by the Comptroller General of the United
States and the Consolidated Audit Guide for Audits of HUD Programs, issued by
the U.S. Department of Housing and Urban Development, Office of Inspector
General, in August 1997. 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citrus Meadows Apartments, Ltd.
at December 31, 1998 and the results of its operations, cash flows and changes
in partners' equity (deficit) for the year then ended in conformity with
generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The supporting information included in the
financial statements (shown on pages 12 through 17) are presented for the
purposes of additional analysis and are not a required part of the basic
financial statements of Citrus Meadows Apartment, Ltd. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly presented in all material respects in
relation to the financial statements taken as a whole.

-113-

In accordance with Government Auditing Standards, we have also issued reports
dated January 29, 1999 on our consideration of Citrus Meadows Apartments, Ltd.'s
internal controls and on its compliance with laws and regulations applicable to
the basic financial statements. In accordance with the Consolidated Audit Guide,
we have also issued reports dated January 29, 1999, on major HUD programs, and
the nonmajor HUD program.

/s/ Christopher, Smith, Gentile, Leonard & Bristow, P.A.
BRADENTON, FLORIDA
January 29, 1999

-114-

[Letterhead of CHRISTOPHER, SMITH, GENTILE, LEONARD & BRISTOW, P.A.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Citrus Meadows Apartments, Ltd.
Bradenton, Florida

We have audited the accompanying balance sheet of Citrus Meadows Apartments,
Ltd., FHA Project No. 067-36654 (a limited partnership) (the Partnership), as of
December 31, 1997, and the related statements of profit and loss, partners'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citrus Meadows Apartments, Ltd.
at December 31, 1997 and the results of its operations and its cash flows and
its changes in partners' equity (deficit) for the year then ended in conformity
with generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The supporting information included in the report
(shown on pages 12 through 17) are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of Citrus
Meadows Apartment, Ltd. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly presented in all material respects in relation to the
financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 27, 1998 on our consideration of Citrus Meadows Apartments, Ltd.'s
internal controls and a report dated January 27, 1998 on its compliance with
laws and regulations.

/s/ Christopher, Smith, Gentile, Leonard & Bristow, P.A.
BRADENTON, FLORIDA
January 27, 1998

-115-

[ZINER, KENNEDY & LEHAN. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Sartain School Venture

We have audited the accompanying balance sheets of Sartain School Venture (a
Pennsylvania limited partnership) as of December 31, 1999 and 1998 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sartain School Venture as of
December 31, 1999 and 1998, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan, LLP
Quincy, Massachusetts
January 14, 2000

-116-

[ZINER & COMPANY, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Sartain School Venture

We have audited the accompanying balance sheets of Sartain School Venture (a
Pennsylvania limited partnership) as of December 31, 1998 and 1997 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sartain School Venture as of
December 31, 1998 and 1997, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner & Company, P.C.
Boston, Massachusetts
January 19, 1999

-117-

[ASHER & COMPANY, LTD. LETTERHEAD]

Independent Auditors' Report

The Partners
Driftwood Terrace Associates, Ltd.
Marlton, New Jersey

We have audited the accompanying balance sheets of Driftwood Terrace Associates,
Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of December 31, 1999
and 1998 and the related statements of profit and loss, Partners' capital and
cash flows for the year ended December 31, 1999. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Driftwood Terrace Associates,
Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of December 31, 1999
and 1998 and the results of its operations, changes in its Partners' capital,
and its cash flows for the year ended December 31, 1999, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

-118-

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 14, 2000 on our
consideration of Driftwood Terrace Associates, Ltd.'s (A Limited Partnership),
HUD Project No. 066-36678, internal control and reports dated January 14, 2000
on its compliance with specific requirements applicable to major HUD programs
and specific requirements applicable to fair housing and non-discrimination.

/s/ Asher & Company, Ltd.
Philadelphia, Pennsylvania
January 14, 2000

-119-

[ASHER & COMPANY, LTD. LETTERHEAD]

Independent Auditors' Report

The Partners
Driftwood Terrace Associates, Ltd.
Marlton, New Jersey

We have audited the accompanying balance sheets of Driftwood Terrace Associates,
Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of December 31, 1998
and 1997 and the related statements of profit and loss, Partners' capital and
cash flows for the year ended December 31, 1998. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Driftwood Terrace Associates,
Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of December 31, 1998
and 1997 and the results of its operations, changes in its Partners' capital,
and its cash flows for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

-120-

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 14, 1999 on our
consideration of Driftwood Terrace Associates, Ltd.'s (A Limited Partnership),
HUD Project No. 066-36678, internal control and reports dated January 14, 1999
on its compliance with specific requirements applicable to major HUD programs
and specific requirements applicable to fair housing and non-discrimination.

/s/ Asher & Company, Ltd.
Philadelphia, Pennsylvania
January 14, 1999

-121-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Holly Hill, Ltd.
Greenville, Tennessee

We have audited the accompanying balance sheets of Holly Hill, Ltd., a limited
partnership, RHS Project No.: 48-030-621264791 as of December 31, 1999 and 1998,
and the related statements of operations, partners' deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Holly Hill, Ltd., RHS Project
No.: 48-030-621264791 as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 12 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 14, 2000 on our consideration of Holly Hill, Ltd.,'s internal
control over financial reporting and on our tests of its compliance with certain
provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 14, 2000

-122-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Holly Hill, Ltd.
Greenville, Tennessee

We have audited the accompanying balance sheets of Holly Hill, Ltd., a limited
partnership, RHS Project No.: 48-030-621264791 as of December 31, 1998 and 1997,
and the related statements of operations, partners' deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Holly Hill, Ltd., RHS Project
No.: 48-030-621264791 as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 22, 1999 on our consideration of Holly Hill, Ltd.,'s internal
control over financial reporting and on our tests of its compliance with certain
provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 22, 1999

-123-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mayfair Apartments, Ltd.
Morristown, Tennessee

We have audited the accompanying balance sheets of Mayfair Apartments, Ltd., a
limited partnership, RHS Project No.: 48-032-630957575 as of December 31, 1999
and 1998, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mayfair Apartments, Ltd., RHS
Project No.: 48-032-630957575 as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 20, 2000 on our consideration of Mayfair Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 20, 2000

-124-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mayfair Apartments, Ltd.
Morristown, Tennessee

We have audited the accompanying balance sheets of Mayfair Apartments, Ltd., a
limited partnership, RHS Project No.: 48-032-630957575 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mayfair Apartments, Ltd., RHS
Project No.: 48-032-630957575 as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 20, 1999 on our consideration of Mayfair Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 20, 1999

-125-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Foxcroft Apartments, Ltd.
Troy, Alabama

We have audited the accompanying balance sheets of Foxcroft Apartments, Ltd., a
limited partnership, RHS Project No.: 01-055-630971151 as of December 31, 1999
and 1998, and the related statements of operations, partners' deficit and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Foxcroft Apartments, Ltd., RHS
Project No.: 01-055-630971151 as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 15, 2000 on our consideration of Foxcroft Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 15, 2000

-126-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Foxcroft Apartments, Ltd.
Troy, Alabama

We have audited the accompanying balance sheets of Foxcroft Apartments, Ltd., a
limited partnership, RHS Project No.: 01-055-630971151 as of December 31, 1998
and 1997, and the related statements of operations, partners' deficit and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Foxcroft Apartments, Ltd., RHS
Project No.: 01-055-630971151 as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 23, 1999 on our consideration of Foxcroft Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 23, 1999

-127-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Indianola, Mississippi

We have audited the accompanying balance sheets of Canterbury Apartments, Ltd.,
a limited partnership, RHS Project No.: 28-067-630979083 as of December 31, 1999
and 1998, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canterbury Apartments, Ltd.,
RHS Project No.: 28-067-630979083 as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 24, 2000 on our consideration of Canterbury Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 24, 2000

-128-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Indianola, Mississippi

We have audited the accompanying balance sheets of Canterbury Apartments, Ltd.,
a limited partnership, RHS Project No.: 28-067-630979083 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canterbury Apartments, Ltd.,
RHS Project No.: 28-067-630979083 as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 12 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 24, 1999 on our consideration of Canterbury Apartments, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 24, 1999

-129-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Cutler Canal III Associates, Ltd.

We have audited the accompanying balance sheets of Cutler Canal III Associates,
Ltd., as of December 31, 1999 and 1998, and the related statements of
operations, partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal III Associates,
Ltd., as of December 31, 1999 and 1998, and the results of its operations, and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 17
and 18 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, if fairly stated in all material respects in relation to
the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 25, 2000

-130-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Cutler Canal III Associates, Ltd.

We have audited the accompanying balance sheets of Cutler Canal III Associates,
Ltd., as of December 31, 1998 and 1997, and the related statements of
operations, partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal III Associates,
Ltd., as of December 31, 1998 and 1997, and the results of its operations, and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 17
and 18 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, if fairly stated in all material respects in relation to
the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 27, 1999

-131-

[Letterhead of MUELLER, PROST, PURK & WILLBRAND, P.C.]

To the Partners
Jefferson Place, L.P.
Omaha, Nebraska

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Jefferson Place, L.P., (a
Missouri Limited Partnership) (the "Partnership"), as of December 31, 1999, 1998
and 1997, and the related statements of income, changes in partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferson Place, L.P., as of
December 31, 1999, 1998 and 1997, and the results of its operations, changes in
partners' deficit and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Mueller, Prost, Purk & Willbrand, P.C.
Certified Public Accountants
St. Louis, MO
January 28, 2000

-132-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Callaway Village, Ltd.
Clinton, Tn.

We have audited the accompanying balance sheets of Callaway Village, Ltd., a
limited partnership, RHS Project No.: 48-001-581172107 as of December 31, 1999
and 1998, and the related statements of operations, partners' (deficit) capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Callaway Village, Ltd., RHS
Project No.: 48-001-581172107 as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 10, 2000 on our consideration of Callaway Village, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 10, 2000

-133-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Callaway Village, Ltd.
Clinton, Tn.

We have audited the accompanying balance sheets of Callaway Village, Ltd., a
limited partnership, RHS Project No.: 48-001-581172107 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Callaway Village, Ltd., RHS
Project No.: 48-001-581172107 as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 20, 1999 on our consideration of Callaway Village, Ltd.'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 20, 1999

-134-

[Letterhead of HALBERT, KATZ & CO. P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Commerce Square Apartments Associates, L.P.
Wilmington, Delaware

We have audited the accompanying balance sheets of Commerce Square Apartments
Associates, L.P., as of December 31, 1999 and December 31, 1998, and the
related statements of loss, partners' capital (capital deficiency) and cash
flows for the years then ended. These financial statements are the
responsibility of the project's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commerce Square Apartments
Associates, L.P., as of December 31, 1999 and December 31, 1998, and the results
of its operations, changes in partners' capital (capital deficiency) and cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on page 16 to 23) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Commerce Square Apartments Associates, L.P. Such information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 31, 2000, on our consideration of Commerce Square Apartments
Associates, L.P.'s internal control and reports dated January 31, 2000, on its
compliance with specific requirements applicable to major HUD programs and
specific requirements applicable to Fair Housing and Non-Discrimination.

/s/ Halbert, Katz & Co. P.C.
Philadelphia, Pennsylvania
January 31, 2000

-135-

[Letterhead of HALBERT, KATZ & CO. P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Commerce Square Apartments Associates, L.P.
Wilmington, Delaware

We have audited the accompanying balance sheets of Commerce Square Apartments
Associates, L.P., as of December 31, 1998 and December 31, 1997, and the related
statements of loss, partners' capital and cash flows for the years then ended.
These financial statements are the responsibility of the project's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commerce Square Apartments
Associates, L.P., as of December 31, 1998 and December 31, 1997, and the results
of its operations, changes in partners' capital and cash flows for the years
then ended, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on page 13 to 21) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Commerce Square Apartments Associates, L.P. Such information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 29, 1999, on our consideration of Commerce Square Apartments
Associates, L.P.'s internal control and reports dated January 29, 1999, on its
compliance with specific requirements applicable to major HUD programs and
specific requirements applicable to Fair Housing and Non-Discrimination.

/s/ Halbert, Katz & Co. P.C.
Philadelphia, Pennsylvania
January 29, 1999

-136-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
West 132nd Development Partnership

We have audited the accompanying balance sheets of West 132nd Development
Partnership as of December 31, 1999 and 1998, and the related statements of
operations, partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 132nd Development
Partnership, as of December 31, 1999 and 1998, and the results of its
operations, changes in partners' equity (deficit) and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 3, 2000

-137-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
West 132nd Development Partnership

We have audited the accompanying balance sheet of West 132nd Development
Partnership as of December 31, 1997, and the related statements of operations,
changes in partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 132nd Development
Partnership, as of December 31, 1997 and the results of its operations, changes
in partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
May 18, 1998

-138-

[Letterhead of MUNNS AND DOBBINS]

To the Partners
Site H Development Company
(A Limited Partnership)

Independent Auditors' Report

We have audited the accompanying statement of assets, liabilities and partners'
capital of Site H Development Company (a Limited Partnership) for the year ended
December 31, 1999 and 1998 and the related statements of income and expenses,
changes in partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of Site H Development Company (a
Limited Partnership) management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the aforementioned financial statements represent fairly, in all
material respects, the assets, liabilities and partners' capital of Site H
Development Company (a Limited Partnership) as of December 31, 1999 and 1998 and
its income and expenses, changes in its partners' capital and cash flows for the
years then ended.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying information in Schedule
1 is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Munns and Dobbins
CERTIFIED PUBLIC ACCOUNTANTS
Scarsdale, NY
February 23, 2000

-139-

[Letterhead of MUNNS AND DOBBINS]

To the Partners
Site H Development Company
(A Limited Partnership)

Independent Auditors' Report

We have audited the accompanying statement of assets, liabilities and partners'
capital - income tax basis of Site H Development Company (a Limited Partnership)
for the year ended December 31, 1997 and the related statements of income and
expenses - income tax basis, changes in partners' capital - income tax basis and
cash flows - income tax basis for the year then ended. These financial
statements are the responsibility of Site H Development Company (a Limited
Partnership) management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the aforementioned financial statements represent fairly, in all
material respects, the assets, liabilities and partners' capital of Site H
Development Company (a Limited Partnership) as of December 31, 1997 and its
income and expenses, changes in its partners' capital accounts and cash flows
for the year then ended on the basis of accounting described in Note 1.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying information in Schedule 1 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Munns and Dobbins
CERTIFIED PUBLIC ACCOUNTANTS
Scarsdale, NY
May 7, 1998

-140-

[Letterhead of KPMG]

Independent Auditors' Report

The Partners
L.I.H. Chestnut Associates, L.P.:

We have audited the accompanying balance sheet of L.I.H. Chestnut Associates,
L.P. (A Pennsylvania limited partnership), PHFA Project No. O-0083, as of
December 31, 1999, and the related statements of loss, changes in Partners'
capital, and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of L.I.H. Chestnut Associates,
L.P. (A Pennsylvania limited partnership), PHFA Project No. O-0083, as of
December 31, 1999, and the results of its operations, changes in its Partners'
capital, and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in note 3 to the
financial statements, the Partnership has suffered recurring losses from
operations and is in default of certain obligations under the terms of the
mortgage loan. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern at December 31, 1999. The General
Partner's plans regarding these matters are described in note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such supplementary information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued our report
dated March 15, 2000, on our consideration of L.I.H. Chestnut Associates, L.P.'s
(A Pennsylvania limited partnership), PHFA Project No. O-0083, internal control
over financial
reporting.

/s/ KPMG LLP
Philadelphia, Pennsylvania
March 15, 2000

-141-

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

The Partners
L.I.H. Chestnut Associates, L.P.
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of L.I.H. Chestnut Associates,
L.P. (A Pennsylvania Limited Partnership), PHFA Project No. O-0083, as of
December 31, 1998 and 1997 and the related statements of loss, changes in
Partners' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of L.I.H. Chestnut Associates,
L.P. (A Pennsylvania Limited Partnership), PHFA Project No. O-0083, as of
December 31, 1998 and 1997 and the results of its operations, changes in its
Partners' capital, and its cash flows for the years then ended in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note C to the
financial statements, the Partnership has suffered recurring losses from
operations and is in default of certain obligations under the terms of the
mortgage loan. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern at December 31, 1998. The General
Partner's plans regarding these matters are described in Note C. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such supplementary information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.

-142-

In accordance with Government Auditing Standards, we have also issued our report
dated February 26, 1999 on our consideration of L.I.H. Chestnut Associates,
L.P.'s (A Pennsylvania Limited Partnership), PHFA Project No. O-0083, internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts and grants.

/s/ Asher & Company, Ltd.
Philadelphia, Pennsylvania
February 26, 1999

-143-

[Letterhead of ZINER, KENNEDY & LEHAN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Diamond Phase II Venture

We have audited the accompanying balance sheets of Diamond Phase II Venture (a
Pennsylvania limited partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Phase II Venture at
December 31, 1999 and 1998, and the results of its operations, changes in
partners' equity and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Quincy, Massachusetts
January 22, 2000

-144-

[Letterhead of ZINER & COMPANY, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Diamond Phase II Venture

We have audited the accompanying balance sheets of Diamond Phase II Venture (a
Pennsylvania limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Phase II Venture at
December 31, 1998 and 1997, and the results of its operations, changes in
partners' equity and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Ziner & Company, P.C.
Boston, Massachusetts
January 16, 1999

-145-

[Letterhead of ZINER, KENNEDY & LEHAN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Bookbindery Associates

We have audited the accompanying balance sheets of Bookbindery Associates (a
Pennsylvania limited partnership) as of December 31, 1999 and 1998 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bookbindery Associates as of
December 31, 1999 and 1998, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan
Quincy, Massachusetts
January 16, 2000

-146-

[Letterhead of ZINER & COMPANY, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Bookbindery Associates

We have audited the accompanying balance sheets of Bookbindery Associates (a
Pennsylvania limited partnership) as of December 31, 1998 and 1997 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bookbindery Associates as of
December 31, 1998 and 1997, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner & Company, P.C.
Boston, Massachusetts
January 16, 1999

-147-

[Letterhead of BUCHBINDER TUNICK & COMPANY LLP]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of The Hamlet, Ltd.

We have audited the accompanying balance sheets of The Hamlet, Ltd. (a Florida
limited partnership) (the "Partnership") as of December 31, 1999 and 1998 and
the related statements of operations, partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Hamlet, Ltd. as of December
31, 1999 and 1998 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

/s/ Buchbinder Tunick & Company LLP
Boca Raton, Florida
February 1, 2000

-148-

[Letterhead of BUCHBINDER TUNICK & COMPANY LLP]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of The Hamlet, Ltd.

We have audited the accompanying balance sheets of The Hamlet, Ltd. (a Florida
limited partnership) (the "Partnership") as of December 31, 1998 and 1997 and
the related statements of operations, partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Hamlet, Ltd. as of December
31, 1998 and 1997 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

/s/ Buchbinder Tunick & Company LLP
Boca Raton, Florida
February 3, 1999

-149-

[Letterhead Of ISRAEL ROLON]

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION

TO THE PARTNERS OF
STOP 22 LIMITED PARTNERSHIP

I have audited the accompanying balance sheet of Stop 22 Limited Partnership,
H.U.D. Project No.: R2-46-E-006-014 and R2-46-E-00l-013, as of December 31,
1999, and the related statements of loss, changes in partners' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Stop 22 Limited Partnership, as of
December 31, 1999, and the results of its operations, changes in partners'
equity, and cash flows for the year then ended in conformity with generally
accepted accounting principles.

-150-

In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued reports dated February 17, 2000 on my
consideration of Stop 22 Limited Partnership's internal control and on its
compliance with specific requirements applicable to major HUD programs, specific
requirements applicable to Fair Housing and Non-discrimination, and laws and
regulations applicable to the financial statements.

My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages to 22 to 30) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ ISRAEL ROLON, C.P.A.
SAN JUAN, PUERTO RICO
FEDERAL EMPLOYER IDENTIFICATION NUMBER: 66-0392808
STAMP NUMBER 1621959 WAS AFFIXED TO THE ORIGINAL OF THIS REPORT.
February 17, 2000

-151-

[Letterhead Of ISRAEL ROLON]

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION

TO THE PARTNERS OF
STOP 22 LIMITED PARTNERSHIP

I have audited the accompanying balance sheet of Stop 22 Limited Partnership,
H.U.D. Project No.: R2-46-E-006-014 and R2-46-E-00l-013, as of December 31,
1998, and the related statements of loss, changes in partners' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Stop 22 Limited Partnership, as of
December 31, 1998, and the results of its operations, changes in partners'
equity, and cash flows for the year then ended in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued reports dated February 19, 1999 on my
consideration of Stop 22 Limited Partnership's internal control and on its
compliance with specific requirements applicable to major HUD programs, specific
requirements applicable to Fair Housing and Non-discrimination, and laws and
regulations applicable to the financial statements.

-152-

My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages to ) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ ISRAEL ROLON, C.P.A.
SAN JUAN, PUERTO RICO
FEDERAL EMPLOYER IDENTIFICATION NUMBER: 66-0392808
STAMP NUMBER 1555745 WAS AFFIXED TO THE ORIGINAL OF THIS REPORT.
February 19, 1999

-153-

[Letterhead of ISRAEL ROLON]

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION

TO THE PARTNERS OF
STOP 22 LIMITED PARTNERSHIP

I have audited the accompanying balance sheet of Stop 22 Limited Partnership,
H.U.D. Project No.: R2-46-E-006-014 and R2-46-E-001-013, as of December 31,
1997, and the related statements of loss, changes in partners' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Stop 22 Limited Partnership, as of
December 31, 1997, and the results of its operations, changes in partners'
equity, and cash flows for the year then ended in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued reports dated February 11, 1998 on my
consideration of Stop 22 Limited Partnership's internal controls and on its
compliance with specific requirements applicable to major HUD programs, specific
requirements applicable to Affirmative Fair Housing and Non-discrimination, and
laws and regulations applicable to the financial statements.

-154-

My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 22 to 33) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ ISRAEL ROLON, C.P.A.
SAN JUAN, PUERTO RICO
FEDERAL EMPLOYER IDENTIFICATION NUMBER: 66-0392808
STAMP NUMBER 1482025 WAS AFFIXED TO THE ORIGINAL OF THIS REPORT.
February 11, 1998

-155-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Knob Hill Apartments, Ltd.
Morristown, Tennessee

We have audited the accompanying balance sheets of Knob Hill Apartments, Ltd. a
limited partnership, RHS Project No.: 48-032-638979224 as of December 31, 1999
and 1998, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Knob Hill Apartments, Ltd., RHS
Project No 48-032-638979224 as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1999 and 1998, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 21, 2000 on our consideration of Knob Hill Apartments, Ltd.,'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 22, 2000

-156-

[Letterhead of DONALD W. CAUSEY & ASSOCIATES, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Knob Hill Apartments, Ltd.
Morristown, Tennessee

We have audited the accompanying balance sheets of Knob Hill Apartments, Ltd. a
limited partnership, RHS Project No.: 48-032-638979224 as of December 31, 1998
and 1997, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted the audits in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States, and the U.S. Department of Agriculture, Farmers Home
Administration Audit Program. Those standards require that we plan and perform
the audits 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 the audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Knob Hill Apartments, Ltd., RHS
Project No 48-032-638979224 as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1998 and 1997, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 22, 1999 on our consideration of Knob Hill Apartments, Ltd.,'s
internal control over financial reporting and on our tests of its compliance
with certain provisions of laws and regulations.

/s/ Donald W. Causey & Associates, P.C.
Gadsden, Alabama
February 22, 1999

-157-

[Letterhead of Insero, Kasperski, Ciaccia & Co., P.C. ]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Conifer James Street Associates
(A Limited Partnership)
Syracuse, New York

We have audited the accompanying balance sheets of Conifer James Street
Associates (A Limited Partnership) as of December 31, 1999 and 1998 and the
related statements of changes in partners' equity (deficiency), operations and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Conifer James Street Associates
(A Limited Partnership) as of December 31, 1999 and 1998, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.

Respectfully Submitted,

/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Certified Public Accountants
Rochester, New York
January 25, 2000

-158-

[Letterhead of Insero, Kasperski, Ciaccia & Co., P.C. ]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Conifer James Street Associates
(A Limited Partnership)
Syracuse, New York

We have audited the accompanying balance sheets of Conifer James Street
Associates (A Limited Partnership) as of December 31, 1998 and 1997 and the
related statements of changes in partners' equity (deficiency), operations and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Conifer James Street Associates
(A Limited Partnership) as of December 31, 1998 and 1997, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.

Respectfully Submitted,

/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Certified Public Accountants
Rochester, New York
January 26, 1999

-159-

[Letterhead of RBG & CO.]

Independent Auditors' Report

Partners
Longfellow Heights Apartments, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Longfellow Heights Apartments,
a limited partnership, as of December 31, 1999 and 1998 and the related
statements of income, partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Longfellow Heights Apartments,
L.P. as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 21, 2000

-160-

[Letterhead of RBG & CO.]

Independent Auditors' Report

Partners
Longfellow Heights Apartments, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Longfellow Heights Apartments,
a limited partnership, as of December 31, 1998 and 1997 and the related
statements of income, partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Longfellow Heights Apartments,
L.P. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 25, 1999

-161-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS
MARCH 31,
-------------------------------
2000 1999
------------ --------------

Property and equipment - at cost, less accumulated
depreciation (Notes 2, 4 and 10) $209,626,152 $220,262,429
Cash and cash equivalents (Notes 2, 3 and 10) 5,124,712 4,261,662
Cash held in escrow (Notes 3 and 5) 14,457,567 15,170,739
Deferred costs - less accumulated amortization (Notes 2 and 6) 3,257,295 3,415,694
Other assets 2,665,601 2,224,523
------------ ------------
Total assets $235,131,327 $245,335,047
============ ============

LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
Mortgage notes payable (Note 7) $194,516,380 $196,503,570
Due to debt guarantor (Note 10(a)) 34,817,045 30,855,866
Accounts payable and other liabilities 22,395,278 21,561,937
Due to local general partners and affiliates (Note 8) 15,489,515 13,731,640
Due to general partners and affiliates (Note 8) 5,305,410 3,681,170
------------ ------------
Total liabilities 272,523,628 266,334,183
------------ ------------
Minority interest (Note 2) 1,226,088 1,672,679
------------ -------------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' deficit
Limited partners (139,101.5 BACs
issued and outstanding) (Note 1) (36,996,748) (21,209,640)
General partners (1,621,641) (1,462,175)
------------ ------------
Total partners' deficit (38,618,389) (22,671,815)
------------ ------------
Total liabilities and partners' deficit $235,131,327 $245,335,047
============ ============

See accompanying notes to consolidated financial statements.

-162-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED MARCH 31,
----------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Revenues
Rental income $ 33,780,252 $ 33,282,554 $ 32,250,396
Other 1,664,097 2,840,286 1,485,510
------------ ------------ ------------
35,444,349 36,122,840 33,735,906
------------ ------------ ------------
Expenses
General and administrative 6,124,845 6,143,062 5,843,674
General and administrative-related parties
(Note 8) 3,511,186 3,592,742 3,742,383
Repairs and maintenance 6,188,428 5,848,011 5,332,720
Operating and other 4,196,914 4,072,781 4,080,561
Real estate taxes 2,315,904 2,333,761 3,569,388
Insurance 1,275,232 1,308,342 1,429,941
Interest 15,784,559 16,121,311 15,878,695
Depreciation and amortization 12,207,960 11,658,513 10,900,762
------------ ------------ ------------

Total expenses 51,605,028 51,078,523 50,778,124
------------ ------------ ------------
Loss before minority interest and
extraordinary gain (16,160,679) (14,955,683) (17,042,218)
Minority interest in loss of subsidiary
partnerships 214,105 259,094 154,367
------------ ------------ ------------

Loss before extraordinary item (15,946,574) (14,696,589) (16,887,851)
Extraordinary item - forgiveness of
indebtedness income (Note 7) 0 0 1,045,627
------------ ------------ ------------

Net loss $(15,946,574) $(14,696,589) $(15,842,224)
============ ============ ============

Loss before extraordinary item -
limited partners $(15,787,108) $(14,549,623) $(16,718,973)

Extraordinary item - limited partners 0 0 1,035,171
------------ ------------ ------------

Net loss - limited partners $(15,787,108) $(14,549,623) $(15,683,802)
============ ============ ============

Number of BACs outstanding 139,101.5 139,101.5 139,101.5
============ ============ ============

Loss before extraordinary item per BAC $ (113.49) $ (104.60) $ (120.19)

Extraordinary item per BAC 0 0 7.44
------------ ------------ ------------

Net loss per BAC $ (113.49) $ (104.60) $ (112.75)
============ ============ ============

See accompanying notes to consolidated financial statements.

-163-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL

Limited General
Total Partners Partners
------------ ------------ -----------

Partners' capital (deficit) - April 1, 1997 $ 7,866,998 $ 9,023,785 $(1,156,787)

Net loss, year ended March 31, 1998 (15,842,224) (15,683,802) (158,422)
------------ ------------ -----------

Partners' deficit - March 31, 1998 (7,975,226) (6,660,017) (1,315,209)

Net loss, year ended March 31, 1999 (14,696,589) (14,549,623) (146,966)
------------ ------------ -----------

Partners' deficit - March 31, 1999 (22,671,815) (21,209,640) (1,462,175)

Net loss, year ended March 31, 2000 (15,946,574) (15,787,108) (159,466)
------------ ------------ -----------

Partners' deficit - March 31, 2000 $(38,618,389) $(36,996,748) $(1,621,641)
============ ============ ===========

See accompanying notes to consolidated financial statements.

-164-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

YEAR ENDED MARCH 31,
----------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Cash flows from operating activities:

Net loss $(15,946,574) $(14,696,589) $(15,842,224)
------------ ------------ ------------

Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 12,207,960 11,658,513 10,900,762
Forgiveness of indebtedness income 0 0 (1,045,627)
Loss on sale of property and equipment 0 0 18,012
Minority interest in loss of subsidiary
partnerships (214,105) (259,094) (154,367)
(Increase) decrease in assets:
Cash held in escrow 110,321 730,975 172,177
Other assets (441,078) 292,110 236,450
Increase (decrease) in liabilities:
Due to debt guarantor 2,736,179 2,620,949 2,467,333
Accounts payable and other liabilities 1,595,517 1,397,788 3,494,029
Increase in due to local general partners
and affiliates 2,099,460 834,215 136,032
Decrease in due to local general partners
and affiliates (143,309) (725,357) (237,443)
Due to general partners and affiliates 1,624,240 1,705,257 (329,617)
------------ ------------ ------------

Total adjustments 19,575,185 18,255,356 15,657,741
------------ ------------ ------------

Net cash provided by (used in) operating activities 3,628,611 3,558,767 (184,483)
------------ ------------ ------------

Cash flows from investing activities:

Acquisition of property and equipment (1,383,823) (1,226,009) (890,758)
Increase in cash held in escrow (54,730) (26,095) (402,787)
Decrease in cash held in escrow for
real estate investments 657,581 2,500 130,089
Increase in due to local general partners
and affiliates 81,857 90,434 124,570
Decrease in due to local general partners
and affiliates (144,907) (592,148) (217,741)
------------ ------------ ------------

Net cash (used in) provided by investing activities (844,022) (1,751,318) (1,256,627)
------------ ------------ ------------

-165-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(continued)

YEAR ENDED MARCH 31,
----------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Cash flows from financing activities:
Increase in deferred costs (29,461) 0 (25,115)
Repayments on mortgage notes (2,444,366) (1,562,799) (13,579,877)
Borrowings on mortgage notes 920,000 0 12,200,000
Advances from debt guarantor 0 0 637,531
Increase in due to local general partners
and affiliates 0 70,135 0
Decrease in due to local general partners
and affiliates (135,226) (98,476) (93,824)
(Decrease) increase in capitalization of consolidated
subsidiaries attributable to minority interest (232,486) (249,564) 78,650
------------ ------------ ------------

Net cash used in financing activities (1,921,539) (1,840,704) (782,635)
------------ ------------ ------------

Net increase (decrease) in cash and cash equivalents 863,050 (33,255) (2,223,745)

Cash and cash equivalents at beginning of year 4,261,662 4,294,917 6,518,662
------------ ------------ ------------

Cash and cash equivalents at end of year $ 5,124,712 $ 4,261,662 $ 4,294,917
============ ============ ============

Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 11,086,905 $ 11,307,707 $ 11,009,605
============ ============ ============
Supplemental disclosures of noncash investing
and financing activities:
Repayment of mortgage notes advanced by
debt guarantor $ 735,000 $ 660,605 $ 655,000
Repayment of accounts payable and other
liabilities advanced by debt guarantor 490,000 0 0
Net increase in mortgage notes reclassified from
accounts payable and other liabilities 272,176 330,735 230,984

Forgiveness of indebtedness income and debt restructuring:
Decrease (increase) in deferred costs 0 0 (292,231)
Decrease in mortgage notes payable 0 0 (600,000)
Decrease in accounts payable and
other liabilities 0 0 (3,653,396)
Increase in due to local general
partners and affiliates 0 0 3,500,000

See accompanying notes to consolidated financial statements.

-166-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

NOTE 1 - General

Liberty Tax Credit Plus III L.P., a Delaware limited partnership (the
"Partnership"), was organized on November 17, 1988. The Partnership had no
operations until commencement of the public offering on May 2, 1989. The general
partners of the Partnership are Related Credit Properties III L.P., a Delaware
limited partnership (the "Related General Partner"), and Liberty GP III Inc., a
Delaware corporation (the "Liberty General Partner"). The general partner of the
Related General Partner is Related Credit Properties III Inc., a Delaware
corporation.

The Partnership's business is to invest in other limited partnerships ("Local
Partnerships" or "Subsidiaries" or "Subsidiary Partnerships") owning leveraged
apartment complexes ("Apartment Complexes") that are eligible for the low-income
housing tax credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986,
and to a lesser extent in Local Partnerships owning properties that are eligible
for the historic rehabilitation tax credit ("Historic Rehabilitation Tax
Credit").

The Partnership has acquired interests in 62 Local Partnerships as of March 31,
2000 and no further acquisitions are anticipated.

The Partnership is authorized to issue a total of 150,000 Beneficial Assignment
Certificates ("BACs"), which have been registered with the Securities and
Exchange Commission for sale to the public. Each BAC represents all of the
economic and virtually all of the ownership rights attributable to one-fifth of
a limited partnership interest. As of March 31, 2000, 139,101.5 have been
issued, and no further issuance of BACs is anticipated. The offering was
completed on March 30, 1990.

The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the general partners.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and 62 subsidiary partnerships in which the Partnership is the principal limited
partner. Through the rights of the Partnership and/or an affiliate of the
General Partners, which affiliate has a contractual obligation to act on behalf
of the Partnership, to remove the general partner of the subsidiary partnerships
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary partnerships.

For financial reporting purposes, the Partnership's fiscal year ends on March
31. All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31. The Partnership's fiscal year ends March 31 in order to allow
adequate time for the subsidiaries financial statements to be prepared and
consolidated. The books and records of the Partnership are maintained on the
accrual basis of accounting, in accordance with generally accepted accounting
principles.

-167-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

All intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.

Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arises from cash contributions and cash
distributions to the minority interest partners.

Losses attributable to minority interest which exceed the minority interest's
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $273,000, $247,000 and $271,000 for the years ended
March 31, 2000, 1999 and 1998, respectively (the 1999, 1998 and 1997 fiscal
years, respectively). The Partnership's investment in each subsidiary is equal
to the respective subsidiary partners' equity less minority interest capital, if
any. In consolidation, all subsidiary partnerships' losses are included in the
Partnership's capital account except for losses allocated to minority interest
capital.

b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and investments in
short-term highly liquid instruments purchased with original maturities of three
months or less. Cash held in escrow has various use restrictions and is not
considered a cash equivalent.

c) Property and Equipment

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the property is considered to be impaired and the
depreciated cost exceeds estimated fair value. Through March 31, 2000, the
Partnership has recorded approximately $20,083,000 as a loss on impairment of
assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. There are no assets classified as property and equipment-held for
sale through March 31, 2000.

-168-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

d) Income Taxes

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (see Note 9).

e) Offering Costs

Costs incurred to sell BACs, including brokerage and the nonaccountable expense
allowance, are considered selling and offering expenses. These costs are charged
directly to limited partners' capital. (See Note 8).

f) Loss Contingencies

The Partnership records loss contingencies as a charge to income when
information becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the
financial statements and the amount of loss can be reasonably estimated.

g) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

h) Adoption of New Accounting Standards

During April of 1998, the Financial Accounting Standards Board issued Statement
of Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up Activities".
SOP 98-5 provides guidance on the financial reporting of start-up costs and
organization costs. SOP 98-5 is effective for all fiscal quarters beginning
after December 15, 1998.

NOTE 3 - Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (all of which are held for non-trading
purposes) for which it is practicable to estimate that value:

Cash and Cash Equivalents and Cash Held in Escrow
- -------------------------------------------------
The carrying amount approximates fair value.

-169-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

Mortgage Notes Payable
- ----------------------
The fair value of mortgage notes payable is estimated, where practicable, based
on the borrowing rate currently available for similar loans.

The estimated fair values of the Partnership's mortgage note payable are as
follows:

March 31, 2000 March 31, 1999
------------------------------- -------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ---------- ----------- -----------

Mortgage Notes Payable for which it is:
Practicable to estimate fair value $ 84,672,608 $84,713,340 $125,498,520 $125,285,699
Not Practicable 109,843,772 (*) 71,005,050 (*)

(*) Management believes it is not practical to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the partnerships.

Due to local general partners and affiliates
- --------------------------------------------
The estimated fair value of the Partnership's due to local general partners and
affiliates are as follows:

March 31, 2000 March 31, 1999
------------------------------- -------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ---------- ----------- -----------

Due to local general partners
and affiliates for which it is:
Not practicable $15,489,515 (*) $13,731,640 (*)

(*) Management believes it is not practical to estimate the fair value of due to
local general partners and affiliates, because market information on such unique
loans are not currently available to the partnership.

The carrying amount of other financial instruments that require such disclosure
approximates fair value.

-170-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

NOTE 4 - Property and Equipment

The components of property and equipment are as follows:

March 31, Estimated
-------------------------------- Useful Lives
2000 1999 (Years)
------------ ------------ --------------

Land $ 12,894,634 $ 12,894,634
Building and improvements 287,014,289 286,063,924 15 to 40 years
Other 7,327,869 6,912,921 5 to 10 years
------------ ------------
307,236,792 305,871,479
Less: Accumulated depreciation (97,610,640) (85,609,050)
------------ ------------
$209,626,152 $220,262,429
============ ============

Included in property and equipment is $8,346,089 of acquisition fees paid to the
general partners and $2,908,694 of acquisition expenses as of March 31, 2000 and
1999. In addition, as of March 31, 2000 and 1999, buildings and improvements
include $14,677,111 of capitalized interest.

Depreciation expense for the years ended March 31, 2000, 1999 and 1998 amounted
to $12,020,100, $11,466,030 and $10,713,309, respectively.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developers' fees of $25,440,729 as of March 31, 2000
and 1999 to the Local General Partner and affiliates. Such fees have been
included in the cost of property and equipment.

During the 2000 and 1999 Fiscal Years, there was a decrease in accumulated
depreciation in the amount of $18,510 and $5,417, respectively, due to
write-offs on dispositions.

-171-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

March 31,
-------------------------------
2000 1999
----------- -----------

Purchase price payments* $ 281,727 $ 939,308
Real estate taxes, insurance and other 6,920,167 7,111,227
Reserve for replacements 5,858,694 5,803,964
Tenants' security deposits 1,396,979 1,316,240
----------- -----------
$14,457,567 $15,170,739
=========== ===========

*Represents amounts to be paid to seller upon meeting specified rental
achievement criteria.

NOTE 6 - Deferred Costs

The components of deferred costs and their periods of amortization are as
follows:

March 31,
-------------------------------
2000 1999 Period
----------- ----------- --------------

Financing expenses $ 4,999,880 $ 4,970,419 **
Organization expenses 0 660,354 60 months
----------- -----------
4,999,880 5,630,773
Less: Accumulated amortization (1,742,585) (2,215,079)
----------- -----------
$ 3,257,295 $ 3,415,694
=========== ===========

*Reclassified for comparative purposes.
**Over the life of the related mortgages.

Amortization of deferred costs for the years ended March 31, 2000, 1999 and 1998
amounted to $187,860, $192,483 and $187,453, respectively. During the years
ended March 31, 2000 and 1999 there was a decrease in accumulated amortization
due to the write-off of fully amortized costs in the amount of $660,354 and
$73,676, respectively.

NOTE 7 - Mortgage Notes Payable

The mortgage and construction notes, which are collateralized by land and
buildings, are payable in aggregate monthly installments of approximately
$972,000, including principal and interest at rates varying from 0% to 11.5% per
annum, through the year 2044. Each subsidiary partnership's mortgage note
payable is without further recourse and is collateralized by the land and
buildings of the respective subsidiary partnership and the assignment of certain
subsidiary partnership's rent and leases.

-172-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

Annual principal payment requirements as of March 31, 2000 for each of the next
five fiscal years and thereafter are as follows:

Fiscal Year Ending Amount
- ------------------ ------------

2000 $ 3,590,907
2001 3,969,202
2002 4,354,825
2003 4,700,078
2004 5,026,965
Thereafter 172,874,403
------------
$194,516,380
============

No adjustment has been made in the table above for the events of default and
other matters described in Note 10(a).

The mortgage agreements require monthly deposits to replacement reserves of
approximately $134,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (Note 5).

JEFFERSON PLACE, L.P.
Jefferson Place, L.P. ("Jefferson Place") refinanced its existing indebtedness
by borrowing $12,200,000 from the City of Olathe, Kansas, as of July 1, 1997.
The loan bears interest at the rate of 8.5% per annum, and matures on July 1,
2023. Jefferson Place's prior indebtedness in the principal amount of
$12,800,000 and related accrued interest of approximately $3,700,000 was repaid
from proceeds of the new loan, a new subordinated loan of $3,500,000 and
$1,045,627 of former mortgage debt and accrued interest was forgiven.

NOTE 8 - Related Party Transactions

Liberty Associates IV L.P. ("Liberty Associates"), an affiliate of the General
Partners, has a 1% and .998% (see Note 10 with respect to River Place) interest
as a Special Limited Partner in 61 and 1 of the Local Partnerships,
respectively.

The General Partners and their affiliates perform services for the Partnership.
The costs incurred for the years ended March 31, 2000, 1999 and 1998 are as
follows:

-173-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

A) Guarantees

The Partnership negotiated Operating Deficit Guarantee Agreements with all Local
Partnerships in which the General Partners of the Local Partnerships agreed to
fund operating deficits for a specified period of time. The terms of the
Operating Deficit Guarantee Agreements vary for each Local Partnership, with the
maximum dollar amounts to be funded for a specified period of time, generally
three years, commencing at stabilization. The gross amount of the Operating
Deficit Guarantees aggregate approximately $18,700,000 of which approximately
$17,300,000 had expired as of March 31, 2000. As of March 31, 2000 and 1999,
approximately $3,720,000 and $4,655,000, respectively, has been funded by the
Local General Partners to meet such obligations. Amounts funded under such
agreements are treated as noninterest bearing loans, which will be repaid only
out of 50% of available cash flow or out of available net sale or refinancing
proceeds.

The Operating Deficit Guarantee Agreements were negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.

B) Related Party Fees

The costs incurred to related parties for the years ended March 31, 2000, 1999
and 1998 were as follows:

Year Ended March 31,
--------------------------------------------------
2000 1999 1998
---------- ---------- ----------

Partnership management fees (i) $1,434,000 $1,434,000 $1,434,000
Expense reimbursement (ii) 257,121 239,390 258,111
Property management fees incurred to
affiliates of the General Partners(iii) 0 11,420 177,825
Local administrative fee (iv) 130,699 196,796 189,966
---------- ---------- ----------

Total general and administrative
- General Partners 1,821,820 1,881,606 2,059,902
---------- ---------- ----------

Property management fees incurred to
affiliates of the subsidiary partnerships'
general partners 1,689,366 1,711,136 1,682,481
---------- ---------- ----------

Total general and administrative
- related parties $3,511,186 $3,592,742 $3,742,383
========== ========== ==========

(i) The General Partners are entitled to receive a partnership management fee
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Unpaid partnership
man-

-174-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

agement fees for any year will be accrued without interest and will be payable
only to the extent of available funds after the Partnership has made the
distributions to the limited partners of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow). Partnership management fees owed
to the General Partners amounting to approximately $4,192,000 and $2,758,000
were accrued and unpaid at March 31, 2000 and 1999. Without the General
Partners' continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partners have continued allowing the accrual without
payment of these amounts but are under no obligation to continue to do so.

(ii) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.

(iii) The subsidiary partnerships incurred property management fees amounting to
$2,214,259, $2,230,323 and $2,157,696 for the years ended March 31, 2000, 1999
and 1998, respectively, of which $1,689,366, $1,722,556 and $1,860,306,
respectively, was incurred to affiliates of the subsidiary partnerships' general
partners. Included in amounts incurred to affiliates of the subsidiary
partnerships' general partners was $0, $11,420 and $177,825 for the years ended
March 31, 2000, 1999 and 1998, respectively, which was also incurred to an
affiliate of the Related General Partner.

(iv) Liberty Associates, a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.

Liberty Associates received cash distributions from the Local Partnerships of
$1,284, $1,106 and $1,854 during the years ended March 31, 2000, 1999 and 1998,
respectively.

Pursuant to the Partnership Agreement and the Local Partnership Agreements, the
General Partners and Liberty Associates received their allocable pro rata share
of profits, losses and tax credits from the Partnership and the Local
Partnerships, respectively.

-175-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

C) Due to Local General Partners and Affiliates

Due to local general partners and affiliates at March 31, 2000 and 1999
consists of the following:

March 31,
-------------------------------
2000 1999
----------- -----------

Operating deficit advances $ 2,840,683 $ 2,983,992
Development fees 1,139,821 1,284,728
Operating advances 3,626,221 2,565,639
Due to contractor 110,431 106,155
General Partner distributions 405,216 470,307
Developer loans (i) 1,452,879 1,435,308
Land note payable (ii) 1,205,106 1,145,096
Long-term note payable (iii) 3,500,000 3,570,135
Management and other operating fees 1,209,158 170,280
----------- -----------
$15,489,515 $13,731,640
=========== ===========

(i) Developer loans consist of the following:

March 31,
------------------------------
2000 1999
---------- ----------

JEFFERSON LIMITED PARTNERSHIP - $ 100,000 $ 100,000
This loan is unsecured, bears interest at an
annually adjusted rate (4.94% at March 31, 2000 and
5.63% at March 31, 1999) and has no predetermined
due date.

This note is unsecured, bears interest at 9.25% per annum 75,000 75,000
and is due in the event of sale or refinancing of
the property.

NORTHWOOD ASSOCIATES LIMITED PARTNERSHIP - 292,095 274,524
This loan bears interest at 12% per annum and is
payable only out of available surplus cash.

CITRUS MEADOWS APARTMENTS, LTD. - 985,784 985,784
This loan bears no interest and can only be repaid ---------- ----------
with the proceeds from a sale or refinancing.
$1,452,879 $1,435,308
Interest expense incurred on developer loans amounted to ========== ==========
$30,139, $30,357 and $30,276 for the years ended March 31,
2000, 1999 and 1998, respectively.

-176-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

(ii) Land note payable consists of the following:

CITRUS MEADOWS APARTMENTS, LTD. - $1,205,106 $1,145,096
The land for this subsidiary partnership was purchased from ========== ==========
the local general partner for a $600,000 note which accrues
interest at 10% per annum. The principal balance, together
with the accrued interest, is payable upon the sale of the
property or in December 2004, whichever event occurs first.

Interest expense incurred on land note payable amounted to
$60,000 for each of the three years ended March 31, 2000,
1999 and 1998.

(iii) Long-term note payable consists of the
following

JEFFERSON PLACE L.P. $3,500,000 $3,500,000
On July 30, 1997, the local general partner, issued a note
payable in the sum of $3,500,000 to the subsidiary partner-
ship. Interest on this note, at the rate of 8.5% annually,
is payable monthly solely out of excess cash flow generated
by the subsidiary partnership. The principal plus all
outstanding interest is due July 1, 2023. All payments under
this $3,500,000 note are subordinate to payments due under
the $12,200,000 tax-exempt mortgage bonds.

For the years ended December 31, 1999, 1998 and 1997,
mortgage interest included interest from this note in the
amount of $336,313, $353,367 and $126,592, respectively. On
the December 31, 1999, 1998 and 1997 amounts, $38,813,
$20,390 and $2,634 was interest calculated on past accrued
base interest.

-177-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

NOTE 9 - Income Taxes

A reconciliation of the financial statement net loss to the income tax loss for
the Partnership and its consolidated subsidiaries follows:

Year Ended December 31,
----------------------------------------------------
1999 1998 1997
------------ ------------ ------------

Financial statement
Net loss $(15,946,574) $(14,696,589) $(15,842,224)

Difference resulting from parent company having a different
fiscal year for income tax and financial reporting purposes (9,305) 56,193 (509,800)

Difference between depreciation and amortization expense
recorded for financial statement and income tax reporting
purposes (1,952,849) (2,622,146) (1,348,092)

Tax-exempt interest income (12,688) (27,455) (133,755)

Other 815,869 672,690 (28,494)
------------ ------------ -------------

Net loss as shown on the Partnership's income tax return $(17,105,547) $(16,617,307) $(17,862,365)
============ ============ =============

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships - Going Concerns

RESULTS OF OPERATIONS OF CERTAIN LOCAL PARTNERSHIPS

R.P.P. LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP ("RIVER PLACE")
River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $29,305,000 at December 31, 1999. River Place has been unable
to generate sufficient cash flows to meet a majority of its required principal
and interest payments under the loans. River Place's debt guarantor, General
Retirement System of the City of Detroit ("GRS"), entered into an agreement with
the Authority to purchase these loans upon occurrence of certain events. GRS has
declared River Place in default under its obligation to make the required
payments. During 1996, GRS agreed to waive its right of foreclosure under the
mortgages, unless certain events occur, through February 1, 2006. GRS has made
advances for debt service and has incurred certain fees relating to these loans
totaling $34,817,045 including accrued interest on such advances at a rate of
15%. Such amount is included in the amount due to debt guarantor on the balance
sheet.

Management anticipates that River Place will be unable to make all of the
required debt service payments during 2000. However, there is no guarantee that
GRS, or any other persons, will

-178-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

continue to make these payments on behalf of River Place. These items raise
substantial doubt about River Place's ability to continue as a going concern.

The financial statements of River Place have been prepared assuming that River
Place will continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Partnership's investment in River Place has been written down to zero by prior
years' losses and the minority interest balance was $882,750 at both March 31,
2000 and 1999. The net loss after minority interest for River Place amounted to
approximately $3,822,000, $3,185,000 and $3,648,000 for the years ended March
31, 2000, 1999 and 1998, respectively.

L.I.H. CHESTNUT ASSOCIATES, L.P. ("CHESTNUT")
Chestnut has sustained recurring losses from operations. At December 31, 1999,
Chestnut had not made certain payments required under the terms of the mortgage
loan and, as a result, is in default. Chestnut's continued existence is
dependent on its resolution of the default under the mortgage loan. These items
raise substantial doubt about Chestnut's ability to continue as a going concern.
The financial statements for Chestnut do not include any adjustments that might
result from the outcome of this uncertainty. The General Partner of Chestnut is
in discussion with the first mortgagee and Chestnut's limited partners
(including the Partnership) in an attempt to resolve the default. The
Partnership's investment in Chestnut has been written down to zero by prior
years' losses and the minority interest balance was $1,147,092 at both March 31,
2000 and 1999. The net loss after minority interest for Chestnut amounted to
approximately $470,000, $463,000 and $476,000 for the years ended March 31,
2000, 1999 and 1998, respectively.

b) Subsidiary Partnerships - Other

WILLIAMSBURG RESIDENTIAL II, L.P. ("WILLIAMSBURG II")
In November 1996, the general partner of Williamsburg II stopped making the
mortgage note payments which constituted an event of default. On January 1,
1997, the general partner was replaced.

A Reinstatement and Modification Agreement dated July 24, 1997, and effective
March 1, 1997 was entered into between Williamsburg II and Federal National
Mortgage Association ("FNMA"). Terms of the agreement include: 1. Interest only
on the loan for 36 months. 2. Replacement reserve escrow payments waived during
1997. 3. Net operating income is to be turned over to the loan servicer monthly.
4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 to be deposited into a debt service escrow account for the mutual
benefit of Williamsburg II and Williamsburg Residential, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment, the debt service
escrow account is drawn upon. At both December 31, 1999 and 1998, balances in
the two entities accounts totaled $0.

The Partnership has advanced Williamsburg II the necessary funds to keep the
mortgage and escrows current during 1999 and 1998 and is expected to continue to
do so during 2000. As of March 31, 2000, the Partnership has advanced
approximately $471,000 to Williamsburg II. The advances do not bear interest and
are short-term in nature.

-179-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

The Partnership's investment in Williamsburg II had been written down to zero by
prior years' losses and the minority interest balance was approximately $330,000
and $332,000 at March 31, 2000 and 1999, respectively. Williamsburg II's net
loss after minority interest amounted to approximately $148,000, $213,000 and
$172,000 for the years ended March 31, 2000, 1999 and 1998, respectively.

JEFFERSON LIMITED PARTNERSHIP ("JEFFERSON")
At December 31, 1999 and 1998, Jefferson's current liabilities exceeded its
current assets by over $27,000 and $25,000, respectively. Although this
condition could raise substantial doubt about Jefferson's ability to continue as
a going concern, such doubt is alleviated by the fact that $14,040 and $21,220
of current liabilities at December 31, 1999 and 1998, respectively, are to
related parties which do not intend to pursue payment beyond Jefferson's ability
to pay.

Accordingly, management believes that Jefferson has the ability to continue as a
going concern for at least one year from December 31, 1999. The Partnership's
investment in Jefferson was approximately $518,000 and $668,000 at March 31,
2000 and 1999, respectively, and the minority interest balance was $0 at each
date. The net loss after minority interest for Jefferson amounted to
approximately $149,000, $132,000, and $140,000 for the years ended March 31,
2000, 1999 and 1998, respectively.

AFFORDABLE FLATBUSH ASSOCIATES ("AFFORDABLE FLATBUSH")
In order for Affordable Flatbush to qualify for the federal low-income tax
credits, it must meet certain rental income restrictions. The rental and income
restrictions must be adhered to for a 15-year compliance period. During 1996,
the Department of Housing Preservation and Development ("HPD") audited
Affordable Flatbush's compliance with the rental and income restrictions of
section 42 of the Internal Revenue Code. HPD concluded in its audit report that
Affordable Flatbush was not in compliance within the guidelines as set forth in
the Internal Revenue Code for certain units of the project and, consequently,
the basis of the property for purposes of computing the low income housing tax
credits should be reduced by an amount which approximates 88% of such basis.
Affordable Flatbush management is contesting the findings by HPD and,
consequently, has computed the low income tax credits for 1999 as if there was
no reduction in the basis of the property.

LEASES

Four of the subsidiary partnerships are leasing the land on which the Projects
are located, for terms ranging from 28 to 99 years. At December 31, 1999, the
subsidiary partnerships were committed to minimum future annual rentals on the
noncancelable leases aggregating $155,130 for each of the next five years, and
$3,944,123 in total thereafter.

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
Accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000. As of March 31, 2000, uninsured cash and
cash equivalents approximated $2,215,000.

d) Other

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic

-180-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000

conditions generally, however no more than 20% of the properties are located
in any single state. There are also substantial risks associated with owning
properties receiving government assistance, for example the possibility that
Congress may not appropriate funds to enable HUD to make rental assistance
payments. HUD also restricts annual cash distributions to partners based on
operating results and a percentage of the owner's equity contribution. The
Partnership cannot sell or substantially liquidate its investments in
subsidiary partnerships during the period that the subsidy agreements are in
existence, without HUD's approval. Furthermore, there may not be market
demand for apartments at full market rents when the rental assistance
contracts expire.

In order for certain subsidiaries to qualify for the Section 421A Program, and
the Inclusionary Zoning Program they are subject to certain requirements by
local authorities as to the level of rent that may be charged to tenants, the
tenants' incomes, the obligation to operate the property in accordance with rent
stabilization guidelines, and restrictions on the rate at which housing units
may be released from such guidelines.

Also, certain subsidiary partnerships obtain grants from local authorities to
fund construction costs of the properties and in order to qualify must maintain
the low-income nature of the property, among other provisions.

e) Tax Credits

A portion of the low-income housing tax credits are subject to recapture in
future years if (1) the Local Partnership ceases to meet qualification
requirements, (2) there is a decrease in the qualified basis of the Projects, or
(3) there is a reduction in the taxpayer's interest in the Project at any time
during the 15-year Compliance Period that began with the first tax year of the
credit period. None of the Local Partnerships in which the Partnership has
acquired an interest has suffered an event of recapture.

During the tax years 1999, 1998 and 1997, the Partnership generated low-income
housing tax credits of approximately $19,534,000, $19,584,000 and $19,632,000,
respectively.

-181-

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None

PART III

Item 10. Directors and Executive Officers of the Registrant.

On November 25, 1997, an affiliate of the Related General Partner, purchased
100% of the stock of the Liberty General Partner (the "Transfer"). In addition
to the Transfer, by acquiring the stock of the Liberty General Partner, an
affiliate of the Related General Partner also acquired the Liberty General
Partner's general partner interest in Liberty Associates IV L.P., the special
limited partner of the Partnership. Pursuant to the Partnership's Amended and
Restated Partnership Agreement, the consent of the limited partners was not
required to approve the Transfer. In connection with the Transfer, the
Partnership paid to the Liberty General Partner the accrued asset management
fees owed to the Liberty General Partner in the aggregate amount of $737,750.

The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by the General Partners. Certain information
concerning the directors and executive officers of the Liberty General Partner
and of Related Credit Properties III Inc., the general partner of the Related
General Partner, are set forth below.

RELATED CREDIT PROPERTIES III, L.P.

Name Position
- ---- --------

Stephen M. Ross Director

Alan P. Hirmes President and Chief Executive Officer

Stuart J. Boesky Senior Vice President

Marc D. Schnitzer Vice President

Denise L. Kiley Vice President

Glenn F. Hopps Treasurer and Assistant Vice President

Teresa Wicelinski Secretary

STEPHEN M. ROSS, 60, is President, Director and shareholder of The Related
Realty Group, Inc., the General Partner of The Related Companies, L.P. He
graduated from the University of Michigan School of Business Administration with
a Bachelor of Science degree and from Wayne State University School of Law with
a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed the predecessor of The
Related Companies, L.P. in 1972 to develop, manage, finance and acquire
subsidized and conventional apartment developments. Mr. Ross also serves on the
Board of Trustees of Charter Municipal Mortgage Acceptance Company.

-182-

ALAN P. HIRMES, 45, has been a Certified Public Accountant in New York since
1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President
of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts
degree.

STUART J. BOESKY, 44, practiced real estate and tax law in New York City with
the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined
Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of
Kaye, Fialkow, Richard & Rothstein (which subsequently merged with Strook &
Strook & Lavan) and from 1978 to 1980 was a consultant specializing in real
estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Laws
degree in Taxation from Boston University School of Law.

MARC D. SCHNITZER, 39, joined Related in January 1988 after receiving his Master
of Business Administration degree from The Wharton School of The University of
Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial
Analyst with The First Boston Corporation in New York, an international
investment banking firm. Mr. Schnitzer received a Bachelor of Science degree,
summa cum laude, in Business Administration, from the School of Management at
Boston University in May 1983.

DENISE L. KILEY, 40, is responsible for overseeing the due diligence and asset
management of all multifamily residential properties invested in RCC sponsored
corporate, public and private equity and debt funds. Prior to joining Related in
1990, Ms. Kiley had experience acquiring, financing and asset managing
multifamily residential properties. From 1981 through 1985 she was an auditor
with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from
Boston College.

GLENN F. HOPPS, 37, joined Related in December, 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.

TERESA WICELINSKI, 34, joined Related in June 1992, and prior to that date was
employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.

LIBERTY GP III INC.

Name Position
- ---- --------

Alan P. Hirmes President and Chief Executive Officer

Stuart J. Boesky Executive Vice President

Marc D. Schnitzer Vice President

Denise L. Kiley Vice President

Glenn F. Hopps Treasurer

Teresa Wicelinski Secretary

-183-

Biographical information with respect to Messrs. Hirmes, Boesky, Hopps,
Schnitzer, Ms. Kiley and Ms. Wicelinski is set forth above.

Item 11. Executive Compensation.

The Partnership has no officers or directors. The Partnership does not pay or
accrue any fees, salaries or other forms of compensation to the directors or
officers of the Liberty General Partner or of the general partner of the Related
General Partner for their services. Certain directors and officers of the
Liberty General Partner and of the general partner of the Related General
Partner receive compensation from the General Partners and their affiliates for
services performed for various affiliated entities which may include services
performed for the Partnership.

Under the terms of the Partnership Agreement, the General Partners and their
affiliates are entitled to receive compensation from the Partnership in
consideration of certain services rendered to the partnership by such parties.
In addition, the General Partners are entitled to 1% of all cash distributions
and Tax Credit allocations and a subordinated 15% interest in Net Sales or
Refinancing Proceeds. See Note 8 to the Financial Statements in Item 8 for a
presentation of the types and amounts of compensation paid to the General
Partners and their affiliates, which information is incorporated herein by
reference thereto. Tabular information concerning salaries, bonuses and other
types of compensation payable to executive officers have not been included in
this annual report. As noted above, the Partnership has no executive officers.
The levels of compensation payable to the General Partners and/or their
affiliates is limited by the terms of the Partnership Agreement and may not be
increased therefrom on a discretionary basis.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class
- -------------- -------------------- -------------------- ----------

General Partnership Related Credit Properties $1,000 capital contribution - 50%
Interest in the III L.P. directly owned
Partnership 625 Madison Avenue
New York, NY 10022

General Partnership Liberty GP III Inc. $1,000 capital contribution - 50%
Interest in the 625 Madison Avenue directly owned
Partnership New York, NY 10022

Liberty Associates IV L.P. holds a 1% and .998% (see Item 7. with respect to
River Place) limited partnership interest in 61 and 1 Local Partnerships,
respectively.

Except as set forth in the table below, no person is known by the Partnership to
be the beneficial owner of more than 5% of the Limited Partnership Interests and
neither the Liberty General Partner nor any director or executive officer of the
Liberty General Partner owns any Limited Partnership Interests or BACs. Neither
the Related General Partner nor any director or executive officer of the general
partner of the Related General Partner owns any Limited Partnership Interests.
The following table sets forth the number of BACs beneficially owned, as of June
1, 2000, by (i) each BACs holder known to the Partnership to be a beneficial
owner of more than 5% of the BACs, (ii) each director and executive officer of
the general partner of the Related General Partner and Liberty General Partner
and (iii) the directors and executive offi-

-184-

cers of the general partner of the Related General Partner and Liberty General
Partner as a group. Unless otherwise noted, all BACs are owned directly with
sole voting and dispositive powers.

Amount and Nature of
Name of Beneficial Owner (1) Beneficial Ownership Percent of Class
- ---------------------------- -------------------- ----------------

Lehigh Tax Credit Partners, Inc. 13,127.66 (2) (3) 9.4%

J. Michael Fried 13,127.66 (2) (3) (4) 9.4%

Alan P. Hirmes 13,127.66 (2) (3) (4) 9.4%

Stuart J. Boesky 13,127.66 (2) (3) (4) 9.4%

Stephen M. Ross - -

Mark D. Schnitzer - -

Denise L. Kiley - -

Glenn F. Hopps - -

Teresa Wicelinski - -

All directors and executive officers 13,127.66 (2) (3) (4) 9.4%
of the general partner of the
Related General Partner as a group
(eight persons)

(1) The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.

(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
June 10, 1997 with the Securities and Exchange Commission (the "Commission") and
pursuant to a letter agreement dated April 4, 1997 among the Partnership, Lehigh
I and the Related General Partner (the "Standstill Agreement"), Lehigh I agreed
that, prior to April 4, 2007 (the "Standstill Expiration Date"), it will not and
it will cause certain affiliates (including Lehigh II) not to (i) acquire,
attempt to acquire or make a proposal to acquire, directly or indirectly, more
than 45% (including BACs acquired through all other means) of the outstanding
BAC's, (ii) seek to propose to enter into, directly or indirectly, any merger,
consolidation, business combination, sale or acquisition of assets, liquidation,
dissolution or other similar transaction involving the Partnership, (iii) make,
or in any way participate, directly or indirectly, in any "solicitation" of
"proxies" or "consents" (as such terms are used in the proxy rules of the
Commission) to vote any voting securities of the Partnership, (iv) form, join or
otherwise participate in a "group" (within the meaning of Section 13 (d)(3) of
the Securities and Exchange Act of 1934) with respect to any voting securities
of the Partnership, except those affiliates bound by the Standstill Agreement
will not be deemed to have violated it and formed a "group" solely by acting in
accordance with the Standstill Agreement, (v) disclose in writing to any third
party any intention, plan or arrangement inconsistent with the terms of the
Standstill Agreement, or (vi) loan money to, advise,

-185-

assist or encourage any person in connection with any action inconsistent with
the terms of the Standstill Agreement. In addition, Lehigh I agreed that until
the Standstill Expiration Date it will not sell any BACs acquired by it unless
the buyer of such BACs agrees to be bound by the Standstill Agreement; provided,
however, Lehigh I may make transfers in the secondary market to any purchaser
which represents that following such sale it will not own three (3%) percent or
more of the BACs outstanding. By the terms of the Standstill Agreement, Lehigh I
also agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, Lehigh I is entitled to vote its BACs as it
determines with regard to any proposal (i) to remove the Related General Partner
as a general partner of the Partnership or (ii) concerning the reduction of any
fees, profits, distributions or allocations for the benefit of the Related
General Partner or its affiliates. The addresses of each of the Partnership,
Lehigh I and the Related General Partner is 625 Madison Avenue, New York, New
York 10022.

(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax
Credit Partners II, L.L.C. ("Lehigh II") for which the Managing Member serves as
managing member. As of June 1, 2000, Lehigh I held 6,458.33 BACs and Lehigh II
held 6,669.33 BACs.

(4) Each such party serves as a director and executive officer of the Managing
Member and owns an equity interest therein except J. Michael Fried who owns only
an economic interest.

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with the
General Partners and its affiliates, as discussed in Item 11 and also Note 8 to
the Financial Statements in Item 8, which is incorporated herein by reference
thereto. However, there have been no direct financial transactions between the
Partnership and the directors and executive officers of the Liberty General
Partner and of the general partner of the Related General Partner.

-186-

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

Sequential
Page
----------

(a) 1. Financial Statements

Independent Auditors' Report 19

Consolidated Balance Sheets at March 31, 2000 and 1999 162

Consolidated Statements of Operations for the Years Ended
March 31, 2000, 1999 and 1998 163

Consolidated Statements of Changes in Partners' (Deficit)
Capital for the Years Ended March 31, 2000, 19998 and 1998 164

Consolidated Statements of Cash Flows for the Years Ended
March 31, 2000, 1999 and 1998 165

Notes to Consolidated Financial Statements 167

(a) 2. FINANCIAL STATEMENT SCHEDULES

Independent Auditors' Report 193

Schedule I - Condensed Financial Information of Registrant 194

Schedule III - Real Estate and Accumulated Depreciation 197

All other schedules have been omitted because they are not required or
because the required information is contained in the financial
statements or notes thereto.

(a) 3. EXHIBITS

(3A) Form of Amended and Restated Agreement of Limited Partnership of
Liberty Tax Credit Plus III L.P. (attached to Prospectus as Exhibit A)**

(3B) Certificate of Limited Partnership of Liberty Tax Credit Plus III L.P.,
together with amendments filed on November 17, 1988**

(4) Form of Subscription Agreement (attached to Prospectus as
Exhibit B)

(10A) Escrow Agreement between Registrant and Bankers Trust
Company**

(10B) Forms of Purchase Agreements for purchase of Local
Partnership Interests**

(21) Subsidiaries of the Registrant 189

-187-

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)

Sequential
Page
----------

(27) Financial Data Schedule (filed herewith) 201

** Incorporated herein by reference to exhibits filed with
Pre-Effective Amendment No. 1 to Liberty Tax Credit Plus
III L.P.'s Registration Statement on Form S-11
(Registration No. 33-25732)

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the quarter.

-188-

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)

Jurisdiction
of Organization
----------------

(c) SUBSIDIARIES OF THE REGISTRANT (EXHIBIT 21)
C.V. Bronx Associates, L.P. NY
Michigan Rural Housing Limited Partnership MI
Jefferson Limited Partnership LA
Inter-Tribal Indian Village Housing Development Associates, L.P. RI
RBM Associates PA
Glenbrook Associates PA
Affordable Flatbush Associates NY
Barclay Village II, LTD. PA
1850 Second Avenue Associates, L.P. NY
R.P.P. Limited Dividend Housing MI
Williamsburg Residential II, L.P. KS
West 104th Street Associates L.P. NY
Meredith Apartments, LTD. UT
Ritz Apartments, LTD. UT
Ashby Apartments, LTD. UT
South Toledo Associates, LTD. OH
Dunlap School Venture PA
Philipsburg Elderly Housing Associates PA
Franklin Elderly Housing Associates PA
Wade D. Mertz Elderly Housing Associates PA
Lancashire Towers Associates Limited Partnership OH
Northwood Associates Limited Partnership OH
Brewery Renaissance Associates NY
Brandywine Court Associates, L.P. FL
Art Apartments Associates PA
The Village at Carriage Hills, LTD. TN
Mountainview Apartments, LTD. TN
The Park Village, Limited MS
River Oaks Apartments, LTD. AL
Forrest Ridge Apartments, LTD. AR
The Hearthside Limited Dividend Housing Association
Limited Partnership MI
Redemptorist Limited Partnership LA
Manhattan A Associates NY
Broadhurst Willows, L.P. NY
Weidler Associates Limited Partnership OR
Gentle Pines-West Columbia Associates, L.P. SC
Lake Forest Estates II, LTD. AL
Las Camelias Limited Partnership PR
WPL Associates XXIII OR
Broadway Townhouses L.P. NJ
Puerto Rico Historic Zone Limited Dividend Partnership PR
Citrus Meadows Apartments, LTD. FL
Sartain School Venture PA
Driftwood Terrace Associates, LTD. FL
Holly Hill, LTD. TN
Mayfair Apartments LTD. TN
Foxcroft Apartments LTD. AL
Canterbury Apartments, LTD. MS

-189-

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)

Jurisdiction
of Organization
----------------

(c) SUBSIDIARIES OF THE REGISTRANT (EXHIBIT 21)
Cutler Canal III Associates, LTD. FL
Jefferson Place L.P. KS
Callaway Village, LTD. TN
Commerce Square Apartments Associates L.P. DE
West 132nd Development Partnership NY
Site H Development Co. NY
L.I.H. Chestnut Associates, L.P. PA
Diamond Phase II Venture PA
Bookbindery Associates PA
The Hamlet, LTD. FL
Stop 22 Limited Partnership PR
Knob Hill Apartments, LTD. TN
Conifer James Street Associates NY
Longfellow Heights Apartments, L.P. MO

(d) Not applicable.

-190-

SIGNATURES

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

LIBERTY TAX CREDIT PLUS III L.P.
(Registrant)

By: RELATED CREDIT PROPERTIES III L.P.,
a General Partner

By: Related Credit Properties III Inc.,
its general partner

Date: June 28, 2000
By: /s/ Alan P. Hirmes
----------------------------------
Alan P. Hirmes
President and Chief Executive Officer
(principal executive and financial
officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 28, 2000
By: /s/ Alan P. Hirmes
----------------------------------
Alan P. Hirmes
President and Chief Executive Officer
(principal executive and financial
officer)

and

By: LIBERTY ASSOCIATES III, L.P.,
a General Partner

By: Related Credit Properties III L.P.,
its general partner

Date: June 28, 2000
By: /s/ Alan P. Hirmes
----------------------------------
Alan. P. Hirmes
President and Chief Executive Officer
(principal executive and financial
officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 28, 2000
By: /s/ Alan P. Hirmes
----------------------------------
Alan P. Hirmes
President and Chief Executive Officer
(principal executive and financial
officer)

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

Signature Title Date
- ------------------ ------------------------------------------- --------------

President and Chief Executive Officer
(principal executive and financial officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
/s/ Alan P. Hirmes (a General Partner of Registrant)
- ------------------ and Liberty GP III, Inc.
Alan P. Hirmes (a General Partner of Registrant) June 28, 2000

Treasurer (principal accounting officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
/s/ Glenn F. Hopps (a General Partner of Registrant)
- ------------------- and Liberty GP III, Inc.
Glenn F. Hopps (a General Partner of Registrant) June 28, 2000

Director of Related Credit Properties
III Inc., general partner of Related
/s/ Stephen M. Ross Credit Properties III L.P.
- ------------------- and Liberty Associates IV, L.P.
Stephen M. Ross (General Partners of Registrant) June 28, 2000

INDEPENDENT AUDITORS' REPORT

To the Partners of
Liberty Tax Credit Plus III L.P. and Subsidiaries
(A Delaware Limited Partnership)

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus III L.P. and Subsidiaries (a Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated
May 26, 2000 on page 19, and based on the reports of other auditors, we have
also audited supporting Schedule I for the 1999, 1998 and 1997 Fiscal Years
and Schedule III at March 31, 2000. In our opinion, and based on the reports
of the other auditors, these consolidated schedules present fairly, when read
in conjunction with the related consolidated financial statements, the
financial data required to be set forth therein.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant
contingencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going
concern. These subsidiary partnerships have been unable to generate
sufficient cash flow to pay their mortgage obligations. The two subsidiary
partnerships' net losses aggregated $4,291,565 (Fiscal 1999), $3,647,759
(Fiscal 1998) and $4,124,102 (Fiscal 1997), and their assets aggregated
$22,472,739 and $23,096,175 at March 31, 2000 and 1999, respectively.
Management's plans in regard to these matters are also described in
Note 10(a). The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
May 26, 2000

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Summarized condensed financial information of registrant (not including
consolidated subsidiary partnerships)

CONDENSED BALANCE SHEETS

ASSETS
March 31,
-------------------------------
2000 1999
----------- -----------

Cash and cash equivalents $ 553,693 $ 346,731
Cash held in escrow 281,727 939,308
Investment and advances in subsidiary partnerships 35,472,910 40,888,006
Other assets 245,466 245,466
----------- -----------
Total assets $36,553,796 $42,419,511
=========== ===========

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates $ 4,774,804 $ 3,219,479
Other liabilities 6,790 24,486
----------- -----------
Total liabilities 4,781,594 3,243,965

Partners' equity 31,772,202 39,175,546
----------- -----------
Total liabilities and partners' equity $36,553,796 $42,419,511
=========== ===========

Investments in sudsidiary partnerships are recorded in accordance with the
equity method of accounting, under which investments are not reduced below zero.
Accordingly, partners' equity on the consolidated balance sheet will differ from
partners' equity shown above.

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS

Year Ended March 31,
--------------------------------------------------
2000 1999 1998
----------- ----------- ------------

Revenues

Other income $ 105,468 $ 14,194 $ 51,210
----------- ----------- ------------

Total revenues 105,468 14,194 51,210
----------- ----------- ------------
Expenses

General and administrative 77,439 215,957 315,341
General and administrative-related parties 1,691,121 1,673,390 1,692,111
----------- ----------- ------------

Total expenses 1,768,560 1,889,347 2,007,452
----------- ----------- ------------

Loss from operations (1,663,092) (1,875,153) (1,956,242)

Distribution income of subsidiary partnerships
in excess of investments 7,024 39,203 0

Equity in loss of subsidiary partnerships (*) (5,747,276) (5,572,887) (8,797,585)
----------- ----------- ------------
Net loss $(7,403,344) $(7,408,837) $(10,753,827)
=========== =========== ============

(*) Includes suspended prior year losses of investment in accordance with
equity method of accounting amounting to $0, $0 and $89,989 for the years
ended March 31, 2000, 1999 and 1998.

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS

Year Ended March 31,
--------------------------------------------------
2000 1999 1998
----------- ----------- ------------

Cash flows from operating activities:

Net loss $(7,403,344) $(7,408,837) $(10,753,827)
----------- ----------- ------------
Adjustments to reconcile net loss to net cash
used in operating activities:

Increase (decrease) in liabilities:

Due to general partners and affiliates 1,555,325 1,625,068 (322,660)
Other liabilities (17,696) 24,486 0
----------- ----------- ------------

Total adjustments 1,537,629 1,649,554 (322,660)
----------- ----------- ------------

Net cash used in operating activities (5,865,715) (5,759,283) (11,076,487)
----------- ----------- ------------

Cash flows from investing activities:

Equity in loss of subsidiary partnerships 5,747,276 5,572,887 8,797,585
Distributions from subsidiary partnerships 144,385 121,383 226,182
Investments and advances
in subsidiary partnerships (476,565) (154,649) (408,580)
Decrease in cash held in escrow-
purchase price payments 657,581 2,500 188,170
----------- ----------- ------------

Net cash provided by investing activities 6,072,677 5,542,121 8,803,357
----------- ----------- ------------

Net increase (decrease) in cash and cash equivalents 206,962 (217,162) (2,273,130)

Cash and cash equivalents, beginning of year 346,731 563,893 2,837,023
----------- ----------- ------------

Cash and cash equivalents, end of year $ 553,693 $ 346,731 $ 563,893
=========== =========== ============

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2000

INITIAL COST TO COST GROSS AMOUNT AT WHICH
PARTNERSHIP CAPITALIZED CARRIED AT CLOSE OF PERIOD
------------------------- SUBSEQUENT TO ----------------------------------------
SUBSIDIARY PARTNERSHIPS' BUILDINGS AND ACQUISITION: BUILDINGS AND
RESIDENTIAL PROPERTY ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- -------------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------

C.V. Bronx Associates, L.P.
Bronx, NY $ 0 $ 1,705,800 $ 0 $4,279,915 $1,439,504 $4,546,211 $ 5,985,715
Michigan Rural Housing
Limited Partnership Michigan 4,660,122 141,930 4,013,207 2,108,421 148,716 6,114,842 6,263,558
Jefferson Limited Partnership
Schreveport, LA 1,390,139 65,000 3,289,429 48,125 71,786 3,330,768 3,402,554
Inter-Tribal Indian Village
Housing Development Associates,
L.P. Providence, RI 1,632,835 36,643 3,290,524 110,464 43,429 3,394,202 3,437,631
RBM Associates
Philadelphia, PA 975,000 0 1,590,733 75,954 6,786 1,659,901 1,666,687
Glenbrook Associates
Atglen, PA 1,645,678 137,000 2,833,081 133,767 143,786 2,960,062 3,103,848
Affordable Flatbush Associates
Brooklyn, NY 1,550,915 0 2,551,365 200,992 6,787 2,745,570 2,752,357
Barclay Village II, LTD.
Chambersburg, PA 2,481,843 204,825 3,249,918 676,404 211,611 3,919,536 4,131,147
1850 Second Avenue Associates,
L.P. New York, NY 0 920,472 6,262,968 1,165 392,457 6,792,148 7,184,605
R.P.P. Limited Dividend Housing
Detroit, MI 29,305,000 0 29,051,380 (12,781,137) 6,786 16,263,457 16,270,243
Williamsburg Residential II,
L.P. Witchita, KS 1,511,112 358,305 2,713,872 (1,211,361) 362,484 1,498,332 1,860,816
West 104th Street Associates,
L.P. New York, NY 0 0 0 3,018,180 6,787 3,011,393 3,018,180
Meredith Apartments, LTD.
Salt Lake City, UT 610,714 40,000 1,500,117 20,962 46,787 1,514,292 1,561,079
Ritz Apartments, LTD.
Salt Lake City, UT 314,006 59,760 592,704 88,299 66,547 674,216 740,763
Ashby Apartments, LTD.
Salt Lake City, UT 314,029 50,850 549,611 186,611 57,637 729,435 787,072
South Toledo Associates, LTD.
Toledo, OH 817,674 47,571 1,411,386 44,416 51,677 1,451,696 1,503,373
Dunlap School Venture
Philadelphia, PA 2,465,667 5,352 4,522,721 154,722 9,458 4,673,337 4,682,795
Philipsburg Elderly Housing
Associates Philipsburg, PA 3,061,499 45,000 4,092,500 530,970 68,101 4,600,369 4,668,470
Franklin Elderly Housing
Associates Franklin, PA 2,204,753 165,000 2,594,447 135,748 169,106 2,726,089 2,895,195
Wade D. Mertz Elderly Housing
Associates Sharpsville, PA 3,318,034 65,000 4,234,049 610,632 69,106 4,840,575 4,909,681
Lancashire Towers Associates
L.P. Cleveland, OH 3,045,887 265,000 6,871,575 372,566 269,106 7,240,035 7,509,141

LIFE ON WHICH
DEPRECIATION IN
YEAR OF LATEST INCOME
ACCUMULATED CONSTRUCTION/ DATE STATEMENTS IS
DEPRECIATION RENOVATION ACQUIRED COMPUTED(a)(b)
------------- ------------- ---------- ------------------

C.V. Bronx Associates, L.P.
Bronx, NY $1,447,921 1990 June 1989 15-27.5 years
Michigan Rural Housing
Limited Partnership Michigan 2,238,372 1989 Sept. 1989 27.5 years
Jefferson Limited Partnership
Schreveport, LA 1,116,682 1990 Dec. 1989 27.5 years
Inter-Tribal Indian Village
Housing Development Associates,
L.P. Providence, RI 1,240,687 1989 Oct. 1989 27.5 years
RBM Associates
Philadelphia, PA 388,035 1989 Dec. 1989 40 years
Glenbrook Associates
Atglen, PA 1,049,608 1989 Nov. 1989 3-27.5 years
Affordable Flatbush Associates
Brooklyn, NY 1,047,722 1989 Dec. 1989 27.5 years
Barclay Village II, LTD.
Chambersburg, PA 1,472,039 1989 Nov. 1989 5-27.5 years
1850 Second Avenue Associates,
L.P. New York, NY 2,404,187 1989 Nov. 1989 27.5 years
R.P.P. Limited Dividend Housing
Detroit, MI 3,495,328 1989 Nov. 1989 27-31.5 years
Williamsburg Residential II,
L.P. Witchita, KS 561,011 1989 Nov. 1989 40 years
West 104th Street Associates,
L.P. New York, NY 928,337 1990 Dec. 1989 27.5 years
Meredith Apartments, LTD.
Salt Lake City, UT 589,558 1989 Aug. 1989 27.5 years
Ritz Apartments, LTD.
Salt Lake City, UT 254,738 1989 Aug. 1989 27.5 years
Ashby Apartments, LTD.
Salt Lake City, UT 238,512 1989 Aug. 1989 27.5 years
South Toledo Associates, LTD.
Toledo, OH 366,365 1988 Jan. 1990 40 years
Dunlap School Venture
Philadelphia, PA 1,132,310 1989 Jan. 1990 40 years
Philipsburg Elderly Housing
Associates Philipsburg, PA 1,839,650 1990 Feb. 1990 15-27.5 years
Franklin Elderly Housing
Associates Franklin, PA 1,195,517 1989 Feb. 1990 7-24 years
Wade D. Mertz Elderly Housing
Associates Sharpsville, PA 2,093,821 1989 Feb. 1990 27.5 years
Lancashire Towers Associates
L.P. Cleveland, OH 2,608,121 1989 Feb. 1990 27.5 years

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2000
(continued)

INITIAL COST TO COST GROSS AMOUNT AT WHICH
PARTNERSHIP CAPITALIZED CARRIED AT CLOSE OF PERIOD
------------------------- SUBSEQUENT TO ----------------------------------------
SUBSIDIARY PARTNERSHIPS' BUILDINGS AND ACQUISITION: BUILDINGS AND
RESIDENTIAL PROPERTY ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- -------------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------

Northwood Associates Limited
Partnership Toledo, OH 1,900,592 200,000 4,065,856 670,520 204,106 4,732,270 4,936,376
Brewery Renaissance Associates
Middletown, NY 3,375,000 77,220 102,780 6,227,311 81,326 6,325,985 6,407,311
Brandywine Court Associates,
L.P. Jacksonville, FL 1,413,470 78,000 1,960,262 80,041 82,106 2,036,197 2,118,303
Art Apartments Associates
Philadelphia, PA 1,113,686 13,695 2,713,615 56,237 17,801 2,765,746 2,783,547
The Village at Carriage Hills,
LTD. Clinton, TN 1,463,222 86,663 1,753,799 69,777 90,769 1,819,470 1,910,239
Mountainview Apartments, LTD,
Newport, TN 1,038,542 49,918 1,254,182 87,195 54,024 1,337,271 1,391,295
The Park Village, Limited
Jackson, MS 362,547 44,102 749,940 83,183 48,208 829,017 877,225
River Oaks Apartments, LTD.
Oneonta, AL 1,066,029 80,340 1,221,336 67,714 84,446 1,284,944 1,369,390
Forrest Ridge Apartments, LTD.
Forrest City, AR 817,978 36,000 1,016,647 66,769 40,106 1,079,310 1,119,416
The Hearthside Limited Dividend
Housing Associates Limited
Partnership Portage, MI 2,881,436 242,550 4,667,594 108,987 246,656 4,772,475 5,019,131
Redemptorist L.P.
New Orleans, LA 2,725,479 0 6,497,259 56,462 4,106 6,549,615 6,553,721
Manhattan A Associates
New York, NY 3,848,665 1,092,959 5,991,888 361,470 1,097,065 6,349,252 7,446,317
Broadhurst Willows, L.P.
New York, NY 0 102,324 5,151,039 93,128 106,430 5,240,061 5,346,491
Weidler Associates Limited
Partnership Portland, OR 1,256,104 225,000 0 2,167,766 229,106 2,163,660 2,392,766
Gentle Pines/West Columbia
Associates, L.P. Columbia, SC 3,594,558 327,650 4,276,739 187,958 331,756 4,460,591 4,792,347
Lake Forest Estates II, LTD.
Livingston, AL 963,330 21,623 1,182,480 62,019 25,729 1,240,393 1,266,122
Las Camelias L.P.
Rio Piedras, PR 6,479,113 249,000 6,400 9,649,060 298,878 9,605,582 9,904,460
WPL Associates XIIII
Portland, OR 2,184,973 0 3,721,763 173,781 4,106 3,891,438 3,895,544
Broadway Townhouses L.P.
Camden, NJ 10,662,522 163,000 5,120,066 14,427,251 167,106 19,543,211 19,710,317
Puerto Rico Historic Zone
Limited Dividend Partnership
San Juan, PR 4,025,000 0 0 6,513,460 156,842 6,356,618 6,513,460
Citrus Meadows Apartments, LTD.
Brandenton, FL 7,228,222 610,073 0 9,379,779 812,609 9,177,243 9,989,852
Sartain School Venture
Philadelphia, PA 1,928,970 3,883 3,486,875 131,248 7,989 3,614,017 3,622,006

LIFE ON WHICH
DEPRECIATION IN
YEAR OF LATEST INCOME
ACCUMULATED CONSTRUCTION/ DATE STATEMENTS IS
DEPRECIATION RENOVATION ACQUIRED COMPUTED(a)(b)
------------- ------------- ---------- ----------------

Northwood Associates Limited
Partnership Toledo, OH 1,661,484 1989 Feb. 1990 27.5 years
Brewery Renaissance Associates
Middletown, NY 2,028,939 1990 Feb. 1990 27.5 years
Brandywine Court Associates, L.P.
Jacksonville, FL 840,322 1988 Nov. 1989 7-27.5 years
Art Apartments Associates
Philadelphia, PA 986,448 1990 Mar. 1990 27.5 years
The Village at Carriage Hills, LTD.
Clinton, TN 661,802 1990 Mar. 1990 25-40 years
Mountainview Apartments, LTD,
Newport, TN 507,810 1990 Mar. 1990 25-40 years
The Park Village, Limited
Jackson, MS 311,576 1990 Mar. 1990 25-40 years
River Oaks Apartments, LTD.
Oneonta, AL 362,238 1990 Mar. 1990 25-40 years
Forrest Ridge Apartments, LTD.
Forrest City, AR 296,574 1990 Mar. 1990 25-40 years
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 2,070,788 1990 Mar. 1990 15-27.5 years
Redemptorist L.P.
New Orleans, LA 2,228,262 1990 Mar. 1990 27.5 years
Manhattan A Associates
New York, NY 2,271,835 1990 Apr. 1990 27.5 years
Broadhurst Willows, L.P.
New York, NY 2,340,443 1990 Apr. 1990 10-25 years
Weidler Associates Limited
Partnership Portland, OR 715,701 1990 May 1990 15-27.5 years
Gentle Pines/West Columbia
Associates, L.P. Columbia, SC 1,915,598 1990 June 1990 27.5 years
Lake Forest Estates II, LTD.
Livingston, AL 328,411 1990 June 1990 25-40 years
Las Camelias L.P.
Rio Piedras, PR 2,999,158 1990 June 1990 27.5 years
WPL Associates XIIII
Portland, OR 1,454,381 1990 July 1990 27.5 years
Broadway Townhouses L.P.
Camden, NJ 6,141,685 1990 July 1990 27.5 years
Puerto Rico Historic Zone
Limited Dividend Partnership
San Juan, PR 1,952,196 1990 Aug. 1990 27.5 years
Citrus Meadows Apartments, LTD.
Brandenton, FL 3,208,897 1990 July 1990 27.5 years
Sartain School Venture
Philadelphia, PA 872,224 1990 Aug. 1990 15-40 years

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2000
(continued)

INITIAL COST TO COST GROSS AMOUNT AT WHICH
PARTNERSHIP CAPITALIZED CARRIED AT CLOSE OF PERIOD
------------------------- SUBSEQUENT TO ----------------------------------------
SUBSIDIARY PARTNERSHIPS' BUILDINGS AND ACQUISITION: BUILDINGS AND
RESIDENTIAL PROPERTY ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- -------------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------

Driftwood Terrace Associates,
LTD. Ft. Lauderdale, FL 6,888,740 270,000 7,753,765 345,795 274,106 8,095,454 8,369,560
Holly Hill, LTD.
Greenville, TN 1,384,788 50,000 1,631,820 136,568 54,106 1,764,282 1,818,388
Mayfair Apartments LTD.
Morristown, TN 1,369,265 50,000 1,614,861 115,684 54,106 1,726,439 1,780,545
Foxcroft Apartments
LTD. Troy, AL 1,240,349 75,000 1,382,973 137,462 79,106 1,516,329 1,595,435
Canterbury Apartments, LTD.
Indianola, MS 1,423,217 33,000 1,738,871 92,758 37,106 1,827,523 1,864,629
Cutler Canal III Associates,
LTD. Miami, FL 7,738,924 1,269,265 0 12,107,793 1,273,507 12,103,551 13,377,058
Jefferson Place L.P.
Olathe, KS 11,735,000 531,063 13,477,553 34,416 535,169 13,507,863 14,043,032
Callaway Village, LTD.
Clinton, TN 1,396,984 66,000 1,613,920 121,493 70,106 1,731,307 1,801,413
Commerce Square Apartments
Associates L.P. Smyrna, DE 2,871,001 303,837 0 4,792,365 307,943 4,788,259 5,096,202
West 132nd Development
Partnership New York, NY 1,625,221 0 0 2,641,552 13,106 2,628,446 2,641,552
Site H Development Co.
Brooklyn, NY 717,306 0 1,346,000 44,416 4,106 1,386,310 1,390,416
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 6,014,739 752,000 693,995 6,417,790 759,229 7,104,556 7,863,785
Diamond Phase II Venture
Philadelphia, PA 1,853,080 0 0 4,010,979 22,081 3,988,898 4,010,979
Bookbindery Associates
Philadelphia, PA 1,517,773 0 0 3,845,601 29,105 3,816,496 3,845,601
The Hamlet, LTD.
Boynton, FL 8,245,723 1,180,482 0 13,345,845 1,184,587 13,341,740 14,526,327
Stop 22 Limited Partnership
Santurce, PR 8,939,864 0 4,025,481 7,048,655 216,918 10,857,218 11,074,136
Knob Hill Apartments, LTD.
Greenville, TN 1,472,393 75,085 0 1,837,332 79,190 1,833,227 1,912,417
Conifer James Street Associates
Syracuse, NY 2,405,087 57,034 0 4,496,847 61,139 4,492,742 4,553,881
Longfellow Heights Apartments,
L.P. Kansas City, MO 4,042,581 0 7,739,692 231,198 204 7,970,686 7,970,890
------------ ----------- ------------ ------------ ----------- ------------ ------------
$194,516,380 $12,730,274 $183,175,038 $111,331,480 $12,894,634 $294,342,158 $307,236,792
============ =========== ============ ============ =========== ============ ============

LIFE ON WHICH
DEPRECIATION IN
YEAR OF LATEST INCOME
ACCUMULATED CONSTRUCTION/ DATE STATEMENTS IS
DEPRECIATION RENOVATION ACQUIRED COMPUTED(a)(b)
------------- ------------- ---------- ------------------

Driftwood Terrace Associates,
LTD. Ft. Lauderdale, FL 3,796,064 1989 Sept. 1990 27.5 years
Holly Hill, LTD.
Greenville, TN 613,563 1990 Oct. 1990 25-40 years
Mayfair Apartments LTD.
Morristown, TN 453,839 1990 Oct. 1990 25-40 years
Foxcroft Apartments
LTD. Troy, AL 406,079 1990 Oct. 1990 25-40 years
Canterbury Apartments, LTD.
Indianola, MS 494,109 1990 Oct. 1990 25-40 years
Cutler Canal III Associates,
LTD. Miami, FL 2,379,238 1990 Oct. 1990 40 years
Jefferson Place L.P.
Olathe, KS 8,348,523 1990 Oct. 1990 19 years
Callaway Village, LTD.
Clinton, TN 458,977 1990 Nov. 1990 25-40 years
Commerce Square Apartments
Associates L.P. Smyrna, DE 992,354 1990 Dec. 1990 40 years
West 132nd Development
Partnership New York, NY 615,844 1990 Dec. 1990 40 years
Site H Development Co.
Brooklyn, NY 502,951 1990 Dec. 1990 27.5 years
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 1,797,551 1990 Dec. 1990 35 years
Diamond Phase II Venture
Philadelphia, PA 842,079 1990 Dec. 1990 40 years
Bookbindery Associates
Philadelphia, PA 816,056 1990 Dec. 1990 40 years
The Hamlet, LTD.
Boynton, FL 4,066,498 1990 Dec. 1990 27.5 years
Stop 22 Limited Partnership
Santurce, PR 3,348,606 1990 Dec. 1990 27.5-31.5 years
Knob Hill Apartments, LTD.
Greenville, TN 458,712 1990 Dec. 1990 25-40 years
Conifer James Street Associates
Syracuse, NY 1,484,062 1990 Dec. 1990 15-27.5 years
Longfellow Heights Apartments,
L.P. Kansas City, MO 1,870,242 1991 Mar. 1991 15-40 years
-----------
$97,610,640
===========

(a) Personal property is depreciated primarily by the straight-line method over
the estimated useful life ranging from 5 to 10 years
(b) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight-line method over the estimated useful
life determined by the Partnership date of acquisition.

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2000
(continued)

COST OF PROPERTY AND EQUIPMENT ACCUMULATED DEPRECIATION
-------------------------------------------- -----------------------------------------
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ----------- ----------- -----------

Balance at beginning of period $305,871,479 $304,650,887 $303,796,120 $85,609,050 $74,148,437 $63,453,107
Additions during period:
Improvements 1,423,745 1,342,989 999,886
Depreciation expense 12,020,100 11,466,030 10,713,309
Deductions during period:
Dispositions (58,432) (122,397) (145,119) (18,510) (5,417) (17,979)
------------ ------------ ------------ ----------- ----------- -----------
Balance at close of period $307,236,792 $305,871,479 $304,650,887 $97,610,640 $85,609,050 $74,148,437
============ ============ ============ =========== =========== ===========

At the time the local partnerships were acquired by Liberty Tax Credit
Plus III L.P., the entire purchase price paid by Liberty Tax Credit
Plus III L.P. was pushed down to the local partnerships as property and
equipment with an offsetting credit to capital. Since the projects were
in the construction phase at the time of acquisition, the capital accounts
were insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.