LIBERTY TAX CREDIT PLUS LP - 10-K Annual Report

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

FORM 10-K
(Mark One)

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

For the fiscal year ended March 15, 1998

OR

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

Commission File Number 0-17015

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

Delaware 13-3446500
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

None

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

Beneficial Assignment Certificates and 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 116

Page 1 of 126

PART I

Item 1. Business.

General

Liberty Tax Credit Plus L.P. (the "Partnership") is a limited partnership which
was formed under the laws of the State of Delaware on June 26, 1987. Since
November 25, 1997, the general partners of the Partnership have been Related
Credit Properties L.P., a Delaware limited partnership (the "Related General
Partner") and Liberty Associates III L.P., a Delaware limited partnership
("Liberty Associates"), and together with the Related General Partner (the
"General Partners"). The Related General Partner is also the special limited
partner of the Partnership. The general partner of the Related General Partner
is Related Credit Properties Inc., a Delaware corporation. The general partner
of Liberty Associates is the Related General Partner. On November 25, 1997,
affiliates of the Related General Partner and Liberty GP Inc. ("LGP"), then the
general partners of the Partnership, entered into a Purchase Agreement pursuant
to which the Related General Partner purchased LGP's general partner interest in
the Partnership (the "Transfer"). In addition to the Transfer, the Related
General Partner also acquired LGP's special limited partner interest in the
Partnership and its general partner interest in Liberty Associates. Prior to the
Transfer, Liberty Associates was an affiliate of Lehman Brothers.

On November 20, 1987, 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"), pursuant to a prospectus dated November 20, 1987, as
supplemented by the supplements thereto dated January 14, 1988 and March 14,
1988 (as so supplemented the, "Prospectus"). As of April 4, 1988 (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 $79,937,500 of gross
proceeds of the Offering from 5,525 investors.

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships", "subsidiaries" or
"subsidiary partnerships") which own leveraged low and moderate-income
multifamily residential complexes ("Apartment Complexes" or "Properties") 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 ("Rehabilitation Projects") that are eligible for the historic
rehabilitation tax credit (together with Housing Tax Credits, "Tax Credits").
The Partnership's investment in each Local Partnership represents a 20% to 98%
interest in each of the Local Partnerships. As of March 15, 1998, the
Partnership had acquired interests in 31 Local Partnerships and does not
anticipate making any additional investments. See Item 2, Properties, below.

Liberty Associates is the Special Limited Partner in all 31 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 Partnership to exercise control over the management and
policies of the Local Partnerships.

The investment objectives of the Partnership are to:

1. Entitle qualified BACs holders to substantial low-income Tax Credits (and
potentially 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

2. 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.

3. Preserve and protect the Partnership's capital.

4. Provide cash distributions when available from the operations of Apartment
Complexes and Rehabilitation Projects.

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, generally ten years from the date of investment or, if
later, the date the Property is leased to qualified tenants; referred to herein
as the "Tax Credit Period"). Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by respective state
credit agencies the authority to recognize Tax Credits during the Tax 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 or
historic rehabilitation tax credits, it may lose such eligibility and suffer an
event of "recapture" if its Property fails to remain in compliance with the Tax
Credit requirements. None of the Local Partnerships in which the Partnership has
acquired an interest has suffered an event of recapture.

As of March 15, 1998, 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. The Partnership does not anticipate providing cash distributions to
BACs holders in circumstances other than refinancings or sales. Accordingly, at
this time there can be no assurance that the Partnership will achieve each of
its investment objectives.

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally. However no more than 20%
of the Properties are located in any single state. There are also substantial
risks associated with owning properties receiving government assistance, for
example the possibility that Congress may not appropriate funds to enable 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.

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

3

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

Item 2. Properties.

The Partnership has acquired an interest as a limited partner in 31 Local
Partnerships. Set forth below is a schedule of these Local Partnerships
including certain information concerning the properties (the "Local Partnership
Schedule"). Further information concerning those Local Partnerships and their
Properties, including any encumbrances affecting the Properties, may be found in
Item 14, Schedule III.

Except for the seven Local Partnerships listed below, the following is the
allocation of ownership percentage for each of the Local Partnerships:

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

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

Shiloh Grove 5% 1% 94% 0%
Concourse Artists 1% 1% 79% 19%
Grand Concourse 1% 1% 79% 19%
Robin Housing 1% 1% 79% 19%
Willoughby - Wyckoff 1% 1% 79% 19%
Penn Alto 1% 1% 19.60% 78.40%
Sartain 1% 1% 71.54% 26.46%

*Affiliate of the Partnership with same management

Local Partnership Schedule

Name and Location % of Units Occupied at May 1,
(Number of Units) Date Acquired 1998 1997 1996 1995 1994
- - - - ----------------- ------------- ---- ---- ---- ---- ----

B & C Housing Associates, L.P. December 1987 93 86 89 87 95
Tulsa, OK (220)

State Street 86 Associates, L.P. February 1988 99 98 98 100 98
Camden, NJ (200)

Fox Glenn Investors, L.P. March 1988 94 96 98 97 98
Seat Pleasant, MD (172)

Shiloh-Grove L.P. (Mt. Vernon) February 1988 96 93 97 97 98
Columbus, OH (394)

Silver Blue Lake Apartments, LTD. February 1988 99 98 98 100 99
Miami, FL (123)

4

Local Partnership Schedule
(continued)
Name and Location % of Units Occupied at May 1,
(Number of Units) Date Acquired 1998 1997 1996 1995 1994
- - - - ----------------- ------------- ---- ---- ---- ---- ----

Lancaster Towers Associates, LTD. May 1988 100 100 100 100 100
Lancaster, NY (157)

West Kinney Associates, L.P. June 1988 99 97 98 98 100
Newark, NJ (114)

Autumn Park Associates, L.P. June 1988 88 96 97 93 93
Wilsonville, OR (144)

Regent Street Associates, L.P. June 1988 90 100 98 99 96
Philadelphia, PA (80)

Magnolia Arms Associates, LTD. July 1988 89 96 97 84 86
Jacksonville, FL (232)

Greenleaf Associates, L.P. July 1988 97 95 97 98 98
Kansas City, Mo (195)

Alameda Towers Associates, L.P. July 1988 99 99 100 98 98
San Juan, PR (150)

Dixie Apartment Associates, LTD. July 1988 100 100 93 100 100
Miami, FL (29)

Ludlam Gardens Apartments, LTD. July 1988 100 100 99 99 99
Miami, FL (90)

Grove Parc Associates, L.P.
(Woodlawn) July 1988 98 98 99 98 100
Chicago, IL (504)

2108 Bolton Drive Associates, L.P. July 1988 96 99 95 100 82
Atlanta, GA (358)

Apple Creek Housing
Associates, LTD. June 1988 98 98 96 99 99
Arvado, CO (195)

Redwood Villa Associates September 1988 96 98 100 96 99
San Diego, CA (92)

Charles Drew Court
Associates, L.P. September 1988 99 95 89 100 97
Atlantic City, NJ (38)

Walnut Park Plaza
Associates, L.P. September 1988 87 88 89 92 93
Philadelphia, PA (227)

5

Local Partnership Schedule
(continued)
Name and Location % of Units Occupied at May 1,
(Number of Units) Date Acquired 1998 1997 1996 1995 1994
- - - - ----------------- ------------- ---- ---- ---- ---- ----

Bayridge Associates, L.P. December 1988 94 93 97 97 97
Beaverton, OR (246)

United-Pennsylvanian, L.P. December 1988 100 96 98 100 100
Erie, PA (112)

2051 Grand Concourse
Associates, L.P. November 1988 94 97 97 98 95
Bronx, NY (63)

Concourse Artists Housing
Associates, L.P. November 1988 91 96 96 100 98
Bronx, NY (23)

Willoughby/Wycoff Housing
Associates, L.P. November 1988 91 93 97 88 90
Bronx, NY (68)

Robin Housing Associates, L.P. November 1988 95 99 97 92 96
Bronx, NY (100)

Lund Hill Associates, L.P. January 1989 100 100 100 100 100
Superior, WI (150)

Tanglewood Apartments, L.P. October 1988 78 85 100 100 90
Joplin, MO (176)

Quality Hill Historic District-
Phase II-A, L.P. March 1989 97 98 94 85 91
Kansas City, MO (49)

Penn Alto Associates, L.P. June 1989 87 81 87 81 94
Altoona, PA (150)

Sartain School Venture, L.P. August 1990 100 100 89 100 100
Philadelphia, PA (35)

The general partners of the Local Partnerships in which the Partnership invests
("Local General Partners") were generally required, pursuant to a Development
Deficit Guaranty Agreement, to fund deficits incurred during the development
stage of the Local Partnerships and/or to undertake to repurchase the
Partnership's interest in the Local Partnership if construction was not
completed substantially on time and on budget. A development deficit is incurred
when costs to rehabilitate, finance and pay all other operating expenses of a
Local Partnership exceed the proceeds of the mortgage note, capital contribution
and rental receipts prior to completion of the development of the Local
Partnership. Development deficit payments were made without right of repayment.

6

The General Partners generally required that the Local General Partners
undertake an obligation, pursuant to an Operating Deficit Guaranty Agreement, to
fund operating deficits (up to a stated maximum amount) of the Local Partnership
during a limited period of time (generally three years) following the
Partnership's investment. In each case, the operating deficits were funded by
Operating Loans which bore interest and which could be repaid only out of 50% of
available cash flow or out of available net sale or refinancing proceeds.

Additionally, the Local General Partners were generally required to enter into a
Rent-Up Guaranty Agreement, whereby the Local General Partner agreed to pay
liquidated damages if predetermined occupancy rates were not achieved. These
payments were to be made without right of repayment. In most instances, if
rental achievement was not met by a specified date, the Local General Partner
was also required to pay to the Local Partnership, a return of capital, and
interest thereon, as stated in the Local Partnership's partnership agreement.
Security for these agreements was generally provided in the form of letters of
credit and/or escrow deposits provided by the Local General Partner.

All development deficit, rent-up and operating deficit guarantees with respect
to the Properties have expired.

Tax Credits with respect to a given Property are available for a ten-year Tax
Credit Period that commences when the property is leased to qualified tenants.
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 would not
be available to the Partnership.

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

Commercial tenants (to which average rental per square foot applies) comprise
less than 5% of the rental revenues of the Local 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.

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.

7

Item 3. Legal Proceedings.

This information is incorporated by reference to the discussions of Regent
Street and Robin Housing 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.

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 15,987.5 Limited Partnership Interests, each
representing a $5,000 capital contribution to the Partnership, for aggregate
Gross Proceeds of $79,937,500. 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 BACs to the purchasers
thereof for an aggregate purchase price of $79,937,500. 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 the payment of transfer costs not to exceed $100), but Limited Partnership
Interests so acquired are not thereafter convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on any
established 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
have imposed limited restrictions on the transferability of the BACs and the
Limited Partnership Interests in secondary market transactions. 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.

The Partnership has 5,525 registered holders of an aggregate of 15,987.5 BACs,
as of June 1, 1998.

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

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

There are no material legal restrictions in the Partnership Agreement on the
ability to make distributions.

8

The Partnership has made no distributions to the BAC holders as of March 15,
1998. The Partnership does not anticipate providing cash distributions to its
Limited Partners in circumstances other than refinancing or sales proceeds.

There has recently been an increasing number of requests for the list of BAC
holders of limited partners such as BAC holders of 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
of the Partnership have adopted a policy with respect to requests for the
Partnership's list of BAC holders. This policy is intended to protect investors
from unsolicited and coercive offers to acquire BAC holders' interests and does
not limit any other rights the General Partners may have under the Partnership
Agreement or applicable law.

9

Item 6. Selected Financial Data.

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

For the Year ended March 15,
-----------------------------------------------------------
OPERATIONS 1998 1997 1996 1995* 1994
---------- ---------- ---------- ---------- -------

Revenues $35,350,849 $35,324,316 $35,455,255 $34,345,754 $31,952,673

Operating expenses 42,873,491 43,324,501 42,396,512 44,104,158 41,632,706
---------- ----------- ---------- ---------- ----------

Loss before (7,522,642) (8,000,185) (6,941,257) (9,758,404) (9,680,033)
minority
interest and
extraordinary
item

Minority interest
in loss of 347,557 382,054 483,863 367,308 621,840
subsidiaries ---------- ----------- ---------- ---------- ----------

Loss before (7,175,085) (7,618,131) (6,457,394) (9,391,096) (9,058,193)
extraordinary
item

Extraordinary item-
forgiveness of 0 0 0 9,335,750 196,889
indebtedness ---------- ----------- ---------- ---------- ----------

Net loss $(7,175,085)$(7,618,131) $(6,457,394) $ (55,346) $(8,861,304)
========== =========== ========== ========== ==========

Loss before $ (444.31)$ (471.74) $ (399.86) $ (581.53) $ (560.91)
extraordinary
item per BAC

Extraordinary item
per BAC 0 0 0 578.10 12.19
---------- ----------- ---------- ---------- ----------

Net loss per $ (444.31) $ (471.74) $ (399.86) $ (3.43) $ (548.72)
weighted average ========== =========== ========== ========== ==========
BAC

*Reclassified for comparative purposes

March 15,
--------------------------------------------------------------
FINANCIAL POSITION 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------

Total assets $ 193,686,678 $ 200,797,952 $ 208,338,218 $ 216,196,946 $ 226,002,670
============ =========== =========== =========== ===========

Total liabilities $(183,787,909 $(183,727,165) $(182,639,668)$(183,414,534) $(192,502,613)
============ =========== =========== =========== ===========

Minority interest $ (6,127,247) $ (6,124,180) $ (7,133,812)$ (7,760,280) (8,422,579)
============ =========== =========== =========== ===========

Total partners' $ 3,771,522 $ 10,946,607 $ 18,564,738 $ 25,022,132 $ 25,077,478
capital ============ =========== =========== =========== ===========

During the years ended March 15, 1994 through 1998, total assets decreased
primarily due to depreciation, partially offset by net additions to property and
equipment.

10

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

Liquidity and Capital Resources

The Partnership's primary sources of funds are the cash distributions from
operations of the Local Partnerships in which the Partnership has invested.
However, the cash distributions received from the Local Partnerships to date
have not been sufficient to meet all such obligations of the Partnership. During
the years ended March 15, 1998, 1997 and 1996, such distributions amounted to
approximately $132,000, $208,000 and $140,000, respectively. Accordingly, the
Related General Partner and its affiliates have advanced funds totaling
approximately $119,000, $118,000 and $59,000 at March 15, 1998, 1997 and 1996,
respectively, to meet the Partnership's third party obligations. In addition,
certain fees and expense reimbursements owed to the General Partners amounting
to approximately $3,553,000, $2,281,000 and $1,022,000 were accrued and unpaid
as of March 15, 1998, 1997 and 1996, respectively. In particular partnership
management fees owed to the General Partners amounting to approximately
$3,126,000 and $1,988,000 were accrued and unpaid as of March 15, 1998 and March
15, 1997, respectively. Furthermore expense reimbursements and asset monitoring
fees owed to the Related General Partner amounting to approximately $404,000 and
$293,000 were accrued and unpaid as of March 15, 1998 and March 15, 1997,
respectively. Without the General Partners' advances and continued accrual
without payment of certain fees and expense reimbursements, the Partnership will
not be in a position to meet its obligations. The General Partners have
continued advancing and allowing the accrual without payment of these amounts
but are under no obligation to continue to do so. The Partnership will use a
portion of the refinancing proceeds received from the Bayridge Associates, L.P.
mortgage refinancing (see below) to pay down some of the outstanding amounts
owed to the General Partners. The General Partners believe these proceeds will
be adequate for its current operating needs and plan to invest the reserves in
short-term investments.

During the year ended March 31, 1998, cash and cash equivalents of the
Partnership decreased approximately $66,000. This decrease is attributable to an
increase in property and equipment ($1,209,000), an increase in cash held in
escrow for investing activities ($779,000), repayments of mortgage notes
($1,868,000) and a decrease in capitalization of consolidated subsidiaries
attributable to minority interest ($343,000) which exceeded cash provided by
operating activities ($3,407,000), a net increase in due to local general
partners and affiliates ($718,000) and an increase in due to selling partners
($7,000). Included in the adjustments to reconcile the net loss to cash provided
by operating activities is depreciation and amortization of approximately
($9,113,000).

A working capital reserve of approximately $32,000 and $83,000 remained unused
at March 15, 1998 and 1997, respectively.

In April 1998, Bayridge Associates, L.P. ("Bayridge") refinanced its mortgage
note payable of approximately $6,150,000. The new mortgage note in the amount of
$10,600,000 paid off the former mortgage note and paid a cash flow distribution
from refinancing proceeds of ap-proximately $1,800,000 to the Partnership. This
new mortgage bears interest at the rate of 6.96% per annum and is payable in
monthly installments of $70,238 which includes principal and interest. Any
remaining principal and interest shall be due and payable May 1, 2000 or on any
earlier date on which the unpaid principal balance of the note be come due and
payable, by acceleration of otherwise.

The Partnership is not expected to have access to additional sources of
financing.

11

The Partnership previously negotiated Operating Deficit Guaranty Agreements with
all Local Partnerships in which the Local General Partners agreed to fund
operating deficits, up to a stated maximum amount, for a specified period of
time (generally, three years commencing at break-even). The terms of the
Operating Deficit Guaranty Agreements varied for each Local Partnership. The
gross amount of the Operating Deficit Guarantees aggregate approximately
$16,880,000, of which $16,880,000, $16,430,000 and $16,430,000 had expired as of
March 15, 1998, 1997 and 1996, respectively. As of March 15, 1998, all operating
deficit guarantees have expired.

HUD recently 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: 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 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,
if any.

Several industry sources have already commented to HUD and Congress that in the
event the ACPA were fully enacted in its present form, the reduction in mortgage
indebtedness would be considered taxable income to limited partners in the
Partnership. Legislative relief has been proposed to exempt "marked-to-market"
debt from cancellation of indebtedness income treatment. Though HUD initially
backed away from the "marked-to-market" proposal, it has now been reintroduced
as "Portfolio Restructuring".

In September 1997, Congress enacted the Multi-family Assisted Housing Reform and
Affordability Act of 1997 ("MAHRAA") which provides for the renewal of Section 8
Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon
market rentals instead of the above-market rentals which is generally the case
under existing Section 8 Contracts. As a result, Section 8 Contracts that are
renewed in the future in projects insured by the Federal Housing Administration
("FHA") may not provide sufficient cash flow to permit owners of properties to
meet the debt service requirements of these existing FHA-insured mortgages.
MAHRAA also provides for the restructuring of these mortgage loans so that the
annual debt service on the restructured loan (or loans) can be supported by
Section 8 rents established at the market rents. The restructured loans will be
held by the current lender or another lender. There can be no assurance that a
property owner will be permitted to restructure its mortgage indebtedness
pursuant to the new rules implementing MAHRAA or that an owner would choose to
restructure the mortgage if it were able to participate. MAHRAA is supposed to
go into effect on October 28, 1998; regulations implementing the program must be
issued prior to that time. It should be noted that there are many uncertainties
as to the economic and tax impact on a property owner because of the combination
of the reduced Section 8 contract rents and the restructuring of the existing
FHA-insured mortgage loan under MAHRAA.

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 expiration of the Credit Period.

12

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 Offering in 31 Local Partnerships, all of which fully have their
Tax Credits in place (see, Results of Operations of Certain Local Partnerships
below with respect to Regent Street Associates, L.P.). The Tax Credits are
attached to the property for a period of ten years and are transferable with the
property during the remainder of such ten year period. If the General Partners
determined that a sale of a property is warranted, the remaining Tax Credits
would transfer to the new owner, thereby adding significant value to the
property on the market, which are not included in the financial statement
carrying amount.

Results of Operations

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

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated.

Through March 15, 1998, the Partnership has not recorded any loss on impairment
of assets or reduction to estimated fair value.

The following is a summary of the results of operations of the Partnership for
the years ended March 15, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal
Years, respectively).

The Partnership's revenues continue to consist primarily of the results of the
Partnership's investment in consolidated Local Partnerships. Twenty one of the
Local Partnerships receive HUD Section 8 subsidies which serve to stabilize the
revenues of these Local Partnerships. The majority of the Local Partnership
income continues to be in the form of rental income with the corresponding
expenses being divided among operations, depreciation, and mortgage interest.

The net loss for the 1997, 1996 and 1995 Fiscal Years totaled $7,175,085,
$7,618,131 and $6,457,394, respectively.

13

The Partnership continues to meet the investment objective of generating Housing
Tax Credits to qualified BACs holders. To date all of the Local Partnerships
have remained in compliance with the Tax Credit requirements, and therefore none
has suffered an event of recapture of Tax Credits. The Partnership generated
$11,058,148, $11,001,671 and $11,327,236 in Tax Credits during the 1997, 1996
and 1995 Fiscal Years, respectively.

1997 vs. 1996

Rental income increased approximately 1% for the 1997 Fiscal Year as compared to
the corresponding period in 1996 primarily due to annual rental rate increases.

Other income decreased approximately $355,000 for the 1997 Fiscal Year as
compared to the corresponding period in 1996 primarily due to a refund of
overpaid property taxes at Bayridge Associates in the 1996 Fiscal Year and a HUD
reimbursement for vacancy losses at Shiloh Grove in the 1996 Fiscal Year.

Total expenses remained fairly consistent for the 1997 Fiscal Year as compared
to the corresponding period in 1996 with a decrease of approximately 1%.

1996 vs. 1995
Rental income decreased less than 1% for the 1996 Fiscal Year as compared to the
corresponding period in 1995 primarily due to a retroactive rent increase during
the third quarter of 1995 at B & C Housing Associates and a decrease in rental
assistance payments at Shiloh-Grove. Excluding these two Local Partnerships,
rental income increased approximately 1% for the 1996 Fiscal Year as compared to
the corresponding period in 1995 primarily due to annual rental rate increases.

Total expenses excluding general and administrative-related parties remained
fairly consistent for the 1996 Fiscal Year as compared to the corresponding
period in 1995 with an increase of less than 1%.

General and administrative-related parties increased approximately $903,000 for
the 1996 Fiscal Year as compared to the corresponding period in 1995 primarily
due to an increase in partnership management fees.

Results of Operations of Certain Local Partnerships

Regent Street Associates, L.P.
During 1997, Regent Street Associates, L.P. ("Regent Street") and the Internal
Revenue Service ("IRS") settled the IRS's challenge to the method by which
Regent Street has allocated the below-market federal financing to its
properties. The IRS had contended that Regent Street is entitled to only a 4%
Low Income Housing Tax Credit rather than a 9% Low Income Housing Tax Credit.
The IRS also challenged the inclusion of a portion of the developer's fee and
legal costs in qualified expenditures for the purpose of determining Low Income
Housing and Historic Rehabilitation Tax Credits and depreciable basis. As part
of the settlement agreement, Regent Street agreed to reflect cumulative
adjustments with respect to the 1988 through 1996 taxable years in the 1997 tax
return and to adjust the related depreciation and tax credits for 1997 to
conform to the settlement. Under the settlement, in its 1997 taxable year Regent
Street will recapture low income housing credits of $1,097,719, recapture
rehabilitation credits of $254,244 and recapture depreciation expense of
approximately $192,198. The settlement will result in there being no liability
for interest with respect to the years involved.

14

Redwood Villa Associates, L.P.
Redwood Villa Associates ("Redwood") has sustained operating losses since its
inception. For the 1997 Fiscal Year, Redwood experienced a loss of $228,599,
including $219,179 of depreciation and $4,533 of amortization and at December
31, 1997 had a working capital deficiency of $530,925 and a partners' deficit of
$484,684. These conditions raise substantial doubt about Redwood's ability to
continue as a going concern. Redwood's continuation as a going concern is
dependent upon its ability to achieve profitable operations or obtain future
capital contributions from the partners. Management, whenever possible, plans to
reduce operating costs to achieve profitable operations. The financial
statements for the 1997, 1996 and 1995 Fiscal Years for Redwood have been
prepared assuming that Redwood will continue as a going concern. The
Partnership's investment in Redwood at March 15, 1998 and 1997 was reduced to
zero by prior years' losses and the minority interest balance was approximately
$408,000 and $410,000, respectively. Redwood's net loss after minority interest
amounted to approximately $226,000, $203,000 and $238,000 for the 1997, 1996 and
1995 Fiscal Years, respectively.

Quality Hill Historic District - Phase II - A, L.P.
One of the loans providing permanent financing for Quality Hill Historic
District - Phase II A, L.P. ("Quality Hill") is being provided by the Land
Clearance for Redevelopment Authority of Kansas City ("LCRA") in the amount of
$960,000. This noninterest bearing note is secured by a fourth deed of trust on
the rental property and is due in full on June 26, 2021. One-fourteenth of the
unpaid principal balance is to be forgiven annually on the anniversary date of
the note so long as the property is used only as rental property for qualified
low-income families and individuals. In both 1997 and 1996, $68,571 is recorded
as cancellation of indebtedness income and is included in other income.

Walnut Park Plaza Associates
Walnut Park Plaza Associates ("Walnut Park") has sustained recurring losses from
operations. At December 31, 1997, Walnut Park had not made certain payments
required under the terms of the Bond Indenture and, as a result, is in default.
On April 9, 1996, Walnut Park entered into an interim agreement with E.A.Moos
("Moos"), Walnut Park's bondholders, which expired October 15, 1996 subject to
certain defined extension and termination provisions. Moo's and Walnut Park
continued to operate under the terms of the interim agreement until the bonds
were sold on October 31, 1997 to Municipal Capital Appreciation Partners, ILP
("MCAPI"), at which time the interim agreement expired. The interim agreement
primarily allowed Moos to select an interim and permanent replacement property
manager, to formulate a proposal to replace the general partner, and to possibly
restructure the indebtedness of the project. On April 29, 1997, an agreement was
signed which provides for, among other things, the transfer of the general
partner interest to RCC Partners '96 LLC ("RCC"), an affiliate of the General
Partners. Upon transfer of the general partner interest to RCC, amounts due to
the former general partner and its affiliates totaling $693,340 were forgiven
resulting in a contribution to the subsidiary partners' capital. 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 approve certain
major operating and financial decisions, the Partnership continues to have a
controlling financial interest in Walnut Park. Walnut Park's continued existence
is dependent on improving the financial operations of Walnut Park, the ultimate
resolution of the default of certain obligations under the terms of the Bond
Indenture, or the refinancing of the Bond Indenture. Contingent upon the outcome
of the aforementioned items, Walnut Park may be unable to continue as a going
concern in its present form. The Partnership's investment in Walnut Park at
March 15, 1998 and March 15, 1997 was reduced to zero by prior years' losses and
the minority interest balance amounted to approximately $1,125,000 and $437,000,
respectively. Walnut Park's net loss after minority interest amounted to
approximately $511,000, $541,000 and $257,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

15

Robin Housing Associates
Robin Housing Associates ("Robin Housing") is a defendant in a personal injury
lawsuit. Robin Housing's insurance carrier intends to defend Robin Housing
vigorously. Management believes that the insurance coverage is adequate to cover
any liability arising from this action. Since it is too premature to make an
evaluation of the amount or range of Robin Housing's potential loss, 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
$577,000. The Partnership's investment in Robin Housing was approximately
$577,000 and $711,000 at March 15, 1998 and 1997, respectively, and the minority
interest balance was approximately $68,000 and $174,000, respectively. Robin
Housing's net loss after minority interest amounted to approximately $91,000,
$115,000 and $140,000 for the 1997, 1996 and 1995 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 their 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. The Partnership's investment in Willoughby at
March 15, 1998 and 1997 was reduced to zero by prior years' losses and the
minority interest balance was approximately $276,000 and $277,000, respectively.
Willoughby's net loss after minority interest amounted to approximately
$141,000, $276,000 and $309,000 for the 1997, 1996 and 1995 Fiscal Years.

Year 2000 Compliance
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The General Partners are in the process of working with the
Partnership's service providers to prepare for the year 2000. Based on
information currently available, the Partnership does not expect that it will
incur significant operating expenses or be required to incur material costs to
be year 2000 compliant.

Other

There has recently been an increasing number of requests for the list of limited
partners such as BAC holders of 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 of the
Partnership have adopted a policy with respect to requests for the Partnership's
list of BAC holders. This policy is intended to protect investors from
unsolicited and coercive offers to acquire BAC holders' interests and does not
limit any other rights the General Partners may have under the Partnership
Agreement or applicable law.

16

Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----------
(a) 1. Consolidated Financial Statements

Independent Auditors' Report 18

Consolidated Balance Sheets at March 15, 1998 and 1997 95

Consolidated Statements of Operations for the Years
Ended March 15, 1998, 1997 and 1996 96

Consolidated Statements of Changes in Partners' Capital
(Deficit) for the Years Ended March 15, 1998, 1997 and
1996 97

Consolidated Statements of Cash Flows for the Years
Ended March 15, 1998, 1997 and 1996 98

Notes to Consolidated Financial Statements 100

17

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of Liberty Tax Credit Plus L.P.
(A Delaware Limited Partnership) and Subsidiaries as of March 15, 1998 and 1997,
and the related consolidated statements of operations, changes in partners'
capital, and cash flows for the years ended March 15, 1998, 1997 and 1996 (the
1997, 1996 and 1995 Fiscal Years, respectively). These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements for 30 (Fiscal 1997, 1996 and 1995) subsidiary
partnerships whose losses aggregated $7,098,332 (Fiscal 1997), $5,837,225
(Fiscal 1996), and $5,342,970 (Fiscal 1995) and whose assets constituted 95% and
93% of the Partnership's assets at March 15, 1998 and 1997, respectively,
presented in the accompanying consolidated financial statements. The financial
statements for 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.

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

In our opinion, based upon our audits, and the reports of the other auditors
referred to above, the accompanying consolidated financial statements referred
to in the first paragraph present fairly, in all material respects, the
financial position of Liberty Tax Credit Plus L.P. and Subsidiaries at March 15,
1998 and 1997 and the results of their operations and cash flows for the years
ended March 15, 1998, 1997 and 1996, in conformity with generally accepted
accounting principles.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of three subsidiary partnerships with significant
contingencies and uncertainties regarding their continuing operations. During
the 1997 Fiscal Year, these subsidiary partnerships incurred significant
operating losses and one is in default on its mortgage obligation. These
conditions raise substantial doubt about the subsidiary partnerships' abilities
to continue as going concerns. The financial statements of these three
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The three subsidiary partnerships' losses aggregated $887,146
(Fiscal 1997), $1,027,546 (Fiscal 1996) and $812,198 (Fiscal 1995) and their
assets aggregated $16,967,227 and $17,647,112 at March 15, 1998 and 1997,
respectively. Management's plans regarding these matters are also discussed in
Note 10(a). The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

TRIEN, ROSENBERG, ROSENBERG,
WEINBERG, CIULLO & FAZZARI, LLP

New York, New York
May 15, 1998
-18-

[JOHN D. SCHULER LETTERHEAD]

Independent Auditor's Report
----------------------------

To the Partners
B & C Housing Associates
Marlton, New Jersey

We have audited the accompanying balance sheets of B & C Housing
Associates, A Limited Partnership, HUD Project No. 118-94004, as of December 31,
1997, and 1996, and the related statements of income and expense, changes in
partners' equity and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of B & C Housing
Associates, as of December 31, 1997, and 1996, and the results of its operations
and the changes in partners' equity and cash flows for the year ended December
31, 1997, in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing
and Urban Development, we have also issued a report dated January 16, 1998, on
our consideration of B & C Housing Associates' internal control structure and
reports dated January 16, 1998, on its compliance with specific requirements
applicable to major HUD programs, specific requirements applicable to
Affirmative Fair Housing and Non-Discrimination, and specific requirements
applicable to nonmajor HUD program transactions.

1

Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplementary
information shown on pages 15 to 23 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ John D. Schuler

Tulsa, Oklahoma
January 16, 1998

2

[JOHN D. SCHULER LETTERHEAD]

Independent Auditor's Report

To the Partners
B & C Housing Associates
Marlton, New Jersey

We have audited the accompanying balance sheets of B & C Housing
Associates, A Limited Partnership, HUD Project No. 118-94004, as of December
31, 1996, and 1995, and the related statements of income and expense, changes
in partners' equity and cash flows for the year ended December 31, 1996. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of B & C Housing
Associates, as of December 31, 1996, and 1995, and the results of its
operations and the changes in partners' equity and cash flows for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs issued by the U.S. Department of
Housing and Urban Development, we have also issued a report dated January 18,
1997, on our consideration of B & C Housing Associates' internal control
structure and reports dated January 18, 1997, on its compliance with specific
requirements applicable to major HUD programs, specific requirements
applicable to Affirmative Fair Housing, and specific requirements applicable
to nonmajor HUD program transactions.

Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplementary
information shown on pages 15 to 24 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ John D. Schuler
-------------------------

Tulsa, Oklahoma
January 18, 1997

[Fishbein & Company, P.C. Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

Partners
State Street 86 Associates Limited Partnership

We have audited the accompanying balance sheets of STATE STREET 86
ASSOCIATES LIMITED PARTNERSHIP (A Limited Partnership) as of December 31, 1997
and 1996, and the related statements of operations, partners' equity
(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 State Street 86
Associates Limited Partnership as of December 31, 1997 and 1996, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Fishbein & Company, P.C.

January 16, 1998
Elkins Park, Pennsylvania

[Fishbein & Company, P.C Letterhead]

INDEPENDENT AUDITOR'S REPORT

January 22, 1997

Partners
State Street 86 Associates Limited Partnership

We have audited the accompanying balance sheets of STATE STREET 86
ASSOCIATES LIMITED PARTNERSHIP (A Limited Partnership) as of December 31, 1996
and 1995, and the related statements of operations, partners' equity
(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 State Street 86
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.

/s/ Fishbein & Company, P.C.
- - - - ---------------------------------

Elkins Park, Pennsylvania
January 22, 1997

[Fishbein & Company, P.C. Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

Partners
Foxglenn Investors

We have audited the accompanying balance sheets of FOXGLENN INVESTORS
(A Limited Partnership) as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity (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 Foxglenn Investors
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

/s/ Fishbein & Company, P.C.

January 15, 1998
Elkins Park, Pennsylvania

[Fishbein & Company, P.C. Letterhead]

INDEPENDENT AUDITOR'S REPORT

January 24, 1997

Partners
Foxglenn Investors

We have audited the accompanying balance sheets of FOXGLENN INVESTORS (A
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity (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 Foxglenn Investors
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/ Fishbein & Company
- - - - -----------------------------
Elkins Park, Pennsylvania
January 22, 1997

[Larry C. Stemen, CPA and Associates Letterhead]

Independent Auditor's Report
----------------------------

February 4, 1998

To the General and Limited Partners of
Shiloh Grove Limited Partnership
Columbus, Ohio

We have audited the accompanying balance sheets of Shiloh Grove Limited
Partnership as of December 31, 1997 and 1996, 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 Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the above mentioned financial statements present fairly, in all
material respects, the financial position of Shiloh Grove Limited Partnership at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental data included in this report
(shown on pages 12-15) are presented for the purposes of additional analysis and
are not a required part of the financial statements. Such information has been
subjected to the same auditing procedures applied in the audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.

/s/ Larry C. Stemen, CPA and Associates

Larry C. Stemen, CPA and Associates
Certified Public Accountants
Columbus, Ohio
February 4, 1998
Revised March 10, 1998

(1)

[Larry C. Stemen, CPA and Associates Letterhead]

Independent Auditor's Report

January 29, 1997

To the General and Limited Partners of
Shiloh Grove Limited Partnership
Columbus, Ohio

We have audited the accompanying balance sheets of Shiloh Grove Limited
Partnership as of December 31, 1996 and 1995, 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 Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the above mentioned financial statements present fairly, in all
material respects, the financial position of Shiloh Grove 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
principles.

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental data included in this report
(shown on pages 12-15) are presented for the purposes of additional analysis and
are not a required part of the financial statements. Such information has been
subjected to the same auditing procedures applied in the audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.

/s/ Larry C. Stemen, CPA and Associates
- - - - --------------------------------------------

Larry C. Stemen, CPA and Associates
Certified Public Accountants
Columbus, Ohio
January 29, 1997

[L.H. FRISHKOFF & COMPANY LLP Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

To the Partners of
Silver Blue Lake Apartments, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-009-124
---------------------------------

We have audited the accompanying statements of financial condition of Silver
Blue Lake Apartments, Ltd. (A Limited Partnership) as of December 31, 1997 and
1996 and the related statements of operations, changes in partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. 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 Silver Blue Lake Apartments,
Ltd. (A Limited Partnership) as of December 31, 1997 and 1996 and the results of
its operations, changes in partners' deficit and its cash flows for the years
then ended in conformity with generally accepted accounting principles.

/s/ L.H. FRISHKOFF & COMPANY LLP
--------------------------------
L.H. FRISHKOFF & COMPANY LLP
/s/ L.H. FRISHKOFF & COMPANY LLP
New York, New York
February 5, 1998

-1-

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Silver Blue Lake Apartments, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-009-124

We have audited the accompanying statements of financial condition of Silver
Blue Lake Apartments, Ltd. (A Limited Partnership) as of December 31, 1996 and
1995 and the related statements of operations, changes in partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. 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 condition of Silver Blue Lake Apartments,
Ltd. (A Limited Partnership) as of December 31, 1996 and 1995 and the results of
its operations, changes in partners' deficit 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

[Bick-Fredman & Co Letterhead]

Independent Auditor's Report
----------------------------

The General and Limited Partners
Lancaster Towers Associates, L.P.
Cleveland, Ohio

We have audited the accompanying balance sheets of Lancaster Towers
Associates, L.P. (a Delaware Limited Partnership), as of December 31, 1997 and
1996, and the related statements of income, partners' capital and cash flows for
the years then ended. These financial statements are the responsibility of the
Project's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. 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 Lancaster Towers
Associates, L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a
report dated January 15, 1998 on our consideration of Lancaster Towers
Associates, L.P.'s internal control and reports dated January 15, 1998 on its
compliance with laws and regulations.

/s/ Bick-Fredman & Co.
Cleveland, Ohio
January 15, 1998

1

[Bick-Fredman & Co. Letterhead]

Independent Auditor's Report

The General and Limited Partners
Lancaster Towers Associates, L.P.
Cleveland, Ohio

We have audited the accompanying balance sheets of Lancaster Towers
Associates, L.P. (a Delaware Limited Partnership), as of 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
Project's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. 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 Lancaster Towers 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.

In accordance with Government Auditing Standards, we have also issued a
report dated January 24, 1997 on our consideration of Lancaster Towers
Associates, L.P.'s internal control structure and a report dated January 24,
1997 on its compliance with laws and regulations.

/s/ Bick-Fredman & Co.
-----------------------------

Cleveland, Ohio
January 24, 1997

[Asher & Company, Ltd. Letterhead]

Independent Auditors' Report
----------------------------

The Partners
West Kinney Associates, L.P.
T/A Willie T. Wright Plaza
Marlton, New Jersey

We have audited the accompanying balance sheets of West Kinney
Associates, L.P. T/A Willie T. Wright Plaza (A Limited Partnership), as of
December 31, 1997 and 1996, and the related statements of operations, Partners'
deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards 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 West Kinney
Associates, L.P. T/A Willie T. Wright Plaza (A Limited Partnership), as of
December 31, 1997 and 1996, and the results of its operations, changes in its
Partners' deficit and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The Partners
West Kinney Associates, L.P.
T/A Willie T. Wright Plaza

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs, issued by the U.S. Department of Housing
and Urban Development, we have issued a report dated January 26, 1998 on our
consideration of West Kinney Associates', L.P. T/A Willie T. Wright Plaza (A
Limited Partnership), internal control and reports dated January 26, 1998 on its
compliance with specific requirements applicable to its major HUD program and
specific requirements applicable to fair housing and non-discrimination.

/s/ ASHER & COMPANY, Ltd.
ASHER & COMPANY, Ltd.

Philadelphia, Pennsylvania
January 26, 1998

[SHORE, AVRACH & COMPANY, P.C. - PHILADELPHIA, PENNSYLVANIA LETTERHEAD]

Independent Auditor's Report on Basic
Financial Statements

To the Partners
West Kinney Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of West Kinney Associates,
L.P. T/A Willie T. Wright Plaza (A New Jersey Limited Partnership) as of
December 31, 1995 and 1994, and the related statements of operations, partners'
(deficit), and cash flows for the years then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards 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 West Kinney 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.

In accordance with Government Auditing Standards, we have also issued the
following reports dated January 18, 1996 concerning West Kinney Associates, L.P.
T/A Willie T. Wright Plaza (1) on the internal control structure, (2) on
compliance with specific requirements applicable to major HUD programs, (3) on
compliance with specific requirements applicable to affirmative fair housing,
and (4) on compliance with applicable laws and regulations.

/s/ SHORE, AVRACH & COMPANY, P.C.
Certified Public Accountants

January 18, 1996

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

INDEPENDENT AUDITOR'S REPORT

To the Partners
of Autumn Park Associates Limited Partnership

I have audited the accompanying balances sheet of Autumn Park Associates Limited
Partnership as of December 31, 1997 and 1996, and the related statements of
operations, changes in partners' capital, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Autumn Park Associates Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Gerald V. Gerritz, Jr.
Gerald V. Gerritz, Jr., CPA, P.C.
Portland, Oregon
January 26, 1998

1

[MERINA MCCOY GERRITZ, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
of Autumn Park Associates Limited Partnership

We have audited the accompanying balance sheets of Autumn Park Associates
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 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 Autumn Park 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.

/s/ Merina McCoy Gerritz
- - - - ---------------------------------
Merina McCoy Gerritz, CPA's, P.C.
West Linn, Oregon
February 18, 1997

[ZINER & COMPANY, P.C. Letterhead]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Regent Street Associates

We have audited the accompanying balance sheet of Regent Street
Associates (a Pennsylvania limited partnership) as of December 31, 1997 and the
related statements of operations, changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Regent Street Associates as of December
31, 1996 were audited by other auditors whose report dated February 9, 1997
expressed an unqualified opinion on those financial 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

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

/s/ ZINER & COMPANY, P.C.

February 9, 1998
Boston, Massachusetts

-1-

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Regent Street Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Regent Street 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 reasonability 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 Regent Street 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 9, 1997

[Asher & Company, Ltd. Letterhead]

Independent Auditors' Report
----------------------------

The Partners
Magnolia Arms Associates, Ltd.
T/A Palm Terrace Apartments
Marlton, New Jersey

We have audited the accompanying balance sheets of Magnolia Arms
Associates, Ltd. T/A Palm Terrace Apartments (A Limited Partnership) as of
December 31, 1997 and 1996 and the related statements of loss, Partners' deficit
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Magnolia Arms
Associates, Ltd. T/A Palm Terrace Apartments (A Limited Partnership) as of
December 31, 1997 and 1996 and the results of its operations, changes in its
Partners' deficit and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Page Two
The Partners
Magnolia Arms Associates, Ltd.
T/A Palm Terrace Apartments

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the 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/ Asher & Company, Ltd.
ASHER & COMPANY, LTD.

Philadelphia, Pennsylvania
January 16, 1998

[SHORE, AVRACH & COMPANY, P.C. - PHILADELPHIA, PENNSYLVANIA LETTERHEAD]

Independent Auditor's Report on
Basic Financial Statements

To the Partners
Magnolia Arms Associates, Ltd.
Marlton, New Jersey

We have audited the accompanying balance sheets of Magnolia Arms
Associates, Ltd. T/A Palm Terrace Apartments (A Florida Limited Partnership), as
of December 31, 1995 and 1994, and the related statements of operations,
partners' (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Magnolia Arms Associates,
Ltd. 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/ SHORE, AVRACH & COMPANY, P.C.
Certified Public Accountants

January 23, 1996

[Asher & Company, Ltd. Letterhead]

Independent Auditors' Report

The Partners
Greenleaf Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Greenleaf Associates,
L.P. (A Limited Partnership), HUD Project No. 084-94009, as of December 31, 1997
and 1996 and the related statements of profit and loss, Partners' deficit and
cash flows for the year ended December 31, 1997. 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 Greenleaf Associates, L.P.
(A Limited Partnership), HUD Project No. 084-94009, as of December 31, 1997 and
1996 and the results of its operations, changes in its Partners' deficit and its
cash flows for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.

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

Page Two
The Partners
Greenleaf Associates, L.P.

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs, issued by the U.S. Department of Housing
and Urban Development, we have also issued a report dated January 16, 1998 on
our consideration of Greenleaf Associates, L.P.'s (A Limited Partnership), HUD
Project No. 084-94009, internal control and reports dated January 16, 1998 on
its compliance with specific requirements applicable to major HUD programs and
specific requirements applicable to fair housing and non-discrimination.

/s/ Asher & Company, Ltd.
Asher & Company, Ltd.

Philadelphia, Pennsylvania
January 16, 1998

[SHORE, AVRACH & COMPANY, P.C. - PHILADELPHIA, PENNSYLVANIA LETTERHEAD]

Independent Auditor's Report on Basic
Financial Statements and Supplemental Data

To the Partners
Greenleaf Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Greenleaf Associates,
L.P. (A Missouri Limited Partnership), HUD Project #084-94009, as of December
31, 1995 and 1994, and the related statements of profit and loss, partners'
(deficit) and cash flows for the year ended December 31, 1995. 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 Greenleaf Associates, L.P.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data included in the
report (shown on pages 15 through 20) are presented for the purposes of
additional analysis 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 presented in all material respects in relation to the basic financial
statements taken as a whole.

The accompanying financial statements have been prepared assuming that
Greenleaf Associates, L.P. will continue as a going concern. As discussed in
Note 3 to the financial statements, Greenleaf Associates, L.P. has defaulted on
its mortgage loan payable which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing Standards, we have also issued the
following reports dated January 24, 1996 concerning Greenleaf Associates, L.P.
(1) on the internal control structure, (2) on compliance with specific
requirements applicable to major HUD programs, (3) on compliance with specific
requirements applicable to affirmative fair housing, and (4) on compliance with
applicable laws and regulations.

/s/ SHORE, AVRACH & COMPANY, P.C.
Certified Public Accountants

January 24, 1996 except for Note 3 as to
which the date is February 21, 1996

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

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of Alameda Towers Associates,
L.P. as of December 31, 1997 and 1996 and the related Statements of Losses and
Changes in Partner's Capital and Cash Flows for the years then ended. These
financial statements are the responsibility of the partnership's management. My
responsibility is to express an opinion on these financial statements based on
my 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 Alameda Towers Associates, L.P. as
of December 31, 1997 and 1996 and the results of its operations and changes in
partner's 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

Seal of JOSE E. ROSARIO

January 30, 1998

Stamp No. 1468191 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
Alameda Towers Associates, L. P.
Rio Piedras, Puerto Rico

I have audited the accompanying balance sheets of Alameda Towers Associates,
L.P. as of December 31, 1996 and 1995 and the related Statements of Losses and
Changes in Partner's Capital and Cash Flows for the years then ended. These
financial statements are the responsibility of the partnership's management. My
responsibility is to express an opinion on these financial statements based on
my 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 Alameda Towers Associates, L.P. as
of December 31, 1996 and 1995 and the results of its operations and changes in
partner's 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. 1401425 of the Puerto
Rico College of CPAs was
affixed to the original.

[L.H. FRISHKOFF & COMPANY LLP Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

To the Partners of
Dixie Apartment Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-013-131
---------------------------------

We have audited the accompanying statements of financial condition of Dixie
Apartment Associates, Ltd. (A Limited Partnership) as of December 31, 1997 and
1996, 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 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 Dixie Apartment Associates,
Ltd. (A Limited Partnership) as of December 31, 1997 and 1996, 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 LLP
---------------------------------
L.H. FRISHKOFF & COMPANY LLP

/s/ L.H. Frishkoff & Company LLP

New York, New York
February 2, 1998

-1-

[L. H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Dixie Apartment Associates, Ltd.
(A Limited Partnership)
Miami, Florida

FHA PROJECT NO. FL29-K005-O13-131

We have audited the accompanying statements of financial condition of Dixie
Apartment 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 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 Dixie Apartment 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 22, 1997

[L. H. FRISHKOFF & COMPANY LLP Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

To the Partners of
Ludlam Gardens Apartments, Ltd.
(A Limited Partnership)
Miami, Florida

FHA Project No. FL29-K005-009-123
---------------------------------

We have audited the accompanying statements of financial condition of Ludlam
Gardens Apartments, Ltd. (A Limited Partnership) as of December 31, 1997 and
1996 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 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 Ludlam Gardens Apartments, Ltd.
(A Limited Partnership) as of December 31, 1997 and 1996 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 LLP
--------------------------------
L.H. FRISHKOFF & COMPANY LLP

/s/ L.H. Frishkoff & Company LLP

New York, New York
February 2, 1998

-1-

[L.H. FRISHKOFF & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Ludlam Gardens Apartments, Ltd.
(A Limited Partnership)
Miami, Florida

FHA Project No. FL29-K005-009-123

We have audited the accompanying statements of financial condition of Ludlam
Gardens Apartments, 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 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 Ludlam Gardens Apartments, 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

[PHILIP ROOTBERG & COMPANY, LLP Letterhead]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Grove Parc Associates Limited Partnership

We have audited the accompanying balance sheet of Grove Parc Associates Limited
Partnership (a limited partnership) - F.H.A. Project No. 071-36654 as of
December 31, 1997 and 1996, and the related statements of operations, partners'
deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
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 Grove Parc Associates Limited
Partnership - F.H.A. Project No. 071-36654 as of December 31, 1997 and 1996, and
the results of its operations, changes in its partners' 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 February 10, 1998, on our consideration of the Partnership's internal
control and a report dated February 10, 1998, on its compliance with laws and
regulations.

1

Our audits were conducted 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
February 10, 1998

2

[PHILIP ROOTBERG & COMPANY, LLP LETTERHEAD]

To the Partners
Grove Parc Associates Limited Partnership

We have audited the accompanying balance sheet of Grove Parc Associates Limited
Partnership, F.H.A. Project No. 071-36654 as of December 31, 1996 and 1995, and
the related statements of operations, 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 Grove Parc Associates Limited
Partnership, F.H.A. Project No. 071-36654 as of December 31, 1996 and 1995, and
the results of its operations, changes in its 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 23, 1997, on our consideration of the Partnership's internal
control structure and a report dated January 23, 1997, 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

Chicago, Illinois
January 23, 1997

[Reznick Fedder & Silverman Letterhead]

INDEPENDENT AUDITORS' REPORT

To the Partners
Apple Creek Housing Associates, Ltd.

We have audited the accompanying balance sheet of Apple Creek Housing
Associates, Ltd. as of December 31, 1997, and the related statements of profit
and loss (on HUD Form No. 92410), 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 and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

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

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 20
through 25 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

-6-

In accordance with Government Auditing Standards and the "Consolidated
Audit Guide for Audits of HUD Programs," we have also issued reports dated
January 16, 1998 on our consideration of Apple Creek Housing Associates, Ltd.'s
internal control and on its compliance with specific requirements applicable to
major HUD programs, fair housing and non-discrimination, and laws and
regulations applicable to the financial statements.

/s/ Reznick Fedder & Silverman

Boston, Massachusetts Federal Employer Identification
January 16, 1998 Number: 52-1088612

Audit Principal: Philip A. Weitzel

-7

[Reznick Fedder & Silverman Letterhead]

INDEPENDENT AUDITORS' REPORT

To the Partners
Apple Creek Housing Associates, Ltd.

We have audited the accompanying balance sheet of Apple Creek Housing
Associates, Ltd. as of December 31, 1996, and the related statements of profit
and loss (on HUD Form No. 92410), 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 and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion. the financial statements referred to above present fairly,
in all material respects, the financial position of Apple Creek Housing
Associates, Ltd. as of December 31, 1996, and the results of its operations, the
changes in partners' deficit and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 20
through 26 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated
Audit Guide for Audits of HUD Programs," we have also issued reports dated
January 23, 1997 on our consideration of Apple Creek Housing Associates, Ltd.'s
internal control structure and on its compliance with specific requirements
applicable to major HUD programs, affirmative fair housing, and laws and
regulations applicable to the financial statements.

/s/ Reznick Fedder & Silverman

Boston, Massachusetts Federal Employer
January 23, 1997 Identification Number:
52-1088612

Audit Principal: Philip A. Weitzel

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Apple Creek Housing Associates, Ltd.

We have audited the accompanying balance sheet of Apple Creek Housing
Associates, Ltd. as of December 31, 1995, and the related statements of profit
and loss (on HUD Form No. 92410), 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 and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Apple Creek Housing
Associates, Ltd. as of December 31, 1995, and the results of its operations, the
changes in partners' deficit and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 20
through 26 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
that portion marked "Unaudited" on which we express no opinion, has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued
reports dated February 7, 1996 on our consideration of Apple Creek Housing
Associates, Ltd.'s internal control structure and on its compliance with
specific requirements applicable to major HUD programs, affirmative fair
housing, and laws and regulations applicable to the financial statements.

/s/ REZNICK FEDDER & SILVERMAN

Boston, Massachusetts Federal Employer
February 7, 1996 Identification Number:
52-1088612

Audit Principal: Philip A. Weitzel

[BRODSHATZER, WALLACE, SPOON & YIP Letterhead]

INDEPENDENT AUDITORS' REPORT
----------------------------

To the Partners of
Redwood Villa Associates
(A Limited Partnership)

We have audited the balance sheet of Redwood Villa Associates (A Limited
Partnership) as of December 31, 1997, 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. The financial statements of Redwood Villa Associates as of December
31, 1996 were audited by other auditors whose reported dated January 22, 1997 on
those statements included an explanatory paragraph that described the
uncertainty about the Partnership's ability to continue as a going concern.

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

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

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 2 to the
financial statements, the Partnership has sustained operating losses since
inception. For the year ended December 31, 1997, the Partnership experienced a
loss of $228,599 (including $219,179 of depreciation and $4,553 of amortization
expense) and as of that date, had a working capital deficiency of $530,925 and a
partners' deficit of

Redwood Villa Associates
(A Limited Partnership)
Page 2

$484,684. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. Management's plans regarding these
matters are described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing Standards, we have also issued our report
dated January 21, 1998 on our consideration of Redwood Villa Associates' (A
Limited Partnership) internal control over financial reporting and our tests of
its compliance with certain provisions of laws, regulations contracts and
grants.

/s/ BRODSHATZER, WALLACE, SPOON & YIP

San Diego, California
January 21, 1998

[BRUNO, MACK & BARCLAY LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Redwood Villa Associates
(A Limited Partnership)

We have audited the balance sheet of Redwood Villa Associates (A Limited
Partnership) as of December 31, 1996, and the related statements of operations,
changes in partner's 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. The financial statements of Redwood Villa
Associates as of December 31, 1995 were audited by other auditors whose report
dated February 22, 1996 on those statements included an explanatory paragraph
that described the uncertainty about the Partnership's ability to continue as a
going concern discussed in note 2 to the 1996 financial statements.

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

In our opinion, 1996 the financial statements referred to above present fairly,
in all material respects, the financial position of Redwood Villa Associates (A
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.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 2 to the
financial statements, the Partnership has sustained operating losses since
inception. For the year ended December 31, 1996, the Partnership experienced a
loss of $204,847 (including $218,595 of depreciation and $4,553 of amortization
expense) and as of that date, had a working capital deficiency of $448,810 and
deficit in partners' equity of $241,085. These conditions raise substantial
doubt about the Partnership's ability to continue as a going concern.
Management's plans regarding these matters are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

In accordance with Government Auditing Standards, we have also issued a report
dated January 22, 1997 on our consideration of Redwood Villa Associates' (A
Limited Partnership) internal control structure and a report dated January 22,
1997, on its compliance with laws and regulations.

/s/Bruno, Mack & Barclay

San Diego, California
January 22, 1997

[LEAF AND COLE LETTERHEAD]

Independent Auditor's Report

To the Partners
Redwood Villa Associates
(A Limited Partnership)

Dear Partners:

We have audited the accompanying balance sheet of Redwood Villa Associates
(A Limited Partnership) as of December 31, 1995, and the related statements of
income (loss), changes in partners' equity (deficit) and cash flows for the year
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 audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Redwood Villa Associates (A
Limited Partnership) at 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.

To the Partners
Redwood Villa Associates
(A Limited Partnership)

The accompanying financial statements have been prepared assuming that the
partnership will continue as a going concern. As discussed in Note 8 to the
financial statements, the partnership has sustained operating losses since
inception. For the year ended December 31, 1995 the partnership experienced a
loss of $244,725 including $227,084 of depreciation and $4,553 of amortization
and as of that date, had a working capital deficiency of $395,250 and partners'
deficit of $25,537. These conditions raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding these matters are
described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

In accordance with Government Auditing Standards, we have also issued a
report dated February 22, 1996 on our consideration of Redwood Villa Associates'
internal control structure and a report dated February 22, 1996 on its
compliance with laws and regulations.

/s/ LEAF AND COLE

San Diego, California
February 22, 1996

[Asher & Company, Ltd. Letterhead]

Independent Auditors' Report
----------------------------

The Partners
Charles Drew Court Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Charles Drew Court
Associates, L.P. (A Limited Partnership) as of December 31, 1997 and 1996 and
the related statements of operations, Partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Charles Drew Court
Associates, L.P. (A Limited Partnership) as of December 31, 1997 and 1996 and
the results of its operations, changes in its Partners' capital and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the 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/ Asher & Company, Ltd.
ASHER & COMPANY, Ltd.

Philadelphia, Pennsylvania
January 17, 1998

[SHORE, AVRACH & COMPANY, P.C. - PHILADELPHIA, PENNSYLVANIA LETTERHEAD]

Independent Auditor's Report on
Basic Financial Statements

To the Partners
Charles Drew Court Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheets of Charles Drew Court
Associates, L.P. (A New Jersey Limited Partnership), as of December 31, 1995 and
1994, and the related statements of operations, partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Charles Drew Court
Associates, L.P. as of December 31, l995 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/ SHORE, AVRACH & COMPANY, P.C.
Certified Public Accountants

January 17, 1996

[Asher & Company, Ltd. Letterhead]

Independent Auditors' Report
----------------------------

The Partners
Walnut Park Plaza Associates
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Walnut Park Plaza
Associates (a Pennsylvania Limited Partnership) as of December 31, 1997 and 1996
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 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 Walnut Park Plaza
Associates as of December 31, 1997 and 1996 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 B to the
financial statements, the Partnership has suffered recurring losses from
operations and is in default of certain obligations under the terms of the bond
indenture. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern at December 31, 1997. The General
Partner's plans regarding these matters are also described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Asher & Company, Ltd.
ASHER & COMPANY, Ltd.

Philadelphia, Pennsylvania
February 10, 1998

[ASHER & COMPANY, Ltd. LETTERHEAD]

Independent Auditors' Report
----------------------------

The Partners
Walnut Park Plaza Associates
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Walnut Park Plaza
Associates (a Pennsylvania 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 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 Walnut Park Plaza 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
Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has suffered recurring losses from
operations and is in default of certain obligations under the terms of the bond
indenture. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern at December 31, 1996. The General
Partner's plans regarding these matters are also described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Asher & Company, Ltd.
ASHER & COMPANY, Ltd.

Philadelphia, Pennsylvania
February 3, 1997, except for Note M,
as to which the date is April 29, 1997.

[HENICK & YLVISAKER, Certified Public Accountants Letterhead]

INDEPENDENT AUDITOR'S REPORT
----------------------------

To the Partners
Bayridge Associates Limited Partnership

We have audited the accompanying Balance Sheet of Bayridge Associates Limited
Partnership (an Oregon Limited Partnership) as of December 31, 1997 and the
related statements of operations, changes in partners' capital and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements for the
year ended December 31, 1996 were audited by other auditors whose report, dated
February 12, 1997, 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 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 Bayridge Associates Limited
Partnership, as of December 31, 1997 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Henick & Ylvisaker

Portland, Oregon
February 8, 1998

[ARTHUR ANDERSEN LLP LETTERHEAD]

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Bayridge Associates Limited Partnership:

We have audited the accompanying balance sheets of BAYRIDGE ASSOCIATES LIMITED
PARTNERSHIP (an Oregon limited partnership) as of December 31, 1996 and 1995,
and the related statements of operations, partners' capital and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bayridge 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.

/s/ Arthur Andersen L.L.P.

Denver, Colorado,
February 12, 1997.

[Habif, Arogeti & Wynne, P.C. Letterhead]

INDEPENDENT AUDITORS'REPORT
---------------------------

To the Partners of
United-Pennsylvanian Limited Partnership

We have audited the accompanying balance sheets of UNITED-PENNSYLVANIAN LIMITED
PARTNERSHIP, PHFA Project No. R-251-8E, as of December 31, 1997 and 1996, and
the related statements of profit and loss, changes in 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
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UNITED-PENNSYLVANIAN LIMITED
PARTNERSHIP as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 31, 1998 on our
consideration of UNITED-PENNSYLVANIAN LIMITED PARTNERSHIP's internal controls
and reports dated January 31, 1998 on its compliance with specific requirements
applicable to major HUD programs, specific requirements applicable to
Affirmative Fair Housing and Non-Discrimination, and 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 supporting information included in
the report [shown on pages 15 to 22] is presented for the purpose of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
January 31, 1998

[Habif, Arogeti & Wynne, P.C. Letterhead]

INDEPENDENT AUDITORS' REPORT

To the Partners of
United-Pennsylvanian Limited Partnership

We have audited the accompanying balance sheets of UNITED-PENNSYLVANIAN LIMITED
PARTNERSHIP, PHFA Project No. R-251-8E, as of December 31, 1996 and 1995, and
the related statements of profit and loss, changes in 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
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining' on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UNITED-PENNSYLVANIAN 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.

In accordance with Government Auditing Standards, we have also issued a report
dated January 31, 1997 on our consideration of UNITED-PENNSYLVANIAN LIMITED
PARTNERSHIP's internal control structure and a report dated January 31, 1997 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 supporting information included in
the report [shown on pages 15 to 23] is presented for the purpose of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

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

Atlanta, Georgia

January 31, 1997

[Marden, Harrison & Kreuter Certified Public Accountants, P.C. 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, 1997 and 1996, 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, 1997 and 1996, 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 Certified Public Accountants, P.C.

Port Chester, New York
January 30, 1998

[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.G.

/s/ Marden, Harrison & Kreuter

Port Chester, New York
January 31, 1997

[Marden, Harrison & Kreuter Certified Public Accountants, P.C. 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, 1997 and 1996, 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, 1997 and 1996, 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 30, 1998

[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 Certified Public Accountants, P.C. 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, 1997 and 1996, 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, 1997 and 1996, 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 30, 1998

[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 Certified Public Accountants, P.C. 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, 1997 and 1996, 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, 1997 and 1996, 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 30, 1998

[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

[SMITH & RADIGAN CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lund Hill Associates

We have audited the accompanying balance sheet of Lund Hill Associates, (a
limited partnership), WHEDA Project No. 021, as of December 31, 1997, and the
related statements of partners' equity (deficit), operations 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, (not presented
herein) present fairly, in all material respects, the financial position of Lund
Hill Associates as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.

/s/ Smith & Radigan

Atlanta, Georgia
January 30, 1998

[SMITH & RADIGAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lund Hill Associates

We have audited the accompanying balance sheet of Lund Hill Associates, (a
limited partnership), WHEDA Project No. 021, as of December 31, 1996, and the
related statements of partners' equity (deficit), operations 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, (not presented
herein) present fairly, in all material respects, the financial position of Lund
Hill Associates 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/ Smith & Radigan

Atlanta, Georgia
February 7, 1997

[SMITH & RADIGAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lund Hill Associates

We have audited the accompanying balance sheet of Lund Hill Associates, (a
limited partnership), WHEDA Project No. 021, as of December 31, 1995, and the
related statements of partners' equity (deficit), operations and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lund Hill Associates 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.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules and supporting data on
pages 13-23 are presented for purposes of additional analysis and are not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 9, 1996 on our consideration of the Partnership's internal
control structure and a report dated February 9, 1996 on its compliance with
specific requirements applicable to State/HUD programs.

/s/ SMITH & RADIGAN

Atlanta, Georgia
February 9, 1996

[Rick J. Tanneberger CERTIFIED PUBLIC ACCOUNTANT Letterhead]

Independent Auditor's Report
----------------------------

The Partners
Tanglewood Apartments, A Limited Partnership

We have audited the accompanying balance sheets of Tanglewood Apartments, A
Limited Partnership, as of December 31, 1997 and 1996, 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
These 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 Tanglewood Apartments, A
Limited Partnership as of December 31, 1997 and 1996, 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 conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information presented
on page 11 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Rick J. Tanneberger
Rick J. Tanneberger, CPA, P.A.

January 28, 1998
Fayetteville, Arkansas

[Rick J. Tanneberger Letterhead]

Independent Auditor's Report

The Partners
Tanglewood Apartments, A Limited Partnership

We have audited the accompanying balance sheets of Tanglewood Apartments, A
Limited Partnership, as of 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. These 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 Tanglewood Apartments, A
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.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information presented
on page 11 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Rick J. Tanneberger
------------------------------
Rick J. Tanneberger, CPA, P.A.

Fayetteville, Arkansas
February 3, 1997

[RBG & CO. Letterhead]

Independent Auditors' Report

Partners
Quality Hill Historic District -
Phase II-A, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Quality Hill Historic
District-Phase II-A, L.P., a limited partnership, as of December 31, 1997 and
1996 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 Quality Hill Historic
District-Phase II-A, L.P. as of December 31, 1997 and 1996, 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
February 1, 1998

[Rubin, Brown, Gornstein & Co. LLP Letterhead]

Independent Auditors' Report

Partners
Quality Hill Historic District -
Phase II-A, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Quality Hill Historic District
- - - - -Phase II-A, 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 Quality Hill Historic District
- - - - - Phase II-A, 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

[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, 1997 and 1996 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, 1997 and 1996, 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, P.C.

February 26, 1998 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, 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, 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.

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, P.C.

February 26, 1997 Certified Public Accountants

[ZINER & COMPANY, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Sartain School Venture

We have audited the accompanying balance sheet of Sartain School
Venture (a Pennsylvania limited partnership) as of December 31, 1997, and the
related statements of operations, changes in partners' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Sartain School Venture as of December 31,
1996 were audited by other auditors whose report dated February 8, 1997,
expressed an unqualified opinion on those financial 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

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

/s/ Ziner & Company, P.C.

February 8, 1998
Boston, Massachusetts

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Sartain School Venture (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Sartain School Venture (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'a general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sartain School Venture (a
Limited Partnership) at December 31, 1996 and 1995, and the results of its
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
- - - - ------------------------------
Kingston, Pennsylvania
February 8, 1997

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

ASSETS

March 15,
-----------------------------
1998 1997
------------ ------------

Property and equipment, at cost, less accumulated
depreciation (Notes 2, 4, 7 and 10) $175,421,110 $182,767,711
Cash and cash equivalents (Notes 2, 3 and 10) 2,852,210 2,918,344
Cash held in escrow (Notes 3 and 5) 10,072,081 9,258,938
Accounts receivable - tenants 602,311 612,022
Deferred costs, less accumulated amortization (Notes 2 and 6) 3,551,003 3,836,817
Other assets 1,187,963 1,404,120
------------ ------------

Total assets $193,686,678 $200,797,952
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities
Mortgage notes payable (Notes 3 and 7) $155,846,595 $157,643,066
Accounts payable and other liabilities 8,530,428 7,954,170
Due to local general partners and affiliates (Note 8) 14,186,745 14,161,748
Due to general partners and affiliates (Note 8) 4,236,430 2,987,268
Due to selling partners 987,711 980,913
------------- -------------

183,787,909 183,727,165
------------ ------------
Minority interests (Note 2) 6,127,247 6,124,180
------------ ------------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' capital
Limited partners (15,987.5 BACs issued and
outstanding) (Note 1) 4,463,651 11,566,985
General partners (692,129) (620,378)
------------- -------------

Total partners' capital 3,771,522 10,946,607
------------ ------------

Total liabilities and partners' capital $193,686,678 $200,797,952
=========== ===========

See accompanying notes to consolidated financial statements.

19

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

Year Ended March 15,
-------------------------------------------
1998 1997 1996
----------- ----------- -----------

Revenues
Rental income $33,795,715 $33,414,089 $33,437,870
Other (Notes 7 and 10) 1,555,134 1,910,227 2,017,385
----------- ----------- -----------

35,350,849 35,324,316 35,455,255
---------- ---------- ----------

Expenses
General and administrative 4,856,007 4,882,668 4,749,747
General and administrative
- related parties (Note 8) 2,573,776 2,677,535 1,774,751
Repairs and maintenance 6,460,088 6,674,072 6,330,209
Operating and other 3,857,090 4,001,390 3,745,599
Taxes 1,670,113 1,618,529 1,568,091
Insurance 1,449,547 1,477,670 1,556,561
Interest 12,893,424 13,118,835 13,611,207
Depreciation and amortization 9,113,446 8,873,802 9,060,347
----------- ----------- -----------

42,873,491 43,324,501 42,396,512
---------- ---------- ----------

Minority interests in loss of subsidiaries 347,557 382,054 483,863
------------ ------------ ------------

Net loss $ (7,175,085) $ (7,618,131) $ (6,457,394)
=========== =========== ===========

Number of BACs outstanding 15,987.5 15,987.5 15,987.5
=========== =========== ===========

Net loss - limited partners $ (7,103,334) $ (7,541,950) $ (6,392,820)
=========== =========== ===========

Net loss per BAC $ (444.31) $ (471.74) $ (399.86)
=========== =========== ===========

See accompanying notes to consolidated financial statements.

20

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

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

Partners' capital (deficit) - March 16, 1995 $25,022,132 $25,501,755 $(479,623)
Net loss, year ended March 15, 1996 (6,457,394) (6,392,820) (64,574)
----------- ----------- ---------

Partners' capital (deficit)- March 15, 1996 18,564,738 19,108,935 (544,197)
Net loss, year ended March 15, 1997 (7,618,131) (7,541,950) (76,181)
----------- ----------- ---------

Partners' capital (deficit)- March 15, 1997 10,946,607 11,566,985 (620,378)
Net loss, year ended March 15, 1998 (7,175,085) (7,103,334) (71,751)
----------- ----------- --------

Partners' capital (deficit)- March 15, 1998 $ 3,771,522 $ 4,463,651 $(692,129)
========== ========== ========

See accompanying notes to consolidated financial statements.

21

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

Year Ended March 15,
------------------------------------------
1998 1997 1996
---------- ---------- ----------

Cash flows from operating activities:
Net loss $(7,175,085) $(7,618,131) $(6,457,394)
---------- ---------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Cancellation of indebtedness income (Note 7) (68,571) (68,571) (68,571)
Accrued interest added to principal
of mortgage note payable 139,676 131,713 126,058
Depreciation and amortization 9,113,446 8,873,802 9,060,347
Loss on sale of property and equipment 0 49,189 0
(Increase) decrease in assets
Cash held in escrow (34,147) 157,260 1,148,855
Accounts receivable - tenants 9,711 (84,509) (49,816)
Other assets 153,164 203,350 (204,531)
Increase (decrease) in liabilities
Accounts payable and other liabilities 367,540 540,196 (155,469)
Due to General Partners and affiliates 1,249,162 605,714 977,618
Minority interest in loss of subsidiaries (347,557) (382,054) (483,863)
----------- ----------- -----------

Total adjustments 10,582,424 10,026,090 10,350,628
---------- ---------- ----------

Net cash provided by operating activities 3,407,339 2,407,959 3,893,234
---------- ---------- ----------

Cash flows from investing activities:
(Increase) decrease in cash held in escrow (778,996) 77,754 (817,081)
Improvements to property and equipment (1,209,320) (1,274,858) (1,268,987)
---------- ---------- ----------

Net cash used in investing activities (1,988,316) (1,197,104) (2,086,068)
---------- ---------- ---------

Net cash from operating and investing activities 1,419,023 1,210,855 1,807,166

See accompanying notes to consolidated financial statements.

22

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

Year Ended March 15,
------------------------------------------
1998 1997 1996
---------- ---------- ----------

Net cash from operating and investing activities,
brought forward 1,419,023 1,210,855 1,807,166
---------- ---------- ----------

Cash flows from financing activities:
Increase in deferred costs 0 (323,658) (30,059)
Increase in due to Local General
Partners and affiliates 892,814 971,417 1,496,048
Decrease in due to Local General
Partners and affiliates (174,477) (268,416) (400,618)
Increase (decrease) in due to selling partners 6,798 (13,670) 29,649
Proceeds from mortgage notes 0 4,480,000 0
Repayment of mortgage notes (1,867,576) (5,290,887) (2,908,134)
Decrease in capitalization of consolidated
subsidiaries attributable to minority interest (342,716) (627,577) (142,605)
---------- ---------- ----------

Net cash used in financing activities (1,485,157) (1,072,791) (1,955,719)
---------- ---------- ----------

Net (decrease) increase in cash and cash equivalents (66,134) 138,064 (148,553)

Cash and cash equivalents, beginning of year 2,918,344 2,780,280 2,928,833
---------- ---------- ----------

Cash and cash equivalents, end of year $ 2,852,210 $ 2,918,344 $ 2,780,280
========== ========== ==========

Supplemental disclosure of cash flows information:

Cash paid during the year for interest $10,554,123 $10,384,244 $11,607,623

Supplemental disclosures of noncash activities:
Increase in accounts payable and other liabilities
for property and equipment additions $ 208,718 $ 0 $ 128,553
Decrease in other assets for
property and equipment additions 62,993 0 0
Reclassification due to local general partner
and affiliates, to contribution by minority
interest shareholders 693,340 0 0

See accompanying notes to consolidated financial statements.

23

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

NOTE 1 - General

Liberty Tax Credit Plus L.P., a Delaware limited partnership (the
"Partnership"), was organized on June 26, 1987, but had no activity until
October 1, 1987 (which date is considered to be inception for financial
accounting purposes). The Partnership had no operations until commencement of
the public offering on November 20, 1987.

The Partnership's business is to invest as a limited partner in other limited
partnerships ("Local Partnerships" or "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. As of March 15, 1998, the
Partnership has invested in 31 subsidiary partnerships and does not anticipate
making any additional investments.

Since November 25, 1997, the general partners of the Partnership have been
Related Credit Properties L.P., a Delaware limited partnership (the "Related
General Partner") and Liberty Associates III L.P., a Delaware limited
partnership ("Liberty Associates"), and together with the Related General
Partner (the "General Partners"). The Related General Partner is also the
special limited partner of the Partnership. The general partner of the Related
General Partner is Related Credit Properties Inc., a Delaware corporation. The
general partner of Liberty Associates is the Related General Partner. On
November 25, 1997, affiliates of the Related General Partner and Liberty GP Inc.
("LGP"), then the general partners of the Partnership, entered into a Purchase
Agreement pursuant to which the Related General Partner purchased LGP's general
partner interest in the Partnership (the "Transfer"). In addition to the
Transfer, the Related General Partner also acquired LGP's special limited
partner interest in the Partnership and its general partner interest in Liberty
Associates. Prior to the Transfer, Liberty Associates was an affiliate of Lehman
Brothers.

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 31 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 partnerships and to approve certain
major operating and financial decisions, the Partnership has a controlling
financial interest in the subsidiary partnerships. All intercompany accounts and
transactions with the subsidiary partnerships have been eliminated in
consolidation.

For financial reporting purposes the Partnership's fiscal year ends on March 15.
The Partnership's fiscal year ends on March 15, in order to allow adequate time
for the subsidiaries finan-

24

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

cial statements to be prepared and consolidated. The books and records of the
Partnership are maintained on the accrual basis of accounting, in accordance
with generally accepted accounting principles ("GAAP"). All subsidiaries have
calendar year ends. Accounts of the subsidiary partnerships have been adjusted
for intercompany transactions from January 1 through March 15.

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

The Partnership's investment in each subsidiary partnership is equal to the
respective subsidiary partnership's partners' equity less minority interest
capital, if any. Losses attributable to minority interests which exceed the
minority interests' investment in subsidiary partnerships have been charged to
the Partnership. Such losses aggregated approximately $147,000, $157,000 and
$175,000 for the years ended March 15, 1998, 1997 and 1996, respectively. 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

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

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated.

Through March 15, 1998, the Partnership has not recorded any loss on impairment
of assets or reduction to estimated fair value.

25

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

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 (Note 8).

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.

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.

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.

26

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

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

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

March 15, 1998 March 15, 1997
-------------- --------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------

Mortgage notes payable for which it is:
Practicable to estimate fair value $62,496,416 $60,476,749 $63,531,870 $63,407,383
Not Practicable $93,350,179 (a) $94,111,196 (a)

(a) 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 financial instruments that require such disclosure
approximates fair value.

NOTE 4 - Property and Equipment

The components of property and equipment are as follows:

March 15, Estimated
------------------------------- Useful Lives
1998 1997 (Years)
------------ ------------- ------------

Land $ 11,804,469 $ 11,804,469 -
Buildings and improvements 239,504,907 238,560,792 15 to 40
Other 4,985,616 4,448,700 3 to 20
------------ -------------
256,294,992 254,813,961
Less: Accumulated depreciation 80,873,882 72,046,250
------------ ------------

$175,421,110 $182,767,711
============ ============

Included in property and equipment are $6,859,371 of acquisition fees paid to
the general partners and $952,737 of acquisition expenses. In addition, as of
March 15, 1998, buildings and improvements include $2,870,719 of capitalized
interest.

In connection with the development or rehabilitation of the properties, the
subsidiary partnerships have incurred developer's fees of $23,360,275 to the
local general partners and affiliates. Such fees have been included in the cost
of property and equipment.

Depreciation expense for the years ended March 15, 1998, 1997 and 1996 amounted
to $8,827,632, $8,575,413 and $8,785,046, respectively.

27

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

During the year ended March 15, 1997, accumulated depreciation on dispositions
amounting to $14,150 was written off.

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

March 15,
----------------------------
1998 1997
----------- ----------

Real estate taxes, insurance, and other $ 2,422,142 $2,506,597
Reserve for replacements 6,734,304 5,955,308
Other 915,635 797,033
----------- ----------
$10,072,081 $9,258,938
=========== ==========

NOTE 6 - Deferred Costs

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

March 15,
-------------------------------- Period
1998 1997 (Months)
----------- ----------- -----------

Operating guarantee fee $ 510,443 $ 510,443 60
Financing expenses 4,683,188 4,724,538 *
Organization expenses 1,452,489 1,452,489 60
Supervisory salaries 795,609 795,609 60
Other 48,518 48,518 Various
----------- -----------
7,490,247 7,531,597
Less: Accumulated amortization (3,939,244) (3,694,780)
---------- ---------
$3,551,003 $3,836,817
========= =========

*Over the life of the respective mortgages.

Amortization of deferred costs for the years ended March 15, 1998, 1997 and 1996
amounted to $285,814, $298,389 and $275,301, respectively.

During the years ended March 15, 1998 and 1997, deferred costs and accumulated
amortization of $41,350 and $124,570 were written off.

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $1,068,000 including principal and interest at rates varying from
1% to 12% per annum, through 2029. 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.

28

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

Annual principal payment requirements as of March 15, 1998 for each of the next
five fiscal years and thereafter are as follows:

Fiscal Year Ending Amount
- - - - ------------------ ------

1998 $ 2,822,289
1999 2,948,930
2000 3,208,679
2001 9,279,904
2002 9,661,389
Thereafter 127,925,404
-----------

$155,846,595
===========

See Note 10 for other subsidiary partnerships' financing activities.

Quality Hill Historic District - Phase II - A, L.P.
One of the loans providing permanent financing for Quality Hill Historic
District - Phase II A, L.P. ("Quality Hill") is being provided by the Land
Clearance for Redevelopment Authority of Kansas City ("LCRA") in the amount of
$960,000. This non-interest bearing note is secured by a fourth deed of trust on
the rental property and is due in full on June 26, 2021. One-fourteenth of the
unpaid principal balance is to be forgiven annually on the anniversary date of
the note so long as the property is used only as rental property for qualified
low-income families and individuals. In both 1997 and 1996, $68,571 is recorded
as cancellation of indebtedness income and is included in other income.

NOTE 8 - Related Party Transactions

An affiliate of the General Partners has a 1% interest as a special limited
partner, in each of the subsidiary partnerships. An affiliate of the General
Partners also has a minority interest in certain subsidiary partnerships.

The costs incurred to related parties for the years ended March 15, 1998, 1997
and 1996 were as follows:

A) Related Party Fees

Year Ended March 15,
-------------------------------------------
1998 1997 1996
---------- ---------- ----------

Partnership management fees (a) $1,138,000 $1,138,000 $ 294,500
Expense reimbursement (b) 119,379 117,130 213,927
Property management fees (c) 1,244,897 1,345,905 1,184,824
Local administrative fee (d) 71,500 76,500 81,500
---------- ---------- ----------

$2,573,776 $2,677,535 $1,774,751
========= ========= =========

(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

29

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

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 $3,126,000 and $1,988,000 were
accrued and unpaid as of March 15, 1998 and March 15, 1997, respectively.

(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. Expense reimbursements and asset monitoring fees owed
to Related Credit Properties L.P. amounting to approximately $404,000 and
$293,000 were accrued and unpaid as of March 15, 1998 and March 15, 1997,
respectively.

The General Partners have continued advancing funds and allowing for the accrual
without payment of the amounts set forth in (a) and (b) but are under no
obligation to do so.

(c) Property management fees incurred by subsidiary partnerships amounted to
$1,815,645, $1,851,991 and $1,828,409 for the years ended March 15, 1998, 1997
and 1996, respectively. Of these fees $1,160,288, $1,265,395 and $1,108,548 were
incurred to affiliates of the subsidiary partnerships' general partners. In
addition, $84,609, $80,510 and $76,276 was incurred to affiliates of the
Partnership.

(d) Liberty Associates III L.P., the 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.

The General Partners of the Partnership were allocated approximately $71,000,
$69,000 and $45,000 of passive losses for the years ended March 15, 1998, 1997
and 1996, respectively.

(e) Liberty Associates III L.P. received cash distributions of approximately
$3,500, $1,900 and $800 during the years ended March 15, 1998, 1997 and 1996,
respectively.

Liberty Associates III L.P. was allocated Low-Income Housing Tax Credits of
approximately $2,200, for each of the taxable years ended March 15, 1998, 1997
and 1996, respectively.

30

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

(f) Due to local general partners and affiliates at March 15, 1998 and 1997
consists of the following:

March 15,
----------------------------
1998 1997
----------- ----------

Operating deficit advances $ 123,055 $ 586,265
Operating advances 1,259,814 1,111,030
Development fee payable 231,500 231,400
Residual loan payable 52,500 52,500
Interest (g) 5,071,288 4,469,886
Long-term notes payable (g) 5,725,981 5,725,981
Management and other fees 1,722,607 1,984,686
----------- -----------
$14,186,745 $14,161,748
=========== ===========

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

March 15,
----------------------------
1998 1997
----------- ----------

Grove Parc Assoc. L.P.
This note bears interest at 7.39%
compounded annually on May 1 of each year.
The note is secured by a mortgage subordinate in
rights to mortgages securing the building loan.
Both principal and interest on the loan are due
and payable in full out of residual receipts on
April 29, 2010, or are immediately due and payable
upon refinancing or sale of the project. $5,040,000 $5,040,000

Dixie Apartment Assoc. LTD
This promissory note bears interest at 11%
with a maturity date of June 1, 2002. (Note 10) 105,187 105,187

Ludlam Gardens Apartments LTD
This promissory note bears interest at 11%
with a maturity date of June 1, 2000. (Note 10) 441,124 441,124

B & C Housing Associates
This promissory note bears interest on the unpaid
principal balance with interest at prime plus 2%
per annum payable along with principal as and when
permitted by the partnership agreement and payable
only from surplus cash. 139,670 139,670
--------- ---------

$5,725,981 $5,725,981
========= =========

B) Guarantees

The Partnership previously negotiated Operating Deficit Guaranty Agreements with
all of the Local Partnerships in which the Local General Partners have agreed to
fund operating deficits, up to a stated maximum amount, for a specified period
of time (generally, three years commencing at break-even). The terms of the
Operating Deficit Guaranty Agreements varied for each Local Partnership. The
gross amount of the Operating Deficit Guarantees aggregated approximately
$16,880,000, of which approximately $16,880,000, $16,430,000 and $16,430,000

31

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

expired as of March 15, 1998, 1997 and 1996, respectively. As of March 15, 1998,
all operating deficit guarantees have expired.

The general partners of Bayridge Associates Limited Partnership ("Bayridge"), a
subsidiary partnership, agreed to provide guarantees of up to $1,000,000 to fund
debt service deficiencies in the event certain debt coverage and debt service
ratios were not met for specified periods of time. As of March 15, 1998, no
guarantees have been funded. The Debt Coverage Guaranty Agreement provides for
the security to be reduced to a $100,000 letter of credit provided by the
Bayridge general partners.

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,
-------------------------------------------
1997 1996 1995
------------ ------------ ------------

Financial statement
Net loss $(7,175,085) $(7,618,131) $(6,457,394)
Difference between depreciation and
amortization expense recorded for financial
reporting purposes and the accelerated cost
recovery system utilized for income tax
purposes 514,650 60,188 84,208
Difference resulting from parent company having
a different fiscal year for income tax and
financial reporting purposes (687,409) 900,555 (62,638)
Tax basis forgiveness of debt 693,340 (89,648) 2,096,523

Differences resulting principally from rental
income recognized for income tax purposes and
deferred for financial reporting purposes and
interest and other operating expenses deducted for
financial reporting purposes not deducted for
income tax purposes (87,919) (119,017) 310,469
----------- ------------ ---------

Net loss as shown on the income tax return for
the calendar year ended $(6,742,423) $(6,866,053) $(4,028,832)
========== ========== ==========

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnership - Going Concern

Three subsidiary partnerships, Redwood Villa Associates, Willoughby-Wyckoff
Housing Associates and Walnut Park Plaza Associates have significant
contingencies and uncertainties regarding their continuing operations which
raise substantial doubt about their abilities to continue as going concerns. The
financial statements of these three subsidiary partnerships were prepared
assuming that each will continue as a going concern.

32

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

Redwood Villa Associates, L.P.
Redwood Villa Associates ("Redwood") has sustained operating losses since its
inception. For the 1997 Fiscal Year, Redwood experienced a loss of $228,599,
including $219,179 of depreciation and $4,533 of amortization and at December
31, 1997 had a working capital deficiency of $530,925 and a partners' deficit of
$484,684. These conditions raise substantial doubt about Redwood's ability to
continue as a going concern. Redwood's continuation as a going concern is
dependent upon its ability to achieve profitable operations or obtain future
capital contributions from the partners. Management, whenever possible, plans to
reduce operating costs to achieve profitable operations. The financial
statements for the 1997, 1996 and 1995 Fiscal Years for Redwood have been
prepared assuming that Redwood will continue as a going concern. The
Partnership's investment in Redwood at March 15, 1998 and 1997 was reduced to
zero by prior years' losses and the minority interest balance was approximately
$408,000 and $410,000, respectively. Redwood's net loss after minority interest
amounted to approximately $226,000, $203,000 and $238,000 for the 1997, 1996 and
1995 Fiscal Years, respectively.

Willoughby-Wyckoff Housing Associates
The financial statements of 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
their 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. The Partnership's investment in Willoughby at
March 15, 1998 and 1997 was reduced to zero by prior years' losses and the
minority interest balance was approximately $276,000 and $277,000, respectively.
Willoughby's net loss after minority interest amounted to approximately
$141,000, $276,000 and $309,000 for the 1997, 1996 and 1995 Fiscal Years.

Walnut Park Plaza Associates
Walnut Park Plaza Associates ("Walnut Park") has sustained recurring losses from
operations. At December 31, 1997, Walnut Park had not made certain payments
required under the terms of the Bond Indenture and, as a result, is in default.
On April 9, 1996, Walnut Park entered into an interim agreement with E.A.Moos
("Moos"), Walnut Park's bondholders, which expired October 15, 1996 subject to
certain defined extension and termination provisions. Moo's and Walnut Park
continued to operate under the terms of the interim agreement until the bonds
were sold on October 31, 1997 to Municipal Capital Appreciation Partners, ILP
("MCAPI"), at which time the interim agreement expired. The interim agreement
primarily allowed Moos to select an interim and permanent replacement property
manager, to formulate a proposal to replace the general partner, and to possibly
restructure the indebtedness of the project. On April 29, 1997, an agreement was
signed which provides for, among other things, the transfer of the general
partner interest to RCC Partners '96 LLC ("RCC"), an affiliate of the General
Partners. Upon transfer of the general partner interest to RCC, amounts due to
the former general partner and its affiliates totaling $693,340 were forgiven
and recorded as a contribution to the subsidiary partners' capital. Through the
rights of the Partnership and/or a General

33

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

Partner, which General Partner has a contractual obligation to act on behalf of
the Partnership to approve certain major operating and financial decisions, the
Partnership continues to have a controlling financial interest in Walnut Park.
Walnut Park's continued existence is dependent on improving the financial
operations of Walnut Park, the ultimate resolution of the default of certain
obligations under the terms of the Bond Indenture, or the refinancing of the
Bond Indenture. Contingent upon the outcome of the aforementioned items, Walnut
Park may be unable to continue as a going concern in its present form. The
Partnership's investment in Walnut Park at March 15, 1998 and March 15, 1997 was
reduced to zero by prior years' losses and the minority interest balance
amounted to approximately $1,125,000 and $437,000, respectively. Walnut Park's
net loss after minority interest amounted to approximately $511,000, $541,000
and $257,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

b) Subsidiary Partnerships - Other

Regent Street Associates, L.P.
During 1997, Regent Street Associates, L.P. ("Regent Street") and the Internal
Revenue Service ("IRS") settled the IRS's challenge to the method by which
Regent Street has allocated the below-market federal financing to its
properties. The IRS had contended that Regent Street is entitled to only a 4%
Low Income Housing Tax Credit rather than a 9% Low Income Housing Tax Credit.
The IRS also challenged the inclusion of a portion of the developer's fee and
legal costs in qualified expenditures for the purpose of determining Low Income
Housing and Historic Rehabilitation Tax Credits and depreciable basis. As part
of the settlement agreement, Regent Street agreed to reflect cumulative
adjustments with respect to the 1988 through 1996 taxable years in the 1997 tax
return and to adjust the related depreciation and tax credits for 1997 to
conform to the settlement. Under the settlement, in its 1997 taxable year Regent
Street will recapture low income housing credits of $1,097,719, recapture
rehabilitation credits of $254,244 and recapture depreciation expense of
approximately $192,198. The settlement will result in there being no liability
for interest with respect to the years involved.

Robin Housing Associates
Robin Housing Associates ("Robin Housing") is a defendant in a personal injury
lawsuit. Robin Housing's insurance carrier intends to defend Robin Housing
vigorously. Management believes that the insurance coverage is adequate to cover
any liability arising from this action. Since it is too premature to make an
evaluation of the amount or range of Robin Housing's potential loss, 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
$577,000. The Partnership's investment in Robin Housing was approximately
$577,000 and $711,000 at March 15, 1998 and 1997, respectively, and the minority
interest balance was approximately $68,000 and $174,000, respectively. Robin
Housing's net loss after minority interest amounted to approximately $91,000,
$115,000 and $140,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

c) Lease Commitment

One of the subsidiary partnerships entered into a forty-year ground lease for
the land on which the building is built. As stipulated in the lease, the
subsidiary partnership agrees to pay all real estate taxes, license and permit
fees, among other charges that may be assessed upon the land or improvements. At
December 31, 1997, the subsidiary partnership was committed

34

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

to minimum future rentals on the noncancellable lease in the amount of $60,000 a
year through 2028. The lease payments are payable from available cash and at
December 31, 1997, the subsidiary partnership has accrued lease payments of
$274,674.

d) 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 15, 1998, uninsured cash and cash
equivalents approximated $735,000.

e) Letter of Credit

The subsidiary partnerships were contingently liable at December 31, 1997 on the
following open letters of credit:

Debt service $600,000
Development contingency 23,310
--------
$623,310
========
f) 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 20%
of the properties are located in any single state. There are also substantial
risks associated with owning properties receiving government assistance, for
example the possibility that Congress may not appropriate funds to enable HUD to
make rental assistance payments. HUD also restricts annual cash distributions to
partners based on operating results and a percentage of the 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.

g) Tax Credits

The Partnership and BAC holders began recognizing Tax Credits with respect to
the Properties when the Credit Period for such Property commenced. Because of
the time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC gradually increases over the first three years of
the Partnership. Tax Credits not recognized in the first three years will be
recognized in the 11th through 13th years. For the 1997, 1996 and 1995 tax
years, Tax Credits of $11,058,148, $11,001,671 and $11,327,236 were generated.

A portion of the Tax Credits could be subject to recapture in future years if
(i) a Local Partnership ceases to meet qualification requirements, (ii) there is
a decrease in the qualified basis of the Projects, or (iii) there is a greater
than one-third 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.

35

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 15, 1998

NOTE 11 - Subsequent Event

In April 1998, Bayridge Associates, L.P. ("Bayridge") refinanced its mortgage
note payable of approximately $6,150,000. The new mortgage note in the amount of
$10,600,000 paid off the former mortgage note and paid a cash flow distribution
from refinancing proceeds of approximately $1,800,000 to the Partnership. This
new mortgage bears interest at the rate of 6.96% per annum and is payable in
monthly installments of $70,238 which includes principal and interest. Any
remaining principal and interest shall be due and payable May 1, 2000 or on any
earlier date on which the unpaid principal balance of the note be come due and
payable, by acceleration of otherwise.

36

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 officers. The Partnership's affairs are
managed and controlled by the General Partners. Certain information concerning
the directors and executive officers of Related Credit Properties, Inc., the
general partner of the Related General Partner (which, in turn, is the general
partner of Liberty Associates), who may be deemed directors or executive
officers of the Partnership is set forth below.

Related Credit Properties Inc.

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

Stephen M. Ross Director

J. Michael Fried President and Director

Alan P. Hirmes Senior Vice President

Stuart J. Boesky Vice President

Glenn F. Hopps Treasurer

Lynn A. McMahon Secretary

STEPHEN M. ROSS, 58, is President, Director and shareholder of The Related
Realty Group, Inc., the general partner of The Related Companies, L.P. He
graduated from the University of Michigan School of Business Administration with
a Bachelor of Science degree and from Wayne State University School of Law with
a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed the predecessor of The
Related Companies, L.P. in 1972 to develop, manage, finance and acquire
subsidized and conventional apartment developments.

J. MICHAEL FRIED, 54, is the sole shareholder of one of the general partners of
Related Capital Company ("Capital"), a real estate finance and acquisition
affiliate of Related. In that capacity, he is responsible for all 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, 43, 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 Pub-

37

lic Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes
graduated from Hofstra University with a Bachelor of Arts degree.

STUART J. BOESKY, 42, 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 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.

GLENN F. HOPPS, 35, joined Related in December, 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.

LYNN A. McMAHON, 42, has served since 1983 as Assistant to the President of
Capital. From 1978 to 1983 she was employed at Sony Corporation of America in
the Government Relations Department.

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
executive officers of the General Partners for their services. However, under
the terms of the Amended and Restated Agreement of Limited Partnership of the
Partnership, the Partnership has entered into certain arrangements with the
General Partners and their affiliates, which provide for compensation to be paid
to the General Partners and their affiliates. Such arrangements include (but are
not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance, a partnership management fee and
an accountable expense reimbursement. The General Partners are entitled, in the
aggregate, to 1% of all cash distributions and an additional 15% of
distributions from net sale or refinancing proceeds after the BACs holders have
received distributions of such proceeds equal to their original capital
contributions plus a 10% return thereon (to the extent not previously paid out
of cash flow). Certain directors and executive officers of the General Partners
receive compensation from the General Partners and their affiliates for services
performed for various affiliated entities which may include services performed
for the Partnership. Such compensation may be based in part of the performance
of the Partnership. See also Note 8 to the Financial Statements, which is
incorporated in this Item 11 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.

38

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class
- - - - -------------- -------------------- -------------------- --------

General Partnership Related Credit $1,000 capital contribution 98%
Interest in the Properties L.P. - directly owned
Partnership 625 Madison Avenue
New York, NY 10022

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

Liberty Associates III 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 any of the General
Partners owns any Limited Partnership Interests or BACs.

On November 25, 1997, affiliates of the Related General Partner and Liberty GP
Inc. ("LGP"), then the general partners of the Partnership, entered into a
Purchase Agreement pursuant to which the Related General Partner purchased LGP's
general partner interest in the Partnership (the "Transfer"). In addition to the
Transfer, the Related General Partner also acquired LGP's special limited
partner interest in the Partnership and its general partner interest in Liberty
Associates. Prior to the Transfer, Liberty Associates was an affiliate of Lehman
Brothers.

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 and as set forth above. However, there have been no direct
financial transactions between the Partnership and the directors and executive
officers of the General Partners.

39

PART IV

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

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

(a) 1. Financial Statements

Independent Auditors' Report 18

Consolidated Balance Sheets at March 15, 1998 and 1997 95

Consolidated Statements of Operations for the Years Ended March 15,
1998, 1997 and 1996 96

Consolidated Statements of Changes in Partners' Capital (Deficit) for
the Years Ended March 15, 1998, 1997 and 1996 97

Consolidated Statements of Cash Flows for the Years Ended March 15,
1998, 1997 and 1996 98

Notes to Consolidated Financial Statements 100

(a) 2. Financial Statement Schedules

Independent Auditors' Report 120

Schedule I - Condensed Financial Information of Registrant 121

Schedule III - Real Estate and Accumulated Depreciation 124

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

(a) 3. Exhibits

(21) Subsidiaries of the Registrant - the Local Partnerships set forth in
Item 2 may be considered subsidiaries of the Registrant 117

(27) Financial Data Schedule (filed herewith) 126

(b) Reports on Form 8-K

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

40

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

Jurisdiction
(c) Subsidiaries of the Registrant (Exhibit 21) of Organization
------------------------------ ---------------

B & C Housing Associates, L.P. OK
State Street 86 Associates, L.P. DE
Fox Glenn Investors, L.P. PA
Shiloh-Grove L.P. (Mt. Vernon) OH
Silver Blue Lake Apartments, LTD. FL
Lancaster Towers Associates, LTD. DE
West Kinney Associates, L.P. NJ
Autumn Park Associates, L.P. OR
Regent Street Associates, L.P. PA
Magnolia Arms Associates, L.P. FL
Greenleaf Associates, L.P. MS
Alameda Towers Associates, L.P. PR
Dixie Apartment Associates, LTD. FL
Ludlam Gardens Apartments, LTD. FL
Grove Parc Associates, L.P. (Woodlawn) IL
2108 Bolton Drive Associates, L.P. DE
Apple Creek Housing Associates, LTD. CO
Redwood Villa Associates CA
Charles Drew Court Associates, L.P. NJ
Walnut Park Plaza Associates, L.P. PA
Bayridge Associates, L.P. OR
United-Pennsylvanian, L.P. PA
2051 Grand Concourse Associates, L.P. NY
Concourse Artists Housing Associates, L.P. NY
Willoughby/Wycoff Housing Associates, L.P. NY
Robin Housing Associates, L.P. NY
Lund Hill Associates, L.P. DE
Tanglewood Apartments, L.P. MS
Quality Hill Historic District-Phase II-A, L.P. MS
Penn Alto Associates, L.P. PA
Sartain School Venture, L.P. PA

(d) Not applicable

41

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 L.P.
(Registrant)

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

By: Related Credit Properties Inc.,
its General Partner

Date: June 9, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive Officer
and Director
(Principal Executive Officer)

By: LIBERTY ASSOCIATES III, L.P.,
a General Partner

By: Related Credit Properties L.P.,
its General Partner

By: Related Credit Properties Inc.,
its General Partner

Date: June 9, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive Officer
and Director
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

Signature Title Date

President, Chief Executive Officer (principal
executive officer) and Director of Related
Credit Properties Inc., general partner of
Related Credit Properties L.P. (a General
Partner of Registrant) which is also the
general partner of
/s/ J. Michael Fried Liberty Associates III, L.P.
- - - - -------------------- (a General Partner of Registrant) June 9, 1998
J. Michael Fried

Senior Vice President, (principal
financial officer) of Related Credit
Properties Inc., general partner of
Related Credit Properties L.P.
(a General Partner of Registrant)
which is also the general partner of
/s/ Alan P. Hirmes Liberty Associates III, L.P.
- - - - ------------------ (a General Partner of Registrant) June 9, 1998
Alan P. Hirmes

Treasurer (principal accounting officer) of
Related Credit Properties Inc., general
partner of Related Credit Properties L.P. (a
General Partner of Registrant) which is also
the general partner of
/s/ Glenn F. Hopps Liberty Associates III, L.P.
- - - - ------------------ (a General Partner of Registrant) June 9, 1998
Glenn F. Hopps

Director of Related Credit
Properties Inc., a general partner of
Related Credit Properties L.P.
(a General Partner of Registrant)
which is also the general partner of
/s/ Stephen M. Ross Liberty Associates III, L.P.
- - - - ------------------- (a General Partner of Registrant) June 9, 1998
Stephen M. Ross

INDEPENDENT AUDITORS' REPORT

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

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus L.P. and Subsidiaries included in the Form 10-K as
presented in our opinion dated May 15, 1998 on page 18 and based on the reports
of other auditors, we have also audited supporting Schedule I for the 1997, 1996
and 1995 Fiscal Years and Schedule III at March 15, 1998. In our opinion, and
based on the reports of the other auditors (certain of which were modified due
to the uncertainty of these subsidiary partnerships' abilities to continue in
existence), these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of three subsidiary partnerships with significant
contingencies and uncertainties regarding their continuing operations. During
the 1997 Fiscal Year, these subsidiary partnerships incurred significant
operating losses and one is in default on its mortgage obligation. These
conditions raise substantial doubt about the subsidiary partnership's abilities
to continue as going concerns. The financial statements of these three
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The three subsidiary partnerships' losses before extraordinary
items aggregated $887,146 (Fiscal 1997), $1,027,546 (Fiscal 1996) and $812,198
(Fiscal 1995) and their assets aggregated $16,967,227 and $17,647,112 at March
31, 1998 and 1997, respectively. Management's plans regarding these matters are
also discussed in Note 10(a). The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.

TRIEN, ROSENBERG, ROSENBERG,
WEINBERG, CIULLO & FAZZARI, LLP

New York, New York
May 15, 1998

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

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

LIBERTY TAX CREDIT PLUS L.P.
CONDENSED BALANCE SHEETS

ASSETS

March 15,
------------------------------
1998 1997
------------- ------------

Cash and cash equivalents $ 32,291 $ 82,962
Investment in subsidiary partnerships 25,151,487 27,362,123
Due from subsidiary partnership 1,109,070 1,109,070
Other assets 231,051 253,499
---------- ----------

Total assets $26,523,899 $28,807,654
========== ==========

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates $ 3,636,125 $ 2,399,155
----------- -----------

Total liabilities 3,636,125 2,399,155

Partners' equity 22,887,774 26,408,499
---------- ----------

Total liabilities and partners' equity $26,523,899 $28,807,654
========== ==========

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.

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

LIBERTY TAX CREDIT PLUS L.P.
CONDENSED STATEMENTS OF OPERATIONS

Year Ended March 15,
-----------------------------------------
1998 1997 1996
--------- ------------- ------------

Revenues $ 1,050 $ 1,150 $ 785
--------- ---------- -----------

Expenses

Administrative and management 185,619 233,068 202,447
Administrative and management-related parties 1,257,379 1,255,130 508,427
--------- ---------- -----------

Total expenses 1,442,998 1,488,198 710,874
--------- ---------- -----------

Loss from operations (1,441,948) (1,487,048) (710,089)

Equity in loss of subsidiary partnerships (2,078,777) (2,692,365) (3,255,555)
--------- ---------- ----------

Net loss $(3,520,725) $(4,179,413) $(3,965,644)
========= ========== ==========

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

LIBERTY TAX CREDIT PLUS L.P.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents

Year Ended March 15,
-------------------------------------------
1998 1997 1996
----------- ----------- ----------

Cash flows from operating activities:

Net loss $(3,520,725) $(4,179,413) $(3,965,644)
---------- ---------- ----------

Adjustments to reconcile net loss to net cash
used in operating activities:

Equity in loss of subsidiary partnerships 2,078,777 2,692,365 3,255,555
Decrease in other assets 22,448 24,371 19,790
Due from subsidiary partnership 0 0 8,990

Increase (decrease) in liabilities

Due to general partners and affiliates 1,236,970 1,318,074 507,737
--------- --------- ----------

Total adjustments 3,338,195 4,034,810 3,792,072
--------- --------- ---------

Net cash used in operating activities (182,530) (144,603) (173,572)
----------- ---------- ----------

Net cash provided by investing activities:

Distributions from subsidiaries 131,859 208,195 139,855
---------- ---------- ----------

Net decrease (increase) in cash and cash equivalents (50,671) 63,592 (33,717)

Cash and cash equivalents, beginning of year 82,962 19,370 53,087
---------- ---------- ----------

Cash and cash equivalents, end of year $ 32,291 $ 82,962 $ 19,370
========== ========== ==========

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 15, 1998

Initial Cost to Partnership Cost Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Subsidiary Partnership's Residential Property Encumbrances Land Improvements improvements
- - - - --------------------------------------------- ------------ ---- ------------ ------------

B & C Housing Associates, L.P.
Tulsa, OK $ 5,642,124 $ 727,300 $ 5,420,791 $ 2,515,765
State Street 86 Associates, L.P.
Camden, NJ 8,384,119 861,947 12,460,882 313,810
Fox Glenn Investors, L.P.
Seat Pleasant, MD 5,993,174 491,209 6,548,849 423,791
Shiloh Grove L.P. (Mt Vernon)
Columbus, OH 13,651,956 764,874 16,618,743 489,506
Silver Blue Lake Apartments Ltd.
Miami, FL 3,887,500 537,204 4,755,176 55,766
Lancaster Towers Associates, Ltd.
Lancaster, NY 2,633,878 147,000 3,673,921 816,625
West Kinney Associates, L.P.
Newark, NJ 4,627,159 262,466 6,072,924 386,709
Autumn Park Associates, L.P.
Wilsonville, OR 3,906,625 369,932 2,251,887 3,564,042
Regent Street Associates, L.P.
Philadelphia, PA 4,382,777 40,000 7,387,283 230,312
Magnolia Arms Associates, Ltd.
Jacksonville, FL 7,047,441 125,000 8,165,738 410,410
Greenleaf Associates L.P.
Kansas City, MO 4,415,930 695,000 5,125,103 262,810
Alameda Towers, Associates L.P.
San Juan, PR 8,797,419 644,000 15,157,047 419,484
Dixie Apartment Associates, Ltd.
Miami, FL 957,515 194,480 1,354,562 53,230
Ludlam Gardens Apartments, Ltd.
Miami, FL 2,681,040 755,057 3,943,234 47,692
Grove Park Associates, L.P. (Woodlawn)
Chicago, IL 5,141,402 600,000 9,386,536 7,823,681
2108 Bolton Drive Associates, L.P.
Atlanta, GA 4,397,585 835,000 6,599,896 6,005,687
Apple Creek Housing Associates, Ltd.
Arvada, CO 10,998,991 618,136 10,973,665 532,232
Redwood Villa Associates
San Diego, CA 4,008,613 0 5,931,183 77,664
Charles Drew Court Associates, L.P.
Atlantic City, NJ 4,355,680 100 7,893,416 324,201
Walnut Park Plaza Associates, L.P.
Philadelphia, PA 7,710,000 454,707 7,690,675 2,301,211
Bayridge Associates, L.P.
Beaverton, OR 6,005,384 917,682 488,333 10,932,488
United-Pennsylvanian, L.P.
Erie, PA 3,594,495 217,000 4,191,327 785,889

Gross Amount at which Carried At Close of Period
------------------------------------------------
Buildings and Accumulated
Subsidiary Partnership's Residential Property Land Improvements Total Depreciation
- - - - --------------------------------------------- ---- ------------ ----- ------------

B & C Housing Associates, L.P.
Tulsa, OK $ 729,685 $ 7,934,171 $ 8,663,856 $ 2,782,177
State Street 86 Associates, L.P.
Camden, NJ 864,332 12,772,307 13,636,639 5,023,638
Fox Glenn Investors, L.P.
Seat Pleasant, MD 493,594 6,970,255 7,463,849 2,535,492
Shiloh Grove L.P. (Mt Vernon)
Columbus, OH 767,259 17,105,864 17,873,123 6,091,387
Silver Blue Lake Apartments Ltd.
Miami, FL 539,589 4,808,557 5,348,146 1,726,524
Lancaster Towers Associates, Ltd.
Lancaster, NY 149,385 4,488,161 4,637,546 1,575,649
West Kinney Associates, L.P.
Newark, NJ 264,850 6,457,249 6,722,099 2,188,903
Autumn Park Associates, L.P.
Wilsonville, OR 938,336 5,247,525 6,185,861 2,023,941
Regent Street Associates, L.P.
Philadelphia, PA 42,384 7,615,211 7,657,595 2,686,478
Magnolia Arms Associates, Ltd.
Jacksonville, FL 127,384 8,573,764 8,701,148 3,443,597
Greenleaf Associates L.P.
Kansas City, MO 697,384 5,385,529 6,082,913 2,335,785
Alameda Towers, Associates L.P.
San Juan, PR 646,384 15,574,147 16,220,531 3,489,438
Dixie Apartment Associates, Ltd.
Miami, FL 196,864 1,405,408 1,602,272 481,727
Ludlam Gardens Apartments, Ltd.
Miami, FL 757,441 3,988,542 4,745,983 1,367,436
Grove Park Associates, L.P. (Woodlawn)
Chicago, IL 602,384 17,207,833 17,810,217 5,403,786
2108 Bolton Drive Associates, L.P.
Atlanta, GA 837,384 12,603,199 13,440,583 5,115,911
Apple Creek Housing Associates, Ltd.
Arvada, CO 620,520 11,503,513 12,124,033 3,383,354
Redwood Villa Associates
San Diego, CA 2,384 6,006,463 6,008,847 1,992,882
Charles Drew Court Associates, L.P.
Atlantic City, NJ 143,846 8,073,871 8,217,717 3,009,696
Walnut Park Plaza Associates, L.P.
Philadelphia, PA 457,091 9,989,502 10,446,593 2,626,205
Bayridge Associates, L.P.
Beaverton, OR 920,066 11,418,437 12,338,503 3,465,824
United-Pennsylvanian, L.P.
Erie, PA 219,385 4,974,831 5,194,216 2,657,139

Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statement is
Subsidiary Partnership's Residential Property Renovation Acquired Computed (a) (b)
- - - - --------------------------------------------- ---------- -------- -----------------

B & C Housing Associates, L.P.
Tulsa, OK 1987 Dec. 1987 27.5 years
State Street 86 Associates, L.P.
Camden, NJ 1987 Feb. 1988 27.5 years
Fox Glenn Investors, L.P.
Seat Pleasant, MD 1987 Mar. 1988 15 to 27.5 years
Shiloh Grove L.P. (Mt Vernon)
Columbus, OH 1987 Feb. 1988 27.5 years
Silver Blue Lake Apartments Ltd.
Miami, FL 1987 Feb. 1988 27.5 years
Lancaster Towers Associates, Ltd.
Lancaster, NY 1987 May 1988 27.5 years
West Kinney Associates, L.P.
Newark, NJ 1983 June 1988 27.5 years
Autumn Park Associates, L.P.
Wilsonville, OR 1988 June 1988 15 to 27.5 years
Regent Street Associates, L.P.
Philadelphia, PA 1987 June 1988 27.5 years
Magnolia Arms Associates, Ltd.
Jacksonville, FL 1987 July 1988 27.5 years
Greenleaf Associates L.P.
Kansas City, MO 1987 July 1988 27.5 years
Alameda Towers, Associates L.P.
San Juan, PR 1987 July 1988 40 years
Dixie Apartment Associates, Ltd.
Miami, FL 1987 July 1988 27.5 years
Ludlam Gardens Apartments, Ltd.
Miami, FL 1987 July 1988 27.5 years
Grove Park Associates, L.P. (Woodlawn)
Chicago, IL 1988 July 1988 27.5 to 31.5 years
2108 Bolton Drive Associates, L.P.
Atlanta, GA 1988 July 1988 15 to 27.5 years
Apple Creek Housing Associates, Ltd.
Arvada, CO 1988 June 1988 28 years
Redwood Villa Associates
San Diego, CA 1988 Sept. 1988 27.5 years
Charles Drew Court Associates, L.P.
Atlantic City, NJ 1987 Sept. 1988 27.5 years
Walnut Park Plaza Associates, L.P.
Philadelphia, PA 1988 Sept. 1988 35 years
Bayridge Associates, L.P.
Beaverton, OR 1988 Dec. 1988 15 to 27.5 years
United-Pennsylvanian, L.P.
Erie, PA 1988 Dec. 1988 15 to 25 years

LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 15, 1998

Initial Cost to Partnership Cost Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Subsidiary Partnership's Residential Property Encumbrances Land Improvements improvements
- - - - --------------------------------------------- ------------ ---- ------------ ------------

2051 Grand Concourse Associates, L.P.
Bronx, NY 4,035,020 31,500 5,221,117 47,691
Concourse Artists Housing Associates, L.P.
Bronx, NY 1,580,553 5,750 16,100 2,278,151
Willoughby-Wycoff Housing Associates, L.P.
Bronx, NY 4,218,865 17,000 47,600 6,126,180
Robin Housing
Bronx, NY 5,431,807 26,750 70,700 8,163,046
Lund Hill Associates, L.P.
Superior, WI 3,675,678 205,000 4,877,828 466,964
Tanglewood Apartments, L.P.
Joplin, MO 3,357,472 114,932 5,233,022 83,909
Quality Hill Historic District-Phase II-A, L.P.
Kansas City, MO 3,355,230 215,181 6,403,141 201,516
Penn Alto Associates, L.P.
Altoona, PA 5,013,922 60,000 2,731,082 8,901,916
Sartain School Venture, L.P.
Philadelphia, PA 1,957,241 3,883 3,486,875 135,888
------------ ---------- ----------- ----------

$155,846,595 $10,938,090 $180,178,636 $65,178,266
=========== ========== =========== ==========

Gross Amount at which Carried At Close of Period
------------------------------------------------
Buildings and Accumulated
Subsidiary Partnership's Residential Property Land Improvements Total Depreciation
- - - - --------------------------------------------- ---- ------------ ----- ------------

2051 Grand Concourse Associates, L.P.
Bronx, NY 33,885 5,266,423 5,300,308 1,766,043
Concourse Artists Housing Associates, L.P.
Bronx, NY 8,135 2,291,866 2,300,001 772,493
Willoughby-Wycoff Housing Associates, L.P.
Bronx, NY 19,386 6,171,394 6,190,780 2,065,299
Robin Housing
Bronx, NY 29,136 8,231,360 8,260,496 2,748,621
Lund Hill Associates, L.P.
Superior, WI 207,900 5,341,892 5,549,792 1,200,673
Tanglewood Apartments, L.P.
Joplin, MO 117,832 5,314,031 5,431,863 1,794,361
Quality Hill Historic District-Phase II-A, L.P.
Kansas City, MO 267,233 6,552,605 6,819,838 1,407,077
Penn Alto Associates, L.P.
Altoona, PA 93,905 11,599,093 11,692,998 3,036,328
Sartain School Venture, L.P.
Philadelphia, PA 9,126 3,617,520 3,626,646 676,018
----------- ------------- ------------- -----------

$11,804,469 $244,490,523 $256,294,992 $80,873,882
========== =========== =========== ==========

Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statement is
Subsidiary Partnership's Residential Property Renovation Acquired Computed (a) (b)
- - - - --------------------------------------------- ---------- -------- -----------------

2051 Grand Concourse Associates, L.P. 1986 Nov. 1988 27.5 years
Bronx, NY
Concourse Artists Housing Associates, L.P. 1986 Nov. 1988 27.5 years
Bronx, NY
Willoughby-Wycoff Housing Associates, L.P. 1987 Nov. 1988 27.5 years
Bronx, NY
Robin Housing 1986 Nov. 1988 27.5 years
Bronx, NY
Lund Hill Associates, L.P. 1988 Jan. 1989 20 to 40 years
Superior, WI
Tanglewood Apartments, L.P. 1988 Oct. 1988 27.5 years
Joplin, MO
Quality Hill Historic District-Phase II-A, L.P. 1988 Mar. 1989 20 to 40 years
Kansas City, MO
Penn Alto Associates, L.P. 1989 June 1989 27.5 years
Altoona, PA
Sartain School Venture, L.P. 1989 Aug. 1990 15 to 40 years
Philadelphia, PA

(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 buildings and improvements, are
depreciated primarily by the straight line method over their estimated
useful lives ranging from 3 to 20 years.

Cost of Property and Equipment Accumulated Depreciation
------------------------------------------- -------------------------------------
Year Ended March 15,
-------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----

Balance at beginning of period $254,813,961 $253,602,442 $252,211,688 $72,046,250 $63,484,987 $54,706,727
Additions during period:
Improvements 1,274,858 1,397,540
Depreciation expense 1,481,031 8,827,632 8,575,413 8,785,046
Reductions during period:
Dispositions 0 63,339 6,786 0 14,150 6,786
----------- ------------ ----------- ---------- ----------- -----------
Balance at end of period $256,294,992 $254,813,961 $253,602,442 $80,873,882 $72,046,250 $63,484,987
=========== =========== =========== ========== ========== ==========

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