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

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

FORM 10-K
(Mark One)

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

For the fiscal year ended March 31, 1998

OR

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

Commission File Number 0-24656

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

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

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

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

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

None

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE
None

Index to exhibits may be found on page 204

Page 1 of 218

PART I

Item 1. Business.

General

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

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

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

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Rehabilitation Tax Credit") ("Rehabilitation Projects"; and
together with the Apartment Complexes, the"Properties"). Some of the Apartment
Complexes benefit from one or more other forms of federal or state housing
assistance. The Partnership's investment in each Local Partnership represents
from 27% to 98% of the partnership interests in the Local Partnership. As of
March 31, 1998, approximately $109,000,000 (not including acquisition fees) of
net proceeds have been invested in 62 Local Partnerships. The Partnership does
not anticipate making any additional investments. See Item 2, Properties, below.

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

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

1. Entitle qualified BACs holders to substantial Housing Tax Credits over the
period of the Partnership's entitlement to claim such Tax Credits (for each
Property, generally ten years

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from the date of investment or, if later, the date the Property is placed in
service; referred to herein as the "Credit Period") with respect to each
Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the Properties and
provide distributions of Sale or Refinancing Proceeds upon the disposition of
the Properties.

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

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

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

The Partnership continues to meet its primary objective of generating Housing
Tax Credits; approximately $19,632,000, $19,673,000, and $19,673,000, during the
years ended March 31, 1998, 1997, and 1996, respectively.

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

Cash distributions received from the Local Partnerships have been relatively
immaterial. Management 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.

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

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

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

-3-

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

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

Competition

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

Employees

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

Item 2. Properties.

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

-4-

Local Partnership Schedule

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

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

-5-

Local Partnership Schedule
(continued)

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

Cleveland, OH (240) February 1990 100 98 100 100 100
Northwood Associates Limited
Partnership
Toledo, OH (176) February 1990 95 96 97 92 95
Brewery Renaissance Associates
Middletown, NY (53) February 1990 94 98 98 98 98
Brandywine Court Associates, L.P.
Jacksonville, FL (52) November 1989 94 98 94 90 96
Art Apartments Associates
Philadelphia, PA (30) March 1990 100 97 83 94 97
The Village at Carriage Hills, LTD.
Clinton, TN (48) March 1990 100 100 100 100 100
Mountainview Apartments, LTD.
Newport, TN (34) March 1990 100 100 100 100 100
The Park Village, Limited
Jackson, MS (24) March 1990 100 100 100 100 100
River Oaks Apartments, LTD.
Oneonta, AL (35) March 1990 94 100 100 100 100
Forrest Ridge Apartments, LTD.
Forrest City, AR (25) March 1990 100 100 100 100 100
The Hearthside Limited Dividend
Housing Association Limited
Partnership
Portage, MI (101) March 1990 97 99 98 100 98
Redemptorist Limited Partnership
New Orleans, LA (126) March 1990 95 95 98 95 100
Manhattan A Associates
New York, NY (99) April 1990 99 97 97 98 96
Broadhurst Willows, L.P.
New York, NY (129) April 1990 97 92 96 97 98
Weidler Associates Limited
Partnership
Portland, OR (52) May 1990 100 100 98 98 99
Gentle Pines-West Columbia
Associates, L.P.
Columbia, SC (150) June 1990 97 100 99 97 100
Lake Forest Estates II, LTD.
Livingston, AL (32) June 1990 97 100 100 97 100
Las Camelias Limited Partnership
Rio Piedras, PR (166) June 1990 97 100 100 98 100
WPL Associates XXIII
Portland, OR (48) July 1990 96 92 97 98 100
Broadway Townhouses L.P.
Camden, NJ (175) July 1990 100 100 100 100 100
Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR (67) August 1990 96 100 100 100 100
Citrus Meadows Apartments, LTD.

-6-

Local Partnership Schedule
(continued)

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

Brandenton, FL (200) July 1990 94 96 94 96 95
Sartain School Venture
Philadelphia, PA (35) August 1990 100 98 89 98 100
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL (176) September 1990 100 100 100 99 100
Holly Hill, LTD.
Greenville, TN (46) October 1990 100 100 100 96 100
Mayfair Apartments LTD.
Morristown, TN (48) October 1990 100 100 100 100 100
Foxcroft Apartments LTD.
Troy, AL (48) October 1990 100 98 98 100 100
Canterbury Apartments, LTD.
Indianola, MS (48) October 1990 90 90 100 100 100
Cutler Canal III Associates, LTD.
Miami, FL (262) October 1990 96 94 95 97 98
Jefferson Place L.P.
Olathe, KS (352) October 1990 95 96 93 99 98
Callaway Village, LTD.
Clinton, TN (46) November 1990 100 100 100 100 100
Commerce Square Apartments
Associates L.P.
Smyrna, DE (80) December 1990 95 100 95 98 100
West 132nd Development
Partnership
New York, NY (40) December 1990 100 95 88 95 97
Site H Development Co.
Brooklyn, NY (11) December 1990 100 100 100 100 100
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA (78) December 1990 96 94 97 85 100
Diamond Phase II Venture
Philadelphia, PA (32) December 1990 100 97 91 97 94
Bookbindery Associates
Philadelphia, PA (41) December 1990 93 98 98 93 95
The Hamlet, LTD.
Boynton Beach, FL (240) December 1990 97 93 98 92 95
Stop 22 Limited Partnership
Santurce, PR (153) December 1990 99 100 100 99 100
Knob Hill Apartments, LTD.
Greenville, TN (48) December 1990 100 100 100 100 100
Conifer James Street Associates
Syracuse, NY (73) December 1990 91 92 92 79 100
Longfellow Heights Apartments, L.P.
Kansas City, MO (104) March 1991 95 98 98 86 98

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

Generally, the General Partners required in connection with investments in Local
Partnerships that the general partners of the Local Partnerships ("Local General
Partners") undertake an

-7-

obligation to fund operating deficits (up to a stated maximum amount) of the
Local Partnership during a limited period of time following rent stabilization,
the Partnership's investment ("Guarantee Period"). In each case the operating
deficits have been funded by Operating Loans which will not bear interest and
will be repaid only out of 50% of available cash flow or out of available net
sale or refinancing proceeds. The gross amount of the Operating Deficit
Guarantees aggregate approximately $18,700,000, of which approximately
$17,300,000 has expired as of March 31, 1998. In cases where the General
Partners deem it appropriate, the obligations of a Local General Partner under
the Operating Deficit and/or Rent-Up Guarantees are secured by letters of credit
and/or cash escrow deposits.

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

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

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

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

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

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

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

Item 3. Legal Proceedings.

None.

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

None.

PART II

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

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

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

As of May 1, 1998, the Partnership has approximately 9,022 registered holders of
an aggregate of 139,101.5 BACs.

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

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

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

However, the Partnership has made no distributions to the BACs holders as of
March 31, 1998. The Partnership does not anticipate providing cash distributions
to its BACs holders other than from net refinancing or sales proceeds.

There has recently been an increasing number of requests for the list of BACs
holders of limited partnerships such as the Partnership. Often these requests
are made by a person who, only a short time before making the request, acquired
merely a small number of BACs in the Partnership and seeks the list for an
improper purpose, a purpose that is not in the best interest of the Partnership
or is harmful to the Partnership. In order to best serve and protect the

-9-

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.

-10-

Item 6. Selected Financial Data.

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

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

Revenues $ 33,735,906 $ 33,542,935 $ 33,211,908 $ 32,437,587 $ 31,371,907
Operating expenses 50,778,124 48,902,130 49,134,034 47,897,186 47,729,423
Loss on impairment
of assets 0 20,083,101 0 0 0
------------- ------------- ------------- ------------- -------------
Loss before (17,042,218) (35,442,296) (15,922,126) (15,459,599) (16,357,516)
minority interest
and extraordinary
gain
Minority interest 154,367 156,523 153,662 158,671 152,604
in income of
subsidiary
partnerships
Extraordinary
item-forgiveness 1,045,627 0 0 0 0
on indebtedness ------------- ------------- ------------- ------------- -------------
income
Net loss $ (15,842,224) $ (35,285,773) $ (15,768,464) $ (15,300,928) $ (16,204,912)
============= ============= ============= ============= =============
Net loss - limited $ (15,683,802) $ (34,932,915) $ (15,610,779) $ (15,147,919) $ (16,042,863)
partners ============= ============= ============= ============= =============
Net loss per BAC $ (112.75) (251.13) (112.23) (108.90) (115.33)
============= ============= ============= ============= =============

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

Total assets $ 256,800,296 $ 268,870,640 $ 302,121,868 $ 314,010,691 $ 324,600,042
============= ============= ============= ============= =============

Total liabilities $ 262,594,185 $ 258,746,588 $ 257,205,366 $ 252,803,110 $ 247,840,864
============= ============= ============= ============= =============

Minority interest $ 2,181,337 $ 2,257,054 $ 1,763,731 $ 2,286,346 $ 2,537,015
============= ============= ============= ============= =============

Total partners'
(deficit) capital $ (7,975,226) $ 7,866,998 $ 43,152,771 $ 58,921,235 $ 74,222,163
============= ============= ============= ============= =============

During the year ended March 31, 1998, total assets decreased primarily due to
depreciation. During the year ended March 31, 1997, total assets decreased
primarily due to depreciation and the loss on impairment of assets. During
the years ended March 31, 1994 through 1996, total assets decreased primarily
due to depreciation, partially offset by net additions to property and
equipment. During the year ended March 31, 1998, total liabilities increased
primarily due to the accrual of principal and interest payments at one of the
Local Partnerships along with the increase in obligations at the remaining Local
Partnerships. During the year ended March 31, 1997, total liabilities decreased
primarily due to payment of obligations. During the years ended March 31, 1994
through 1996, total liabilities increased primarily due to the accrual of
principal and interest payments at one of the Local Partnerships, partially
offset by payments of obligations at the remaining Local Partnerships.

CASH DISTRIBUTION

The Partnership has made no distributions to the BACs holders as of March 31,
1998.

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

Liquidity and Capital Resources

Through March 31, 1998, the Partnership has invested approximately $109,000,000
(not including acquisition fees) of net proceeds in 62 Local Partnerships of
which approximately $1,231,000 remains to be paid (which includes approximately
$942,000 held in escrow).

During the year ended March 31, 1998, the Partnership's primary source of funds
include (i) working capital reserves and (ii) cash distributions from the
operations of the Local Partnerships.

For the year ended March 31, 1998, cash and cash equivalents of the Partnership
and its 62 consolidated subsidiary partnerships decreased by approximately
$2,224,000. This decrease was primarily attributable to cash flow used in
operations ($184,000), acquisition of property and equipment ($891,000),
repayments on mortgage notes ($13,580,000), a net increase in cash held in
escrow for investing ($273,000) and a net decrease in due to local general
partners and affiliates ($187,000) which exceeded borrowings on mortgage notes
$12,200,000, an increase in capitalization of consolidated subsidiaries
attributable to minority interest $79,000 and an increase in advances from debt
guarantor $638,000. Included in the adjustments to reconcile the net loss to
cash flow used in operations is depreciation and amortization in the amount of
$10,901,000 and an increase in due to debt guarantor in the amount of
$2,467,000.

The Partnership has a working capital reserve of approximately $275,000 at March
31, 1998.

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

Cash distributions received from the Local Partnerships remain relatively
immaterial. These distributions, as well as the working capital reserves
referred to above, will be used to meet the future operating expenses of the
Partnership.

-12-

During the years ended March 31, 1998, 1997 and 1996, the amounts received from
operations of the Local Partnerships approximated $226,000, $112,000, and
$190,600, respectively.

The Partnership has negotiated Operating Deficit Guarantee Agreements with all
Local Partnerships, in which the Local General Partners have agreed to fund
operating deficits for a specified period of time. The terms of the Operating
Deficit Guarantee Agreements vary for each Local Partnership, with the maximum
dollar amounts to be funded for a specified period of time, generally three
years, commencing at rent stabilization. The gross amount of the Operating
Deficit Guarantees aggregate approximately $18,700,000 of which approximately
$17,300,000, $16,100,000 and $15,600,000 had expired as of March 31, 1998, 1997
and 1996, respectively. As of March 31, 1998 and 1997, approximately $4,284,000
and $3,980,000, respectively, has been funded by the Local General Partners to
meet such obligations. All operating deficit guarantees expire within the next
two years. Management does not expect their expiration to have a material impact
on liquidity, based on prior years' fundings.

In addition, several Local Partnerships were initially subject to Rent-Up
Guarantee Agreements, in which the general partners of the Local General Partner
agree to pay liquidated damages if predetermined occupancy rates are not
achieved. As of March 31, 1998, all such guarantees have expired.

Partnership management fees owed to the General Partners amounting to
approximately $1,374,000 and $1,774,000 were accrued and unpaid at March 31,
1998 and 1997. Without the General Partners' continued accrual without payment
of certain fees and expense reimbursements, the Partnership will not be in a
position to meet its obligations. The General Partners have continued allowing
the accrual without payment of these amounts but are under no obligation to
continue to do so.

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

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

-13-

Results of Operations

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows) when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through March 31, 1998, the Partnership has
recorded approximately $20,083,000 as a loss on impairment of assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. There are no assets classified as property and equipment-held for
sale through March 31, 1998.

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

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

The net loss for the 1997, 1996 and 1995 Fiscal Years totaled $15,842,224,
$35,285,773 and $15,768,464, respectively.

1997 vs. 1996

Rental income increased approximately 1% for the year ended March 31, 1998 as
compared to the corresponding period in 1997 primarily due to rental rate
increases.

Total expenses, excluding, repairs and maintenance, real estate taxes and loss
on impairment of assets remained fairly consistent with a decrease of
approximately 1% for the year ended March 31, 1998 as compared to the
corresponding period in 1997.

General and administrative-related parties increased approximately $381,000 for
the year ended March 31, 1998 as compared to the corresponding period in 1997
primarily due to an increase in expense reimbursements payable to the General
Partners, the change at three Local Partnerships from an unaffiliated property
manager to one which is an affiliate and an increase in administrative fees
received from the Local Partnerships.

Repairs and maintenance expense increased approximately $547,000 for the year
ended March 31, 1998 as compared to the corresponding period in 1997 primarily
due to increases at six Local Partnerships. There was an increase at one Local
Partnership due to the replacement of floor coverings and carpets in certain
apartments and the hiring of additional security. The increase at the second
Local Partnership was due to the cycle painting of apartments. The increase at
the third Local Partnership was due to the new management company hiring outside
contractors to do maintenance repairs rather than having the work done by
in-house em-

-14-

ployees. The increase at the fourth Local Partnership was due to parking lot
repairs and the painting of vacant units. The increase at the fifth Local
Partnership was due to the repainting of certain units, the replacement of
carpets, roof repairs and landscaping improvements. The increase at the sixth
Local Partnership was due to the painting of the exterior of the buildings.

Real estate taxes increased approximately $1,581,000 for the year ended March
31, 1998 as compared to the corresponding period in 1997 primarily due to an
accrual of the expected tax liability resulting from the probable outcome of a
pending tax exemption application at one Local Partnership.

1996 vs. 1995

Rental income increased approximately 2% for the year ended March 31, 1997 as
compared to the corresponding period in 1996 primarily due to rental rate
increases.

Other income decreased approximately $414,000 for the year ended March 31, 1997
as compared to the corresponding period in 1996 primarily due to decreases at
four Local Partnerships. There was a decrease at one Local Partnership due to
forgiveness of indebtedness in 1995 on loans from the former general partners.
There was a decrease at a second Local Partnership due to a settlement with New
York City in 1995 resulting in the cancellation of water and sewer taxes which
had been accrued for 1985 and 1986. The decreases at the third and fourth Local
Partnerships were due to the Local Partnerships being awarded a
Federally-Assisted Low-Income Housing Drug Elimination Grant by the U.S.
Department of Housing and Urban Development in 1995.

Total expenses, excluding general and administrative-related parties, repairs
and maintenance and provision for impairment of assets remained fairly
consistent with a decrease of approximately 3% for the year ended March 31, 1997
as compared to the corresponding period in 1996.

General and administrative-related parties increased approximately $718,000 for
the year ended March 31, 1997 as compared to the corresponding period in 1996
primarily due to an increase in partnership management fees payable to the
General Partners.

Repairs and maintenance expense increased approximately $454,000 for the year
ended March 31, 1997 as compared to the corresponding period in 1996 primarily
due to increases at eight Local Partnerships. There was an increase at one Local
Partnership due to the replacement of the safety surface in the play area and
the replacement of counter tops and cabinet doors. The increase at the second
Local Partnership was due to the conversion of fourteen wood entry doors to
steel doors, the addition of handicap access ramps, and the upgrade of the
hydroneumatic water pump system. The increase at the third Local Partnership was
due to the replacement of carpeting with vinyl tile in high traffic areas, the
repainting of hallways and doors and the repair and repainting of ceilings and
walls due to water damage caused by high winds and heavy rains. The increase at
the fourth Local Partnership was due to the installation of 68 new electrical
boxes. The increase at the fifth Local Partnership was due to the painting of
the exterior of 10 buildings, sidewalk repairs and landscaping improvements. The
increase at the sixth Local Partnership was due to roof repairs. The increase at
the seventh Local Partnership was due to the painting of the exterior of the
buildings.

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

-15-

Results of Operations of Certain Local Partnerships

R.P.P. Limited Dividend Housing Association Limited Partnership ("River Place")

River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $30,735,000 at December 31, 1997. The partnership has been
unable to generate sufficient cash flows to meet a majority of its required
principal and interest payments under the loans. River Place's debt guarantor,
General Retirement System of the City of Detroit ("GRS"), entered into an
agreement with the Authority to purchase these loans upon occurrence of certain
events. GRS has declared River Place in default under its obligation to make the
required payments. During 1996, GRS agreed to waive its right of foreclosure
under the mortgages, unless certain events occur, through February 1, 2006. GRS
has made advances for debt service and has incurred certain fees relating to
these loans totaling $27,574,312 including accrued interest on such advances at
a rate of 15%. Such amount is included in due to debt guarantor on the balance
sheet.

Management anticipates that River Place will be unable to make all of the
required debt service payments during 1998. However, there is no guarantee that
GRS, or any other persons, will continue to make these payments on behalf of
River Place. These items raise substantial doubt about River Place's ability to
continue as a going concern.

The financial statements of River Place have been prepared assuming that River
Place will continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Partnership's investment in River Place has been written down to zero by prior
years' losses and the minority interest balance was $882,750 at both March 31,
1998 and 1997. The net loss after minority interest for River Place amounted to
approximately $3,648,000, $22,373,000 (after loss on impairment of assets of
approximately $18,803,000) and $5,166,000 for the years ended March 31, 1998,
1997 and 1996, respectively.

L.I.H. Chestnut Associates, L.P.

L.I.H. Chestnut Associates, L.P. ("Chestnut") has sustained recurring losses
from operations. At December 31, 1997, Chestnut had not made certain payments
required under the terms of the mortgage loan and, as a result, is in default.
Chestnut's continued existence is dependent on its resolution of the default
under the mortgage loan. These items raise substantial doubt about Chestnut's
ability to continue as a going concern. The financial statements for Chestnut do
not include any adjustments that might result from the outcome of this
uncertainty. Management of Chestnut is in discussion with the first mortgagee
and Chestnut's general and limited partners in an attempt to resolve the
default. The Partnership's investment in Chestnut was approximately $348,000 and
$824,000 and the minority interest balance was $1,147,092 at March 31, 1998 and
1997, respectively. The net loss after minority interest for Chestnut amounted
to approximately $476,000, $348,000 and $306,000 for the years ended March 31,
1998, 1997 and 1996, respectively.

-16-

Williamsburg Residential II, L.P.

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

The new general partner, which is an affiliate of the Related General Partner,
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 II 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 to be deposited into a debt service escrow account for the mutual
benefit of Williamsburg II and Williamsburg Residential, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment, the debt service
escrow account is drawn upon. At December 31, 1997, balances in the two entities
accounts totaled $97,653.

In 1997, the Partnership advanced Williamsburg II 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 II had been written down to zero by
prior years' losses and the minority interest balance was approximately $334,000
and zero at March 31, 1998 and 1997, respectively. Williamsburg II's net loss
after minority interest amounted to approximately $172,000, $1,368,000 (after
provision for impairment of assets of approximately $1,279,974) and $77,000 for
the years ended March 31, 1998, 1997 and 1996, respectively.

Jefferson Limited Partnership

At December 31, 1997 and 1996, Jefferson Limited Partnership's ("Jefferson")
current liabilities exceeded its current assets by over $40,000 and $220,000,
respectively. Although this condition could raise substantial doubt about
Jefferson's ability to continue as a going concern, such doubt is alleviated by
the fact that $34,690 and $47,216 of current liabilities at December 31, 1997
and 1996, respectively, are to related parties which do not intend to pursue
payment beyond Jefferson's ability to pay.

Accordingly, management believes that Jefferson has the ability to continue as a
going concern for at least one year from December 31, 1997. The Partnership's
investment in Jefferson was approximately $800,000 and $940,000 at March 31,
1998 and 1997, respectively, and the minority interest balance was $0 at each
date. The net loss after minority interest for Jefferson amounted to
approximately $140,000, $133,000 and $146,000 for the years ended March 31,
1998, 1997 and 1996, respectively.

Northwood Associates Limited Partnership

Northwood Associates Limited Partnership ("Northwood") is a defendant in a
lawsuit brought on by a group of tenants demanding better living conditions.
Northwood was found in con-

-17-

tempt by the Toledo Municipal Court and the tenants were each awarded an amount
for retroactive damages estimated by legal counsel to be aggregately in excess
of $200,000 plus attorney fees. Northwood has and still is vigorously defending
the action and has filed an appeal. The Plaintiffs have filed a cross-appeal.
The case is now pending. Legal counsel for Northwood estimates the chances of
prevailing to be 50/50. Therefore, no accrual has been recorded at December 31,
1997. Northwood has proposed a settlement under which the Plaintiffs would
retain the money that has been escrowed ($52,000 at December 31, 1997) plus an
additional $20,000 and legal fee reimbursements. The offer has not been accepted
or responded to. As of December 31, 1997, Northwood has charged to operations
$52,000 as a reserve against the amount of tenant rents held in escrow.

1850 Second Avenue Associates, L.P.

1850 Second Avenue Associates, L.P. ("1850 Second Ave.") has an application for
an exemption from current real estate taxes pending before the New York City
Department of Finance and an application for the cancellation of prior year
taxes is pending before the office of the Comptroller of the City of New York.
As of December 31, 1997, approximately $1,033,964 in outstanding real estate
taxes and $509,112 in accrued interest thereon would have to be paid if 1850
Second Ave.'s applications are denied. Management and Counsel have advised that
this is the likely outcome. Accordingly, 1850 Second Ave. has recorded a
liability of $1,543,076, of which $60,000 was accrued in prior years.

The General Partner of 1850 Second Ave. is West 107th II. The General Partner of
West 107th II has entered into a Cash Flow Sharing Agreement with the Special
Limited Partners of various other partnerships, pursuant to which cash flow
distributions are pooled and held in trust and applied to reduce any deficits of
1850 Second Ave. It is anticipated that in the event 1850 Second Ave. becomes
liable for real estate taxes and interest thereon, there will be sufficient
funds in the trust account to meet this obligation.

Other Subsidiary Partnerships

Four of the subsidiary partnerships are leasing the land on which the Projects
are located for terms ranging from 28 to 99 years. At December 31, 1997, the
subsidiary partnerships were committed to minimum annual rentals on the
noncancelable leases aggregating $155,130 for each of the next five years, and
$4,293,554 in total, thereafter.

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

-18-

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

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

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

-19-

Item 8. Financial Statements and Supplementary Data.

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

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 21

Consolidated Balance Sheets at March 31, 1998 and 1997 178

Consolidated Statements of Operations for the years ended
March 31, 1998, 1997 and 1996 179

Consolidated Statements of Changes in Partners' Capital
for the years ended March 31, 1998, 1997 and 1996 180

Consolidated Statements of Cash Flows for the years ended
March 31, 1998, 1997 and 1996 181

Notes to Consolidated Financial Statements 183

-20-

[Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP Letterhead]

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of Liberty Tax Credit Plus III
L.P. and Subsidiaries (a Delaware Limited Partnership) (the "Partnership") as of
March 31, 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, respectively). These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of 61 (Fiscal 1997, 1996
and 1995) subsidiary partnerships whose losses aggregated $48,514,709,
$33,407,170 (including a provision for impairment of assets of $20,083,101) and
$14,773,600 of the Partnership's net loss for the 1997, 1996 and 1995 Fiscal
Years, respectively, and whose assets constituted 95% and 94% of the
Partnership's assets at March 31, 1998 and 1997, respectively, presented in the
accompanying consolidated financial statements. The financial statements of
these 61 subsidiary partnerships were audited by other auditors whose reports
thereon have been furnished to us and our opinion expressed herein, insofar as
it relates to the amounts included for these subsidiary partnerships, is based
solely upon the reports of the other auditors.

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

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

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant
contingencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going concern.
These subsidiary partnerships have been unable to generate sufficient cash flow
to pay their mortgage obligations. The two subsidiary partnerships' net losses
aggregated $4,124,102, (Fiscal 1997), $23,519,749 (Fiscal 1996) and $5,471,930
(Fiscal 1995), and their assets aggregated $24,701,855 and $25,613,840 at March
31, 1998 and 1997, respectively. Management's plans in regard to these matters
are also described in Note 10(a). The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

/s/ Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
June 24, 1998

-21-

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of C.V. Bronx Associates, L.P.
(a Delaware limited partnership) as of December 31, 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 C.V. Bronx 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
C.V. Bronx Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of C.V. Bronx Associates, L.P.
(a Delaware limited partnership) as of December 31, 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 C.V. Bronx 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 31, 1997

[Letterhead of THEO CARSON & ASSOCIATES]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Michigan Rural Housing Limited Partnership

I have audited the accompanying balance sheets of Michigan Rural Housing Limited
Partnership (a Michigan partnership) as of December 31, 1997 and 1996, and the
related statements of operations, changes in partners' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. My responsibility is to express an opinion on
these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Michigan Rural Housing Limited
Partnership as of December 31, 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/ Theo C. Carson & Associates

Theo C. Carson & Associates
Kalamazoo, Michigan

February 3, 1998

[THEO CARSON & ASSOCIATES LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Michigan Rural Housing Limited Partnership

I have audited the accompanying balance sheets of Michigan Rural Housing Limited
Partnership (a Michigan partnership) as of December 31, 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. My responsibility is to express an opinion on
these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Michigan Rural Housing Limited
Partnership as of December 31, 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/ Theo C. Carson & Associates
- - -------------------------------
Theo C. Carson & Associates

Kalamazoo, Michigan
February 17, 1997

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT

To the Partners
Jefferson Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheets of Jefferson Limited Partnership
at December 31, 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. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of
Jefferson Limited Partnership at December 31, 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.

/s/ Cole, Evans & Peterson

Cole, Evans & Peterson
February 4, 1998
Shreveport, Louisiana

[COLE, EVANS & PETERSON LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Jefferson Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheets of Jefferson Limited
Partnership at December 31, 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. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of
Jefferson Limited Partnership at December 31, 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.

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

February 4. 1997
Shreveport, Louisiana

-1-

[Letterhead of PAUL DAMIANO]

INDEPENDENT AUDITORS' REPORT

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

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

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

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

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

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

/s/ Paul Damiano CPA

Lincoln, RI
January 23, 1998

[PAUL DAMIANO LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of Project No. HIP010 of
Inter-Tribal Indian Village Housing Development Associates, L.P. (a limited
partnership) as of December 31, 1996, and the related statements of loss and
changes in partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the project's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Project No. HIP010 as of December
31, 1996 and the results of its operations and the changes in partners' equity
and cash flows for the year then ended in conformity with generally accepted
accounting principles.

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

In accordance with Government Auditing standards, we have also issued a report
dated January 16, 1997 on our consideration of Inter-Tribal Indian Village
Housing Development Associates, L.P.'s internal control structure and a report
dated January 16, 1997 on its compliance with specific requirements applicable
to RIHMFC programs.

/s/ Paul Damiano CPA pc
-----------------------

Lincoln, RI
January 16, 1997

[PAUL DAMIANO LETTERHEAD - LINCOLN, RI]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of Project No. HIPO10 of
Inter-Tribal Indian Village Housing Development Associates, L.P. (a limited
partnership) as of December 31, 1995, and the related statements of loss and
changes in partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the project's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Project No. HIPO10 as of
December 31, 1995 and the results of its operations and the changes in partners'
equity and cash flows for the year then ended in conformity with generally
accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report shown on pages 13-17 are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Project No. HIPO10. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued a report
dated January 17, 1996 on our consideration of Inter-Tribal Indian Village
Housing Development Associates, L.P.'s internal control structure and a report
dated January 17, 1996 on its compliance with specific requirements applicable
to RIHMFC programs.

/s/ PAUL DAMIANO

January 17, 1996

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
RBM Associates

We have audited the accompanying balance sheet of RBM 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 RBM Associates as of December 31, 1996,
were audited by other auditors, whose report dated February 12, 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 RBM 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 21, 1998
Boston, Massachusetts

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

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

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

We have audited the accompanying balance sheets of RBM 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 RBM Associates (a Limited
Partnership) at December 31, 1996 and 1995, and the results of its operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ J.H. Williams & Co., LLP
- - ----------------------------

Kingston, Pennsylvania
February 12, 1997

[Letterhead of McKONLY & ASBURY LLP]

INDEPENDENT AUDITOR'S REPORT

The Partners of
Glenbrook Associates Rural Housing Service
Lancaster, Pennsylvania Allentown, Pennsylvania

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

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

In accordance with Government Auditing Standards, we have also issued a report
dated January 13, 1998 on our consideration of Glenbrook Associates' internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts, and grants.

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

/s/ McKonly & Asbury LLP

Harrisburg, Pennsylvania
January 13, 1998

[MCKONLY & ASBURY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

The Partners of
Glenbrook Associates Rural Development
Lancaster, Pennsylvania Allentown, Pennsylvania

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

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

In accordance with Government Auditing Standards, we have also issued a report
dated January 10, 1997 on our consideration of Glenbrook Associates' internal
control structure and a report dated January 10, 1997 on its compliance with
laws and regulations.

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

/s/ McKonly & Asbury
-------------------

Harrisburg, Pennsylvania
January 10, 1997

[Letterhead of M.L. BERGER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

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

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

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

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

/s/ M.L. Berger & Company

New York, New York
February 21, 1998

[M.L. BERGER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheet of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1996, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ M.L. Berger & Company
- - -------------------------

New York, New York
February 10, 1997

-1-

[M.L. BERGER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheet of Affordable Flatbush Associates
(A New York Limited Partnership) as of December 31, 1995, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

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

/s/ M.L. BERGER & COMPANY

New York, New York
February 15, 1996

[Letterhead of WESSEL & COMPANY]

INDEPENDENT AUDITOR'S REPORT

January 22, 1998

To the Partners of
Barclay Village II, Ltd.

We have audited the accompanying balance sheets of Barclay Village II,
Ltd. (a limited partnership) PHFA No. R-0039-8F as of December 31, 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 Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Barclay Village II,
Ltd., PHFA No. R-0039-8F, as of December 31, 1997 and 1996, and the results of
its operations, changes in partners' capital, and cash flows for the years then
ended in conformity with generally accepted accounting principles.

In accordance with Govemment Auditing Standards the Consolidated Audit
Guide for Auditing of HUD Programs issued by the U.S. Department of Housing and
Urban Development and the Pennsylvania Housing Finance Agency regulations, we
have also issued a report dated January 22, 1998, on our consideration of
Barclay Village II, Ltd.'s internal control, and reports dated January 22, 1998,
on its compliance with specific requirements applicable to major HUD Programs,
Pennsylvania Housing Finance Agency regulations, and Specific Requirements
applicable to Fair Housing and Nondiscrimination.

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

[WESSEL & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

January 23,1997

To the Partners of
Barclay Village II, Ltd.

We have audited the accompanying balance sheets of Barclay Village II, Ltd.
(a limited partnership) PHFA No. R-0039-8F as of December 31, 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 Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Barclay Village II, Ltd.,
PHFA No. R-0039-8F, as of December 31, 1996 and 1995, and the results of its
operations, changes in partners' capital, and cash flows for the years then
ended in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Pennsylvania
Housing Finance Agency regulations, we have also issued a report dated January
23, 1997, on our consideration of Barclay Village II, Ltd.'s internal control
structure, and a report dated January 23,1997, on its compliance with
Pennsylvania Housing Finance Agency regulations and laws.

As described in Note 7 to the financial statements, the Partnership's
December 31, 1994, partners' capital has been restated to reflect a prior period
adjustment to properly reflect partner distributions.

/s/ Wessel & Company
----------------------------
WESSEL & COMPANY
Johnstown, Pennsylvania Certified Public Accountants

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of 1850 Second Avenue
Associates, L.P. (a Delaware limited partnership) as of December 31, 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 1850 Second Avenue 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
1850 Second Avenue
Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of 1850 Second Avenue
Associates, L.P. (a Delaware limited partnership) as of December 31, 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 1850 Second Avenue 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 31, 1997

Report of Independent Certified Public Accountants

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

We have audited the accompanying balance sheets of R.P.P. Limited Dividend
Housing Association Limited Partnership (the Partnership) as of December 31,
1997 and 1996, and the related statements of operations, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

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

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

As discussed in Note 1 to the financial statements, in 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.

/s/ Ernst & Young LLP

West Palm Beach, Florida
February 10, 1998

[DELOITTE & TOUCHE LETTERHEAD - DETROIT, MICHIGAN]

INDEPENDENT AUDITORS' REPORT

To the Partners of
R.P.P. Limited Dividend Housing
Association Limited Partnership
Detroit, Michigan

We have audited the accompanying balance sheets of R.P.P. Limited Dividend
Housing Association Limited Partnership (the "Partnership") as of December 31,
1995 and 1994, and the related statements of net loss, partners' deficit and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 7 to the
financial statements, the Partnership's difficulties in generating sufficient
cash flow to repay debt and interest raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ DELOITTE & TOUCHE LLP

April 25, 1996

[Letterhead of CHESSER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheet of Williamsburg Residential II,
L.P. as of December 31, 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 II,
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 II, L.P.
Wichita, Kansas

We have audited the accompanying balance sheet of Williamsburg Residential II,
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 II,
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 M.L BERGER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

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

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

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

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

/s/ M.L. Berger & Company

New York, New York
February 20, 1998

[M.L. BERGER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheet of West 104th Street Associates,
L.P. (a Delaware Limited Partnership) as of December 31, 1996, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 104th Street Associates,
L.P. as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

/s/ M.L. Berger & Company
- - -------------------------

New York, New York
February 10, 1997

[M.L. BERGER & COMPANY LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheet of West 104th Street Associates,
L.P. (a Delaware Limited Partnership) as of December 31, 1995, and the related
statements of operations, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 104th Street Associates,
L.P. as of December 31, 1995, and the results of its operations, changes in
partners' capital and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ M.L. Berger & Company

New York, New York
February 16, 1996

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Meredith Apartments, Ltd.

We have audited the accompanying balance sheet of Meredith Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Lake, Hill & Myers
Lake, Hill & Myers

Salt Lake City, Utah
January 21, 1998

INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------

To the Partners of
Meredith Apartments, Ltd.

We have audited the accompanying balance sheet of Meredith Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Lake, Hill & Company
- - ------------------------
Lake, Hill & Company

Salt Lake City, Utah
January 17, 1997

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ritz Apartments, Ltd.

We have audited the accompanying balance sheet of Ritz Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Lake, Hill & Myers
Lake, Hill & Myers

Salt Lake City, Utah
January 20, 1998

INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------

To the Partners of
Ritz Apartments, Ltd.

We have audited the accompanying balance sheet of Ritz Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Lake, Hill & Company
- - ------------------------
Lake, Hill & Company
Salt Lake City, Utah
January 17, 1997

INDEPENDENT ACCOUNTANTS' REPORT

To the Partners of
Ashby Apartments, Ltd.

We have audited the accompanying balance sheet of Ashby Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

/s/ Lake, Hill & Myers
Lake, Hill & Myers

Salt Lake City, Utah
January 7, 1998

INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------

To the Partners of
Ashby Apartments, Ltd.

We have audited the accompanying balance sheet of Ashby Apartments, Ltd. (a
Limited Partnership) as of December 31, 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 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

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

/s/ Lake, Hill & Company
- - ------------------------
Lake, Hill & Company

Salt Lake City, Utah
January 17, 1997

[Letterhead of DAUBY O'CONNOR & ZALESKI]

Independent Auditors' Report

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

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

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

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

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

South Toledo Associates, Ltd.
Page Two

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

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

[ZINNER & CO. LETTERHEAD]

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

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

We have audited the accompanying balance sheet of South Toledo Associates, Ltd.,
Project No. 042 35432 PM L8, (a limited partnership) as of December 31, 1996,
and the related statements of operations, partners' equity (deficit), and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Toledo Associates, Ltd.,
at 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.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 13, 1997, on our
consideration of South Toledo Associates, Ltd.'s internal control structure, and
reports dated January 13, 1997, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to
Affirmative Fair Housing.

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

January 13, 1997
Cleveland, Ohio
/s/ Zinner & Co.
----------------

[ZINNER & CO. LETTERHEAD - CLEVELAND, OHIO]

INDEPENDENT AUDITORS' REPORT

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Toledo Associates, Ltd.,
at December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

/s/ Zinner & Co.

January 16, 1996

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Dunlap School Venture

We have audited the accompanying balance sheet of Dunlap School Venture
(a Pennsylvania limited partnership) as of December 31, 1997 and the related
statements of operations, changes in partners' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Dunlap School Venture as of December 31,
1996, were audited by other auditors, whose report dated February 12, 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 Dunlap School
Venture 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.

February 10, 1998
Boston, Massachusetts

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

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

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

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

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

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

/s/ J.H. Williams & Co., LLP
- - ----------------------------

Kingston, Pennsylvania
February 7, 1997

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

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

INDEPENDENT AUDITORS' REPORT

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

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

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

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

Philipsburg Elderly Housing Associates
(A Limited Partnership)
Page Two

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

/s/ Kostin, Ruffkess & Company, LLC

West Hartford, Connecticut
January 30, 1998

[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]

To The Partners
Philipsburg Elderly Housing Associates
PHFA Project #R-0210-8E

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

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

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

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

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 30, 1997 on our
consideration of Philipsburg Elderly Housing Associates' internal control
structure and a report dated January 30, 1997 on its compliance with laws and
regulations.

1

Philipsburg Elderly Housing Associates
Page Two

Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 17 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Co , LLC
- - -------------------------------

West Hartford, Connecticut
January 30, 1997

2

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

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

INDEPENDENT AUDITORS' REPORT

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

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

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

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

Franklin Elderly Housing Associates
(A Limited Partnership)
Page Two

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

/s/ Kostin, Ruffkess & Company, LLC

West Hartford, Connecticut
January 20, 1998

[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]

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

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

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

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

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

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 24, 1997 on our
consideration of Franklin Elderly Housing Associates' internal control structure
and a report dated January 24, 1997 on its compliance with laws and regulations.

1

Franklin Elderly Housing Associates
(A Limited Partnership)
Page Two

Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 16 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Co, LLC
- - ------------------------------

West Hartford, Connecticut
January 24, 1997

[Letterhead of KOSTIN, RUFFKESS & COMPANY, LLC]

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

INDEPENDENT AUDITORS' REPORT

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

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

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

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

Wade D. Mertz Elderly Housing Associates
(A Limited Partnership)
Page Two

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

/s/ Kostin, Ruffkess & Company, LLC

West Hartford, Connecticut
January 30, 1998

[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]

To The Partners
Wade D. Mertz Elderly Housing Associates
PHFA #R-0488-8E

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

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wade D. Mertz Elderly Housing
Associates at December 31, 1996 and 1995, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs, issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 28, 1997 on our
consideration of Wade D. Mertz Elderly Housing Associates' internal control
structure and a report dated January 28, 1997 on its compliance with laws and
regulations.

1

Wade D. Mertz Elderly Housing Associates
Page Two

Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information contained in
Schedules 1 through 17 is presented for the purpose of additional analysis and
is not a required part of the financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, the supplementary information is fairly
presented in all material respects in relation to the basic financial statements
taken as a whole.

/s/ Kostin, Ruffkess & Co, LLC
- - ------------------------------

West Hartford, Connecticut
January 28, 1997

2

[Letterhead of BICK FREDMAN & CO]

Independent Auditor's Report

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

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

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

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

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing
and Urban Development, we have also issued a report dated January 29, 1998 on
our consideration of Lancashire Towers Associates Limited Partnership's internal
control and reports dated January 29, 1998 on its compliance with specific
requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Non-Discrimination, and specific requirements
applicable to nonmajor HUD program transactions.

/s/ Bick Fredman & Co

Cleveland, Ohio
January 29, 1998

[BICK o FREDMAN & CO LETTERHEAD]

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

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

We have audited the accompanying balance sheets of Lancashire Towers
Associates Limited Partnership (an Ohio Limited Partnership), as of December 31,
1996 and 1995, and the related statements of operations, partners' capital and
cash flows for the years then ended. These financial statements are the
responsibility of the Project's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

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

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

/s/ Bick o Fredman & Co
-----------------------

Cleveland, Ohio
January 24, 1997

[Letterhead of BROVITZ, INSERO, KASPERSKI & CO., P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Northwood Associates Limited Partnership
Toledo, Ohio

We have audited the accompanying balance sheets of Northwood Associates Limited
Partnership, HUD Project No. 042-44050-LDP, as of December 31, 1997 and the
related statements of changes in partners' equity, operations, and cash flows
for the year then ended. These financial statements are the responsibility of
the Project's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

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

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 9, 1998, on our
consideration of Northwood Associates Limited Partnership's internal control
structure, and reports dated February 9, 1998, on its compliance with specific
requirements applicable to major HUD programs and specific requirements
applicable to Affirmative Fair Housing and Non-Discrimination.

Respectfully Submitted,

/s/ Brovitz, Insero, Kasperski & Co., P.C.

Brovitz, Insero, Kasperski & Co., P.C.
Certified Public Accountants

Rochester, New York
February 6, 1998

[BICK o FREDMAN & CO LETTERHEAD]

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

The General and Limited Partners
Northwood Associates Limited Partnership
Cleveland, Ohio

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

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

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

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

/s/ Bick o Fredman & Co
-----------------------

Cleveland, Ohio
January 24, 1997

1

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Brewery Renaissance Associates, L.P.

We have audited the accompanying balance sheet of Brewery Renaissance
Associates, L.P. as of December 31, 1997 and 1996, and the related statements of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

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

/s/ Reznick Fedder & Silverman

Bethesda, Maryland
January 21, 1998

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Brewery Renaissance Associates, L.P.

We have audited the accompanying balance sheet of Brewery Renaissance
Associates, L.P. as of December 31, 1995, and the related statements of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

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

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
January 21, 1996

Independent Auditors' Report

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

We have audited the accompanying balance sheets of Brandywine Court
Associates, L.P. (A Limited Partnership), HUD Project No. 063-94015, as of
December 31, 1997 and 1996 and the related statements of profit and loss,
Partners' capital and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Brandywine Court
Associates, L.P. (A Limited Partnership), HUD Project No. 063-94015, as of
December 31, 1997 and 1996, and the results of its operations, changes in its
Partners' capital, and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

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

Page Two
The Partners
Brandywine Court Associates, L.P.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 23, 1998 on our
consideration of Brandywine Court Associates, L.P.'s (A Limited Partnership),
HUD Project No. 063-94015, internal control and reports dated January 23, 1998
on its compliance with specific requirements applicable to major HUD program,
specific requirements applicable to nonmajor HUD program transactions and
specific requirements applicable to fair housing and non-discrimination.

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

Philadelphia, Pennsylvania
January 23, 1998

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

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

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

We have audited the accompanying balance sheets of Brandywine Court
Associates, L.P. (A Florida Limited Partnership), HUD Project #063-94015, as of
December 31, 1995 and 1994, and the related statements of profit and loss,
partners' (deficit) and cash flows for the year ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brandywine Court Associates,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data included in the
report (shown on pages 14 through 19) are presented for the purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly presented in all material respects in relation to the basic financial
statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued the
following reports dated January 15, 1996 concerning Brandywine Court Associates,
L.P. (1) on the internal control structure, (2) on compliance with specific
requirements applicable to major HUD programs, (3) on compliance with specific
requirements applicable to affirmative fair housing, and (4) on compliance with
applicable laws and regulations.

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

January 15, 1996

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

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheets of Art Apartments Associates (a
Limited Partnership) as of December 31, 1997 and 1996 and the related statements
of (loss), changes in partners' equity (deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Art Apartments Associates (a
Limited Partnership) at December 31, 1997 and 1996, 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 12, 1998

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

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

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

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

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Art Apartments Associates (a
Limited Partnership) at December 31, 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
January 23, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of The Village At Carriage Hills,
Ltd., a limited partnership, RHS Project No.: 48-001-630980039 as of December
31, 1997 and 1996, and the related statements of operations, partners' deficit
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The Village At Carriage Hills,
Ltd., RHS Project No.: 48-001-630980039 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 25, 1998 on my consideration of The Village At Carriage Hills,
Ltd.'s internal control structure and a report dated February 25, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 25, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of The Village At Carriage Hills,
Ltd., a limited partnership, RHS Project No.: 4X-001-6309X0039 as of December
31, 1996 and 1995, and the related statements of operations, partners' capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The Village At Carriage Hills,
Ltd., RHS Project No.: 48-001-6309X0039 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 21, 1997 on my consideration of The Village At Carriage Hills,
Ltd., internal control structure and a report dated February 21, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.
- - -------------------------------

Gadsden, Alabama
February 21, 1997

-1-

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Mountainview Apartments, Ltd.
Newport, Tennessee

I have audited the accompanying balance sheets of Mountainview Apartments, Ltd.,
a limited partnership, RHS Project No.: 48-015-63097225 as of December 31, 1997
and 1996, and the related statements of operations, partners' deficit and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mountainview Apartments, Ltd., RHS
Project No.: 48-015-63097225 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 24, 1998 on my consideration of Mountainview Apartments, Ltd.,
internal control structure and a report dated February 24, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 24, 1998

[DONALD W. CAUDEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Mountainview Apartments, Ltd.
Newport, Tennessee

I have audited the accompanying balance sheets of Mountainview Apartments, Ltd.,
a limited partnership, RHS Project No.: 48-015-63097225 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mountainview Apartments, Ltd., RHS
Project No.: 48-015-63097225 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 16, 1997 on my consideration of Mountainview Apartments, Ltd.,
internal control structure and a report dated February 16, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.
- - -------------------------------

Gadsden, Alabama
February 16, 1997

-1-

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
The Park Village, Limited
Jackson, Mississippi

I have audited the accompanying balance sheets of The Park Village, Limited, a
limited partnership, as of December 31, 1997 and 1996, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audits.

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

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

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 23, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
The Park Village, Limited
Jackson, Mississippi

I have audited the accompanying balance sheets of The Park Village, Limited, a
limited partnership, as of December 31, 1996 and 1995, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audits.

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

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

/s/ Donald W. Causey, CPA, P.C.
- - -------------------------------

Gadsden, Alabama
February 21, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of River Oaks Apartments, Ltd., a
limited partnership, RHS Project No.: 01-005-630988076 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of River Oaks Apartments, Ltd., RHS
Project No.: 01-005-630988076 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated Report Date on my consideration of River Oaks Apartments, Ltd., internal
control structure and a report dated Report Date on its compliance with laws and
regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 25, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of River Oaks Apartments, Ltd., a
limited partnership, RHS Project No.: 01-005-630988076 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of River Oaks Apartments, Ltd., RHS
Project No.: 01-005-630988076 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 23, 1997 on my consideration of River Oaks Apartments, Ltd.,
internal control structure and a report dated February 23, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.
- - -------------------------------

Gadsden, Alabama
February 23, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of Forrest Ridge Apartments,
Ltd., a limited partnership, RHS Project No.: 03-062-630899211 as of December
31, 1997 and 1996, and the related statements of operations, partners' capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Forrest Ridge Apartments, Ltd., RHS
Project No.: 03-062-630899211 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 24, 1998 on my consideration of Forrest Ridge Apartments, Ltd.,
internal control structure and a report dated February 24, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 24, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of Forrest Ridge Apartments,
Ltd., a limited partnership, RHS Project No.: 03-062-630899211 as of December
31, 1996 and 1995, and the related statements of operations, partners' capital
and cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Forrest Ridge Apartments, Ltd., RHS
Project No.: 03-062-630899211 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 21, 1997 on my consideration of Forrest Ridge Apartments, Ltd.,
internal control structure and a report dated February 21, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.
- - -------------------------------

Gadsden, Alabama
February 21, 1997

-1-

[Letterhead of SCHOONOVER BOYER GETTMAN AND ASSOCIATES]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of The Hearthside Limited
Dividend Housing Association Limited Partnership, (a Michigan limited
partnership) as of December 31, 1997 and 1996, and the related statements of
income (loss), partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

In our opinion, the financial statements mentioned above present fairly, in all
material respects, the financial position of The Hearthside Limited Dividend
Housing Association Limited Partnership as of December 31, 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/ Schoonover Boyer Gettman & Associates

Columbus, Ohio
January 23, 1998

[SCHOONOVER BOYER GETTMAN & ASSOCIATES LETTERHEAD]

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

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

We have audited the accompanying balance sheets of The Hearthside Limited
Dividend Housing Association Limited Partnership, (a Michigan limited
partnership) as of December 31, 1996 and 1995, and the related statements of
income (loss), 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 the financial statements based on our
audits.

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

In our opinion, the financial statements mentioned above present fairly, in all
material respects, the financial position of The Hearthside Limited Dividend
Housing Association Limited Partnership as of December 31, 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/ SCHOONOVER BOYER GETTMAN & ASSOCIATES
- - -----------------------------------------

Columbus, Ohio
January 25, 1997

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

INDEPENDENT AUDITOR'S REPORT

To the Partners
of Redemptorist Limited Partnership
New Orleans, Louisiana

We have audited the accompanying balance sheets of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1997 and 1996, and
the related statements of income, changes in partners, equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1997 and 1996, and
the results of its operations, changes in partners' equity, and cash flows for
the years then ended in conformity with generally accepted accounting
principles.

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

/s/ Pailet, Meunier and LeBlanc, L.L.P.
Metairie, Louisiana
January 30, 1998

[PAILET, MEUNIER AND LEBLANC, L.L.P. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
of Redemptorist Limited Partnership
New Orleans, Louisiana:

We have audited the accompanying balance sheets of HUD Project No. 064-35271 of
the Redemptorist Limited Partnership, as of December 31, 1996 and 1995, and the
related statements of income, changes in partners' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redemptorist Limited
Partnership, HUD Project No. 064-35271, as of December 31, 1996 and 1995, and
the results of its operations, changes in partners' equity, and cash flows for
the years then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 21, 1997, on our
consideration of Redemptorist Limited Partnership's internal control structure
and reports dated January 21, 1997, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to
Affirmative Fair Housing.

/s/ Pailet, Meunier and Leblanc, L.L.P.

Metairie, Louisiana
January 21, 1997

[Letterhead of LEVINE GREENBERG & COMPANY]

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

Gentlemen:

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

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

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

/s/ Levine, Greenberg & Company
Certfied Public Accountant

Hewlett, New York
February 9, 1998

[LEVINE, GREENBERG & COMPANY LETTERHEAD]

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

Gentlemen:

We have audited the accompanying balance sheet of Manhattan A Associates (A
Limited Partnership) as of December 31, 1996 and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion of these financial
statements based on our audit.

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

In our opinion the financial statements referred to above presently fairly, in
all material respects the financial position of MANHATTAN A ASSOCIATES (a
Limited Partnership) as of December 31 1996 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Levine, Greenberg & Company
Certified Public Accountant

Hewlett New York
March 3, 1997

[J. MANNING WINIKUS & CO. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
MANHATTAN A ASSOCIATES
(A LIMITED PARTNERSHIP)
New York, New York 10029

Gentlemen:

We have audited the accompanying balance sheet of MANHATTAN A ASSOCIATES (a
Limited Partnership) as of December 31, 1995 and the related statements of loss,
changes in partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MANHATTAN A ASSOCIATES (a
Limited Partnership) as of December 31, 1995 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ J. MANNING WINIKUS & CO.
New York, New York
February 13, 1996

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

INDEPENDENT AUDITOR'S REPORT

To the Partners
of Weidler Associates Limited Partnership

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

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

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

/s/ Gerald V. Gerritz

Gerald V. Gerritz, Jr., CPA, P.C.
Portland, Oregon
January 28, 1998

[MERINA MCCOY GERRITZ, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
of Weidler Associates Limited Partnership

We have audited the accompanying balance sheets of the Weidler 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 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 Weidler Associates Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Merina McCoy Gerritz
---------------------------------

Merina McCoy Gerritz, CPA's, P.C.
West Linn, Oregon
February 25, 1997

Independent Auditors' Report

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

We have audited the accompanying balance sheets of Gentle Pines - West
Columbia Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as
of December 31, 1997 and 1996, and the related statements of profit and loss,
Partners' capital and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Gentle Pines - West
Columbia Associates, L.P. (A Limited Partnership), HUD Project No. 054-36627, as
of December 31, 1997 and 1996, and the results of its operations, changes in its
Partners' capital, and its cash flows for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.

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

Page Two
The Partners
Gentle Pines - West Columbia Associates, L.P.

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs, issued by the U.S. Department of Housing
and Urban Development, we have also issued a report dated January 23, 1998 on
our consideration of Gentle Pines - West Columbia Associates, L.P.'s (A Limited
Partnership), HUD Project No. 054-36627, internal control and reports dated
January 23, 1998 on its compliance with specific requirements applicable to
major HUD programs and specific requirements applicable to fair housing and
non-discrimination.

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

Philadelphia, Pennsylvania
January 23, 1998

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

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

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

We have audited the accompanying balance sheets of Gentle Pines - West
Columbia Associates, L.P. (A South Carolina Limited Partnership), HUD Project
#054-36627, as of December 31, 1995 and 1994, and the related statements of
profit and loss, partners' (deficit) and cash flows for the year ended December
31, 1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gentle Pines - West Columbia
Associates, L.P. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data included in the
report (shown on pages 14 through 20) are presented for the purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly presented in all material respects in relation to the basic financial
statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued the
following reports dated January 20, 1996 concerning Gentle Pines - West Columbia
Associates, L.P. (1) on the internal control structure, (2) on compliance with
specific requirements applicable to major HUD programs, (3) on compliance with
specific requirements applicable to affirmative fair housing, and (4) on
compliance with applicable laws and regulations.

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

January 20, 1996

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of Lake Forest Estates II, Ltd.,
a limited partnership, RHS Project No.: 01-060-630996944 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lake Forest Estates II, Ltd., RHS
Project No.: 01-060-630996944 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 24, 1998 on my consideration of Lake Forest Estates II, Ltd.,
internal control structure and a report dated February 24, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 24, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheets of Lake Forest Estates II, Ltd.,
a limited partnership, RHS Project No.: 01-060-630996944 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lake Forest Estates II, Ltd., RHS
Project No.: 01-060-630996944 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements.

Such information has been subjected to the audit procedures applied in the audit
of the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial

In accordance with Government Auditing Standards, I have also issued a report
dated February 20, 1997 on my consideration of Lake Forest Estates II, Ltd.,
internal control structure and a report dated February 20, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 20, 1997

[Letterhead of AMILCAR TORRES RIVERA, CPA]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Las Camelias Limited Partnership

I have audited the accompanying balance sheets of Las Camelias Limited
Partnership as of December 31, 1997 and 1996, 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
management. My responsibility is to express an opinion on these financial
statements based on my audit.

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

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

/s/ Amilcar Torres Rivera, CPA
Amilcar Torres Rivera, CPA

Stamp #1482819 of the
Puerto Rico Society of
CPA's has been affixed
to the original.

January 29, 1998
San Juan, Puerto Rico

[AMILCAR TORRES RIVERA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Las Camelias Limited Partnership

I have audited the accompanying balance sheet of Las Camelias Limited
Partnership as of December 31, 1995, and the related statement of loss, changes
in Partner's equity and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

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

/s/ AMILCAR TORRES RIVERA
AMILCAR TORRES RIVERA, CPA

Stamp #1320017 of the
Puerto Rico Society of
CPA's has been affixed
to the original.

San Juan, Puerto Rico
January 29, 1996

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

INDEPENDENT AUDITOR'S REPORT

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

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

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

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

/s/ David W. Scott, CPA, P.C.
-----------------------------
David W. Scott, CPA, P.C.

Portland, Oregon
February 4, 1998

[DAVID W. SCOTT, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheet of WPL Associates XXIII Limited
Partnership, as of December 31, 1996, and the related statements of operations,
changes in partnerships' capital, and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of WPL Associates XXIII Limited
Partnership at 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/ David W. Scott, CPA, P.C.
-------------------------
David W. Scott, CPA, P.C.

Portland, Oregon
February 10, 1997

[DAVID W. SCOTT, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

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

I have audited the accompanying balance sheet of WPL Associates XXIII Limited
Partnership, as of December 31, 1995, and the related statements of operations,
changes in partnerships' capital, and cash flows for the year ended December 31,
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 audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of WPL Associates XXIII Limited
Partnership at December 31, 1995, and the results of its operations and its cash
flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.

/s/ DAVID W. SCOTT, CPA, P.C.
David W. Scott, CPA, P.C.

Portland, Oregon
February 14, 1996

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

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

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

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

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

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

/s/ Reznick Fedder & Silverman

Bethesda, Maryland Federal Employer
January 27, 1998 Identification Number:
52-1088612

Audit Principal: Lester A. Kanis

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

We have audited the accompanying balance sheet of Broadway Townhouses L.P.
as of December 31, 1996, and the related statements of profit and loss (on HUD
Form No. 92410), changes in partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Broadway Townhouses L.P. as
of December 31, 1996, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 23
through 28 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated
Audit Guide for Audits of HUD Programs," we have also issued reports dated
January 24, 1997 on our consideration of Broadway Townhouses Limited
Partnership's internal control structure and on its compliance with specific
requirements applicable to major HUD programs, affirmative fair housing, and
laws and regulations applicable to the financial statements.

/s/ Reznick Fedder & Silverman

Bethesda, Maryland Federal Employer
January 24, 1997 Identification Number:
52-1088612

Audit Principal: Lester A. Kanis

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Broadway Townhouses L.P.

We have audited the accompanying balance sheet of Broadway Townhouses L.P.
as of December 31, 1995, and the related statements of profit and loss (on HUD
Form No. 92410), changes in partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Broadway Townhouses L.P. 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.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 23
through 28 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued
reports dated January 27, 1996 on our consideration of Broadway Townhouses
Limited Partnership internal control structure and on its compliance with
specific requirements applicable to major HUD programs, affirmative fair
housing, and laws and regulations applicable to the financial statements.

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland Federal Employer
January 27, 1996 Identification Number:
52-1088612

Audit Principal: Lester A. Kanis

[Letterhead of SANTIAGO, RILEY & REZNICK]

INDEPENDENT AUDITORS' REPORT

To the Partners
Puerto Rico Historic Zone Limited Dividend Partnership

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

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

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

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

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

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

[1481349]
Seal /s/ Santiago, Riley & Reznick

San Juan, Puerto Rico Federal Employer
March 6, 1998 Identification Number:
66-0432841

Audit Principal: William T. Riley, Jr.

[KEVANE PETERSON SOTO & PASARELL LETTERHEAD]

Independent Auditors' Report
To the Partners of
PUERTO RICO HISTORIC ZONE LTD DIVIDEND PARTNERSHIP

We have audited the accompanying statements of financial position of PUERTO
RICO HISTORIC ZONE LTD DIVIDEND PARTNERSHIP, FHA Project No. RQ46-K051-003-04 (a
limited partnership) as of December 31, 1996 and 1995, and the related
statements of profit and loss, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PUERTO RICO HISTORIC ZONE
LTD DIVIDEND PARTNERSHIP as of 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/ Kevane Peterson Soto & Pasarell

San Juan, Puerto Rico,
January 31, 1997.

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

INDEPENDENT AUDITORS' REPORT

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

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

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

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

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

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

/s/ Christopher, Smith, Gentile,
Leonard & Bristow, P.A.

CHRISTOPHER, SMITH, GENTILE,
BRADENTON, FLORIDA LEONARD & BRISTOW, P.A.
January 27, 1998

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

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of Citrus Meadows Apartments,
Ltd., FHA Project No. 067-36654 (a limited partnership) (the partnership), as of
December 31, 1996, and the related statements of profit and loss, partners'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citrus Meadows Apartments, Ltd.
at December 31, 1996 and the results of its operations and its cash flows and
its changes in partners' equity (deficit) for the year then ended in conformity
with generally accepted accounting principles.

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

In accordance with Government Auditing Standards, we have also issued a report
dated January 21, 1997 on our consideration of Citrus Meadows Apartments, Ltd.'s
internal control structure and a report dated January 21, 1997 on its compliance
with laws and regulations.

/s/ Christopher, Smith, Gentile,
Leonard & Bristow, P.A.
---------------------------------
CHRISTOPHER, SMITH, GENTILE,
LEONARD & BRISTOW, P.A.

Bradenton, Florida
January 21, 1997

[CHRISTOPHER, SMITH, GENTILE, LEONARD & BRISTOW, P.A.
LETTERHEAD - BRADENTON, FL]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of Citrus Meadows Apartments,
Ltd., FHA Project No. 067-36654 (a limited partnership) (the Partnership), as of
December 31, 1995, and the related statements of profit and loss, partners'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citrus Meadows Apartments, Ltd.
at December 31, 1995 and the results of its operations and its cash flows and
its changes in partners' equity (deficit) for the year then ended in conformity
with generally accepted accounting principles.

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

In accordance with Government Auditing Standards, we have also issued a report
dated February 12, 1996 on our consideration of Citrus Meadows Apartments,
Ltd.'s internal control structure and a report dated February 12, 1996 on its
compliance with laws and regulations.

/s/ CHRISTOPHER, SMITH, GENTILE,
LEONARD & BRISTOW, P.A.

CHRISTOPHER, SMITH, GENTILE,
LEONARD & BRISTOW, P.A.

February 12, 1996

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Sartain School Venture

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

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

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

/s/ Ziner & Company, P.C.

February 8, 1998
Boston, Massachusetts

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

INDEPENDENT AUDITORS' REPORT

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

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

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

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

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

Kingston, Pennsylvania
February 8, 1997

Independent Auditors' Report

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

We have audited the accompanying balance sheets of Driftwood Terrace
Associates, Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of
December 31, 1997 and 1996 and the related statements of profit and loss,
Partners' deficit and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Driftwood Terrace
Associates, Ltd. (A Limited Partnership), HUD Project No. 066-36678, as of
December 31, 1997 and 1996 and the results of its operations, changes in its
Partners' deficit, and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.

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

Page Two
The Partners
Driftwood Terrace Associates, Ltd.

In accordance with Government Auditing Standards and the Consolidated
Audit Guide for Audits of HUD Programs, issued by the U.S. Department of Housing
and Urban Development, we have also issued a report dated January 20, 1998 on
our consideration of Driftwood Terrace Associates, Ltd.'s (A Limited
Partnership), HUD Project No. 066-36678, internal control and reports dated
January 20, 1998 on its compliance with specific requirements applicable to
major HUD programs and specific requirements applicable to fair housing and
non-discrimination.

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

Philadelphia, Pennsylvania
January 20, 1998

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

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

To the Partners
Driftwood Terrace Associates, Ltd.
Marlton, New Jersey

We have audited the accompanying balance sheets of Driftwood Terrace
Associates, Ltd. (A Florida Limited Partnership), HUD Project #066-36678, as of
December 31, 1995 and 1994, and the related statements of profit and loss,
partners' capital (deficit) and cash flows for the year ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Driftwood Terrace
Associates, Ltd. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data included in the
report (shown on pages 14 through 20) are presented for the purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly presented in all material respects in relation to the basic financial
statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued the
following reports dated January 29, 1996 concerning Driftwood Terrace
Associates, Ltd. (1) on the internal control structure, (2) on compliance with
specific requirements applicable to major HUD programs, (3) on compliance with
specific requirements applicable to affirmative fair housing, and (4) on
compliance with applicable laws and regulations.

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

January 29, 1996

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Holly Hill, Ltd.
Greenville, Tennessee

I have audited the accompanying balance sheets of Holly Hill, Ltd., a limited
partnership, RHS Project No.: 48-30-621264791 as of December 31, 1997 and 1996,
and the related statements of operations, partners' capital and cash flows for
the years then ended. These financial statements are the responsibility of the
partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Holly Hill, Ltd., RHS Project No.:
48-30-621264791 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 22, 1998 on my consideration of Holly Hill, Ltd., internal
control structure and a report dated February 22, 1998 on its compliance with
laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 22, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Holly Hill, Ltd.
Greenville, Tennessee

I have audited the accompanying balance sheets of Holly Hill, Ltd., a limited
partnership, RHS Project No.: 48-30-621264791 as of December 31, 1996 and 1995,
and the related statements of operations, partners' deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
partnership's management. My responsibility is to express an opinion on these
financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Holly Hill, Ltd., RHS Project No.:
48-30-621264791 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 20, 1997 on my consideration of Holly Hill, Ltd., internal
control structure and a report dated February 20, 1997 on its compliance with
laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 20, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Mayfair Apartments, Ltd.
Morristown, Tennessee

I have audited the accompanying balance sheets of Mayfair Apartments, Ltd., a
limited partnership, RHS Project No.: 48-032-630957575 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mayfair Apartments, Ltd., RHS
Project No.: 48-032-630957575 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II or the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 23, 1998 on my consideration of Mayfair Apartments, Ltd.,
internal control structure and a report dated February 23, 1998 on its
compliance with laws and regulations.

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

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Mayfair Apartments, Ltd.
Morristown, Tennessee

I have audited the accompanying balance sheets of Mayfair Apartments, Ltd., a
limited partnership, RHS Project No.: 48-032-630957575 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mayfair Apartments, Ltd., RHS
Project No.: 48-032-630957575 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 20, 1997 on my consideration of Mayfair Apartments, Ltd.,
internal control structure and a report dated February 20, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 20, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Foxcroft Apartments, Ltd.
Troy, Alabama

I have audited the accompanying balance sheets of Foxcroft Apartments, Ltd., a
limited partnership, RHS Project No.: 01-055-630971151 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Foxcroft Apartments, Ltd., RHS
Project No.: 01-055-630971151 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 19, 1998 on my consideration of Foxcroft Apartments, Ltd.,
internal control structure and a report dated February 19, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 19, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Foxcroft Apartments, Ltd.
Troy, Alabama

I have audited the accompanying balance sheets of Foxcroft Apartments, Ltd., a
limited partnership, RHS Project No.: 01-055-630971151 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Foxcroft Apartments, Ltd., RHS
Project No.: 01 -055-630971151 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Year End Report and Analysis (Form FmHA 1930-8) Parts I through
II for the year ended December 31, 1996 and 1995, is presented for purposes of
complying with the requirements of the Rural Housing Services and is also not a
required part of the basic financial statements. Such information has been
subjected to the audit procedures applied in the audit of the basic financial
statements and, in my opinion is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 17, 1997 on my consideration of Foxcroft Apartments, Ltd.,
internal control structure and a report dated February 17, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 17, 1997

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Canterbury Apartments, Ltd.
Indianola, Mississippi

I have audited the accompanying balance sheets of Canterbury Apartments, Ltd., a
limited partnership, RHS Project No.: 28-067-630979083 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Canterbury Apartments, Ltd., RHS
Project No.: 28-067-630979083 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 12 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated Report Date on my consideration of Canterbury Apartments, Ltd., internal
control structure and a report dated Report Date on its compliance with laws and
regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 24, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Canterbury Apartments, Ltd.
Indianola, Mississippi

I have audited the accompanying balance sheets of Canterbury Apartments, Ltd., a
limited partnership, RHS Project No.: 28-067-630979083 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Canterbury Apartments, Ltd., RHS
Project No.: 28-067-630979083 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 12 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the o requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 21, 1997 on my consideration of Canterbury Apartments, Ltd.,
internal control structure and a report dated February 21, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 21, 1997

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Cutler Canal III Associates, Ltd.

We have audited the accompanying balance sheets of Cutler Canal III
Associates, Ltd., as of December 31, 1997 and 1996, and the related statements
of operations, partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

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

/s/ Reznick Fedder & Silverman
Atlanta, Georgia /s/ Reznick Fedder & Silverman
February 9, 1998

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Cutler Canal III Associates, Ltd.

We have audited the accompanying balance sheets of Cutler Canal III
Associates, Ltd., as of December 31, 1996 and 1995, and the related statements
of operations, partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cutler Canal III Associates,
Ltd. 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/ Reznick Fedder & Silverman

Charlotte, North Carolina
January 17, 1997

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

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

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying balance sheets of Jefferson Place, L.P., (a
Missouri Limited Partnership) (the "Partnership"), as of December 31, 1997,
1996 and 1995, and the related statements of income, changes in partners'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferson Place, L.P., as of
December 31, 1997, 1996 and 1995, and the results of its operations and the
changes in partners' deficit and cash flows for the years then ended in
conformity with generally accepted accounting principles.

St. Louis, MO /s/ Mueller, Prost, Purk, & Willbrand, P.C.
January 27, 1998 Certified Public Accountants

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Callaway Village, Ltd.
Clinton, Tennessee

I have audited the accompanying balance sheets of Callaway Village, Ltd., a
limited partnership, RHS Project No.: 48-001-581172107 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Callaway Village, Ltd., RHS Project
No.: 48-001-581172107 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 18, 1998 on my consideration of Callaway Village, Ltd.'s internal
control structure and a report dated February 18, 1998 on its compliance with
laws and regulations.

/s/ Donald W. Causey, CPA, P.C.
Gadsden, Alabama
February 18, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Callaway Village, Ltd.
Clinton, Tennessee

I have audited the accompanying balance sheets of Callaway Village, Ltd., a
limited partnership, RHS Project No.: 48-001-581172107 as of December 31, 1996
and 1995, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Callaway Village, Ltd., RHS Project
No.: 48-001-581172107 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form 1930-8)
Parts I through II for the year ended December 31, 1996 and 1995, is presented
for purposes of complying with the requirements of the Rural Housing Services
and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 15, 1997 on my consideration of Callaway Village, Ltd., internal
control structure and a report dated February 15, 1997 on its compliance with
laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 15, 1997

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

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of Commerce Square Apartments
Associates, L.P., as of December 31, 1997 and December 31, 1996, and the related
statements of loss, partners' capital and cash flows for the years then ended.
These financial statements are the responsibility of the project's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

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

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on pages 12 and 13) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Commerce Square Apartments Associates, L.P. Such information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.

/s/ Halbert, Katz & Co. P.C.

Philadelphia, Pennsylvania
January 30, 1998

[HALBERT, KATZ & CO., P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheets of Commerce Square Apartments
Associates, L.P., as of December 31, 1996 and December 31, 1995, and the related
statements of loss, partners' capital and cash flows for the years then ended.
These financial statements are the responsibility of the project's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

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

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on page 11 and 12) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Commerce Square Apartments Associates, L.P. Such information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.

/s/ Halbert, Katz & Co., P.C.

Philadelphia, Pennsylvania
January 30, 1997

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
West 132nd Development Partnership

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

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

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

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

[KENNETH J. SCHUSTER LETTERHEAD]

Independent Auditors Report

To The Partners' of
West 132nd Development Partnership
(A New York Limited Partnership)

We have audited the balance sheet of West 132nd Development Partnership as of
December 31, 1996, and the related statements of income, changes in partners'
capital and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 132nd Development
Partnership, at December 31, 1996 and the results of their operations, changes
in Partners' capital and cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Kenneth J. Schuster
---------------------------
Certified Public Accountant

March 17, 1997
Syosset, New York

[KENNETH J. SCHUSTER LETTERHEAD]

To The Partners' of
West 132nd Development Partnership
(A New York Limited Partnership)

We have audited the balance sheet of West 132nd Development Partnership as of
December 31, 1995, and the related statements of income, changes in partners'
capital and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 132nd Development
Partnership, at December 31, 1995 and the results of their operations, changes
in Partners' capital and cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ KENNETH J. SCHUSTER
Certified Public Accountant

February 7, 1996
Syosset, New York

[Letterhead of MUNNS AND DOBBINS]

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

Independent Auditors' Report

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

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

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

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

/s/ Munns and Dobbins
CERTIFIED PUBLIC ACCOUNTANTS

Scarsdale, NY
May 7, 1998

[STEVEN M. WEINBERG LETTERHEAD]

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

I have audited the accompanying statements of assets, liabilities, and partners'
capital of Site H Development Company a Limited Partnership) as of December 31,
1996 and 1995, and the related statements of revenues and expenses and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the assets, liabilities and partners' capital as of December
31, 1996 and 1995, and its revenues and expenses, and cash flows for the years
then ended, in conformity with generally accepted accounting principles.

/s/ Steven M. Weinberg

Brooklyn, New York
March 6, 1997

[Letterhead of ASHER & COMPANY, LTD.]

Independent Auditors' Report

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

We have audited the accompanying balance sheets of L.I.H. Chestnut
Associates, L.P. (a Pennsylvania Limited Partnership) as of December 31, 1997
and 1996 and the related statements of profit and loss, changes in Partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

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

The accompanying financial statements have been prepared assuming that
the Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has suffered recurring losses from
operations and is in default of certain obligations under the terms of the
mortgage loan. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern at December 31, 1997 and 1996. The
General Partner's plans regarding these matters are also described in Note B.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Asher & Company, Ltd.

Page Two
The Partners
L.I.H. Chestnut Associates, L.P.

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

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

Philadelphia, Pennsylvania
February 10, 1998

[ASHER & COMPANY, LTD. - LETTERHEAD]

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

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

We have audited the accompanying balance sheets of L.I.H. Chestnut
Associates, L.P. (a Pennsylvania Limited Partnership) as of December 31, 1996
and 1995 and the related statements of profit and loss, changes in Partners'
capital, and cash flows for the years then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

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

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

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

[ASHER & COMPANY, LTD. - LETTERHEAD]

Asher & Company, Ltd.

Page Two
The Partners
L.I.H. Chestnut Associates, L.P.

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

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

Philadelphia, Pennsylvania
January 31, 1997

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Diamond Phase II Venture

We have audited the accompanying balance sheet of Diamond Phase II
Venture (a Pennsylvania limited partnership) as of December 31, 1997, and the
related statement 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 Diamond Phase II Venture as of December
31, 1996 were audited by other auditors whose report dated February 13, 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 Diamond Phase II
Venture at December 31, 1997, and the results of its operations, changes in
partners' equity and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Ziner & Company, P.C.

February 10, 1998
Boston, Massachusetts

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Diamond Phase II Venture (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Diamond Phase II Venture (a
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of (lose), 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 Diamond Phase II Venture (a
Limited Partnership) at December 31, 1996 and 1995, and the results of its
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

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

Kingston, Pennsylvania
February 13, 1997

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Bookbindery Associates

We have audited the accompanying balance sheet of Bookbindery
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 Bookbindery 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 Bookbindery
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 27, 1998
Boston, Massachusetts

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

INDEPENDENT AUDITORS' REPORT

To the Partners of
Bookbindery Associates (a Limited Partnership)
Reading, Pennsylvania

We have audited the accompanying balance sheets of Bookbindery 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 its 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 Bookbindery Associates (a
Limited Partnership) at December 31, 1996 and 1995, and the results of its
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

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

Kingston, Pennsylvania
February 10, 1997

[Letterhead of BUCHBINDER TUNICK & COMPANY LLP]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of The Hamlet, Ltd.

We have audited the accompanying balance sheet of The Hamlet, Ltd. (a
Florida limited partnership) (the "Partnership") as of December 31, 1997 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. The financial statements of The Hamlet,
Ltd. as of December 31, 1996 were audited by other auditors whose report dated
January 31, 1997 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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 The Hamlet, Ltd. as of
December 31, 1997 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/ Buchbinder Tunick & Company LLP
BUCHBINDER TUNICK & COMPANY LLP

January 22, 1998
Boca Raton, Florida

[DELOITTE & TOUCHE LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the General Partner and Limited Partners
of The Hamlet, Ltd.
Boynton Beach, Florida

We have audited the accompanying balance sheet of The Hamlet, Ltd. (a Florida
limited partnership) as of December 31, 1996 and the related statements of
operations, partners' equity (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of The Hamlet, Ltd. as
of December 31, 1995, were audited by other auditors whose report dated January
31, 1996 expressed an unqualified opinion on those statements.

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

In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of The Hamlet, Ltd. 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/ Deloitte & Touche LLP

Jacksonville, Florida
January 31, 1997

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

INDEPENDENT AUDITORS' REPORT

To the General Partner and Limited Partners
of The Hamlet, Ltd.

We have audited the accompanying balance sheet of THE HAMLET, LTD. [A FLORIDA
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. The statements of THE HAMLET, LTD. [A
FLORIDA LIMITED PARTNERSHIP] as of December 31, 1994 were audited by other
auditors whose report dated March 10, 1995 expressed an unqualified opinion on
those statements.

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

In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of THE HAMLET, LTD. [A FLORIDA
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 ISRAEL ROLON]

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION

TO THE PARTNERS OF
STOP 22 LIMITED PARTNERSHIP

I have audited the accompanying balance sheet of Stop 22 Limited
Partnership, H.U.D. Project No.: R2-46-E-006-014 and R2-46-E-001-013, as of
December 31, 1997, and the related statements of loss, changes in partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. My responsibility is to
express an opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stop 22 Limited
Partnership, as of December 31, 1997, and the results of its operations, changes
in partners' equity, and cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards, and the
Consolidated Audit Guide for Audits of HUD Programs issued by the U.S.
Department of Housing and Urban Development, I have also issued reports dated
February 11, 1998 on my consideration of Stop 22 Limited Partnership's internal
controls and on its compliance with specific requirements applicable to major
HUD programs, specific requirements applicable to Affirmative Fair Housing and
Non-discrimination, and laws and regulations applicable to the financial
statements.

My audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplementary
information (shown on pages 22 to 33) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Israel Rolon
ISRAEL ROLON, C.P.A.

SAN JUAN, PUERTO RICO
February 11, 1998

FEDERAL EMPLOYER IDENTIFICATION NUMBER:
66-0392808

STAMP NUMBER 1482025 WAS
AFFIXED TO THE ORIGINAL
OF THIS REPORT.

[ISRAEL ROLON LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION

TO THE PARTNERS OF
STOP 22 LIMITED PARTNERSHIP

I have audited the accompanying balance street of Stop 22 Limited
Partnership, H.U.D. Project No.: R2 46-E-006-014 and R2 46-E-001-013, as of
December 31, 1996, and the related statements of loss, changes in partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. My responsibility is to
express an opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stop 22 Limited Partnership,
as of December 31, 1996, and the results of its operations, changes in partners'
equity, and cash flows for the year then ended in conformity with generally
accepted accounting principles.

In accordance with Government Auditing Standards, and the Consolidated
Audit Guide for audits of HUD Programs issued by the U.S. Department of Housing
and Urban Development, I have also issued reports dated February 27, 1997, on my
consideration of Stop 22 Limited Partnership's internal control structure and on
its compliance with specific requirements applicable to major HUD programs,
specific requirements applicable to Affirmative Fair Housing, and laws and
regulations applicable to the financial statements.

My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 21 to 31) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements, and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ Israel Rolon
------------------------
ISRAEL ROLON, C.P.A.

SAN JUAN, PUERTO RICO
FEBRUARY 27, 1997

FEDERAL EMPLOYER IDENTIFICATION NUMBER:
66-0392808

STAMP NUMBER 1414556 WAS
AFFIXED TO THE ORIGINAL
OF THIS REPORT.

[ARMANDO A. SUAREZ CPA-LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of Stop 22
Limited Partnership
San Juan, Puerto Rico

I have audited the accompanying balance sheet of Stop 22 Limited Partnership, a
Delaware limited partnership (HUD Project No. R2 46-E-006-014 and R2
46-E-001-013), as of December 31, 1995 and the related statements of loss, cash
flows and changes in partners' equity for the year then ended. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion. In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stop 22 Limited
Partnership as of December 31, 1995, and the results of its operations and its
cash flows and its changes in partners' equity for the year then ended in
conformity with generally accepted accounting principles.

As more fully explained in Notes D and E, the partnership experienced
substantial operating deficits during the year just ended and had nine months
interest in arrears on its mortgage loan. As of the date of this report the
Lender and the Partnership were conducting negotiations to revise the loan
terms. Failure to successfully conclude such negotiation may result on a default
of the loan and foreclosure. Also, as explained on Note E, the Partnership has
not recognized a claim for $70,000 instituted against the Municipality of San
Juan for retroactive rent increases due under the Housing Assistant Payment
Contract since there is an uncertainty as to its collection.

My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
pages 19 through 32 is presented for the purpose of additional analysis and is
not a required part of the basic financial statements of Stop 22 Limited
Partnership. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

/s/ Armando A. Suarez, CPA

Armando A. Suarez, CPA

February 1, 1996
San Juan, Puerto Rico

The stamp No.1328737 of the P.R. Society of
CPA's was affixed to the original of this report.

[Letterhead of DONALD W. CAUSEY, CPA, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Knob Hill Apartments, Ltd.
Morristown, Tennessee

I have audited the accompanying balance sheets of Knob Hill Apartments, Ltd., a
limited partnership, RHS Project No.: 48-032-638979224 as of December 31, 1997
and 1996, and the related statements of operations, partners' capital and cash
flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Knob Hill Apartments, Ltd., RHS
Project No.: 48-032-638979224 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 10
through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I and II for the year ended December 31, 1997 and 1996, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in my opinion is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 23, 1998 on my consideration of Knob Hill Apartments, Ltd.,
internal control structure and a report dated February 23, 1998 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 23, 1998

[DONALD W. CAUSEY, CPA, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Knob Hill Apartments, Ltd.
Morristown, Tennessee

I have audited the accompanying balance sheets of Knob Hill Apartments, Ltd.,
a limited partnership, RHS Project No.: 48-032-638979224 as of December 31,
1996 and 1995, and the related statements of operations, partners' capital and
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to
express an opinion on these financial statements based on my audits.

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

In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Knob Hill Apartments, Ltd.,
RHS Project No.: 48-032-638979224 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 audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages
10 through 13 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. The supplemental information
presented in the Multiple Family Housing Borrower Balance Sheet (Form FmHA
1930-8) Parts I through II for the year ended December 31, 1996 and 1995, is
presented for purposes of complying with the requirements of the Rural Housing
Services and is also not a required part of the basic financial statements.
Such information has been subjected to the audit procedures applied in the
audit of the basic financial statements and, in my opinion is fairly stated in
all material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, I have also issued a report
dated February 20, 1997 on my consideration of Knob Hill Apartments, Ltd.,
internal control structure and a report dated February 20, 1997 on its
compliance with laws and regulations.

/s/ Donald W. Causey, CPA, P.C.

Gadsden, Alabama
February 20, 1997

[Letterhead of BROVITZ, INSERO, KASPERSKI & CO., P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Conifer James Street Associates
(A Limited Partnership)
Syracuse, New York

We have audited the accompanying balance sheets of Conifer James Street
Associates (A Limited Partnership) as of December 31, 1997 and 1996 and the
related statements of changes in partners' equity, operations and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

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

Respectfully Submitted,

/s/ Brovitz, Insero, Kasperski & Co., P.C.

Brovitz, Insero, Kasperski & Co., P.C.
Certified Public Accountants

Rochester, New York
January 26, 1998

[CORTLAND L. BROVITZ & CO., P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Conifer James Street Associates
(A Limited Partnership)
Syracuse, New York

We have audited the balance sheets of Conifer James Street Associates (A Limited
Partnership) as of December 31, 1996 and 1995 and the related statements of
changes in partners' equity, operations, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits

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

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

Respectfully Submitted,

/s/ Cortland L. Brovitz & Co., P.C.
---------------------------------
Cortland L. Brovitz & Co., P.C.
Certified Public Accountants

Rochester, New York
January 22, 1997

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

Independent Auditors' Report

Partners
Longfellow Heights Apartments, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Longfellow Heights Apartments,
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 Longfellow Heights Apartments,
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 23, 1998

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

Independent Auditors' Report

Partners
Longfellow Heights Apartments, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Longfellow Heights Apartments,
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 Longfellow Heights Apartments,
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

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

ASSETS

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

Property and equipment - at cost, less accumulated
depreciation (Notes 2, 4 and 10) $230,502,450 $240,343,013
Cash and cash equivalents (Notes 2 and 10) 4,294,917 6,518,662
Cash held in escrow (Note 5) 15,878,119 15,777,598
Deferred costs - less accumulated amortization
(Notes 2 and 6) 3,608,177 3,478,284
Other assets 2,516,633 2,753,083
----------- -----------

Total assets $256,800,296 $268,870,640
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Mortgage notes payable (Note 7) $198,396,239 $200,800,132
Due to debt guarantor (Notes 7 and 10(a)) 27,574,312 23,814,448
Accounts payable and other liabilities 20,494,884 20,885,235
Due to local general partners and affiliates (Note 8) 14,152,837 10,941,243
Due to general partners and affiliates (Note 8) 1,975,913 2,305,530
----------- -----------
262,594,185 258,746,588
----------- -----------

Minority interest (Note 2) 2,181,337 2,257,054
----------- -----------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' capital:
Limited partners (139,101.5 BACs
issued and outstanding) (Note 1) (6,660,017) 9,023,785
General partners (1,315,209) (1,156,787)
------------ -----------

Total partners' capital (7,975,226) 7,866,998
------------ -----------

Total liabilities and partners' capital $256,800,296 $268,870,640
=========== ===========

See accompanying notes to consolidated financial statements.

-22-

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

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

Revenues
Rental income $ 32,250,396 $ 31,997,180 $ 31,252,634
Other 1,485,510 1,545,755 1,959,274
----------- ----------- -----------

33,735,906 33,542,935 33,211,908
----------- ----------- -----------

Expenses
General and administrative 5,843,674 5,605,944 6,158,752
General and administrative-related
parties (Note 8) 3,742,383 3,361,278 2,637,073
Repairs and maintenance 5,332,720 4,785,295 4,331,313
Operating and other 4,080,561 4,384,824 4,260,943
Real estate taxes 3,569,388 1,988,029 1,989,457
Insurance 1,429,941 1,534,903 1,514,776
Interest 15,878,695 15,768,603 16,061,865
Depreciation and amortization 10,900,762 11,473,254 12,179,855
Loss on impairment of assets 0 20,083,101 0
----------- ----------- -----------

50,778,124 68,985,231 49,134,034
----------- ----------- -----------
Loss before minority interest and
extraordinary gain (17,042,218) (35,442,296) (15,922,126)
Minority interest in loss of subsidiary
partnerships 154,367 156,523 153,662
----------- ----------- -----------

Loss before extraordinary item (16,887,851) (35,285,773) (15,768,464)
Extraordinary item - forgiveness of
indebtedness income (Note 7) 1,045,627 0 0
----------- ----------- -----------

Net loss $(15,842,224) $(35,285,773) $(15,768,464)
=========== =========== ===========

Loss before extraordinary item -
limited partners $(16,718,973) $(34,932,915) $(15,610,779)

Extraordinary item - limited partners 1,035,171 0 0
------------- ----------- -----------

Net loss - limited partners $(15,683,802) $(34,932,915) $(15,610,779)
=========== =========== ===========

Number of BACs outstanding 139,101.5 139,101.5 139,101.5
=========== =========== ===========

Loss before extraordinary item per BAC $ (120.19) $ (251.13) $ (112.23)

Extraordinary item per BAC 7.44 0 0
----------- ----------- -----------

Net loss per BAC $ (112.75) $ (251.13) $ (112.23)
=========== =========== ===========

See accompanying notes to consolidated financial statements.

-23-

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED MARCH 31, 1996, 1997 AND 1998

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

Partners' capital - April 1, 1995 $58,921,235 $59,567,479 $ (646,244)

Net loss, year ended March 31, 1996 (15,768,464) (15,610,779) (157,685)
----------- ----------- -----------

Partners' capital - March 31, 1996 43,152,771 43,956,700 (803,929)

Net loss, year ended March 31, 1997 (35,285,773) (34,932,915) (352,858)
----------- ----------- -----------

Partners' capital - March 31, 1997 7,866,998 9,023,785 (1,156,787)

Net loss, year ended March 31, 1998 (15,842,224) (15,683,802) (158,422)
----------- ----------- -----------

Partners' capital - March 31, 1998 $(7,975,226) $(6,660,017) $(1,315,209)
=========== =========== ===========

See accompanying notes to consolidated financial statements.

-24-

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

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

Cash flows from operating activities:

Net loss $(15,842,224) $(35,285,773) $(15,768,464)
----------- ----------- -----------

Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization 10,900,762 11,473,254 12,179,855
Forgiveness of indebtedness income (1,045,627) 0 0
Loss on sale of property and equipment 18,012 170 16,258
Provision for impairment of assets 0 20,083,101 0
Minority interest in loss of subsidiary
partnerships (154,367) (156,523) (153,662)
(Increase) decrease in assets
Cash held in escrow 172,177 906,997 144,143
Other assets 236,450 (445,349) 161,674
Increase (decrease) in liabilities
Accounts payable and other liabilities 3,494,029 202,033 2,021,307
Due to local general partners and
affiliates 136,032 84,308 527,219
Due to local general partners and
affiliates (237,443) (444,256) 0
Due to general partners and affiliates (329,617) (10,539) 832,075
Due to debt guarantor 2,467,333 2,306,775 2,724,344
----------- ----------- -----------

Total adjustments 15,657,741 33,999,971 18,453,213
----------- ----------- -----------

Net cash (used in) provided by
operating activities (184,483) (1,285,802) 2,684,749
----------- ----------- -----------

Cash flows from investing activities:

Acquisition of property and equipment (890,758) (819,881) (1,290,504)
Increase in cash held in escrow (402,787) (667,023) (327,512)
Decrease in cash held in escrow for
real estate investments 130,089 814,871 379,247
Increase in due to local general partners
and affiliates 124,570 60,000 60,000
Decrease in due to local general partners
and affiliates (217,741) (954,282) (773,729)
----------- ----------- -----------

Net cash used in investing activities (1,256,627) (1,566,315) (1,952,498)
----------- ----------- -----------

*Reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.

-25-

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

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

Cash flows from financing activities:
Decrease in deferred costs 0 162,464 0
Increase in deferred costs (25,115) (159,673) 0
Repayments on mortgage notes (13,579,877) (5,461,313) (989,032)
Borrowings on mortgage notes 12,200,000 4,754,359 0
Advances from debt guarantor 637,531 1,926,006 0
Increase in due to local general partners
and affiliates 0 0 72
Decrease in due to local general partners
and affiliates (93,824) (39,119) 0
Increase (decrease) in capitalization of
consolidated subsidiaries attributable
to minority interest 78,650 (232,904) (368,953)
----------- ----------- -----------

Net cash (used in) provided by
financing activities (782,635) 949,820 (1,357,913)
----------- ----------- -----------

Net decrease in cash and cash equivalents (2,223,745) (1,902,297) (625,662)

Cash and cash equivalents at beginning
of year 6,518,662 8,420,959 9,046,621
----------- ----------- -----------

Cash and cash equivalents at end of year $ 4,294,917 $ 6,518,662 $ 8,420,959
=========== =========== ===========

Supplemental disclosure of cash flows
information:
Cash paid during the year for interest $11,009,605 $10,619,520 $10,331,751

Supplemental disclosures of noncash
investing and financing activities:
Repayment of mortgage notes advanced by
debt guarantor $ 655,000 $ 610,000 $ 575,000
Net increase in mortgage notes
reclassified from accounts payable and
other liabilities 230,984 512,992 114,828
Reclassification of development fees
payable to contribution by minority
interest shareholders 0 882,750 0

Forgiveness of indebtedness income and
debt restructuring:
Increase in deferred costs (292,231) 0 0
Decrease in mortgage notes payable (600,000) 0 0
Decrease in accounts payable and
other liabilities (3,653,396) 0 0
Increase in due to local general
partners and affiliates 3,500,000 0 0

*Reclassified for comparative purposes.

See accompanying notes to consolidated financial statements.

-26-

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

NOTE 1 - General

Liberty Tax Credit Plus III L.P., a Delaware limited partnership (the
"Partnership"), was organized on November 17, 1988. The Partnership had no
operations until commencement of the public offering on May 2, 1989. The general
partners of the Partnership are Related Credit Properties III L.P., a Delaware
limited partnership (the "Related General Partner"), and Liberty GP III Inc., a
Delaware corporation (the "Liberty General Partner"). The general partner of the
Related General Partner is Related Credit Properties III Inc., a Delaware
corporation.

The Partnership's business is to invest in other limited partnerships ("Local
Partnerships" or "Subsidiaries" or "Subsidiary Partnerships") owning leveraged
apartment complexes ("Apartment Complexes") that are eligible for the low-income
housing tax credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986,
and to a lesser extent in Local Partnerships owning properties that are eligible
for the historic rehabilitation tax credit ("Historic Rehabilitation Tax
Credit").

The Partnership has acquired interests in 62 Local Partnerships as of March 31,
1998 and no further acquisitions are anticipated.

The Partnership is authorized to issue a total of 150,000 Beneficial Assignment
Certificates ("BACs"), which have been registered with the Securities and
Exchange Commission for sale to the public. Each BAC represents all of the
economic and virtually all of the ownership rights attributable to one-fifth of
a limited partnership interest. As of March 31, 1998, 139,101.5 have been
issued, and no further issuance of BACs is anticipated. The offering was
completed on March 30, 1990.

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

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and 62 subsidiary partnerships in which the Partnership is the principal limited
partner. Through the rights of the Partnership and/or an affiliate of the
General Partners, which affiliate has a contractual obligation to act on behalf
of the Partnership, to remove the general partner of the subsidiary partnerships
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary partnerships.

For financial reporting purposes, the Partnership's fiscal year ends on March
31. All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31. The Partnership's fiscal year ends March 31 in order to allow
adequate time for the subsidiaries financial statements to be

-27-

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

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.

All intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.

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

Losses attributable to minority interest which exceed the minority interest's
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $271,000, $659,000 and $283,000 for the years ended
March 31, 1998, 1997 and 1996, respectively (the 1997, 1996 and 1995 fiscal
years, respectively). The Partnership's investment in each subsidiary is equal
to the respective subsidiary partners' equity less minority interest capital, if
any. In consolidation, all subsidiary partnerships' losses are included in the
Partnership's capital account except for losses allocated to minority interest
capital.

b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and investments in
short-term highly liquid instruments purchased with original maturities of three
months or less. Cash held in escrow has various use restrictions and is not
considered a cash equivalent.

c) Property and Equipment

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the property is considered to be impaired and the
depreciated cost exceeds estimated fair value. Through March 31, 1998, the
Partnership has recorded approximately $20,083,000 as a loss on impairment of
assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. There are no assets classified as property and equipment-held for
sale through March 31, 1998.

-28-

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

d) Income Taxes

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

e) 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. (See Note 8).

f) Acquisition Fees and Expenses

Acquisition fees and other acquisition expenses incurred are charged to the
property accounts based on the cost of properties acquired.

g) 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.

h) Use of Estimates

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

NOTE 3 - Fair Value of Financial Instruments

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

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

-29-

LIBERTY TAX CREDIT PLUS III 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 note 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 $109,703,309 $110,801,816 $55,150,593 $56,077,998
Not practicable 88,692,930 (a) 145,649,539 (a)

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

Due to local general partners and affiliates

The estimated fair value of the Partnership's due to local general partners and
affiliates are as follows:

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

Due to local general partners
and affiliates for which it is:
Practicable to estimate
fair value $ 29,981 0 $ 362,023 0
Not practicable $14,122,856 (b) $10,579,220 (b)

(b) Management believes it is not practical to estimate the fair value of due to
local general partners and affiliates, because market information on such unique
loans are not currently available to the partnership.

The carrying amount of other financial instruments that require such disclosure
approximates fair value.

-30-

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

NOTE 4 - Property and Equipment

The components of property and equipment are as follows:

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

Land $ 12,894,634 $ 12,894,634 -
Building and improvements 285,415,910 285,043,002 15 to 40 years
Other 6,340,343 5,858,484 5 to 10 years
----------- -----------
304,650,887 303,796,120
Less: Accumulated depreciation (74,148,437) (63,453,107)
----------- -----------

$230,502,450 $240,343,013
=========== ===========

Included in property and equipment is $8,346,089 of acquisition fees paid to the
general partners and $2,908,694 of acquisition expenses as of March 31, 1998 and
1997. In addition, as of March 31, 1998 and 1997, buildings and improvements
include $14,677,111 of capitalized interest.

Depreciation expense for the years ended March 31, 1998, 1997 and 1996 amounted
to $10,713,309, $11,108,603 and $11,885,729, respectively.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developers' fees of $25,440,729 as of March 31, 1998
and 1997 to the Local General Partner 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 amount of $17,979 and $305, respectively, due to write-offs
on dispositions and $0 and $9,469,214, respectively, due to the loss on
impairment of assets relating to R.P.P. Limited Dividend Housing Association
Limited Partnership ("River Place").

As a result of River Place's recurring losses and operating cash shortfalls (see
Note 10), management of River Place determined that an evaluation of the ongoing
value of the real estate held for lease was necessary. Based upon this
evaluation, management of River Place determined that the real estate held for
lease, with a carrying value of approximately $34,088,000, was impaired and
wrote it down by $18,803,127 to its fair value. Fair value was determined based
on estimated future discounted cash flows over a projected holding period
including estimated sales proceeds, net of disposition costs, at the end of the
holding period.

Williamsburg Residential II, L.P. has experienced significant losses and cash
flow problems and is presently in default on the mortgage note. As a result of
the operating losses and cash flow problems, management of Williamsburg II
determined that an impairment of the property existed at December 31, 1996. The
impairment loss was determined to be $1,279,974. 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.

-31-

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

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

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

Purchase price payments* $ 941,808 $ 1,071,897
Real estate taxes, insurance and other (Note 10(a)) 7,828,240 8,049,300
Reserve for replacements 5,777,869 5,375,082
Tenants' security deposits 1,330,202 1,281,319
----------- -----------

$15,878,119 $15,777,598
=========== ===========

*Represents amounts to be paid to seller upon meeting specified rental
achievement criteria.

NOTE 6 - Deferred Costs

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

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

Financing expenses $4,896,785 $4,579,439 *
Organization expenses 807,664 829,921 60 months
---------- ----------
5,704,449 5,409,360
Less: Accumulated amortization (2,096,272) (1,931,076)
---------- ----------

$3,608,177 $3,478,284
========== ==========

*Over the life of the related mortgages.

Amortization of deferred costs for the years ended March 31, 1998, 1997 and 1996
amounted to $187,453, $364,651and $294,126, respectively. During the years ended
March 31, 1998 and 1997 there was a decrease in accumulated amortization due to
the write-off of fully amortized costs in the amount of $22,257 and $227,795,
respectively, and the write-off of $194,683 of deferred costs with accumulated
amortization of $32,219 for the year ended March 31, 1997.

NOTE 7 - Mortgage Notes Payable

The mortgage and construction notes, which are collateralized by land and
buildings, are payable in aggregate monthly installments of approximately
$917,000, including principal and interest at rates varying from 0% to 11.5% per
annum, through the year 2042. Each subsidiary partnership's mortgage note
payable is without further recourse and is collateralized by the land and
buildings of the respective subsidiary partnership and the assignment of certain
subsidiary partnership's rent and leases.

-32-

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

Annual principal payment requirements as of March 31, 1998 for each of the next
five fiscal years and thereafter are as follows:

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

1998 $3,167,220
1999 3,309,813
2000 3,669,155
2001 4,055,937
2002 4,413,547
Thereafter 179,780,567
-----------

$198,396,239
===========

No adjustment has been made in the table above for the events of default and
other matters described in Note 10(a).

The mortgage agreements require monthly deposits to replacement reserves of
approximately $177,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (Note 5).

R.P.P. Limited Dividend Housing Association Limited Partnership ("River Place")

During 1997 and 1996, a Local Partnership, River Place, was unable to make the
required principal and interest payments on its debt. These payments of
$1,292,531 and $1,134,352 in 1997 and 1996, respectively, were paid by The
General Retirement System of the City of Detroit ("GRS"), the debt guarantor, on
behalf of the Local Partnership. The Local Partnership accrues interest on
payments made by the Guarantor at an interest rate of 15% per annum. The debt
payments and accrued interest thereon are included in due to debt guarantor.

Jefferson Place, L.P.

Jefferson Place, L.P. ("Jefferson Place") refinanced its existing indebtedness
by borrowing $12,200,000 from the City of Olathe, Kansas, as of July 1, 1997.
The loan bears interest at the rate of 8.5% per annum, and matures on July 1,
2023. Jefferson Place's prior indebtedness in the principal amount of
$12,800,000 and related accrued interest of approximately $3,700,000 was repaid
from proceeds of the new loan, a new subordinated loan of $3,500,000 and
$1,045,627 of former mortgage debt and accrued interest was forgiven.

NOTE 8 - Related Party Transactions

Liberty Associates IV L.P. ("Liberty Associates"), an affiliate of the General
Partners, has a 1% and .998% (see Note 10 with respect to River Place) interest
as a Special Limited Partner in 61 and 1 of the Local Partnerships,
respectively.

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

-33-

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

A) Related Party Fees

As of March 31, 1998, the excess organization and offering costs totaled
$247,465 and is included in other assets.

Liberty Associates received cash distributions from the Local Partnerships of
$1,854, $15,473 and $863 during the years ended March 31, 1998, 1997 and 1996,
respectively.

Pursuant to the Partnership Agreement and the Local Partnership Agreements, the
General Partners and Liberty Associates received their allocable pro rata share
of profits, losses and tax credits from the Partnership and the Local
Partnerships, respectively.

During 1997, Whitney Management Corp., an affiliate of the Related General
Partner, purchased the general partner interest in the local general partner of
one subsidiary partnership: Williamsburg Residential II, L.P.

During 1996, Related G.P. Holdings, Inc., an affiliate of the Related General
Partner, purchased the general partner interest in the local general partner of
two subsidiary partnerships: 1850 Second Avenue Associates, L.P. and C.V. Bronx
Associates, L.P.

B) Guarantees

The Partnership negotiated Operating Deficit Guarantee Agreements with all Local
Partnerships in which the General Partners of the Local Partnerships agreed to
fund operating deficits for a specified period of time. The terms of the
Operating Deficit Guarantee Agreements vary for each Local Partnership, with the
maximum dollar amounts to be funded for a specified period of time, generally
three years, commencing at stabilization. The gross amount of the Operating
Deficit Guarantees aggregate approximately $18,700,000 of which approximately
$17,300,000, $16,100,000 and $15,600,000 had expired as of March 31, 1998, 1997
and 1996, respectively. As of March 31, 1998 and 1997, approximately $ 4,284,000
and $3,980,000, respectively, has been funded by the Local General Partners to
meet such obligations. Amounts funded under such agreements are treated as non
interest bearing loans, which will be repaid only out of 50% of available cash
flow or out of available net sale or refinancing proceeds.

The Operating Deficit Guarantee Agreements were negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.

-34-

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

C) Other Related Parties Expenses

The costs incurred to related parties for the years ended March 31, 1998, 1997
and 1996 were as follows:

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

Partnership management fees (i) $1,434,000 $1,434,000 $ 750,000
Expense reimbursement (ii) 258,111 172,345 174,662
Property management fees (iii) 1,860,306 1,644,501 1,610,911
Local administrative fee (iv) 189,966 110,432 101,500
---------- ---------- ----------

$3,742,383 $3,361,278 $2,637,073
========== ========== ==========

(i) The General Partners are entitled to receive a partnership management fee
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable only to the extent of available funds after the Partnership has made the
distributions to the limited partners of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow). Partnership management fees owed
to the General Partners amounting to approximately $1,374,000 and $1,774,000
were accrued and unpaid at March 31, 1998 and 1997. Without the General
Partners' continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partners have continued allowing the accrual without
payment of these amounts but are under no obligation to continue to do so.

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

(iii) The subsidiary partnerships incurred property management fees amounting to
$2,157,696, $2,056,191 and $1,995,155 for the years ended March 31, 1998, 1997
and 1996, respectively, of which $1,860,306, $1,644,501 and $1,610,911,
respectively, was incurred to affiliates of the subsidiary partnerships' general
partners. Included in amounts incurred to affiliates of the subsidiary
partnerships' general partners was $177,825, $73,927 and $76,396 for the years
ended March 31, 1998, 1997 and 1996, respectively, which was also incurred to an
affiliate of the Related General Partner.

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

-35-

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

D) Due to Local General Partners and Affiliates

Due to local general partners and affiliates at March 31, 1998 and 1997 consists
of the following:

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

Operating deficit advances $ 2,149,777 $ 2,013,745
Development fees 1,876,876 2,094,617
Operating advances 2,946,757 3,175,416
Due to contractor 93,290 46,289
General Partner distributions 568,783 662,607
Developer loans (i) 1,417,739 1,400,170
Land note payable (ii) 1,085,096 1,025,096
Long-term note payable (iii) 3,500,000 0
Management and other operating fees 514,519 523,303
----------- -----------

$14,152,837 $10,941,243
=========== ===========

(i) Developer loans consist of the following:

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

Jefferson Limited Partnership - $ 100,000 $ 100,000
This loan is unsecured, bears interest at an annually
adjusted rate (5.85% at March 31, 1998 and 5.77% at
March 31, 1997) and has no predetermined due date.

This note is unsecured, bears interest at 9.25% per
annum and is due in the event of sale or refinancing 75,000 75,000
of the property.

Northwood Associates Limited Partnership - 256,955 239,386
This loan bears interest at 12% per annum and is
payable only out of available surplus cash.

Citrus Meadows Apartments, Ltd. - 985,784 985,784
This loan bears no interest and can only be repaid ----------- -----------
with the proceeds from a sale or refinancing.

$ 1,417,739 $ 1,400,170
=========== ===========

Interest expense incurred on developer loans amounted to $30,276, $32,312 and
$38,910 for the years ended March 31, 1998, 1997 and 1996, respectively.

-36-

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

(ii) Land note payable consists of the following:

Citrus Meadows Apartments, Ltd. - $ 1,085,096 $ 1,025,096
The land for this subsidiary partnership was =========== ===========
purchased from the local general partner for a
$600,000 note which accrues interest at 10% per
annum. The principal balance, together with the
accrued interest, is payable upon the sale of the
property or in December 2004, whichever event occurs
first.

Interest expense incurred on land note payable
amounted to $60,000 for each of the three years ended
December 31, 1997, 1996 and 1995.

(iii) Long-term note payable consists of the following

Jefferson Place L.P. $ 3,500,000 $ 0
On July 30, 1997, the local general partner, issued =========== ===========
a note payable in the sum of $3,500,000 to the
subsidiary partnership. Interest on this note, at the
rate of 8.5% annually, is payable monthly solely out
of excess cash flow generated by the subsidiary
partnership. The principal plus all outstanding
interest is due July 1, 2023. All payments under this
$3,500,000 note are subordinate to payments due under
the $12,200,000 tax-exempt mortgage bonds.

For the years ended December 31, 1997, 1996 and 1995,
mortgage interest included interest from this note in
the amount of $126,592, $0 and $0, respectively. On
the December 31, 1997 amount, $2,634 was interest
calculated on past accrued base interest.

-37-

LIBERTY TAX CREDIT PLUS III 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 follows:

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

Financial statement
Net loss $(15,842,224) $(35,285,773) $(15,768,464)

Difference resulting from parent company
having a different fiscal year for income
tax and financial reporting purposes (509,800) 637,510 (665,038)

Difference between depreciation and
amortization expense recorded for
financial statement and income tax
reporting purposes (1,348,092) (1,137,185) (1,343,380)

Tax-exempt interest income (133,755) (133,699) (138,990)

Expenses and fees not deductible for
income tax purposes 0 0 909,915

Loss on impairment of assets 0 20,083,101 0

Other (28,494) (5,861) 757,254
------------ ------------- ------------

Net loss as shown on the Partnership's
income tax return $(17,862,365) $(15,841,907) $(16,248,703)
============ ============ ============

NOTE 10 - Commitments and Events of Default

a) Subsidiary Partnerships - Going Concerns

Results of Operations of Certain Local Partnerships

R.P.P. Limited Dividend Housing Association Limited Partnership ("River Place")

River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $30,735,000 at December 31, 1997. The partnership has been
unable to generate sufficient cash flows to meet a majority of its required
principal and interest payments under the loans. River Place's debt guarantor,
General Retirement System of the City of Detroit ("GRS"), entered into an
agreement with the Authority to purchase these loans upon occurrence of certain
events. GRS has declared River Place in default under its obligation to make the
required payments. During 1996, GRS agreed to waive its right of foreclosure
under the mortgages, unless certain events occur, through February 1, 2006. GRS
has made advances for debt service and has incurred certain fees relating to
these loans totaling $27,574,312 including accrued interest on

-38-

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

such advances at a rate of 15%. Such amount is included in due to debt guarantor
on the balance sheet.

Management anticipates that River Place will be unable to make all of the
required debt service payments during 1998. However, there is no guarantee that
GRS, or any other persons, will continue to make these payments on behalf of
River Place. These items raise substantial doubt about River Place's ability to
continue as a going concern.

The financial statements of River Place have been prepared assuming that River
Place will continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
Partnership's investment in River Place has been written down to zero by prior
years' losses and the minority interest balance was $882,750 at both March 31,
1998 and 1997. The net loss after minority interest for River Place amounted to
approximately $3,648,000, $22,373,000 (after loss on impairment of assets of
approximately $18,803,000) and $5,166,000 for the years ended March 31, 1998,
1997 and 1996, respectively.

L.I.H. Chestnut Associates, L.P.
L.I.H. Chestnut Associates, L.P. ("Chestnut") has sustained recurring losses
from operations. At December 31, 1997, Chestnut had not made certain payments
required under the terms of the mortgage loan and, as a result, is in default.
Chestnut's continued existence is dependent on its resolution of the default
under the mortgage loan. These items raise substantial doubt about Chestnut's
ability to continue as a going concern. The financial statements for Chestnut do
not include any adjustments that might result from the outcome of this
uncertainty. Management of Chestnut is in discussion with the first mortgagee
and Chestnut's general and limited partners in an attempt to resolve the
default. The Partnership's investment in Chestnut was approximately $348,000 and
$824,000 and the minority interest balance was $1,147,092 at March 31, 1998 and
1997, respectively. The net loss after minority interest for Chestnut amounted
to approximately $476,000, $348,000 and $306,000 for the years ended March 31,
1998, 1997 and 1996, respectively.

b) Subsidiary Partnerships - Other

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

The new general partner, which is an affiliate of the Related General Partner,
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 II and FNMA. Terms of the agreement include: 1. Interest only on
the loan for 36 months. 2. Replacement reserve escrow payments

-39-

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

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 II and Williamsburg Residential, L.P. (an adjoining and
affiliated project). If the monthly net operating income turned over to the loan
servicer is less than the required mortgage and escrow payment, the debt service
escrow account is drawn upon. At December 31, 1997, balances in the two entities
accounts totaled $97,653.

In 1997, the Partnership advanced Williamsburg II 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 II had been written down to zero by
prior years' losses and the minority interest balance was approximately $334,000
and $0 at March 31, 1998 and 1997, respectively. Williamsburg II's net loss
after minority interest amounted to approximately $172,000, $1,368,000 (after
provision for impairment of assets of approximately $1,279,974) and $77,000 for
the years ended March 31, 1998, 1997 and 1996, respectively.

Jefferson Limited Partnership
At December 31, 1997 and 1996, Jefferson Limited Partnership's ("Jefferson")
current liabilities exceeded its current assets by over $40,000 and $220,000,
respectively. Although this condition could raise substantial doubt about
Jefferson's ability to continue as a going concern, such doubt is alleviated by
the fact that $34,690 and $47,216 of current liabilities at December 31, 1997
and 1996, respectively, are to related parties which do not intend to pursue
payment beyond Jefferson's ability to pay.

Accordingly, management believes that Jefferson has the ability to continue as a
going concern for at least one year from December 31, 1997. The Partnership's
investment in Jefferson was approximately $800,000 and $940,000 at March 31,
1998 and 1997, respectively, and the minority interest balance was $0 at each
date. The net loss after minority interest for Jefferson amounted to
approximately $140,000, $133,000 and $146,000 for the years ended March 31,
1998, 1997 and 1996, respectively.

Northwood Associates Limited Partnership
Northwood Associates Limited Partnership ("Northwood") is a defendant in a
lawsuit brought on by a group of tenants demanding better living conditions.
Northwood was found in contempt by the Toledo Municipal Court and the tenants
were each awarded an amount for retroactive damages estimated by legal counsel
to be aggregately in excess of $200,000 plus attorney fees. Northwood has and
still is vigorously defending the action and has filed an appeal. The Plaintiffs
have filed a cross-appeal. The case is now pending. Legal counsel for Northwood
estimates the chances of prevailing to be 50/50. Therefore, no accrual has been
recorded at December 31, 1997. Northwood has proposed a settlement under which
the Plaintiffs would retain the money that has been escrowed ($52,000 at
December 31, 1997) plus an additional $20,000 and legal fee reimbursements. The
offer has not been accepted or re-

-40-

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

sponded to. As of December 31, 1997, Northwood has charged to operations $52,000
as a reserve against the amount of tenant rents held in escrow.

1850 Second Avenue Associates, L.P.
1850 Second Avenue Associates, L.P. ("1850 Second Ave.") has an application for
an exemption from current real estate taxes pending before the New York City
Department of Finance and an application for the cancellation of prior year
taxes is pending before the office of the Comptroller of the City of New York.
As of December 31, 1997, approximately $1,033,964 in outstanding real estate
taxes and $509,112 in accrued interest thereon would have to be paid if 1850
Second Ave.'s applications are denied. Management and Counsel have advised that
this is the likely outcome. Accordingly, 1850 Second Ave. has recorded a
liability of $1,543,076, of which $60,000 was accrued in prior years.

The General Partner of 1850 Second Ave. is West 107th II. The General Partner of
West 107th II has entered into a Cash Flow Sharing Agreement with the Special
Limited Partners of various other partnerships, pursuant to which cash flow
distributions are pooled and held in trust and applied to reduce any deficits of
1850 Second Ave. It is anticipated that in the event 1850 Second Ave. becomes
liable for real estate taxes and interest thereon, there will be sufficient
funds in the trust account to meet this obligation.

Leases

Four of the subsidiary partnerships are leasing the land on which the Projects
are located, for terms ranging from 28 to 99 years. At December 31, 1997, the
subsidiary partnerships were committed to minimum future annual rentals on the
noncancelable leases aggregating $155,130 for each of the next five years, and
$4,254,383 in total thereafter.

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
Accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation ("FDIC") up to $100,000. As of March 31, 1998, uninsured cash and
cash equivalents approximated $3,013,000.

d) Other

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

-41-

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

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

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

e) Tax Credits

A portion of the low-income housing tax credits are subject to recapture in
future years if (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.

During the Fiscal Years 1997, 1996 and 1995, the Partnership generated
low-income housing tax credits of approximately $19,632,000, $19,673,000 and
$19,673,000, respectively.

-42-

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

None

PART III

Item 10. Directors and Executive Officers of the Registrant.

On November 25, 1997, an affiliate of the Related General Partner, purchased
100% of the stock of the Liberty General Partner (the "Transfer"). In addition
to the Transfer, by acquiring the stock of the Liberty General Partner, an
affiliate of the Related General Partner also acquired the Liberty General
Partner's general partner interest in Liberty Associates IV L.P., the special
limited partner of the Partnership. Pursuant to the Partnership's Amended and
Restated Partnership Agreement, the consent of the limited partners was not
required to approve the Transfer. In connection with the Transfer, the
Partnership paid to the Liberty General Partner the accrued asset management
fees owed to the Liberty General Partner in the aggregate amount of $737,750.

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

Related Credit Properties III, L.P.

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

Stephen M. Ross Director

J. Michael Fried President, Chief Executive Officer and Director

Alan P. Hirmes Senior Vice President

Stuart J. Boesky Vice President

Glenn F. Hopps Treasurer and Assistant Vice President

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

-43-

Partner. In that capacity, he is the chief executive officer of Capital, and is
responsible for initiating and directing all of Capital's syndication, finance,
acquisition and investor reporting activities. Mr. Fried practiced corporate law
in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from
1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law
School with a Juris Doctor degree, magna cum laude; from Long Island University
Graduate School with a Master of Science degree in Psychology; and from Michigan
State University with a Bachelor of Arts degree in History.

ALAN P. HIRMES, 43, has been a Certified Public Accountant in New York since
1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., Certified 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, joined Related in December, 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.

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

Liberty GP III Inc.

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

J. Michael Fried President, Chief Executive Officer and Director

Alan P. Hirmes Senior 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 re-

-44-

ceived 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 the directors or
officers of the Liberty General Partner or of the general partner of the Related
General Partner for their services. Certain directors and officers of the
Liberty General Partner and of the general partner of the Related General
Partner receive compensation from the General Partners and their affiliates for
services performed for various affiliated entities which may include services
performed for the Partnership.

Under the terms of the Partnership Agreement, the General Partners and their
affiliates are entitled to receive compensation from the Partnership in
consideration of certain services rendered to the partnership by such parties.
In addition, the General Partners are entitled to 1% of all cash distributions
and Tax Credit allocations and a subordinated 15% interest in Net Sales or
Refinancing Proceeds. See Note 8 to the Financial Statements in Item 8 for a
presentation of the types and amounts of compensation paid to the General
Partners and their affiliates, which information is incorporated herein by
reference thereto. Tabular information concerning salaries, bonuses and other
types of compensation payable to executive officers have not been included in
this annual report. As noted above, the Partnership has no executive officers.
The levels of compensation payable to the General Partners and/or their
affiliates is limited by the terms of the Partnership Agreement and may not be
increased therefrom on a discretionary basis.

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

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

General Partnership Related Credit Properties $1,000 capital contribution - 50%
Interest in the III L.P. directly owned
Partnership 625 Madison Avenue
New York, NY 10022

Liberty GP III Inc. $1,000 capital contribution - 50%
625 Madison Avenue directly owned
New York, NY 10022

Liberty Associates IV L.P. holds a 1% and .998% (see Item 7. with respect to
River Place) limited partnership interest in 61 and 1 Local Partnerships,
respectively.

-45-

No person is known by the Partnership to be the beneficial owner of more than 5%
of the Limited Partnership Interests and neither the Liberty General Partner nor
any director or executive officer of the Liberty General Partner owns any
Limited Partnership Interests or BACs. Neither the Related General Partner nor
any director or executive officer of the general partner of the Related General
Partner owns any Limited Partnership Interests. The following table sets forth
the number of BACs beneficially owned, as of June 23, 1998, by (i) each BACs
holder known to the Partnership to be a beneficial owner of more than 5% of the
BACs, (ii) each director and executive officer of the general partner of the
Related General Partner and (iii) the directors and executive officers of the
general partner of the Related General Partner as a group. Unless otherwise
noted, all BACs are owned directly with sole voting and dispositive powers.

Amount and Nature of
Name of Beneficial Owner (1) Beneficial Ownership Percent of Class
- - ------------------------ -------------------- ----------------

Lehigh Tax Credit Partners, Inc. 13,127.66 (2)(3) 9.4%

J. Michael Fried 13,127.66 (2)(3)(4) 9.4%

Alan P. Hirmes 13,127.66 (2)(3)(4) 9.4%

Stuart J. Boesky 13,127.66 (2)(3)(4) 9.4%

Stephen M. Ross - -

Glenn F. Hopps - -

Lynn A. McMahon - -

All directors and executive officers 13,127.66 (2)(3)(4) 9.4%
of the general partner of the
Related General Partner as a group
(six persons)

(1) The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.

(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
June 10, 1997 with the Securities and Exchange Commission (the "Commission") and
pursuant to a letter agreement dated April 4, 1997 among the Partnership, Lehigh
I and the Related General Partner (the "Standstill Agreement"), Lehigh I agreed
that, prior to April 4, 2007 (the "Standstill Expiration Date"), it will not and
it will cause certain affiliates not to (i) acquire, attempt to acquire or make
a proposal to acquire, directly or indirectly, more than 45% (including BACs
acquired through all other means) of the outstanding BAC's, (ii) seek to propose
to enter into, directly or indirectly, any merger, consolidation, business
combination, sale or acquisition of assets, liquidation, dissolution or other
similar transaction involving the Partnership, (iii) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" or
"consents" (as such terms are used in the proxy rules of the Commission) to vote
any voting securities of the Partnership, (iv) form, join or otherwise
participate in a "group" (within the meaning of Section 13 (d)(3) of the
Securities and Exchange Act of 1934) with respect to any voting securities of
the Partnership, except those affiliates bound by the Standstill Agreement will
not be deemed to have violated it and formed a "group" solely by acting in
accordance with the Standstill Agreement,

-46-

(v) disclose in writing to any third party any intention, plan or arrangement
inconsistent with the terms of the Standstill Agreement, or (vi) loan money to,
advise, assist or encourage any person in connection with any action
inconsistent with the terms of the Standstill Agreement. In addition, Lehigh I
agreed that until the Standstill Expiration Date it will not sell any BACs
acquired by it unless the buyer of such BACs agrees to be bound by the
Standstill Agreement; provided, however, Lehigh I may make transfers in the
secondary market to any purchaser which represents that following such sale it
will not own three (3%) percent or more of the BACs outstanding. By the terms of
the Standstill Agreement, Lehigh I also agreed to vote its BACs in the same
manner as a majority of all voting BACs holders; provided, however, Lehigh I is
entitled to vote its BACs as it determines with regard to any proposal (i) to
remove the Related General Partner as a general partner of the Partnership or
(ii) concerning the reduction of any fees, profits, distributions or allocations
for the benefit of the Related General Partner or its affiliates. The addresses
of each of the Partnership, Lehigh I and the Related General Partner is 625
Madison Avenue, New York, New York 10022.

(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax
Credit Partners II, L.L.C. ("Lehigh II") for which the Managing Member serves as
managing member. As of June 23, 1998, Lehigh I held 6,458.33 BACs and Lehigh II
held 6,669.33 BACs.

(4) Each such party serves as a director and executive officer of the Managing
Member and owns an equity interest therein.

Item 13. Certain Relationships and Related Transactions.

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

-47-

PART IV

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

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

(a) 1. Financial Statements

Independent Auditors' Report 21

Consolidated Balance Sheets at March 31, 1998 and 1997 178

Consolidated Statements of Operations for the years ended March 31,
1998, 1997 and 1996 179

Consolidated Statements of Changes in Partners' Capital for the years
ended March 31, 1998, 1997 and 1996 180

Consolidated Statements of Cash Flows for the years ended March 31,
1998, 1997 and 1996 181

Notes to Consolidated Financial Statements 183

(a) 2. Financial Statement Schedules

Independent Auditors' Report 210

Schedule I - Condensed Financial Information of Registrant 211

Schedule III - Real Estate and Accumulated Depreciation 214

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

(a) 3. Exhibits

(3A) Form of Amended and Restated Agreement of Limited Partnership of
Liberty Tax Credit Plus III L.P. (attached to Prospectus as Exhibit
A)**

(3B) Certificate of Limited Partnership of Liberty Tax Credit Plus III L.P.,
together with amendments filed on November 17, 1988**

(4) Form of Subscription Agreement (attached to Prospectus as Exhibit B)

(10A) Escrow Agreement between Registrant and Bankers Trust Company**

(10B) Forms of Purchase Agreements for purchase of Local Partnership
Interests**

(21) Subsidiaries of the Registrant 206

-48-

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

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

(27) Financial Data Schedule (filed herewith) 218

** Incorporated herein by reference to exhibits filed with
Pre-Effective Amendment No. 1 to Liberty Tax Credit Plus III L.P.'s
Registration Statement on Form S-11 (Registration No. 33-25732)

(b) Reports on Form 8-K

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

-49-

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

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

C.V. Bronx Associates, L.P. NY
Michigan Rural Housing Limited Partnership MI
Jefferson Limited Partnership LA
Inter-Tribal Indian Village Housing Development Associates, L.P. RI
RBM Associates PA
Glenbrook Associates PA
Affordable Flatbush Associates NY
Barclay Village II, LTD. PA
1850 Second Avenue Associates, L.P. NY
R.P.P. Limited Dividend Housing MI
Williamsburg Residential II, L.P. KS
West 104th Street Associates L.P. NY
Meredith Apartments, LTD. UT
Ritz Apartments, LTD. UT
Ashby Apartments, LTD. UT
South Toledo Associates, LTD. OH
Dunlap School Venture PA
Philipsburg Elderly Housing Associates PA
Franklin Elderly Housing Associates PA
Wade D. Mertz Elderly Housing Associates PA
Lancashire Towers Associates Limited Partnership OH
Northwood Associates Limited Partnership OH
Brewery Renaissance Associates NY
Brandywine Court Associates, L.P. FL
Art Apartments Associates PA
The Village at Carriage Hills, LTD. TN
Mountainview Apartments, LTD. TN
The Park Village, Limited MS
River Oaks Apartments, LTD. AL
Forrest Ridge Apartments, LTD. AR
The Hearthside Limited Dividend Housing Association
Limited Partnership MI
Redemptorist Limited Partnership LA
Manhattan A Associates NY
Broadhurst Willows, L.P. NY
Weidler Associates Limited Partnership OR
Gentle Pines-West Columbia Associates, L.P. SC
Lake Forest Estates II, LTD. AL
Las Camelias Limited Partnership PR
WPL Associates XXIII OR
Broadway Townhouses L.P. NJ
Puerto Rico Historic Zone Limited Dividend Partnership PR
Citrus Meadows Apartments, LTD. FL
Sartain School Venture PA
Driftwood Terrace Associates, LTD. FL
Holly Hill, LTD. TN
Mayfair Apartments LTD. TN
Foxcroft Apartments LTD. AL

-50-

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

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

Canterbury Apartments, LTD. MS
Cutler Canal III Associates, LTD. FL
Jefferson Place L.P. KS
Callaway Village, LTD. TN
Commerce Square Apartments Associates L.P. DE
West 132nd Development Partnership NY
Site H Development Co. NY
L.I.H. Chestnut Associates, L.P. PA
Diamond Phase II Venture PA
Bookbindery Associates PA
The Hamlet, LTD. FL
Stop 22 Limited Partnership PR
Knob Hill Apartments, LTD. TN
Conifer James Street Associates NY
Longfellow Heights Apartments, L.P. MO

(d) Not applicable.

-51-

SIGNATURES

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

LIBERTY TAX CREDIT PLUS III L.P.
(Registrant)

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

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

Date: June 25, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive
Officer and Director (principal
executive officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 25, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive
Officer and Director (principal
executive officer)

and

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

By: Related Credit Properties III L.P.,
its general partner

Date: June 25, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive
Officer and Director (principal
executive officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 25, 1998
By: /s/ J. Michael Fried
--------------------
J. Michael Fried
President, Chief Executive
Officer and Director (principal
executive officer)

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

Signature Title Date
- - ---------------------- ---------------------------------------- ---------------

President, Chief Executive Officer
(principal executive officer) and
Director of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ J. Michael Fried and Liberty GP III, Inc.
- - -------------------- (a General Partner of Registrant) June 25, 1998
J. Michael Fried

Senior Vice President
(principal financial officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ Alan P. Hirmes and Liberty GP III, Inc.
- - ------------------ (a General Partner of Registrant) June 25, 1998
Alan P. Hirmes

Treasurer (principal accounting officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ Glenn F. Hopps and Liberty GP III, Inc.
- - ------------------ (a General Partner of Registrant) June 25, 1998
Glenn F. Hopps

Director of Related Credit Properties
III Inc., general partner
of Related Credit Properties III L.P.
/s/ Stephen M. Ross and Liberty Associates IV, L.P.
- - ------------------- (General Partners of Registrant) June 25, 1998
Stephen M. Ross

[Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP Letterhead]

INDEPENDENT AUDITORS' REPORT

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

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus III L.P. and Subsidiaries (a Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated June
24, 1998 on page 21 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
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant
contingencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going concern.
These subsidiary partnerships have been unable to generate sufficient cash flow
to pay their mortgage obligations. The two subsidiary partnerships' net losses
aggregated $4,124,102, (Fiscal 1997), $23,519,749 (Fiscal 1996) and $5,471,930
(Fiscal 1995), and their assets aggregated $24,701,855 and $25,613,840 at March
31, 1998 and 1997, respectively. Management's plans in regard to these matters
are also described in Note 10(a). The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

/s/ Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
June 24, 1998

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

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

CONDENSED BALANCE SHEETS

ASSETS

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

Cash and cash equivalents $ 563,893 $ 2,837,023
Cash held in escrow 941,808 1,071,897
Investment in subsidiary partnerships 46,427,627 55,100,895
Other assets 245,466 245,466
----------- -----------

Total assets $48,178,794 $59,255,281
=========== ===========

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates $ 1,594,411 $ 1,917,071
----------- -----------

Total liabilities 1,594,411 1,917,071

Partners' equity 46,584,383 57,338,210
----------- -----------

Total liabilities and partners' equity $48,178,794 $59,255,281
=========== ===========

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

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

CONDENSED STATEMENTS OF OPERATIONS

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

Revenues

Other income $ 51,210 $ 131,606 $ 141,845
------------ ------------ -----------

Total revenues 51,210 $ 131,606 $ 141,845
------------ ------------ -----------

Expenses

General and administrative 315,341 248,865 227,513
General and administrative-related parties 1,692,111 1,606,344 924,662
------------ ------------ -----------

Total expenses 2,007,452 1,855,209 1,152,175
------------ ------------ -----------

Loss from operations (1,956,242) (1,723,603) (1,010,330)
------------ ------------ -----------

Distribution income of subsidiary partnerships
in excess of investments 0 12,956 2,681

Equity in loss of subsidiary partnerships (*) (8,797,585) (8,435,002) (7,545,818)
------------ ------------ -----------

Net loss $(10,753,827) $(10,145,649) $(8,553,467)
============ ============ ===========

(*) Includes suspended prior year losses of investment in accordance with equity
method of accounting amounting to $89,989, $0, and $0 for the years ended March
31, 1998, 1997 and 1996.

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

CONDENSED STATEMENTS OF CASH FLOWS

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

Cash flows from operating activities:

Net loss $(10,753,827) $(10,145,649) $(8,553,467)
------------ ------------ -----------
Adjustments to reconcile net loss to net cash
used in operating activities:

(Increase) decrease in assets:

Other assets 0 0 52,348

Cash held in escrow 0 0 672,600

Increase (decrease) in liabilities:

Due to general partners and affiliates (322,660) (41,512) 767,976
Other liabilities 0 (2,893) 2,893
------------ ------------ -----------

Total adjustments (322,660) (44,405) 1,495,817
------------ ------------ -----------

Net cash used in operating activities (11,076,487) (10,190,054) (7,057,650)
------------ ------------ -----------

Cash flows from investing activities:

Equity in loss of subsidiary partnerships 8,797,585 8,435,002 7,545,818
Distributions from subsidiary partnerships 226,182 99,473 187,921
Advances and investments
in subsidiary partnerships (408,580) (814,871) (379,247)
Decrease in cash held in escrow-
purchase price payments 188,170 814,871 379,247
------------ ------------ -----------

Net cash provided by investing activities 8,803,357 8,534,475 7,733,739
------------ ------------ -----------

Net (decrease) increase in cash and
cash equivalents (2,273,130) (1,655,579) 676,089

Cash and cash equivalents, beginning of year 2,837,023 4,492,602 3,816,513
------------ ------------ -----------

Cash and cash equivalents, end of year $ 563,893 $ 2,837,023 $ 4,492,602
============ ============ ===========

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

Initial Cost to Partnership Cost Capitalized
Carrying --------------------------- Subsequent to
Amount of Buildings and Acquisition:
Description Mortgages Land Improvements Improvements
- - ------------------------------------------- ------------ ----------- ------------- ----------------

C.V. Bronx Associates, L.P.
Bronx, NY $ 0 $ 1,705,800 $ 0 $ 4,244,915
Michigan Rural Housing Limited Partnership
Michigan 4,696,089 141,930 4,013,207 1,987,655
Jefferson Limited Partnership
Schreveport, LA 1,381,645 65,000 3,289,429 50,806
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 1,645,487 36,643 3,290,524 109,552
RBM Associates
Philadelphia, PA 975,000 0 1,590,733 72,853
Glenbrook Associates
Atglen, PA 1,652,474 137,000 2,833,081 123,724
Affordable Flatbush Associates
Brooklyn, NY 1,624,165 0 2,551,365 187,099
Barclay Village II, LTD.
Chambersburg, PA 2,572,064 204,825 3,249,918 532,987
1850 Second Avenue Associates, L.P.
New York, NY 0 920,472 6,262,968 (54,340)
R.P.P. Limited Dividend Housing
Detroit, MI 30,735,000 0 29,051,380 (13,253,805)
Williamsburg Residential II, L.P.
Witchita, KS 1,511,112 358,305 2,713,872 (1,211,361)
West 104th Street Associates, L.P.
New York, NY 0 0 0 3,011,826
Meredith Apartments, LTD.
Salt Lake City, UT 637,194 40,000 1,500,117 20,962
Ritz Apartments, LTD.
Salt Lake City, UT 317,826 59,760 592,704 88,299
Ashby Apartments, LTD.
Salt Lake City, UT 317,826 50,850 549,611 128,546
South Toledo Associates, LTD.
Toledo, OH 835,322 47,571 1,411,386 44,416
Dunlap School Venture
Philadelphia, PA 2,479,332 5,352 4,522,721 147,783
Philipsburg Elderly Housing Associates
Philipsburg, PA 3,210,358 45,000 4,092,500 418,562
Franklin Elderly Housing Associates
Franklin, PA 2,309,417 165,000 2,594,447 135,748
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 3,470,538 65,000 4,234,049 603,617

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

C.V. Bronx Associates, L.P.
Bronx, NY $ 1,439,504 $ 4,511,211 $ 5,950,715 $ 1,095,694
Michigan Rural Housing Limited Partnership
Michigan 148,716 5,994,076 6,142,792 1,754,284
Jefferson Limited Partnership
Schreveport, LA 71,786 3,333,449 3,405,235 883,317
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 43,429 3,393,290 3,436,719 995,390
RBM Associates
Philadelphia, PA 6,786 1,656,800 1,663,586 303,080
Glenbrook Associates
Atglen, PA 143,786 2,950,019 3,093,805 828,745
Affordable Flatbush Associates
Brooklyn, NY 6,787 2,731,677 2,738,464 811,853
Barclay Village II, LTD.
Chambersburg, PA 211,611 3,776,119 3,987,730 1,149,502
1850 Second Avenue Associates, L.P.
New York, NY 392,457 6,736,643 7,129,100 1,894,008
R.P.P. Limited Dividend Housing
Detroit, MI 6,786 15,790,789 15,797,575 1,663,038
Williamsburg Residential II, L.P.
Witchita, KS 362,484 1,498,332 1,860,816 477,893
West 104th Street Associates, L.P.
New York, NY 6,787 3,005,039 3,011,826 704,379
Meredith Apartments, LTD.
Salt Lake City, UT 46,787 1,514,292 1,561,079 442,921
Ritz Apartments, LTD.
Salt Lake City, UT 66,547 674,216 740,763 208,867
Ashby Apartments, LTD.
Salt Lake City, UT 57,637 671,370 729,007 192,496
South Toledo Associates, LTD.
Toledo, OH 51,677 1,451,696 1,503,373 292,980
Dunlap School Venture
Philadelphia, PA 9,458 4,666,398 4,675,856 882,976
Philipsburg Elderly Housing Associates
Philipsburg, PA 68,101 4,487,961 4,556,062 1,475,870
Franklin Elderly Housing Associates
Franklin, PA 169,106 2,726,089 2,895,195 970,801
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 69,106 4,833,560 4,902,666 1,684,634

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

C.V. Bronx Associates, L.P.
Bronx, NY 1990 June 1989 15-27.5 years
Michigan Rural Housing Limited Partnership
Michigan 1989 Sept. 1989 27.5 years
Jefferson Limited Partnership
Schreveport, LA 1990 Dec. 1989 27.5 years
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 1989 Oct. 1989 27.5 years
RBM Associates
Philadelphia, PA 1989 Dec. 1989 40 years
Glenbrook Associates
Atglen, PA 1989 Nov. 1989 3-27.5 years
Affordable Flatbush Associates
Brooklyn, NY 1989 Dec. 1989 27.5 years
Barclay Village II, LTD.
Chambersburg, PA 1989 Nov. 1989 5-27.5 years
1850 Second Avenue Associates, L.P.
New York, NY 1989 Nov. 1989 27.5 years
R.P.P. Limited Dividend Housing
Detroit, MI 1989 Nov. 1989 27-31.5 years
Williamsburg Residential II, L.P.
Witchita, KS 1989 Nov. 1989 40 years
West 104th Street Associates, L.P.
New York, NY 1990 Dec. 1989 27.5 years
Meredith Apartments, LTD.
Salt Lake City, UT 1989 Aug. 1989 27.5 years
Ritz Apartments, LTD.
Salt Lake City, UT 1989 Aug. 1989 27.5 years
Ashby Apartments, LTD.
Salt Lake City, UT 1989 Aug. 1989 27.5 years
South Toledo Associates, LTD.
Toledo, OH 1988 Jan. 1990 40 years
Dunlap School Venture
Philadelphia, PA 1989 Jan. 1990 40 years
Philipsburg Elderly Housing Associates
Philipsburg, PA 1990 Feb. 1990 15-27.5 years
Franklin Elderly Housing Associates
Franklin, PA 1989 Feb. 1990 7-24 years
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 1989 Feb. 1990 27.5 years

Initial Cost to Partnership Cost Capitalized
Carrying --------------------------- Subsequent to
Amount of Buildings and Acquisition:
Description Mortgages Land Improvements Improvements
- - ------------------------------------------- ------------ ----------- ------------- ---------------

Lancashire Towers Associates L.P.
Cleveland, OH 3,253,008 265,000 6,871,575 318,666
Northwood Associates Limited Partnership
Toledo, OH 2,063,215 200,000 4,065,856 480,181
Brewery Renaissance Associates
Middletown, NY 3,375,000 77,220 102,780 6,149,166
Brandywine Court Associates, L.P.
Jacksonville, FL 1,427,871 78,000 1,960,262 69,916
Art Apartments Associates
Philadelphia, PA 1,139,224 13,695 2,713,615 56,237
The Village at Carriage Hills, LTD.
Clinton, TN 1,470,024 86,663 1,753,799 58,758
Mountainview Apartments, LTD,
Newport, TN 1,042,864 49,918 1,254,182 74,089
The Park Village, Limited
Jackson, MS 374,387 44,102 749,940 77,387
River Oaks Apartments, LTD.
Oneonta, AL 1,071,330 80,340 1,221,336 51,117
Forrest Ridge Apartments, LTD.
Forrest City, AR 822,196 36,000 1,016,647 63,884
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 2,922,554 242,550 4,667,594 61,725
Redemptorist L.P.
New Orleans, LA 2,796,300 0 6,497,259 51,202
Manhattan A Associates
New York, NY 4,048,639 1,092,959 5,991,888 358,970
Broadhurst Willows, L.P.
New York, NY 0 102,324 5,151,039 53,644
Weidler Associates Limited Partnership
Portland, OR 1,265,411 225,000 0 2,163,427
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 3,634,893 327,650 4,276,739 163,252
Lake Forest Estates II, LTD.
Livingston, AL 967,842 21,623 1,182,480 52,722
Las Camelias L.P.
Rio Piedras, PR 6,396,671 249,000 6,400 9,317,987
WPL Associates XIIII
Portland, OR 2,234,959 0 3,721,763 173,781
Broadway Townhouses L.P.
Camden, NJ 10,726,273 163,000 5,120,066 14,424,001

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

Lancashire Towers Associates L.P.
Cleveland, OH 269,106 7,186,135 7,455,241 2,087,978
Northwood Associates Limited Partnership
Toledo, OH 204,106 4,541,931 4,746,037 1,257,478
Brewery Renaissance Associates
Middletown, NY 81,326 6,247,840 6,329,166 1,571,921
Brandywine Court Associates, L.P.
Jacksonville, FL 82,106 2,026,072 2,108,178 692,522
Art Apartments Associates
Philadelphia, PA 17,801 2,765,746 2,783,547 766,477
The Village at Carriage Hills, LTD.
Clinton, TN 90,769 1,808,451 1,899,220 530,359
Mountainview Apartments, LTD,
Newport, TN 54,024 1,324,165 1,378,189 406,792
The Park Village, Limited
Jackson, MS 48,208 823,221 871,429 247,087
River Oaks Apartments, LTD.
Oneonta, AL 84,446 1,268,347 1,352,793 284,754
Forrest Ridge Apartments, LTD.
Forrest City, AR 40,106 1,076,425 1,116,531 231,196
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 246,656 4,725,213 4,971,869 1,707,712
Redemptorist L.P.
New Orleans, LA 4,106 6,544,355 6,548,461 1,756,447
Manhattan A Associates
New York, NY 1,097,065 6,346,752 7,443,817 1,786,639
Broadhurst Willows, L.P.
New York, NY 106,430 5,200,577 5,307,007 1,976,536
Weidler Associates Limited Partnership
Portland, OR 229,106 2,159,321 2,388,427 556,393
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 331,756 4,435,885 4,767,641 1,608,091
Lake Forest Estates II, LTD.
Livingston, AL 25,729 1,231,096 1,256,825 254,298
Las Camelias L.P.
Rio Piedras, PR 298,878 9,274,509 9,573,387 2,336,814
WPL Associates XIIII
Portland, OR 4,106 3,891,438 3,895,544 1,116,143
Broadway Townhouses L.P.
Camden, NJ 167,106 19,539,961 19,707,067 5,240,843

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

Lancashire Towers Associates L.P.
Cleveland, OH 1989 Feb. 1990 27.5 years
Northwood Associates Limited Partnership
Toledo, OH 1989 Feb. 1990 27.5 years
Brewery Renaissance Associates
Middletown, NY 1990 Feb. 1990 27.5 years
Brandywine Court Associates, L.P.
Jacksonville, FL 1988 Nov. 1989 7-27.5 years
Art Apartments Associates
Philadelphia, PA 1990 Mar. 1990 27.5 years
The Village at Carriage Hills, LTD.
Clinton, TN 1990 Mar. 1990 25-40 years
Mountainview Apartments, LTD,
Newport, TN 1990 Mar. 1990 25-40 years
The Park Village, Limited
Jackson, MS 1990 Mar. 1990 25-40 years
River Oaks Apartments, LTD.
Oneonta, AL 1990 Mar. 1990 25-40 years
Forrest Ridge Apartments, LTD.
Forrest City, AR 1990 Mar. 1990 25-40 years
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 1990 Mar. 1990 15-27.5 years
Redemptorist L.P.
New Orleans, LA 1990 Mar. 1990 27.5 years
Manhattan A Associates
New York, NY 1990 Apr. 1990 27.5 years
Broadhurst Willows, L.P.
New York, NY 1990 Apr. 1990 10-25 years
Weidler Associates Limited Partnership
Portland, OR 1990 May 1990 15-27.5 years
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 1990 June 1990 27.5 years
Lake Forest Estates II, LTD.
Livingston, AL 1990 June 1990 25-40 years
Las Camelias L.P.
Rio Piedras, PR 1990 June 1990 27.5 years
WPL Associates XIIII
Portland, OR 1990 July 1990 27.5 years
Broadway Townhouses L.P.
Camden, NJ 1990 July 1990 27.5 years

Initial Cost to Partnership Cost Capitalized
Carrying --------------------------- Subsequent to
Amount of Buildings and Acquisition:
Description Mortgages Land Improvements Improvements
- - ------------------------------------------- ------------ ----------- ------------- ---------------

Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 4,025,000 0 0 6,486,762
Citrus Meadows Apartments, LTD.
Brandenton, FL 7,294,189 610,073 0 9,377,919
Sartain School Venture
Philadelphia, PA 1,957,241 3,883 3,486,875 120,867
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 6,981,043 270,000 7,753,765 256,019
Holly Hill, LTD.
Greenville, TN 1,390,951 50,000 1,631,820 126,266
Mayfair Apartments LTD.
Morristown, TN 1,375,359 50,000 1,614,861 86,261
Foxcroft Apartments
LTD. Troy, AL 1,247,062 75,000 1,382,973 120,962
Canterbury Apartments, LTD.
Indianola, MS 1,430,401 33,000 1,738,871 92,758
Cutler Canal III Associates, LTD.
Miami, FL 7,845,288 1,269,265 0 11,933,201
Jefferson Place L.P.
Olathe, KS 12,200,000 531,063 13,477,553 44,416
Callaway Village, LTD.
Clinton, TN 1,404,373 66,000 1,613,920 114,848
Commerce Square Apartments Associates L.P.
Smyrna, DE 2,868,059 303,837 0 4,792,365
West 132nd Development Partnership
New York, NY 1,698,223 0 0 2,636,852
Site H Development Co.
Brookyn, NY 766,994 0 1,346,000 44,416
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 6,155,155 752,000 693,995 6,317,446
Diamond Phase II Venture
Philadelphia, PA 1,877,784 0 0 3,989,774
Bookbindery Associates
Philadelphia, PA 1,525,650 0 0 3,843,720
The Hamlet, LTD.
Boynton, FL 8,318,386 1,180,482 0 13,344,074
Stop 22 Limited Partnership
Santurce, PR 8,573,906 0 4,025,481 6,910,451
Knob Hill Apartments, LTD.
Greenville, TN 1,478,102 75,085 0 1,828,749

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

Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 156,842 6,329,920 6,486,762 1,496,669
Citrus Meadows Apartments, LTD.
Brandenton, FL 812,609 9,175,383 9,987,992 2,541,318
Sartain School Venture
Philadelphia, PA 7,989 3,603,636 3,611,625 677,039
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 274,106 8,005,678 8,279,784 3,276,261
Holly Hill, LTD.
Greenville, TN 54,106 1,753,980 1,808,086 482,449
Mayfair Apartments LTD.
Morristown, TN 54,106 1,697,016 1,751,122 358,143
Foxcroft Apartments
LTD. Troy, AL 79,106 1,499,829 1,578,935 309,611
Canterbury Apartments, LTD.
Indianola, MS 37,106 1,827,523 1,864,629 383,739
Cutler Canal III Associates, LTD.
Miami, FL 1,273,507 11,928,959 13,202,466 1,737,747
Jefferson Place L.P.
Olathe, KS 535,169 13,517,863 14,053,032 4,602,891
Callaway Village, LTD.
Clinton, TN 70,106 1,724,662 1,794,768 358,227
Commerce Square Apartments Associates L.P.
Smyrna, DE 307,943 4,788,259 5,096,202 751,131
West 132nd Development Partnership
New York, NY 13,106 2,623,746 2,636,852 483,792
Site H Development Co.
Brookyn, NY 4,106 1,386,310 1,390,416 402,245
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 759,229 7,004,212 7,763,441 1,349,536
Diamond Phase II Venture
Philadelphia, PA 22,081 3,967,693 3,989,774 633,567
Bookbindery Associates
Philadelphia, PA 29,105 3,814,615 3,843,720 616,024
The Hamlet, LTD.
Boynton, FL 1,184,587 13,339,969 14,524,556 3,091,762
Stop 22 Limited Partnership
Santurce, PR 216,918 10,719,014 10,935,932 2,552,446
Knob Hill Apartments, LTD.
Greenville, TN 79,190 1,824,644 1,903,834 352,080

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

Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 1990 Aug. 1990 27.5 years
Citrus Meadows Apartments, LTD.
Brandenton, FL 1990 July 1990 27.5 years
Sartain School Venture
Philadelphia, PA 1990 Aug. 1990 15-40 years
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 1989 Sept. 1990 27.5 years
Holly Hill, LTD.
Greenville, TN 1990 Oct. 1990 25-40 years
Mayfair Apartments LTD.
Morristown, TN 1990 Oct. 1990 25-40 years
Foxcroft Apartments
LTD. Troy, AL 1990 Oct. 1990 25-40 years
Canterbury Apartments, LTD.
Indianola, MS 1990 Oct. 1990 25-40 years
Cutler Canal III Associates, LTD.
Miami, FL 1990 Oct. 1990 40 years
Jefferson Place L.P.
Olathe, KS 1990 Oct. 1990 19 years
Callaway Village, LTD.
Clinton, TN 1990 Nov. 1990 25-40 years
Commerce Square Apartments Associates L.P.
Smyrna, DE 1990 Dec. 1990 40 years
West 132nd Development Partnership
New York, NY 1990 Dec. 1990 40 years
Site H Development Co.
Brookyn, NY 1990 Dec. 1990 27.5 years
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 1990 Dec. 1990 35 years
Diamond Phase II Venture
Philadelphia, PA 1990 Dec. 1990 40 years
Bookbindery Associates
Philadelphia, PA 1990 Dec. 1990 40 years
The Hamlet, LTD.
Boynton, FL 1990 Dec. 1990 27.5 years
Stop 22 Limited Partnership
Santurce, PR 1990 Dec. 1990 27.5-31.5 years
Knob Hill Apartments, LTD.
Greenville, TN 1990 Dec. 1990 25-40 years

Initial Cost to Partnership Cost Capitalized
Carrying --------------------------- Subsequent to
Amount of Buildings and Acquisition:
Description Mortgages Land Improvements Improvements
- - ------------------------------------------- ------------ ----------- ------------- ---------------

Conifer James Street Associates
Syracuse, NY 2,475,893 57,034 0 4,453,384
Longfellow Heights Apartments, L.P.
Kansas City, MO 4,103,670 0 7,739,692 214,109
------------ ----------- ------------ ------------

$198,396,239 $12,730,274 $183,175,038 $108,745,575
============ =========== ============ ============

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

Conifer James Street Associates
Syracuse, NY 61,139 4,449,279 4,510,418 1,133,672
Longfellow Heights Apartments, L.P.
Kansas City, MO 204 7,953,597 7,953,801 1,428,880
----------- ------------ ------------ -----------

$12,894,634 $291,756,253 $304,650,887 $74,148,437
=========== ============ ============ ===========

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

Conifer James Street Associates
Syracuse, NY 1990 Dec. 1990 15-27.5 years
Longfellow Heights Apartments, L.P.
Kansas City, MO 1991 Mar. 1991 15-40 years

(a) Personal property is depreciated primarily by the straight-line method over
the estimated useful life ranging from 5 to 10 years
(b) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight-line method over the estimated useful
life determined by the Partnership date of acquisition.

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

Balance at beginning of period $303,796,120 $332,529,029 $331,283,225 $63,453,107 $61,814,023 $49,956,736
Additions during period:
Improvements 999,886 819,881 1,290,504
Depreciation expense 10,713,309 11,108,603 11,885,729
Deductions during period:
Loss on impairment 29,552,315 0 9,469,214 0
Dispositions 145,119 475 44,700 17,979 305 28,442
------------ ------------ ------------ ----------- ----------- -----------
Balance at close of period $304,650,887 $303,796,120 $332,529,029 $74,148,437 $63,453,107 $61,814,023
============ ============ ============ =========== =========== ===========

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