FORM 10-K            

               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

(Mark One)

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

For the fiscal year ended December 31, 1995

OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934  [NO FEE REQUIRED]

For the transition period from              to           

Commission File Number 0-15665

AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
(Exact name of registrant as specified
	in its Pooling and Servicing Agreement)

Nebraska           		                       47-0700551    
(State or other jurisdiction of		           (I.R.S. Employer 
 incorporation or organization)		            Identification No.)

Commission File Number: 0-15854

AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its Agreement of Limited Partnership)

Delaware                              	     47-0700550   
(State or other jurisdiction of		           (I.R.S. Employer 
 incorporation or organization)              Identification No.)


Suite 400, 1004 Farnam Street,
Omaha, Nebraska                             68102          
(Address of principal executive offices)			 (Zip Code)

(402) 444-1630
(Registrants' telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

     None

Securities Registered Pursuant to Section 12(g) of the Act:

     Exchangeable Passthrough Certificates representing assigned general 
     partnership interests in America First Participating/Preferred Equity 
     Mortgage Fund (the "Certificates")

	    Exchangeable Units representing assigned limited partnership interests in 
     America First Participating/Preferred Equity Mortgage Fund Limited 
     Partnership (the "Units")





<PAGE>                               -i-
     Indicate by check mark whether the registrants (1) have 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 
registrants were required to file such reports) and (2) have 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 (229.405 of the chapter) is not contained herein, 
and will not be contained, to the best of the 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]

     The Certificates are not currently being traded in any market.  
Therefore, the Certificates had neither a market selling price nor an average 
bid and asked price within the 60 days prior to the date of this filing.  The 
aggregate market value of the Units on March 18, 1996, based on the final 
sales price per Unit as reported in The Wall Street Journal on March 19, 
1996, was $45,888,703.


























































<PAGE>                               -ii-
                     DOCUMENTS INCORPORATED BY REFERENCE
                                     None
                              TABLE OF CONTENTS

                                                                           Page
                                                                               
                                                                               
                                    PART I                                     
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .   2
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .   2
                                                                               
                                   PART II                                     
                                                                               
Item 5. Market for Registrant's Common Equity and                              
        Related Stockholder Matters . . . . . . . . . . . . . . . . . . . .   2
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . .   4
Item 7. Management's Discussion and Analysis of Financial Condition and        
        Results of Operations . . . . . . . . . . . . . . . . . . . . . . .   4
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . .  10
Item 9. Changes in and Disagreements With Accountants on Accounting and        
        Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . .  10
                                                                               
                                   PART III                                    
                                                                               
Item 10. Directors and Executive Officers of the Registrant . . . . . . . .  10
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .  11
Item 12. Security Ownership of Certain Beneficial Owners and Management . .  12
Item 13. Certain Relationships and Related Transactions . . . . . . . . . .  12
                                                                               
                                   PART IV                                     
                                                                               
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 12
                                                                               
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30








































<PAGE>                               -iii-
                                    PART I

     Item 1.  Business.  America First Participating/Preferred Equity Mortgage
Fund (the "Fund"), a Nebraska general partnership, was formed pursuant to a 
Pooling and Servicing Agreement dated November 20, 1986, to invest principally 
in federally-insured first mortgages on multifamily residential properties, 
including retirement living centers, and in securities collateralized by first 
mortgages on single-family and multifamily residential properties.  The Fund 
also invested in Preferred Equity Participations ("PEPs") in the form of 
limited partnership interests in the limited partnerships which own the 
financed properties and in the form of participating mortgages.  America First 
Participating/Preferred Equity Mortgage Fund Limited Partnership (the 
"Partnership") was formed as a limited partnership on November 20, 1986, under 
the Delaware Revised Uniform Limited Partnership Act to act as managing 
partner of the Fund.  The Fund and the Partnership are referred to 
collectively herein as the "Registrants."  The Registrants' business 
objectives are to provide investors (i) safety and preservation of capital, 
(ii) regular cash distributions and (iii) a potential for an enhanced yield 
from participations in the net cash flow and net capital appreciation from the 
financed properties received under the terms of the PEPs.

     A total of 5,722,527 Units were sold at $20 per Unit and a total of 100 
Certificates were sold at $50,000 per Certificate for total capital 
contributions of $111,178,590 after the payment of certain organization and 
offering costs.

     Through December 31, 1995, the Fund had acquired: (i) ten mortgage-backed 
securities guaranteed as to principal and interest by the Government National 
Mortgage Association (the "GNMA Certificates") collateralized by first 
mortgage loans on multifamily housing properties located in seven states and 
five GNMA Certificates backed by pools of single-family mortgages; (ii) a 
first mortgage loan insured by the Federal Housing Administration (the "FHA 
Loan") on a retirement living center located in California; (iii) limited 
partnership interests ("PEPs") in 11 limited partnerships which own the 
multifamily housing properties financed by the GNMA Certificates and the FHA 
Loan; and, (iv) two participating first mortgage loans (the "Participating 
Loans") on multifamily housing properties financed in part by an affiliated 
mortgage fund.  The FHA Loan and six GNMA Certificates collateralized by 
multifamily properties have been repaid by GNMA or the Department of Housing 
and Urban Development which left the Fund with only the PEPs on these 
properties.  The Fund acquired the entire equity interest in the PEPs holding 
three multifamily properties.  The Fund continues to own all the equity in two 
of these properties and the third property was acquired by GNMA through 
foreclosure.  During 1995, another property in which the Fund held a PEP was 
sold at a foreclosure auction in conjunction with bankruptcy proceedings and 
the Fund withdrew as a limited partner of another property in which the Fund 
held a PEP.  Accordingly, the Fund no longer holds a PEP in either of these 
properties.  Collectively, the four remaining GNMA Certificates, six remaining 
PEPs, two real estate properties and two Participating Loans are referred to 
as the "Permanent Investments."

     The GNMA Certificates and the FHA Loan provide the Registrants with 
monthly payments of principal and interest which are either guaranteed by the 
Government National Mortgage Association or insured by the Federal Housing 
Administration.  The Partnership Interests and the Participating Loan 
(collectively, the "PEPs") are intended to provide the Registrants with a base 
return plus a participation in the net cash flow and net capital appreciation 
of the underlying real estate properties.  Therefore, the return to the 
Registrants depends, in part, on the economic performance of the real estate 
financed by the PEPs.  A description of the Permanent Investments acquired by 
the Fund (and the properties financed thereby) appears in Notes 4, 5, 6 and 7 
to the Notes to Combined Financial Statements filed in response to Item 8 
hereof.  The Partnership has no significant assets other than its general 
partner interest in the Fund.

     The Registrants are engaged solely in the business of providing financing 
for the acquisition and improvement of real estate.  Accordingly, the 
presentation of information about industry segments is not applicable and 
would not be material to an understanding of the Registrants' business taken 
as a whole.

     The Registrants have no employees.  Certain services are provided to the 
Registrants by employees of America First Companies L.L.C. which is the 
general partner of the general partner of the Partnership, and the Fund 


<PAGE>                               -1- 
reimburses America First Companies L.L.C. for such services at cost. The 
Registrants are not charged and do not reimburse for the services performed by 
managers and officers of America First Companies L.L.C.

     Item 2.  Properties.  Neither Registrant directly owns or leases any 
physical properties.  However, the Fund initially acquired PEPs in 11 limited 
partnerships which were formed to own multifamily housing projects.  Under the 
terms of the limited partnership agreements, the Fund has removed the general 
partners of seven of these partnerships.  In three cases, the Fund acquired 
the general partners' interest in the limited partnerships in addition to its 
PEP.  Accordingly, the Fund became the indirect owner of the entire equity 
interest in these properties and began accounting for them as investments in 
real estate.  One of these properties was foreclosed upon by GNMA in 1989 and, 
therefore, the Fund no longer holds an interest in this property.  In the 
remaining four limited partnerships, a substitute limited partner was admitted 
and acquired a portion of the removed general partner's interest.  The Fund 
continued to own PEPs in these properties until 1995 when one of the 
properties was sold in foreclosure and the Fund withdrew as the limited 
partner from another property.  Accordingly the Fund continues to hold PEPs in 
six multifamily properties.  Descriptions of the multifamily properties in 
which the Fund owns indirect equity interests are set forth in Notes 5 and 6 
to the Combined Financial Statements filed in response to Item 8 hereof.

     The only assets of the Partnership consist of its general partner 
interest in the Fund.

     Item 3.  Legal Proceedings.  There are no other material pending legal 
proceedings to which the Registrants or any of their property is subject.

     Item 4.  Submission of Matters to a Vote of Security Holders.  No matter 
was submitted during the fourth quarter of the fiscal year ending December 31, 
1995 to a vote of the Registrants' security holders.

                                   PART II

     Item 5.  Market for Registrant's Common Equity and Related Stockholder 
Matters.

		   (a)	Market Information.  There is no established public market for the 
Certificates.  The Units trade on The NASDAQ Stock Market under the trading 
symbol "AFPFZ."  The following table sets forth the high and low sale prices 
for the Units for each quarterly period from January 1, 1994, through December 
31, 1995.

<TABLE>
<CAPTION>
                                        Sale Prices      
                                   ----------------------
              1994                 High           Low    
              <S>                  <C>            <C>     
              1st Quarter          $10-1/4        $ 8-5/8
              2nd Quarter          $ 9-3/4        $ 8-3/4
              3rd Quarter          $ 9-1/4        $ 8-1/8
              4th Quarter          $ 8-5/8        $ 7    
                                                         
              1995                                       
              1st Quarter          $ 9-1/8        $ 8-1/8
              2nd Quarter          $ 8-7/8        $ 7-3/4
              3rd Quarter          $ 8-7/8        $ 8    
              4th Quarter          $ 8-7/8        $ 8    
</TABLE>

     (b)	Investors.  The approximate number of Unit Holders on December 31, 
1995, was 4,662, and there was one Certificate Holder as of that date.

     (c)	Distributions.  Cash distributions are being made on a monthly basis. 
Total cash distributions paid or accrued to Certificate Holders and Unit 
Holders during the fiscal years ended December 31, 1995, and December 31, 
1994, equaled $6,196,298 and $6,275,297, respectively.  The cash distributions 
paid per Certificate and per Unit during the fiscal years ended December 31, 
1995, and December 31, 1994, were as follows:





<PAGE>                               -2-
<TABLE>
<CAPTION>
                                    Per Certificate             
                          Year Ended              Year Ended
                       December 31, 1995       December 31, 1994
                       -----------------       -----------------
<S>                    <C>                     <C>              
Income                     $1,426.95               $1,537.88    
Return of Capital           1,222.05                1,111.12    
                       -----------------       -----------------
Total                      $2,649.00               $2,649.00    
                       =================       =================
</TABLE>
<TABLE>
<CAPTION>
                                       Per Unit                
                          Year Ended              Year Ended
                       December 31, 1995       December 31, 1994
                       -----------------       -----------------
<S>                    <C>                     <C>              
Income                     $  .5708                $  .6151     
Return of Capital             .4888                   .4445     
                       -----------------       -----------------
Total                      $ 1.0596                $ 1.0596     
                       =================       =================
</TABLE>

     See Item 7, Management's Discussion and Analysis of Financial Conditions 
and Results of Operations, for information regarding the sources of funds used 
for cash distributions and for a discussion of factors, if any, which may 
adversely affect the Registrants' ability to make cash distributions at the 
same levels in 1996 and thereafter.












































<PAGE>                               -3-
     Item 6.  Selected Financial Data.  Set forth below is selected financial 
data for the Fund and the Partnership.  The information set forth below should 
be read in conjunction with the combined financial statements and notes to 
combined financial statements filed in response to Item 8 hereof.
<TABLE>
<CAPTION>
                                                        For the         For the         For the         For the         For the
                                                     Year Ended      Year Ended      Year Ended      Year Ended      Year Ended
                                                  Dec. 31, 1995   Dec. 31, 1994   Dec. 31, 1993   Dec. 31, 1992   Dec. 31, 1991
                                                  -------------   -------------   -------------   -------------   ------------- 
<S>                                               <C>             <C>             <C>             <C>             <C>           
Mortgage and mortgage-backed securities 
  income                                          $   3,398,068   $   3,488,646   $   4,035,182   $   4,464,692   $   3,819,705 
Equity in earnings of property partnerships             148,589         203,318         285,208         246,982         223,849
Rental income                                         2,334,465    	  2,268,649       2,189,546       2,166,104       2,076,698
Gain on sale of mortgage-backed securities                 -	      	       -       	       -       	       -            370,284
Interest income on participating loans                  251,157         264,904         268,633         266,216         254,685
Interest income on temporary cash investments
  and U.S. government securities                        408,645         374,521         284,652         243,394       1,321,667
General and administrative expenses                    (834,594)       (647,772)       (785,128)       (760,903)       (802,772)
Real estate operating expenses                       (1,155,052)     (1,044,385)     (1,116,833)       (973,726)     (1,032,424)
Depreciation                                           (337,598)       (502,358)       (463,046)       (569,476)       (571,022)
Interest expense                                       (841,815)       (721,906)       (609,667)       (622,902)       (473,252)
                                                  -------------   -------------   -------------   -------------   -------------
Net income                                        $   3,371,865   $   3,683,617   $   4,088,547   $   4,460,381   $   5,187,418 
                                                  =============   =============   =============   =============   =============
Net income per exchangeable unit                  $         .57   $         .62   $         .68   $         .75   $         .87
                                                  =============   =============   =============   =============   =============
Net income per passthrough certificate            $    1,426.95   $    1,537.88   $    1,699.55   $    1,872.22   $	   2,163.47
                                                  =============   =============   =============   =============   =============
Cash distributions paid or accrued per                                                                                           
  exchangeable unit                               $      1.0596   $      1.0596   $      1.0596   $      1.0596   $      3.1121
                                                  =============   =============   =============   =============   =============
Cash distributions paid or accrued per                                                                                           
  passthrough certificate                         $    2,649.00   $    2,649.00   $    2,649.00   $    2,649.00   $    7,780.25
                                                  =============   =============   =============   =============   =============
Investment in U.S. government securities          $   5,025,000   $        -      $        -      $        -      $        -   
                                                  =============   =============   =============   =============   =============
Investment in mortgage and                                                                                                      
  mortgage-backed securities                      $  43,103,240   $  45,810,512   $  46,851,694   $  50,413,119   $  49,070,601
                                                  =============   =============   =============   =============   =============
Investment in PEPs, net of valuation allowance    $     325,517   $     449,510   $     469,176   $     462,766   $     537,190
                                                  =============   =============   =============   =============   =============
Investment in real estate                         $   6,668,864   $   6,970,972   $   7,473,330   $   7,936,376   $   8,386,064
                                                  =============   =============   =============   =============   =============
Investment in participating loans, net of                                                                                        
  valuation allowance                             $   2,960,000   $   2,960,000   $   2,960,000   $   2,960,000   $   2,960,000
                                                  =============   =============   =============   =============   =============
Total assets                                      $  64,566,103   $  67,833,181   $  69,994,829   $  72,067,829   $  74,105,486
                                                  =============   =============   =============   =============   =============
Mortgage notes payable                            $   9,614,760   $   9,614,760   $   9,614,760   $   9,614,760   $   9,614,760
                                                  =============   =============   =============   =============   =============
</TABLE>

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

Liquidity and Capital Resources

The Fund originally acquired: (i) ten mortgage-backed securities guaranteed as 
to principal and interest by the Government National Mortgage Association 
(GNMA) collateralized by first mortgage loans on multifamily housing 
properties located in seven states, GNMA Certificates backed by pools of 
single-family mortgages (the GNMA Certificates); (ii) a first mortgage loan 
insured by the Federal Housing Administration (the FHA Loan) on a retirement 
living center located in California; (iii) limited partnership interests 
(PEPs) in eleven limited partnerships which own the multifamily properties 
financed by the GNMA Certificates and the FHA Loan; and (iv) two participating 
first mortgage loans (the Participating Loans) on multifamily housing 
properties financed in part by an affiliated mortgage fund.  The FHA Loan and 
six of the GNMA Certificates secured by multifamily properties have been 
repaid which left the Fund with only the PEPs on these properties.  Under the 
terms of the limited partnership agreements for the PEPs, the Fund has removed 
the general partners of seven of the limited partnerships owning multifamily 
properties.  In three cases, the Fund acquired the general partners' interest 
in the limited partnerships in addition to its PEP.  Accordingly, the Fund 
<PAGE>                                -4- 
became the indirect owner of the entire equity interest in these properties 
and began accounting for them as investments in real estate (the "Real Estate 
Interests").  One of these properties was foreclosed upon by GNMA in 1989 and, 
therefore, the Fund no longer holds an interest in this property.  In the 
remaining four limited partnerships, a substitute limited partner was admitted 
and acquired a portion of the removed general partner's interest.  The Fund 
continued to own PEPs in these properties until 1995 when Casa Sandoval was 
sold in foreclosure and the Fund withdrew as the limited partner from 
Moonraker Apartments.  As a result of the foregoing, the Fund continues to 
hold four GNMA Certificates, six PEPs, two Real Estate Interests and two 
Participating Loans.

The following table shows the occupancy levels of the properties financed by 
the Fund in which the Fund continues to hold an interest at December 31, 1995:
<TABLE>
<CAPTION>
                                                                                                    Number          Percentage
                                                                                Number            of Units            of Units
 Property Name                               Location                         of Units            Occupied            Occupied
-------------------------------------        ------------------         --------------      --------------      --------------
<S>                                          <C>                        <C>                 <C>                 <C>           
 The Parklane                                Salt Lake City, UT                     94                  86                 91%
 Grand Villa                                 Grand Junction, CO                     46                  46                100%
 Cambridge Court                             Kearney, NE                            41                  41                100%
 Hickory Villa                               Omaha, NE                              57                  48                 84%
 Harmony Bay Apartments                      Roswell, GA                           300                 272                 91%
 Timber Cove Apartments                      Decatur, IA                           272                 237                 87%
 Meadow Brook Apartments (1)                 Amelia, OH                            168                 142                 85%
 Morrowood Townhouses (1)                    Morrow, GA                            264                 259                 98%
 Avalon Ridge                                Renton, WA                            356                 280                 79%
 Jackson Park Place                          Fresno, CA                            296                 272                 92%
                                                                        --------------      --------------      --------------
                                                                                 1,894               1,683                 89%
                                                                        ==============      ==============      ==============
</TABLE>
(1)Property acquired in settlement of PEP.						

DISTRIBUTIONS

Cash distributions paid or accrued were as follows:
<TABLE>
<CAPTION>
                                                  For the Year Ended          For the Year Ended          For the Year Ended  
                                                    Dec. 31, 1995               Dec. 31, 1994               Dec. 31, 1993     
                                                ----------------------      ----------------------      ----------------------
                                                                   Per                         Per                         Per
                                                Per Unit   Certificate      Per Unit   Certificate      Per Unit   Certificate
                                                --------   -----------      --------   -----------      --------   -----------
<S>                                             <C>        <C>              <C>        <C>              <C>        <C>        
Regular monthly distributions                                                                                                 
 Income distributed                             $ .5708    $ 1,426.95       $ .6151    $ 1,537.88       $ .6798    $ 1,699.55 
 Return of capital                                .4888      1,222.05         .4445      1,111.12         .3798        949.45 
                                                --------   -----------      --------   -----------      --------   -----------
                                                $1.0596    $ 2,649.00       $1.0596    $ 2,649.00       $1.0596    $ 2,649.00 
                                                ========   ===========      ========   ===========      ========   ===========
Distributions                                                                                                                 
 Paid out of current and                                                                                                      
   prior undistributed cash flow                $1.0596    $ 2,649.00       $1.0596    $ 2,649.00       $1.0596    $ 2,649.00 
                                                ========   ===========      ========   ===========      ========   ===========
</TABLE>

Regular monthly distributions to investors consist primarily of interest and 
principal received on mortgage-backed securities.  Additional cash for 
distributions is received from PEPs and other investments.  The Fund may draw 
on reserves to pay operating expenses or to supplement cash distributions to 
investors.  The Fund is permitted to replenish its reserves through the sale 
or refinancing of assets.  During 1995, a net amount of $777,828 of 
undistributed mortgage principal payments was placed in reserves.  In 
addition, the Fund withdrew $962,741 from reserves to purchase 110,060 
Exchangeable Units (Units) during 1995.  The total amount held in reserves at 
December 31, 1995, was $34,418,105 of which $32,839,361 was invested in GNMA 
and FNMA Certificates and U.S. government securities.




<PAGE>                                -5-
The Fund believes that cash provided by operating and investing activities 
and, if necessary, withdrawals from the Fund's reserves will be adequate to 
meet its short-term and long-term liquidity requirements, including the 
payments of distributions to investors.  The Fund has no other internal or 
external sources of liquidity.  Under the terms of the Pooling and Servicing 
agreement, the Fund is not authorized to enter into short-term or long-term 
debt financing arrangements or issue additional Units or Certificates to meet 
short-term and long-term liquidity requirements.

Asset Quality

The Fund continues to receive the full amount of monthly principal and 
interest payments on its GNMA and FNMA Certificates.  The GNMA and FNMA 
Certificates are fully guaranteed as to principal and interest by GNMA and 
FNMA, respectively.  The obligations of GNMA are backed by the full faith and 
credit of the United States government.

PEPs and Participating Loans, however, are not insured or guaranteed.  The 
value of these investments is a function of the value of the real estate 
underlying the PEPs or collateralizing the Participating Loans.  It is the 
policy of the management of the Fund to make a periodic review of the real 
estate underlying the PEPs or collateralizing the Participating Loans in order 
to establish, when necessary, valuation reserves on investments in PEPs and 
Participating Loans.  The allowance for losses on investments in PEPs is based 
on the fair value of the properties underlying the PEPs.  A reserve for the 
Participating Loans is established for the difference between the recorded 
investment in the Participating Loans and the fair value of the underlying 
collateral.  

The fair value of the properties underlying the PEPs and the collateral for 
the Participating Loans is based on management's best estimate of the net 
realizable value of such properties; however, the ultimate realized values may 
vary from these estimates.  The net realizable value of the properties is 
determined based on the discounted estimated future cash flows from the 
properties, including estimated sales proceeds.  The calculation of discounted 
estimated future cash flows includes certain variables such as the assumed 
inflation rates for rents and expenses, capitalization rates and discount 
rates.  These variables are supplied to management by an independent real 
estate appraisal firm based upon local market conditions for each property.  
In certain cases, additional factors such as the replacement value of the 
property or comparable sales of similar properties are also taken into 
consideration.  The allowances are periodically reviewed and adjustments are 
made to the allowances when there are significant changes in the estimated net 
realizable value of the properties underlying the PEPs or the underlying 
collateral for the loans.

Based on the foregoing methodology, valuations and reviews performed during 
1995 indicated that the investment in PEPs and Participating Loans recorded on 
the balance sheet at December 31, 1995, required no adjustments to their 
carrying amounts.

The Parklane

The Parklane, a retirement living center located in Salt Lake City, Utah, had 
an average occupancy rate of 96% during 1995, compared to 99% during 1994.  
Cash flow from operations of the property has been sufficient to pay debt 
service on the first mortgage loan collateralized by the property and the Fund 
continues to receive timely payment of principal and interest on its GNMA 
Certificate.  However, the Fund received no equity distributions in 1995 from 
the PEP interest in the limited partnership which owns this property and does 
not expect any distributions in 1996.

Grand Villa

Average occupancy at Grand Villa retirement living center, in Grand Junction, 
Colorado, was 81% during 1995, compared to 96% during 1994.  During 1995, the 
net cash provided from the operations of the property was sufficient to pay 
total debt service on the mortgage loan.  In addition to the GNMA payments, in 
1995, the Fund received approximately $79,000 in equity distributions from its 
PEP interest in the partnership which owns the property.  The Fund anticipates 
the property will continue to generate cash flow in excess of debt service in 
1996.




<PAGE>                                -6-
Cambridge Court

Average occupancy at Cambridge Court retirement living center, in Kearney, 
Nebraska, was 96% during 1995, compared to 98% during 1994.  During 1995, the 
net cash provided from the operations of the property was sufficient to pay 
total debt service on the mortgage loan.  In addition to the GNMA payments, in 
1995, the Fund received approximately $11,000 in equity distributions from its 
PEP interest in the partnership which owns the property.  Cash flow from the 
operations of this property is expected to continue to remain sufficient to 
pay debt service on the mortgage loan during 1996.

Hickory Villa

Average occupancy at Hickory Villa retirement living center, in Omaha, 
Nebraska, was 91% during 1995, compared to 95% during 1994.  Cash flow from 
the operations of the property was sufficient to make principal and interest 
payments on the mortgage loan during 1995.  Cash flow from the operations of 
this property is expected to continue to remain sufficient to pay debt service 
on the mortgage loan during 1996.  However, the Fund received no equity 
distribution from the PEP interest in the limited partnership which owns this 
property in 1995 and does not expect any in 1996.

Harmony Bay Apartments

Harmony Bay Apartments, in Roswell, Georgia, had an average occupancy rate of 
93% during 1995, compared to 94% during 1994.  The GNMA Certificate has been 
repaid in full, but the property partnership in which the Fund holds a PEP 
continues to own the property.  However, the Fund received no equity 
distribution from the PEP interest in the limited partnership which owns this 
property in 1995 and does not expect any in 1996.  The mortgage loan on the 
property went into default in 1990.  However, the property partnership entered 
into a Provisional Workout Agreement (PWA) with HUD effective February 1, 
1995.  Under the terms of the PWA, the property is required to make monthly 
payments which increase over the term of the PWA.  Monthly payments are 
currently $57,189 which are sufficient to pay 72% of current interest.  The 
monthly payments increase annually at February 1 at varying amounts to 
$121,123 beginning February 1, 2003, at which point payments will be 
sufficient to pay 153% of current interest.  Any funds over $85,127 remaining 
in the operating account are to be remitted in addition to the scheduled 
monthly payments.  On February 1, 2004, HUD will recast the mortgage and any 
delinquent interest at 9.5% interest amortized over the remaining term of the 
mortgage, providing the mortgagor has fully complied with the terms of the PWA 
and HUD has determined that it is financially feasible.  Under the terms of 
the PWA, HUD was given the option to declare the entire indebtedness due and 
payable at or after February 1, 2005.  Effective May 8, 1995, HUD assigned the 
Deed of Trust to a private mortgagee.  However, the property will continue to 
operate under the PWA.  The property was in compliance with the terms of the 
PWA as of December 31, 1995 and expects to remain in compliance during 1996.

Timber Cove Apartments

Timber Cove Apartments, in Decatur, Illinois, had an average occupancy rate of 
90% during 1995, compared to 88% during 1994.  Cash flow from operations of 
the property has not been sufficient to make principal and interest payments 
and the mortgage loan on the property has been in default since 1990.  The 
GNMA Certificate has been repaid in full, but the property partnership, in 
which the Fund holds a PEP continues to own the property.  However, the Fund 
received no equity distribution from the PEP interest in the limited 
partnership which owns this property in 1995 and does not expect any in 1996.  
The property partnership is continuing negotiations with HUD concerning a 
potential workout agreement that would help the property reestablish its 
financial stability and preserve the Fund's equity position.

Meadow Brook Apartments

Meadow Brook Apartments, in Amelia, Ohio, had an average occupancy rate of 91% 
during 1995, compared to 87% during 1994.  The GNMA Certificate has been 
repaid in full, but the Fund continues to own the property.  The mortgage loan 
on the property went into default in 1990.  However, the property entered into 
a Provisional Workout Agreement (PWA) with HUD effective March 1, 1995, in 
order to help the property reestablish its financial stability.  Under the 
terms of the PWA, the Partnership is required to make monthly payments which 
increase over the term of the PWA.  Monthly payments beginning March 1, 1995, 
are $24,374 which are sufficient to pay 70% of the current interest, service 
charges and taxes.  The monthly payments increase annually at March 1 at 
varying amounts to $38,497 beginning March 1, 2001, at which point payments 
<PAGE>                                -7- 
will be sufficient to pay 120% of current interest, service charge and taxes.  
Any funds over $30,287 remaining in the operating account are to be remitted 
in addition to the scheduled monthly payments.  On February 28, 2004, HUD will 
recast any delinquent interest, principal and other charges at 9.5% interest 
amortized over the remaining term of the mortgage, providing the mortgagor has 
fully complied with the terms of the PWA and HUD has determined that it is 
financially feasible.  Terms of the PWA also forgave past delinquencies in the 
reserve for replacement and accrued late fees payable of $165,775.  The 
property was in compliance with the terms of the PWA as of December 31, 1995 
and expects to remain in compliance during 1996.

Morrowood Townhouses

Morrowood Townhouses, in Morrow, Georgia, had an average occupancy rate of 96% 
during 1995, compared to 94% during 1994.  The GNMA Certificate has been paid 
in full, but the Fund continues to own the property.  The mortgage loan on the 
property went into default in 1989.  However, the property entered into a 
Provisional Workout Agreement (PWA) with HUD effective July 1, 1994.  Under 
the terms of the PWA, the property is required to make monthly payments which 
increase over the term of the PWA.  Monthly payments are currently $44,118 
which are sufficient to pay 92% of current interest.  The monthly payments 
increase annually at July 1 at varying amounts to $57,430 beginning July 1, 
2002, at which point payments will be sufficient to pay 120% of current 
interest.  Additional payments are to be made monthly to reduce previous 
mortgage delinquencies.  The payments adjust annually on July 1 and range 
from $1,215 to $2,350, monthly.  Any funds over $51,237 remaining in the 
operating account are to be remitted in addition to the scheduled monthly 
payments.  On July 1, 2003, HUD will recast any delinquent interest, principal 
and other charges at 9.5% interest amortized over the remaining term of the 
mortgage, providing the mortgagor has fully complied with the terms of the PWA 
and HUD has determined that it is financially feasible.  Under the terms of 
the PWA, HUD was given the option to declare the entire indebtedness due and 
payable at or after July 1, 2004.  Effective May 12, 1995, HUD assigned the 
Deed of Trust to a private mortgagee.  However, the property will continue to 
operate under the PWA.  The property was in compliance with the terms of the 
PWA as of December 31, 1995 and expects to remain in compliance during 1996.

Avalon Ridge

Avalon Ridge Apartments, in Renton, Washington, had an average occupancy rate 
of 84% during 1995 and 1994.  Interest is recognized as income on the Fund's 
Participating Loan on a cash basis.  Interest earned in 1995 was $41,157, 
compared to $54,904 in 1994 and was approximately $83,000 less than the amount 
needed to pay the base interest in 1995.  An affiliate of the Fund's general 
partner began managing this property in September of 1994.  Since that time, 
the property manager has implemented a plan to improve the tenant profile 
through more stringent tenant qualifications.  In addition, management has 
been working to evict some of the current problem tenants.  This has resulted 
in a higher-than-normal turnover of units.  The increase in tenant turnover 
caused an increase of approximately $175,000 in repairs and maintenance expense 
and property improvements.  The majority of the increase was due to expenses 
incurred to prepare apartment units for new rentals.  In order to attract new 
tenants, the property manager has had to decrease rental rates which resulted 
in a decrease in rental income of $137,000 from 1994 to 1995.  This decrease 
in rental income and the $175,000 increase in repairs and maintenance expenses 
were partially offset by a decrease of $53,000 in other operating expenses, 
primarily property taxes.  Thus, net cash flow generated by the property, 
excluding interest, decreased approximately $259,000 from 1994 to 1995.  
Management believes that its efforts will improve future operating results of 
the property.

Jackson Park Place

Jackson Park Place Apartments, in Fresno, California, had an average occupancy 
rate of 96% during 1995, compared to 95% during 1994.  As a result, net cash 
flow, excluding interest, in 1995 increased by approximately $14,000, compared 
to 1994.  Interest of $210,000 earned on the Fund's Participating Loan in 1995 
and 1994 represents the full amount of base interest due for the respective 
year.  No contingent interest was earned in 1995 or 1994 and none is expected 
in 1996.






<PAGE>                                -8-
Results of Operations

The Fund ended its ninth full year of operations on December 31, 1995.  The 
table below compares the results of operations for each year shown.

<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Mortgage and mortgage-backed securities income                          $    3,398,068      $    3,488,646      $    4,035,182
Equity in earnings of property partnerships                                    148,589             203,318             285,208
Rental income                                                                2,334,465           2,268,649           2,189,546
Interest income on participating loans                                         251,157             264,904             268,633
Interest income on temporary cash investments                                                                                  
 and U.S. government securities                                                408,645             374,521             284,652
                                                                        --------------      --------------      --------------
                                                                             6,540,924           6,600,038           7,063,221
                                                                        --------------      --------------      --------------
General and administrative expenses                                            834,594             647,772             785,128
Real estate operating expenses                                               1,155,052           1,044,385           1,116,833
Depreciation                                                                   337,598             502,358             463,046  
Interest expense                                                               841,815             721,906             609,667
                                                                        --------------      --------------      --------------
                                                                             3,169,059           2,916,421           2,974,674
                                                                        --------------      --------------      --------------
Net income                                                              $    3,371,865      $    3,683,617      $    4,088,547
                                                                        ==============      ==============      ==============
</TABLE>

<TABLE>
<CAPTION>
                                                                              Increase            Increase 
                                                                            (Decrease)          (Decrease)
                                                                             From 1994           From 1993 
                                                                        --------------      --------------
<S>                                                                     <C>                 <C>            
Mortgage and mortgage-backed securities income                         $       (90,578)    $      (546,536)
Equity in earnings of property partnerships                                    (54,729)            (81,890)
Rental income                                                                   65,816              79,103 
Interest income on participating loans                                         (13,747)             (3,729)
Interest income on temporary cash investments                                                              
 and U.S. government securities                                                 34,124              89,869 
                                                                        --------------      --------------
                                                                               (59,114)           (463,183)
                                                                        --------------      --------------
General and administrative expenses                                            186,822            (137,356)
Real estate operating expenses                                                 110,667             (72,448)
Depreciation                                                                  (164,760)             39,312
Interest expense                                                               119,909             112,239
                                                                        --------------      --------------
                                                                               252,638             (58,253)
                                                                        --------------      --------------
Net income                                                              $     (311,752)     $     (404,930)
                                                                        ==============      ==============
</TABLE>

The decrease in mortgage and mortgage-backed securities income of $90,578 from 
1994 to 1995 is a result of the continued amortization of the principal 
balances of the GNMA and FNMA Certificates resulting in a decrease in such 
income of approximately $322,600 during 1995.  The decrease during 1995 was 
partially offset by the acquisition of additional GNMA Certificates by the 
Fund during June 1994, which added approximately $232,000 of such income 
during 1995.  The decrease in mortgage and mortgage-backed securities income 
of $546,536 from 1993 to 1994 was a result of a $1,390,000 decrease due to the 
continued amortization of the principal balances of the GNMA and FNMA 
Certificates which was offset by an $843,000 increase in interest attributable 
to the purchase of GNMA and FNMA Certificates during July 1993, December 1993 
and June 1994.

Equity in earnings of property partnerships is a function of the cash flow 
received by the Fund from its PEP interests in the operating partnerships which 
own certain of the properties as well as the Fund's allocable share of earnings
generated by these properties.  Because of an overall decrease in the cash 
<PAGE>                                -9-
flow received by the Fund from these properties, equity in earnings of 
property partnerships decreased by $54,729 from 1994 to 1995, primarily due to 
a decrease in the occupancy of Grand Villa.  Equity in earnings of property 
partnerships decreased by $81,890 from 1993 to 1994 due to a decrease in cash 
flow from the property partnerships.  See discussion of the properties in 
which the Fund holds a PEP in the Asset Quality Section for additional 
information.

The decreases in interest income on participating loans from 1994 to 1995 and 
1993 to 1994 are attributable to the Fund recording income on the Avalon Ridge 
property when it is received.  The rate of interest received, which is lower 
than the base interest rate, fluctuates with the cash flow generated by this 
property.  See discussion of this property in the Asset Quality section for 
additional information.

The increase in interest income on temporary cash investments of $34,124 from 
1994 to 1995 and $89,869 from 1993 to 1994 is attributable to additional cash 
available for investment resulting from the receipt of principal payments on 
GNMA Certificates backed by pools of single family properties.  Principal 
payments have exceeded normal amortization because of increased prepayments of 
the underlying mortgages.

Rental income, net of real estate operating expenses and depreciation, from 
the properties acquired by the Fund in settlement of PEPs increased by 
approximately $120,000 in 1995 and $112,000 in 1994.  The increase from 1994 
to 1995 is due to an increase in rental income resulting from overall higher 
average occupancy and rental rate increases which was partially offset by an 
increase in real estate operating expenses.  The increase in net rental income 
from 1993 to 1994 was due to an increase in rental income resulting from 
higher average occupancy and rental rate increases and a decrease in operating 
expenses, primarily property improvements.  The increases in net rental income 
in 1995 and 1994 were entirely offset by increases in interest paid by the 
Fund on the mortgage loans it has assumed on these properties.  Since interest 
is paid only to the extent of available cash flow from these properties, the 
Fund records additional interest expense as such cash flow increases.

General and administrative expenses increased by $186,822 from 1994 to 1995 
due to increases in: (i) salaries and related expenses of approximately 
$129,000; (ii) administrative fees of approximately $30,000 paid by the Fund 
to the general partner since the PEPs did not generate sufficient cash flow to 
pay the full amount; (iii) legal and accounting fees of approximately $28,000; 
(iv) insurance expense of approximately $10,000; and (v) other expenses of 
approximately $6,000.  These increases were partially offset by a decrease of 
approximately $16,000 in printing and investor servicing expenses. 

General and administrative expenses decreased $137,356 from 1993 to 1994 due 
to decreases in: (i) administrative fees of approximately $58,000 paid to the 
general partner; (ii) salaries and related expenses of approximately $52,000; 
(iii) printing fees of approximately $19,000; (iv) legal and accounting fees 
of approximately $11,000; and (v) other expenses or approximately $6,000.  
These decreases were partially offset by an increase of approximately $9,000 
in insurance expense.

     Item 8.  Financial Statements and Supplementary Data.  The Combined 
Financial Statements and supporting schedules of the Registrants are set forth 
in Item 14 hereof and are incorporated herein by reference.

     Item 9.  Changes in and Disagreements With Accountants on Accounting and 
Financial Disclosure.  There were no disagreements with the Registrants' 
independent accountants on accounting principles and practices or financial 
disclosure during the fiscal years ended December 31, 1995 and 1994. 

                                   PART III

   Item 10.  Directors and Executive Officers of Registrants.  The Registrants 
have no managers or officers.  Management of the Fund consists of the 
Partnership which is the managing general partner of the Fund.  Management of 
the Partnership consists of the general partner of the Partnership, America 
First Capital Associates Limited Partnership Three ("AFCA") and its general 
partner, America First Companies L.L.C.  The following individuals are the 
managers and officers of America First Companies L.L.C, and each serves for a 
term of one year.




<PAGE>                                -10-
Name	                       Position Held			                Position Held Since
-----------------------     ----------------------------    -------------------
                                                                               
Michael B. Yanney           Chairman of the Board,	                1987        
                    	         President, Chief Executive               
                    	         Officer and Manager                      
Michael Thesing	            Vice President, Secretary,	            1987
                    	         Treasurer and Manager                    
William S. Carter, M.D.  	  Manager	                               1994
George Kubat	               Manager	                               1994
Martin Massengale	          Manager	                               1994
Alan Baer	                  Manager	                               1994
Gail Walling Yanney	        Manager	                               1996

     Michael B. Yanney, 62, is the Chairman and President of America First 
Companies L.L.C.  From 1977 until the organization of the first such fund in 
1984, Mr. Yanney was principally engaged in the ownership and management of 
commercial banks.  Mr. Yanney also has investments in private corporations 
engaged in a variety of businesses.  From 1961 to 1977, Mr. Yanney was 
employed by Omaha National Bank and Omaha National Corporation (subsequently 
merged into FirsTier Financial, Inc.), where he held various positions, 
including the position of Executive Vice President and Treasurer of the 
holding company.  Mr. Yanney also serves as a member of the boards of 
directors of Burlington Northern Santa Fe Corporation, Forest Oil Corporation, 
MFS Communications Company, Inc., Lozier Corporation, Mid-America Apartment 
Communities, Inc., and PKS Information Services, Inc.

     Michael Thesing, 41, has been Vice President and Chief Financial Officer 
of affiliates of America First Companies L.L.C. since July 1984.  From January 
1984 until July 1984, he was employed by various companies controlled by Mr. 
Yanney.  He was a certified public accountant with Coopers & Lybrand from 1977 
through 1983.

     William S. Carter, M.D., 69, is a retired physician.  Dr. Carter 
practiced medicine for 30 years in Omaha, Nebraska, specializing in 
otolaryngology (disorders of the ears, nose and throat).

     George Kubat, 50, is the President and Chief Executive Officer of 
Phillips Manufacturing Co., an Omaha, Nebraska, based manufacturer of drywall 
and construction materials.  Prior to assuming that position in November 1992, 
Mr. Kubat was a certified public accountant with Coopers & Lybrand in Omaha, 
Nebraska, from 1969.  He was the tax partner in charge of the Omaha office from 
1981 to 1992.

     Martin Massengale, 62, is the President Emeritus of the University of 
Nebraska.  Prior to becoming President in 1991, he served as Interim President 
from August 1989, as Chancellor of the University of Nebraska Lincoln from 
June 1981 through December 1990 and as Vice Chancellor for Agriculture and 
Natural Resources from 1976 to 1981.  Prior to that time, he was a professor 
and associate dean of the College of Agriculture at the University of 
Arizona.  Dr. Massengale currently serves on the board of directors of Woodmen 
Accident & Life Insurance Company.

     Alan Baer, 73, is presently Chairman of Alan Baer & Associates, Inc., a 
management company located in Omaha, Nebraska.  He is also Chairman of Lancer 
Hockey, Inc., Baer Travel Services, Wessan Telemarketing, Total Security 
Systems, Inc. and several other businesses.  Mr. Baer is the former Chairman 
and Chief Executive Officer of the Brandeis Department Store chain which was, 
until its acquisition, one of the larger retailers in the Midwest.  Mr. Baer 
has also owned and served on the board of directors of several banks in 
Nebraska and Illinois.  

     Gail Walling Yanney, 60, is a retired physician.  Dr. Walling practiced 
anesthesia and was most recently the Executive Director of the Clarkson 
Foundation until October of 1995.  In addition, she is a former director of 
FirsTier Bank, N.A., Omaha.  Ms. Yanney is the wife of Michael Yanney.

     Item 11.  Executive Compensation.  Neither the Registrants nor AFCA has 
any directors or officers.  None of the managers or executive officers of 
America First Companies L.L.C. (the general partner of AFCA) receives 
compensation from the Registrants and AFCA receives no reimbursement from the 
Registrant for any portion of their salaries.  Remuneration paid by the Fund 
to AFCA pursuant to the terms of its pooling and servicing agreement during 
the year ending December 31, 1995, is described in Note 9 of the Notes to 
Combined Financial Statements filed in response to Item 8 hereof.

<PAGE>                                -11- 
     Item 12.  Security Ownership of Certain Beneficial Owners and Management. 

     (a) No person is known by Registrants to own beneficially more than 5% of 
the Units.  One hundred percent of the Certificates are owned by National Bank 
of Detroit as trustee for the K Mart Corporation Employee Welfare Benefit 
Plan, 611 Woodward Avenue, Detroit, Michigan 48232.

     (b)	William S. Carter, M.D. owns 3,500 units.  No other manager or 
officer of America First Companies L.L.C. and no partner of AFCA owns any 
Certificates or Units.

     (c)	LB I Group, Inc. is the special limited partner of AFCA, with the 
right to become the managing general partner of AFCA, or to designate another 
corporation or other entity as the managing general partner, upon the 
happening of any of the following events: (1) the commission of any act which, 
in the opinion of LB I Group, Inc., constitutes negligence, misfeasance or 
breach of fiduciary duty on the part of the managing general partner, (2) the 
dissolution, insolvency or bankruptcy of the managing general partner or the 
occurrence of such other events which cause the managing general partner to 
cease to be a general partner under Delaware law, or (3) the happening of an 
event which results in the change in control of the managing general partner 
whether by operation of law or otherwise.

     There exists no other arrangement known to the Registrants, the operation 
of which may at any subsequent date result in a change in control of the 
Registrants.

     Item 13.  Certain Relationships and Related Transactions.  The general 
partner of the Registrants is AFCA and the sole general partner of AFCA is 
America First Companies L.L.C.  

     Except as described herein, neither Registrant is a party to any 
transaction or proposed transaction with AFCA, America First Companies L.L.C. 
or with any person who is (i) a director or executive officer of America First 
Companies L.L.C. or any general partner of AFCA, (ii) a nominee for election 
as a director of America First Companies L.L.C, (iii) an owner of more than 5% 
of the Units or Certificates or (iv) a member of the immediate family of any 
of the foregoing persons.

     During 1995, the Registrants paid or reimbursed AFCA or America First 
Companies L.L.C. $582,010 for certain costs and expenses incurred in 
connection with the operation of the Registrants, including legal and 
accounting fees and investor communication costs, such as printing and mailing 
charges.  See Note 9 to Notes to Combined Financial Statements filed in 
response to Item 8 hereof for a description of these costs and expenses. 	AFCA 
is entitled to an annual administrative fee equal to .35% of the Fund's 
outstanding investments which is paid by the Fund to the extent such amounts 
are not paid by property owners.  AFCA earned $248,129 in such administrative 
fees during 1995, and of such amount, the Fund paid $215,033.

     An affiliate of AFCA has been retained to provide property management 
services for Morrowood Townhouses, Avalon Ridge and Harmony Bay Apartments.  
The fees for services provided represent the lower of:  (i) costs incurred in 
providing management of the property; or, (ii) customary fees for such 
services determined on a competitive basis.  Total fees amounted to $155,167 
in 1995.

                                   PART IV

     Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:

     1.	Financial Statements.  The following financial statements are included 
in response to Item 8 of this report:

   		Independent Accountants' Report dated March 26, 1996.

     Combined Balance Sheets of Registrants as of December 31, 1995, and 
     December 31, 1994.

     Combined Statements of Income of Registrants for the years ended December 
     31, 1995, December 31, 1994, and December 31, 1993.

     Combined Statements of Partners' Capital of Registrants for the years 
     ended December 31, 1995, December 31, 1994, and December 31, 1993.

<PAGE>                                -12- 
     Combined Statements of Cash Flows of Registrants for the years ended 
     December 31, 1995, December 31, 1994, and December 31, 1993.

		   Notes to Combined Financial Statements of Registrants.

     2.	Financial Statement Schedules.  The information required to be set 
forth in the financial statement schedules is shown in the Notes to Combined 
Financial Statements filed in response to Item 8 hereof.

     3.	Exhibits.  The following exhibits were filed as required by Item 14(c) 
of this report.  Exhibit numbers refer to the paragraph numbers under Rule 601 
of Regulation S-K:

     3(a).	Articles of Incorporation and Bylaws of America First Fiduciary 
Corporation Number Six (incorporated herein by reference to Form 10-K dated 
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act 
of 1934 by America First Participating/Preferred Equity Mortgage Fund Limited 
Partnership (Commission File No. 0-15854)).

     3(b).	Articles of Incorporation and Bylaws of America First Fiduciary 
Corporation Number Seven (incorporated herein by reference to Form 10-K, dated 
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act 
of 1934 by America First Participating/Preferred Equity Mortgage Fund 
(Commission File No. 0-15665)).

     4(a).	Agreement of Limited Partnership dated November 20, 1986, 
(incorporated herein by reference to Form 10-K dated December 31, 1986, filed 
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by 
America First Participating/Preferred Equity Mortgage Fund Limited Partnership 
(Commission File No. 0-15854)).

     4(b).	Form of Certificate of Exchangeable Unit (incorporated by reference 
to Form S-11 Registration Statement filed February 24, 1986, with the 
Securities and Exchange Commission by America First Participating/Preferred 
Equity Mortgage Fund Limited Partnership (Commission File No. 33-3566)).

     4(c).	Pooling and Servicing Agreement dated November 20, 1986, (including 
as an exhibit thereto the Form of Exchangeable Passthrough Certificate) 
(incorporated herein by reference to Form 10-K dated December 31, 1986, filed 
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by 
America First Participating/Preferred Equity Mortgage Fund (Commission File 
No. 0-15665)).

     10(a).	$18,667,000 Deed of Trust Note, dated December 1, 1987, of Casa 
Sandoval Investors, a California Limited Partnership (incorporated by 
reference to Form 10-K dated December 31, 1987, filed pursuant to Section 13 of 
the Securities Exchange Act of 1934 by America First Participating/Preferred 
Equity Mortgage Fund (Commission File No. 0-15665)).

     10(b).	Deed of Trust, dated December 1, 1987, of Casa Sandoval Investors, 
a California Limited Partnership (incorporated by reference to Form 10-K dated 
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act 
of 1934 by America First Participating/Preferred Equity Mortgage Fund 
(Commission File No. 0-15665)).

     10(c).	Assignment of Mortgage Loan and Related Documents, dated December 
1, 1987, from America First Mortgage Corp. to FirsTier Bank, National 
Association as custodian for the Registrant (incorporated by reference to Form 
10-K dated December 31, 1987, filed pursuant to Section 13 of the Securities 
Exchange Act of 1934 by America First Participating/Preferred Equity Mortgage 
Fund (Commission File No. 0-15665)).

24.	Power of Attorney.

     (b)	The Registrant did not file any reports on Form 8-K during the last 
quarter of the period covered by this report.










<PAGE>                                -13- 
INDEPENDENT ACCOUNTANTS' REPORT

To the Partners
America First Participating/Preferred Equity Mortgage Fund
and
America First Participating/Preferred Equity Mortgage Fund Limited Partnership:

We have audited the accompanying combined balance sheets of America First 
Participating/Preferred Equity Mortgage Fund and America First 
Participating/Preferred Equity Mortgage Fund Limited Partnership as of 
December 31, 1995 and 1994, and the related combined statements of income, 
partners' capital and cash flows for each of the three years in the period 
ended December 31, 1995.  These combined financial statements are the 
responsibility of the Fund's management.  Our responsibility is to express an 
opinion on these combined 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 combined financial statements 
are free of material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the combined 
financial statements.  An audit also includes assessing the accounting 
principles used and significant estimates made by management, as well as 
evaluating the overall combined financial statement presentation.  We believe 
that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present 
fairly, in all material respects, the financial position of America First 
Participating/Preferred Equity Mortgage Fund and America First 
Participating/Preferred Equity Mortgage Fund Limited Partnership as of 
December 31, 1995 and 1994, and the results of their operations and their cash 
flows for each of the three years in the period ended December 31, 1995, in 
conformity with generally accepted accounting principles.





Omaha, Nebraska	       						            Coopers & Lybrand L.L.P.
March 26, 1996						                                


                                         

































<PAGE>                               -14-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                             Dec. 31, 1995       Dec. 31, 1994
                                                                                            --------------      --------------
<S>                                                                                         <C>                 <C>            
Assets                                                                                                                        
 Cash and temporary cash investments, at cost which approximates market value               $    2,573,156      $    7,806,496
 Investment in U.S. government securities (Note 8)                                               5,025,000                -   
 Investment in mortgage-backed securities (Note 4)                                              43,103,240          45,810,512
 Investment in preferred equity participations (PEPs), net of valuation allowance (Note 5)         325,517             449,510
 Investment in real estate (Note 6)                                                              6,668,864           6,970,972
 Investment in participating loans, net of valuation allowance (Note 7)                          2,960,000           2,960,000
 Interest receivable                                                                               374,487             359,225
 Investment evaluation fees, net                                                                   610,477             633,515
 Other assets                                                                                    2,925,362           2,842,951
                                                                                            --------------      --------------
                                                                                            $   64,566,103      $   67,833,181
                                                                                            ==============      ==============
Liabilities and Partners' Capital                                                                                             
 Liabilities                                                                                                                  
  Accounts payable (Note 9)                                                                 $      316,778     $       551,365
  Distributions payable (Note 3)                                                                 1,029,143           1,048,974
  Mortgage notes payable (Note 10)                                                               9,614,760           9,614,760
                                                                                            --------------      --------------
                                                                                                10,960,681          11,215,099
                                                                                            --------------      --------------
 Partners' Capital                                                                                                            
  General Partner                                                                                      100                 100
  Passthrough Certificate Holder ($23,060 per certificate in 1995 and $23,901 in 1994)           2,305,965           2,390,147
  Exchangeable Unit Holders ($9.22 per unit in 1995 and $9.56 in 1994)                          51,299,357          54,227,835
                                                                                            --------------      --------------
                                                                                                53,605,422          56,618,082
                                                                                            --------------      --------------
                                                                                            $   64,566,103      $   67,833,181
                                                                                            ==============      ==============

The accompanying notes are an integral part of the combined financial statements.
</TABLE>


































<PAGE>                               -15-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Income                                                                                                                        
 Mortgage and mortgage-backed securities income (Note 4)                $    3,398,068      $    3,488,646      $    4,035,182
 Equity in earnings of property partnerships (Note 5)                          148,589             203,318             285,208
 Rental income                                                               2,334,465           2,268,649           2,189,546
 Interest income on participating loans (Note 7)                               251,157             264,904             268,633
 Interest income on temporary cash investments                                                                                  
  and U.S. government securities                                               408,645             374,521             284,652
                                                                        --------------      --------------      --------------
                                                                             6,540,924           6,600,038           7,063,221
                                                                        --------------      --------------      --------------
Expenses                                                                                                                      
 General and administrative expenses (Note 9)                                  834,594             647,772             785,128
 Real estate operating expenses                                              1,155,052           1,044,385           1,116,833
 Depreciation                                                                  337,598             502,358             463,046  
 Interest expense                                                              841,815             721,906             609,667
                                                                        --------------      --------------      --------------
                                                                             3,169,059           2,916,421           2,974,674
                                                                        --------------      --------------      --------------
Net income                                                              $    3,371,865      $    3,683,617      $    4,088,547
                                                                        ==============      ==============      ==============
Net income allocated to:                                                                                                      
 General Partner                                                        $       34,064      $       40,484      $       62,434
 Exchangeable Unit Holders                                                   3,195,130           3,489,345           3,856,158
 Passthrough Certificate Holder                                                142,671             153,788             169,955
                                                                        --------------      --------------      --------------
                                                                        $    3,371,865      $    3,683,617      $    4,088,547
                                                                        ==============      ==============      ==============
Net income per exchangeable unit                                        $          .57      $          .62      $          .68
                                                                        ==============      ==============      ==============
Net income per passthrough certificate                                  $     1,426.95      $     1,537.88      $     1,699.55
                                                                        ==============      ==============      ==============
Weighted average number of units outstanding                                 5,597,771           5,672,327           5,672,327
                                                                        ==============      ==============      ==============
Weighted average number of certificates outstanding                                100                 100                 100
                                                                        ==============      ==============      ==============

The accompanying notes are an integral part of the combined financial statements.
</TABLE>



























<PAGE>                               -16-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF PARTNERS' CAPITAL
FROM DECEMBER 31, 1992, TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
                                                          Passthrough Certificate         Exchangeable Unit                   
                                                                   Holders                     Holders                        
                                                         --------------------------   -------------------------               
                                               General           # of                                                         
                                               Partner   Certificates        Amount   # of Units         Amount          Total
                                              --------   ------------  ------------   ----------   ------------   ------------
<S>                                           <C>        <C>           <C>            <C>          <C>            <C>         
Partners' Capital (excluding net unrealized
    holding gains)
 Balance at December 31, 1992                 $    100            100  $  2,596,205    5,672,327   $ 58,903,126   $ 61,499,431 
 Net income                                     62,434             -        169,955         -         3,856,158      4,088,547 
 Cash distributions paid or accrued (Note 3)   (62,434)            -       (264,901)        -        (6,010,397)    (6,337,732)
                                              --------   ------------  ------------   ----------   ------------   ------------
 Balance at December 31, 1993                      100            100     2,501,259    5,672,327     56,748,887     59,250,246 
 Net income                                     40,484             -        153,788         -         3,489,345      3,683,617 
 Cash distributions paid or accrued (Note 3)   (40,484)            -       (264,900)        -        (6,010,397)    (6,315,781)
                                              --------   ------------  ------------   ----------   ------------   ------------
 Balance at December 31, 1994                      100            100     2,390,147    5,672,327     54,227,835     56,618,082 
 Net income                                     34,064             -        142,671         -         3,195,130      3,371,865 
 Cash distributions paid or accrued (Note 3)   (34,064)            -       (264,900)        -        (5,931,398)    (6,230,362)
 Purchase of 110,060 units (Note 8)               -                -          3,268     (110,060)      (966,009)      (962,741)
                                              --------   ------------  ------------   ----------   ------------   ------------
                                                   100            100     2,271,186    5,562,267     50,525,558     52,796,844
                                              --------   ------------  ------------   ----------   ------------   ------------
Net unrealized holding gains 
 Balance at December 31, 1994                     -                -           -            -              -              -
 Net change                                       -                -         34,779         -           773,799        808,578
                                              --------   ------------  ------------   ----------   ------------   ------------
                                                  -                -         34,779         -           773,799        808,578
                                              --------   ------------  ------------   ----------   ------------   ------------
Balance at December 31, 1995                  $    100            100  $  2,305,965    5,562,267   $ 51,299,357   $ 53,605,422 
                                              ========   ============  ============   ==========   ============   ============

The accompanying notes are an integral part of the combined financial statements.
</TABLE>


































<PAGE>                               -17-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Cash flows from operating activities                                                                                          
 Net income                                                             $    3,371,865      $    3,683,617      $    4,088,547 
 Adjustments to reconcile net income to                                                                                       
  net cash from operating activities:                                                                                          
   Equity in earnings of property partnerships                                (148,589)           (203,318)           (285,208)
   Depreciation                                                                337,598             502,358             463,046 
   Amortization of discount on mortgage-backed and                                                                            
    U.S. government securities                                                 (72,975)            (39,831)            (56,043)
   Decrease (increase) in interest receivable                                  (15,262)             26,369              29,060
   Amortization of investment evaluation fees                                   23,038              23,036              23,037
   Increase in other assets                                                    (82,411)           (684,541)           (144,890)
   Increase (decrease) in accounts payable                                    (234,587)              1,149             119,519
                                                                        --------------      --------------      --------------
  Net cash provided by operating activities                                  3,178,677           3,308,839           4,237,068
                                                                        --------------      --------------      --------------
Cash flows from investing activities                                                                                           
 Acquisition of U.S. government securities                                  (4,937,891)               -                   -   
 Mortgage principal payments received                                        3,512,331           8,980,410          15,621,198
 Acquisition of mortgage-backed securities                                     (10,615)         (7,899,397)        (12,003,730)
 Distributions received from PEPs                                              272,582             222,984             278,798 
 Investment in real estate                                                     (35,490)               -                   -   
                                                                        --------------      --------------      --------------
  Net cash provided by (used in) investing activities                       (1,199,083)          1,303,997           3,896,266
                                                                        --------------      --------------      --------------
Cash flows from financing activities                                                                                        
 Purchase of Units                                                            (962,741)               -                   -   

 Distributions paid                                                         (6,250,193)         (5,846,414)         (6,281,066)
                                                                        --------------      --------------      --------------
  Net cash used in financing activities                                     (7,212,934)         (5,846,414)         (6,281,066)
                                                                        --------------      --------------      --------------
Net increase (decrease) in cash and temporary cash investments              (5,233,340)         (1,233,578)          1,852,268
Cash and temporary cash investments at beginning of year                     7,806,496           9,040,074           7,187,806
                                                                        --------------      --------------      --------------
Cash and temporary cash investments at end of year                      $    2,573,156      $    7,806,496      $    9,040,074
                                                                        ==============      ==============      ==============
Supplemental disclosure of cash flow information                                                                              
  Cash paid during the period for interest                              $      841,815      $      721,906      $      609,667
                                                                        ==============      ==============      ==============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
























<PAGE>                               -18-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. Organization

America First Participating/Preferred Equity Mortgage Fund (the Fund) was 
formed on November 20, 1986, as a Nebraska general partnership for the purpose 
of acquiring a portfolio of federally-insured multifamily mortgages or other 
investments including preferred equity participations (PEPs).  PEPs consist 
of equity interests which are intended to provide the Fund with a 
participation in the net cash flow and net sale or refinancing proceeds of the 
properties collateralizing the mortgage loans.  America First 
Participating/Preferred Equity Mortgage Fund Limited Partnership (the 
Partnership) was also formed on November 20, 1986, under the Delaware Revised 
Uniform Limited Partnership Act to serve as the managing general partner of 
the Fund.  The Fund and the Partnership will continue in existence until 
December 31, 2036, unless terminated earlier under the provisions of the 
Pooling and Servicing Agreement forming the Fund and the Partnership Agreement 
forming the Partnership.  The General Partner of the Partnership is America 
First Capital Associates Limited Partnership Three (AFCA 3).

2. Summary of Significant Accounting Policies

 A)Method of Accounting
   The financial statements include the combined statements of the Fund and 
   the Partnership.  The combined financial statements are prepared on the 
   accrual basis of accounting in accordance with generally accepted accounting 
   principles.

   The preparation of financial statements in conformity with generally 
   accepted accounting principles requires management to make estimates and 
   assumptions that affect the reported amounts of assets and liabilities and 
   disclosure of contingent assets and liabilities at the date of the 
   financial statements and the reported amounts of revenues and expenses 
   during the reporting period.  Actual results could differ from those 
   estimates.

 B)Investments in Mortgage-Backed Securities, U.S. Government Securities and 
    Participating Loans

   On January 1, 1994, the Fund adopted Statement of Financial Accounting    
   Standard No. 115 "Accounting for Certain Investments in Debt and Equity    
   Securities" (FAS 115).  FAS 115 requires that investment securities be    
   classified as held-to-maturity, available-for-sale, or trading.  Under FAS
   115, investments classified as held-to-maturity are carried at amortized    
   cost.  Investments classified as available-for-sale are reported at 
   fair value with any unrealized gains or losses excluded from earnings 
   and reflected as a separate component of partners' capital.  Subsequent 
   increases and decreases in the net unrealized gain/loss on the 
   available-for-sale securities are reflected as adjustments to the carrying
   value of the portfolio and adjustments to the component of partners' 
   capital.  The Fund does not have investment securities classified as 
   trading.  FAS 115 had no impact to partners' capital or earnings prior to 
   June 30, 1995, since all investment securities were classified as 
   held-to-maturity.  As described in Note 4, on June 30, 1995, the Fund 
   reclassified certain investment securities from the held-to-maturity 
   category to the available-for-sale category.

  	The investment in Participating Loans is recorded at cost and reduced by    
   principal payments received.  Participating Loans are not insured or    
   guaranteed.  The value of these investments is a function of the value of
   the real estate collateralizing the Participating Loans.  Interest income on 
   Participating Loans is excluded from income when, in the opinion of    
   management, collection of such interest is doubtful.  This interest is    
   recognized as income when it is received.

 C)Investment in Preferred Equity Participations (PEPs)

  	The investment in PEPs consist of interests in limited partnerships which 
   own the properties underlying the mortgage-backed securities and are
   accounted for using the equity method.  PEPs are not insured or guaranteed.
   The value of these investments is a function of the value of the real estate
   underlying the PEPs.
<PAGE>                               -19-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

D)Allowance for Losses on Investment in PEPs and Participating Loans

 	The allowance for losses on investments in PEPs is a valuation reserve which 
  has been established at a level that management feels is adequate to absorb
  potential losses on investments in PEPs.  The allowance is based on the fair
  value of the properties underlying the PEPs.

  The allowance for losses on Participating Loans is a valuation reserve 
  which has been established at a level that management feels is adequate to 
  absorb potential losses on outstanding loans.  Reserves are established for 
  loans which management considers impaired.  Loans are considered impaired 
  when it is probable that the Fund will be unable to collect amounts due 
  according to the contractual terms of the loan agreements.  Based on this 
  analysis, all loans were considered impaired at December 31, 1995.  A 
  reserve is established for the difference between the recorded investment in 
  the Participating Loans and the fair value of the underlying collateral.
  
  The fair value of the properties underlying the PEPs and the collateral for 
  the Participating Loans is based on management's best estimate of the net 
  realizable value of such properties; however, the ultimate realized values 
  may vary from these estimates.  The net realizable value of the properties is 
  determined based on the discounted estimated future cash flows from the 
  properties, including estimated sales proceeds.  The calculation of discounted
  estimated future cash flows includes certain variables such as the assumed 
  inflation rates for rents and expenses, capitalization rates and discount 
  rates.  These variables are supplied to management by an independent real 
  estate appraisal firm based upon local market conditions for each property.  
  In certain cases, additional factors such as the replacement value of the 
  property or comparable sales of similar properties are also taken into 
  consideration.  The allowances are periodically reviewed and adjustments are 
  made to the allowances when there are significant changes in the estimated 
  net realizable value of the properties underlying the PEPs or the underlying
  collateral for the loans.

E)Investment in Real Estate

 	The investment in real estate is recorded at the lower of cost or estimated 
	 net realizable value at the date of acquisition.

F)Depreciation

 	Depreciation of real estate acquired in settlement of PEPs is based on the 
	 estimated useful life of the properties (ranging from 6 to 27 1/2 years) 
	 using the straight-line method.

G)Income Taxes
 
 	No provision has been made for income taxes since each Exchangeable Unit 
	 Holder or Passthrough Certificate Holder is required to report their share 
	 of the Partnership's or Fund's income for federal and state income tax 
	 purposes.  The reported amounts of the Fund's assets and liabilities 
  exceeded the tax basis by $5,956,079 and $10,394,969 at December 31, 1995,
  and December 31, 1994, respectively.

H)Temporary Cash Investments

 	Temporary cash investments are invested in short-term debt securities 
	 purchased with original maturities of three months or less.

I)Investment Evaluation Fees

 	The investment evaluation fees were incurred in connection with the 
	 acquisition of assets.  These fees are being amortized over the life of the 
	 Fund.

J)Net Income Per Exchangeable Unit and Passthrough Certificate

	 Net income per Exchangeable Unit and Passthrough Certificate is allocated 
	 based on the weighted average number of exchangeable units and passthrough 
	 certificates outstanding during each year presented.
<PAGE>                               -20-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

K)New Accounting Pronouncement

  The Financial Accounting Standards Board has issued Statement of Financial   
  Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived   
  Assets and for Long-Lived Assets to be Disposed of".  Among other things, 
  this Statement requires that long-lived assets and certain identifiable 
  intangibles to be held and used by an entity be reviewed for impairment 
  whenever events or circumstances indicate that the carrying value of an 
  asset may not be recoverable.  The Partnership plans to adopt this Statement 
  in 1996 and anticipates that the adoption of this Statement will not have a 
  material impact on the combined financial statements.

3. Partnership Income, Expenses and Cash Distributions

The Partnership Agreement and the Pooling and Servicing Agreement contain 
provisions for distributing the cash available for distribution and for the 
allocation of income and expenses for tax purposes among AFCA 3 and investors.

Income and expenses are allocated to each investor on a monthly basis based on 
the number of exchangeable units or passthrough certificates held by each 
investor as of the last day of the month for which such allocation is to be 
made.

Net income from operations will generally be allocated between investors and 
AFCA 3 in accordance with cash distributions from regular monthly payments on 
investments.  Net income arising from sale or refinancing proceeds will 
generally be allocated first to AFCA 3 in an amount equal to the sale or 
refinancing proceeds distributed to AFCA 3 and the balance will be allocated 
to the investors.  Net income arising from both operations and sale or 
refinancing proceeds, however, may be specially allocated to AFCA 3 to the 
extent that prior allocations of net income from sale or refinancing proceeds 
are insufficient to match distributions arising from sale or refinancing 
proceeds.  Net losses, for tax purposes, will be allocated 99% to investors 
and 1% to AFCA 3.

Cash distributions representing return of capital (other than sale or 
refinancing proceeds) are allocated 100% to investors.  Cash distributions 
representing income (other than sale or refinancing proceeds) from investments 
during each distribution period are allocated in the following order of 
priority:  (i) 99% to investors and 1% to AFCA 3 until investors receive from 
all sources a cumulative noncompounded return of 9% per annum on their 
adjusted capital contributions; (ii) 90% to investors and 10% to AFCA 3 until 
investors receive from all sources a cumulative noncompounded return of 11% 
per annum on their adjusted capital contributions; and thereafter, (iii) 95% 
to investors and 5% to AFCA 3.

Cash distributions representing sale or refinancing proceeds are allocated in 
the following order of priority:  (i) 100% to investors until investors 
receive aggregate cash distributions from all sources equal to a full return 
of investment; (ii) 99% to investors and 1% to AFCA 3 until investors have 
received from all sources a full return of investment plus a cumulative 
noncompounded return of 9% per annum on their adjusted capital contributions; 
(iii) 90% to investors and 10% to AFCA 3  until investors have received from 
all sources a full return of investment plus a cumulative noncompounded return 
of 11% per annum on their adjusted capital contributions; and thereafter, (iv) 
95% to investors and 5% to AFCA 3.

Cash distributions are presently made on a monthly basis but may be made 
quarterly if AFCA 3 so elects.  The cash distributions included in the 
combined financial statements represent the actual cash distributions made 
during each year and the cash distributions accrued at the end of each year.

4. Investment in Mortgage-Backed Securities

The mortgage-backed securities held by the Partnership represent Government 
National Mortgage Association (GNMA) Certificates and Federal National 
Mortgage Association (FNMA) Certificates.  The GNMA Certificates are backed by 
first mortgage loans on multifamily residential properties and pools of single- 
family properties.  The FNMA Certificates are backed by pools of single-family 
properties.  The GNMA Certificates are debt securities issued by a private 
<PAGE>                               -21-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

mortgage lender and are guaranteed by GNMA as to the full and timely payment 
of principal and interest on the underlying loans.  The FNMA Certificates are 
debt securities issued by FNMA and are guaranteed by FNMA as to the full and 
timely payment of principal and interest on the underlying loans.

On June 30, 1995, the Fund transferred all GNMA and FNMA Certificates held in 
the reserve account from the held-to-maturity classification to the 
available-for-sale classification (see Note 8).  

At December 31, 1995, the total amortized cost, gross unrealized holding gains 
and aggregate fair value of held-to-maturity securities were $15,288,879, 
$529,439 and $15,818,318, respectively.

At December 31, 1994, the total amortized cost, gross unrealized holding 
gains, gross unrealized holding losses and aggregate fair value of 
held-to-maturity securities were $45,810,512, $155,875, $1,547,616 and 
$44,418,771, respectively.

Descriptions of the Fund's mortgage-backed securities at December 31, 1995, 
are as follows:

<TABLE>
<CAPTION>
                                                                                                                      Income
                                                          Number  Interest         Maturity      Carrying             Earned
Type of Security and Name            Location           of Units      Rate             Date        Amount            in 1995
----------------------------------   ------------------ --------  --------     ------------  ------------       ------------
<S>                                  <C>                <C>       <C>           <C>           <C>                <C>         
Held-to-Maturity                                                                                                          
 GNMA Certificates:                                                                                                       
  The Parklane                       Salt Lake City, UT      94     9.25%        03/15/2029  $  6,421,567       $    595,119
  Grand Villa                        Grand Junction, CO      46     9.25%        03/15/2029     2,000,362             92,691 (3)
  Cambridge Court                    Kearney, NE             41     9.25%        02/15/2029     1,951,783             90,442 (3)
  Hickory Villa                      Omaha, NE               57     9.25%        02/15/2029     2,526,874            234,182
  Pools of single-family properties                                 9.58% (1)          2017     2,337,957            255,032
  Pools of single-family properties                                 9.62% (1)  2016 to 2017        50,336              5,513
                                                                                             ------------       ------------
                                                                                               15,288,879          1,272,979
                                                                                             ------------       ------------
Available-for-Sale                                                                                                           
 GNMA Certificates:                                                                                                       
  Pools of single-family properties                                 8.56% (1)  2016 to 2020     3,393,641 (2)        305,590
  Pools of single-family properties                                 9.30% (1)          2021     1,953,202 (2)        215,864
  Pools of single-family properties                                 8.76% (1)          2021     1,296,052 (2)        123,039
  Pools of single-family properties                                 8.76% (1)          2021       596,682 (2)         61,118
  Pools of single-family properties                                 8.25% (1)  2021 to 2022     2,811,962 (2)        223,450
  Pools of single-family properties                                 6.50% (1)          2023     4,629,795 (2)        311,895
  Pools of single-family properties                                 6.03% (1)          2008     2,582,943 (2)        162,919
  Pools of single-family properties                                 7.13% (1)          2009     7,216,934 (2)        527,688
 FNMA Certificates:                                                                                                           
  Pools of single-family properties                                 5.52% (1)          2000     3,333,150 (2)        193,526
                                                                                             ------------       ------------
                                                                                               27,814,361          2,125,089
                                                                                             ------------       ------------
Balance at December 31, 1995                                                                 $ 43,103,240       $  3,398,068
                                                                                             ============       ============
</TABLE>
(1)Represents yield to the Fund.
(2)Reserve account asset - see Note 8.
(3)Mortgage income has been reduced due to the elimination of the Fund's share 
    of interest received from the PEP partnerships.









<PAGE>                               -22-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
                                                                        <C>                 <C>                 <C>           
Reconciliation of the carrying amount of the mortgage-backed                                                                  
 securities is as follows:                                                                                                    
Balance at beginning of year                                            $   45,810,512      $   46,851,694      $   50,413,119
 Additions                                                                                                                    
  Acquisition of mortgage-backed securities                                     10,615           7,899,397          12,003,730
  Amortization of discount on mortgage-backed securities                        26,726              39,831              56,043
  Net unrealized holding gains on available-for-sale securities                767,718                -                   -   
 Deduction                                                                                                                    
  Mortgage principal payments received                                      (3,512,331)         (8,980,410)        (15,621,198)
                                                                        --------------      --------------      --------------
Balance at end of year                                                  $   43,103,240      $   45,810,512      $   46,851,694
                                                                        ==============      ==============      ==============
</TABLE>

5. Investment in Preferred Equity Participations (PEPs)

The PEPs consist of interests in limited partnerships which own properties 
financed by the Fund.  The limited partnership agreements provide for a 
participation in the net cash flow and net sale or refinancing proceeds of the 
properties subject to various priority payments. 

Descriptions of the PEPs held at December 31, 1995, are as follows:

<TABLE>
<CAPTION>
                                                                                                                     Equity in
                                                                                                                      Earnings
                                                                                                    Amount         of Property
Name                       Location               Partnership Name                                 of PEPs        Partnerships
----------------------     ------------------     --------------------------------------    --------------      --------------
<S>                        <C>                    <C>                                       <C>                 <C>           
Harmony Bay Apartments     Roswell, GA            Harmony Bay Associates, Ltd.              $      887,388      $         -   
Timber Cove Apartments     Decatur, IL            Timber Cove Associates                            50,019                -   
Grand Villa                Grand Junction, CO     Stazier Associates Grand Junction Ltd.           214,523              57,689
Cambridge Court            Kearney, NE            Stazier Associates Kearney Ltd.                  127,855              90,900
Hickory Villa              Omaha, NE              Stazier Associates Omaha Ltd.                       -                   -   
The Parklane               Salt Lake City, UT     Congregate Care Company                             -                   -   
                                                                                            --------------      --------------
                                                                                                 1,279,785      $      148,589
Less valuation allowance                                                                          (954,268)     ==============
                                                                                            --------------
Balance at December 31, 1995                                                                $      325,517
                                                                                            ==============
</TABLE>



















<PAGE>                               -23-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
                                                                        <C>                 <C>                 <C>           
Reconciliation of the carrying amount of the PEPs is as follows:                                                             
Balance at beginning of year                                            $    4,203,793      $    4,223,459      $    4,217,049
 Addition                                                                                                                    
  Equity in earnings of property partnerships                                  148,589             203,318             285,208
 Deductions                                                                                                                    
  Distributions received from PEPs                                            (272,582)           (222,984)           (278,798)
  Write-offs (1)                                                            (2,800,015)               -                   -
                                                                        --------------      --------------      --------------
Balance at end of year                                                  $    1,279,785      $    4,203,793      $    4,223,459
                                                                        ==============      ==============      ==============
The following summarizes the activity in the valuation allowance:                                                             
Balance at beginning of year                                            $    3,754,283      $    3,754,283      $    3,754,283
 Write-offs (1)                                                             (2,800,015)               -                   -   
                                                                        --------------      --------------      --------------
Balance at end of year                                                  $      954,268      $    3,754,283      $    3,754,283
                                                                        ==============      ==============      ==============
</TABLE>
(1)The Fund no longer holds a PEP investment in Casa Sandoval or the Villages 
    at Moonraker.  During 1995, Casa Sandoval was sold at a foreclosure 
    auction and the Fund withdrew as a limited partner of the operating 
    partnership which owns the Villages at Moonraker.  Therefore, the 
    valuation allowance previously established for the full amount of these 
    PEP investments was written off.

<TABLE>
<CAPTION>
                                                                                  1995                1994                1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Combined condensed financial information for the PEPs is as follows:                                                          
Assets                                                                                                                        
 Real estate                                                            $   21,764,899      $   51,438,474      $   51,205,777
 Restricted deposits and funded reserves                                       644,429           2,021,659             742,886
 Other assets                                                                2,614,643           3,417,931           7,936,506
                                                                        --------------      --------------      --------------
                                                                        $   25,023,971      $   56,878,064      $   59,885,169
                                                                        ==============      ==============      ==============
Liabilities and Partners' Capital                                                                                             
 Liabilities                                                                                                                  
  Mortgage and notes payable                                            $   28,582,989      $   58,841,803     $    61,343,441
  Other liabilities                                                          3,753,136          12,637,370           5,942,192
 Partners' Capital (Deficit)                                                                                                  
  General Partners                                                          (7,134,537)        (17,494,365)        (10,352,799)
  Limited Partners                                                                                                           
   Other                                                                    (1,457,402)         (1,310,537)         (1,271,124)
   America First Participating/Preferred Equity Mortgage Fund                1,279,785           4,203,793           4,223,459
                                                                        --------------      --------------      --------------
                                                                        $   25,023,971      $   56,878,064      $   59,885,169
                                                                        ==============      ==============      ==============
</TABLE>

<TABLE>
<CAPTION>
                                                                                  1995                1994                1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Rental income                                                           $   10,009,582      $   13,591,876      $   10,882,195
                                                                        ==============      ==============      ==============
Combined results of operations                                          $   (1,413,339)     $   (3,638,218)     $   (5,266,230)
                                                                        ==============      ==============      ==============
Equity in earnings of property partnerships                             $      148,589      $      203,318      $      285,208
                                                                        ==============      ==============      ==============
</TABLE>
<PAGE>                               -24-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

6. Real Estate Acquired in Settlement of PEPs

The rental income and real estate operating, interest and depreciation 
expenses of the properties owned by the Fund have been consolidated with the 
Fund's operations and are reflected in the combined financial statements.  

Real estate acquired in settlement of PEPs is comprised of the following 
multifamily housing properties:

<TABLE>
<CAPTION>
                                                                                                  Carrying            Carrying
                                                                   Number                         Value at            Value at
Name                                Location                     of Units                    Dec. 31, 1995       Dec. 31, 1994
--------------------------          ------------------           --------                   --------------      --------------
<S>                                 <C>                               <C>                   <C>                 <C>           
Meadow Brook Apartments             Amelia, OH                        168                   $    3,470,774      $    3,470,774
Morrowood Townhouses                Morrow, GA                        264                        6,001,956           5,966,466 
                                                                                            --------------      -------------- 
                                                                                            $    9,472,730      $    9,437,240 
Less accumulated depreciation                                                                   (2,803,866)         (2,466,268)
                                                                                            --------------      -------------- 
                                                                                            $    6,668,864      $    6,970,972 
                                                                                            ==============      ============== 
</TABLE>
<TABLE>
<CAPTION>                                                                                                                    
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
                                                                        <C>                 <C>                 <C>           
Reconciliation of the carrying value of the                                                                                   
 real estate held is as follows:                                                                                              
Balance at beginning of year                                            $    6,970,972      $    7,473,330      $    7,936,376
 Investment in real estate                                                      35,490                -                   -
 Depreciation                                                                 (337,598)           (502,358)           (463,046)
                                                                        --------------      --------------      --------------
Balance at end of year                                                  $    6,668,864      $    6,970,972      $    7,473,330
                                                                        ==============      ==============      ==============
</TABLE>

7.	Investment in Participating Loans

The Participating Loans are collateralized by first mortgages on properties 
jointly financed with America First Tax Exempt Mortgage Fund 2 Limited 
Partnership, whose general partner is an affiliate of AFCA 3.  The 
Participating Loan agreements call for payment of base interest and additional 
interest out of a portion of the net cash flow or net sale or refinancing 
proceeds of the properties.

Descriptions of the Participating Loans held as of December 31, 1995, are as 
follows:
<TABLE>
<CAPTION>
                                                                                                                      Interest
                                                                                                  Carrying           Income on
                                                Number    Interest            Maturity              Amount       Participating
Name                      Location            of Units        Rate (1)            Date            of Loans               Loans
----------------------    ----------------    --------    --------        ------------      --------------      --------------
<S>                       <C>                 <C>         <C>             <C>               <C>                 <C>         
Avalon Ridge              Renton, WA               356         10% (2)        09/01/99      $    1,245,000      $       41,157
Jackson Park Place        Fresno, CA               296         10%            09/01/99           2,100,000             210,000
                                                                                            --------------      --------------
                                                                                                 3,345,000      $      251,157
Valuation allowance to net realizable value                                                       (385,000)     ==============
                                                                                            --------------
Balance at end of year                                                                      $    2,960,000 
                                                                                            ==============
</TABLE>
<PAGE>                               -25-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

(1)In addition to the base interest rate, the notes bear additional contingent
    	interest which, when combined with the base interest, is limited to a
 	   cumulative, non-compounded amount not greater than 13% per annum.  The
     Fund did not receive any additional contingent interest in 1995, 1994 or
     1993.
 (2)Interest is recognized as income on the cash basis which is at a rate lower
    	than the base interest rate.  The amount of foregone interest was $83,343
     for 1995, $69,596 for 1994 and $65,867 for 1993.

<TABLE>
<CAPTION>                                                                                                                    
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1995       Dec. 31, 1994       Dec. 31, 1993
                                                                        --------------      --------------      --------------
                                                                        <C>                 <C>                 <C>           
The following summarizes the activity in the valuation allowance:                                                             
Balance at beginning and end of year                                    $      385,000      $      385,000      $      385,000
                                                                        ==============      ==============      ==============
</TABLE>

8.	Fund Reserve Account

The Fund maintains a reserve account which consisted of the following:
<TABLE>
<CAPTION>
                                                    Dec. 31, 1995  
                                                    -------------
<S>                                                 <C>                      
Cash and temporary cash investments                 $   1,578,744 
U.S. government securities                              5,025,000   
GNMA Certificates                                      24,481,211
FNMA Certificates                                       3,333,150
                                                    -------------
Balance at end of year                              $  34,418,105 
                                                    ============= 
</TABLE>

The reserve account was established to maintain working capital for the Fund 
and is available to supplement distributions to investors and for any 
contingencies related to the ownership of the investments and the operation of 
the Fund.  The U.S. government securities mature in 1996, the GNMA 
Certificates mature between 2008 and 2023 and the FNMA Certificates mature in 
2000.

During the quarter ended June 30, 1995, the Partnership reassessed the 
appropriateness of the classification of securities held in the reserve 
account.  The Partnership concluded, given the nature of the reserve account, 
it would be more appropriate to classify securities held in the reserve 
account as available-for-sale rather than as held-to-maturity.  Accordingly, 
on June 30, 1995, the Partnership transferred all securities held in the 
reserve account from the held-to-maturity classification to the 
available-for-sale classification.  The total amortized cost, gross unrealized 
holding gains, gross unrealized holding losses and the aggregate fair value of 
the securities transferred were $33,950,530, $617,701, $241,388 and 
$34,326,843, respectively.

At December 31, 1995, the total amortized cost, gross unrealized holding 
gains, gross unrealized holding losses and the aggregate fair value of 
available-for-sale securities were $32,030,783, $851,198, $42,620 and 
$32,839,361 respectively.

On September 12, 1990, June 7, 1995 and July 25, 1995, management announced 
its intent to utilize a portion of the reserve account to acquire a maximum of 
200,000 Exchangeable Units (Units) in the over-the-counter market.  As of 
December 31, 1995, 160,260 Units (110,060 during 1995) had been acquired at a 
total cost of $1,529,382 ($962,741 during 1995).



<PAGE>                               -26-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

9.	Transactions with Related Parties

Substantially all of the Fund's general and administrative expenses are paid 
by AFCA 3 or an affiliate and reimbursed by the Fund.  The amounts of such 
expenses reimbursed to AFCA 3 or an affiliate are shown below.  The amounts 
are presented on a cash basis and do not reflect accruals made at the end of 
each year.

<TABLE>
<CAPTION>
                                                                                  1995                1994                1993
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>            
Reimbursable salaries and benefits                                      $      380,301      $      264,544      $      270,761
Investor services and custodial fees                                            54,967              67,470              69,806
Professional fees and expenses                                                  52,846              32,776              28,661
Insurance                                                                       21,333              15,917               4,189
Report preparation and distribution                                             20,973              23,812              39,049
Registration fees                                                               16,666              15,031              11,411
Consulting and travel expenses                                                   5,235               6,990              17,439
Telephone                                                                        8,729               7,538              10,009
Other expenses                                                                  20,960              15,314               7,323
Stock certificates                                                                -                    592               1,403
                                                                        --------------      --------------      --------------
                                                                        $      582,010      $      449,984      $      460,051
                                                                        ==============      ==============      ==============
</TABLE>

AFCA 3 is entitled to an administrative fee of .35% per annum of the 
outstanding amount of investments of the Fund to be paid by the Fund to the 
extent such amount is not paid by property owners.  AFCA 3 earned 
administrative fees of $248,129 in 1995, $255,687 in 1994 and $262,361 in 
1993.  Of such amounts, $215,033, $184,373 and $241,721 were paid by the Fund 
during 1995, 1994, and 1993, respectively, and the remainder was paid by 
property owners.  

An affiliate of AFCA 3 provided property management services for Morrowood 
Townhouses beginning in November 1992, Avalon Ridge beginning in September 
1994, and Harmony Bay Apartments beginning in June 1995.  The fees for 
services provided represent the lower of: (i) costs incurred in providing 
management of the property; or, (ii) customary fees for such services 
determined on a competitive basis.  Total fees amounted to $155,167 in 1995, 
$56,486 in 1994 and $54,524 in 1993. 

10. Mortgage Notes Payable

The Fund assumed the following mortgage notes as a result of the acquisition 
of real estate in settlement of PEPs.

<TABLE>
<CAPTION>
                                                                                    
                                      Interest          Maturity             Monthly            Balance at          Balance at
Collateral                                Rate              Date             Payment         Dec. 31, 1995       Dec. 31, 1994
------------------------------        --------        ----------        ------------        --------------      --------------
<S>                                   <C>             <C>               <C>                 <C>                 <C>           
Meadow Brook Apartments                  9.50%        11/25/2022        $     24,374        $    3,569,236      $    3,569,236
Morrowood Townhouses                     9.50%        11/19/2022              44,118             6,045,524           6,045,524
                                                                                            --------------      --------------
                                                                                            $    9,614,760      $    9,614,760 
                                                                                            ==============      ==============
</TABLE>

These notes are payable to an unaffiliated party and are collateralized solely 
by the foregoing properties. The notes are in default; however, the Fund 
effectively has no risk with respect to the mortgage notes payable since the 
Fund's net equity in the properties has previously been reduced to zero.  
Therefore, for accounting purposes, the Fund records interest expense on these 
notes only when it is paid.

<PAGE>                               -27-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

11.  Fair Value of Financial Instruments

The following methods and assumptions were used by the Fund in estimating the 
fair value of its financial instruments:

  Cash and temporary cash investments:  Fair value approximates the carrying   
  value of such assets.

  Investment in U.S. government securities and mortgage-backed securities:  
  Fair values are based on amounts obtained from an independent pricing source.

  Investment in participating loans:  Fair value is based on management's best 
  estimate of the net realizable value of the underlying collateral of the 
  loans.  See Footnote 2D.

  Mortgage notes payable:  Fair values are not readily determinable as certain 
  terms of the mortgage loans have recently been revised under provisional 
  workout agreements.
<TABLE>
<CAPTION>
                                                                               At December 31, 1995       
                                                                        ----------------------------------
                                                                              Carrying           Estimated
                                                                                Amount          Fair Value      
                                                                        --------------      --------------
<S>                                                                     <C>                 <C>           
    Cash and temporary cash investments                                 $    2,573,156      $    2,573,156
    U.S. government securities                                               5,025,000           5,025,000
    Investment in mortgage-backed securities                                43,103,240          43,632,679
    Investment in participating loans                                        2,960,000           2,960,000
</TABLE>

12. Summary of Unaudited Quarterly Results of Operations
<TABLE>
<CAPTION>
                                                             First              Second               Third              Fourth
From January 1, 1995, to December 31, 1995                 Quarter             Quarter             Quarter             Quarter
                                                    --------------      --------------      --------------      --------------
<S>                                                 <C>                 <C>                 <C>                 <C>            
Total income                                        $    1,644,154      $    1,627,344      $    1,590,634      $    1,678,792
Total expenses                                            (751,884)           (774,208)           (786,091)           (856,876)
                                                    --------------      --------------      --------------      --------------
Net income                                          $      892,270      $      853,136      $      804,543      $      821,916
                                                    ==============      ==============      ==============      ==============
Net income per exchangeable unit                    $          .15      $          .14      $          .14      $          .14
                                                    ==============      ==============      ==============      ==============
Net income per passthrough certificate              $       375.03      $       359.68      $       342.13      $       350.11
                                                    ==============      ==============      ==============      ==============
Market Price per BUC                                                                                                          
  High sale                                                  9-1/8               8-7/8               8-7/8               8-7/8
  Low sale                                                   8-1/8               7-3/4               8                   8    
                                                    ==============      ==============      ==============      ==============
</TABLE>

















<PAGE>                               -28-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                             First              Second               Third              Fourth
From January 1, 1994, to December 31, 1994                 Quarter             Quarter             Quarter             Quarter
                                                    --------------      --------------      --------------      --------------
<S>                                                 <C>                 <C>                 <C>                 <C>            
Total income                                        $    1,601,908      $    1,589,033      $    1,640,505      $    1,768,592
Total expenses                                            (664,044)           (716,375)           (694,853)           (841,149)
                                                    --------------      --------------      --------------      --------------
Net income                                          $      937,864      $      872,658      $      945,652      $      927,443
                                                    ==============      ==============      ==============      ==============
Net income per exchangeable unit                    $          .16      $          .14      $          .16      $          .16
                                                    ==============      ==============      ==============      ==============
Net income per passthrough certificate              $       390.34      $       364.73      $       395.20      $       387.61
                                                    ==============      ==============      ==============      ==============
Market Price per BUC                                                                                                          
  High sale                                                 10-1/4               9-3/4               9-1/4               8-5/8
  Low sale                                                   8-5/8               8-3/4               8-1/8               7    
                                                    ==============      ==============      ==============      ==============
</TABLE>

The exchangeable units are quoted on the NASDAQ National Market System under 
the symbol AFPFZ.  The high and low quarterly prices of the exchangeable units 
shown were compiled from the Monthly Statistical Reports provided to the Fund 
by the National Association of Securities Dealers, Inc. and represent final 
sale prices.












































<PAGE>                               -29-
                                  SIGNATURES

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

                            AMERICA FIRST PARTICIPATING/
                            PREFERRED EQUITY MORTGAGE FUND

                            By	America First Participating/
                            			Preferred Equity Mortgage
                              	Fund Limited Partnership,
                              	managing general partner

                            By	America First Capital
                              	Associates Limited Partnership
                              	Three, general partner of America First 
                              	Participating/Preferred Equity Mortgage
                              	Fund Limited Partnership
 
                            By	America First Companies L.L.C, general
                              	partner of America First Capital
                              	Associates Limited Partnership
                              	Three


                            By	/s/ Michael Thesing    
                            			Michael Thesing,
                            			Vice President

Date:  March 27, 1996
 	
                            AMERICA FIRST PARTICIPATING/
                            PREFERRED EQUITY MORTGAGE
                            FUND LIMITED PARTNERSHIP

                            By	America First Capital
                            			Associates Limited Partnership
                            			Three, general partner of America First
                            			Participating/Preferred Equity Mortgage
                            			Fund Limited Partnership

                            By	America First Companies L.L.C, general
                            			partner of America First Capital
                            			Associates Limited Partnership
                            			Three


                            By	/s/ Michael Thesing
                            			Michael Thesing,
                            			Vice President
Date:  March 27, 1996
























<PAGE>                               -30-
     Pursuant to the requirements of the Securities and 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.

Date:  March 27, 1996	      By	/s/ Michael B. Yanney*	
                               Michael B. Yanney
                             		Chairman of the Board, President, Chief
                             		Executive Officer and Manager
                               (Principal Executive Officer)


Date:  March 27, 1996	      By	/s/ Michael Thesing	
                               Michael Thesing
                               Vice President, Secretary, Treasurer and
                          	   	Manager (Principal Financial Officer)


Date:  March 27, 1996       By  
                               George Kubat
                               Manager


Date:  March 27, 1996	      By	/s/ William S. Carter, M.D.*	
                               William S. Carter, M.D.
                               Manager 


Date:  March 27, 1996	      By	/s/ Martin Massengale*	
                              	Martin Massengale
                               Manager


Date:  March 27, 1996	      By	/s/ Alan Baer*	
                             		Alan Baer
                            	 	Manager


Date:  March 27, 1996	      By	/s/ Gail Walling Yanney*
                              	Gail Walling Yanney
                              	Manager
        	 

*By Michael Thesing Attorney in Fact


/s/ Michael Thesing		
Michael Thesing





























<PAGE>                               -31-

































                                  EXHIBIT 24


                               POWER OF ATTORNEY







































<PAGE>                               -32-
                               POWER OF ATTORNEY


     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1995, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax-Exempt Mortgage Fund Limited Partnership 
       		America First Tax-Exempt Mortgage Fund 2 Limited Partnership
       		America First Participating/Preferred Equity Mortgage Fund
       		America First PREP Fund 2 Limited Partnership
       		America First PREP Fund 2 Pension Series Limited Partnership
       		Capital Source L.P.
       		Capital Source II L.P.

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 10th day of March, 1996.


                                                							  /s/ Michael B. Yanney
                                                 							Michael B. Yanney





















































<PAGE>                               -33-
                               POWER OF ATTORNEY


     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1995, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

		       America First Tax-Exempt Mortgage Fund Limited Partnership 
		       America First Tax-Exempt Mortgage Fund 2 Limited Partnership 
       		America First Participating/Preferred Equity Mortgage Fund
       		America First PREP Fund 2 Limited Partnership
       		America First PREP Fund 2 Pension Series Limited Partnership

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 2nd day of March, 1996.


                                               							   /s/ William S. Carter
                                                 							William S. Carter, M.D.























































<PAGE>                               -34-
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1995, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

		       America First Tax-Exempt Mortgage Fund Limited Partnership 
       		America First Tax-Exempt Mortgage Fund 2 Limited Partnership 
       		America First Participating/Preferred Equity Mortgage Fund
       		America First PREP Fund 2 Limited Partnership
       		America First PREP Fund 2 Pension Series Limited Partnership

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 25th day of March, 1996.


                                                					  /s/ Gail Walling Yanney
                                               							Gail Walling Yanney
























































<PAGE>                               -35-
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1995, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

     		  America First Tax-Exempt Mortgage Fund Limited Partnership 
       		America First Tax-Exempt Mortgage Fund 2 Limited Partnership 
       		America First Participating/Preferred Equity Mortgage Fund
       		America First PREP Fund 2 Limited Partnership
       		America First PREP Fund 2 Pension Series Limited Partnership

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 2nd day of March, 1996.


                                                							 /s/  Martin Massingale
                                                							Martin Massingale
























































<PAGE>                               -36-
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1995, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

		       America First Tax-Exempt Mortgage Fund Limited Partnership 
       		America First Tax-Exempt Mortgage Fund 2 Limited Partnership 
       		America First Participating/Preferred Equity Mortgage Fund
       		America First PREP Fund 2 Limited Partnership
       		America First PREP Fund 2 Pension Series Limited Partnership

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 3rd day of March, 1996.


                                                  							        /s/ Alan Baer
                                                         							Alan Baer
























































<PAGE>                               -37-