Back to GetFilings.com




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

FORM 10-K
(Mark One)

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

For the fiscal year ended March 31, 1998

OR

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

Commission File Number 0-24660

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

Delaware 13-3458180
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
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 (including underlying Limited
Partnership Interests)
(Title of Class)

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

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

DOCUMENTS INCORPORATED BY REFERENCE
None

Index to exhibits may be found on page 112
Page 1 of 123



PART I

Item 1. Business.

General

Liberty Tax Credit Plus II L.P. (the "Partnership") is a limited partnership
which was formed under the laws of the State of Delaware on March 25, 1988. The
general partners of the Partnership are Related Credit Properties II L.P., a
Delaware limited partnership (the "Related General Partner"), Liberty Associates
II L.P., a Delaware limited partnership ("Liberty Associates"), and Liberty GP
II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware corporation (the
"Liberty General Partner" and together with the Related General Partner and
Liberty Associates, the "General Partners"). The general partner of the Related
General Partner is Related Credit Properties II Inc., a Delaware corporation.
The general partners of Liberty Associates are Related Credit Properties II
Inc., and the Liberty General Partner. On November 25, 1997, an affiliate of the
Related General Partner, purchased 100% of the stock of the Liberty General
Partner (the "Transfer"). In addition to the Transfer, by acquiring the stock of
the Liberty General Partner, an affiliate of the Related General Partner also
acquired the Liberty General Partner general partner interest in Liberty
Associates, which is also the special limited partner of the Partnership.
Pursuant to the Partnership's Amended and Restated Partnership Agreement, the
consent of the limited partners was not required to approve the Transfer.

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

On July 20, 1988 the Partnership commenced a public offering (the "Offering") of
Beneficial Assignment Certificates ("BACs") representing assignments of limited
partnership interests in the Partnership ("Limited Partnership Interests").

As of January 9, 1989 (the date on which the Partnership held the final closing
of the sale of BACs and on which the Offering was terminated), the Partnership
had received $115,917,500 of gross proceeds of the Offering from 8,431
investors.

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships" or "subsidiary
partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of
1986, and to a lesser extent, in Local Partnerships owning properties that are
eligible for the historic rehabilitation tax credit ("Rehabilitation Projects";
and together with the Apartment Complexes, the "Properties"). Some of the
Apartment Complexes benefit from one or more other forms of federal and state
housing assistance. The Partnership's investment in each Local Partnership
represents from 20% to 98% of the partnership interests in the Local
Partnership. As of March 31, 1998, the Partnership had acquired interests in 27
Local Partnerships and does not anticipate making any additional investments.
See Item 2, Properties. The Partnership sold 24.98% of its limited partnership
interest in United-Glenarden I Limited Partnership and sold 32.32% of its
limited partnership interest in Property Development Associates, L.P. (See
Results of Operations of Certain Local Partnerships).


-2-



Investment Objectives, Tax Credits

The investment objectives of the Partnerships are to:

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

2. Preserve and protect the Partnership's capital.

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

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

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

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

The Tax Credits are available for a ten-year period which commences when the
property is placed into service. However, the annual Tax Credits available in
the year in which the Apartment Complex is placed in service must be prorated
based upon the months remaining in the year. The amount of the annual Tax
Credits not available in the first year will be available in the eleventh year.
In certain cases, the Partnership acquired its interest in a Local Partnership
after the Local Partnership had placed its Apartment Complex in service. In
these cases, the Partnership may be allocated Tax Credits only beginning in the
month following the month in which it acquired its interest and Tax Credits
allocated in any prior period may not be claimed by the Partnership.

The General Partners generally required in connection with certain investments
in Local Partnerships that the general partner of the local partnership
undertake to fund operating deficits (up to a stated maximum amount) of the
Local Partnership during a limited period of time following the Partnership's
investment ("Guarantee Period"). As of March 31, 1998, all operating deficit
guarantees have expired. Generally the amounts funded pursuant to the Operating
Deficit Guarantee are treated as Operating Loans, do not bear interest and will
be repaid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. See Item 8, Note 8 - Related Party Transactions.


-3-


The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships has
failed to remain in compliance with the Tax Credit requirements, and therefore
none has suffered an event of recapture of Tax Credits. The Partnership
generated $17,061,894, $17,193,735 and $17,174,288 in Tax Credits during the
1997, 1996 and 1995 Fiscal Years, respectively.

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

As of March 31, 1998, cash distributions received from the Local Partnerships
have been relatively immaterial. Management expects that the distributions
received from the Local Partnerships will increase, although not to a level
sufficient to permit cash distributions to BACs holders. The Partnership does
not anticipate providing cash distributions to BACs holders in circumstances
other than refinancings or sales.

Government Regulations

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.

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally, however no more than 33%
of the properties are located in any single state. There are also substantial
risks associated with owning properties receiving government assistance, for
example the possibility that Congress may not appropriate funds to enable the
U.S. Department of Housing and Urban Development ("HUD") to make rental
assistance payments. HUD also restricts annual cash distributions to partners
based on operating results and a percentage of the owner's equity contribution.
The Partnership cannot sell or substantially liquidate its investments in
subsidiary partnerships during the period that the subsidy agreements are in
existence, without HUD's approval. Furthermore there may not be market demand
for apartments at full market rents when the rental assistance contracts expire.

Competition
The real estate business is highly competitive and substantially all of the
Properties acquired by the Partnership are subject to competition from similar
properties in their respective vicinities. In addition, various other limited
partnerships may, in the future, be formed by the Gen-


-4-


eral Partners and/or their affiliates to engage in business which may compete
with the Partnership.

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

Item 2. Properties.

The Partnership has acquired an interest as a limited partner in 27 Local
Partnerships. Set forth below is a schedule of these Local Partnerships
including certain information concerning the Apartment Complexes (the "Local
Partnership Schedule"). Further information concerning these Local Partnerships
and their properties, including any encumbrances affecting the properties, may
be found in Item 14, Schedule III.

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



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




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

Concourse Artists 1% 1% 19% *79%
Grand Concourse 1% 1% 19% *79%
Robin Housing 1% 1% 19% *79%
Willoughby-Wyckoff 1% 1% 19% *79%
Penn Alto 1% 1% 78.40% *19.60%
United Glen Arden I 1% 1% 73.52% *24.48%
Property Development
Associates 1% 1% 66.33% *31.67%


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

Local Partnership Schedule



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

Polynesian Apartments Associates,
Ltd. (a Limited Partnership)
Homestead, FL (84) July 1988 96 100 94 99 99
Seagrape Village Associates, Ltd.
(a Limited Partnership)
Homestead, FL (112) July 1988 96 100 96 100 100


-5-


Local Partnership Schedule (continued)
--------------------------------------



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

Metropolitan Towers Associates, L.P.
Rio Piedras, PR (150) December 1988 99 95 99 100 99
Westminster Place II - Olive Site, L.P.
St. Louis, MO (84) October 1988 93 90 88 93 99
Property Development Associates, L.P.
Kansas City, MO (232) December 1988 95 98 98 99 97
Whittier Plaza Associates
Limited Partnership
St. Louis, MO (27) December 1988 78 81 81 88 100
United-Glen Arden I
Limited Partnership
Glen Arden, MD (354) December 1988 96 91 90 95 96
United-Glen Arden II
Limited Partnership
Glen Arden, MD (238) December 1988 98 95 98 98 96
Rolling Green Limited Partnership
Chicago, IL (224) December 1988 97 96 87 92 91
Santa Juanita II Limited Partnership
Bayamon, PR (46) December 1988 96 100 100 100 100
Spring Creek Associates, L.P.
(a Delaware Limited Partnership)
Brooklyn, NY (582) December 1988 99 97 97 95 97
East Two Thirty-Five Associates
(a Delaware Limited Partnership)
New York, NY (17) December 1988 100 100 94 94 100
Upper Fifth Avenue Residential
Associates, L.P.
New York, NY (151) January 1989 98 96 97 93 95
West 107th Street Associates, L.P.
(a Delaware Limited Partnership)
New York, NY (25) January 1989 96 100 100 100 96
General Atlantic Second Avenue
Associates, L.P.
(a Delaware Limited Partnership)
New York, NY (18) January 1989 100 95 94 100 100
Church Lane Associates
Germantown, PA (40) February 1989 98 98 95 92 99
Campeche Isle Apartments
Limited Partnership
Galveston, TX (208) May 1989 78 70 65 85 97
Robin Housing Associates
(a Limited Partnership)
Bronx, NY (100) November 1988 95 99 97 92 96
Concourse Artists Housing
Associates (a Limited Partnership)
Bronx, NY (23) November 1988 91 96 96 100 98
2051 Grand Concourse Housing
Associates (a Limited Partnership)
Bronx, NY (63) November 1988 94 97 97 98 95



-6-


Local Partnership Schedule (continued)
--------------------------------------



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

Willoughby-Wyckoff Housing
Associates (a Limited Partnership)
Bronx, NY (68) November 1988 91 93 97 88 90
Goodfellow Place Limited Partnership
St. Louis, MO (71) May 1989 96 99 91 96 98
Penn Alto Associates
Limited Partnership
Altoona, PA (150) June 1989 87 81 87 81 94
Gramco Development
Limited Dividend
Partnership, L.P.
Bayamon, PR (300) July 1989 98 94 99 93 100
Alexis Park Apartments
A Louisiana Partnership
in Commendam
Bossier City, LA (280) July 1989 95 92 93 95 97
Williamsburg Residential, L.P.
Witchita, KS (76) August 1989 78 74 93 91 100
Victory Apartments
Chicago, IL (107) September 1989 93 97 96 98 100



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

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

Management continuously reviews the physical state of the properties and budgets
improvements when required, which are generally funded from cash flow, from
operations or release of replacement reserve escrows.

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 Alexis,
Metropolitan, Santa Juanita, Robin Housing, Campeche and Bayamon in the Results
of Operations of Certain Local Partnerships contained in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.

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

None.

PART II

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

The Partnership has issued and outstanding 115,917.5 Limited Partnership
Interests, each representing a $1,000 capital contribution to the Partnership,
or an aggregate capital contribution of $115,917,500. All of the issued and
outstanding Limited Partnership Interests have been issued to Liberty Credit
Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued
115,917.5 BACs to the purchasers thereof for an aggregate purchase price of
$115,917,500. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to a Limited Partnership Interest held by the
Assignor Limited Partner. BACs may be converted into Limited Partnership
Interests at no cost to the holder (other than payment of transfer costs not to
exceed $100), but Limited Partnership Interests so acquired are not thereafter
convertible into BACs.

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

As of June 8, 1998, the Partnership has 8,429 registered holders of an aggregate
of 115,917.5 BACs.

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

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

The Partnership has not made any distributions to the BACs holders as of March
31, 1998. The Partnership does not anticipate providing cash distributions to
its BACs holders other than from net refinancings or sales proceeds.


-8-


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



-9-


Item 6. Selected Financial Data.

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



Year ended March 31,
----------------------------------------------------------------------
OPERATIONS 1998 1997 1996* 1995* 1994*
- - ---------- ----------- ------------ ----------- ----------- -----------

Revenues $26,563,918 $ 25,919,807 $25,386,930 $25,074,695 $24,430,064

Operating expenses 35,799,640 39,490,613 32,104,631 32,403,689 31,395,344
----------- ------------ ----------- ----------- -----------

Loss before
minority interest
and extraordinary
items (9,235,722) (13,570,806) (6,717,701) (7,328,994) (6,965,280)

Minority interest
in loss of
subsidiaries 404,890 163,680 185,143 418,892 585,685
----------- ------------ ----------- ----------- -----------

Net loss $(8,830,832) $(13,407,126) $(6,532,558) $(6,910,102) $(6,379,595)
=========== ============ =========== =========== ===========

Per unit amounts:

Net loss per BAC $ (75.42) $ (114.50) $ (55.79) $ (59.01) $ (54.48)
=========== ============ =========== =========== ===========


*Reclassified for comparative purposes.



Year ended March 31,
----------------------------------------------------------------------
FINANCIAL POSITION 1998 1997 1996 1995 1994
- - ------------------ ----------- ------------ ----------- ----------- -----------

Total assets $192,850,536 $200,269,263 $212,829,666 $218,920,596 $226,067,610
============ ============ ============ ============ ============

Total liabilities $145,266,475 $145,257,171 $143,880,937 $143,305,749 $143,119,315
============ ============ ============ ============ ============

Minority interest $ 4,700,747 $ 3,297,946 $ 3,827,457 $ 3,961,017 $ 4,384,363
============ ============ ============ ============ ============

Total partners'
capital $ 42,883,314 $ 51,714,146 $ 65,121,272 $ 71,653,830 $ 78,563,932
============ ============ ============ ============ ============


During the years ended March 31, 1994 through 1998, total assets decreased
primarily due to depreciation, partially offset by net additions to property and
equipment. For the year ended March 31, 1997, there was also a decrease in
assets due to a loss on impairment of assets.


-10-


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

Liquidity and Capital Resources

Prior to the time that all of the net proceeds had been fully invested in Local
Partnerships, the Partnership's primary source of funds was from the proceeds of
its public offering. During the years ended March 31, 1998, 1997 and 1996, the
primary sources of liquidity included: (i) working capital reserves in the
original amount of 3% of gross equity raised; (ii) interest earned on the
working capital reserves; and (iii) cash distributions from operations of the
Local Partnerships. All these sources of funds are available to meet obligations
of the Partnership.

As of March 31, 1998, the Partnership has invested all of the net proceeds in
twenty-seven Local Partnerships. Approximately $400,000 of the purchase price
remains to be paid (none of which is held in escrow). During the year ended
March 31, 1998, $39,000 was paid.

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

During the years ended March 31, 1998, 1997 and 1996, respectively, amounts
received from operations of the Local Partnerships were approximately $272,000,
$621,000 and $11,000. The General Partners believe that cash distributions
received from the operations of the Local Partnerships are sufficient to fund
the Partnership's ongoing operations for the foreseeable future.

During the year ended March 31, 1998, cash and cash equivalents of the
Partnership and its 27 consolidated Local Partnerships decreased approximately
$779,000. This decrease was a result of an increase in acquisitions of property
and equipment ($792,000), construction in progress ($604,000), repayments of
mortgage loans ($5,505,000), an increase in cash held in escrow ($363,000), a
net increase in due to local general partners and affiliates ($791,000), and an
increase in deferred costs ($193,000), which exceeded cash flows provided by
operating activities ($1,435,000), an increase in due to selling partners
($72,000), proceeds from mortgage notes ($4,000,000), proceeds from sales of
interests ($1,400,000) and an increase in capitalization of consolidated
subsidiaries attributable to minority interest ($562,000). Included in the
adjustments to reconcile the net loss to cash provided by operating activities
is depreciation and amortization of approximately $8,704,000.

The Partnership has negotiated Operating Deficit Guarantee Agreements with all
Local Partnerships, pursuant to which the general partners of the Local
Partnerships had agreed to fund operating deficits for a specified period of
time. As of March 31, 1998, 1997 and 1996, approximately $5,526,000, $5,580,000
and $4,965,000, respectively had been funded by the Local General Partners to
meet such obligations. Of the total amount funded through March 31, 1998,
approximately $1,033,000 has been recorded as a capital contribution, $136,000
was funded by the Partnership, $60,000 has been recognized as income during the
1992 Fiscal Year, and the remaining balance of approximately $4,297,000 is
recorded as noninterest-bearing operating advances to be repaid from operating
cash flow. As of March 31, 1998, all such guarantees have expired.

Partnership management fees owed to the General Partners amounting to
approximately $3,874,000 and $2,378,000 were accrued and unpaid as of March 31,
1998 and March 31, 1997,


-11-


respectively. Without the General Partner's continued accrual without payment
the Partnership will not be in a position to meet its obligations. The General
Partners have continued allowing the accrual without payment of these amounts
but are under no obligation to continue to do so.

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 the expiration of the Credit Period.

Except as described above, management is not aware of any trends or events,
commitments or uncertainties which have not otherwise been disclosed, that will
or are likely to impact liquidity in a material way. Management believes the
only impact would be from laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining properties in the portfolio may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy. The Partnership has fully invested the
proceeds of its offerings in 27 Local Partnerships, all of which fully have
their tax credits in place. The tax credits are attached to the project for a
period of ten years and are transferable with the property during the remainder
of the ten-year period. If trends in the real estate market warranted the sale
of a property, the remaining tax credits would transfer to the new owner,
thereby adding significant value to the property on the market, which are not
included in the financial statement carrying amount.

Results of Operations

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 capital-


-12-


ized. At the time property and equipment are retired or otherwise disposed of,
the cost and accumulated depreciation are eliminated from the assets and
accumulated depreciation accounts and the profit or loss on such disposition is
reflected in earnings. A loss on impairment of assets is recorded when
management estimates amounts recoverable through future operations and sale of
the property on an undiscounted basis are below depreciated cost. At that time
property investments themselves are reduced to estimated fair value (generally
using discounted cash flows) when the property is considered to be impaired and
the depreciated cost exceeds estimated fair value.

Through March 31, 1998, the Partnership has recorded approximately $4,727,000 as
a loss on impairment of assets.

The following is a summary of the results of operations of the Partnership for
the years ended March 31, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal
Years, respectively).

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

The net loss for the 1997, 1996 and 1995 Fiscal Years totaled $8,830,832,
$13,407,126 and $6,532,558, respectively. The net loss for the 1996 Fiscal Year
includes a loss on impairment of assets of approximately $4,727,000 (see Note 4
in Item 8. Financial Statements and Supplementary Data).

The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships have
failed to remain in compliance with the Tax Credit requirements, and, therefore,
none have suffered an event of recapture of Tax Credits. The Partnership
generated $17,061,894, $17,193,735 and $17,174,288 in Tax Credits during the
1997, 1996 and 1995 Fiscal Years, respectively.

1997 vs. 1996
Rental income remained fairly consistent with a decrease of less than 1% for the
1997 Fiscal Year as compared to the 1996 Fiscal Year.

Other income increased approximately $520,000 for the 1997 Fiscal Year as
compared to the 1996 Fiscal Year primarily due to a settlement of an estimated
liability for water and sewer expenses in 1996 which was written off and
recognized as other income in 1997 at one Local Partnership, partially offset by
small decreases at two other Local Partnerships.

A gain on sale of interests of approximately $155,000 was realized during the
1997 Fiscal Year (see Note 10 in Item 8. Financial Statements and Supplementary
Data).

Total expenses excluding general and administrative, general and
administrative-related parties, repairs and maintenance, operating, insurance
and loss on impairment of assets remained fairly consistent with a decrease of
approximately 2% for the 1997 Fiscal Year as compared to the 1996 Fiscal Year.

General and administrative expense increased approximately $724,000 for the 1997
Fiscal Year as compared to the 1996 Fiscal Year primarily due to an increase in
number of employees and related payroll and benefits, an increase in legal fees,
and an increase in advertising expense at one Local Partnership, along with the
opening of a management and leasing office at a second Local Partnership as well
as general increases in general and administrative expenses at three other Local
Partnerships. General and administrative expenses increased at the Partnership


-13-


level due to increased legal costs pertaining to the Campeche Isle restructuring
and the partial sale of interests in two Local Partnerships.

General and administrative expenses-related parties increased approximately
$314,000 for the 1997 Fiscal Year as compared to the 1996 Fiscal Year primarily
due to a change at one Local Partnership from an unaffiliated property manager
to one which is an affiliate.

Repairs and maintenance increased approximately $1,087,000 for the 1997 Fiscal
Year as compared to the 1996 Fiscal Year primarily due to an extensive repair
and maintenance program to correct neglected conditions at one Local
Partnership, a repainting of the building at a second Local Partnership and
increases in general repairs at four other Local Partnerships.

Operating expenses decreased approximately $452,000 for the 1997 Fiscal Year as
compared to the 1996 Fiscal Year primarily due to overaccrual of estimated water
and sewer charges in 1996 at one Local Partnership, decreases in costs of
supplies at a second Local Partnership as well as general decreases in operating
expenses at three other Local Partnerships.

Insurance decreased approximately $218,000 primarily due to a change of
insurance carriers at two Local Partnerships as well as a general decrease in
insurance expense at a third Local Partnership.

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

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

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

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

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


-14-


Results of Operations of Certain Local Partnerships

(a) Subsidiary Partnerships - Going Concern

Whittier Plaza Associates
The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that Whittier will continue as a going
concern. Whittier has sustained continuous losses since commencement of
operations in 1988, including losses of approximately $25,000, $550,000 and
$42,000 for the 1997, 1996 and 1995 Fiscal Years, respectively. Whittier has
experienced higher vacancies and lower rents than those originally projected,
resulting in increased difficulty in meeting both operating and debt service
obligations. The Local General Partner, pursuant to a development deficit
guarantee agreement, has advanced $50,292 and $53,086 in the 1997 and 1996
Fiscal Years, respectively, and $342,286 since 1988 to fund operating cash
shortfalls. In addition, Whittier's management company, an affiliate of the
Local General Partner, has deferred receipt of various fees since 1991 totaling
$49,530. These items raise substantial doubt about Whittier's ability to
continue as a going concern. The Partnership's investment in Whittier at March
31, 1998 and 1997 was reduced to zero as a result of prior years' losses and the
minority interest balance was $0 at each date. Whittier's net loss after
minority interest amounted to approximately $25,000, $550,000 (after loss on
impairment of assets of approximately $490,000), and $42,000 for the 1997, 1996
and 1995 Fiscal Years.

Alexis Park Apartments
During 1990, vapor fumes were discovered in several apartments at Alexis Park
Apartments, a Louisiana Partnership in Commendam ("Alexis"). As a result, 47 of
the 280 units were vacated as ordered by the Louisiana Department of
Environmental Quality ("LDEQ"). At December 31, 1997, 43 of these units have
been cleared for occupancy by the Louisiana Department of Health and Hospital.

The United States Environmental Protection Agency (EPA) has placed the site on
the list of proposed Superfund sites. The EPA performed indoor air tests at the
site on 28 units and issued a draft report on January 2, 1997 that found that
none of the units had acute air pollution levels, but further states that two
units were found to have sufficient amounts of air pollutants to possibly cause
health concerns after years of continual exposure. The report recommended the
installation of mechanical systems to reduce air pollutant levels to acceptable
amounts and the sealing of penetrations or openings in the floor slab and walls.
During the year ended December 31, 1997, such remediation was performed. The EPA
has informed management that additional testing of the project site began in
early 1998. At December 31, 1997, management is unaware of any additional or
potential remediation or clean-up costs that will be required and accordingly,
is unable to estimate the possible cost to Alexis of any remediation or clean-up
that may be required in the future.

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

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


-15-


Management believes the testing conducted by the LDEQ and the EPA has provided
sufficient evidence that there is no significant environmental hazard at the
Alexis Park Apartments site. Management, along with the mayor of Bossier City,
has been active in requesting that the EPA remove the site from the list of
proposed Superfund sites and that no further tests be conducted. Alexis has also
requested assistance with bringing this issue to closure from its congressman
and U.S. senators who have been responsive.

Although the environmental issue is in many respects beyond its control,
management intends to continue its efforts in bringing this issue to a close and
believes the favorable test results thus far reduce the chances of a disruptive
action by the EPA and provide an opportunity for Alexis to continue as a going
concern. In addition, Alexis has sustained losses and its current liabilities
exceed its current assets by approximately $123,000. Management of Alexis
expects operating income to improve for 1998 from both increased occupancy and
slightly reduced expenses and also believes cash flows for 1998 will be
sufficient to meet liabilities and subject to the environmental uncertainty
enable Alexis to continue as a going concern. These items raise substantial
doubt about Alexis' ability to continue as a going concern. The maximum loss
which the Partnership would be liable for is its net investment in Alexis. The
Partnership's investment in Alexis at March 31, 1998 and 1997 was approximately
$620,000 and $879,000, respectively, and the minority interest balance was
approximately $1,200 and $3,800, respectively. Alexis' net loss after minority
interest amounted to approximately $259,000, $137,000 and $244,000, for the
1997, 1996 and 1995 Fiscal Years, respectively.

Goodfellow Place Limited Partnership
The financial statements for Goodfellow Place Limited Partnership ("Goodfellow")
have been prepared in conformity with generally accepted accounting principles,
which contemplates continuation of Goodfellow as a going concern. Goodfellow has
sustained substantial operating losses in recent years, has used substantial
amounts of working capital in its operations and has depleted the operating
deficit escrow originally established in 1990 in the amount of $163,000.
Further, at December 31, 1997, current liabilities exceed current assets and
prepaid expenses by $57,669.

A prepayment of $163,000 was due on the promissory note payable to St. Louis
Community Development Agency ("CDA") in August 1996, upon release of the
Operating Deficit Guarantee Escrow. The Local General Partners have defaulted on
this requirement and placed $163,000 in an interest-bearing money market account
in the name of the project. This account has been voluntarily restricted by the
Local General Partners and has a balance of $171,218 at December 31, 1997. The
general partners of Goodfellow plan to negotiate with CDA in an attempt to
restructure the agreement to allow the project to place those funds in the
operating deficit escrow account held in trust by Missouri Housing Development
Committee ("MHDC"). These funds would then be used to fund future operating
deficits. In addition, management has increased rents $15 per month beginning in
January 1998, as leases renew to help meet cash flow needs.

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

The Partnership's investment in Goodfellow at March 31, 1998 and 1997 was
reduced to zero by prior years' losses, and the minority interest balance was
zero at each date. Goodfellow's


-16-


net income (loss) after minority interest amounted to approximately $200,
($2,829,000) (after loss on impairment of assets of approximately ($2,649,000))
and ($102,000) 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 its control and seek additional funding sources to supplement
project operations. Continuance of Willoughby as a going concern is dependent
upon Willoughby's ability to obtain additional funding to supplement project
operations and enable Willoughby to meet its obligations as they become due. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. The Partnership's investment in Willoughby at
March 31, 1998 and 1997 has been reduced to zero by prior years' losses and the
minority interest balance amounted to approximately $180,000 and $182,000,
respectively. Willoughby's net loss after minority interest amounted to
approximately $141,000, $273,000 and $309,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

United-Glen Arden I Limited Partnership
The United-Glen Arden I Limited Partnership (United-Glen Arden I) incurred a net
loss of $732,764 during the year ended December 31, 1997. In addition,
United-Glen Arden I is in default of the terms of its loan agreement. These
conditions raise substantial doubt about United-Glen Arden I's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
if United-Glen Arden I is unable to continue in existence. The Partnership's
investment in United-Glen Arden I at March 31, 1998 and 1997 was approximately
$767,000 and $1,692,000, and the minority interest balance was approximately
$192,000 and $0, respectively. United-Glen Arden I's net loss after minority
interest was approximately $550,000, $690,000 and $804,000 for the 1997, 1996
and 1995 Fiscal Years.

United-Glen Arden II Limited Partnership
The United-Glen Arden II Limited Partnership (United-Glen Arden II) incurred a
net loss of $488,048 during the year ended December 31, 1997, and as of that
date, total liabilities ex-ceeded total assets by $2,076.236. In addition,
United-Glen Arden II is in default of the terms of its loan agreement. These
conditions raise substantial doubt about United-Glen Arden II's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
if United-Glen Arden II is unable to continue in existence. The Partnership's
investment in United-Glen Arden II at March 31, 1998 and 1997 was zero and the
minority interest balance was zero. United-Glen Arden II's net loss after
minority interest was approximately $488,000, $391,000 and $496,000 for the
1997, 1996 and 1995 Fiscal Years.

b) Subsidiary Partnerships - Other

Santa Juanita II Limited Partnership
A bank filed a suit against the Local Partnership Santa Juanita II Limited
Partnership ("Santa Juanita") for non-payment of the monthly installments
required by a second mortgage loan agreement. During February 1994, the court
issued a judgment against Santa Juanita de-


-17-


manding immediate payment of the second mortgage note with an outstanding
principal balance of $474,656, plus accrued interest and legal expenses. A
significant portion of Santa Juanita's operating assets is pledged as collateral
for this note and foreclosure by the bank would seriously impair Santa Juanita's
continued existence. In May 1996, the special limited partner of Santa Juanita
instituted proceedings to formally remove the Local General Partner of Santa
Juanita. In June 1996, the Local General Partner of Santa Juanita filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code
("Chapter 11") and in June 1997 the court ordered that Santa Juanita's Amended
and Restated Agreement of Limited Partnership and Management Agreement should
not be part of the Local General Partner's bankruptcy. As such, the court
ordered the Local General Partner to surrender the books and records of Santa
Juanita to Liberty Associates, the special limited partner and in July, the case
was dismissed in the Bankruptcy Court. Liberty Associates amended Santa
Juanita's Amended and Restated Agreement of Limited Partnership to remove the
former Local General Partner as general partner and management agent and
admitted a new general partner and management agent. Management of Santa Juanita
is currently pursuing a workout agreement with the lenders in respect to Santa
Juanita's mortgage debt. The financial statements for the 1997 and 1996 Fiscal
Years for this subsidiary partnership were not audited. The maximum loss which
the Partnership would be liable for is its net investment in Santa Juanita. The
Partnerships investment in Santa Juanita at March 31, 1998 and 1997 was
approximately $405,000 and $478,000, respectively, and the minority interest
balance was zero at each date. Santa Juanita's net loss after minority interest
amounted to approximately $112,000, $90,000 and $90,000 for the 1997, 1996 and
1995 Fiscal Years, respectively.


Gramco Development Limited Dividend

Gramco Development Limited Dividend Partnership, L.P. ("Bayamon") was granted
net funds of $4,867,000. In the event a substantial violation of the provisions
of certain agreements between Bayamon and the Municipality of Bayamon (the
"Municipality") and between the Municipality and HUD, the funds shall become
immediately due and payable at the election of HUD and the Municipality.
Otherwise, the principal amount of the obligation together with any interest
will be forgiven. Proceeds from the loan have been deducted from fixed assets.
The Partnership's investment in Bayamon at March 31, 1998 and 1997 was
approximately $974,000 and $1,231,000 and the minority interest balance was
approximately $423,000 and $425,000, respectively. Bayamon's net (loss) income
after minority interest amounted to approximately, ($257,000), ($275,000) and
$77,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

Robin Housing Associates
Robin Housing Associates ("Robin Housing") is a defendant in a personal injury
lawsuit. The Partnership's insurance carrier intends to defend the Partnership
vigorously. Counsel believes that the insurance coverage is adequate to cover
any liability arising from this action. It is management's opinion that no
accrual for potential losses is currently warranted in the financial statements.
The maximum loss which the Partnership would be liable for is its net investment
in Robin Housing. The Partnership's investment in Robin Housing at March 31,
1998 and 1997 was approximately $123,000 and $160,000 and the minority interest
balance was $544,000 and $728,000, respectively. Robin Housing's net loss after
minority interest amounted to approximately $24,000, $30,000 and $36,000 for the
1997, 1996 and 1995 Fiscal Years, respectively.

Metropolitan Towers Associates, L.P.
The subsidiary partnership, Metropolitan Towers Associates, L.P.
("Metropolitan"), is a defendant in a legal proceeding brought about by one of
its tenants for damages suffered. It is man-


-18-


agement's opinion that the claim should be covered by Metropolitan's insurance
policy. The maximum loss which the Partnership would be liable for is its net
investment in Metropolitan. The Partnership's investment in Metropolitan at
March 31, 1998 and 1997 was approximately $1,228,000 and $1,340,000,
respectively, and the minority interest was zero at each date. Metropolitan's
net loss after minority interest amounted to approximately $113,000, $131,000
and $147,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

Rolling Green Limited Partnership
Rolling Green Limited Partnership ("Rolling Green") operates and is regulated by
HUD under Section 221(d)(3) of the National Housing Act. Rents received by
Rolling Green are subsidized by Section 8 Housing Assistance Payments. Rental
income from such Assistance Payments totaled $1,406,915 and $1,198,880 in the
1997 and 1996 Fiscal Years, respectively. In September 1998, the three Section 8
contracts will expire. Management has been assured in verbal communications that
such contracts will be renewed. However, uncertainties regarding the future of
HUD Programs exist. It is not practical to estimate the impact upon Rolling
Green's operations if the rents were to be respectively changed to market value.

Campeche Isle Apartments, L.P.
On July 24, 1997, Campeche Isle Apartments Limited Partnership ("Campeche")
emerged from Chapter 11 bankruptcy proceedings. While in bankruptcy, Campeche
completed a restructuring of its mortgage debt and satisfied its $4,200,000
mortgage debt through the following transactions: Bank of Boston made a
$4,000,000 loan to Campeche and the Partnership as co-borrowers. Such loan is
secured by a first mortgage on Campeche Isle Apartments, a pledge of the
Partnership's interest in Spring Creek and recourse guarantees of the
Partnership and one of its General Partners, Campeche, and Campeche's Local
General Partner. In addition to satisfying the mortgage, the restructuring
agreement requires Campeche to make approximately $800,000 of required repairs
to the project. The Partnership raised approximately $1,400,000 in June 1997 by
selling a portion of its limited partnership interest in two subsidiary
partnerships to Related Glenport Associates, an affiliate of the General
Partner. The Partnership sold 24.98% of its limited partnership interest in
United-Glenarden I Limited Partnership for $600,000 resulting in a gain of
$224,482 and sold 32.32% of its limited partnership interest in Property
Development Associates, L.P. for $800,000 resulting in a loss of $69,905. A
portion of the proceeds were used to repay the Mortgagee, pay closing costs on
the new loan and to fund debt service and an escrow account for repairs. Monthly
debt service on the new loan will be paid by the net income of Campeche and the
balance by the Partnership. In addition, any distributions received by the
Partnership from Spring Creek must be placed in escrow at Bank of Boston. The
new loan matures on December 31, 1998. On or prior to the maturity of the new
loan a refinancing will be completed which will have a term of at least equal to
the remaining compliance period of the project which ends 2004. As of December
31, 1997, total advances to Campeche from the Partnership totaled approximately
$1,516,000. The financial statements for the 1996 Fiscal Year for this
subsidiary partnership were not audited. The Partnership's investment in
Campeche at March 31, 1998 and 1997 was approximately $0 and $454,000,
respectively, and the minority interest balance was zero at each date.
Campeche's net loss after minority interest amounted to approximately $845,000,
$334,000 and $334,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

Williamsburg Residential , L.P.
In November 1996, the Local General Partner of Williamsburg Residential , L.P.
("Williamsburg ") stopped making the mortgage note payments which constituted an
event of default. The Local General Partner also communicated to the limited
partners its desire to withdraw as Local General Partner and property manager in
an effort to eliminate the need for it to further secure loans from its
affiliated entities to keep the project going. The limited partners retained


-19-


a national property management firm to operate the property effective January 1,
1997 and replaced the Local General Partner effective January 16, 1997.

The new Local General Partner, which is an affiliate of the Related General
Partner, had been in contact with the lender, Federal National Mortgage
Association ("FNMA"), shortly after the default. A Reinstatement and
Modification Agreement dated July 24, 1997, and effective March 1, 1997 was
entered into between Williamsburg and FNMA. Terms of the agreement include: 1.
Interest only on the loan for 36 months. 2. Replacement reserve escrow payments
waived during 1997. 3. Net operating income is to be turned over to the loan
servicer monthly. 4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 be deposited into a debt service escrow account for the mutual benefit
of Williamsburg and Williamsburg Residential II, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment, the debt service
escrow account is drawn upon. At December 31, 1997, balances in the two entities
accounts totaled $97,653.

In 1997, the Partnership advanced Williamsburg funds to pay legal costs,
delinquent mortgage payments, and to set up a debt service escrow account. All
of which were required as part of the Reinstatement and Modification Agreement
dated July 24, 1997 with FNMA. The advances do not bear interest and are
short-term in nature.

The Partnership's investment in Williamsburg has been written down to zero by
prior years' losses and the minority interest balance was approximately $736,000
and $0 at March 31, 1998 and 1997, respectively. Williamsburg net loss after
minority interest amounted to approximately $220,000, $1,667,000 (after
provision for impairment of assets of approximately $1,588,000) and $142,000 for
the years ended March 31, 1998, 1997 and 1996, respectively.

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

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

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low and
moderate-income tenants may pay as rent; the possibility that Congress may


-20-


not appropriate funds to enable HUD to make the rental assistance payments it
has contracted to make; and that when the rental assistance contracts expire,
there may not be market demand for apartments at full market rents in a Local
Partnership's Apartment Complex.

The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs as, for example, for such items as fuel,
utilities and labor.

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


-21-


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

Independent Auditors' Report 23

Consolidated Balance Sheets at March 31, 1998 and 1997 85

Consolidated Statements of Operations for the Years
Ended March 31, 1998, 1997 and 1996 86

Consolidated Statements of Changes in Partners' Capital
for the Years Ended March 31, 1998, 1997 and 1996 87

Consolidated Statements of Cash Flows for the Years
Ended March 31, 1998, 1997 and 1996 88

Notes to Consolidated Financial Statements 90


-22-


INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of Liberty Tax Credit Plus II
L.P. and Subsidiaries (a Delaware Limited Partnership) as of March 31, 1998 and
1997, and the related consolidated statements of operations, changes in
partners' capital, and cash flows for the years ended March 31, 1998, 1997 and
1996 (the 1997, 1996 and 1995 Fiscal Years). These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements for 27 (1997, 1996 and 1995 Fiscal Years) subsidiary
partnerships whose losses aggregated $6,318,514, $10,828,750 and $6,098,858 for
the 1997, 1996 and 1995 Fiscal Years, respectively, and whose assets constituted
98% of the Partnership's assets at March 31, 1998 and 1997, presented in the
accompanying consolidated financial statements. The financial statements for 26
(1997 Fiscal Year) and 25 (1996 and 1995 Fiscal Years) of these subsidiary
partnerships were audited by other auditors whose reports thereon have been
furnished to us and our opinion expressed herein, insofar as it relates to the
amounts included for these subsidiary partnerships, is based solely upon the
reports of the other auditors. The financial statements of one (Fiscal 1997) and
two (Fiscal 1996 and 1995) of these subsidiary partnerships were unaudited.

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

In our opinion, based upon our audits, and the reports of the other auditors
referred to above, the accompanying consolidated financial statements referred
to in the first paragraph present fairly, in all material respects, the
financial position of Liberty Tax Credit Plus II L.P. and Subsidiaries at March
31, 1998 and 1997 and the results of their operations and cash flows for the
years ended March 31, 1998, 1997 and 1996, in conformity with generally accepted
accounting principles.


-23-


As discussed in Note 10(a), the consolidated financial statements include the
financial statements of seven limited partnerships with significant
contingencies and uncertainties. The financial statements of six of these
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The financial statements for the 1997 Fiscal Year for one of
these subsidiary partnerships were not audited. The seven subsidiary
partnerships' net losses aggregated $1,761,033 (Fiscal 1997), $4,964,266 (Fiscal
1996) and $2,092,791 (Fiscal 1995) and their assets aggregated $42,936,661 and
$44,639,208 at March 31, 1998 and 1997, respectively. These matters raise
substantial doubt about these subsidiary partnerships' abilities to continue as
going concerns. Management's plans in regard to these matters are also described
in Note 10(a). The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.


TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP


New York, New York
June 11, 1998


-24-




[Letterhead of L. H. FRISHKOFF & COMPANY LLP]


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

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

FHA PROJECT NO. FL29-K005-015-152
---------------------------------

We have audited the accompanying statements of financial condition of Polynesian
Apartments Associates, Ltd. (A Limited Partnership) as of December 31, 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Polynesian Apartments
Associates, Ltd., (A Limited Partnership) as of December 31, 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

New York, New York
February 5, 1998





[L. H. FRISHKOFF & COMPANY LETTERHEAD]


INDEPENDENT AUDITOR'S REPORT


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

FHA PROJECT NO. FL29-K005-015-152

We have audited the accompanying statements of financial condition of Polynesian
Apartments Associates, Ltd. (A Limited Partnership) as of December 31, 1996 and
1995, and the related statements of operations, changes in partners' capital,
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Polynesian Apartments
Associates, Ltd., (A Limited Partnership) as of December 31, 1996 and 1995, and
the results of its operations, changes in partners' capital, and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.


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


New York, New York
January 23, 1997





[Letterhead of L. H. FRISHKOFF & COMPANY LLP]


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


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


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

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

New York, New York
February 4, 1998





[L. H. FRISHKOFF & COMPANY LETTERHEAD]


INDEPENDENT AUDITOR'S REPORT


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

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

We have audited the accompanying statements of financial condition of Seagrape
Village Associates, Ltd. (A Limited Partnership) as of December 31, 1996 and
1995, and the related statements of operations, changes in partners' capital,
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of Seagrape Village Associates,
Ltd. (A Limited Partnership) as of December 31, 1996 and 1995, and the results
of its operations, changes in partners' capital, and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.


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


New York, New York
January 24, 1997





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


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


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

I have audited the accompanying balance sheets of Metropolitan Towers
Associates, L.P. as of December 31, 1997 and 1996 and the related statements of
operations and changes in partners' capital and cash flows for the years ended
December 31, 1997 and 1996. These financial statements are the responsibility of
the partnership's management. My responsibility is to express an opinion on
these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Metropolitan Towers Associates,
L.P. as of December 31, 1997 and 1996, the results of its operations and changes
in partners' capital and cash flows for the years then ended in conformity with
generally accepted accounting principles.


/s/ Jose E. Rosario & Co.

Jose E. Rosario & Co.
License No. 961
Expires December 1, 1998


January 26, 1998

Stamp No. 1468192 of the Puerto
Rico College of CPAs was
affixed to the original.





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


INDEPENDENT AUDITOR'S REPORT


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

I have audited the accompanying balance sheets of Metropolitan Towers
Associates, L.P. as of December 31, 1996 and 1995 and the related statements of
operations and changes in partners' capital and cash flows for the years ended
December 31, 1996 and 1995. These financial statements are the responsibility of
the partnership's management. My responsibility is to express an opinion on
these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Metropolitan Towers Associates,
L.P. as of December 31, 1996 and 1995, the results of its operations and changes
in partners' capital and cash flows for the years then ended in conformity with
generally accepted accounting principles.


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


January 27, 1997

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





[Letterhead of RUBIN, BROWN, GORNSTEIN & CO. LLP]


Independent Auditors' Report


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

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., Project No. 085-35415-PM, 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
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 Westminster Place II - Olive
Site, 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.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting data included in the
report for 1997 (shown on pages 12 to 20) is presented for the purposes of
additional analysis and is not a required part of the financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 17, 1998 on our consideration of Westminster Place II - Olive
Site, L.P.'s internal controls and a report dated January 17, 1998 on its
compliance with laws and regulations.

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


St. Louis, Missouri
January 17, 1998





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


Independent Auditors' Report


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

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., a limited partnership, as of December 31, 1996 and 1995 and the
related statements of income, partners' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Westminster Place II - Olive
Site, L.P. as of December 31, 1996 and 1995 and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.


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


St. Louis, Missouri
January 23, 1997





[Letterhead of RUBIN, BROWN, GORNSTEIN & CO. LLP]


Independent Auditors' Report


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

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


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


St. Louis, Missouri
January 21, 1998





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


Independent Auditors' Report


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

We have audited the accompanying balance sheet of Property Development
Associates, L.P., a limited partnership, as of December 31, 1996 and 1995 and
the related statements of income, partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Property Development
Associates, L.P., as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.


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


St. Louis, Missouri
January 21, 1997





[Letterhead of RUBIN, BROWN, GORNSTEIN & CO. LLP]


Independent Auditors' Report

To The Partners
Whittier Plaza Associates Limited
Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, Project No. 085-35412-PM-SR, a limited partnership, as of
December 31, 1997 and 1996 and the related statements of income, partners'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
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 Whittier Plaza 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 audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting data included in the
report for 1997 (shown on pages 14 through 21) is presented for the purposes of
additional analysis and is not a required part of the financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 1998 on our consideration of Whittier Plaza Associates Limited
Partnership's internal controls and a report dated January 23, 1998 on its
compliance with laws and regulations.





To The Partners
Whittier Plaza Associates Limited Partnership Page 2
- - --------------------------------------------------------------------------------


The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 7 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, and has continually required a general partner
to fund deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

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


St. Louis, Missouri
January 23, 1998





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


Independent Auditors' Report


Partners
Whittier Plaza Associates Limited
Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, a limited partnership, as of December 31, 1996 and 1995 and
the related statements of income, partners' equity (deficit) and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Whittier Plaza Associates
Limited Partnership as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.





The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 6 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, as well as required continual general partner
funding of deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


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


St. Louis, Missouri
January 27, 1997





[Letterhead of HABIF, AROGETI & WYNNE, P.C.]


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


To the Partners
United - Glenarden I Limited Partnership


We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1997, and the related statements of operations,
changes in partners' equity [deficit], and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

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

As discussed in Note O of the financial statements, the Partnership is in
default of the terms of its loan agreement. In addition, the Partnership
incurred a net operating loss of $732,764 for 1997. These conditions raise
substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


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

Atlanta, Georgia
February 16, 1998





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


INDEPENDENT AUDITORS' REPORT


To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1996, and the related statements of operations,
changes in partners' equity [deficit], and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

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


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


Atlanta, Georgia
January 31, 1997





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

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1995, and the related statements of operations,
changes in partners' equity [deficit], and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1995, and results of its operations and its cash
flows for the year then ended in conformity with generally accented accounting
principles.

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

Atlanta, Georgia
January 31, 1996





[Letterhead of HABIF, AROGETI & WYNNE, P.C.]


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

To the Partners
United - Glenarden II Limited Partnership


We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 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.

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

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

As discussed in Note N of the financial statements, the Partnership is in
default of the term of its loan agreement. In addition, the Partnership incurred
a net operating loss of $488,048 for 1997 and the Partnership's deficit totaled
$2,076,236 as of December 31, 1997. These conditions raise substantial doubt
about the Partnership's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


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

Atlanta, Georgia

February 16, 1998





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


To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1996, and the related statements of operations,
changes in partners' deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

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

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

Atlanta, Georgia
January 31, 1996





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

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1995, and the related statements of operations,
changes in partners' deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

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

Atlanta, Georgia
January 31, 1996





[Letterhead of SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.]

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


To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
Libertyville, IL

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 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 audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 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/ Solomon, Baerson, Witonski, Patel & Kaskel, Ltd.
SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.

Chicago, IL
January 23, 1998





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


INDEPENDENT AUDITOR'S REPORT


To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
Libertyville, IL

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1996 and 1995 and the related statements of income,
partners' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principle.


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


Chicago, IL
January 25, 1997





[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]


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


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

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spring Creek Associates, L.P.
as of December 31, 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.

Respectfully submitted,
/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
February 13, 1998





[GROSSMAN, TUCHMAN AND SHAH, LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of Spring Creek Associates, L.P.
(a Delaware limited partnership) as of December 31, 1996 and 1995, and the
related statements of income (loss), changes in partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spring Creek Associates, L.P.
as of December 31, 1996 and 1995 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP

New York, N.Y.
January 27, 1997





[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]


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

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

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. (a Delaware limited partnership) and subsidiary as
of December 31, 1997 and 1996, and the related consolidated statements of income
(loss), changes in partners' capital, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of East Two Thirty-Five
Associates, L.P. and subsidiary as of December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.


Respectfully submitted,
/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
February 5, 1998



[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. (a Delaware limited partnership) and subsidiary as
of December 31, 1996 and 1995, and the related consolidated statements of income
(loss), changes in partners' capital (deficit), and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of East Two Thirty-Five
Associates, L.P. and subsidiary as of December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

Respectfully submitted,


/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
January 29, 1997







[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]


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

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

We have audited the accompanying balance sheets of Upper Fifth Avenue
Residential Associates, L.P. (a Delaware limited partnership) as of December 31,
1997 and 1996, and the related statements of income (loss), changes in partners'
capital (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Upper Fifth Avenue Residential
Associates, L.P. as of December 31, 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.


Respectfully submitted,
/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
February 5, 1998





[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of Upper Fifth Avenue
Residential Associates, L.P. (a Delaware limited partnership) as of December 31,
1996 and 1995, and the related statements of income (loss), changes in partners'
capital (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Upper Fifth Avenue Residential
Associates, L.P. as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Respectfully submitted,


/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
February 4, 1997





[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

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


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

We have audited the accompanying balance sheets of West 107th Street Associates,
L.P. (a Delaware limited partnership) as of December 31, 1997 and 1996, and the
related statements of income (loss), changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 107th Street Associates,
L.P. as of December 31, 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.


Respectfully submitted,
/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
January 27, 1998





[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of West 107th Street Associates,
L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the
related statements of income (loss), changes in partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 107th Street Associates,
L.P. as of December 31, 1996 and 1995 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

Respectfully submitted,


/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
January 22, 1997





[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]


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

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

We have audited the accompanying consolidated balance sheets of General Atlantic
Second Avenue Associates, L.P. (a Delaware limited partnership) and subsidiary
as of December 31, 1997 and 1996, and the related consolidated statements of
income (loss), changes in partners' capital (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Atlantic
Second Avenue Associates, L.P. and subsidiary as of December 31, 1997 and 1996
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.


Respectfully submitted,
/s/ Grossman, Tuchman & Shah, LLP


New York, N.Y.
February 5, 1998





[GROSSMAN, TUCHMAN & SHAH, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of General Atlantic
Second Avenue Associates, L.P. (a Delaware limited partnership) and subsidiary
as of December 31, 1996 and 1995, and the related consolidated statements of
income (loss), changes in partners' capital (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Atlantic
Second Avenue Associates, L.P. and subsidiary as of December 31, 1996 and 1995
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.

Respectfully submitted,


/s/ Grossman, Tuchman & Shah, LLP

New York, N.Y.
January 27, 1997





[Letterhead of ZINER & COMPANY, P.C.]


INDEPENDENT AUDITORS' REPORT

To the Partners of
Church Lane Associates

We have audited the accompanying balance sheet of Church Lane 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 Church Lane Associates as of December 31,
1996 were audited by other auditors, whose report, dated February 10, 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 Church Lane Associates as of
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.

January 26, 1998
Boston, Massachusetts





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


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of Church Lane Associates (a
Limited Partnership) as of December 31, 1996 and 1995 and the related statements
of (loss), changes in partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's general
partners and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

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

/s/ J. H. WIlliams & Co., LLP


Kingston, Pennsylvania
February 10, 1997





[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT


To the Partners
Campeche Isle Apartments
Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 1997, and the related statements of
operations, partners' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

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


/s/ Reznick Fedder & Silverman

Bethesda, Maryland
March 12, 1998





[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments
Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 1995, and the related statements of
operations, partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Campeche Isle Apartments
Limited Partnership as of December 31, 1995, and the results of its operations,
the changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

/s/ Reznick Fedder & Silverman

Bethesda, Maryland
February 29, 1996





[Letterhead of MARDEN HARRISON & KREUTER]


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





[Letterhead of MARDEN HARRISON & KREUTER]


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





[Letterhead of MARDEN HARRISON & KREUTER]


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

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.C.


/s/ Marden Harrison & Kreuter


Port Chester, New York
January 31, 1997





[Letterhead of MARDEN HARRISON & KREUTER]


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





[Letterhead of WOLFE NILGES NAHORSKI]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, 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 audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Goodfellow Place Limited
Partnership as of December 31, 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
Project will continue as a going concern. As discussed in Note 11 to the
financial statements, the Project has suffered recurring cash flow deficiencies
from operations. This raises substantial doubt about the Project's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 11. The financial statements for 1996 include an
adjustment of $2,648,894 for the impairment of apartment buildings held and used
as described in Note 12, but do not include any adjustments relating to the
recoverability and classification of other recorded assets, or the amounts and
classifications of liabilities that might be necessary in the event the
Partnership cannot continue in existence.

/s/ Wolfe Nilges Nahorski

A Professional Corporation
Certified Public Accountants

January 30, 1998
St. Louis, Missouri





[WOLFE NILGES NAHORSKI LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, 1996 and 1995, and the related statements of
income, partners' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Goodfellow Place Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

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


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


February 10, 1997
St. Louis, Missouri





[Letterhead of HAMILTON & MUSSER, P.C.]


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, 1998 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

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


Mechanicsburg, Pennsylvania
February 26, 1997


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




[Letterhead of Torres Llompart, Sanchez Ruiz & Co.]


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

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
----------------------------------------------------

We have audited the accompanying balance sheets of Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 1997 and 1996, and the related statements of profit and loss, partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
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 statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), 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.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for audits of HUD Programs, issued by the US Department of Housing and
Urban Development, we have also issued a report dated March 13, 1998, on our
consideration of the Partnership's internal control structure and reports dated
March 13, 1998, on its compliance with specific requirements applicable to major
HUD programs and specific requirements applicable to Fair Housing and
Non-Discrimination.




Partners
Gramco Development Limited Dividend Partnership, LP
San Juan, Puerto Rico


INDEPENDENT AUDITORS' REPORT ON
-------------------------------
FINANCIAL STATEMENTS (CONTINUED)
-------------------------------


Our audits were conducted for the purpose of forming an opinion on the basic
financial statements, taken as a whole. The accompanying supplementary
information included in the report on pages 24 to 31 is presented for purposes
of additional analysis and is not a required part of the basic financial
statements of Gramco Development Limited Dividend Partnership, L.P., HUD Project
No. 056-35140-LD (HODAG). Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements for the year
ended December 31, 1997 and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements for the year ended
December 31, 1997 and, taken as a whole.


/s/ Torres Llompart, Sanchez Ruiz & Co.






March 13, 1998
License No. 169
San Juan, Puerto Rico

Stamp number 1490131 was affixed
to the original of this report.




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

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

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

We have audited the accompanying balance sheets of Gramco Development Dividend
Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December 31, 1995
and 1994, and the related statements of profit and loss, partners' capital, and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gramco Development Limited
Dividend Partnership, L.P. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Velez Semprit Nieves & Co.

March 11, 1996

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





[Letterhead of COLE, EVANS & PETERSON]


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of Alexis Park Apartments,
A Louisiana Partnership In Commendam at December 31, 1997 and December 31, 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 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 in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 1997 and
December 31, 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 at Note 11 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste and negative performance indicators
that raise substantial doubt about the Partnership's ability to continue as a
going concern. Management's position in regard to these matters is also
discussed at Note 11. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.





To the Partners Page 2
Alexis Park Apartments, A Louisiana
Partnership in Commendam



Our audit was made primarily for the purpose of forming an opinion on the
basic financial statements for the years ended December 31, 1997 and December
31, 1996 taken as a whole. The supplementary Schedule 1 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 audit procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.


/s/ Cole, Evans & Peterson

Cole, Evans & Peterson
Shreveport, Louisiana
February 26, 1998





[COLE, EVANS & PETERSON LETTERHEAD]


February 24, 1997


INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of Alexis Park Apartments,
A Louisiana Partnership In Commendam at December 31, 1996 and December 31, 1995
and the related statements of income, partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 1996 and
December 31, 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As mentioned in Note 12 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste, related lawsuits, and an unrelated
investigation by the U. S. Department of Justice, that raise substantial doubt
about the Partnership's ability to continue as a going concern. Management's
position in regards to these matters are also mentioned in Note 12. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.


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


February 24, 1997
Shreveport, Louisiana





[Letterhead of CHESSER & COMPANY]


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

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Williamsburg Residential, 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/ Chesser & Company, P.A.

Wichita, Kansas
February 19, 1998






[CHESSER & COMPANY LETTERHEAD]


INDEPENDENT AUDITOR'S REPORT


Partners
Williamsburg Residential, L.P.
Wichita, Kansas

We have audited the accompanying balance sheet of Williamsburg Residential, L.P.
as of December 31, 1996 and 1995, and the related statements of operations,
changes in partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position. of Williamsburg Residential, L.P.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 11 to the
financial statements, the Company has suffered recurring losses from operations
and defaulted on their mortgage note payable which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 11. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ Chesser & Company


Wichita, Kansas
March 12, 1997





[Letterhead of PHILIP ROOTBERG & COMPANY, LLP]

INDEPENDENT AUDITOR'S REPORT


To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 1997 and 1996,
and the related statements of profit and loss, partners' capital, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 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.

In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 1998, on our consideration of the Partnership's internal
control and a report dated January 23, 1998, on its compliance with laws and
regulations.




[Letterhead of PHILIP ROOTBERG & COMPANY, LLP]


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, 1998






[PHILIP ROOTBERG & COMPANY, LLP LETTERHEAD]


INDEPENDENT AUDITOR'S REPORT


To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 1996 and 1995,
and the related statements of profit and loss, partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 1996 and 1995, and the results of its
operations, changes in partners' capital (deficit) and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 29, 1997, on our consideration of the Partnership's internal
control structure and a report dated January 29, 1997, on its compliance with
laws and regulations.




[PHILIP ROOTBERG & COMPANY, LLP LETTERHEAD]


Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed on the preceding contents page are presented for purposes of additional
analysis to comply with HUD reporting requirements and are not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.


/s/ PHILIP ROOTBERG & COMPANY, LLP

Chicago, Illinois
January 29, 1997



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


ASSETS


March 31,
--------------------------------
1998 1997
------------ ------------

Property and equipment, at cost, less accumulated
depreciation (Notes 2, 4 and 7) $173,036,778 $180,610,721
Construction in progress 604,411 0
Cash and cash equivalents (Notes 2, 3 and 10) 4,177,583 4,956,628
Cash held in escrow (Notes 2, 3 and 5) 6,823,943 6,304,514
Deferred costs - less accumulated amortization
(Notes 2 and 6) 4,121,038 4,273,139
Other assets 4,086,783 4,124,261
------------ ------------

Total assets $192,850,536 $200,269,263
============ ============


LIABILITIES AND PARTNERS' CAPITAL

Liabilities
Mortgage notes payable (Note 7) $117,331,318 $118,783,431
Accounts payable and other liabilities (Note 10) 9,339,821 9,331,939
Due to local general partners and affiliates (Note 8) 10,135,658 10,926,397
Due to general partners and affiliates (Note 8) 4,957,989 2,785,541
Due to selling partners 3,501,689 3,429,863
------------ ------------

145,266,475 145,257,171
------------ ------------

Minority interests (Note 2) 4,700,747 3,297,946
------------ ------------

Commitments and contingencies (Notes 8 and 10)

Partners' capital
Limited partners ( 115,917.5 BACs
issued and outstanding) (Note 1) 43,485,164 52,227,688
General partners (601,850) (513,542)
------------ ------------

Total partners' capital 42,883,314 51,714,146
------------ ------------

Total liabilities and partners' capital $192,850,536 $200,269,263
============ ============




See accompanying notes to consolidated financial statements.


-25-




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



Year Ended March 31,
--------------------------------------
1998 1997 1996*
----------- ------------ -----------

Revenues
Rental income $25,156,685 $25,187,403 $24,338,859
Other (Note 10) 1,252,656 732,404 1,048,071
Gain on sale of interests (Note 10) 154,577 0 0
----------- ------------ -----------
26,563,918 25,919,807 25,386,930
----------- ------------ -----------

Expenses
General and administrative 6,199,421 5,474,850 5,194,757
General and administrative-related parties
(Note 8) 2,592,241 2,283,782 1,051,462
Repairs and maintenance 5,365,245 4,278,462 3,979,837
Operating and other 2,664,912 3,116,779 2,838,531
Real estate taxes 1,037,475 1,035,225 1,031,134
Insurance 1,126,788 1,344,916 1,370,405
Financial, primarily interest 8,109,996 8,381,581 8,498,925
Depreciation and amortization 8,703,562 8,847,941 8,139,580
Loss on impairment of assets (Note 4) 0 4,727,077 0
----------- ------------ -----------

35,799,640 39,490,613 32,104,631
----------- ------------ -----------

Loss before minority interest (9,235,722) (13,570,806) (6,717,701)

Minority interest in loss of subsidiaries 404,890 163,680 185,143
----------- ------------ -----------

Net loss $(8,830,832) $(13,407,126) $(6,532,558)
=========== ============ ===========

Net loss - limited partners $(8,742,524) $(13,273,055) $(6,467,232)
=========== ============ ===========

Number of BACs outstanding 115,917.5 115,917.5 115,917.5
=========== ============ ===========

Net loss per BAC $ (75.42) $ (114.50) $ (55.79)
=========== ============ ===========





*Reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.


-26-


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




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

Partners' capital - April 1, 1995 $71,653,830 $71,967,975 $(314,145)
Net loss (6,532,558) (6,467,232) (65,326)
----------- ----------- ---------

Partners' capital - March 31, 1996 65,121,272 65,500,743 (379,471)
Net loss (13,407,126) (13,273,055) (134,071)
----------- ----------- ---------

Partners' capital - March 31, 1997 51,714,146 52,227,688 (513,542)
Net loss (8,830,832) (8,742,524) (88,308)
----------- ----------- ---------

Partners' capital - March 31, 1998 $42,883,314 $43,485,164 $(601,850)
=========== =========== =========




See accompanying notes to consolidated financial statements.


-27-


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




Year Ended March 31,
-----------------------------------------
1998 1997 1996
----------- ------------ -----------

Cash flows from operating activities:
Net loss $(8,830,832) $(13,407,126) $(6,532,558)
----------- ------------ -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:

Gain on sale of interests (154,577) 0 0
Present value of legal settlement (Note 10) 0 75,905 0
Loss on sale of property and equipment 7,251 21,061 0
Depreciation and amortization 8,703,562 8,847,941 8,139,580
Loss on impairment of assets 0 4,727,077 0
Minority interest in loss of subsidiaries (404,890) (163,680) (185,143)
Accrued interest added to principal of
mortgage note payable 52,879 52,872 52,872
(Increase) decrease in assets
Cash held in escrow (155,978) (350,708) (135,938)
Deferred costs 0 (23,625) 0
Other assets 37,478 864,340 (154,802)
Increase in liabilities
Accounts payable and other liabilities 7,882 778,253 424,090
Due to general partners and affiliates 2,172,448 1,568,577 502,513
----------- ------------ -----------

Total adjustments 10,266,055 16,398,013 8,643,172
----------- ------------ -----------

Net cash provided by operating activities 1,435,223 2,990,887 2,110,614
----------- ------------ -----------

Cash flows from investing activities:
Acquisitions of property and equipment (792,036) (1,463,525) (1,452,484)
Construction in progress (604,411) 0 0
(Increase) decrease in cash held in escrow (363,451) 429,045 (52,967)
----------- ------------ -----------

Net cash used in investing activities (1,759,898) (1,034,480) (1,505,451)
----------- ------------ -----------

Net cash (used in) provided by operating and
investing activities (324,675) 1,956,407 605,163



See accompanying notes to consolidated financial statements.

-28-




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




Year Ended March 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------

Net cash (used in) provided by operating and
investing activities, brought forward (324,675) 1,956,407 605,163
---------- ---------- ----------

Cash flows from financing activities:
Increase in deferred costs (192,733) (33,140) (128,112)
Proceeds from mortgage notes 4,000,000 0 0
Repayments of mortgage notes (5,504,992) (1,164,748) (1,184,860)
Increase in due to local general partners
and affiliates 397,477 735,853 1,115,182
Decrease in due to local general partners
and affiliates (1,188,216) (441,677) (396,023)
Increase (decrease) in due to selling partners 71,826 (228,801) 61,414
Increase (decrease) in capitalization of
consolidated subsidiaries attributable to
minority interest 562,268 (365,831) 51,583
Proceeds from sale of interests 1,400,000 0 0
---------- ---------- ----------

Net cash used in financing activities (454,370) (1,498,344) (480,816)
---------- ---------- ----------

Net (decrease) increase in cash and
cash equivalents (779,045) 458,063 124,347

Cash and cash equivalents at
beginning of year 4,956,628 4,498,565 4,374,218
---------- ---------- ----------
Cash and cash equivalents
at end of year $4,177,583 $4,956,628 $4,498,565
========== ========== ==========

Supplemental disclosure of cash flows
information:
Cash paid during the year for interest $6,663,972 $7,356,078 $7,600,270

Supplemental disclosures of noncash
investing and financing activities:
Proceeds from mortgage notes used to
reduce due to local general partners
and affiliates $ 0 $ 0 $ 161,205
Increase in accounts payable and other
liabilities from present value of
legal settlement $ 0 $ 75,905 $ 0



See accompanying notes to consolidated financial statements.

-29-


LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


NOTE 1 - General

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

The Partnership's business is to invest in other limited partnerships ("Local
Partnerships", "subsidiaries" or "subsidiary partnerships") owning leveraged
Apartment Complexes that are eligible for the low-income housing tax credit
("Tax Credit") enacted in the Tax Reform Act of 1986, and to a lesser extent in
Local Partnerships owning properties that are eligible for the historic
rehabilitation tax credit. The Partnership's investment in each Local
Partnership represents a 20% to 98% interest in that Local Partnership.

The Partnership has acquired interests in 27 Local Partnerships as of March 31,
1998, and does not anticipate making any additional investments.

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

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

The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the general partners.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

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


-30-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


For financial reporting purposes, the Partnership's fiscal year ends on March
31. The Partnership's fiscal year ends on March 31 in order to allow adequate
time for the subsidiaries' financial statements to be prepared and consolidated.
The books and records of the Partnership are maintained on the accrual basis of
accounting, in accordance with generally accepted accounting principles
("GAAP"). All subsidiaries have calendar year ends. Accounts of the subsidiaries
have been adjusted for intercompany transactions from January 1 through March
31. All intercompany accounts and transactions with the subsidiary partnerships
have been eliminated in consolidation.

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

The Partnership's investment in each subsidiary partnership is equal to the
respective subsidiary partners' equity less minority interest capital, if any.
Losses attributable to minority interests which exceed the minority interest's
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated $391,000 $524,000 and $532,000 for the years ended March
31, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal Years), 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.


-31-


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

e) Income Taxes

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note 9).

f) Loss Contingencies

The Partnership records loss contingencies as a charge to income when
information becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the
financial statements and the amount of loss can be reasonably estimated. In
addition, the Partnership evaluates a potential environmental liability
independently from any potential claim for recovery.

g) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

h) Financial Statements Reclassifications

Certain reclassifications have been made to the 1995 Fiscal Year Financial
Statement to conform with the 1997 and 1996 Fiscal Year Financial Statement
presentation. Such reclassifications had no effect on net loss as previously
reported.

NOTE 3 - Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (all of which are held for non-trading
purposes) for which it is practicable to estimate that value:

Cash and Cash Equivalents, and Cash Held in Escrow
- - --------------------------------------------------
The carrying amount approximates fair value.


-32-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 31, 1998 March 31, 1997
------------------------- ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------

Mortgage Notes Payable for which it is:
Practicable to estimate fair value $54,134,394 $53,443,892 $24,439,740 $23,554,365
Not Practicable $63,196,924 * $94,343,691 *


*Management believes it is not practical to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the partnerships.

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



March 31, 1998 March 31, 1997
------------------------- ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------

Due to selling partners $ 3,501,689 $ 4,749,512 $ 3,429,863 $ 4,446,316
Due to Local General Partner
and affiliates $10,135,658 $10,135,658 $10,926,397 $10,191,997


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 31, Estimated
----------------------------- Useful Lives
1998 1997 (Years)
------------ ------------ ------------

Land $ 14,444,085 $ 14,444,085 -
Building and improvements 217,110,837 217,275,838 15 to 40
Other 6,026,878 5,190,378 5 to 15
------------ ------------
237,581,800 236,910,301
Less: Accumulated depreciation (64,545,022) (56,299,580)
------------ ------------
$173,036,778 $180,610,721
============ ============



-33-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


Included in property and equipment is $6,955,050 of acquisition fees paid or
accrued to the general partners and $1,606,014 of acquisition expenses as of
March 31, 1998 and 1997. In addition, as of March 31, 1998 and 1997, buildings
and improvements include $7,015,991 of capitalized interest.

Depreciation expense for the years ended March 31, 1998, 1997 and 1996 amounted
to $8,358,728, $8,584,497 and $7,947,111, respectively.

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

During the 1997 and 1996 Fiscal Years, there was a decrease in accumulated
depreciation in the amounts of $113,286 and $61,438, respectively, due to
write-offs on dispositions.

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

Williamsburg Residential L.P. had experienced significant losses and cash flow
problems and was in default on the mortgage note. As a result of the operating
losses and cash flow problems, management of Williamsburg determined that an
impairment of the property existed at December 31, 1996. The impairment loss was
determined to be $1,588,193 and has been charged to operations in the 1996
Fiscal Year. The amount of the impairment loss was determined based on the
difference in the carrying value of the property and the valuation of the
property based on capitalized cash flows.

As a result of cash flow deficiencies described in Note 10, land and apartment
buildings at Goodfellow Place Limited Partnership have been deemed to be
impaired and written down to their fair value. The fair value at December 31,
1996 was estimated by management to be $1,140,000. Management estimated the fair
value by capitalizing estimated annual cash flows before debt service using a
13% capitalization rate. The carrying value of the apartment buildings at
December 31, 1996 exceeded their fair value by $2,648,894. An impairment loss of
that amount has been charged to operations in the 1996 Fiscal Year.

NOTE 5 - Cash Held in Escrow

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



March 31,
------------------------
1998 1997
---------- ----------

Real estate taxes, insurance, reconstruction and other $3,404,024 $3,289,258
Reserve for replacements 2,477,614 2,114,163
Tenant security deposits 942,305 901,093
---------- ----------

$6,823,943 $6,304,514
========== ==========


-34-


LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


NOTE 6 - Deferred Costs

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



March 31,
---------------------------
1998 1997 Period
---------- ---------- ---------

Financing expenses $5,031,372 $4,838,639 *
Organization expenses 1,615,521 1,660,147 60 months
Other 741,253 741,253 Various
---------- ----------
7,388,146 7,240,039
Less: Accumulated amortization (3,267,108) (2,966,900)
---------- ----------

$4,121,038 $4,273,139
========== ==========


*Over the life of the respective related mortgages.

Amortization expense for the years ended March 31, 1998, 1997 and 1996 amounted
to $344,834, $263,444 and $192,469, respectively. During the years ended March
31, 1998 and 1997, $44,626 and $174,405 of fully amortized deferred costs were
written off.

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $677,000, including principal and interest at rates varying from
0% to 15% per annum, through 2030. Each subsidiary partnership's mortgage note
payable is collateralized by the land and buildings of the respective subsidiary
partnership and the assignment of certain subsidiary partnership's rents and
leases and is without further recourse.

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



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

1998 $ 6,284,605
1999 1,512,384
2000 1,629,296
2001 1,755,306
2002 1,870,851
Thereafter 104,278,876
-----------
$117,331,318
============


One subsidiary partnership, United Glen Arden II Limited Partnership, holds a
mortgage note which is eligible for an interest reduction subsidy under Section
236 of the National Housing Act. At December 31, 1997, said note, which bears
interest at 7.5% per annum through May 1, 2011, had a balance of $2,622,836.


-35-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


NOTE 8 - Related Party Transactions

A) Related Party Fees

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

The General Partners and their affiliates perform services for the Partnership.
The costs incurred for the years ended March 31, 1998, 1997 and 1996 are as
follows:



Year Ended March 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------

Partnership management fees (a) $1,496,000 $1,496,000 $299,000
Expense reimbursement (b) 135,010 92,872 89,987
Property management fees (c) 909,731 643,410 613,475
Local administrative fee (d) 51,500 51,500 49,000
---------- ---------- ----------

$2,592,241 $2,283,782 $1,051,462
========== ========== ==========


(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee, subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Partnership management
fees owed to the General Partners amounting to approximately $3,874,000 and
$2,378,000 were accrued and unpaid as of March 31, 1998 and March 31, 1997.
Without the General Partner's continued accrual without payment, the Partnership
will not be in a position to meet its obligations. The General Partners have
continued allowing the accrual without payment of these amounts but are under no
obligation to do so.

(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.

(c) Property management fees incurred by subsidiary partnerships amounted to
$1,521,339, $1,497,138 and $1,478,178 for the 1997, 1996 and 1995 Fiscal Years,
respectively. Of these fees $909,731, $643,410 and $613,475 were incurred to
affiliates of the subsidiary partnerships' general partners. Included in amounts
incurred to affiliates of the subsidiary partnerships' general partners are
$350,474, $102,869 and $77,325, respectively, which were also incurred to
affiliates of the Partnership.

-36-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


(d) Liberty Associates II L.P., a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.

Liberty Associates II L.P. has a 1% interest as the special limited partner in
each of the subsidiary partnerships. Liberty Associates II L.P. received cash
distributions of approximately $5,690, $500 and $142 during the 1998, 1997 and
1996 Fiscal Years, respectively.

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

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

(e) Due to Local General Partners and affiliates at March 31, 1998 and 1997
consists of the following:



March 31,
-------------------------
1998 1997
----------- -----------

Operating advances $ 1,175,243 $ 1,974,497
Development fee payable 2,553,084 2,583,084
Operating deficit advances 4,297,397 4,291,724
Management and other fees 647,015 733,304
Long-term notes payable (f) 965,541 965,541
Interest long-term notes payable 497,378 378,247
----------- -----------
$10,135,658 $10,926,397
=========== ===========

(f) Long-term notes payable consist of the following:

Polynesian $316,370 $ 316,370
- - ----------
This promissory note bears interest at 11% with a
maturity date of June 1, 2003. Interest expense of
$34,800 was incurred for the years ended
March 31, 1998 and 1997.

Seagrape 649,171 649,171
- - -------- ----------- -----------
This promissory note bears interest at 11% with a
maturity date of July 1, 2002. Interest expense of
$71,409 and $96,289 was incurred for the years ended
March 31, 1998 and 1997.
$965,541 $ 965,541
=========== ===========



-37-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


B) Guarantees

The Partnership negotiated Operating Deficit Guarantee Agreements with all Local
Partnerships, pursuant to which the general partners of the Local Partnerships
had agreed to fund operating deficits for a specified period of time. As of
March 31, 1998, 1997 and 1996, approximately $5,526,000, $5,580,000 and
$4,965,000, respectively had been funded by the Local General Partners to meet
such obligations. Of the total amount funded through March 31, 1998,
approximately $1,033,000 has been recorded as a capital contribution, $136,000
was funded by the Partnership, $60,000 has been recognized as income during the
1992 Fiscal Year, and the remaining balance of approximately $4,297,000 is
recorded as noninterest-bearing operating advances to be repaid from operating
cash flow. As of March 31, 1998, all such guarantees have expired.


-38-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


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 $(8,830,832) $(13,407,126) $(6,532,558)

Difference resulting from parent company
having a different fiscal year for income
tax and financial reporting purposes (1,128,089) 1,272,589 (59,193)

Difference between depreciation and amortization
expense recorded for financial reporting purposes
and the accelerated cost recovery system utilized
for income tax purposes (1,613,036) (1,354,876) (1,980,066)

Difference between gain on sale of
interests for financial reporting
purposes and income tax purposes (200,101) 0 0

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

Non-deductible litigation settlement 0 55,042 (18,800)

Excess losses allocated to minority
interest for income tax purposes 1,202,905 863,663 799,926

Other 190,143 412,996 (62,028)
------------ ----------- -----------

Net loss as shown on the income tax return
for the calendar year ended $(10,379,010) $(7,430,635) $(7,852,719)
============ =========== ===========


*Reclassified for comparative purposes.


-39-


LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships - Going Concern

The auditors for six subsidiary Partnerships, Whittier Plaza Associates Limited
Partnership, Alexis Park Apartments, Goodfellow Place Limited Partnership,
Willougby-Wyckoff Housing Associates, United-Glen Arden I Limited Partnership
and United-Glen Arden II Limited Partnership, modified their reports on the 1997
Fiscal Year financial statements due to the uncertainty of each subsidiary
partnership's ability to continue as a going concern. The financial statements
do not include any adjustments that would be necessary in the event the
subsidiary partnerships are unable to continue as going concerns.

Whittier Plaza Associates
- - -------------------------
The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that Whittier will continue as a going
concern. Whittier has sustained continuous losses since commencement of
operations in 1988, including losses of approximately $25,000, $550,000 and
$42,000 for the 1997, 1996 and 1995 Fiscal Years, respectively. Whittier has
experienced higher vacancies and lower rents than those originally projected,
resulting in increased difficulty in meeting both operating and debt service
obligations. The Local General Partner, pursuant to a development deficit
guarantee agreement, has advanced $50,292 and $53,086 in the 1997 and 1996
Fiscal Years, respectively, and $342,286 since 1988 to fund operating cash
shortfalls. In addition, Whittier's management company, an affiliate of the
Local General Partner, has deferred receipt of various fees since 1991 totaling
$49,530. These items raise substantial doubt about Whittier's ability to
continue as a going concern. The Partnership's investment in Whittier at March
31, 1998 and 1997 was reduced to zero as a result of prior years' losses and the
minority interest balance was $0 at each date. Whittier's net loss after
minority interest amounted to approximately $25,000, $550,000 (after loss on
impairment of assets of approximately $490,000), and $42,000 for the 1997, 1996
and 1995 Fiscal Years.

Alexis Park Apartments
- - ----------------------
During 1990, vapor fumes were discovered in several apartments at Alexis Park
Apartments, a Louisiana Partnership in Commendam ("Alexis"). As a result, 47 of
the 280 units were vacated as ordered by the Louisiana Department of
Environmental Quality ("LDEQ"). At December 31, 1997, 43 of these units have
been cleared for occupancy by the Louisiana Department of Health and Hospital.

The United States Environmental Protection Agency (EPA) has placed the site on
the list of proposed Superfund sites. The EPA performed indoor air tests at the
site on 28 units and issued a draft report on January 2, 1997 that found that
none of the units had acute air pollution levels, but further states that two
units were found to have sufficient amounts of air pollutants to possibly cause
health concerns after years of continual exposure. The report recommended the
installation of mechanical systems to reduce air pollutant levels to acceptable
amounts and the sealing of penetrations or openings in the floor slab and walls.
During the year ended December 31, 1997, such remediation was performed. The EPA
has informed management that additional testing of the project site began in
early 1998. At December 31, 1997, management is unaware of any additional or
potential remediation or clean-up costs that will be required


-40-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


and accordingly, is unable to estimate the possible cost to Alexis of any
remediation or clean-up that may be required in the future.

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

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

Management believes the testing conducted by the LDEQ and the EPA has provided
sufficient evidence that there is no significant environmental hazard at the
Alexis Park Apartments site. Management, along with the mayor of Bossier City,
has been active in requesting that the EPA remove the site from the list of
proposed Superfund sites and that no further tests be conducted. Alexis has
also requested assistance with bringing this issue to closure from its
congressman and U.S. senators who have been responsive.

Although the environmental issue is in many respects beyond its control,
management intends to continue its efforts in bringing this issue to a close and
believes the favorable test results thus far reduce the chances of a disruptive
action by the EPA and provide an opportunity for Alexis to continue as a going
concern. In addition, Alexis has sustained losses and its current liabilities
exceed its current assets by approximately $123,000. Management of Alexis
expects operating income to improve for 1998 from both increased occupancy and
slightly reduced expenses and also believes cash flows for 1998 will be
sufficient to meet liabilities and subject to the environmental uncertainty
enable Alexis to continue as a going concern. These items raise substantial
doubt about Alexis' ability to continue as a going concern. The maximum loss
which the Partnership would be liable for is its net investment in Alexis. The
Partnership's investment in Alexis at March 31, 1998 and 1997 was approximately
$620,000 and $879,000, respectively, and the minority interest balance was
approximately $1,200 and $3,800, respectively. Alexis' net loss after minority
interest amounted to approximately $259,000, $137,000 and $244,000, for the
1997, 1996 and 1995 Fiscal Years, respectively.

Goodfellow Place Limited Partnership
- - ------------------------------------
The financial statements for Goodfellow Place Limited Partnership ("Goodfellow")
have been prepared in conformity with generally accepted accounting principles,
which contemplates continuation of Goodfellow as a going concern. Goodfellow has
sustained substantial operating losses in recent years, has used substantial
amounts of working capital in its operations and has depleted the operating
deficit escrow originally established in 1990 in the amount of $163,000.
Further, at December 31, 1997, current liabilities exceed current assets and
prepaid expenses by $57,669.

A prepayment of $163,000 was due on the promissory note payable to St. Louis
Community Development Agency ("CDA") in August 1996, upon release of the
Operating Deficit Guaran-


-41-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


tee Escrow. The Local General Partners have defaulted on this requirement and
placed $163,000 in an interest-bearing money market account in the name of the
project. This account has been voluntarily restricted by the Local General
Partners and has a balance of $171,218 at December 31, 1997. The general
partners of Goodfellow plan to negotiate with CDA in an attempt to restructure
the agreement to allow the project to place those funds in the operating deficit
escrow account held in trust by Missouri Housing Development Committee ("MHDC").
These funds would then be used to fund future operating deficits. In addition,
management has increased rents $15 per month beginning in January 1998, as
leases renew to help meet cash flow needs.

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

The Partnership's investment in Goodfellow at March 31, 1998 and 1997 was
reduced to zero by prior years' losses, and the minority interest balance was
zero at each date. Goodfellow's net income (loss) after minority interest
amounted to approximately $200, ($2,829,000) (after loss on impairment of assets
of approximately ($2,649,000)) and ($102,000) 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 its control and seek additional funding sources to supplement
project operations. Continuance of Willoughby as a going concern is dependent
upon Willoughby's ability to obtain additional funding to supplement project
operations and enable Willoughby to meet its obligations as they become due. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. The Partnership's investment in Willoughby at
March 31, 1998 and 1997 has been reduced to zero by prior years' losses and the
minority interest balance amounted to approximately $180,000 and $182,000,
respectively. Willoughby's net loss after minority interest amounted to
approximately $141,000, $273,000 and $309,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

United-Glen Arden I Limited Partnership
- - ---------------------------------------
The United-Glen Arden I Limited Partnership (United-Glen Arden I) incurred a net
loss of $732,764 during the year ended December 31, 1997. In addition,
United-Glen Arden I is in default of the terms of its loan agreement. These
conditions raise substantial doubt about United-Glen Arden I's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
if United-Glen Arden I is unable to continue in existence. The Partnership's
investment in United-Glen Arden


-42-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


I at March 31, 1998 and 1997 was approximately $767,000 and $1,692,000, and the
minority interest balance was approximately $192,000 and $0, respectively.
United-Glen Arden I's net loss after minority interest was approximately
$550,000, $690,000 and $804,000 for the 1997, 1996 and 1995 Fiscal Years.

United-Glen Arden II Limited Partnership
- - ----------------------------------------
The United-Glen Arden II Limited Partnership (United-Glen Arden II) incurred a
net loss of $488,048 during the year ended December 31, 1997, and as of that
date, total liabilities exceeded total assets by $2,076.236. In addition,
United-Glen Arden II is in default of the terms of its loan agreement. These
conditions raise substantial doubt about United-Glen Arden II's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
if United-Glen Arden II is unable to continue in existence. The Partnership's
investment in United-Glen Arden II at March 31, 1998 and 1997 was zero and the
minority interest balance was zero. United-Glen Arden II's net loss after
minority interest was approximately $488,000, $391,000 and $496,000 for the
1997, 1996 and 1995 Fiscal Years.

b) Subsidiary Partnerships - Other

Santa Juanita II Limited Partnership
- - ------------------------------------
A bank filed a suit against the Local Partnership Santa Juanita II Limited
Partnership ("Santa Juanita") for non-payment of the monthly installments
required by a second mortgage loan agreement. During February 1994, the court
issued a judgment against Santa Juanita demanding immediate payment of the
second mortgage note with an outstanding principal balance of $474,656, plus
accrued interest and legal expenses. A significant portion of Santa Juanita's
operating assets is pledged as collateral for this note and foreclosure by the
bank would seriously impair Santa Juanita's continued existence. In May 1996,
the special limited partner of Santa Juanita instituted proceedings to formally
remove the Local General Partner of Santa Juanita. In June 1996, the Local
General Partner of Santa Juanita filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code ("Chapter 11") and in June 1997 the court
ordered that Santa Juanita's Amended and Restated Agreement of Limited
Partnership and Management Agreement should not be part of the Local General
Partner's bankruptcy. As such, the court ordered the Local General Partner to
surrender the books and records of Santa Juanita to Liberty Associates, the
special limited partner and in July, the case was dismissed in the Bankruptcy
Court. Liberty Associates amended Santa Juanita's Amended and Restated Agreement
of Limited Partnership to remove the former Local General Partner as general
partner and management agent and admitted a new general partner and management
agent. Management of Santa Juanita is currently pursuing a workout agreement
with the lenders in respect to Santa Juanita's mortgage debt. The financial
statements for the 1997 and 1996 Fiscal Years for this subsidiary partnership
were not audited. The maximum loss which the Partnership would be liable for is
its net investment in Santa Juanita. The Partnerships investment in Santa
Juanita at March 31, 1998 and 1997 was approximately $405,000 and $478,000,
respectively, and the minority interest balance was zero at each date. Santa
Juanita's net loss after minority interest amounted to approximately $112,000,
$90,000 and $90,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.


-43-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


Gramco Development Limited Dividend
- - -----------------------------------
Gramco Development Limited Dividend Partnership, L.P. ("Bayamon") was granted
net funds of $4,867,000. In the event a substantial violation of the provisions
of certain agreements between Bayamon and the Municipality of Bayamon (the
"Municipality") and between the Municipality and HUD, the funds shall become
immediately due and payable at the election of HUD and the Municipality.
Otherwise, the principal amount of the obligation together with any interest
will be forgiven. Proceeds from the loan have been deducted from fixed assets.
The Partnership's investment in Bayamon at March 31, 1998 and 1997 was
approximately $974,000 and $1,231,000 and the minority interest balance was
approximately $423,000 and $425,000, respectively. Bayamon's net (loss) income
after minority interest amounted to approximately, ($257,000), ($275,000) and
$77,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.

Robin Housing Associates
- - ------------------------
Robin Housing Associates ("Robin Housing") is a defendant in a personal injury
lawsuit. The Partnership's insurance carrier intends to defend the Partnership
vigorously. Counsel believes that the insurance coverage is adequate to cover
any liability arising from this action. It is management's opinion that no
accrual for potential losses is currently warranted in the financial statements.
The maximum loss which the Partnership would be liable for is its net investment
in Robin Housing. The Partnership's investment in Robin Housing at March 31,
1998 and 1997 was approximately $123,000 and $160,000 and the minority interest
balance was $544,000 and $728,000, respectively. Robin Housing's net loss after
minority interest amounted to approximately $24,000, $30,000 and $36,000 for the
1997, 1996 and 1995 Fiscal Years, respectively.

Metropolitan Towers Associates, L.P.
- - ------------------------------------
The subsidiary partnership, Metropolitan Towers Associates, L.P.
("Metropolitan"), is a defendant in a legal proceeding brought about by one of
its tenants for damages suffered. It is management's opinion that the claim
should be covered by Metropolitan's insurance policy. The maximum loss which the
Partnership would be liable for is its net investment in Metropolitan. The
Partnership's investment in Metropolitan at March 31, 1998 and 1997 was
approximately $1,228,000 and $1,340,000, respectively, and the minority interest
was zero at each date. Metropolitan's net loss after minority interest amounted
to approximately $113,000, $131,000 and $147,000 for the 1997, 1996 and 1995
Fiscal Years, respectively.

Rolling Green Limited Partnership
- - ---------------------------------
Rolling Green Limited Partnership ("Rolling Green") operates and is regulated by
HUD under Section 221(d)(3) of the National Housing Act. Rents received by
Rolling Green are subsidized by Section 8 Housing Assistance Payments. Rental
income from such Assistance Payments totaled $1,406,915 and $1,198,880 in the
1997 and 1996 Fiscal Years, respectively. In September 1998 the three Section 8
contracts will expire. Management has been assured in verbal communications that
such contracts will be renewed. However, uncertainties regarding the future of
HUD Programs exist. It is not practical to estimate the impact upon Rolling
Green's operations if the rents were to be respectively changed to market value.

Campeche Isle Apartments, L.P.
- - ------------------------------
On July 24, 1997, Campeche Isle Apartments Limited Partnership ("Campeche")
emerged from Chapter 11 bankruptcy proceedings. While in bankruptcy, Campeche
completed a restruc-


-44-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


turing of its mortgage debt and satisfied its $4,200,000 mortgage debt through
the following transactions: Bank of Boston made a $4,000,000 loan to Campeche
and the Partnership as co-borrowers. Such loan is secured by a first mortgage on
Campeche Isle Apartments, a pledge of the Partnership's interest in Spring Creek
and recourse guarantees of the Partnership and one of its General Partners,
Campeche, and Campeche's Local General Partner. In addition to satisfying the
mortgage, the restructuring agreement requires Campeche to make approximately
$800,000 of required repairs to the project. The Partnership raised
approximately $1,400,000 in June 1997 by selling a portion of its limited
partnership interest in two subsidiary partnerships to Related Glenport
Associates, an affiliate of the General Partner. The Partnership sold 24.98% of
its limited partnership interest in United-Glenarden I Limited Partnership for
$600,000 resulting in a gain of $224,482 and sold 32.32% of its limited
partnership interest in Property Development Associates, L.P. for $800,000
resulting in a loss of $69,905. A portion of the proceeds were used to repay the
Mortgagee, pay closing costs on the new loan and to fund debt service and an
escrow account for repairs. Monthly debt service on the new loan will be paid by
the net income of Campeche and the balance by the Partnership. In addition, any
distributions received by the Partnership from Spring Creek must be placed in
escrow at Bank of Boston. The new loan matures on December 31, 1998. On or prior
to the maturity of the new loan a refinancing will be completed which will have
a term of at least equal to the remaining compliance period of the project which
ends 2004. As of December 31, 1997, total advances to Campeche from the
Partnership totaled approximately $1,516,000. The financial statements for the
1996 Fiscal Year for this subsidiary partnership were not audited. The
Partnership's investment in Campeche at March 31, 1998 and 1997 was
approximately $0 and $454,000, respectively, and the minority interest balance
was zero at each date. Campeche's net loss after minority interest amounted to
approximately $845,000, $334,000 and $334,000 for the 1997, 1996 and 1995 Fiscal
Years, respectively.

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

The new Local General Partner, which is an affiliate of the Related General
Partner, had been in contact with the lender, Federal National Mortgage
Association ("FNMA"), shortly after the default. A Reinstatement and
Modification Agreement dated July 24, 1997, and effective March 1, 1997 was
entered into between Williamsburg and FNMA. Terms of the agreement include: 1.
Interest only on the loan for 36 months. 2. Replacement reserve escrow payments
waived during 1997. 3. Net operating income is to be turned over to the loan
servicer monthly. 4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 be deposited into a debt service escrow account for the mutual benefit
of Williamsburg and Williamsburg Residential II, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment,


-45-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


the debt service escrow account is drawn upon. At December 31, 1997, balances in
the two entities accounts totaled $97,653.

In 1997, the Partnership advanced Williamsburg funds to pay legal costs,
delinquent mortgage payments, and to set up a debt service escrow account. All
of which were required as part of the Reinstatement and Modification Agreement
dated July 24, 1997 with FNMA. The advances do not bear interest and are
short-term in nature.

The Partnership's investment in Williamsburg has been written down to zero by
prior years' losses and the minority interest balance was approximately $736,000
and $0 at March 31, 1998 and 1997, respectively. Williamsburg net loss after
minority interest amounted to approximately $220,000, $1,667,000 (after
provision for impairment of assets of approximately $1,588,000) and $142,000 for
the years ended March 31, 1998, 1997 and 1996, respectively.

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
Accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. As of March 31, 1998, uninsured cash and cash
equivalents approximated $1,981,000.

d) Line of Credit

Included in accounts payable and other liabilities at March 31, 1998, is
approximately $693,000 borrowed by one subsidiary partnership, Rolling Green,
against a $1,000,000 line of credit. Rolling Green is required to pay
forty-eight monthly installments of $10,602 including interest at an annual rate
of 10.25% with a balloon payment of approximately $662,000 due on July 15, 1998.

e) Other

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally, however no more than 33%
of the properties are located in any single state. There are also substantial
risks associated with owning properties receiving government assistance, for
example the possibility that Congress may not appropriate funds to enable HUD to
make rental assistance payments. HUD also restricts annual cash distributions to
partners based on operating results and a percentage of the owner's equity
contribution. The Partnership cannot sell or substantially liquidate its
investments in subsidiary partnerships during the period that the subsidy
agreements are in existence, without HUD's approval. Furthermore, there may not
be market demand for apartments at full market rents when the rental assistance
contracts expire.

f) Tax Credits

The Partnership and BACs holders began recognizing Housing Tax Credits with
respect to a Property when the Credit Period for such Property began. Because of
the time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC gradually increased over the first three years of
the Partnership. Housing Tax Credits not recog-


-46-



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998


nized in the first three years will be recognized in the 11th through 13th
years. For the 1997, 1996 and 1995 tax years, Housing Tax Credits of
$17,061,894, $17,193,735 and $17,174,288, were generated.

A portion of the low-income housing tax credits are subject to recapture in
future years if (i) the Partnership ceases to meet qualification requirements,
(ii) there is a decrease in the qualified basis of the projects, or (iii) there
is a reduction in the taxpayer's interest in the project at any time during the
15-year Compliance Period that began with the first tax year of the credit
period.


-47-


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None

PART III

Item 10. Directors and Executive Officers of the Registrant.

On November 25, 1997, an affiliate of the Related General Partner, purchased
100% of the stock of the Liberty General Partner (the "Transfer"). In addition
to the Transfer, by acquiring the stock of the Liberty General Partner, an
affiliate of the Related General Partner also acquired the Liberty General
Partner general partner interest in Liberty Associates, which is also the
special limited partner of the Partnership. Pursuant to the Partnership's
Amended and Restated Partnership Agreement, the consent of the limited partners
was not required to approve the Transfer.

The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by the General Partners. Certain information
concerning the directors and executive officers of the Liberty General Partner
and of Related Credit Properties II Inc., the general partner of the Related
General Partner, is set forth below.



Related Credit Properties II, Inc.
- - ----------------------------------

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

Stephen M. Ross Director

J. Michael Fried President, Chief Executive Officer and Director

Alan P. Hirmes Vice President

Stuart J. Boesky Vice President

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 the Related General Partner. In that capacity, he is the chief
executive officer of Capital 's syndication, finance, acquisition and investor
reporting activities. Mr. Fried practiced corporate law in New York


-48-



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

STUART J. BOESKY, 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 (which subsequently merged with Strook &
Strook & Lavan), and from 1978 to 1980 was a consultant specializing in real
estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Laws
degree in Taxation from Boston University School of Law.

GLENN F. HOPPS, 35, prior to joining Related in December 1990, 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 since 1983, she has served as Assistant to the
President of Capital. From 1978 to 1983 she was employed at Sony Corporation of
America in the Government Relations Department.


-49-


Liberty GP II Inc.
- - ------------------



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

J. Michael Fried President and Director

Alan P. Hirmes Vice President

Stuart J. Boesky Vice President

Marc D. Schnitzer Vice President

Denise L. Kiley Vice President

Glenn F. Hopps Treasurer

Lynn A. McMahon Secretary


MARC D. SCHNITZER, 37, joined Related in January 1988 after receiving his Master
of Business Administration degree from The Wharton School of The University of
Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial
Analyst with The First Boston Corporation in New York, an international
investment banking firm. Mr. Schnitzer received a Bachelor of Science degree,
summa cum laude, in Business Administration, from the School of Management at
Boston University in May 1983.

DENISE L. KILEY, 38, is responsible for overseeing the due diligence and asset
management of all multifamily residential properties invested in RCC sponsored
corporate, public and private equity and debt funds. Prior to joining Related in
1990, Ms. Kiley had experience acquiring, financing and asset managing
multifamily residential properties. From 1981 through 1985 she was an auditor
with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from
Boston College.

Biographical information with respect to Messrs. Fried, Hirmes, Boesky, Hopps
and Ms. McMahon is set forth above.

Item 11. Executive Compensation.

The Partnership has no officers or directors. The Partnership does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the Liberty General Partner or the general partner of the Related
General Partner for their services. Certain directors and executive officers of
the Liberty General Partner and the general partner of the Related General
Partner receive compensation from the General Partners and their affiliates for
services performed for various affiliated entities which may include services
performed for the Partnership.

Under the terms of the Partnership Agreement, the General Partners and their
affiliates are entitled to receive compensation from the Partnership in
consideration of certain services rendered to the Partnership by such parties.
Such arrangements include, but are not limited to, the payment of an accountable
operating expense reimbursement, an annual partnership management fee not to
exceed 0.5% of invested assets and subordinated disposition fees. In addition,
the General Partners are entitled to 1% of all cash distributions and Tax Credit
allocations and a subordinated 15% interest in Net Sales or Refinancing
Proceeds. See also Note 8 to the


-50-



Financial Statements in Item 8 for a presentation of the types and amounts of
compensation paid to the General Partners and their affiliates, which is
incorporated by reference thereto.

Tabular information concerning salaries, bonuses and other types of compensation
payable to executive officers has not been included in this annual report. As
noted above, the Partnership has no executive officers. The levels of
compensation payable to the General Partners and/or their affiliates is limited
by the terms of the Partnership Agreement and may not be increased therefrom on
a discretionary basis.

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



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

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

Liberty GP II, Inc. $500 capital contribution 49%
625 Madison Avenue - directly owned
New York, NY 10022

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


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

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

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with the
General Partners and their affiliates, as discussed in Item 11 and also Note 8
to the Financial Statements in Item 8 above, which is incorporated herein by
reference thereto. However, there have been no direct financial transactions
between the Partnership and the directors and executive officers of the Liberty
General Partner and the general partner of the Related General Partner.


-51-




PART IV

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



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

(a) 1. Financial Statements

Independent Auditors' Report 23

Consolidated Balance Sheets at March 31, 1998 and 1997 85

Consolidated Statements of Operations for the Years Ended March 31,
1998, 1997 and 1996 86

Consolidated Statements of Changes in Partners' Capital for the Years
Ended March 31, 1998, 1997 and 1996 87

Consolidated Statements of Cash Flows for the Years Ended March 31,
1998, 1997 and 1996 88

Notes to Consolidated Financial Statements 90

(a) 2. Financial Statement Schedules
-----------------------------

Independent Auditors' Report 116

Schedule I - Condensed Financial Information of Registrant 117

Schedule III - Real Estate and Accumulated Depreciation and Mortgage
Loans on Real Estate 120

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

(a) 3. Exhibits
--------

(3B) Form of Amended and Restated Agreement of Limited Partnership of
Liberty Tax Credit Plus II L.P. (incorporated by reference to exhibits
filed with Amendment No. 1 to Liberty Tax Credit Plus II L.P.'s
Registration Statement on Form S-11 Registration No. 33-21429)

(21) Subsidiaries of the Registrant 113

(27) Financial date schedule (filed herewith) 123


(b) Reports on Form 8-K
-------------------

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



-52-


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



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

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



-53-


SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


LIBERTY TAX CREDIT PLUS II L.P.
-------------------------------
(Registrant)

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

By: Related Credit Properties II Inc.,
its general partner

Date: June 23, 1998
By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President, Chief Executive
Officer and Director
(Principal Executive Officer)

and

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

Date: June 23, 1998
By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President and Director
and

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

By: Related Credit Properties II, Inc.,
its General Partner

Date: June 23, 1998
By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President and Director

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

By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President and Director



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 II L.P.
and Liberty Associates II, L.P.,
General Partners of Registrant)
and Liberty GP II, Inc.
(general partner of Liberty
/s/ J. Michael Fried Associates II, L.P.)
- - -------------------- (a General Partner of Registrant) June 23, 1998
J. Michael Fried

Vice President (Principal Financial
Officer) of Related Credit Properties
II Inc., (general partner
of Related Credit Properties II L.P.
and Liberty Associates II, L.P.,
General Partners of Registrant)
and Liberty GP II, Inc.
(general partner of Liberty
/s/ Alan P. Hirmes Associates II, L.P.)
- - -------------------- (a General Partner of Registrant) June 23, 1998
Alan P. Hirmes

Treasurer (Principal Accounting
Officer) of Related Credit Properties
II Inc., (general partner
of Related Credit Properties II L.P.
and Liberty Associates II, L.P.,
General Partners of Registrant)
and Liberty GP II, Inc.
(general partner of Liberty.
/s/ Glenn F. Hopps Associates II, L.P.)
- - -------------------- (a General Partner of Registrant) June 23, 1998
Glenn F. Hopps

Director of Related Credit Properties
II Inc., (general partner
of Related Credit Properties II L.P.
/s/ Stephen M. Ross and Liberty Associates II, L.P.,
- - -------------------- (General Partners of Registrants) June 23, 1998
Stephen M. Ross




INDEPENDENT AUDITORS' REPORT

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

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus II L.P. and Subsidiaries (a Delaware Limited
Partnership) included in this Form 10-K as presented in our opinion dated June
11, 1998 on pages 23 and 24 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 31, 1998. In our opinion, and based on the reports of the
other auditors, these consolidated schedules present fairly, when read in
conjuction with the related consolidated financial statements, the financial
data required to be set forth therein.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of seven limited partnerships with significant
contingencies and uncertainties. The financial statements of six of these
subsidiary partnerships were prepared assuming that each will continue as a
going concern. The financial statements for the 1997 Fiscal Year for one of
these subsidiary partnerships were not audited. The seven subsidiary
partnerships' net losses aggregated $1,761,033 (Fiscal 1997), $4,964,266 (Fiscal
1996) and $2,092,791(Fiscal 1995) and their assets aggregated $42,936,661 and
$44,639,208 at March 31, 1998 and 1997, respectively. These matters raise
substantial doubt about these subsidiary partnerships' abilities to continue as
going concerns. Management's plans in regard to these matters are also described
in Note 10(a). The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP


New York, New York
June 11, 1998



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

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

CONDENSED BALANCE SHEETS

ASSETS



March 31,
-------------------------
1998 1997
----------- -----------

Cash and cash equivalents $ 261,592 $ 959,136
Cash held in escrow 157,581 0
Investment in subsidiary partnerships 54,621,758 59,499,564
Other assets 153,197 153,197
----------- -----------

Total assets $55,194,128 $60,611,897
=========== ===========

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates $ 4,152,220 $ 2,420,502
Other liabilities 111,242 136,513
----------- -----------

Total liabilities 4,263,462 2,557,015

Partners' equity 50,930,666 58,054,882
----------- -----------

Total liabilities and partners' equity $55,194,128 $60,611,897
=========== ===========


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 II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS



Year Ended March 31,
---------------------------------------
1998 1997 1996
---------- ----------- -----------

Revenues $ 14,021 $ 30,188 $ 31,847
Gain on sale of investments in subsidiary
partnerships 154,577 0 0
----------- ----------- -----------

Expenses 168,598 30,188 31,847

Administrative and management 595,300 358,444 213,523
Administrative and management-related parties 1,631,010 1,588,872 388,987
---------- ---------- -----------

Total Expenses 2,226,310 1,947,316 602,510
----------- ----------- -----------

Loss from operations (2,057,712) (1,917,128) (570,663)

Equity in loss of subsidiary partnerships(*) (5,066,504) (7,235,061) (4,991,144)
----------- ----------- -----------

Net loss $(7,124,216) $(9,152,189) $(5,561,807)
=========== =========== ===========


(*) Includes suspended prior year losses in excess of investment in accordance
with the equity method of accounting amounting to $(176,296), $0, and $0 for
1998, 1997, and 1996, respectively.



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

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




Year Ended March 31,
----------------------------------------
1998 1997 1996
---------- ----------- ------------

Cash flows from operating activities:

Net loss $(7,124,216) $(9,152,189) $(5,561,807)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:

Equity in loss of subsidiary partnerships 5,066,504 7,235,061 4,991,144

Gain on sale of investments in subsidiary
partnerships (154,577) 0 0

Increase (decrease) in liabilities

Due to general partners and affiliates 1,731,718 1,523,577 308,803
Other liabilities (25,271) (3,377) 3,377
----------- ----------- -----------

Total adjustment 6,618,374 8,755,261 5,303,324
----------- ----------- -----------

Net cash used in operating activities (505,842) (396,928) (258,483)
----------- ----------- -----------

Cash flows from investing activities:

Distributions from subsidiaries 272,052 621,476 10,592
(Increase) decrease in cash held in escrow (157,581) 294,250 0
Advances and investments in
subsidiary partnerships (1,706,173) (400,835) (108,672)
Proceeds from sale of investments in subsidiary
partnerships 1,400,000 0 0
---------- ----------- -----------

Net cash (used in) provided by investing
activities (191,702) 514,891 (98,080)
---------- ---------- -----------

Net (decrease) increase in cash and
cash equivalents (697,544) 117,963 (356,563)

Cash and cash equivalents, beginning of year 959,136 841,173 1,197,736
---------- ---------- -----------

Cash and cash equivalents, end of year $ 261,592 $ 959,136 $ 841,173
========== ========== ===========



LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1998



Gross Amount at which
Initial Cost to Partnership Carried At Close of Period
--------------------------- Acquisition: -----------------------------
Buildings and Improvements Buildings and
Description Encumbrances Land Improvements (Disposals) Land Improvements Total
- - ----------- ------------ ---- ------------ ----------- ---- ------------ -----

Apartment Complexes
Polynesian Apartments Associates, Ltd.
Homestead, FL $ 2,691,046 $ 386,180 $ 4,195,068 $ (10,325) $ 388,192 $ 4,182,731 $ 4,570,923
Seagrape Village Associates, LTD.
Homestead, FL 4,643,293 1,270,000 6,123,373 709,189 1,275,292 6,827,270 8,102,562
Metropolitan Towers Associates, Ltd.
Rio Piedras, PR 4,960,378 322,000 2,434,303 5,607,539 327,292 8,036,550 8,363,842
Westminster Place II- Olive Site, L.P.
St. Louis, MO 4,519,751 928,979 5,382,740 166,670 916,669 5,561,720 6,478,389
Property Development Associates, L.P.
Kansas City, MO 5,650,000 624,858 7,228,721 5,194,359 606,704 12,441,234 13,047,938
Whittier Plaza Associates, L.P.
St. Louis, MO 1,731,407 26,920 2,015,030 (395,926) 32,261 1,613,763 1,646,024
United-Glen Arden I L.P.
Glen Arden, MO 12,577,833 1,770,000 6,577,720 12,620,804 1,775,293 19,193,231 20,968,524
United-Glen Arden II L.P.
Glen Arden, MO 9,592,764 1,190,000 4,837,436 8,987,534 1,195,293 13,819,677 15,014,970
Rolling Green L.P.
Chicago, IL 1,778,480 466,683 4,533,670 3,291,335 471,975 7,819,713 8,291,688
Santa Juanita II L.P.
Bayamon, PR 1,718,238 115,000 2,085,485 1,748,804 120,293 3,828,996 3,949,289
Spring Creek Associates, L.P.
Brooklyn, NY 0 3,343,549 16,216,700 18,368,456 2,595,782 35,332,923 37,928,705
East Two Thirty-Five Associates L.P.
(14th Street)
New York, NY 0 950,000 2,542,604 (527,787) 462,662 2,502,155 2,964,817
Concourse Artists Housing Associates, L.P.
Bronx, NY 1,580,553 5,750 2,246,560 52,924 11,042 2,294,192 2,305,234






Gross Amount at which
Initial Cost to Partnership Carried At Close of Period
--------------------------- Acquisition: -----------------------------
Buildings and Improvements Buildings and
Description Encumbrances Land Improvements (Disposals) Land Improvements Total
- - ----------- ------------ ---- ------------ ----------- ---- ------------ -----

Apartment Complexes
2051 Grand Concourse Housing Associates
Bronx, NY 4,035,020 31,500 5,221,117 52,924 36,792 5,268,749 5,305,541
Robin Housing Associates
Bronx, NY 5,431,807 26,750 8,186,055 52,925 32,042 8,233,688 8,265,730
Willoughby-Wyckoff Housing Associates
Bronx, NY 4,218,865 17,000 6,126,088 52,925 22,292 6,173,721 6,196,013
Upper Fifth Avenue Residential Associates, L.P.
Bronx, NY 19,245,100 159,861 21,096,862 1,091,069 166,763 22,181,029 22,347,792
West 107th Street Associates, L.P.
Bronx, NY 0 305,813 3,850,928 119,944 312,715 3,963,970 4,276,685
General Atlantic Second Avenue Associates, L.P.
(96th Street)
Bronx, NY 0 246,495 2,689,395 167,710 253,397 2,850,203 3,103,600
Church Lane Associates
Germantown, PA 1,877,114 20,000 4,009,983 (13,386) 26,902 3,989,695 4,016,597
Campeche Isle Apartments L.P.
Galveston, TX 4,000,000 450,000 6,792,005 164,731 456,902 6,949,834 7,406,736
Goodfellow Place L.P.
St. Louis, MO 3,970,218 160,000 4,581,787 (3,532,767) 41,102 1,167,918 1,209,020
Penn Alto Associates L.P.
Altoona, PA 5,013,922 60,000 2,731,082 8,988,596 97,907 11,681,771 11,779,678
Gramco Development Limited Dividend
Partnership, L.P. (Bayamon)
Bayamon, PR 4,665,766 1,322,887 7,609,024 (203,401) 1,329,788 7,398,722 8,728,510
Alexis Park Apartments
Bossier City, LA 5,092,042 640,000 7,297,925 401,735 646,902 7,692,758 8,339,660
Williamsburg Residential
Witchita, KS 1,998,926 136,974 831,584 1,878,957 673,429 2,174,086 2,847,515
Victory Apartments
Chicago, IL 6,338,795 161,500 4,929,133 5,035,185 168,402 9,957,416 10,125,818
------------ ----------- ------------ ----------- ----------- ------------ ------------
$117,331,318 $15,138,699 $152,372,378 $70,070,723 $14,444,085 $223,137,715 $237,581,800
============ =========== ============ =========== =========== ============ ============





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

Apartment Complexes
Polynesian Apartments Associates, Ltd.
Homestead, FL $ 751,955 1988 July 1988 27.5 years
Seagrape Village Associates, LTD.
Homestead, FL 1,296,353 1988 July 1988 27.5 years
Metropolitan Towers Associates, Ltd.
Rio Piedras, PR 1,576,589 1987 Dec. 1988 40 years
Westminster Place II- Olive Site, L.P.
St. Louis, MO 1,372,508 1988 Oct. 1988 20-40 years
Property Development Associates, L.P.
Kansas City, MO 3,176,138 1988 Dec. 1988 40 years
Whittier Plaza Associates, L.P.
St. Louis, MO 523,583 1987 Dec. 1988 20-40 years
United-Glen Arden I L.P.
Glen Arden, MO 6,860,889 1988 Dec. 1988 8-25 years
United-Glen Arden II L.P.
Glen Arden, MO 4,914,580 1988 Dec. 1988 15-25 years
Rolling Green L.P.
Chicago, IL 2,127,893 1988 Dec. 1988 7-39 years
Santa Juanita II L.P.
Bayamon, PR 1,116,232 1988 Dec. 1988 27.5 years
Spring Creek Associates, L.P.
Brooklyn, NY 10,641,186 1987 Dec. 1988 15-27.5 years
East Two Thirty-Five Associates L.P.
(14th Street)
New York, NY 865,840 1988 Dec. 1988 27.5-31.5 years
Concourse Artists Housing Associates, L.P.
Bronx, NY 777,365 1988 Nov. 1988 27.5 years
2051 Grand Concourse Housing Associates
Bronx, NY 1,770,916 1988 Nov. 1988 27.5 years
Robin Housing Associates
Bronx, NY 2,753,494 1988 Nov. 1988 27.5 years
Willoughby-Wyckoff Housing Associates
Bronx, NY 2,070,174 1988 Nov. 1988 27.5 years
Upper Fifth Avenue Residential Associates, L.P.
Bronx, NY 4,900,830 1987 Jan. 1989 40 years
West 107th Street Associates, L.P.
Bronx, NY 1,353,410 1987 Jan. 1989 27.5-31.5 years
General Atlantic Second Avenue Associates, L.P.
(96th Street)
Bronx, NY 971,105 1988 Jan. 1989 27.5-31.5 years
Church Lane Associates
Germantown, PA 1,369,501 1988 Feb. 1989 15-27.5 years
Campeche Isle Apartments L.P.
Galveston, TX 2,359,000 1988 May 1989 27.5 years
Goodfellow Place L.P.
St. Louis, MO 71,706 1988 May 1989 10-40 years
Penn Alto Associates L.P.
Altoona, PA 3,041,204 1989 June 1989 27.5-40 years
Gramco Development Limited Dividend
Partnership, L.P. (Bayamon)
Bayamon, PR 2,742,375 1989 July 1989 25 years
Alexis Park Apartments
Bossier City, LA 2,440,343 1986 July 1989 27.5 years
Williamsburg Residential
Witchita, KS 688,143 1989 Aug. 1989 40 years
Victory Apartments
Chicago, IL 2,011,710 1988 Sept.1989 40 years
-----------
$64,545,022
==========


(a) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight line method over the estimated useful
lives determined by the partnership date of acquisition.
(b) Furniture and fixtures, included in building improvements, are depreciated
primarily by the straight line method over the estimated useful lives
ranging from 5 to 15 years.




LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1998




Cost of Property and Equipment Accumulated Depreciation
--------------------------------------------- ------------------------------------------------
Year Ended March 31,
----------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ----------- ----------- -----------

Balance at beginning of period $236,910,301 $241,223,589 $239,775,640 $56,299,580 $48,743,758 $40,801,182
Additions during period:
Improvements 792,036 1,463,525 1,452,484
Depreciation expense 8,358,728 8,584,497 7,947,111
Deductions during period:
Loss on impairment 0 5,694,314 0 0 967,237 0
Dispositions 120,537 82,499 4,535 113,286 61,438 4,535
------------ ------------ ------------ ----------- ----------- -----------
Balance at close of period $237,581,800 $236,910,301 $241,223,589 $64,545,022 $56,299,580 $48,743,758
============ ============ ============ =========== =========== ===========


At the time the local partnerships were acquired by Liberty Tax Credit Plus II
Limited Partnership, the entire purchase price paid by Liberty Tax Credit Plus
II Limited Partnership was pushed down to the local partnerships as property and
equipment with an offsetting credit to capital. Since the projects were in the
construction phase at the time of acquisition, the capital accounts were
insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.