LIBERTY TAX CREDIT PLUS II L P - 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, 1997

OR

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

Commission File Number 0-24660

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

Delaware 13-3458180
- - -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

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:

Beneficial Assignment Certificates (including underlying Limited
Partnership Interests)
(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 110

Page 1 of 120

PART I

Item 1. Business.

General

Liberty Tax Credit Plus II L.P. (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on March
25, 1988. The general partners of the Partnership are Related Credit Properties
II L.P., a Delaware limited partnership (the "Related General Partner"), Liberty
Associates II L.P., a Delaware limited partnership ("Liberty Associates"), and
Liberty GP II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware
corporation (the "Liberty General Partner" and together with the Related General
Partner and Liberty Associates, the "General Partners"). The general partner of
the Related General Partner is Related Credit Properties II Inc., a Delaware
corporation. The general partners of Liberty Associates are Related Credit
Properties II Inc., and the Liberty General Partner.

Liberty Associates is the Special Limited Partner in all 27 Local
Partnerships, as well as a general partner of the Partnership. Liberty
Associates has certain rights and obligations in its role as Special Limited
Partner, which permit this affiliate of the registrant to execute control over
the management and policies of the subsidiaries.

On July 20, 1988 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 January 9, 1989 (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 $115,917,500 of gross proceeds of the Offering from
8,431 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 ("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 ("Rehabilitation Projects";
and together with the Apartment Complexes, the "Properties"). Some of the
Apartment Complexes benefit from one or more other forms of federal and state
housing assistance. The Partnership's investment in each Local Partnership
represents from 20% to 98% of the partnership interests in the Local
Partnership. As of March 31, 1997, the Partnership had acquired interests in 27
Local Partnerships and does not anticipate making any additional investments.
See Item 2, Properties.

The investment objectives of the Partnerships are to:

1. Entitle qualified BACs holders to Tax Credits (and to a lesser extent
historic rehabilitation tax credits) over the period of the Partnership's
entitlement to claim Tax Credits (for each Property, ten years from the date of
investment or, if later, the date the Property is placed in service.)

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
Apartment Complexes and Rehabilitations Projects.

-2-

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 active business income.

One of the Partnership's objectives is to entitle qualified BACs holders to
Tax Credits over the period of the Partnership's entitlement to claim Tax
Credits (for each Property, 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"). 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 (i) the Partnership ceases to
meet qualification requirements , (ii) there is a decrease in the qualified
basis of the Projects, or (iii) 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 Tax Credits are available for a ten-year period which commences when
the property is placed into service. However, the annual Tax Credits available
in the year in which the Apartment Complex is placed in service must be prorated
based upon the months remaining in the year. The amount of the annual Tax
Credits 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 may be allocated Tax Credits only beginning in the
month following the month in which it acquired its interest and Tax Credits
allocated in any prior period may not be claimed by the Partnership.

The General Partners generally require in connection with certain
investments in Local Partnerships that the general partner of the local
partnership undertake to fund operating deficits (up to a stated maximum amount)
of the Local Partnership during a limited period of time following the
Partnership's investment ("Guarantee Period"). As of March 31, 1997, all
operating deficit guarantees have expired. Generally the amounts funded pursuant
to the Operating Deficit Guarantee are treated as Operating Loans, do not bear
interest and will be repaid only out of 50% of available cash flow or out of
available net sale or refinancing proceeds. See Item 8, Note 8 - Related Party
Transactions.

The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships has
failed to remain in compliance with the Tax Credit requirements, and therefore
none has suffered an event of recapture of Tax Credits. The Partnership
generated $17,193,735, $17,174,288 and $17,203,141 in Tax Credits during the
1996, 1995 and 1994 Fiscal Years, 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.

As of March 31, 1997, the Partnership has not met its investment objective
of providing cash distributions from the operations of the Properties. Cash
distributions received from the Local Partnerships have been relatively
immaterial. Management expects that the distributions received from the Local
Partnerships will increase, although not to a level 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.

HUD previously released the American Community Partnerships Act (the
"ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget authority. Two key proposals in
the ACPA that could affect the Local Partnerships are: a discontinuation of
project-based Section 8 subsidy payments, and an attendant reduction in debt on
properties that were supported by the Section 8 payments. The ACPA calls for a
transition during which the project-based Section 8

-3-

payments would be converted to a tenant-based voucher system. Any FHA insured
debt would then be "marked-to-market" that is revalued in light of the reduced
income stream.

Several industry sources have commented to HUD and Congress that in the
event the ACPA was fully enacted in its present form, the reduction in mortgage
indebtedness would be considered taxable income to owners such as to the limited
partners in the Partnership. Legislative relief has been proposed to exempt
"marked-to-market" debt from cancellation of indebtedness income treatment.
Additionally, in the interim, HUD has agreed to annual extensions of any
expiring project-based Section 8 contracts but there is no guarantee that such
extensions will be available in the future. Though HUD initially backed away
from the "marked-to-market" proposal, it has now been reintroduced as "Portfolio
Restructuring".

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 33% 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 by the Partnership are subject to 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 business which may compete 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 Partnerships Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement").

-4-

Item 2. Properties.

The Partnership has acquired an interest as a limited partner in 27 Local
Partnerships. Set forth below is a schedule of these Local Partnerships
including certain information concerning the 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.

Except for the five limited partnerships listed below, the following is the
allocation of ownership percentage for each of the lower-tier partnerships:

General Partner 1%
Special Limited Partner 1%
Limited Partner -
Liberty Tax Credit Plus II L.P. 98%

General Special Liberty Tax *Other
Partner(s) Limited Partner Credit Plus II L.P. Limited Partners
---------- --------------- ------------------- ----------------

Concourse Artists 1% 1% 19% 79%
Grand Concourse 1% 1% 19% 79%
Robin Housing 1% 1% 19% 79%
Willoughby - Wyckoff 1% 1% 19% 79%
Penn Alto 1% 1% 78.40% 19.60%

* Affiliate of Liberty Tax Credit Plus II L.P. with same management

Local Partnership Schedule

% of Units Occupied at May 1,
---------------------------------
Name and Location (Number of Units) Date Acquired 1997 1996 1995 1994 1993
- - ----------------------------------- ------------- ---- ---- ---- ---- ----

Polynesian Apartments Associates, Ltd.
(a Limited Partnership)
Homestead, FL (84) July 1988 100 94 99 99 0*
Seagrape Village Associates, Ltd.
(a Limited Partnership)
Homestead, FL (112) July 1988 100 96 100 100 0*
Metropolitan Towers Associates, L.P.
Rio Piedras, PR (150) December 1988 95 99 100 99 97
Westminster Place II - Olive Site, L.P.
St. Louis, MO (84) October 1988 90 88 93 99 96
Property Development Associates, L.P.
Kansas City, MO (232) December 1988 98 98 99 97 94
Whittier Plaza Associates Limited Partnership
St. Louis, MO (27) December 1988 81 81 88 100 89
United-Glen Arden I Limited Partnership
Glen Arden, MD (354) December 1988 91 90 95 96 87
United-Glen Arden II Limited Partnership
Glen Arden, MD (238) December 1988 95 98 98 96 94
Rolling Green Limited Partnership
Chicago, IL (224) December 1988 96 87 92 91 96
Santa Juanita II Limited Partnership
Bayamon, PR (46) December 1988 100 100 100 100 100

-5-

Local Partnership Schedule
(continued)

% of Units Occupied at May 1,
---------------------------------
Name and Location (Number of Units) Date Acquired 1997 1996 1995 1994 1993
- - ----------------------------------- ------------- ---- ---- ---- ---- ----

Spring Creek Associates, L.P.
(a Delaware Limited Partnership)
Brooklyn, NY (582) December 1988 97 97 95 97 99
East Two Thirty-Five Associates
(a Delaware Limited Partnership)
New York, NY (17) December 1988 100 94 94 100 100
Upper Fifth Avenue Residential Associates, L.P.
New York, NY (151) January 1989 96 97 93 95 95
West 107th Street Associates, L.P.
(a Delaware Limited Partnership)
New York, NY (25) January 1989 100 100 100 96 100
General Atlantic Second Avenue Associates, L.P.
(a Delaware Limited Partnership)
New York, NY (18) January 1989 95 94 100 100 100
Church Lane Associates
Germantown, PA (40) February 1989 98 95 92 99 98
Campeche Isle Apartments Limited Partnership
Galveston, TX (208) May 1989 70 65 85 97 99
Robin Housing Associates (a Limited Partnership)
Bronx, NY (100) November 1988 99 97 92 96 96
Concourse Artists Housing Associates
(a Limited Partnership)
Bronx, NY (23) November 1988 96 96 100 98 100
2051 Grand Concourse Housing Associates
(a Limited Partnership)
Bronx, NY (63) November 1988 97 97 98 95 96
Willoughby-Wyckoff Housing Associates
(a Limited Partnership)
Bronx, NY (68) November 1988 93 97 88 90 85
Goodfellow Place Limited Partnership
St. Louis, MO (71) May 1989 99 91 96 98 92
Penn Alto Associates Limited Partnership
Altoona, PA (150) June 1989 81 87 81 94 100
Gramco Development Limited Dividend
Partnership, L.P.
Bayamon, PR (300) July 1989 94 99 93 100 100
Alexis Park Apartments
A Louisiana Partnership in Commendam
Bossier City, LA (280) July 1989 92 93 95 97 93
Williamsburg Residential, L.P.
Witchita, KS (76) August 1989 74 93 91 100 98
Victory Apartments
Chicago, IL (107) September 1989 97 96 98 100 98

* Both properties suffered from major damage from Hurricane Andrew. The
reconstruction and leasing of the buildings was completed during the summer of
1993.

-6-

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

Rents from commercial tenants (to which average rental per square foot
applies) comprise less than 5% of the rental revenues of the Partnership. Rents
for the residential units are determined annually by HUD and reflect increases
in consumer price indices in various geographic areas.

Management continuously reviews the physical state of the properties and
budgets improvements when required, which are generally funded from cash flow
from operations or release of replacement reserve escrows. No improvements are
expected to require additional financing.

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

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 included herein.

Item 3. Legal Proceedings.

This information is incorporated by reference to the discussions of Alexis,
Metropolitan, Santa Juanita, Robin Housing, Campeche and Bayamon in the Results
of Operations of Certain Local Partnerships contained in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.

-7-

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 and outstanding 115,917.5 Limited Partnership
Interests, each representing a $1,000 capital contribution to the Partnership,
or an aggregate capital contribution of $115,917,500. All of the issued and
outstanding Limited Partnership Interests have been issued to Liberty Credit
Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued
115,917.5 BACs to the purchasers thereof for an aggregate purchase price of
$115,917,500. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to 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 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 public trading market. Because of the provisions of the Revenue Act
of 1987, unless there are further changes in such law, 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
plan to impose 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 June 16, 1997, the Partnership has 8,421 registered holders of an
aggregate of 115,917.5 BACs.

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

There are no material provisions in the Partnership Agreement that restrict
the ability of the Partnership to make distributions.

The Partnership has not made any distributions to the BACs holders as of
March 31, 1997. The Partnership does not anticipate providing cash distributions
to its BACs holders other than from net refinancings or sales proceeds.

There has recently been an increasing number of requests for the list of
BACs holders of limited partnerships such as the Partnership. Often these
requests are made by a person who, only a short time before making the request,
acquired merely a small number of BACs in the partnership and seeks the list for
an improper purpose, a purpose that is not in the best interest of the
partnership or is harmful to the partnership. In order to best serve and protect
the interests of the Partnership and all of its investors, the General Partners
have adopted a policy with respect to requests for the Partnership's list of
BACs holders. This policy is intended to protect investors from unsolicited and
coercive offers to acquire BACs holders' interests and does not limit any other
rights the General Partners may have under the Partnership Agreement or
applicable law.

-8-

Item 6. Selected Financial Data.

The information set forth below presents selected financial data of the
Partnership. There were no operations prior to commencement of the Offering of
BACs on July 20, 1988. Additional financial information is set forth in the
audited financial statements in Item 8 hereof.

Years Ended March 31
------------------------------------------------------------------------------------
OPERATIONS 1997 1996* 1995* 1994* 1993*
- - ---------- ------------ ------------ ------------ ------------ ------------

Revenues $ 25,919,807 $ 25,386,930 $ 25,074,695 $ 24,430,064 $ 25,158,658

Operating expenses 39,490,613 32,104,631 32,403,689 31,395,344 30,757,467
------------ ------------ ------------ ------------ ------------

Loss before minority interest
and extraordinary items (13,570,806) (6,717,701) (7,328,994) (6,965,280) (5,598,809)

Minority interest in loss
of subsidiaries 163,680 185,143 418,892 585,685 1,136,510
------------ ------------ ------------ ------------ ------------

Loss before extraordinary
items (13,407,126) (6,532,558) (6,910,102) (6,379,595) (4,462,299)

Extraordinary gain (loss) 0 0 0 0 1,120,708
------------ ------------ ------------ ------------ ------------
Net loss $(13,407,126) $ (6,532,558) $ (6,910,102) $ (6,379,595) $ (3,341,591)
============ ============ ============ ============ ============

Per unit amounts:

Loss before extra-
ordinary item per BAC $ (114.50) $ (55.79) $ (59.01) $ (54.48) $ (55.27)

Extraordinary gain (loss)
per BAC 0.00 0.00 0.00 0.00 26.73
------------ ------------ ------------ ------------ ------------

Net loss per BAC $ (114.50) $ (55.79) $ (59.01) $ (54.48) $ (28.54)
============ ============ ============ ============ ============

*Reclassified for comparative purposes

March 31,
----------------------------------------------------------------------------------------
FINANCIAL POSITION 1997 1996 1995 1994 1993
- - ------------------ ------------ ------------ ------------ ------------ ------------

Total assets $200,269,263 $212,829,666 $218,920,596 $226,067,610 $232,159,011
============ ============ ============ ============ ============
Total liabilities $145,257,171 $143,880,937 $143,305,749 $143,119,315 $142,293,804
============ ============ ============ ============ ============
Minority interest $ 3,297,946 $ 3,827,457 $ 3,961,017 $ 4,384,363 $ 4,921,680
============ ============ ============ ============ ============
Total partners' capital $ 51,714,146 $ 65,121,272 $ 71,653,830 $ 78,563,932 $ 84,943,527
============ ============ ============ ============ ============

During the years ended March 31, 1993 through 1997, total assets decreased
primarily due to depreciation, partially offset by net additions to property and
equipment. For the year ended March 31, 1997, there was also a decrease in
assets due to a provision for impairment of assets.

-9-

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

Liquidity and Capital Resources

Prior to the time that all of the net proceeds had been fully invested in
Local Partnerships, the Partnership's primary source of funds was from the
proceeds of its public offering. During the years ended March 31, 1997, 1996 and
1995, the primary sources of liquidity included: (i) working capital reserves in
the original amount of 3% of gross equity raised; (ii) interest earned on the
working capital reserves; and (iii) cash distributions from operations of the
Local Partnerships. All these sources of funds are available to meet obligations
of the Partnership.

As of March 31, 1997, the Partnership has invested all of the net proceeds
in twenty-seven Local Partnerships. Approximately $439,000 of the purchase price
remains to be paid (none of which is held in escrow). During the year ended
March 31, 1997, $294,250 was paid (all of which was released from escrow).

The Partnership is not expected to have access to additional sources of
financing, and in particular will not have the ability to access BACs holders
for additional capital contributions to provide capital if needed by the
Partnership. There can be no assurance that additional funds will be available
to the Partnership or any local partnership, nor that, if any property is sold,
the proceeds of the sale will be sufficient to pay outstanding balances due on
mortgage loans or other outstanding indebtedness to which the property is
subject.

The Partnership established a working capital reserve of approximately
$3,500,000 (3% of gross equity raised) of which approximately $520,000 and
$402,000 was unused at March 31, 1997 and 1996, respectively. The General
Partners believe that the remaining reserves plus any cash distributions
received from the operations of the Local Partnerships are sufficient to fund
the Partnership's ongoing operations for the foreseeable future. During the
years ended March 31, 1997, 1996 and 1995, respectively, amounts received from
operations of the Local Partnerships were approximately $621,000, $11,000 and
$8,000.

During the year ended March 31, 1997, cash and cash equivalents of the
Partnership and its 27 consolidated Local Partnerships increased approximately
$458,000. This increase was primarily due to cash provided by operating
activities $2,990,000, a decrease in cash held in escrow for investing
activities ($429,000) and a net increase in due to local general partners and
affiliates ($294,000) which exceeded acquisitions of property and equipment
($1,463,000), an increase in deferred costs ($33,000), repayments of mortgage
notes ($1,165,000), a decrease in due to selling partners ($229,000) and a
decrease in capitalization of consolidated subsidiaries attributable to minority
interest ($366,000). Included in the adjustments to reconcile the net loss to
cash provided by operating activities is depreciation and amortization of
approximately $8,848,000 and a provision for impairment of assets of
approximately $4,727,000.

The Partnership has negotiated Operating Deficit Guarantee Agreements with
all Local Partnerships, pursuant to which the general partners of the Local
Partnerships 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 is approximately $11,567,000,
of which an aggregate of approximately $11,567,000, $11,273,300 and $10,099,330
had expired as of March 31, 1997, 1996 and 1995, respectively. As of March 31,
1997, 1996 and 1995, respectively, approximately $5,580,000, $4,965,000 and
$4,304,000, had been funded by the Local General Partners to meet such
obligations. Although all operating deficit guarantees have expired, management
does not expect their expiration to have a material impact on liquidity, based
on prior years' funding.

Partnership management fees owed to the General Partners amounting to
approximately $2,378,000 and $882,000 were accrued and unpaid as of March 31,
1997 and March 31, 1996, respectively.

HUD previously released the American Community Partnerships Act (the
"ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget

-10-

authority. Two key proposals in the ACPA that could affect the Local
Partnerships are: a discontinuation of project-based Section 8 subsidy payments,
and an attendant reduction in debt on properties that were supported by the
Section 8 payments. The ACPA calls for a transition during which the
project-based Section 8 payments would be converted to a tenant-based voucher
system. Any FHA insured debt would then be "marked-to-market" that is revalued
in light of the reduced income stream.

Several industry sources have commented to HUD and Congress that in the
event the ACPA was fully enacted in its present form, the reduction in mortgage
indebtedness would be considered taxable income to owners such as to the limited
partners in the Partnership. Legislative relief has been proposed to exempt
"marked-to-market" debt from cancellation of indebtedness income treatment.
Additionally, in the interim, HUD has agreed to annual extensions of any
expiring project-based Section 8 contracts but there is no guarantee that such
extensions will be available in the future. Though HUD initially backed away
from the "marked-to-market" proposal, it has now been reintroduced as "Portfolio
Restructuring".

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 from 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 diversification of the portfolio may not protect against a general
downturn in the national economy. The Partnership has fully invested the
proceeds of its offerings in 27 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

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.

Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties. A provision
for loss on impairment of assets is recorded when estimated amounts recoverable
through future operations and sale of the property on an undiscounted basis are
below depreciated cost. 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, 1997, the Partnership has recorded approximately $4,727,000 as
a provision for loss on impairment of assets.

-11-

The following is a summary of the results of operations of the Partnership
for the years ended March 31, 1997, 1996 and 1995 (the 1996, 1995 and 1994
Fiscal Years, respectively).

The majority of the Local Partnerships' revenues continue to be in the form
of rental income with the corresponding expenses divided among operations,
depreciation and mortgage interest.

The net loss for the 1996, 1995 and 1994 Fiscal Years totaled $13,407,126,
$6,532,558 and $6,910,102, respectively. The net loss for the 1996 Fiscal Year
includes a provision for impairment of assets of approximately $4,727,000 (see
Note 4 in Item 8. Financial Statements and Supplementary Data).

The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships have
failed to remain in compliance with the Tax Credit requirements, and, therefore,
none have suffered an event of recapture of Tax Credits. The Partnership
generated $17,193,735, $17,174,288 and $17,203,141 in Tax Credits during the
1995, 1994 and 1993 Fiscal Years, respectively.

1996 vs. 1995

Rental income increased approximately 3% for the 1996 Fiscal Year as
compared to the corresponding period in 1995 primarily due to the merger of
Spring Creek Retail Associates, L.P. ("Retail") with Spring Creek Associates,
L.P. ("Spring Creek") effective August 16, 1996 (see Note 1 to the financial
statements in Item 8.). Before such merger, the commercial rent was accrued by
Spring Creek on the basis of cash flow from Retail's operations, pursuant to the
terms of a net lease agreement. Excluding Spring Creek, rental income increased
approximately 2% primarily due to rental rate increases.

Other income decreased approximately $316,000 for the 1996 Fiscal Year as
compared to the corresponding period in 1995 primarily due to a settlement
agreement in 1995 which resulted in the return of funds allegedly distributed in
an unauthorized manner by the managing agent to Bayamon's operating bank account
(see Results of Operations of Certain Local Partnerships).

Total expenses excluding general and administrative-related parties and
provision for impairment of assets remained fairly consistent with an increase
of approximately 5% for the 1996 Fiscal Year as compared to the 1995 Fiscal
Year.

General and administrative-related parties increased approximately
$1,233,000 for the 1996 Fiscal Year as compared to the corresponding period in
1995 primarily due to an increase in partnership management fees payable to the
General Partners.

A provision for impairment of assets was recorded in the 1996 Fiscal Year
(see Note 4 in Item 8. Financial Statements and Supplementary Data).

1995 vs. 1994

Rental income increased approximately $44,000 for the 1995 Fiscal Year as
compared to the corresponding period in 1994 due to annual rent increases which
are generally subject to HUD limitations.

Other income increased approximately $271,000 primarily due to a settlement
agreement which resulted in the return of funds allegedly distributed in an
unauthorized manner by the managing agent to Bayamon's operating bank account.
(See Results of Operation's of Certain Local Partnerships).

Total expenses, excluding general and administrative-related parties,
remained fairly consistent with an increase of less than 1% for the 1995 Fiscal
Year as compared to the corresponding period in 1994.

-12-

General and administrative-related parties decreased approximately
$377,000 for the 1995 Fiscal Year as compared to the corresponding period in
1994 primarily due to the proceeds from the savings of interest expense
resulting from a refinancing at one Local Partnership which became payable to
the local general partner of such Local Partnership in the 1994 Fiscal Year (see
Note 8 to the financial statements in Item 8 below).

Results of Operations of Certain Local Partnerships

Whittier Plaza Associates

The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that the partnership will continue as a
going concern. Whittier has sustained continuous losses since commencement of
operations in 1988, including losses of approximately $550,000, $42,000 and
$58,000 for the 1996, 1995 and 1994 Fiscal Years, respectively. Whittier has
experienced higher vacancies and lower rents than those originally projected,
resulting in increased difficulty in meeting both operating and debt service
obligations. A subsidiary general partner, pursuant to a development deficit
guarantee agreement, has advanced $53,086 and $54,234 in the 1996 and 1995
Fiscal Years, respectively, and $291,994 since 1988 to fund operating cash
shortfalls. In addition, the subsidiary partnership's management company, an
affiliate of the local general partner, has deferred receipt of various fees
since 1991 totalling $42,864. These items raise substantial doubt about
Whittier's ability to continue as a going concern. The Partnership's investment
in Whittier at March 31, 1997 and 1996 was reduced to zero as a result of prior
years' losses and the minority interest balance was $0 at each date. Whittier's
net loss after minority interest amounted to approximately $550,000 (after
provision for impairment of assets of approximately $490,000), $42,000 and
$58,000 for the 1996, 1995 and 1994 Fiscal Years.

Alexis Park Apartments

During 1990, vapor fumes were discovered in several apartments at Alexis
Park Apartments, a Louisiana Partnership in Commendam ("Alexis"). As a result,
47 of the 280 units were vacated as ordered by the Louisiana Department of
Environmental Quality ("DEQ"). At December 31, 1996, 39 of these units have been
cleared for occupancy by the Louisiana Department of Health and Hospital and the
remaining 8 units have undergone refurbishing and are currently being rented to
an oil company. It is anticipated that the units will be available to the
general public in the near future.

Alexis has also been named as co-defendant in a suit for damages filed by a
group comprised of former tenants and a few present tenants at the project. The
suit, Berzas, et. al. v. Oxy USA, Inc., et al., was instituted in January 1991
in the 26th Judicial District Court, Bossier Parish, Louisiana. The Partnership
has been advised that Louisiana law does not permit disclosure of money damages
sought. The suit alleges certain personal injuries as a result of exposure to
toxic chemicals emanating from the site upon which the Apartment Complex is
built. Management intends to deny all allegations stated in the complaint. Legal
counsel for Alexis expects a settlement agreement and a dismissal of claims will
be perfected in early 1997. The settlement will be paid by insurance with no
loss to the Partnership.

Alexis is named as co-defendant in another suit. The suit, Jimmy Green, et
al. v. Cities Service Refinery, et al., was instituted in March 1991 in the 26th
Judicial District Court, Bossier Parish, Louisiana. The Partnership has been
advised that Louisiana law does not permit disclosure of money damages sought.
The plaintiffs are a group of homeowners who live south of the Alexis site and
are seeking damages for devaluation of their property and for alleged personal
injuries suffered as a result of exposure to toxic chemicals which they claim
emanated from the site of an oil refinery. Alexis is built on a portion of this
site. The property upon which the plaintiffs homes are built is not within the
boundaries of the oil refinery site. During 1996, Alexis' insurer settled the
suit for $2,500.

Alexis has filed a cross claim against the former owners of the property it
now operates, for judgment against them in solido, for any damages Alexis may
sustain arising from the environmental problem which is the subject of the suit
and also, should Alexis be cast in judgment in the main demand, then for
judgment over them in cross claim in solido, for the full amount of said
judgment.

-13-

Management of Alexis believes that the environmental issue has created a
negative image for the Project. The DEQ has issued a statement that all occupied
apartments are safe. Pursuant to an Investigative Agreement with the DEQ,
additional testing of the project site and adjacent areas began June 15, 1992.
The testing was overseen by the DEQ and was completed on February 10, 1995.

The DEQ has now turned the matter over to the United States Environmental
Protection Agency ("EPA") to review the testing. The EPA performed indoor air
tests at the site on 28 units and issued a draft report on January 2, 1997.
According to the report, the EPA's inspection found that none of the units has
acute air pollution levels. The report further states that two units were found
to have sufficient amounts of air pollutants to possibly cause health concerns
after years of continual exposure. The report recommends certain remediation for
these two units and states that testing of the surrounding units will continue.
If remediation in some manner is required, the remediation plan will take into
account the health and safety of the residents and workers which would improve
the long-term prospects for occupancy.

In July of 1991, the former general partner of Alexis received notification
from the U.S. Department of Justice that some of its officers were under
investigation for possible violations of Federal criminal statutes arising out
of the filing of the Alexis partnership tax returns for the years 1988 and 1989.
Included in this notification was an invitation to appear before the Grand Jury.
The former general partner of Alexis opted to have its corporate counsel submit
to the U.S. Attorney and Internal Revenue Service, a written summary of the
former general partner's involvement with Alexis and the filing of Alexis' tax
returns.

The former general partner of Alexis denies any wrong doing. The facts and
focus of this investigation are unclear and the ultimate effects, if any, on
Alexis' financial statements are not determinable.

In summary, management is optimistic that the hazardous waste matter will
be favorably resolved and that any losses from the class action lawsuit will be
covered by insurance. Management believes that the investigation by the U.S.
Department of Justice is unlikely to have any material financial effect on
Alexis. Management believes Alexis has demonstrated that it has the ability to
generate sufficient operating capital without the oil company's assistance.
Based on these evaluations, management believes that Alexis will continue as a
going concern for at least one year beyond December 31, 1996. It is too
premature to make an evaluation of the amount or range of Alexis' potential
loss, therefore it is management's opinion that no accrual for potential losses
is currently warranted in the financial statements. The maximum loss which the
Partnership would be liable for is its net investment in Alexis amounting to
approximately $879,000 at March 31, 1997. Management estimates that the impact
of the negative publicity on occupancy may continue for a while and believes
that future levels of occupancy will depend on the final findings of the
investigating parties and on future media attention. The Partnership's
investment in Alexis at March 31, 1997 and 1996 was approximately $879,000 and
$1,016,000, respectively, and the minority interest balance was approximately
$3,800 and $5,200, respectively. Alexis' net loss after minority interest
amounted to approximately $137,000, $244,000 and $165,000, for the 1996, 1995
and 1994 Fiscal Years, respectively.

Williamsburg Residential, L.P.

In November 1996, the general partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making mortgage note payments which constituted an
event of default. The general partner also communicated to the limited partners
its desire to withdraw as general partner and property manager in an effort to
eliminate the need for it to further secure loans from its affiliated entities
to keep the project going. The limited partners retained a national property
management firm to operate the property effective January 1, 1997 and replaced
the general partner effective January 16, 1997.

The new general partner, which is an affiliate of the Related General
Partner, has been in contact with the lender, Federal National Mortgage
Association ("FNMA"), since shortly after the default. Williamsburg entered into
a Forbearance Agreement with FNMA on January 27, 1997. The agreement called for
back payments to be made and provided Williamsburg 60 days to work out a loan
agreement. A subsequent extension of the forbearance agreement runs through July
25, 1997. The general framework of the

-14-

proposed loan modification agreement calls for: 1. Williamsburg to deposit an
amount approximately equal to six months payments into a debt service escrow
fund to be utilized as needed; 2. Payments of interest only on the loan for 36
months; 3. The waiving of replacement reserve escrow payments during 1997; 4.
Excess net operating income to be turned over to the loan servicer monthly.
FNMA's standard modification documentation will be used after which FNMA will
not exercise further remedies relating to the default. The factors mentioned
above create an uncertainty as to Williamsburg's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should Williamsburg be unable to continue as a going concern. The
Partnership's investment in Williamsburg at March 31, 1997 and 1996 was reduced
to zero by prior and current years' losses and $1,037,000, respectively, and the
minority interest balance was zero at each date. Williamsburg's net loss after
minority interest amounted to approximately $1,667,000 (after provision for
impairment of assets of approximately $1,588,000), $142,000 and $58,000 for the
1996, 1995 and 1994 Fiscal Years, respectively.

Goodfellow Place Limited Partnership

The financial statements for Goodfellow Place Limited Partnership
("Goodfellow") have been prepared in conformity with generally accepted
accounting principles, which contemplates continuation of Goodfellow as a going
concern. However, Goodfellow has sustained substantial operating losses in
recent years. In addition, Goodfellow has used substantial amounts of working
capital in its operations and has depleted the operating deficit escrow
originally established in 1990 in the amount of $163,000. Further, at December
31, 1996, current liabilities exceed current assets and prepaid expenses by
$61,076.

A prepayment of $163,000 was due on the promissory note payable to St.
Louis Community Development Agency ("CDA") in August 1996, upon release of the
Operating Deficit Guarantee Escrow. The General Partners have defaulted on this
requirement and placed $163,000 in an interest bearing money market account in
the name of the project. This account has been voluntarily restricted by the
general partners and has a balance of $165,756 at December 31, 1996. The general
partners of Goodfellow plan to negotiate with CDA in an attempt to restructure
the agreement to allow the project to place those funds in the operating deficit
escrow account held in trust by Missouri Housing Development Committee ("MHDC").
These funds would then be used to fund future operating deficits. In addition,
management is evaluating the possibility of increasing rents to meet cash flow
needs.

In view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of
Goodfellow, which in turn is dependent upon Goodfellow's ability to negotiate an
agreement with CDA, and the success of its future operations. Management
believes that actions presently being taken to review Goodfellow's operating and
financial requirements provide the opportunity for Goodfellow to continue as a
going concern, however, the outcome of the planned negotiations with CDA is
uncertain.

It is management's opinion that no accrual for potential losses is
currently warranted in the financial statements. The Partnership's investment in
Goodfellow at March 31, 1997 and 1996 was reduced to zero by prior and current
years' losses and $34,000, respectively and the minority interest balance was
zero at each date. Goodfellow's net loss after minority interest amounted to
approximately $2,829,000 (after provision for impairment of assets of
approximately $2,649,000), $102,000 and $103,000 for the 1996, 1995 and 1994
Fiscal Years, respectively.

Willoughby-Wyckoff Housing Associates

The financial statements for Willoughby-Wyckoff Housing Associates
("Willoughby") have been prepared on the basis that it will continue as a going
concern, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. There are certain
conditions that raise substantial doubt about Willoughby's ability to continue
as a going concern. Willoughby has had operating losses, operating cash flow
deficiencies and equity deficiencies.

-15-

Management plans to continue to minimize costs within its control and seek
additional funding sources to supplement project operations.

Continuance of Willoughby as a going concern is dependent upon Willoughby's
ability to obtain additional funding to supplement project operations and enable
Willoughby to meet its obligations as they become due. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties. It is management's opinion that no accrual for potential losses
is currently warranted in the financial statements.

The Partnership's investment in Willoughby at March 31, 1997 and 1996 has
been reduced to zero by prior years' losses and the minority interest balance
amounted to approximately $182,000 and $184,000, respectively. Willoughby's net
loss after minority interest amounted to approximately $273,000, $309,000 and
$316,000 for the 1996, 1995 and 1994 Fiscal Years, respectively.

Robin Housing Associates

Robin Housing Associates ("Robin Housing") is a defendant in a personal
injury lawsuit. The Partnership's insurance carrier intends to defend the
Partnership vigorously. Counsel believes that the insurance coverage is adequate
to cover any liability arising from this action. It is management's opinion that
no accrual for potential losses is currently warranted in the financial
statements. The maximum loss which the Partnership would be liable for is its
net investment in Robin Housing amounting to approximately $160,000 at March 31,
1997. The Partnership's investment in Robin Housing at March 31, 1997 and 1996
was approximately $160,000 and $185,000 and the minority interest balance was
$728,000 and $949,000, respectively. Robin Housing's net loss after minority
interest amounted to approximately $30,000, $36,000 and $31,000 for the 1996,
1995 and 1994 Fiscal Years, respectively.

Metropolitan Towers Associates, L.P.

The subsidiary partnership, Metropolitan Towers Associates, L.P.
("Metropolitan"), is a defendant in a legal proceeding brought about by one of
its tenants for damages suffered by her child upon falling from her apartment's
balcony. The proceedings are still in a preliminary phase but it is legal
counsel's opinion that if any damages are awarded to the plaintiff, the same
will be covered by the partnership's insurance policy. It is management's
opinion that no accrual for potential losses is currently warranted in the
financial statements. The maximum loss which the Partnership would be liable for
is its net investment in Metropolitan amounting to approximately $1,340,000 at
March 31, 1997. The Partnership's investment in Metropolitan at March 31, 1997
and 1996 was approximately $1,340,000 and $1,471,000, respectively, and the
minority interest was zero at each date. Metropolitan's net loss after minority
interest amounted to approximately $131,000, $147,000 and $139,000 for the 1996,
1995 and 1994 Fiscal Years, respectively.

Gramco Development Limited Dividend

The Office of the Inspector General ("OIG") conducted an audit of the
construction and operational costs of the Gramco Development Limited Dividend
Partnership, L.P. ("Bayamon") to ascertain compliance with federal government
regulations. The report on such audit recommended the repayment of $2,006,118 of
Housing Development Assistance Grant ("HODAG") funds provided by HUD through the
Municipality of Bayamon (the "Municipality"). The report also recommended the
return of $341,667 to Bayamon's operating account, allegedly distributed in an
unauthorized manner. In May 1995, the Partnership, OIG, HUD, the Municipality,
the general contractor (a related company of Bayamon), the Local Partnership's
general partner, the management agent, and the officers and directors of the
related companies executed a settlement agreement. As a result of this
agreement, the management agent assumed the liability and reimbursed $600,000 to
the Municipality corresponding to HODAG funds and $341,667 to the project's
general operating account which is included in other income for the 1995 Fiscal
Year. The parties fully released one and the other from any further claim and
any/all causes of action in connection with the OIG audit.

-16-

In the event of a substantive violation to the provisions of certain
agreements between Bayamon and the Municipality and between the Municipality and
HUD, a promissory note dated April 4, 1987 for $4,867,000 granted to Bayamon
shall become immediately due and payable at the election of HUD and the
Municipality. Otherwise, the principal amount of the obligation together with
any interest will be forgiven. Proceeds from the loan have been deducted from
fixed assets. It is management's opinion that no accrual for potential losses is
currently warranted in the financial statements. The Partnership's investment in
Bayamon at March 31, 1997 and 1996 was approximately $1,231,000 and $1,506,000
and the minority interest balance was approximately $425,000 and $427,000,
respectively. Bayamon's net income (loss) after minority interest amounted to
approximately, ($275,000), $77,000 and ($252,000) for the 1996, 1995 and 1994
Fiscal Years, respectively.

Santa Juanita II Limited Partnership

A bank filed a suit against the Local Partnership Santa Juanita II Limited
Partnership ("Santa Juanita") for non-payment of the monthly installments
required by a second mortgage loan agreement. During February 1994, the court
issued a judgement against Santa Juanita demanding immediate payment of the
second mortgage note with an outstanding principal balance of $474,656, plus
accrued interest and legal expenses. A significant portion of Santa Juanita's
operating assets is pledged as collateral for this note and foreclosure by the
bank would seriously impair Santa Juanita's continued existence. In May 1996,
the special limited partner of Santa Juanita instituted proceedings to formally
remove the general partner of Santa Juanita. In June 1996, the general partner
of Santa Juanita filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"). In June 1997 the court ordered that Santa
Juanita's Amended and Restated Agreement of Limited Partnership and Management
Agreement should not be part of the general partner's bankruptcy. As such, the
court ordered the general partner to surrender the books and records of Santa
Juanita to Liberty Associates, the special limited partner. Liberty Associates
is in the process of amending Santa Juanita's Amended and Restated Agreement of
Limited Partnership to remove the current general partner as general partner and
management agent and admit a new general partner and management agent. It is
managements opinion that no accrual for potential losses is currently warranted
in the financial statements. The financial statements for the 1996 and 1995
Fiscal Years for this subsidiary partnership were not audited. The maximum loss
which the Partnership would be liable for is its net investment in Santa Juanita
amounting to approximately $568,000 at March 31, 1997. The Partnerships
investment in Santa Juanita at March 31, 1997 and 1996 was approximately
$478,000 and $568,000, respectively, and the minority interest balance was zero
at each date. Santa Juanita's net loss after minority interest amounted to
approximately $90,000, $90,000 and $177,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

Rolling Green Limited Partnership

Rolling Green Limited Partnership ("Rolling Green") operates and is
regulated by HUD under Section 221(d)(3) of the National Housing Act. Rents
received by Rolling Green are subsidized by Section 8 Housing Assistance
Payments. Rental income from such Assistance Payments totaled $1,198,880 and
$1,143,607 in the 1996 and 1995 Fiscal Years, respectively. In September 1997
two of the three Section 8 contracts, now in operation, will expire. Management
has been assured in verbal communications that such contracts will be renewed.
However, uncertainties regarding the future of HUD Programs exist. It is not
practical to estimate the impact upon Rolling Green's operations if the rents
were to be respectively changed to market value.

Campeche Isle Apartments, L.P.

Campeche Isle Apartments, L.P. ("Campeche") filed a voluntary petition
under Chapter 11 during March 1996. Although current on its debt service up to
and including the January 1, 1996 payment, the property was unable to fully fund
all operating expenses plus debt service following a 1% increase in the interest
rate on the property's mortgage in June of 1994. Debt service had been kept
current through advances by the subsidiary partnership's general partner, RCC
Pineview, Inc., and the Partnership totaling $302,222 as of December 31, 1996.
In addition, Campeche has not paid its managing agent in excess of $100,000 of
management fees.

In an effort to reduce the property's debt service burden, negotiations
with the holder of the property's first mortgage, Sun America Life Insurance
Company (the "Mortgagee") had been ongoing during January and

-17-

February of 1996. The Mortgagee rejected Campeche's proposals and commenced a
foreclosure action during the latter part of February. In order to preserve
Campeche's ownership of the property, a Chapter 11 filing was made during March
1996 and the Mortgagee was stayed from proceeding with its foreclosure. Campeche
has presented a Plan of Reorganization to the Bankruptcy Court and the property
is being operated under a Cash Collateral order issued by the Court. Campeche
completed the restructuring of their mortgage debt on June 19, 1997 wherein the
mortgage debt was settled for $4,200,000, through the following transactions:
Bank of Boston made a $4,000,000 loan to Campeche and the Partnership as
co-borrowers. Such loan is secured by a first mortgage on Campeche Isle
Apartments, a pledge of the Partnership's interest in Spring Creek and recourse
guarantees of the Partnership, Campeche, Campeche's general partner and one of
the General Partners. In addition to paying off the mortgage, the restructuring
agreement required Campeche to make approximately $800,000 of required repairs
to the project. The Partnership raised approximately $1,400,000 through the sale
of a portion of its limited partnership interests in United-Glenarden I Limited
Partnership and Property Development Associates, L.P. to Related Glenport
Associates, L.P., an affiliate of the General Partner. Monthly debt service on
the new loan will be paid by the net income of Campeche and the balance by the
Partnership. In addition, any distributions received by the Partnership from
Spring Creek must be placed in escrow at Bank of Boston. The new loan matures on
December 31, 1998. The financial statements for the 1996 Fiscal Year for this
subsidiary partnership were not audited. The Partnerships investment in Campeche
at March 31, 1997 and 1996 was approximately $454,000 and $788,000,
respectively, and the minority interest balance was zero at each date.
Campeche's net loss after minority interest amounted to approximately $334,000,
$334,000 and $251,000 for the 1996, 1995 and 1994 Fiscal Years, respectively.

Seagrape Village Associates

Pursuant to an audit conducted by HUD, it was determined that 14 units of
the property were ineligible effective March 1, 1991, for inclusion in the
housing assistance payment contract. On November 1, 1994, Seagrape Village
Associates, Ltd. ("Seagrape") entered into a settlement agreement with HUD
whereby Seagrape will reimburse to HUD the sum of $474,500 without interest over
twelve years commencing on December 1, 1996. Payment will be made by deducting
the monthly amount from each rental assistance payment. In 1994, Seagrape
recorded a liability of $306,154 after discounting the value of the settlement
by imputing an interest rate equal to 8%.

During 1996, HUD reviewed the refinancing of the mortgage note payable with
respect to its impact on rent. They determined that a retroactive reduction of
rents should take place. On September 10, 1996, Seagrape entered into a
settlement agreement with HUD whereby Seagrape will reimburse to HUD the sum of
$90,093 without interest over four years commencing on December 1, 1996. Payment
will be made by deducting the monthly amount from each rental assistance
payment. Seagrape recorded a liability of $75,905 after discounting the value of
the settlement by imputing an interest rate equal to 8%.

Other

The Partnership's investment, as a limited partner in the Local
Partnerships, is subject to the risks incident to the potential losses arising
from management and ownership of improved real estate. The Partnership's
investments also could be adversely affected by poor economic conditions
generally, which could increase vacancy levels, rental payment defaults, and
increased 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 include 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.

-18-

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 as, for example, for such items as fuel,
utilities and labor.

There has recently been an increasing number of requests for the list of
BACs holders of limited partnerships such as the Partnership. Often these
requests are made by a person who, only a short time before making the request,
acquired merely a small number of BACs in the partnership and seeks the list for
an improper purpose, a purpose that is not in the best interest of the
partnership or is harmful to the partnership. In order to best serve and protect
the interests of the Partnership and all of its investors, the General Partners
have adopted a policy with respect to requests for the Partnership's list of
BACs holders. This policy is intended to protect investors from unsolicited and
coercive offers to acquire BACs holders' interests and does not limit any other
rights the General Partners may have under the Partnership Agreement or
applicable law.

-19-

Item 8. Financial Statements and Supplementary Data.

Sequential
Page
----

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 21

Consolidated Balance Sheets at March 31, 1997 and 1996 82

Consolidated Statements of Operations for the Years Ended
March 31, 1997, 1996 and 1995 83

Consolidated Statements of Changes in Partners' Capital for the
Years Ended March 31, 1997, 1996 and 1995 84

Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995 85

Notes to Consolidated Financial Statements 88

-20-

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of Liberty Tax Credit Plus
II L.P. and Subsidiaries (a Delaware Limited Partnership) as of March 31, 1997
and 1996, and the related consolidated statements of operations, changes in
partners' capital, and cash flows for the years ended March 31, 1997, 1996 and
1995 (the 1996, 1995 and 1994 Fiscal Years). 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 for 27 (1996, 1995 and 1994 Fiscal Years) subsidiary
partnerships whose losses aggregated $10,828,750, $6,098,858, and $6,767,457 for
the 1996, 1995 and 1994 Fiscal Years, respectively, and whose assets constituted
98% and 99% of the Partnership's assets at March 31, 1997 and 1996,
respectively, presented in the accompanying consolidated financial statements.
The financial statements for 25 of these 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.
The financial statements of two of these subsidiary partnerships for the 1996
Fiscal Year were unaudited.

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, based upon our audits, and the reports of the other
auditors referred to above, the accompanying consolidated financial statements
referred to in the first paragraph present fairly, in all material respects, the
financial position of Liberty Tax Credit Plus II L.P. and Subsidiaries at March
31, 1997 and 1996 and the results of their operations and cash flows for the
years ended March 31, 1997, 1996 and 1995, in conformity with generally accepted
accounting principles.

As discussed in Note 10(a), the consolidated financial statements include
the financial statements of seven limited partnerships with significant
contingencies and uncertainties. The financial statements of five of these
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The financial statements for the 1996 Fiscal Year for two of
these subsidiary partnerships were not audited. The seven subsidiary
partnerships' net losses aggregated $5,884,547(Fiscal 1996), $1,268,304 (Fiscal
1995) and $1,133,889 (Fiscal 1994) and their assets aggregated $24,497,927 and
$30,301,229 at March 31, 1997 and 1996, respectively. These matters raise
substantial doubt about these subsidiary partnerships' abilities to continue as
going concerns. 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
June 30, 1997
-21-

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Polynesian Apartments Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-015-152

We have audited the accompanying statements of financial condition of Polynesian
Apartments Associates, Ltd. (A Limited Partnership) as of December 31, 1996 and
1995, 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 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 Polynesian Apartments
Associates, Ltd., (A Limited Partnership) as of December 31, 1996 and 1995, 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.

/s/ L. H. FRISHKOFF & COMPANY
--------------------------
L. H. FRISHKOFF & COMPANY

New York, New York
January 23, 1997

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Polynesian Apartments Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-015-152

We have audited the accompanying statements of financial condition of Polynesian
Apartments Associates, Ltd. (A Limited Partnership) as of December 31, 1995 and
1994, 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 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 Polynesian Apartments
Associates, Ltd., (A Limited Partnership) as of December 31, 1995 and 1994, 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.

/s/ L. H. Frishkoff & Company
L. H. FRISHKOFF & COMPANY
New York, New York
January 19, 1996

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Seagrape Village Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29--K005-015-151

We have audited the accompanying statements of financial condition of Seagrape
Village Associates, Ltd. (A Limited Partnership) as of December 31, 1996 and
1995, 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 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 condition of Seagrape Village Associates,
Ltd. (A Limited Partnership) as of December 31, 1996 and 1995, 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.

/s/ L. H. FRISHKOFF & COMPANY
-------------------------
L. H. FRISHKOFF & COMPANY

New York, New York
January 24, 1997

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Seagrape Village Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-015-151

We have audited the accompanying statements of financial condition of Seagrape
Village Associates, Ltd. (A Limited Partnership) as of December 31, 1995 and
1994, 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 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 condition of Seagrape Village Associates,
Ltd. (A Limited Partnership) as of December 31, 1995 and 1994, 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.

/s/ L. H. Frishkoff & Company
L. H. FRISHKOFF & COMPANY
New York, New York
January 19, 1996

[JOSE E. ROSARIO & CO. - SAN JUAN, PUERTO RICO - LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Metropolitan Towers Associates, L.P.
Rio Piedras, Puerto Rico

I have audited the accompanying balance sheets of Metropolitan Towers
Associates, L.P. as of December 31, 1996 and 1995 and the related statements of
operations and changes in partners' capital and cash flows for the years ended
December 31, 1996 and 1995. 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
misstatements. An audit includes examining on a test basis, evidence supporting
the amount of 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 Metropolitan Towers Associates,
L.P. as of December 31, 1996 and 1995, the results of its operations and changes
in partners' capital and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ JOSE E. ROSARIO & CO.
---------------------
JOSE E. ROSARIO & CO.
License No. 961
Expires December 1, 1998

January 27, 1997

Stamp No. 1401431 of the Puerto
Rico College of CPAs was
affixed to the original.

[JOSE E. ROSARIO & CO. - SAN JUAN, PUERTO RICO - LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Metropolitan Towers Associates, L.P.
Rio Piedras, Puerto Rico

I have audited the accompanying balance sheets of Metropolitan Towers
Associates, L.P. as of December 31, 1995 and 1994 and the related statements of
operations and changes in partners' capital and cash flows for the years ended
December 31, 1995 and 1994. 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
misstatements. An audit includes examining on a test basis, evidence supporting
the amount of 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 Metropolitan Towers Associates,
L.P. as of December 31, 1995 and 1994, the results of its operations and changes
in partners' capital and cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Jose E. Rosario
JOSE E. ROSARIO & CO.
License No. 961
Expires December 1, 1998

January 23, 1996

Stamp No. 1336625 of the Puerto
Rico College of CPAs was
affixed to the original.

[RUBIN, BROWN, GORNSTEIN & CO. LLP LETTERHEAD]

Independent Auditors' Report

Partners
Westminster Place II -- Olive Site, L.P.
St. Louis Missouri

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., a limited partnership, as of December 31, 1996 and 1995 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 Westminster Place II - Olive
Site, L.P. as of December 31, 1996 and 1995 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 23, 1997

[RUBIN, BROWN, GORNSTEIN & CO. LLP - ST LOUIS, MISSOURI - LETTERHEAD]

Independent Auditors' Report

Partners
Westminster Place II - Olive Site, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., a limited partnership, as of December 31, 1995 and 1994 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 Westminster Place II - Olive
Site, L.P. as of December 31, 1995 and 1994 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
January 24, 1996

[RUBIN, BROWN, GORNSTEIN & CO. LLP LETTERHEAD]

Independent Auditors' Report

Partners
Property Development Associates, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Property Development
Associates, L.P., a limited partnership, as of December 31, 1996 and 1995 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 Property Development
Associates, L.P., as of December 31, 1996 and 1995 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, 1997

[RUBIN, BROWN, GORNSTEIN & CO. LLP - ST LOUIS, MISSOURI - LETTERHEAD]

Independent Auditors' Report

Partners
Property Development Associates, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Property Development
Associates, L.P., a limited partnership, as of December 31, 1995 and 1994 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 Property Development
Associates, L.P., as of December 31, 1995 and 1994 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

January 22, 1996

[RUBIN, BROWN, GORNSTEIN & CO. LLP LETTERHEAD]

Independent Auditors' Report

Partners
Whittier Plaza Associates Limited
Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, a limited partnership, as of December 31, 1996 and 1995 and
the related statements of income, 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 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 Whittier Plaza Associates
Limited Partnership as of December 31, 1996 and 1995 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 6 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, as well as required continual general partner
funding of deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Rubin, Brown, Gornstein & Co. LLP

St. Louis, Missouri
January 27, 1997

[RUBIN, BROWN, GORNSTEIN & CO. LLP - ST LOUIS, MISSOURI - LETTERHEAD]

Independent Auditors' Report

Partners
Whittier Plaza Associates Limited
Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, a limited partnership, as of December 31, 1995 and 1994 and
the related statements of income, 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 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 Whittier Plaza Associates
Limited Partnership as of December 31, 1995 and 1994 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 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, as well as required continual general partner
funding of deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Rubin, Brown, Gornstein & Co. LLP

February 1, 1996

[HABIF AROGETI & WYNNE, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1996, and the related statements of operations,
changes in 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.
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 UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1996, and results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

/s/ Habif Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1997

[HABIF, AROGETI & WYNNE, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1995, and the related statements of operations,
changes in 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.
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 UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1995, and results of its operations and its cash
flows for the year then ended in conformity with generally accented accounting
principles.

/s/ Habif, Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1996

[HABIF, AROGETI & WYNNE, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1994, and the related statements of operations,
changes in 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.
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 UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1994, and results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

/s/ Habif, Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1995

[HABIF AROGETI & WYNNE, P.C. LETTERHEAD]

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1996, and the related statements of operations,
changes in partners' 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.
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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Habif Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1996

[HABIF, AROGETI & WYNNE, P.C. LETTERHEAD]

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1995, and the related statements of operations,
changes in partners' 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.
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 disclosure 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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Habif, Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1996

[HABIF, AROGETI & WYNNE, P.C. LETTERHEAD]

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1994, and the related statements of operations,
changes in partners' 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.
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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1994, and results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

/s/ Habif, Arogeti & Wynne, P.C.

Atlanta, Georgia
January 31, 1995

[SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
Libertyville, IL

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1996 and 1995 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. 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 ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principle.

/s/ SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.
------------------------------------------------
SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.

Chicago, IL
January 25, 1997

[SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.
- CHICAGO, ILLINOIS - LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
North Chicago, Illinois

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1995 and 1994 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. 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 ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Solomon, Baerson, Witonski, Patel & Kaskel, Ltd.

January 26, 1996

[VELEZ, SEMPRIT, NIEVES & CO. - SAN JUAN, PUERTO RICO - LETTERHEAD]

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

Partners
Santa Juanita II Limited Dividend Partnership
San Juan, Puerto Rico

We have audited the accompanying balance sheets of Santa Juanita II Limited
Dividend Partnership as of December 31, 1994 and 1993, 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 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 Santa Juanita II Limited
Dividend Partnership Development as of December 31, 1994 and 1993, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

/s/ Velez, Semprit, Nieves & Co.

January 27, 1995

Stamp number 1282940 was
affixed to the original of this
report.

[GROSSMAN, TUCHMAN AND SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of Spring Creek
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Spring Creek Associates, L.P.
(a Delaware limited partnership) as of December 31, 1996 and 1995, 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 Spring Creek Associates, L.P.
as of December 31, 1996 and 1995 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 27, 1997

[GROSSMAN, TUCHMAN AND SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of Spring Creek
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Spring Creek Associates, L.P.
(a Delaware limited partnership) as of December 31, 1995 and 1994, 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 Spring Creek Associates, L.P.
as of December 31, 1995 and 1994 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, 1996

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
East Two Thirty-Five
Associates, L.P.
New York, New York

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. (a Delaware limited partnership) and subsidiary as
of December 31, 1996 and 1995, and the related consolidated statements of income
(loss), changes in partners' capital (deficit), and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of East Two Thirty-Five
Associates, L.P. and subsidiary as of December 31, 1996 and 1995 and the
consolidated results of their operations and their 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, 1997

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
East Two Thirty-Five
Associates, L.P.
New York. New York

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. (a Delaware limited partnership) and subsidiary as
of December 31, 1995 and 1994, and the related consolidated statements of income
(loss), changes in partners' capital (deficit), and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of East Two Thirty-Five
Associates, L.P. and subsidiary as of December 31, 1995 and 1994 and the
consolidated results of their operations and their 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 7, 1996

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Upper Fifth Avenue Residential
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Upper Fifth Avenue
Residential Associates, L.P. (a Delaware limited partnership) as of December 31,
1996 and 1995, 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 Upper Fifth Avenue Residential
Associates, L.P. as of December 31, 1996 and 1995 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 4, 1997

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Upper Fifth Avenue Residential
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Upper Fifth Avenue
Residential Associates, L.P. (a Delaware limited partnership) as of December 31,
1995 and 1994, 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 Upper Fifth Avenue Residential
Associates, L.P. as of December 31, 1995 and 1994 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, 1996

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
West 107th Street
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of West 107th Street Associates,
L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, 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 West 107th Street Associates,
L.P. as of December 31, 1996 and 1995 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 22, 1997

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
West 107th Street
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of West 107th Street Associates,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, 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 West 107th Street Associates,
L.P. as of December 31, 1995 and 1994 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, 1996

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of General Atlantic
Second Avenue Associates, L.P. (a Delaware limited partnership) and subsidiary
as of December 31, 1996 and 1995, and the related consolidated statements of
income (loss), changes in partners' capital (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Atlantic
Second Avenue Associates, L.P. and subsidiary as of December 31, 1996 and 1995
and the consolidated results of their operations and their 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 27, 1997

[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of General Atlantic
Second Avenue Associates, L.P. (a Delaware limited partnership) and subsidiary
as of December 31, 1995 and 1994, and the related consolidated statements of
income (loss), changes in partners' capital (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Atlantic
Second Avenue Associates, L.P. and subsidiary as of December 31, 1995 and 1994
and the consolidated results of their operations and their 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 7, 1996

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Church Lane Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Church Lane Associates (a
Limited Partnership) as of December 31, 1996 and 1995 and the related statements
of (loss), 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 Church Lane Associates (a
Limited Partnership) at December 31, 1996 and 1995, 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 10, 1997

[J.H. WILLIAMS & CO., LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Church Lane Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Church Lane Associates (a
Limited Partnership) as of December 31, 1995 and 1994 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 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 Church Lane Associates (a
Limited Partnership) at December 31, 1995 and 1994, 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 9, 1996

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments
Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 1995, 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. 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 Campeche Isle Apartments
Limited Partnership as of December 31, 1995, 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.

/s/ Reznick Fedder & Silverman

Bethesda, Maryland
February 29, 1996

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments
Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 1994, 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. 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 Campeche Isle Apartments
Limited Partnership as of December 31, 1994, and the results of its operations,
the changes in partners' equity and cash flows for the year then ended, in
conformity with qenerally accepted accounting principles.

/s/ Reznick Fedder & Silverman

Bethesda, Maryland
February 1, 1995

[MARDEN HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Robin Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Robin Housing Associates (a
limited partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partners' capital (deficiency), 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 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 Robin Housing Associates as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

MARDEN HARRISON & KREUTER
Certified Public Accountants, P.C

/s/ Marden Harrison & Kreuter

Port Chester, New York
January 31, 1997

[MARDEN, HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Robin Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Robin Housing Associates (a
limited partnership) as of December 31, 1995 and 1994, and the related
statements of operations, partners' capital (deficiency), 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 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 Robin Housing Associates (a
limited partnership) as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

MARDEN, HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden, Harrison & Kreuter

Port Chester, New York
January 29, 1996

[MARDEN HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Concourse Artists Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Concourse Artists Housing
Associates (a limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficiency), 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 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 Concourse Artists Housing
Associates as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

MARDEN HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden Harrison & Kreuter

Port Chester, New York
January 31, 1997

[MARDEN, HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Concourse Artists Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Concourse Artists Housing
Associates (a limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital (deficiency), 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 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 Concourse Artists Housing
Associates as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

MARDEN, HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden, Harrison & Kreuter

Port Chester, New York
January 29, 1996

[MARDEN HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
2051 Grand Concourse Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of 2051 Grand Concourse Housing
Associates (a limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficiency), 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 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 2051 Grand Concourse Housing
Associates as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

MARDEN HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden Harrison & Kreuter

Port Chester, New York
January 31, 1997

[MARDEN, HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
2051 Grand Concourse Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of 2051 Grand Concourse Housing
Associates (a limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital (deficiency), 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 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 2051 Grand Concourse Housing
Associates as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

MARDEN, HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden, Harrison & Kreuter

Port Chester, New York
January 29, 1996

[MARDEN HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Willoughby-Wyckoff Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing
Associates (a limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficiency), 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 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 Willoughby-Wyckoff Housing
Associates as of December 31, 1996 and 1995, 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
company will continue as a going concern. As discussed in Note 1B to the
financial statements, the Partnership has had operating losses, operating cash
flow deficiencies, and equity deficiencies. These conditions raise substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

MARDEN HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden Harrison & Kreuter

Port Chester, New York
January 31, 1997

[MARDEN HARRISON & KREUTER LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Willoughby-Wyckoff Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing
Associates (a limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital (deficiency), 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 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 Willoughby-Wyckoff Housing
Associates (a limited partnership) as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

MARDEN, HARRISON & KREUTER
Certified Public Accountants, P.C.

/s/ Marden, Harrison & Kreuter

Port Chester, New York
January 29, 1996

[WOLFE NILGES NAHORSKI LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Goodfellow Place Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, 1996 and 1995, 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 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 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 Goodfellow Place Limited
Partnership as of December 31, 1996 and 1995, 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
Project will continue as a going concern. As discussed in Note 12 to the
financial statements, the Project has suffered recurring cash flow deficiencies
from operations. This raises substantial doubt about the Project's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 12. The financial statements include an adjustment of
$2,648,894 for the impairment of apartment buildings held and used as described
in Note 13, but do not include any adjustments relating to the recoverability
and classification of other recorded assets, or the amounts and classifications
of liabilities that might be necessary in the event the Partnership cannot
continue in existence.

/s/ Wolfe Nilges Nahorski
----------------------------
A Professional Corporation
Certified Public Accountants

February 10, 1997
St. Louis, Missouri

[WOLFE NILGES NAHORSKI]

INDEPENDENT AUDITORS' REPORT

To the Partners
Goodfellow Place Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, l995 and 1994, 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 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 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 Goodfellow Place Limited
Partnership as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Wolfe Nilges Nahorski
----------------------------
A Professional Corporation
Certified Public Accountants

February 6, 1996

[HAMILTON & MUSSER, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Penn Alto Associates, Limited Partnership
Altoona, Pennsylvania 16601

We have audited the accompanying balance sheets of Penn Alto Associates, Limited
Partnership as of December 31, 1996 and 1995 and the related statements of
income, changes in partners' capital, and cash flows for the years then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our 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 the opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penn Alto Associates, Limited
Partnership, as of December 31, 1998 and 1995, and the results of its operations
and its cash flows for the years 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 accompanying supplementary information on pages
10 and 11 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 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.

Mechanicsburg, Pennsylvania
February 26, 1997

/s/ Hamilton & Musser, P.C.
-----------------------------
Certified Public Accountants

[HAMILTON & MUSSER, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Penn Alto Associates, Limited Partnership
Altoona, Pennsylvania 16601

We have audited the accompanying balance sheets of Penn Alto Associates,
Limited Partnership as of December 31, 1995 and 1994 and the related statements
of income, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our 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 the opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Penn Alto Associates,
Limited Partnership, as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years 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 accompanying supplementary
information on pages 10 and 11 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 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.

Mechanicsburg, Pennsylvania /s/ Hamilton & Musser
February 26, 1996 Certified Public Accountants

[TORRES LLOMPART, SANCHEZ RUIZ & CO. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

Partners
Gramco Development Limited Dividend Partnership, L.P.
San Juan, Puerto Rico

We have audited the accompanying balance sheet of Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-3514( -LD (HODAG), as of
December 31, 1996, and the related statements of profit and loss, 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 Gramco Development Limited Dividend Partnership, L.P. as
of December 31, 1995, were audited by other auditors whose report dated March
11, 1996, 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 statements 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 Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 1996, and the results of its operations, changes in partners' capital and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.

/s/ Torres Llompart, Sanchez Ruiz & Co.

March 27, 1997
License No. 169
San Juan, Puerto Rico

Stamp number 1421600 was affixed
to the original of this report.

[VELEZ, SEMPRIT, NIEVES & CO. - SAN JUAN, PUERTO RICO - LETTERHEAD]

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

Partners
Gramco Development Limited Dividend Partnership, L.P.
San Juan, Puerto Rico

We have audited the accompanying balance sheets of Gramco Development Dividend
Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December 31, 1995
and 1994, and the related statements of profit and 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 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 Gramco Development Limited
Dividend Partnership, L.P. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Velez Semprit Nieves & Co.

March 11, 1996

Stamp number 1340376 was
affixed to the original of this
report.

[COLE, EVANS & PETERSON LETTERHEAD]

February 24, 1997

INDEPENDENT AUDITORS' REPORT

To the Partners
Alexis Park Apartments,
A Louisiana Partnership In Commendam
Bossier City, Louisiana

We have audited the accompanying balance sheets of Alexis Park Apartments,
A Louisiana Partnership In Commendam at December 31, 1996 and December 31, 1995
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. 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 in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 1996 and
December 31, 1995, 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 mentioned in Note 12 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste, related lawsuits, and an unrelated
investigation by the U. S. Department of Justice, that raise substantial doubt
about the Partnership's ability to continue as a going concern. Management's
position in regards to these matters are also mentioned in Note 12. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

/s/ Cole, Evans & Peterson
----------------------
Cole, Evans & Peterson

February 24, 1997
Shreveport, Louisiana

[COLE, EVANS & PETERSON - SHREVEPORT, LOUISIANA - LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Alexis Park Apartments,
A Louisiana Partnership In Commendam
Bossier City, Louisiana

We have audited the accompanying balance sheets of Alexis Park Apartments, A
Louisiana Partnership In Commendam at December 31, 1995 and December 31, 1994
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. 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 in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 1995 and
December 31, 1994, 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 mentioned in Note 12 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste, related lawsuits, and an unrelated

investigation by the U.S. Department of Justice, that raise substantial doubt
about the Partnership's ability to continue as a going concern. Management's
position in regards to these matters are also mentioned in Note 12. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

/s/ Cole, Evans & Peterson
Cole, Evans & Peterson

[CHESSER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

Partners
Williamsburg Residential, L.P.
Wichita, Kansas

We have audited the accompanying balance sheet of Williamsburg Residential, L.P.
as of December 31, 1996 and 1995, 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 our 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, L.P.
as of December 31, 1996 and 1995, 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
Company will continue as a going concern. As discussed in note 11 to the
financial statements, the Company has suffered recurring losses from operations
and defaulted on their mortgage note payable which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 11. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ Chesser & Company

Wichita, Kansas
March 12, 1997

[CHESSER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

Partners
Williamsburg Residential, L.P.
Wichita, Kansas

We have audited the accompanying balance sheet of Williamsburg Residential, L.P.
as of December 31, 1995 and 1994, 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 our 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, L.P.
as of December 31, 1995 and 1994, 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

Wichita, Kansas
February 14, 1996

[PHILIP ROOTBERG & COMPANY, LLP LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 1996 and 1995,
and the related statements of profit and loss, 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
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 Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 1996 and 1995, and the results of its
operations, changes in partners' capital (deficit) 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 29, 1997, on our consideration of the Partnership's internal
control structure and a report dated January 29, 1997, on its compliance with
laws and regulations.

[PHILIP ROOTBERG & COMPANY, LLP LETTERHEAD]

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed on the preceding contents page are presented for purposes of additional
analysis to comply with HUD reporting requirements and are 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/ PHILIP ROOTBERG & COMPANY, LLP

Chicago, Illinois
January 29, 1997

[PHILIP ROOTBERG & COMPANY, LLP - CHICAGO, ILLINOIS - LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 1995 and 1994,
and the related statements of profit and loss, 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
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 Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 1995 and 1994, and the results of its
operations, changes in partners' capital (deficit) 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 30, 1996, on our consideration of the Partnership's internal
control structure and a report dated January 30, 1996, on its compliance with
laws and regulations.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed on the preceding contents page are presented for purposes of additional
analysis to comply with HUD reporting requirements and are 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/ Philip Rootberg & Company, LLP

January 30, 1996

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

March 31
------------------------------
1997 1996
------------- -------------

ASSETS

Property and equipment, at cost, less accumulated
depreciation (Notes 2, 4 and 7) $ 180,610,721 $ 192,479,831
Cash and cash equivalents (Notes 2, 3 and 10) 4,956,628 4,498,565
Cash held in escrow (Notes 2, 3 and 5) 6,304,514 6,382,851
Deferred costs - less accumulated amortization (Notes 2 and 6) 4,273,139 4,479,818
Other assets 4,124,261 4,988,601
------------- -------------

Total assets $ 200,269,263 $ 212,829,666
============= =============

LIABILITIES AND PARTNERS' CAPITAL

Liabilities
Mortgage notes payable (Note 7) $ 118,783,431 $ 119,895,307
Accounts payable and other liabilities (Note 10) 9,331,939 8,477,781
Due to local general partners and affiliates (Note 8) 10,926,397 10,632,221
Due to general partners and affiliates (Note 8) 2,785,541 1,216,964
Due to selling partners 3,429,863 3,658,664
------------- -------------

145,257,171 143,880,937
------------- -------------

Minority interests (Note 2) 3,297,946 3,827,457
------------- -------------

Commitments and contingencies (Notes 8 and 10)
Partners' capital
Limited partners ( 115,917.5 BACs
issued and outstanding) (Note 1) 52,227,688 65,500,743
General partners (513,542) (379,471)
------------- -------------

Total partners' capital 51,714,146 65,121,272
------------- -------------

Total liabilities and partners' capital $ 200,269,263 $ 212,829,666
============= =============

See accompanying notes to consolidated financial statements.

-22-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended March 31
--------------------------------------------
1997 1996* 1995*
------------ ------------ ------------

Revenues
Rental income $ 25,187,403 $ 24,338,859 $ 24,297,753
Other (Note 10) 732,404 1,048,071 776,942
------------ ------------ ------------

25,919,807 25,386,930 25,074,695
------------ ------------ ------------

Expenses
General and administrative 5,474,850 5,194,757 4,788,987
General and administrative-related parties (Note 8) 2,283,782 1,051,462 1,428,375
Repairs and maintenance 4,278,462 3,979,837 4,020,852
Operating and other 3,116,779 2,838,531 3,028,546
Real estate taxes 1,035,225 1,031,134 1,063,983
Insurance 1,344,916 1,370,405 1,339,173
Financial, primarily interest 8,381,581 8,498,925 8,364,351
Depreciation and amortization 8,847,941 8,139,580 8,369,422
Provision for impairment of assets (Note 4) 4,727,077 0 0
------------ ------------ ------------

39,490,613 32,104,631 32,403,689
------------ ------------ ------------

Loss before minority interest (13,570,806) (6,717,701) (7,328,994)

Minority interest in loss of subsidiaries 163,680 185,143 418,892
------------ ------------ ------------

Net loss $(13,407,126) $ (6,532,558) $ (6,910,102)
============ ============ ============
Net loss - limited partners $(13,273,055) $ (6,467,232) $ (6,841,001)
============ ============ ============
Number of BACs outstanding 115,917.5 115,917.5 115,917.5
============ ============ ============
Net loss per BAC $ (114.50) $ (55.79) $ (59.01)
============ ============ ============

*Reclassified for comparative purpoes
See accompanying notes to consolidated financial statements.

-23-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

Total Limited Partners General Partners
----- ---------------- ----------------

Partners' capital - April 1, 1994 78,563,932 78,808,976 (245,044)
Net loss (6,910,102) (6,841,001) (69,101)
------------ ------------ ------------

Partners' capital - March 31, 1995 71,653,830 71,967,975 (314,145)
Net loss (6,532,558) (6,467,232) (65,326)
------------ ------------ ------------

Partners' capital - March 31, 1996 65,121,272 65,500,743 (379,471)

Net loss (13,407,126) (13,273,055) (134,071)
------------ ------------ ------------

Partners' capital - March 31, 1997 $ 51,714,146 $ 52,227,688 $ (513,542)
============ ============ ============

See accompanying notes to consolidated financial statements.

-24-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year Ended March 31
--------------------------------------------
1997 1996* 1995*
------------ ------------ ------------

Cash flows from operating activities:
Net loss $(13,407,126) $ (6,532,558) $ (6,910,102)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:

Present value of legal settlement (Note 10) 75,905 0 363,149
Loss on sale of property and equipment 21,061 0 17,435
Depreciation and amortization 8,847,941 8,139,580 8,369,422
Provision for impairment of assets 4,727,077 0 0
Minority interest in loss of subsidiaries (163,680) (185,143) (418,892)
Accrued interest added to principal of
mortgage note payable 52,872 52,872 52,872
(Increase) decrease in assets
Cash held in escrow (350,708) (135,938) (519,316)
Deferred costs (23,625) 0 (5,000)
Other assets 864,340 (154,802) (538,766)
Increase (decrease) in liabilities
Accounts payable and other liabilities 778,253 424,090 (1,534,982)
Due to general partners and affiliates 1,568,577 502,513 329,411
------------ ------------ ------------

Total adjustments 16,398,013 8,643,172 6,115,333
------------ ------------ ------------

Net cash provided by (used in) operating activities 2,990,887 2,110,614 (794,769)
------------ ------------ ------------

Cash flows from investing activities:
Acquisitions of property and equipment (1,463,525) (1,452,484) (264,731)
Dispositions of property and equipment 0 0 0
Decrease (increase) in cash held in escrow 429,045 (52,967) (540,012)
------------ ------------ ------------

Net cash used in investing activities (1,034,480) (1,505,451) (804,743)
------------ ------------ ------------

Net cash provided by (used in) operating and
investing activities, carried forward 1,956,407 605,163 (1,599,512)

*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.

-25-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(CONTINUED)

Year Ended March 31
--------------------------------------------
1997 1996* 1995*
------------ ------------ ------------

Net cash provided by (used in) operating and
investing activities, brought forward $ 1,956,407 $ 605,163 $ (1,599,512)
------------ ------------ ------------
Cash flows from financing activities:
Increase in deferred costs (33,140) (128,112) (94,190)
Proceeds from refinancing of mortgage notes 0 0 2,920,000
Repayments of mortgage notes (1,164,748) (1,184,860) (4,028,749)
Increase in due to local general partners
and affiliates 735,853 1,115,182 2,470,239
Decrease in due to local general partners
and affiliates (441,677) (396,023) (455,588)
(Decrease) increase in due to selling partners (228,801) 61,414 56,858
(Decrease) increase in capitalization of consolidated
subsidiaries attributable to minority interest (365,831) 51,583 (4,454)
------------ ------------ ------------

Net cash (used in) provided by financing activities (1,498,344) (480,816) 864,116
------------ ------------ ------------

Net increase (decrease) in cash and cash equivalents 458,063 124,347 (735,396)

Cash and cash equivalents at beginning of year 4,498,565 4,374,218 5,109,614
------------ ------------ ------------

Cash and cash equivalents at end of year $ 4,956,628 $ 4,498,565 $ 4,374,218
============ ============ ============

Supplemental disclosure of cash flows information:

Cash paid during the year for interest $ 7,356,078 $ 7,600,270 $ 7,553,865

Supplemental disclosures of noncash investing
and financing activities:

Proceeds from mortgage notes used to reduce due to
local general partners and affiliates $ 0 $ 161,205 $ 0
Increase in accounts payable and other liabilities
from present value of legal settlement 75,905 0 363,149
Mortgage principal payments and funding of
reserve for replacements made by the subsidiary
general partner on the subsidiary's behalf 0 0 74,621

*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.

-26-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 1 - General

Liberty Tax Credit Plus II L.P., a Delaware limited partnership (the
"Partnership"), was organized on March 25, 1988, but had no activity until July
1, 1988 (which date is considered to be inception for financial accounting
purposes). The Partnership had no operations until commencement of the public
offering on July 20, 1988.

The Partnership's business is to invest in other limited partnerships
("Local Partnerships", "subsidiaries" or "subsidiary partnerships") owning
leveraged Apartment Complexes that are eligible for the low-income housing tax
credit ("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. The Partnership's investment in each Local
Partnership represents a 20% to 98% interest in that Local Partnership.

The Partnership has acquired interests in 27 Local Partnerships as of March
31, 1997, and does not anticipate making any additional investments.

Effective August 16, 1996, pursuant to an Agreement and Consent
("Agreement"), Spring Creek Retail Associates, L.P. ("Retail") was merged with
Spring Creek Associates, L.P. ("Spring Creek") in which the Partnership has a
limited partnership interest. Before such merger, the commercial net rental
income from Retail was accrued by Spring Creek on the basis of cash flow from
Retail's operations, pursuant to the terms of a net lease agreement. Effective
upon the merger, the partnership agreement of Spring Creek was amended and the
net lease agreement was cancelled.

The Partnership was authorized to issue a total of 200,000 Beneficial
Assignment Certificates ("BACs"), of which 120,000 have been registered with the
Securities and Exchange Commission for sale to the public. The public offering
was completed on January 9, 1989 with a total of 115,917.5 BACs sold and
$115,917,500 of proceeds received by the Partnership.

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 27 subsidiary partnerships in which the Partnership is a limited
partner. Through the rights of the Partnership and/or a General Partner, which
General Partner has a contractual obligation to act on behalf of the
Partnership, to remove the general partner of the subsidiary local partnerships
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary local partnerships.

The Partnership's fiscal year ends on March 31. All subsidiaries have
calendar year ends. Accounts of the subsidiaries have been adjusted for
intercompany transactions from January 1 through March 31. The books and records
of the Partnership are maintained on the accrual basis of accounting, in
accordance with generally accepted accounting principles ("GAAP"). All
intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.

-27-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 2 - Summary of Significant Accounting Policies (Continued)

Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions and cash
distributions to the minority interest partners.

Losses attributable to minority interests which exceed the minority
interest's investment in a subsidiary partnership have been charged to the
Partnership. Such losses aggregated $524,000, $532,000 and $274,950 for the
years ended March 31, 1997, 1996 and 1995 (the 1996, 1995 and 1994 Fiscal
Years), respectively. The Partnership's investment in each subsidiary
partnership is equal to the respective subsidiary's partners' equity less
minority interest capital, if any. In consolidation, all subsidiary partnership
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.

c) Property and Equipment

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.

Property and equipment are carried at the lower of depreciated cost of
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, 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 provision for loss on impairment of
assets is recorded when estimated amounts recoverable through future operations
and sale of the property on an undiscounted basis are below depreciated cost.
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, 1997, the
Partnership has recorded approximately $4,727,000 as a provision for loss on
impairment of assets.

d) Organization and Offering Costs

Costs incurred to organize the Partnership, including but not limited to
legal, accounting, and registration fees, are considered deferred organization
expenses. These costs have been capitalized and are being amortized over a
60-month period. 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.

-28-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 2 - Summary of Significant Accounting Policies (Continued)

e) 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 (Note 9).

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. In
addition, the Partnership evaluates a potential environmental liability
independently from any potential claim for recovery.

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) Financial Statements Reclassifications

Certain reclassifications have been made to the 1995 and 1994 Fiscal Year
Financial Statements to conform with the 1996 Fiscal Year Financial Statement
presentation. Such reclassifications had no effect on net loss as previously
reported.

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.

Mortgage Notes Payable

The fair value of mortgage notes payable is estimated, where practicable,
based on the borrowing rate currently available for similar loans.

-29-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 3 - Fair Value of Financial Instruments (Continued)

The estimated fair values of the Partnership's mortgage notes payable are
as follows:

March 31, 1997 March 31, 1996
--------------------------- ---------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ------------ ------------ ------------

Mortgage Notes Payable for which it is:
Practicable to estimate fair value $ 9,039,722 $ 8,154,347 $ 9,206,333 $ 8,160,232

Not Practicable $109,743,706 * $110,688,974 *

*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.

The carrying amount of other assets and liabilities reported on the
statement of financial position that require such disclosure approximates fair
value.

Due to Selling Partners and Due to General Partner and Affiliates

The estimated fair value of the Partnership's due to selling partners and
due to General Partner and affiliates which are different than the carrying
value are as follows:

March 31, 1997 March 31, 1996
--------------------------- ---------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ------------ ------------ ------------

Due to selling partners $ 3,429,863 $ 4,446,316 $ 3,658,664 $ 4,471,090
Due to general partner and
affiliates $ 10,926,397 $ 10,191,997 $ 10,632,221 $ 10,206,358

The carrying amount of other assets and liabilities reported on the
statement of financial position that require such disclosure approximates fair
value.

-30-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 4 - Property and Equipment

The components of property and equipment are as follows:

March 31
------------------------------ Estimated Useful
1997 1996 Lives (Years)
------------- ------------- ----------------

Land $ 14,444,085 $ 14,537,850 --
Building and improvements 217,275,838 221,514,496 15 to 40
Other 5,190,378 5,171,243 5 to 15
------------- -------------
236,910,301 241,223,589
Less: Accumulated depreciation (56,299,580) (48,743,758)
------------- -------------

$ 180,610,721 $ 192,479,831
============= =============

Included in property and equipment is $6,955,050 of acquisition fees paid
or accrued to the general partners and $1,606,014 of acquisition expenses as of
March 31, 1997 and 1996. In addition, as of March 31, 1997 and 1996, buildings
and improvements include $7,015,991 of capitalized interest.

Depreciation expense for the years ended March 31, 1997, 1996 and 1995
amounted to $8,584,497, $7,947,111 and $7,954,255, respectively.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $20,563,695 to the Local General
Partners and affiliates. Such fees have been included in the cost of property
and equipment.

During the 1996 Fiscal Year, there was a decrease in accumulated
depreciation in the amounts of $61,438 and $967,237 due to write-offs on
dispositions and the provision for impairment of assets relating to Gramco
Development Limited Dividend Partnership and Goodfellow Place Limited
Partnership, respectively.

On December 31, 1996, the buildings at Whittier Plaza Associates, L.P. were
deemed to be impaired and written down to estimated fair value. Fair value was
determined based on forecasted net operating income, capitalized at a rate of
10%. Carrying value exceeded estimated fair value by approximately $490,000.
Accordingly, a loss of that amount has been charged to operations in the 1996
Fiscal Year.

Williamsburg Residential L.P. has experienced significant losses and cash
flow problems and is presently in default on the mortgage note. As a result of
the operating losses and cash flow problems, management of Williamsburg
determined that an impairment of the property existed at December 31, 1996. The
impairment loss was determined to be $1,588,183 and has been charged to
operations in the 1996 Fiscal Year. The amount of the impairment loss was
determined based on the difference in the carrying value of the property and the
valuation of the property based on capitalized cash flows.

As a result of cash flow deficiencies decribed in Note 11, land and
apartment buildings at Goodfellow Place Limited Partnership have been deemed to
be impaired and written down to their fair value. The fair value at December 31,
1996 was estimated by management to be $1,140,000. Management estimated the fair
value by capitalizing estimated annual cash flows before debt service using a
13% capitalization rate. The carrying value of the apartment buildings at
December 31, 1996 exceeded their fair value by $2,648,894. An impairment loss of
that amount has been charged to operations in the 1996 Fiscal Year.

-31-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 5 - Cash Held in Escrow

Cash held in escrow is restricted and consists of the following:

March 31
-------------------------
1997 1996
---------- ----------
Real estate taxes, insurance, reconstruction
and other $3,289,258 $2,985,222
Reserve for replacements 2,114,163 2,248,958
Tenant security deposits 901,093 854,421
Purchase price payments 0 294,250
---------- ----------
$6,304,514 $6,382,851
========== ==========
NOTE 6 - Deferred Costs

The components of other deferred costs and their periods of
amortization are as follows:

March 31
--------------------------
1997 1996 Period
----------- ----------- ---------
Financing expenses $ 4,838,639 $ 4,805,499 *
Organization expenses 1,660,147 1,834,552 60 months
Other 741,253 717,628 Various
----------- -----------
7,240,039 7,357,679
Less: Accumulated amortization (2,966,900) (2,877,861)
----------- -----------
$ 4,273,139 $ 4,479,818
=========== ===========

*Over the life of the respective related mortgages.

Amortization expense for the years ended March 31, 1997, 1996 and 1995
amounted to $263,444, $192,469 and $415,167, respectively. During the year ended
March 31, 1997, $174,405 of fully amortized deferred costs were written off.

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $701,000, including principal and interest at rates varying from
0% to 15% per annum, through 2030. Each subsidiary partnership's mortgage note
payable is collateralized by the land and buildings of the respective subsidiary
partnership and the assignment of certain subsidiary partnership's rents and
leases and is without further recourse.

-32-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 7 - Mortgage Notes Payable (Continued)

Annual principal payment requirements for each of the next five fiscal
years and thereafter are as follows:

Fiscal Year Amount
----------- ------
1997 $ 2,227,876
1998 1,531,116
1999 1,617,217
2000 1,725,032
2001 1,860,890
Thereafter 109,821,300
-------------
$ 118,783,431
=============

One subsidiary partnership, United Glen Arden II Limited Partnership, holds
a mortgage note which is eligible for an interest reduction subsidy under
Section 236 of the National Housing Act. At December 31, 1996, said note, which
bears interest at 7.5% per annum through May 1, 2011, has a balance of
$2,732,263.

NOTE 8 - Related Party Transactions

A) Related Party Fees

One of the General Partners has a 1% interest as a special limited partner
in each of the Local Partnerships. An affiliate of the General Partners also has
a minority interest in certain Local Limited Partnerships.

The General Partners and their affiliates perform services for the
Partnership. The costs incurred for the years ended March 31, 1997, 1996 and
1995 are as follows:

Year Ended March 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
Partnership management fees (a) $1,496,000 $ 299,000 $ 293,000
Expense reimbursement (b) 92,872 89,987 88,719
Property management fees (c) 643,410 613,475 697,786
Local administrative fee (d) 51,500 49,000 32,500
Interest expense (e) 0 0 316,370
---------- ---------- ----------
$2,283,782 $1,051,462 $1,428,375
========== ========== ==========

(a) 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. Partnership
management fees owed to the General Partners amounting to approximately
$2,378,000 and $882,000 were accrued and unpaid as of March 31, 1997 and March
31, 1996, respectively.

-33-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 8 - Related Party Transactions (Continued)

A) Related Party Fees (Continued)

(b) 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.

(c) Property management fees incurred by subsidiary partnerships amounted
to $1,497,138, $1,478,178 and $1,456,512 for the 1996, 1995 and 1994 Fiscal
Years, respectively. Of these fees $643,410, $613,475 and $697,786 were incurred
to affiliates of the subsidiary partnerships' general partners. Included in
amounts incurred to affiliates of the subsidiary partnerships' general partners
are $102,869, $77,325 and $127,061, respectively, which were also incurred to
affiliates of the Partnership.

(d) Liberty Associates II L.P., 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 II L.P. has a .01% interest as the special limited
partner in each of the subsidiary partnerships. Liberty Associates II L.P.
received cash distributions of approximately $500, $142 and $166 during the
1997, 1996 and 1995 Fiscal Years, respectively.

Pursuant to the Partnership Agreement and the Local Partnership Agreements,
the General Partners and Liberty Associates II L.P. received their allocable
share of profits, losses and tax credits allocated by the Partnership and the
Local Partnerships, respectively.

During the 1996 Fiscal Year, Related G.P. Holdings, Inc., an affiliate of
the Related General Partner, purchased the general partner interest in the local
general partner of four subsidiary partnerships: Spring Creek Associates, L.P.,
East Two Thirty-Five Associates, West 107th Street Associates, L.P. and General
Atlantic Second Ave. Associates, L.P. As of November 1, 1996 and January 1,
1997, Related Management Company, L.P., an affiliate of the Related General
Partner, became the managing agent of Spring Creek Associates, L.P. and East Two
Thirty-Five Associates, respectively.

(e) On June 3, 1994, Polynesian Apartments Associates, Ltd. refinanced its
mortgage note. The original mortgage loan amortized over a thirty-year period
assuming an eleven percent pay-rate on the outstanding principal balance.
Interest accrued at two and three quarters percent above a specified index. At
December 31, 1993, the interest rate was 6%. To the extent that the monthly
payments exceeded the applicable interest rate, such excess payments (positive
amortization) were to be treated as voluntary prepayments of the outstanding
principal balance. Proceeds from the savings of interest expense amounting to
316,370 due to positive amortization became payable to the principals of the
general partner, as stated in the partnership agreement.

-34-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 8 - Related Party Transactions (Continued)

A) Related Party Fees (Continued)

(f) Due to Local General Partners and affiliates at March 31, 1997 and 1996
consists of the following:

March 31,
-----------------------------
1997 1996
----------- -----------
Operating advances $ 1,974,497 $ 2,116,729
Development fee payable 2,583,084 2,610,081
Operating deficit advances 4,291,724 3,736,146
Management and other fees 733,304 719,566
Long term notes payable (g) 965,541 1,202,541
Interest - long term notes payable 378,247 247,158
----------- -----------
$10,926,397 $10,632,221
=========== ===========

(g) Long term notes payable consist of the following:

Polynesian $ 316,370 $ 316,370

This promissory note bears interest at 11%
with a maturity date of June 1, 2003.
Interest expense of $34,800 was incurred for
the years ended March 31, 1997 and 1996

Seagrape 649,171 886,171
---------- ----------

This promissory note bears interest at 11%
with a maturity date of July 1, 2002.
Interest expense of $96,289 and $97,479 was
incurred for the years ended March 31, 1997
and 1996
$ 965,541 $1,202,541
========== ==========

B) Guarantees

The Partnership has negotiated Operating Deficit Guarantee Agreements with
all Local Partnerships, pursuant to which the general partners of the Local
Partnerships 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 stabilization. The gross
amount of the Operating Deficit Guarantees aggregates approximately $11,567,000,
of which $11,567,000, $11,273,300 and $10,099,330 had expired as of March 31,
1997, 1996, and 1995, respectively. As of March 31, 1997, 1996, and 1995,
approximately $5,580,000, $4,965,000 and $4,304,000, respectively had been
funded by the Local General Partners to meet such obligations. Although all
operating deficit guarantees have expired, management does not expect a material
impact on liquidity, based on prior years' funding. Of the total amount funded
through March 31, 1997, approximately $1,033,000 has been recorded as a capital
contribution, $136,000 was funded by the Partnership, $60,000 has been
recognized as income during the 1992 Fiscal Year, and the remaining balance of
approximately $4,292,000 is recorded as noninterest-bearing operating advances
to be repaid from operating cash flow.

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.

-35-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 9 - Income Taxes

A reconciliation of the financial statement net loss to the income tax loss
for the Partnership and its consolidated subsidiaries is as follows:

Year Ended December 31
--------------------------------------------
1996 1995* 1994*
------------ ------------ ------------

Financial statement Net loss $(13,407,126) $ (6,532,558) $ (6,910,102)

Difference resulting from parent company having a
different fiscal year for income tax and financial
reporting purposes 1,272,589 (59,193) 218,609

Difference between depreciation and amortization
expense recorded for financial reporting purposes
and the accelerated cost recovery system utilized
for income tax purposes (1,354,876) (1,980,066) (1,995,644)

Provision for impairment
of assets recorded for financial reporting purposes 4,727,077 0 0

Non-deductible litigation settlement 55,042 (18,800) 359,244

Excess losses allocated to minority interest for income
tax purposes 863,663 799,926 640,859

Other 412,996 (62,028) (195,956)
------------ ------------ ------------

Net loss as shown on the income tax return for the
calendar year ended $ (7,430,635) $ (7,852,719) $ (7,882,990)
============ ============ ============

*Reclassified for comparative purposes

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships - Going Concern

The auditors for five subsidiary Partnerships, Whittier Plaza Associates
Limited Partnership, Alexis Park Apartments, Williamsburg Residential, L.P.,
Goodfellow Place Limited Partnership and Willougby-Wyckoff Housing Associates,
modified their reports on the 1996 Fiscal Year financial statements due to the
uncertainty of each subsidiary partnership's ability to continue as a going
concern. The financial statements do not include any adjustments that would be
necessary in the event the subsidiary partnerships are unable to continue as
going concerns.

-36-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

a) Subsidiary Partnerships - Going Concern (Continued)

Whittier Plaza Associates

The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that the partnership will continue as a
going concern. Whittier has sustained continuous losses since commencement of
operations in 1988, including losses of approximately $550,000, $42,000 and
$58,000 for the 1996, 1995 and 1994 Fiscal Years, respectively. Whittier has
experienced higher vacancies and lower rents than those originally projected,
resulting in increased difficulty in meeting both operating and debt service
obligations. A subsidiary general partner, pursuant to a development deficit
guarantee agreement, has advanced $53,086 and $54,234 in the 1996 and 1995
Fiscal Years, respectively, and $291,994 since 1988 to fund operating cash
shortfalls. In addition, the subsidiary partnership's management company, an
affiliate of the local general partner, has deferred receipt of various fees
since 1991 totalling $42,864. These items raise substantial doubt about
Whittier's ability to continue as a going concern. The Partnership's investment
in Whittier at March 31, 1997 and 1996 was reduced to zero as a result of prior
years' losses and the minority interest balance was $0 at each date. Whittier's
net loss after minority interest amounted to approximately $550,000 (after
provision for impairment of assets of approximately $490,000), $42,000 and
$58,000 for the 1996, 1995 and 1994 Fiscal Years.

Alexis Park Apartments

During 1990, vapor fumes were discovered in several apartments at Alexis
Park Apartments, a Louisiana Partnership in Commendam ("Alexis"). As a result,
47 of the 280 units were vacated as ordered by the Louisiana Department of
Environmental Quality ("DEQ"). At December 31, 1996, 39 of these units have been
cleared for occupancy by the Louisiana Department of Health and Hospitals, the
remaining 8 units have undergone refurbishing and are currently being rented to
an oil company. It is anticipated that the units will be available to the
general public in the near future.

Alexis has also been named as co-defendant in a suit for damages filed by a
group comprised of former tenants and a few present tenants at the project. The
suit, Berzas, et. al. v. Oxy USA, Inc., et al., was instituted in January 1991
in the 26th Judicial District Court, Bossier Parish, Louisiana. The Partnership
has been advised that Louisiana law does not permit disclosure of money damages
sought. The suit alleges certain personal injuries as a result of exposure to
toxic chemicals emanating from the site upon which the Apartment Complex is
built. Management intends to deny all allegations stated in the complaint. Legal
counsel for Alexis expects a settlement agreement and a dismissal of claims will
be perfected in early 1997. The settlement will be paid by insurance with no
loss to the Partnership.

Alexis is named as co-defendant in another suit. The suit, Jimmy Green, et
al. v. Cities Service Refinery, et al., was instituted in March 1991 in the 26th
Judicial District Court, Bossier Parish, Louisiana. The Partnership has been
advised that Louisiana law does not permit disclosure of money damages sought.
The plaintiffs are a group of homeowners who live south of the Alexis site and
are seeking damages for devaluation of their property and for alleged personal
injuries suffered as a result of exposure to toxic chemicals which they claim
emanated from the site of an oil refinery. Alexis is built on a portion of this
site. The property upon which the plaintiff's homes are built is not within the
boundaries of the oil refinery site. During 1996, Alexis' insurer settled the
suit for $2,500.

Alexis has filed a cross claim against the former owners of the property it
now operates, for judgment against them in solido, for any damages Alexis may
sustain arising from the environmental problem which

-37-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

a) Subsidiary Partnerships - Going Concern (Continued)

is the subject of the suit and also, should Alexis be cast in judgment in the
main demand, then for judgment over them in cross claim in solido, for the full
amount of said judgment.

Management of Alexis believes that the environmental issue has created a
negative image for the Project. The DEQ has issued a statement that all occupied
apartments are safe. Pursuant to an Investigative Agreement with the DEQ,
additional testing of the project site and adjacent areas began June 15, 1992.
The testing was overseen by the DEQ and was completed February 10, 1995.

The DEQ has now turned the matter over to the United States Environmental
Protection Agency ("EPA") to review the testing. The EPA performed indoor air
tests at the site on 28 units and issued a draft report on January 2, 1997.
According to the report, the EPA's inspection found that none of the units has
acute air pollution levels. The report further states that two units were found
to have sufficient amounts of air pollutants to possibily cause health concerns
after years of continual exposure. The report recommends certain remediation for
these two units and states that testing of the surrounding units will continue.
If remediation in some manner is required, the remediation plan will take into
account the health and safety of the residents and workers which would improve
the long-term prospects for occupancy.

In July of 1991, the former general partner of Alexis received notification
from the U.S. Department of Justice that some of its officers were under
investigation for possible violations of Federal criminal statutes arising out
of the filing of the Alexis partnership tax returns for the years 1988 and 1989.
Included in this notification was an invitation to appear before the Grand Jury.
The former general partner of Alexis opted to have its corporate counsel submit
to the U.S. Attorney and Internal Revenue Service, a written summary of the
former general partner's involvement with Alexis and the filing of Alexis' tax
returns.

The former general partner denies any wrong doing. The facts and focus of
this investigation are unclear and the ultimate effects, if any, on the
Partnership's financial statements are not determinable.

In summary, management is optimistic that the hazardous waste matter will
be favorably resolved and that any losses from the class action lawsuit will be
covered by insurance. Management believes that the investigation by the U.S.
Department of Justice is unlikely to have any material financial effect on the
Partnership. Management believes Alexis has demonstrated that it has the ability
to generate sufficient operating capital without the oil company's assistance.
Based on these evaluations, management believes that Alexis will continue as a
going concern for at least one year beyond December 31, 1996. It is too
premature to make an evaluation of the amount or range of Alexis' potential
loss, therefore it is management's opinion that no accrual for potential losses
is currently warranted in the financial statements. The maximum loss which the
Partnership would be liable for is its net investment in Alexis amounting to
approximately $879,000 at March 31, 1997. Management estimates that the impact
of the negative publicity on occupancy may continue for awhile and believes that
future levels of occupancy will depend on the final findings of the
investigating parties and on future media attention. The Partnership's
investment in Alexis at March 31, 1997 and 1996 was approximately $879,000 and
$1,016,000, respectively, and the minority interest balance was approximately
$3,800 and $5,200, respectively. Alexis' net loss after minority interest
amounted to approximately $137,000, $244,000 and $165,000, for the 1996, 1995
and 1994 Fiscal Years respectively.

-38-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

a) Subsidiary Partnerships - Going Concern (Continued)

Williamsburg Residential, L.P.

In November 1996, the general partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making mortgage note payments which constituted an
event of default. The general partner also communicated to the limited partners
its desire to withdraw as general partner and property manager in an effort to
eliminate the need for it to further secure loans from its affiliated entities
to keep the project going. The limited partners retained a national property
management firm to operate the property effective January 1, 1997 and replaced
the general partner effective January 16, 1997.

The new general partner, which is an affiliate of the Related General
Partner, has been in contact with the lender, Federal National Mortgage
Association ("FNMA"), since shortly after the default. Williamsburg entered into
a Forbearance Agreement with FNMA on January 27, 1997. The agreement called for
back payments to be made and provided Williamsburg 60 days to work out a loan
agreement. A subsequent extension of the forbearance agreement runs through July
25, 1997. The general framework of the proposed loan modification agreement
calls for: 1. Williamsburg to deposit an amount approximately equal to six
months payments into a debt service escrow fund to be utilized as needed; 2.
Payments of interest only on the loan for 36 months; 3. The waiving of
replacement reserve escrow payments during 1997; 4. Excess net operating income
to be turned over to the loan servicer monthly. FNMA's standard modification
documentation will be used after which FNMA will not exercise further remedies
relating to the default. The factors mentioned above create an uncertainty as to
Williamsburg's ability to continue as a going concern. The financial statements
do not include any adjustments that might be necessary should Williamsburg be
unable to continue as a going concern. The Partnership's investment in
Williamsburg at March 31, 1997 and 1996 was reduced to zero by prior and current
years' losses and $1,037,000, respectively, and the minority interest balance
was zero at each date. Williamsburg's net loss after minority interest amounted
to approximately $1,667,000 (after provision for impairment of assets of
approximately $1,588,000), $142,000 and $58,000 for the 1996, 1995 and 1994
Fiscal Years, respectively.

Goodfellow Place Limited Partnership

The financial statements for Goodfellow Place Limited Partnership
("Goodfellow") have been prepared in conformity with generally accepted
accounting principles, which contemplates continuation of Goodfellow as a going
concern. However, Goodfellow has sustained substantial operating losses in
recent years. In addition, Goodfellow has used substantial amounts of working
capital in its operations and has depleted the operating deficit escrow
originally established in 1990 in the amount of $163,000. Further, at December
31, 1996 current liabilities exceed current assets and prepaid expenses by
$61,076.

A prepayment of $163,000 was due on the promissory note payable to St.
Louis Community Development Agency ("CDA") in August 1996, upon release of the
Operating Deficit Guarantee Escrow. The General Partners have defaulted on this
requirement and placed $163,000 in an interest bearing money market account in
the name of the project. This account has been voluntarily restricted by the
general partners and has a balance of $165,756 at December 31, 1996. The general
partners of Goodfellow plan to negotiate with CDA in an attempt to restructure
the agreement to allow the project to place those funds in the operating deficit
escrow account held in trust by Missouri Housing Development Commission
("MHDC"). These funds would then be used to fund future operating deficits. In
addition, management is evaluating the possibility of increasing rents to meet
cash flow needs.

-39-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

a) Subsidiary Partnerships - Going Concern (Continued)

In view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of
Goodfellow, which in turn is dependent upon Goodfellow's ability to negotiate an
agreement with CDA, and the success of its future operations. Management
believes that actions presently being taken to review Goodfellow's operating and
financial requirements provide the opportunity for Goodfellow to continue as a
going concern, however, the outcome of the planned negotiations with CDA is
uncertain.

It is management's opinion that no accrual for potential losses is
currently warranted in the financial statements. The Partnership's investment in
Goodfellow at March 31, 1997 and 1996 was reduced to zero by prior and current
years' losses, and $34,000, respecitvely and the minority interest balance was
zero at each date. Goodfellow's net loss after minority interest amounted to
approximately $2,829,000 (after provision for impairment of assets of
approximately $2,649,000), $102,000 and $103,000 for the 1996, 1995 and 1994
Fiscal Years, respectively.

Willoughby-Wyckoff Housing Associates

The financial statements for Willoughby-Wyckoff Housing Associates
("Willoughby") have been prepared on the basis that it will continue as a going
concern, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. There are certain
conditions that raise substantial doubt about Willoughby's ability to continue
as a going concern. Willoughby has had operating losses, operating cash flow
deficiencies and equity deficiencies.

Management plans to continue to minimize costs within its control and seek
additional funding sources to supplement project operations.

Continuance of Willoughby as a going concern is dependent upon Willoughby's
ability to obtain additional funding to supplement project operations and enable
Willoughby to meet its obligations as they become due. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties. It is management's opinion that no accrual for potential losses
is currently warranted in the financial statements.

The Partnership's investment in Willoughby at March 31, 1997 and 1996 has
been reduced to zero by prior years' losses and the minority interest balance
amounted to approximately $182,000 and $184,000, respectively. Willoughby's net
loss after minority interest amounted to approximately $273,000, $309,000 and
$316,000 for the 1996, 1995 and 1994 Fiscal Years, respectively.

b) Subsidiary Partnerships - Other

Gramco Development Limited Dividend Partnership, L.P.

The Office of the Inspector General conducted an audit of the construction
and operational costs of the Gramco Development Limited Dividend Partnership,
L.P. ("Bayamon") to ascertain compliance with federal government regulations.
The report on such audit recommended the repayment of $2,006,118 of Housing
Development Assistance Grant ("HODAG") funds provided by the U.S. Department of
Housing and Urban Development ("HUD") through the Municipality of Bayamon
("Municipality"). The report also recommended

-40-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

b) Subsidiary Partnerships - Other (Continued)

the return of $341,667 to Bayamon's operating account, allegedly distributed in
an unauthorized manner. In May 1995, the Partnership, OIG, HUD, the Municipality
of Bayamon, the general contractor (a related company of Bayamon), the Local
Partnership's general partner, the management agent, and the officers and
directors of the related companies executed a settlement agreement. As a result
of this agreement, the management agent assumed the liability and reimbursed
$600,000 to the Municipality corresponding to HODAG funds and $341,667 to the
project's general operating account, which is included in other income for the
1995 Fiscal Year. The parties fully released one and the other from any further
claim and any/all causes of action in connection with the OIG audit.

In the event of a substantive violation to the provisions of certain
agreements between Bayamon and the Municipality and between the Municipality and
HUD, a promissory note dated April 4, 1987 for $4,867,000 granted to Bayamon
shall become immediately due and payable at the election of HUD and the
Municipality. Otherwise, the principal amount of the obligation together with
any interest will be forgiven. Proceeds from the loan have been deducted from
fixed assets. It is management's opinion that no accrual for potential losses is
currently warranted in the financial statements. The Partnership's investment in
Bayamon at March 31, 1997 and 1996 was approximately $1,231,000 and $1,506,000
and the minority interest balance was approximately $425,000 and $427,000,
respectively. Bayamon's net income (loss) after minority interest amounted to
approximately ($275,000), $77,000 and ($252,000) for the 1996, 1995 and 1994
Fiscal Years, respectively.

Robin Housing Associates

Robin Housing Associates ("Robin Housing") is a defendant in a personal
injury lawsuit. The Partnership's insurance carrier intends to defend the
Partnership vigorously. Counsel believes that the insurance coverage is adequate
to cover any liability arising from this action. It is management's opinion that
no accrual for potential losses is currently warranted in the financial
statements. The maximum loss which the Partnership would be liable for is its
net investment in Robin Housing amounting to approximately $160,000 at March 31,
1997. The Partnership's investment in Robin Housing at March 31, 1997 and 1996
was approximately $160,000 and $185,000 and the minority interest balance was
$728,000 and $949,000, respectively. Robin Housing's net loss after minority
interest amounted to approximately $30,000, $36,000 and $31,000 for the 1996,
1995 and 1994 Fiscal Years, respectively.

Metropolitan Towers Associates, L.P.

The subsidiary partnership, Metropolitan Towers Associates, L.P.
("Metropolitan"), is a defendant in a legal proceeding brought about by one of
its tenants for damages suffered by her child upon falling from her apartment's
balcony. The proceedings are still in a preliminary phase but it is legal
counsel's opinion that if any damages are awarded to the plaintiff, the same
will be covered by the partnership's insurance policy. It is management's
opinion that no accrual for potential losses is currently warranted in the
financial statements. The maximum loss which the Partnership would be liable for
is its net investment in Metropolitan amounting to approximately $1,340,000 at
March 31, 1997. The Partnership's investment in Metropolitan at March 31, 1997
and 1996 was approximately $1,340,000 and $1,471,000, respectively, and the
minority interest was zero at each date. Metropolitan's net loss after minority
interest amounted to approximately $131,000, $147,000 and $139,000 for the 1996,
1995 and 1994 Fiscal Years, respectively.

-41-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

b) Subsidiary Partnerships - Other (Continued)

Santa Juanita II Limited Partnership

A bank filed a suit against the Local Partnership Santa Juanita II Limited
Partnership ("Santa Juanita") for non-payment of the monthly installments
required by a second mortgage loan agreement. During February 1994, the court
issued a judgement against Santa Juanita demanding immediate payment of the
second mortgage note with an outstanding principal balance of $474,656, plus
accrued interest and legal expenses. A significant portion of Santa Juanita's
operating assets is pledged as collateral for this note and foreclosure by the
bank would seriously impair Santa Juanita's continued existence. In May 1996,
the special limited partner of Santa Juanita instituted proceedings to formally
remove the general partner of Santa Juanita. In June 1996, the general partner
of Santa Juanita filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"). In June 1997 the court ordered that Santa
Juanita's Amended and Restated Agreement of Limited Partnership and Management
Agreement should not be part of the general partner's bankruptcy. As such, the
court ordered the general partner to surrender the books and records of Santa
Juanita to Liberty Associates, the special limited partner. Liberty Associates
is in the process of amending Santa Juanita's Amended and Restated Agreement of
Limited Partnership to remove the current general partner as general partner and
management agent and admit a new general partner and management agent. It is
managements opinion that no accrual for potential losses is currently warranted
in the financial statements. The financial statements for the 1996 and 1995
Fiscal Years for this subsidiary partnership were not audited. The maximum loss
which the Partnership would be liable for is its net investment in Santa Juanita
amounting to approximately $568,000 at March 31, 1997. The Partnerships
investment in Santa Juanita at March 31, 1997 and 1996 was approximately
$478,000 and $568,000, respectively, and the minority interest balance was zero
at each date. Santa Juanita's net loss after minority interest amounted to
approximately $90,000, $90,000 and $177,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

Rolling Green Limited Partnership

Rolling Green Limited Partnership ("Rolling Green") operates and is
regulated by HUD under Section 221(d)(3) of the National Housing Act. Rents
received by Rolling Green are subsidized by Section 8 Housing Assistance
Payments. Rental income from such Assistance Payments totaled $1,198,880 and
$1,143,607 in the 1996 and 1995 Fiscal Years, respectively. In September 1997,
two of the three Section 8 contracts, now in operation, will expire. Management
has been assured in verbal communications that such contracts will be renewed.
However, uncertainties regarding the future of HUD Programs exist. It is not
practical to estimate the impact upon Rolling Green's operations if the rents
were to be respectively changed to market value.

Campeche Isle Apartments, L.P.

Campeche Isle Apartments, L.P. ("Campeche") filed a voluntary petition
under Chapter 11 during March 1996. Although current on its debt service up to
and including the January 1, 1996 payment, the property was unable to fully fund
all operating expenses plus debt service following a 1% increase in the interest
rate on the property's mortgage in June of 1994. Debt service had been kept
current through advances by the subsidiary partnership's general partner, RCC
Pineview, Inc., and the Partnership totaling $302,222 as of December 31, 1996.
In addition, Campeche has not paid its managing agent in excess of $100,000 of
management fees.

In an effort to reduce the property's debt service burden, negotiations
with the holder of the property's first mortgage, Sun America Life Insurance
Company (the "Mortgagee") had been ongoing during

-42-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

b) Subsidiary Partnerships - Other (Continued)

January and February of 1996. The Mortgagee rejected Campeche's proposals and
commenced a foreclosure action during the latter part of February. In order to
preserve Campeche's ownership of the property, a Chapter 11 filing was made
during March 1996 and the Mortgagee was stayed from proceeding with its
foreclosure. Campeche has presented a Plan of Reorganization to the Bankruptcy
Court and the property is being operated under a Cash Collateral order issued by
the Court. Campeche completed the restructuring of their mortgage debt on June
19, 1997 wherein the mortgage debt was settled for $4,200,000, through the
following transactions: Bank of Boston made a $4,000,000 loan to Campeche and
the Partnership as co-borrowers. Such loan is secured by a first mortgage on
Campeche Isle Apartments, a pledge of the Partnership's interest in Spring Creek
and recourse guarantees of the Partnership, Campeche, Campeche's general partner
and one of the General Partners. In addition to paying off the mortgage, the
restructuring agreement required Campeche to make approximately $800,000 of
required repairs to the project. The Partnership raised approximately $1,400,000
through the sale of a portion of its limited partnership interests in
United-Glenarden I Limited Partnership and Property Development Associates, L.P.
to Related Glenport Associates, L.P., an affiliate of the General Partner.
Monthly debt service on the new loan will be paid by the net income of Campeche
and the balance by the Partnership. In addition, any distributions received by
the Partnership from Spring Creek must be placed in escrow at Bank of Boston.
The new loan matures on December 31, 1998. The financial statements for the 1996
Fiscal Year for this subsidiary partnership were not audited. The Partnerships
investment in Campeche at March 31, 1997 and 1996 was approximately $454,000 and
$788,000, respectively, and the minority interest balance was zero at each date.
Campeche's net loss after minority interest amounted to approximately $334,000,
$334,000 and $251,000 for the 1996, 1995 and 1994 Fiscal Years, respectively.

Seagrape Village Associates

Pursuant to an audit conducted by HUD, it was determined that 14 units of
the property were ineligible effective March 1, 1991, for inclusion in the
housing assistance payment contract. On November 1, 1994, Seagrape Village
Associates Ltd. ("Seagrape") entered into a settlement agreement with HUD
whereby Seagrape will reimburse to HUD the sum of $474,500 without interest over
twelve years commencing on December 1, 1996. Payment will be made by deducting
the monthly amount from each rental assistance payment. In 1994, Seagrape
recorded a liability of $306,154 after discounting the value of the settlement
by imputing an interest rate equal to 8%.

During 1996, HUD reviewed the refinancing of the mortgage note payable with
respect to its impact on rent. They determined that a retroactive reduction of
rents should take place. On September 10, 1996 Seagrape entered into a
settlement agreement with HUD whereby Seagrape will reimburse to HUD the sum of
$90,093 without interest over four years commencing on December 1, 1996. Payment
will be made by deducting the monthly amount from each rental assistance
payment. Seagrape recorded a liability of $75,905 after discounting the value of
the settlement by imputing an interest rate equal to 8%.

Polynesian Apartments Associates, Ltd.

On November 1, 1994, Polynesian Apartments Associates, Ltd. ("Polynesian")
entered into a settlement agreement with HUD whereby Polynesian will reimburse
to HUD the sum of $88,250 without interest over twelve years commencing on
December 1, 1994. Payment will be made by deducting the monthly amount from each
rental assistance payment. Polynesian recorded a liability of $56,995 after
discounting the value of the settlement by imputing an interest rate equal to
8%.

-43-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997

NOTE 10 - Commitments and Contingencies (Continued)

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, 1997, uninsured cash and cash
equivalents approximated $3,284,000.

d) Line of Credit

Included in accounts payable and other liabilities at March 31, 1997, is
approximately $745,000 borrowed by one subsidiary partnership, Rolling Green,
against a $1,000,000 line of credit. Rolling Green is required to pay
forty-eight monthly installments of $10,602 including interest at an annual rate
of 10.25% with a balloon payment of approximately $662,000 due on July 15, 1998.

e) 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 conditions generally, however
no more than 33% 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
owners 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.

f) Tax Credits

The Partnership and BACs holders began recognizing Housing Tax Credits with
respect to a Property when the Credit Period for such Property began. Because of
the time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC gradually increased over the first three years of
the Partnership. Housing Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. For the 1996, 1995 and 1994
tax years, Housing Tax Credits of $17,193,735, $17,174,288 and $17,203,141, were
generated.

A portion of the low-income housing tax credits are subject to recapture in
future years if (i) the Partnership ceases to meet qualification requirements,
(ii) there is a decrease in the qualified basis of the projects, or (iii) 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.

-44-

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.

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 II Inc., the general partner of the Related
General Partner, is set forth below.

Name Position
---- --------

Stephen M. Ross Director

J. Michael Fried President, Chief Executive Officer
and Director

Alan P. Hirmes Vice President

Stuart J. Boesky Vice President

Richard A. Palermo Treasurer

Lynn A. McMahon Secretary

STEPHEN M. ROSS, 57, is a Director of the general partner of the Related
General Partner. Mr. Ross is also 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.

J. MICHAEL FRIED, 53, is President, Chief Executive Officer and a Director
of the general partner of the Related General Partner. Mr. Fried is the sole
shareholder of one of the general partners of Related Capital Company
("Capital"), a real estate finance and acquisition affiliate of the Related
General Partner. In that capacity, he is the chief executive officer of Capital
's syndication, finance, acquisition and investor reporting activities. Mr.
Fried practiced corporate law in New York City with the law firm of Proskauer
Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried
graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude;
from Long Island University Graduate School with a Master of Science degree in
Psychology; and from Michigan State University with a Bachelor of Arts degree in
History.

ALAN P. HIRMES, 42, is a Vice President of the general partner of the
Related General Partner. Mr. Hirmes 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.

-45-

STUART J. BOESKY, 41, is a Vice President of the general partner of the
Related General Partner. Mr. Boesky 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.

RICHARD A. PALERMO, 37, is Treasurer of the general partner of the Related
General Partner. Mr. Palermo has been a Certified Public Accountant in New York
since 1985. Prior to joining Related in September 1993, Mr. Palermo was employed
by Sterling Grace Capital Management from October 1990 to September 1993,
Integrated Resources, Inc. from October 1988 to October 1990 and E.F. Hutton &
Company, Inc. from June 1986 to October 1988. From October 1982 to June 1986,
Mr. Palermo was employed by Marks Shron & Company and Mann Judd Landau,
certified public accountants. Mr. Palermo graduated from Adelphi University with
a Bachelor of Business Administration Degree.

LYNN A. McMAHON, 41, is Secretary of the general partner of the Related
General Partner. Since 1983, she has served as Assistant to the President of
Capital. From 1978 to 1983 she was employed at Sony Corporation of America in
the Government Relations Department.

-46-

Liberty GP II Inc.

Name Position
---- --------

Paul L. Abbott Chairman of the Board, President, Chief
Executive Officer and Chief Financial
Officer

Donald E. Petrow Vice President

PAUL L. ABBOTT, 51, is Chairman of the Board, President, Chief Executive
Officer and Chief Financial Officer of the Liberty General Partner and the
Managing Director of Lehman Brothers. Mr. Abbott joined Lehman in August 1988,
and is responsible for investment management of residential, commercial and
retail real estate. Prior to joining Lehman, Mr. Abbott was a real estate
consultant and a senior officer of a privately held company specializing in the
syndication of private real estate limited partnerships. From 1974 to 1983, Mr.
Abbott was an officer of two life insurance companies and a director of an
insurance agency subsidiary. Mr. Abbott received his formal education in the
undergraduate and graduate schools of Washington University in St. Louis.

DONALD E. PETROW, 40, is a Vice President of the Liberty General Partner
and First Vice President of Lehman Brothers. From March 1989, he has been
responsible for the investment management and restructuring of mortgage and
equity investments secured by multi-family apartments and government assisted
housing. From November 1981 to February 1989, Mr. Petrow, as a Vice President of
Lehman, was involved in investment banking activities relating to commercial
real estate direct investments. Prior to joining Lehman, Mr. Petrow was employed
in accounting and equipment leasing firms. Mr. Petrow holds a B.S. degree in
accounting from Saint Peters College and an M.B.A. in finance from Pace
University.

-47-

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 directors or
officers of the Liberty General Partner or the general partner of the Related
General Partner for their services. Certain directors and executive officers of
the Liberty General Partner and 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.
Such arrangements include, but are not limited to, the payment of an accountable
operating expense reimbursement, an annual partnership management fee not to
exceed 0.5% of invested assets and subordinated disposition fees. 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 also 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 is incorporated by reference thereto.

Tabular information concerning salaries, bonuses and other types of
compensation payable to executive officers has 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 Percent
Title of Class Beneficial Owner Beneficial Ownership of Clas
- - -------------- ---------------- -------------------- -------

General Partnership Related Credit Properties $500 capital contribution 49%
Interest in the Partnership II L.P. - directly owned
625 Madison Avenue
New York, NY 10022

Liberty GP II, Inc. $500 capital contribution 49%
c/o Lehman Brothers - directly owned
3 World Financial Center
New York, NY 10285

Liberty Associates II L.P. $1,000 capital contribution 2%
625 Madison Avenue - directly owned
New York, NY 10022

Liberty Associates II L.P. holds a 1% limited partnership interest in each
Local Partnership.

No person is known by the Partnership to be the beneficial owner of more
than 5% percent of the Limited Partnership Interests and/or the BACs; and none
of the General Partners nor any director or executive officer of the Liberty
General Partner or of the general partner of the Related General Partner owns
any Limited Partnership Interests or BACs.

-48-

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with
the General Partners and their affiliates, as discussed in Item 11 and also Note
8 to the Financial Statements in Item 8 above, 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 the general partner of the Related General Partner.

-49-

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

Sequential
Page
----

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 21

Consolidated Balance Sheets at March 31, 1997 and 1996 82

Consolidated Statements of Operations for the Years Ended
March 31, 1997, 1996 and 1995 83

Consolidated Statements of Changes in Partners' Capital for
the Years Ended March 31, 1997, 1996 and 1995 84

Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995 85

Notes to Consolidated Financial Statements 88

(a) 2. Financial Statement Schedules

Independent Auditors' Report 115

Schedule I - Condensed Financial Information of Registrant 116

Schedule III - Real Estate and Accumulated Depreciation and 119
Mortgage Loans on Real Estate

All other schedules have been omitted because they are not
required or because the required information is contained in the
financial statements and notes thereto.

(a) 3. Exhibits

(21) Subsidiaries of the Registrant 112

(27) Financial date schedule (filed herewith) 121

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter.

-50-

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(c) Subsidiaries of the Registrant (Exhibit 21)

Jurisdiction of
Formation
---------

Polynesian Apartments Associates, Ltd. (a Limited Partnership) FL
Seagrape Village Associates, Ltd. (a Limited Partnership) FL
Metropolitan Towers Associates, L.P. PR
Westminster Place II - Olive Site, L.P. MO
Property Development Associates, L.P. (Bridgeport) MO
Whittier Plaza Associates Limited Partnership MO
United-Glen Arden I Limited Partnership MD
United-Glen Arden II Limited Partnership MD
Rolling Green Limited Partnership IL
Santa Juanita II Limited Partnership NY
Spring Creek Associates, L.P. (a Delaware Limited Partnership) DE
East Two Thirty-Five Associates L.P. (a Delaware Limited Partnership) (14th Street) DE
Upper Fifth Avenue Residential Associates, L.P. DE
West 107th Street Associates, L.P. (a Delaware Limited Partnership) DE
General Atlantic Second Avenue Associates, L.P. (a Delaware Limited Partnership)
(96th Street) NY
Church Lane Associates PA
Campeche Isle Apartments Limited Partnership TX
Robin Housing Associates (a Limited Partnership) NY
Concourse Artists Housing Associates (a Limited Partnership) NY
2051 Grand Concourse Housing Associates (a Limited Partnership) NY
Willoughby-Wyckoff Housing Associates (a Limited Partnership) NY
Goodfellow Place Limited Partnership MO
Penn Alto Associates Limited Partnership PA
Gramco Development Limited Dividend Partnership, L.P. (Bayamon) PR
Alexis Park Apartments, a Louisiana Partnership in Commendam LA
Williamsburg Residential, L.P. KS
Victory Apartments IL

-51-

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 II L.P.
(Registrant)

By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner

By: RELATED CREDIT PROPERTIES II INC.,
a General Partner therein

Date: June 27, 1997 By: /s/ J. Michael Fried
--------------------------
J. Michael Fried
President, Chief Executive Officer
and Director (Principal Executive
Officer)

and

By: LIBERTY G.P. II INC.,
a General Partner

Date: June 27, 1997 By: /s/ Paul L. Abbott
--------------------------
Paul L. Abbott
Chairman of the Board, President,
Chief Executive Officer, Chief
Financial Officer and Director

-52-

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, Chief Executive Officer (Principal
Executive Officer) and Director of Related Credit
Properties Inc., general partner of Related Credit
/s/ J. Michael Fried Properties II L.P. (a General Partner of Registrant) June 27, 1997
- - ------------------------------
J. Michael Fried

Vice President (Principal Financial Officer) of
Related Credit Properties II Inc., general partner
of Related Credit Properties II L.P. (a General
/s/ Alan P. Hirmes Partner of Registrant) June 27, 1997
- - ------------------------------
Alan P. Hirmes

Treasurer (Principal Accounting Officer) of
Related Credit Properties II Inc., general partner
of Related Credit Properties II L.P. (a General
/s/ Richard A. Palermo Partner of Registrant) June 27, 1997
- - ------------------------------
Richard A. Palermo

Director of Related Credit Properties II Inc.,
general partner of Related Credit
/s/ Stephen M. Ross Properties II L.P. (a General Partner of Registrant) June 27, 1997
- - ------------------------------
Stephen M. Ross

Chairman of the Board, President, Chief
Executive Officer (Principal Executive Officer)
/s/ Paul L. Abbott and Director of Liberty GP II Inc. June 27, 1997
- - ------------------------------
Paul L. Abbott

-53-

INDEPENDENT AUDITORS' REPORT

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

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus II L.P. and Subsidiaries (a Delaware Limited
Partnership) included in this Form 10-K as presented in our opinion dated June
30, 1997 on page 21 and based on the reports of other auditors, we have also
audited supporting Schedule I for the 1996, 1995 and 1994 Fiscal Years and
Schedule III at March 31, 1997. In our opinion, and based on the reports of the
other auditors, these consolidated schedules present fairly, when read in
conjuction 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 seven limited partnerships with significant
contingencies and uncertainties. The financial statements of five of these
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The financial statements for the 1996 Fiscal Year for two of
these subsidiary partnerships were not audited. The seven subsidiary
partnerships' net losses aggregated $5,884,547(Fiscal 1996), $1,268,304 (Fiscal
1995) and $1,133,889 (Fiscal 1994) and their assets aggregated $24,497,927 and
$30,301,229 at March 31, 1997 and 1996, respectively. These matters raise
substantial doubt about these subsidiary partnerships' abilities to continue as
going concerns. 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
June 30, 1997

-54-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Summarized condensed financial information of registrant (not including
consolidated subsidiary partnerships)

CONDENSED BALANCE SHEETS

ASSETS

March 31
-------------------------
1997 1996
----------- -----------

Cash and cash equivalents $ 959,136 $ 841,173
Investment in subsidiary partnerships 59,499,564 66,955,266
Other assets 153,197 447,447
----------- -----------

Total assets $60,611,897 $68,243,886
=========== ===========

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates 2,420,502 896,925
Other liabilities 136,513 139,890
----------- -----------

Total liabilities 2,557,015 1,036,815

Partners' equity 58,054,882 67,207,071
----------- -----------

Total liabilities and partners' equity $60,611,897 $68,243,886
=========== ===========

Investments in subsidiary partnerships are recorded in accordance with the
equity method of accounting, wherein the investments are not reduced below zero.
Accordingly, partners' equity on the consolidated balance sheet will differ from
partners' equity shown above.

-55-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS

Year Ended March 31,
----------- -----------------------------
1997 1996 1995
----------- ----------- -----------

Revenues $ 30,188 $ 31,847 $ 43,843
----------- ----------- -----------

Expenses

Administrative and management 358,444 213,523 223,661
Administrative and management-related parties 1,588,872 388,987 381,719
----------- ----------- -----------
Total Expenses 1,947,316 602,510 605,380
----------- ----------- -----------
Loss from operations (1,917,128) (570,663) (561,537)
----------- ----------- -----------
Equity in loss of subsidiary partnerships (7,235,061) (4,991,144) (5,592,469)
----------- ----------- -----------

Net loss $(9,152,189) $(5,561,807) $(6,154,006)
=========== =========== ===========

-56-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year Ended March 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------

Cash flows from operating activities:

Net loss $(9,152,189) $(5,561,807) $(6,154,006)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:

Equity in loss of subsidiary partnerships 7,235,061 4,991,144 5,592,469

Increase (decrease) in liabilities

Due to general partners and affiliates 1,523,577 308,803 305,941
Other liabilities (3,377) 3,377 (1,956)
----------- ----------- -----------
Total adjustment 8,755,261 5,303,324 5,896,454
----------- ----------- -----------
Net cash used in operating activities (396,928) (258,483) (257,552)
----------- ----------- -----------
Cash flows from investing activities:

Distributions from subsidiaries 621,476 10,592 8,250
Cash held in escrow 294,250
Advances and investments in subsidiary partnerships (400,835) (108,672) (411,184)
----------- ----------- -----------
Net cash provided by (used in) investing activities 514,891 (98,080) (402,934)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 117,963 (356,563) (660,486)

Cash and cash equivalents, beginning of year 841,173 1,197,736 1,858,222
----------- ----------- -----------

Cash and cash equivalents, end of year $ 959,136 $ 841,173 $ 1,197,736
=========== =========== ===========

-57-

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1997

Initial Cost Cost
to Partnership Capitalized
------------------------------ Subsequent to
Buildings Acquisition:
and Improvements
Description Encumbrances Land Improvements (Disposals)
----------- ------------ ------------ ------------ ------------

Apartment Complexes

Polynesian Apartments Associates, Ltd.
Homestead, FL $ 2,763,552 $ 386,180 $ 4,195,068 $ (10,325)
Seagrape Village Associates, LTD.
Homestead, FL 4,688,900 1,270,000 6,123,373 709,189
Metropolitan Towers Associates, Ltd.
Rio Piedras, PR 5,026,609 322,000 2,434,303 5,593,133
Westminster Place II- Olive Site, L.P.
St. Louis, MO 4,567,090 928,979 5,382,740 162,170
Property Development Associates, L.P.
Kansas City, MO 5,700,000 624,858 7,228,721 5,164,684
Whittier Plaza Associates, L.P.
St. Louis, MO 1,747,125 26,920 2,015,030 (395,926)
United-Glen Arden I L.P.
Glen Arden, MO 12,756,669 1,770,000 6,577,720 12,506,310
United-Glen Arden II L.P.
Glen Arden, MO 9,721,832 1,190,000 4,837,436 8,899,110
Rolling Green L.P.
Chicago, IL 2,627,880 466,683 4,533,670 3,255,515
Santa Juanita II L.P.
Bayamon, PR 1,718,238 115,000 2,085,485 1,748,804
Spring Creek Associates, L.P.
Brooklyn, NY 0 3,343,549 16,216,700 18,094,859
East Two Thirty-Five Associates L.P.
(14th Street)
New York, NY 0 950,000 2,542,604 (527,787)
Concourse Artists Housing Associates, L.P.
Bronx, NY 1,596,295 5,750 2,246,560 52,924
2051 Grand Concourse Housing Associates
Bronx, NY 4,100,215 31,500 5,221,117 52,924
Robin Housing Associates
Bronx, NY 5,474,935 26,750 8,186,055 52,925
Willoughby-Wyckoff Housing Associates
Bronx, NY 4,228,573 17,000 6,126,088 52,925
Upper Fifth Avenue Residential Associates, L.P.
Bronx, NY 19,245,100 159,861 21,096,862 979,633
West 107th Street Associates, L.P.
Bronx, NY 0 305,813 3,850,928 106,794
General Atlantic Second Avenue Associates, L.P.
(96th Street)
Bronx, NY 0 246,495 2,689,395 167,710
Church Lane Associates
Germantown, PA 1,900,175 20,000 4,009,983 (18,825)
Campeche Isle Apartments L.P.
Galveston, TX 4,287,516 450,000 6,792,005 164,731
Goodfellow Place L.P.
St. Louis, MO 4,003,421 160,000 4,581,787 (3,466,311)

Gross Amount at which
Carried At Close of Period
------------------------------------------------
Buildings
and Accumulated
Description Land Improvements Total Depreciation
----------- ------------ ------------ ------------ ------------

Apartment Complexes

Polynesian Apartments Associates, Ltd.
Homestead, FL $ 388,192 $ 4,182,731 $ 4,570,923 $ 588,001
Seagrape Village Associates, LTD.
Homestead, FL 1,275,292 6,827,270 8,102,562 1,002,136
Metropolitan Towers Associates, Ltd.
Rio Piedras, PR 327,292 8,022,144 8,349,436 1,388,887
Westminster Place II- Olive Site, L.P.
St. Louis, MO 916,669 5,557,220 6,473,889 1,223,496
Property Development Associates, L.P.
Kansas City, MO 606,704 12,411,559 13,018,263 2,847,419
Whittier Plaza Associates, L.P.
St. Louis, MO 32,261 1,613,763 1,646,024 482,613
United-Glen Arden I L.P.
Glen Arden, MO 1,775,293 19,078,737 20,854,030 6,013,228
United-Glen Arden II L.P.
Glen Arden, MO 1,195,293 13,731,253 14,926,546 4,356,504
Rolling Green L.P.
Chicago, IL 471,975 7,783,893 8,255,868 1,855,589
Santa Juanita II L.P.
Bayamon, PR 120,293 3,828,996 3,949,289 975,450
Spring Creek Associates, L.P.
Brooklyn, NY 2,595,782 35,059,326 37,655,108 8,983,598
East Two Thirty-Five Associates L.P.
(14th Street)
New York, NY 462,662 2,502,155 2,964,817 731,221
Concourse Artists Housing Associates, L.P.
Bronx, NY 11,042 2,294,192 2,305,234 672,709
2051 Grand Concourse Housing Associates
Bronx, NY 36,792 5,268,749 5,305,541 1,581,739
Robin Housing Associates
Bronx, NY 32,042 8,233,688 8,265,730 2,440,345
Willoughby-Wyckoff Housing Associates
Bronx, NY 22,292 6,173,721 6,196,013 1,822,909
Upper Fifth Avenue Residential Associates, L.P.
Bronx, NY 166,763 22,069,593 22,236,356 4,307,638
West 107th Street Associates, L.P.
Bronx, NY 312,715 3,950,820 4,263,535 1,132,577
General Atlantic Second Avenue Associates, L.P.
(96th Street)
Bronx, NY 253,397 2,850,203 3,103,600 819,837
Church Lane Associates
Germantown, PA 26,902 3,984,256 4,011,158 1,228,317
Campeche Isle Apartments L.P.
Galveston, TX 456,902 6,949,834 7,406,736 2,130,877
Goodfellow Place L.P.
St. Louis, MO 41,102 1,234,374 1,275,476 80,746

Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statements is
Description Renovation Acquired Computed(a)(b)
----------- ---------- -------- --------------

Apartment Complexes

Polynesian Apartments Associates, Ltd.
Homestead, FL 1988 July 1988 27.5 years
Seagrape Village Associates, LTD.
Homestead, FL 1988 July 1988 27.5 years
Metropolitan Towers Associates, Ltd.
Rio Piedras, PR 1987 Dec. 1988 20-40 years
Westminster Place II- Olive Site, L.P.
St. Louis, MO 1988 Oct. 1988 20-40 years
Property Development Associates, L.P.
Kansas City, MO 1988 Dec. 1988 15-40 years
Whittier Plaza Associates, L.P.
St. Louis, MO 1987 Dec. 1988 20-40 years
United-Glen Arden I L.P.
Glen Arden, MO 1988 Dec. 1988 25 years
United-Glen Arden II L.P.
Glen Arden, MO 1988 Dec. 1988 25 years
Rolling Green L.P.
Chicago, IL 1988 Dec. 1988 7-39 years
Santa Juanita II L.P.
Bayamon, PR 1988 Dec. 1988 27.5 years
Spring Creek Associates, L.P.
Brooklyn, NY 1987 Dec. 1988 15-27.5 years
East Two Thirty-Five Associates L.P.
(14th Street)
New York, NY 1988 Dec. 1988 27.5-31.5 years
Concourse Artists Housing Associates, L.P.
Bronx, NY 1988 Nov. 1988 27.5 years
2051 Grand Concourse Housing Associates
Bronx, NY 1988 Nov. 1988 27.5 years
Robin Housing Associates
Bronx, NY 1988 Nov. 1988 27.5 years
Willoughby-Wyckoff Housing Associates
Bronx, NY 1988 Nov. 1988 27.5 years
Upper Fifth Avenue Residential Associates, L.P.
Bronx, NY 1987 Jan. 1989 40 years
West 107th Street Associates, L.P.
Bronx, NY 1987 Jan. 1989 27.5-31.5 years
General Atlantic Second Avenue Associates, L.P.
(96th Street)
Bronx, NY 1988 Jan. 1989 27.5-31.5 years
Church Lane Associates
Germantown, PA 1988 Feb. 1989 27.5 years
Campeche Isle Apartments L.P.
Galveston, TX 1988 May 1989 27.5 years
Goodfellow Place L.P.
St. Louis, MO 1988 May 1989 40 years

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1997

Initial Cost Cost
to Partnership Capitalized
------------------------------ Subsequent to
Buildings Acquisition:
and Improvements
Description Encumbrances Land Improvements (Disposals)
----------- ------------ ------------ ------------ ------------

Apartment Complexes

Penn Alto Associates L.P.
Altoona, PA 5,116,575 60,000 2,731,082 8,988,596
Gramco Development Limited Dividend
Partnership, L.P. (Bayamon)
Bayamon, PR 4,735,347 1,322,887 7,609,024 (195,723)
Alexis Park Apartments
Bossier City, LA 5,151,099 640,000 7,297,925 348,588
Williamsburg Residential
Witchita, KS 2,005,627 136,974 831,584 1,878,957
Victory Apartments
Chicago, IL 6,365,539 161,500 4,929,133 5,033,640
------------ ------------ ------------ ------------
$119,528,312 $ 15,138,699 $152,372,378 $ 69,399,224
============ ============ ============ ============

Gross Amount at which
Carried At Close of Period
------------------------------------------------
Buildings
and Accumulated
Description Land Improvements Total Depreciation
----------- ------------ ------------ ------------ ------------

Apartment Complexes

Penn Alto Associates L.P.
Altoona, PA 97,907 11,681,771 11,779,678 2,699,784
Gramco Development Limited Dividend
Partnership, L.P. (Bayamon)
Bayamon, PR 1,329,788 7,406,400 8,736,188 2,427,693
Alexis Park Apartments
Bossier City, LA 646,902 7,639,611 8,286,513 2,119,520
Williamsburg Residential
Witchita, KS 673,429 2,174,086 2,847,515 626,506
Victory Apartments
Chicago, IL 168,402 9,955,871 10,124,273 1,760,241
------------ ------------ ------------ ------------
$ 14,444,085 $222,466,216 $236,910,301 $ 56,299,580
============ ============ ============ ============

Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statements is
Description Renovation Acquired Computed(a)(b)
----------- ---------- -------- --------------

Apartment Complexes

Penn Alto Associates L.P.
Altoona, PA 1989 June 1989 40 years
Gramco Development Limited Dividend
Partnership, L.P. (Bayamon)
Bayamon, PR 1989 July 1989 25 years
Alexis Park Apartments
Bossier City, LA 1986 July 1989 27.5 years
Williamsburg Residential
Witchita, KS 1989 Aug. 1989 40 years
Victory Apartments
Chicago, IL 1988 Sept. 1989 40 years

(a) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight line method over the estimated useful
lives determined by the partnership date of acquisition.

(b) Furniture and fixtures, included in building improvements, are depreciated
primarily by the straight line method over the estimated useful lives
ranging from 5 to 15 years.

Cost of Property and Equipment Accumulated Depreciation
------------------------------------------------ ----------------------------------------------
Year Ended March 31,
----------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ------------ ----------- ----------- -----------

Balance at beginning of period $241,223,589 $239,775,640 $239,572,378 $48,743,758 $40,801,182 $32,890,961
Additions during period:
Improvements 1,463,525 1,452,484 264,731
Depreciation expense 8,584,497 7,947,111 7,954,255
Deductions during period:
Provision for impairment 5,694,314 0 0 967,237 0 0
Dispositions 82,499 4,535 61,469 61,438 4,535 44,034
------------ ------------ ------------ ----------- ----------- -----------
Balance at close of period $236,910,301 $241,223,589 $239,775,640 $56,299,580 $48,743,758 $40,801,182
============ ============ ============ =========== =========== ===========

At the time the local partnerships were acquired by Liberty Tax Credit Plus II
Limited Partnership, the entire purchase price paid by Liberty Tax Credit Plus
II Limited Partnership 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.