FORM 10-Q

               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C.  20549


 X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 Act of 1934

For the quarterly period ended June 30, 1997 or

     Transition report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

For the transition period from               to              

Commission File Number:  0-17582

  AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
     (Exact name of registrant as specified in its charter)

Delaware                                                47-0719051            
(State or other jurisdiction                            (IRS Employer 
of incorporation or organization)                       Identification No.)


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


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


     Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

                YES   X                  NO     



































<PAGE>                               - i -
Part I.  Financial Information
  Item 1.  Financial Statements
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                                                              June 30, 1997       Dec. 31, 1996
                                                                                             --------------      --------------
<S>                                                                                          <C>                 <C>
Assets
 Cash and temporary cash investments, at cost which                                                                            
  approximates market value                                                                  $   2,563,358       $   2,072,577
 Investment in mortgage-backed securities (Note 5)                                               7,734,371           8,506,853
	Investment in preferred real estate participations (PREPs),
	 net of valuation allowance (Note 6)                                                                 -                   -
	Interest receivable																																																																																57,925              60,561
 Other assets                                                                                       37,828														50,805
                                                                                             --------------      --------------
                                                                                             $  10,393,482       $  10,690,796
                                                                                             ==============      ==============
Liabilities and Partners' Capital
 Liabilities                                                                                                                   
  Accounts payable (Note 7)                                                                  $      39,149       $      54,401
  Distribution payable (Note 4)                                                                     99,474             101,945
                                                                                             --------------      --------------
                                                                                                   138,623             156,346
                                                                                             --------------      --------------
 Partners' Capital
  General Partner                                                                                      100                 100
  Beneficial Unit Certificate Holders
  ($11.32 per BUC in 1997 and $11.63 in 1996)                                                   10,254,759          10,534,350
                                                                                             --------------      --------------
                                                                                                10,254,859          10,534,450
                                                                                             --------------      --------------
                                                                                             $  10,393,482       $  10,690,796
                                                                                             ==============      ==============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
                                                           For the             For the         For the Six         For the Six
                                                     Quarter Ended       Quarter Ended        Months Ended        Months Ended
                                                     June 30, 1997       June 30, 1996       June 30, 1997       June 30, 1996
                                                    ---------------     ---------------     ---------------     ---------------
<S>                                                 <C>                 <C>                 <C>                 <C>
Income
 Mortgage-backed securities income                  $      141,564      $      168,964      $      285,537      $      338,523
 Equity in earnings of property partnerships                21,049               2,573              47,061              42,727
 Interest income on temporary cash investments              35,128              21,908              67,741              45,531
                                                    ---------------     ---------------     ---------------     ---------------
                                                           197,741             193,445             400,339             426,781
Expenses
 General and administrative expenses (Note 7)               52,626              46,850              98,416              91,805
                                                    ---------------     ---------------     ---------------     ---------------
Net income                                          $      145,115      $      146,595      $      301,923      $      334,976
                                                    ===============     ===============     ===============     ===============
Net income allocated to:
 General Partner                                    $        2,996      $        3,145      $        6,029      $        6,328
 BUC Holders                                               142,119             143,450             295,894             328,648
                                                    ---------------     ---------------     ---------------     ---------------
                                                    $      145,115      $      146,595      $      301,923      $      334,976
                                                    ===============     ===============     ===============     ===============
Net income per BUC                                  $          .16      $          .16      $          .33      $          .36
                                                    ===============     ===============     ===============     ===============

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






<PAGE>                               - 1 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                           Beneficial Unit
                                                                              General          Certificate
                                                                              Partner              Holders               Total
                                                                        --------------     ----------------     ---------------
<S>                                                                     <C>                <C>                  <C>   
Partners' Capital (excluding net unrealized holding losses)
 Balance at December 31, 1996                                           $         100      $    10,573,074      $   10,573,174
 Net income                                                                     6,029              295,894             301,923
 Cash distributions paid or accrued (Note 4)                                   (6,029)            (596,858)           (602,887)
                                                                        --------------     ----------------     ---------------
                                                                                  100           10,272,110          10,272,210
                                                                        --------------     ----------------     ---------------
Net unrealized holding losses
 Balance at December 31, 1996                                                    -                 (38,724)            (38,724)
 Net change                                                                      -                  21,373              21,373
                                                                        --------------     ----------------     ---------------
                                                                                 -                 (17,351)            (17,351)
                                                                        --------------     ----------------     ---------------
Balance at June 30, 1997                                                $         100      $    10,254,759      $   10,254,859
                                                                        ==============     ================     ===============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                                                               For the Six         For the Six
                                                                                              Months Ended        Months Ended
                                                                                             June 30, 1997       June 30, 1996
                                                                                            ---------------     ---------------
<S>                                                                                         <C>                 <C>   
Cash flows from operating activities                                                                                           
 Net income                                                                                 $      301,923      $      334,976
  Adjustments to reconcile net income to net cash 
   provided by operating activities
    Equity in earnings of property partnerships                                                    (47,061)            (42,727)
    Amortization of discount on mortgage-backed securities                                          (3,808)             (5,254)
    Decrease in interest receivable                                                                  2,636               2,984
    Decrease in other assets                                                                        12,977               2,577
    Decrease in accounts payable                                                                   (15,252)            (14,629)
                                                                                            ---------------     ---------------
Net cash provided by operating activities                                                         	251,415             277,927
                                                                                            ---------------     ---------------
Cash flows from investing activities
 Mortgage principal payments received                                                              797,663             348,774
 Distributions received from PREPs                                                                  47,061              42,727
                                                                                            ---------------     ---------------
Net cash provided by investing activities                                                         	844,724             391,501
                                                                                            ---------------     ---------------
Cash flow used in financing activity
 Distributions paid                                                                               (605,358)           (637,726)
                                                                                            ---------------     ---------------
Net increase in cash and temporary cash investments                                                490,781              31,702
Cash and temporary cash investments at beginning of period                                       2,072,577           1,813,499 
                                                                                            ---------------     ---------------
Cash and temporary cash investments at end of period                                        $    2,563,358      $    1,845,201 
                                                                                            ===============     ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>










<PAGE>                               - 2 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

1. Organization

America First PREP Fund 2 Pension Series Limited Partnership (the Partnership) 
was formed on February 2, 1988, under the Delaware Revised Uniform Limited 
Partnership Act for the purpose of acquiring a portfolio of federally-insured 
multifamily mortgages and other investments including preferred real estate 
participations (PREPs).  PREPs consist of equity interests which are intended 
to provide the Partnership with a participation in the net cash flow and net 
sale or refinancing proceeds of the properties collateralizing the mortgage 
loans.  The Partnership began operations with the first escrow closing on May 
25, 1988, and will continue in existence until December 31, 2017, unless 
terminated earlier under the provisions of the Partnership Agreement.  The 
General Partner of the Partnership is America First Capital Associates Limited 
Partnership Six (AFCA 6).    

2. Summary of Significant Accounting Policies

 A) Financial Statement Presentation
    The financial statements of the Partnership are prepared without audit on 
    the accrual basis of accounting in accordance with generally accepted 
    accounting principles.  The financial statements should be read in 
    conjunction with the financial statements and notes thereto included in 
    the Partnership's Annual Report on Form 10-K for the year ended December 
    31, 1996.  In the opinion of	management, all normal and recurring 
    adjustments necessary to present fairly	the financial position at June 
    30, 1997, and results of operations for all periods presented	have been 
    made.

    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) Investment in Mortgage-Backed Securities
    Investment securities are classified as held-to-maturity, 
    available-for-sale, or trading.  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 Partnership does not have investment 
    securities classified as trading.

 C) Investment in PREPs
    The investment in PREPs consists of interests in limited partnerships 
    which own properties underlying the mortgage-backed securities and are 
    accounted for	using the equity method.  When an investment in a PREP has 
    been reduced to zero, earnings are recorded to the extent that 
    distributions are received.  PREPs are not insured or guaranteed.  The 
    value of these investments is a function of the value of the real estate 
    underlying the PREPs.

 D) Allowance for Losses on Investments in PREPs
    The allowance for losses on investments in PREPs is a valuation reserve 
    which has been established at a level that management feels is adequate to 
    absorb potential losses on investments in PREPs.  The allowance 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 allowance is periodically reviewed and adjustments are 
    made to the allowance when there are significant changes in the estimated 
    net realizable value of the properties underlying the PREPs.





<PAGE>                               - 3 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

 E) Income Taxes
    No provision has been made for income taxes since Beneficial Unit 
			 Certificate (BUC) Holders are required to report their share of the 
			 Partnership's income for federal and state income tax purposes.

 F) Temporary Cash Investments
    Temporary cash investments are invested in short-term debt securities 
			 purchased with an original maturity of three months or less. 

	G) Net Income Per BUC
			 Net income per BUC has been calculated based on the number of BUCs 
			 outstanding (905,974) for all periods presented.

3. Partnership Reserve Account

The Partnership maintains a reserve account which consisted of the following 
at June 30, 1997:

<TABLE>
<S>                                                                   <C>
 Cash and temporary cash investments                                  $    2,485,395
 GNMA Certificates                                                         1,433,898
 FNMA Certificates                                                         1,020,877
                                                                      ---------------
                                                                      $    4,940,170
																																																																						===============
</TABLE>

The reserve account was established to maintain working capital for the 
Partnership and is available for distribution to BUC Holders and for any 
contingencies related to Permanent Investments and the operation of the 
Partnership.  See Note 5 regarding the investment in mortgage-backed 
securities.

4. Partnership Income, Expenses and Cash Distributions

The Partnership Agreement contains provisions for distributing the cash 
available for distribution and for the allocation of income and expenses for 
tax purposes among AFCA 6 and BUC Holders.    	

Cash distributions included in the financial statements represent the actual 
cash distributions made during each period, and the cash distributions accrued 
at the end of each period.

5. 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 housing 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 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 as to the 
full and timely payment of principal and interest on the underlying loans.

At June 30, 1997, the total amortized cost, gross unrealized holding gains, 
gross unrealized holding losses, and aggregate fair value of 
available-for-sale securities are $2,472,126, $21,214, $38,565 and $2,454,775, 
respectively.  The total amortized cost, gross unrealized holding gains, gross 
unrealized holding losses, and aggregate fair value of held-to-maturity 
securities are $5,279,596, $150,928, $285,620 and $5,144,904, respectively. 








<PAGE>                               - 4 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

Descriptions of the Partnership's mortgage-backed securities at June 30, 
1997, are as follows:

<TABLE>
<CAPTION>
                                          					               			    Number	 	 Interest				 					Maturity     						Carrying 
  Type of Security and Name        					  Location              			of Units    	   Rate  		  								Date       						Amount 
  ----------------------------------				  --------------------     --------    --------  		 -------------    ---------------
  <S>                              					  <C>                     	<C>         <C>   						 <C>			    		     <C> 
  Held-to-Maturity
    GNMA Certificates:                                                                                       
     Broadmoor Court	              					  Colorado Springs, CO         47		    			9.25%    						10/15/29			  $   		580,032
			  Owings Chase Apartments												  Pikesville, MD														234				 				6.75%    						12/15/23									3,173,556
			  Pools of single-family mortgages 			  																										   				 				 8.74%(1) 		2016 to 2018									1,526,008
                                                                                                              --------------
                                                                                                                  5,279,596
                                                                                                              --------------

  Available-for-Sale
    GNMA Certificates:
			  Pools of single-family mortgages			  																		   								           6.03%(1)				 						2008											730,971(2)
			  Pools of single-family mortgages		 												  																   								 7.58%(1)					 					2008											702,927(2)

		  FNMA Certificates:
			  Pools of single-family mortgages																  														   				 				 5.52%(1)						 				2000									1,020,877(2)
																																																								  																				 																		 											---------------
																																																										  																			 																		 											 			2,454,775
                                                                                              					 								 ---------------
  Balance at June 30, 1997                                                                                   $    7,734,371 
                                                                                              							 							===============
</TABLE>
(1) Represents yield to the Partnership.
(2)	Reserve account asset - see Note 3.

Reconciliation of the carrying amount of the mortgage-backed securities is as 
follows:
<TABLE>
<S>																																																																																																					    	<C>
Balance at December 31, 1996																																																																											      $	 	 8,506,853
		Additions
			Amortization of discount on mortgage-backed securities																																																				    					3,808
   Change in net unrealized holding losses on available-for-sale securities                                          21,373
		Deduction
			Mortgage principal payments received (1)																																																																						 	(797,663)
																																																																																																									    ---------------
Balance at June 30, 1997           																																																																 		     		$			 7,734,371
																																																																																																							    		===============
(1) Includes proceeds of $556,444 received from GNMA due to the redemption
of the GNMA Certificate related to Ashwood Apartments.

</TABLE>

6.	Investment in PREPs

The Partnership's PREPs consist of interests in limited partnerships which own 
multifamily properties financed by the Partnership.  The limited partnership 
agreements originally provided for the payment of a base return on the equity 
provided to the limited partnerships and for the payment of additional amounts 
out of a portion of the net cash flow or net sale or refinancing proceeds of 
the properties subject to various priority payments.  Certain of the 
agreements have been amended to defer payment of the base return.










<PAGE>                               - 5 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

Descriptions of the PREPs at June 30, 1997, are as follows:

<TABLE>
<CAPTION>
                                                                                                               Carrying
  Name                             Location                 Partnership Name                                     Amount 
  --------------------------       --------------------     -----------------------------              -----------------
  <S>                              <C>                      <C>                                        <C> 
  Broadmoor Court                  Colorado Springs, CO     Stazier Associates Colorado Springs, Ltd.  $         53,547
  Owings Chase Apartments          Pikesville, MD           Owings Chase Limited Partnership                    150,000
  Laurel Park Apartments           Riverdale, GA            Gold Key Venture                                       -
                                                                                                       -----------------
                                                                                                                203,547
  Less valuation allowance                                                                                     (203,547)
                                                                                                       -----------------
  Balance at June 30, 1997                                                                             $           -
                                                                                                       =================
</TABLE>
Reconciliation of the carrying amount of the PREPs is as follows:

<TABLE>
<S>                                                                                                    <C>
Balance at December 31, 1996                                                                           $           -
  Addition
   Equity in earnings of property partnerships                                                                   47,061
  Deduction
   Distributions received from PREPs                                                                            (47,061)
                                                                                                       -----------------
Balance at June 30, 1997                                                                               $           -
                                                                                                       =================
</TABLE>

7. Transactions with Related Parties

Substantially all the Partnership's general and administrative expenses are 
paid by AFCA 6 or an affiliate and reimbursed by the Partnership.  The amount 
of such expenses reimbursed to AFCA 6 during 1997 was $108,087 ($63,428 for 
the quarter ended June 30, 1997).  The reimbursed expenses are presented on a 
cash basis and do not reflect accruals made at quarter end.

AFCA 6 is entitled to an administrative fee of .35% per annum of the 
outstanding principal amounts invested in mortgage-backed securities, PREPs, 
and temporary cash investments to be paid by the Partnership to the extent 
such amount is not paid by property owners.  During 1997, AFCA 6 earned 
administrative fees of $12,461 ($6,196 for the quarter ended June 30, 1997), 
all of which was paid by the Partnership.

The general partner of the property partnership which owns Owings Chase 
Apartments is principally owned by an employee of an affiliate of AFCA 6.  
Such employee has a nominal interest in the affiliate.  Affiliates of AFCA 6 
also own small interests in the general partner.  The general partner has a 
nominal interest in the property partnership's profits, losses and cash flow 
which is subordinate to the interest of the Partnership.  The general partner 
did not receive cash distributions from the property partnership in 1997.

An affiliate of AFCA 6 has been retained to provide property management 
services for Laurel Park Apartments and Owings Chase 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 and amounted to $21,426 in 1997 ($10,967 for 
the quarter ended June 30, 1997).










<PAGE>                               - 6 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)

8. Subsequent Event

On July 29, 1997, the Partnership announced that it had signed an Agreement 
and Plan of Merger, dated as of July 29, 1997 (the Merger Agreement), among 
the Partnership, America First Participating Preferred Equity Mortgage Fund 
Limited Partnership, a Delaware limited partnership (Prep Fund 1), America 
First PREP Fund 2 Limited Partnership, a Delaware limited partnership (Prep 
Fund 2 and together with the Partnership and Prep Fund 1, the Funds), America 
First Mortgage Investments, Inc., a newly formed Maryland corporation (AFM), 
and AF Merger, L.P., a newly formed Delaware limited partnership and a 
subsidiary of AFM (AFM L.P.), which contemplates a business combination 
transaction (the Merger) pursuant to which Prep Fund 1 and Prep Fund 2 will 
merge with AFM, with AFM surviving such merger, and the Partnership will merge 
with AFM L.P., with the Partnership surviving such merger.  The Merger, which 
is expected to be accomplished on a tax-deferred basis for investors in the 
Funds, will not be consummated unless both Prep Fund 1 and Prep Fund 2 
participate in the Merger.  The participation of the Partnership is not a 
condition to the closing of the Merger with respect to Prep Fund 1 and Prep 
Fund 2.

As a result of the Merger, (i) the outstanding BUCs of the Partnership 
(Pension BUCs) will be converted, at the rate of approximately 1.31 shares for 
each Pension BUC, into a maximum of 1,183,373 shares of common stock, par 
value $0.01 per share, of AFM (the Common Stock), (ii) the outstanding 
Exchangeable Units of Prep Fund 1 will be converted, at the rate of 1.00 share 
for each Exchangeable Unit, into 5,775,797 shares of Common Stock and (iii) 
the outstanding BUCs of Prep Fund 2 (Prep Fund 2 BUCs) will be converted, at 
the rate of approximately 1.26 shares for each Prep Fund 2 BUC, into 2,012,336 
shares of Common Stock.  If the Partnership participates in the Merger, 
holders of Pension BUCs will be given the option, in lieu of receiving shares 
of Common Stock, to remain as investors in the Partnership (the Retention 
Option).  To the extent that holders of Pension BUCs elect the Retention 
Option, the aggregate number of shares of Common Stock otherwise issuable to 
the such holders in the Merger will be accordingly reduced.  In connection 
with the organization of AFM, the general partners of the Funds (the General 
Partners) were issued 90,621 shares of Common Stock and will not be issued any 
additional shares as a result of the Merger.

Upon consummation of the Merger, AFM will become an externally advised 
mortgage real estate investment trust owning, directly and indirectly, the 
mortgage-backed securities, mortgage loans and other assets, subject to 
liabilities, held by the Funds.  AFM's business strategy will be to build on 
and extend the business plans and investment methods and policies of the Funds 
by employing leverage, investing primarily in adjustable-rate mortgage-backed 
securities and mortgage loans and varying its investments over time.  
Consequently, following the Merger, AFM intends to replace a substantial 
portion of the Funds' current portfolio with a portfolio of adjustable-rate 
mortgage-backed securities, mortgage loans and other related assets.

Pursuant to the Merger Agreement, each of the Funds shall generally bear their 
own expenses in connection with the Merger.  However, if the Merger Agreement 
is terminated because a Fund (the Terminating Fund) has triggered certain of 
the events of termination specified therein and such Terminating Fund has, on 
or prior to the date of such termination, received a proposal constituting a 
superior Competing Transaction (as such term is defined in the Merger 
Agreement) that has not been offered on substantially equivalent terms to any 
of the other Funds (each, an Excluded Fund), then each Terminating Fund agrees 
to reimburse each Excluded Fund for its share of the out-of-pocket expenses 
incurred in connection with the Merger Agreement, plus any expenses incurred 
in enforcing the provisions of the obligations thereunder.  Furthermore, if 
the Partnership is the Terminating Fund, Prep Fund 1 and Prep Fund 2 shall 
have the right (i) to continue with the Merger, (ii) to terminate the 
Partnership's obligations under the Merger Agreement and (iii) to be 
reimbursed by the Partnership for its share of such expenses.







<PAGE>                               - 7 -
     Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Liquidity and Capital Resources

The Partnership originally acquired: (i) five 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 four states (the GNMA Certificates); (ii) 
various mortgage-backed securities collateralized by pools of single-family 
mortgages and guaranteed as to principal and interest by either GNMA or the 
Federal National Mortgage Association (FNMA) (the Single-Family Certificates); 
and (iii) limited partnership interests (PREPs) in five limited partnerships 
which own the multifamily housing properties financed by the GNMA 
Certificates.  The Partnership has been repaid by GNMA on the GNMA 
Certificates collateralized by the Villages at Moonraker, Laurel Park 
Apartments and, during January of 1997, Ashwood Apartments. During 1995, the 
Partnership withdrew as a limited partner of the operating partnership which 
owns the Villages at Moonraker and, therefore, no longer holds its PREP in 
this property.  During the fourth quarter of 1996, the Partnership sold its 
PREP in Ashwood Apartments.  The Partnership has retained its PREP in Laurel 
Park Apartments.  Collectively, the two remaining GNMA Certificates and the 
three remaining PREPs are referred to as the Permanent Investments.  In 
addition, the Partnership held various Single-Family Certificates at June 30, 
1997.

The following table shows the occupancy levels of the properties financed by 
the Partnership, in which the Partnership continues to hold an equity 
interest, at June 30, 1997.

<TABLE>
<CAPTION>
                                                                                                     Number          Percentage
                                                                                 Number            of Units            of Units
 Property Name                               Location                          of Units            Occupied            Occupied
-------------------------------------        ------------------               ---------          ----------         -----------
<S>                                          <C>                              <C>                <C>                <C>
 Broadmoor Court                             Colorado Springs, CO                   47                  41                  87%
 Laurel Park Apartments                      Riverdale, GA                         387                 370                  96%
 Owings Chase Apartments                     Pikesville, MD                        234                 222                  95%
                                                                              ---------          ----------         -----------
   				                                                                            668                 633                  95%
                                                                              =========          ==========         ===========
</TABLE>

Distributions

Cash distributions paid or accrued per Beneficial Unit Certificate (BUC) were 
as follows:

<TABLE>
<CAPTION>
                                                                                                For the Six         For the Six
                                                                                               Months Ended        Months Ended
                                                                                              June 30, 1997       June 30, 1996
                                                                                             --------------      --------------
<S>                                                                                          <C>                 <C>
Regular monthly distributions
 Income                                                                                      $       .3266       $       .3628
 Return of Capital                                                                                   .3322               .3288
                                                                                             --------------      --------------
                                                                                             $       .6588       $       .6916
                                                                                             ==============      ==============
Distributions
	Paid out of cash flow (including mortgage principal payments)                               $       .6588       $       .6916
                                                                                             ==============      ==============
</TABLE>









<PAGE>                               - 8 -
Regular monthly distributions to investors consist primarily of interest and 
principal received on GNMA Certificates and Single-Family Certificates. 
Additional cash for distributions is received from PREPs and temporary cash 
investments.  The Partnership may draw on reserves to pay operating expenses 
or to supplement cash distributions to BUC Holders.  The Partnership is 
permitted to replenish its reserves through the sale or refinancing of 
assets.  During 1997, a net amount of $496,699 of undistributed mortgage 
principal payments was placed in reserves (a net amount of $24,176 was 
withdrawn from reserves for the quarter ended June 30, 1997).  The total 
amount held in reserves at June 30, 1997, was $4,940,170 of which $2,454,775 
was invested in Single-Family Certificates.  

The Partnership believes that cash provided by operating and investing 
activities and, if necessary, withdrawals from the Partnership's reserves will 
be adequate to meet its short-term and long-term liquidity requirements, 
including the payments of distributions to BUC Holders.  Under the terms of 
the Partnership Agreement, the Partnership has the authority to enter into 
short-term and long-term debt financing arrangements; however, the Partnership 
currently does not anticipate entering into such arrangements.  The 
Partnership is not authorized to issue additional BUCs to meet short-term and 
long-term liquidity requirements.

Asset Quality

The Partnership continues to receive monthly principal and interest payments 
on its GNMA Certificates and Single-family Certificates which are fully 
guaranteed either by GNMA or FNMA.  The obligations of GNMA are backed by the 
full faith and credit of the United States government.  

PREPs, however, are not insured or guaranteed.  The value of these investments 
is a function of the value of the real estate underlying the PREPs.  It is the 
policy of the Partnership to make a periodic review of the real estate 
underlying the PREPs in order to establish, when necessary, a valuation 
reserve on the investment in PREPs.  The allowance for losses on investment in 
PREPs is based on the fair value of the properties underlying the PREPs.  The 
fair value of the properties underlying the PREPs 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 allowance is 
periodically reviewed and adjustments are made to the allowance when there are 
significant changes in the estimated net realizable value of the properties 
underlying the PREPs.  Internal property valuations and reviews performed 
during the six months ended June 30, 1997, indicated that the PREPs recorded 
on the balance sheet at June 30, 1997, required no adjustments to their 
current carrying amounts.

The overall status of the Partnership's Permanent Investments has remained 
relatively constant since March 31, 1997.

Results of Operations

The tables below compare the results of operations for each period shown.
<TABLE>
<CAPTION>
                                                                               For the             For the            Increase
                                                                         Quarter Ended       Quarter Ended           (Decrease)
                                                                         June 30, 1997       June 30, 1996           From 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Mortgage-backed securities income                                       $      141,564      $      168,964      $      (27,400)
Equity in earnings of property partnerships                                     21,049               2,573              18,476
Interest income on temporary cash investments                                   35,128              21,908              13,220
                                                                        ---------------     ---------------     ---------------
                                                                               197,741             193,445               4,296
General and administrative expenses                                            (52,626)            (46,850)              5,776
                                                                        ---------------     ---------------     ---------------
Net income                                                              $      145,115      $      146,595      $       (1,480)
                                                                        ===============     ===============     ===============
</TABLE>








<PAGE>                               - 9 -
<TABLE>
<CAPTION>
                                                                           For the Six         For the Six            Increase
                                                                          Months Ended        Months Ended           (Decrease)
                                                                         June 30, 1997       June 30, 1996           From 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Mortgage-backed securities income                                       $      285,537      $      338,523      $      (52,986)
Equity in earnings of property partnerships                                     47,061              42,727               4,334
Interest income on temporary cash investments                                   67,741              45,531              22,210
                                                                        ---------------     ---------------     ---------------
                                                                               400,339             426,781             (26,442)
General and administrative expenses                                            (98,416)            (91,805)              6,611
                                                                        ---------------     ---------------     ---------------
Net income                                                              $      301,923      $      334,976      $      (33,053)
                                                                        ===============     ===============     ===============
</TABLE>

Mortgage-backed securities income decreased for the quarter and six months 
ended June 30, 1997, compared to the same periods in 1996.  Approximately 
$12,900 of such decrease for the quarter and $25,800 of such decrease for the 
six months was due to the redemption of the GNMA Certificate related to 
Ashwood Apartments.  The remaining decrease of approximately $14,500 for the 
quarter and $27,200 for the six months was due to the continued amortization 
of the principal balances of the Partnership's other mortgage-backed 
securities.

Equity in earnings of property partnerships is a function of the cash flow 
received by the Partnership from its interest in the operating partnerships 
which own the properties.  Prior to the write-down of each investment in PREPs 
to zero, equity in earnings of property partnerships also reflects the 
Partnership's allocable share of earnings generated by each of the properties. 
Equity in earnings of property partnerships increased for the quarter and six 
months ended June 30, 1997, compared to the same periods in 1996.  
Approximately $21,000 of such increase for the quarter and six months is 
attributable to the Partnership receiving a distribution from Owings Chase 
Apartments during the quarter ended June 30, 1997, whereas the Partnership did 
not receive a distribution from Owings Chase Apartments during the quarter or 
six months ended June 30, 1996.  The distribution received from Owings Chase 
for the quarter and six months ended June 30, 1997 was partially offset by a 
decrease of approximately $2,600 and $14,800, respectively, from Ashwood 
Apartments.  The Partnership no longer receives distributions from Ashwood 
Apartments due to the sale of the Partnership's PREP in such property in 
December 1996.  Also contributing to the decrease for the six months ended 
June 30, 1997, was a decrease of $1,900 in cash flow received from Broadmoor 
Court.

The increase in interest on temporary cash investments for the quarter and six 
months ended June 30, 1997, compared to the same periods in 1996 was primarily 
attributable to the increase in cash reserves as a result of the redemption of 
the GNMA Certificate related to Ashwood Apartments and the sale of the 
Partnership's PREP in Ashwood Apartments.

General and administrative expenses increased for the quarter and six months 
ended June 30, 1997, compared to the same periods in 1996 due primarily to 
costs of approximately $5,600 incurred during the quarter and six months ended 
June 30, 1997, in conjunction with the proposed merger described in Note 8 to 
the financial statements.  Also contributing to the increase was an increase 
in salaries expense, which was partially offset by an overall decrease in 
other general and administrative expenses.
















<PAGE>                               - 10 -
PART II.  OTHER INFORMATION

     Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               4(a) Agreement of Limited Partnership dated May 25, 1988
                    (incorporated herein by reference to Form 10-Q dated 
                    June 30, 1988 filed pursuant to Section 13 or 15(d) of 
                    the Securities Act of 1934 by America First PREP Fund 2 
                    Pension Series Limited Partnership (Commission File No.
                    33-13407)).

               4(b) Form of Certificate of Beneficial Unit Certificate 
                    (incorporated herein by reference to Form 10-Q dated 
                    June 30, 1988 filed pursuant to Section 13 or 15(d) of 
                    the Securities Act of 1934 by America First PREP Fund 2 
                    Pension Series Limited Partnership (Commission File No. 
                    33-13407)).

               4(c) Agreement and Plan of Merger, dated as of July 29, 1997, 
                    among the Registrant, America First 
                    Participating/Preferred Equity Mortgage Fund Limited 
                    Partnership, America First Prep Fund 2 Limited Partnership 
                    and AF Merger, L.P..

          (b)  Form 8-K

               The registrant did not file a report on Form 8-K during the 
               quarter for which this report is filed.














































<PAGE>                               - 11 -
	                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

Dated:  August 13, 1997       AMERICA FIRST PREP FUND 2
                              PENSION SERIES LIMITED PARTNERSHIP

                              By America First Capital
                                   Associates Limited
                                   Partnership Six, General
                                   Partner of the Registrant

                              By America First Companies L.L.C.,
                                   General Partner of America
																																			First Capital Associates
																																			Limited Partnership Six


                              By /s/ Michael Thesing             
                                   Michael Thesing,
                                   Vice President and
                                   Principal Financial
                                   Officer



















































<PAGE>                               - 12 -


















                                  EXHIBIT 4(c)


                          AGREEMENT AND PLAN OF MERGER




                           Dated as of July 29, 1997,



                                     Among


                    AMERICA FIRST MORTGAGE INVESTMENTS, INC.,


              AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE
                            FUND LIMITED PARTNERSHIP,


                  AMERICA FIRST PREP FUND 2 LIMITED PARTNERSHIP,


           AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP,



                                       And


                                 AF MERGER, L.P.


























TABLE OF CONTENTS

                                                                           Page
                                                                           ----
ARTICLE I

The Merger

SECTION 1.1	The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .   1
SECTION 1.2	Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
SECTION 1.3	Effective Date. . . . . . . . . . . . . . . . . . . . . . . . .   2
SECTION 1.4	Effects of the Merger . . . . . . . . . . . . . . . . . . . . .   2
SECTION 1.5	Organizational Documents. . . . . . . . . . . . . . . . . . . .   2
        (a)	The Company . . . . . . . . . . . . . . . . . . . . . . . . . .   2
        (b)	Pension Fund. . . . . . . . . . . . . . . . . . . . . . . . . .   2
SECTION 1.6	Officers and Directors. . . . . . . . . . . . . . . . . . . . .   2
SECTION 1.7	General Partner of Pension Fund . . . . . . . . . . . . . . . .   2
SECTION 1.8	Principal Executive Office. . . . . . . . . . . . . . . . . . .   2

ARTICLE II

Effect of the Merger on the Exchange Units
of the Partnerships; Exchange of Certificates

SECTION 2.1	Effect on Exchange Units; Conversion of Exchange Units. . . . .   2
SECTION 2.2	Exchange of Certificates. . . . . . . . . . . . . . . . . . . .   3
        (a)	Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . .   3
        (b)	Provision of Common Stock . . . . . . . . . . . . . . . . . . .   3
        (c)	Exchange Procedure. . . . . . . . . . . . . . . . . . . . . . .   3
        (d)	Record Dates; Distributions with Respect to Unconverted Exchange 
              Units. . . . . . . . . . . . . . . . . . . . . . . . . . .  .   3
        (e)	No Further Ownership Rights in Exchange Units . . . . . . . . .   4
        (f)	No Liability. . . . . . . . . . . . . . . . . . . . . . . . . .   4
        (g)	No Fractional Shares. . . . . . . . . . . . . . . . . . . . . .   4
        (h)	Withholding Rights. . . . . . . . . . . . . . . . . . . . . . .   5

ARTICLE III

Representations and Warranties

SECTION 3.1	Representations and Warranties of the Partnerships. . . . . . .   5
        (a)	Organization, Standing and Power of the Partnership . . . . . .   5
        (b)	Capital Structure . . . . . . . . . . . . . . . . . . . . . . .   5
        (c)	Authority; Noncontravention; Consents . . . . . . . . . . . . .   6
        (d)	SEC Documents; Financial Statements; Undisclosed Liabilities. .   7
        (e)	Absence of Certain Changes or Events. . . . . . . . . . . . . .   7
        (f)	Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .   8
        (g)	Brokers; Fees and Expenses. . . . . . . . . . . . . . . . . . .   8
        (h)	Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .   8
        (i)	Contracts; Debt Instruments . . . . . . . . . . . . . . . . . .   8
        (j)	Tangible Property and Assets. . . . . . . . . . . . . . . . . .   8
        (k)	Books and Records . . . . . . . . . . . . . . . . . . . . . . .   9
        (l)	Registration Statement. . . . . . . . . . . . . . . . . . . . .   9
        (m)	Vote Required . . . . . . . . . . . . . . . . . . . . . . . . .   9

ARTICLE IV

Covenants

SECTION 4.1	Conduct of Business by the Partnerships . . . . . . . . . . . .   9
SECTION 4.2	Other Actions . . . . . . . . . . . . . . . . . . . . . . . . .   9
SECTION 4.3	Payments of Dividends By the Company. . . . . . . . . . . . . .  10

ARTICLE V

Additional Covenants

SECTION 5.1	Preparation of the Registration Statement and the Consent 
              Solicitation. . . . . . . . . . . . . . . . . . . . . . . . .  10
            Statement/Prospectus. . . . . . . . . . . . . . . . . . . . . .  10
SECTION 5.2	Best Efforts; Notification. . . . . . . . . . . . . . . . . . .  10
SECTION 5.3	No Solicitation of Transactions . . . . . . . . . . . . . . . .  11
SECTION 5.4	Public Announcements. . . . . . . . . . . . . . . . . . . . . .  11
SECTION 5.5	Listing of Common Stock . . . . . . . . . . . . . . . . . . . .  11
SECTION 5.6	Indemnification . . . . . . . . . . . . . . . . . . . . . . . .  12

<PAGE>                               -i-
                                                                           Page
                                                                           ----
ARTICLE VI

Conditions Precedent

SECTION 6.1	Conditions to Each Party's Obligation to Effect the Merger. . .  13
        (a)	Approval of Unitholders of Prep Fund 1 and Prep Fund 2. . . . .  13
        (b)	Listing of Common Stock . . . . . . . . . . . . . . . . . . . .  13
        (c)	Absence of Certain Conditions . . . . . . . . . . . . . . . . .  13
        (d)	Registration Statement. . . . . . . . . . . . . . . . . . . . .  13
        (e)	No Injunctions or Restraints. . . . . . . . . . . . . . . . . .  13
        (f)	Opinion Related to Partnership Status of the Partnership. . . .  13
        (g)	Opinion Related to REIT Status of the Company . . . . . . . . .  14
        (h)	The Investment Company Act Opinion. . . . . . . . . . . . . . .  14
        (i)	Consents and Approvals. . . . . . . . . . . . . . . . . . . . .  14
        (j)	Absence of Material Adverse Effects . . . . . . . . . . . . . .  14
SECTION 6.2	Conditions to Obligations of the Partnerships . . . . . . . . .  14
        (a)	Representations and Warranties. . . . . . . . . . . . . . . . .  14
        (b)	Performance of Obligations of the Other Partnerships. . . . . .  14
        (c)	Material Adverse Change . . . . . . . . . . . . . . . . . . . .  14
        (d)	Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
SECTION 6.3	Conditions to Obligations of Pension Fund 20. . . . . . . . . .  15

ARTICLE VII

General Partner Actions

SECTION 7.1	General Partner Actions . . . . . . . . . . . . . . . . . . . .  15

ARTICLE VIII

Termination, Amendment and Waiver

SECTION 8.1	Termination . . . . . . . . . . . . . . . . . . . . . . . . . .  15
SECTION 8.2	Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
SECTION 8.3	Effect of Termination . . . . . . . . . . . . . . . . . . . . .  16
SECTION 8.4	Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
SECTION 8.5	Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . .  16

ARTICLE IX

General Provisions

SECTION 9.1	Nonsurvival of Representations and Warranties . . . . . . . . .  17
SECTION 9.2	Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
SECTION 9.3	Interpretation. . . . . . . . . . . . . . . . . . . . . . . . .  17
SECTION 9.4	Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .  17
SECTION 9.5	Entire Agreement; No Third-Party Beneficiaries. . . . . . . . .  17
SECTION 9.6	Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .  18
SECTION 9.7	Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . .  18
SECTION 9.8	Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . .  18

ARTICLE X

Certain Definitions

SECTION 10.1	Certain Definitions. . . . . . . . . . . . . . . . . . . . . .  18
 
 
Exhibits

A          Charter of the Company
B     	    Bylaws of the Company
C	         Amended Charter of the Company
D         	Pension Fund Agreement
E         	Certificate of Limited Partnership of Pension Fund









<PAGE>                               -ii-

     AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of July 29, 1997,
among AMERICA FIRST MORTGAGE INVESTMENTS, INC., a Maryland corporation (the 
"Company"), AMERICA FIRST  PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND 
LIMITED PARTNERSHIP, a Delaware limited partnership ("Prep Fund 1"), AMERICA 
FIRST PREP FUND 2 LIMITED PARTNERSHIP, a Delaware limited partnership ("Prep 
Fund 2"), AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP, a 
Delaware limited partnership ("Pension Fund" and together with Prep Fund 1 and 
Prep Fund 2, the "Partnerships") and AF MERGER, L.P., a Delaware limited 
partnership subsidiary of the Company ("Partnership Merger Sub").

RECITALS

     WHEREAS, certain terms used herein shall have the meanings assigned to 
them in Article X of this Agreement;

     WHEREAS, the Board of Directors of the Company and the general partners 
of each of the Partnerships (the "General Partners"), together with the 
Special Committee (as herein defined), have determined that it is advisable 
and in the best interest of the Company and Partnership Merger Sub, on the one 
hand, and the Partnerships, on the other hand, and their respective 
stockholders and Unitholders, as the case may be, to proceed with the 
strategic business combination involving the five entities on the terms 
described in this Agreement, pursuant to which (i) Prep Fund 1 and Prep Fund 2 
will merge with the Company, the Company will be the surviving corporation in 
such merger and each Prep Fund 1 Unit and Prep Fund 2 BUC will be converted 
into the right to receive common stock, par value $0.01 per share, of the 
Company (the "Common Stock") and (ii) Pension Fund will merge with Partnership 
Merger Sub, Pension Fund will be the surviving limited partnership in such 
merger and each Pension BUC will be converted into the right to receive Common 
Stock, except for those Pension BUCs held by Unitholders electing to exercise 
their option to retain their current investment in Pension Fund (the 
"Retention Option") (the transactions described in (i) and (ii) above being 
referred to herein as the "Merger");

   		WHEREAS, the Company, as the surviving corporation in the Merger with 
Prep Fund 1 and Prep Fund 2, intends that, following the Merger, it shall be 
subject to taxation as a real estate investment trust (a "REIT") within the 
meaning of the Internal Revenue Code of 1986, as amended (the "Code"); and

     WHEREAS, Pension Fund, as the surviving limited partnership in the Merger 
with Partnership Merger Sub, intends that, following the Merger, it shall 
continue to be subject to taxation as a partnership under the Code.

     NOW, THEREFORE, in consideration of the representations, warranties, 
covenants and agreements contained in this Agreement, the parties agree as 
follows:


ARTICLE I

The Merger

     SECTION 1.1     The Merger.  Upon the terms and subject to the conditions 
set forth in this Agreement, (i) in accordance with the Maryland General 
Corporation Law (the "MGCL") and the Delaware Revised Uniform Limited 
Partnership Act (the "DRULPA"), Prep Fund 1 and Prep Fund 2 shall be merged 
with and into the Company at the Effective Time (as defined below) and (ii) in 
accordance with DRULPA, Pension Fund shall be merged with Partnership Merger 
Sub at the Effective Time.  Following the Merger, (i) the separate existence 
of Prep Fund 1 and Prep Fund 2 shall cease and the Company shall continue as 
the surviving corporation and shall succeed to and assume all the rights and 
obligations of Prep Fund 1 and Prep Fund 2 in accordance with the MGCL and 
DRULPA and (ii) the separate existence of Partnership Merger Sub shall cease 
and Pension Fund shall continue as the surviving limited partnership and shall 
succeed to and assume all the rights and obligations of Partnership Merger Sub 
in accordance with the DRULPA.

     SECTION 	1.2     Closing.  The closing of the Merger will take place at 
10:00 A.M. Eastern Time, on a date to be specified by the parties, which 
(subject to satisfaction or waiver of the conditions set forth in Sections 6.2 
and 6.3) shall be no later than the second business day after satisfaction or 
waiver of the conditions set forth in Section 6.1 (the "Closing Date"), at the 
offices of Rogers & Wells, 200 Park Avenue, New York, New York 10166, unless 
another date or place is agreed to in writing by the parties hereto.

<PAGE>                               -1-
     SECTION 1.3   	 Effective Date.  As soon as practicable following the 
satisfaction or waiver of the conditions set forth in Article VI, the parties 
shall file the articles of merger, certificate of merger or other appropriate 
documents for the merger of Prep Fund 1 and Prep Fund 2 with and into the 
Company executed in accordance with Section 3-110 of the MGCL and Section 
17-211 of the DRULPA and the certificate of merger or other appropriate 
documents for the merger of Pension Fund with Partnership Merger Sub executed 
in accordance with Section 17-211 of the DRULPA (collectively, the "Articles 
of Merger") and shall make all other filings or recordings required under the 
MGCL or the DRULPA to effect the Merger. The Merger shall become effective at 
such time as the Articles of Merger have been duly filed with the Department 
of Assessments and Taxation of the State of Maryland and the Office of the 
Secretary of State of the State of Delaware, or at such other time as the 
parties shall specify in the Articles of Merger (the time and the date the 
Merger becomes effective being, the "Effective Time" and the "Effective Date," 
respectively), it being understood that the parties shall cause the Effective 
Time to occur on the Closing Date.

     SECTION 1.4	    Effects of the Merger.  The Merger shall have the effects 
set forth in the MGCL or the DRULPA, as appropriate.

     SECTION 1.5	    Organizational Documents.

        (a) 			 The Company.  The Articles of Incorporation of the Company as 
in effect on the date hereof are substantially in the form of Exhibit A hereto 
(the "Charter").  The bylaws of the Company as in effect on the date hereof 
are substantially in the form of Exhibit B hereto (the "Bylaws").  Prior to 
the Effective Time, the Charter shall be amended and restated by the Amended 
and Restated Articles of Incorporation substantially in the form of Exhibit C 
hereto (the "Amended Charter") and as amended shall continue to be in effect 
after the Merger.

        (b) 			 Pension Fund.  The Agreement of Limited Partnership, dated as 
of May 25, 1988, of Pension Fund as in effect on the date hereof and 
substantially in the form of Exhibit D hereto (the "Pension Fund Agreement"), 
shall be in effect after the Merger.  The certificate of limited partnership 
of Pension Fund in effect on the date hereof and substantially in the form of 
Exhibit E hereto, shall continue to be in effect after the Merger.  

     SECTION 1.6 	   Officers and Directors.  The officers of the Company 
immediately following the Effective Time shall continue to be the officers of 
the Company.  The Board of Directors of the Company immediately following the 
Effective Time shall continue to be composed of the current members of the 
Board of Directors of the Company.

     SECTION 1.7	    General Partner of Pension Fund.  Immediately following 
the Effective Time, the general partner of Pension Fund shall continue to be 
America First Capital Associates Limited Partnership Six, a Delaware limited 
partnership ("AFCA 6").

     SECTION 1.8	    Principal Executive Office.  The principal executive 
office of the Company following the Effective Date shall continue to be in New 
York, New York.

ARTICLE II

Effect of the Merger on the Exchange Units of the Partnerships; Exchange of 
Certificates

     SECTION 	2.1     Effect on Exchange Units; Conversion of Exchange Units. 
By virtue of the Merger and without any action on the part of any Unitholder 
participating in the Merger:














<PAGE>                               -2-
        (a) 				At the Effective Time, each issued and outstanding Prep Fund 1 
Unit, Prep Fund 2 BUC and Pension BUC (except those Pension BUCs held by 
Unitholders electing the Retention Option) shall be converted into the right 
to receive from the Company 1.00, 1.262758 and 1.306189, respectively, fully 
paid and nonassessable shares of Common Stock.  At the Effective Time, all 
such Exchange Units shall no longer be outstanding and shall automatically be 
canceled and retired and all rights with respect thereto shall cease to exist, 
and each holder of a certificate representing any such Exchange Unit (an 
"Exchange Unit Certificate") shall cease to have any rights with respect 
thereto, except the right to receive, upon surrender of such certificate in 
accordance with Section 2.2(c), certificates representing the shares of Common 
Stock required to be delivered under this Section 2.1 and any cash in lieu of 
fractional shares of Common Stock to be issued or paid in consideration 
therefor upon surrender of such certificate (the "Merger Consideration") and 
any dividends or other distributions to which such holder is entitled pursuant 
to Section 2.2(d), in each case, without interest and less any required 
withholding taxes.

        (b) 				Notwithstanding the foregoing, the parties understand that 
following the Merger the rights of each stockholder of the Company under this 
Section 2.1 will be subject to the ownership limitations and other related 
provisions contained in the Amended Charter.

     SECTION 2.2	    Exchange of Certificates.

        (a) 			 Exchange Agent.  Prior to the Effective Time, the Company and 
the Partnerships shall jointly appoint a bank or trust company to act as 
exchange agent (the "Exchange Agent") for the exchange of the Merger 
Consideration upon surrender of Exchange Unit Certificates or cancellation of 
uncertificated Exchange Units, as the case may be.

        (b) 			 Provision of Common Stock.  The Company shall provide to the 
Exchange Agent on or before the Effective Time, for the benefit of the 
Unitholders participating in the Merger, sufficient shares of Common Stock 
issuable in exchange for the issued and outstanding Exchange Units pursuant to 
Section 2.1.

        (c) 			 Exchange Procedure.  As soon as reasonably practicable after 
the Effective Time, the Exchange Agent shall mail to each holder of record of 
a Exchange Unit Certificate whose Units were converted into the right to 
receive the Merger Consideration pursuant to Section 2.1, (i) a letter of 
transmittal (which shall specify that delivery shall be effected, and risk of 
loss and title to the Exchange Unit Certificates shall pass, only upon 
delivery of the Exchange Unit Certificates to the Exchange Agent and shall be 
in a form and have such other provisions as the Company may reasonably 
specify) and (ii) instructions for use in effecting the surrender of the 
Exchange Unit Certificates in exchange for the Merger Consideration.  Upon 
surrender of a Exchange Unit Certificate for cancellation to the Exchange 
Agent, together with such letter of transmittal, duly completed and executed, 
and such other documents as may reasonably be required by the Exchange Agent, 
the holder of such Exchange Unit Certificate shall be entitled to receive in 
exchange therefor the Merger Consideration and any dividends or other 
distributions to which such holder is entitled pursuant to Section 2.2(d), and 
the Exchange Unit Certificate so surrendered shall forthwith be canceled.  In 
the event of a transfer of ownership of Exchange Units which is not registered 
in the transfer records of the appropriate Partnership, payment may be made to 
a person other than the person in whose name the Exchange Unit Certificate so 
surrendered is registered if such Exchange Unit Certificate shall be properly 
endorsed or otherwise be in proper form for transfer and the person requesting 
such payment either shall pay any transfer or other taxes required by reason 
of such payment being made to a person other than the registered holder of 
such Exchange Unit Certificate or establish to the satisfaction of the Company 
that such tax or taxes have been paid or are not applicable.  Until 
surrendered as contemplated by this Section 2.2, each Exchange Unit 
Certificate shall be deemed at any time after the Effective Time to represent 
only the right to receive upon such surrender the Merger Consideration, 
without interest, into which the Exchange Units theretofore represented by 
such Exchange Unit Certificate shall have been converted pursuant to Section 
2.1 and any dividends or other distributions to which such holder is entitled 
pursuant to Section 2.2(d). No interest will be paid or will accrue on the 
Merger Consideration upon the surrender of any Exchange Unit Certificate or on 
any cash payable pursuant to Section 2.2(d) or Section 2.2(g).

        (d) 			 Record Dates; Distributions with Respect to Unconverted 
Exchange Units.

<PAGE>                               -3-
              (i) 				From the date of this Agreement, the Company and the 
Partnerships shall cooperate to establish and maintain record and payment 
dates for regular quarterly cash distributions on their respective capital 
stock and Units, such that the record and payment dates, respectively, for 
each of the Company and the Partnerships occur on the same calendar date.  

              (ii) 			No dividends or other distributions with respect to 
Exchange Units with a record date after the Effective Time shall be paid to 
the holder of any unsurrendered Exchange Unit Certificate with respect to the 
Exchange Units represented thereby, and no cash payment in lieu of fractional 
shares shall be paid to any such holder pursuant to Section 2.2(g), in each 
case until the surrender of such Exchange Unit Certificate in accordance with 
this Article II.  Subject to the effect of applicable abandoned property, 
escheat or similar laws, following surrender of any such Exchange Unit 
Certificate there shall be paid to the holder of such Exchange Unit 
Certificate, without interest, (A) at the time of such surrender, the amount 
of any cash payable in lieu of any fractional share of Common Stock to which 
such holder is entitled pursuant to Section 2.2(g) and (B) if such Exchange 
Unit Certificate is exchangeable for one or more whole shares of Common Stock, 
(x) at the time of such surrender, the amount of dividends or other 
distributions with a record date after the Effective Time theretofore paid 
with respect to such whole shares of Common Stock and (y) at the appropriate 
payment date, the amount of dividends or other distributions with a record 
date after the Effective Time but prior to such surrender and with a payment 
date subsequent to such surrender payable with respect to such whole shares of 
Common Stock.

        (e) 			 No Further Ownership Rights in Exchange Units.  All Merger 
Consideration paid upon the surrender of Exchange Unit Certificates in 
accordance with the terms of this Article II (and any cash paid pursuant to 
Section 2.2(g)) shall be deemed to have been paid in full satisfaction of all 
rights pertaining to the Exchange Units theretofore represented by such 
Exchange Unit Certificates, subject, however, to the obligation of the Company 
to pay, without interest, any dividends or make any other distributions with a 
record date prior to the Effective Time which may have been declared or made 
by the Partnerships on such Exchange Units in accordance with the terms of 
this Agreement or prior to the date of this Agreement and which remain unpaid 
at the Effective Time and have not been paid prior to such surrender, and 
there shall be no further registration of transfers on the transfer books of 
the Partnerships of the Exchange Units which were outstanding immediately 
prior to the Effective Time (except for transfers of Pension BUCs held by 
Unitholders electing the Retention Option).  If, after the Effective Time, 
Exchange Unit Certificates are properly presented to the Company they shall be 
canceled and exchanged as provided in this Article II.

        (f) 			 No Liability.  None of the Company, the Partnerships, 
Partnership Merger Sub or the Exchange Agent shall be liable to any person in 
respect of any Merger Consideration delivered to a public official pursuant to 
any applicable abandoned property, escheat or similar law.  Any portion of the 
Merger Consideration delivered to the Exchange Agent pursuant to this 
Agreement that remains unclaimed for six months after the Effective Time shall 
be redelivered by the Exchange Agent to the Company, upon demand, and any 
holders of Exchange Unit Certificates who have not theretofore complied with 
Section 2.2(c) shall thereafter look only to the Company for delivery of the 
Merger Consideration, subject to applicable abandoned property, escheat and 
other similar laws.

        (g) 			 No Fractional Shares.

              (i) 				No certificates or scrip representing fractional shares 
of Common Stock shall be issued upon the surrender for exchange of Exchange 
Unit Certificates, and such fractional share interests will not entitle the 
owner thereof to vote, to receive dividends or to any other rights of a 
stockholder of the Company.












<PAGE>                               -4-
           (ii)				Notwithstanding any other provision of this Agreement, each 
holder of Exchange Units exchanged in the Merger who would otherwise have been 
entitled to receive a fraction of a share of Common Stock (after taking into 
account all Exchange Unit Certificates delivered by such holder) shall 
receive, from the Exchange Agent in accordance with the provisions of this 
Section 2.2(g), a cash payment in lieu of such fractional share of Common 
Stock representing such holder's proportionate interest, if any, in the net 
proceeds from the sale by the Exchange Agent in one or more transactions 
(which sale transactions shall be made at such times, in such manner and on 
such terms as the Exchange Agent shall determine in its reasonable discretion) 
on behalf of all such holders of the aggregate of the fractional shares of 
Common Stock which would otherwise have been issued (the "Fractional 
Shares").  The sale of the Fractional Shares by the Exchange Agent shall be 
executed on the New York Stock Exchange (the "NYSE") or such other nationally 
recognized securities exchange (collectively, a "National Exchange") on which 
the Common Stock is traded through one or more member firms of the NYSE or a 
National Exchange and shall be executed in round lots to the extent 
practicable.  Until the net proceeds of such sale or sales have been 
distributed to the holders of Exchange Unit Certificates, the Exchange Agent 
will hold such proceeds in trust (the "Exchange Trust") for the holders of 
Exchange Unit Certificates.  The Company shall pay all commissions, transfer 
taxes and other out-of-pocket transaction costs, including the expenses and 
compensation of the Exchange Agent, incurred in connection with this sale of 
the Fractional Shares.  As soon as practicable after the determination of the 
amount of cash, if any, to be paid to holders of Exchange Unit Certificates in 
lieu of any fractional shares of Common Stock, the Exchange Agent shall make 
available such amounts to such holders of Exchange Unit Certificates without 
interest.

        (h) 			 Withholding Rights.  The Company or the Exchange Agent shall 
be entitled to deduct and withhold from the Merger Consideration otherwise 
payable pursuant to this Agreement to any Unitholder such amounts as the 
Company or the Exchange Agent is required to deduct and withhold with respect 
to the making of such payment under the Code, or any provision of state, local 
or foreign tax law.  To the extent that amounts are so withheld by the Company 
or the Exchange Agent, such withheld amounts shall be treated for all purposes 
of this Agreement as having been paid to the holder of the Exchange Units, in 
respect of which such deduction and withholding was made by the Company or the 
Exchange Agent.


ARTICLE III

Representations and Warranties

     SECTION 3.1	    Representations and Warranties of the Partnerships.  Each 
of the Partnerships represents and warrants to the other Partnerships, the 
Company and Partnership Merger Sub as follows:

        (a) 			 Organization, Standing and Power of the Partnership.  The 
Partnership is a limited partnership duly organized and validly existing under 
the laws of Delaware and has the requisite power and authority to carry on its 
business as now being conducted.  The Partnership is duly qualified or 
licensed to do business and is in good standing in each jurisdiction in which 
the nature of its businesses or the ownership of its assets makes such 
qualification or licensing necessary, other than in such jurisdictions where 
the failure to be so qualified or licensed, individually or in the aggregate, 
would not have a material adverse effect on the businesses, properties, 
assets, financial conditions or results of operations of the Partnership 
(a "Partnership Material Adverse Effect").  

        (b) 			 Capital Structure.  Prep Fund 1 represents and warrants that 
(i) its sole general partner is America First Capital Associates Limited 
Partnership Three, a Delaware limited partnership ("AFCA 3"), (ii) its sole 
limited partner is America First Fiduciary Corporation Number Six, a Nebraska 
corporation ("AFFC 6"), and (iii) on the date hereof, there were 5,775,797 
Prep Fund 1 Units representing limited partnership interests in Prep Fund 1 
assigned by AFFC 6 outstanding.  Prep Fund 2 represents and warrants that (i) 
its sole general partner is AFCA 6, (ii) its sole limited partner is America 
First Fiduciary Corporation Number Fourteen, a Nebraska corporation ("AFFC 
14"), and (iii) on the date hereof, there were 1,593,604 Prep Fund 2 BUCs 
representing limited partnership interests in Prep Fund 2 assigned by AFFC 14 
outstanding.  Pension Fund represents and warrants that (i) its sole general 
partner is AFCA 6, (ii) its sole limited partner is America First Fiduciary 
Corporation Number Sixteen, a Nebraska corporation ("AFFC 16"), and (iii) on 
the date hereof, there were 905,974 Pension BUCs representing limited 
<PAGE>                               -5-
partnership interests in Pension Fund assigned by AFFC 16 outstanding.  On the 
date of this Agreement, except as set forth in this Section 3.1(b), no other 
Units of the Partnership were outstanding.  All outstanding Units are validly 
issued, fully paid and nonassessable and not subject to preemptive rights.  
There are no bonds, debentures, notes or other indebtedness of the Partnership 
having the right to vote (or convertible into, or exchangeable for, securities 
having the right to vote) on any matters on which Unitholders may vote.  There 
are no outstanding securities, options, warrants, calls, rights, commitments, 
agreements, arrangements or undertakings of any kind to which the Partnership 
is a party or by which such entity is bound, obligating the Partnership to 
issue, deliver or sell, or cause to be issued, delivered or sold, additional 
Units, voting securities or other ownership interests of or obligating the 
Partnership to issue, grant, extend or enter into any such security, option, 
warrant, call, right, commitment, agreement, arrangement or undertaking.  
There are no outstanding contractual obligations of the Partnership to 
repurchase, redeem or otherwise acquire any Units, voting securities or other 
ownership interests in the Partnership or make any material investment (in the 
form of a loan, capital contribution or otherwise) in any Person.

        (c) 			 Authority; Noncontravention; Consents.  The Partnership has 
the requisite power and authority to enter into this Agreement.  The 
Partnership has the requisite power and authority, subject to approval of the 
Merger, this Agreement and any other transactions contemplated hereby by the 
requisite vote of the Unitholders (the "Unitholder Approvals"), to consummate 
the Merger and other transactions contemplated by this Agreement to which the 
Partnership is a party.  The execution and delivery of this Agreement by the 
Partnership and the consummation by the Partnership and other transactions 
contemplated hereby to which the Partnership is a party have been duly 
executed and authorized by all necessary action on the part of the 
Partnership, subject to approval of this Agreement pursuant to the Unitholder 
Approvals. This Agreement has been duly executed and delivered by the 
Partnership and constitutes a valid and binding obligation of the Partnership, 
enforceable against such entity in accordance with its terms.  The execution 
and delivery of this Agreement by the Partnership does not, and the 
consummation of the Merger and other transactions contemplated hereby and 
thereby to which the Partnership is a party and compliance by the Partnership 
with the provisions of this Agreement will not, conflict with, or result in 
any violation of, or default (with or without notice or lapse of time, or 
both) under, or give rise to a right of termination, cancellation or 
acceleration of any obligation or to loss of a material benefit under, or 
result in the creation of any pledge, claim, lien, charge, encumbrance or 
security interest of any kind or nature whatsoever (a "Lien") upon any of the 
properties or assets of the Partnership under (i) the partnership agreement 
(the "Partnership Agreement") or certificate of limited partnership of the 
Partnership, each as amended or supplemented to the date of this Agreement, 
(ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal 
easement agreement, lease or other agreement, instrument, permit, concession, 
franchise or license applicable to the Partnership or its properties or assets 
or (iii) subject to the governmental filings and other matters referred to in 
the following sentence, any judgement, order, decree, statute, law, ordinance, 
rule or regulation (collectively "Laws") applicable to the Partnership or its 
properties or assets, other than, in the case of clause (ii) or (iii), any 
such conflicts, violations, defaults, rights or Liens that individually or in 
the aggregate would not (x) have a Partnership Material Adverse Effect or (y) 
prevent the consummation of the Merger or other transactions contemplated 
hereby.  No consent, approval, order or authorization of, or registration, 
declaration or filing with, any federal, state or local government or any 
court, administrative authority or agency (a "Governmental Entity"), is 
required by or with respect to the Partnership in connection with the 
execution and delivery of this Agreement by the Partnership or the 
consummation by the Partnership of the Merger and other transactions 
contemplated hereby and thereby, except for (i) the filing with the Securities 
and Exchange Commission ("SEC") of (x) a consent solicitation 
statement/prospectus (the "Consent Solicitation Statement/Prospectus") 
relating to the approval by Unitholders of the Merger, this Agreement and the 
other transactions contemplated by this Agreement, and a registration 
statement relating to the issuance of the Merger Consideration ("Registration 
Statement") in which the Consent Solicitation Statement/Prospectus will be 
included as a prospectus and (y) such reports under Section 13(a) and Section 
14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as 
may be required in connection with this Agreement and the other transactions 
contemplated by this Agreement, (ii) the filing of the Articles of Merger for 
the Merger with the Department of Assessments and Taxation of the State of 
Maryland and the Office of the Secretary of State of the State of Delaware, 


<PAGE>                               -6-
(iii) such other consents, approvals, orders, authorizations, registrations, 
declarations and filings which, if not obtained or made, would not prevent or 
delay in any material respect the consummation of the Merger or any of the 
transactions contemplated by this Agreement or otherwise prevent the 
Partnership from performing its obligations under this Agreement in any 
material respect or have, individually or in the aggregate, a Partnership 
Material Adverse Effect.

        (d) 			 SEC Documents; Financial Statements; Undisclosed Liabilities.  
Each of Prep Fund 1, Prep Fund 2 and Pension Fund have filed all required 
reports, schedules, forms, statements and other documents with the SEC since 
December 31, 1986, June 30, 1987 and March 31, 1988, respectively (the 
"Partnership SEC Documents").  All of the Partnership SEC Documents (other 
than preliminary material), as of their respective filing dates, complied in 
all material respects with all applicable requirements of the Securities Act 
of 1933, as amended (the "Securities Act"), and the Exchange Act and, in each 
case, the rules and regulations promulgated thereunder applicable to such 
Partnership SEC Documents.  None of the Partnership SEC Documents at the time 
of filing contained any untrue statement of a material fact or omitted to 
state any material fact required to be stated therein or necessary in order to 
make the statements therein, in light of the circumstances under which they 
were made, not misleading, except to the extent such statements have been 
modified or superseded by later filed Partnership SEC Documents.  There is no 
unresolved violation, criticism or exception by any Governmental Entity of 
which the Partnership has received written notice with respect to such entity 
or statement which, if resolved in a manner unfavorable to the Partnership 
could have a Partnership Material Adverse Effect.  The financial statements of 
the Partnership included in the Partnership SEC Documents complied as to form 
in all material respects with applicable accounting requirements and the 
published rules and regulations of the SEC with respect thereto, have been 
prepared in accordance with generally accepted accounting principles ("GAAP") 
(except, in the case of interim financial statements, as permitted by Forms 
10-Q and 8-K of the SEC) applied on a consistent basis during the periods 
involved (except as may be indicated in the notes thereto) and fairly 
presented, in accordance with the applicable requirements of GAAP, the 
financial position of the Partnership as of the dates thereof and the results 
of operations and cash flows of the Partnership for the periods then ended 
(subject, in the case of interim financial statements, to normal year-end 
adjustments).  Except as permitted by Section 4.1 (for the purposes of this 
sentence, as if Section 4.1 had been in effect since December 31, 1996), the 
Partnership does not have any liabilities or obligations of any nature 
(whether accrued, absolute, contingent or otherwise) required by GAAP to be 
set forth on a balance sheet of the Partnership or in the notes thereto and 
which, individually or in the aggregate, would have a Partnership Material 
Adverse Effect.

        (e) 		  Absence of Certain Changes or Events.  Except as disclosed in 
the Partnership SEC Documents filed and publicly available prior to the date 
of this Agreement (referred to collectively as the "Partnership Filed SEC 
Documents"), since the date of the most recent financial statements included 
in the Partnership Filed SEC Documents (the "Financial Statement Date") and to 
the date of this Agreement, the Partnership has conducted its business only in 
the ordinary course and there has not been (i) any material adverse change in 
the business, financial condition or results of operations of the Partnership 
that has resulted or would result, individually or in the aggregate, in 
Economic Losses (as defined in Section 6.2 below) of the greater of $1,000,000 
or 5% of the Net Asset Value (as hereinafter defined) of such Partnership (a 
"Partnership Material Adverse Change"), nor has there been any occurrence or 
circumstance that with the passage of time would reasonably be expected to 
result in a Partnership Material Adverse Change, (ii) except for regular 
quarterly distributions not in excess of $.2649 per Unit in the case of Prep 
Fund 1, $.3354 per unit in the case of Prep Fund 2, and $.3314 per Unit in the 
case of Pension Fund, with customary record and payment date, any declaration, 
setting aside or payment of any dividend or other distribution (whether in 
cash, stock or property) with respect to any of the Units, (iii) any split, 
combination or reclassification of any of the Units or any issuance or the 
authorization of any issuance of any other securities in respect of, in lieu 
of or in substitution for, or giving the right to acquire by exchange or 
exercise, Units, except as permitted by Section 4.1, (iv) any damage, 
destruction or loss, whether or not covered by insurance, that has or would 
have a Partnership Material Adverse Effect or (v) any change in accounting 
methods, principles or practices by the Partnership materially affecting its 
assets, liabilities or business, except insofar as may have been disclosed in 
the Partnership Filed SEC Documents or required by a change in GAAP.


<PAGE>                               -7-
        (f) 			 Litigation.  Except as disclosed in the Partnership Filed SEC 
Documents and other than routine tort litigation arising from the ordinary 
course of operations of the Partnership which are covered by adequate 
insurance, there is no suit, action or proceeding pending or, to the knowledge 
of the Partnership, threatened against or affecting such entity that, 
individually or in the aggregate, could reasonably be expected to (i) have a 
Partnership Material Adverse Effect or (ii) prevent the consummation of the 
Merger or any of the transactions contemplated by this Agreement, nor is there 
any judgment, decree, injunction, rule or order of any Governmental Entity or 
arbitrator outstanding against the Partnership having, or which, insofar as 
reasonably can be foreseen, in the future would have, any such effect.

        (g) 			 Brokers; Fees and Expenses.  No broker, investment banker, 
financial advisor or other person, other than PaineWebber Incorporated 
("PaineWebber"), the fees and expenses of which, as set forth in a letter 
agreement between the General Partners and PaineWebber, will be paid by the 
Partnerships pro rata in accordance with their respective net asset values as 
used to determine the allocation of Common Stock among the Partnerships in the 
Merger (the "Net Asset Values") and Oppenheimer & Co. ("Oppenheimer"), the 
fees and expenses of which, as set forth in a letter agreement between the 
General Partners, together with the Special Committee and Oppenheimer, will be 
paid by the Partnerships pro rata in accordance with their respective Net 
Asset Values, is entitled to any broker's, finder's, financial advisor's or 
other similar fee or commission in connection with the Merger based upon 
arrangements made by or on behalf of the Partnership.

        (h) 			 Compliance with Laws.  Except as disclosed in the Partnership 
Filed SEC Documents, the Partnership has not violated or failed to comply with 
any statute, law, ordinance, regulation, rule, judgment, decree or order of 
any Governmental Entity applicable to its business, properties or operations, 
except for violations and failures to comply that would not, individually or 
in the aggregate, reasonably be expected to result in a Partnership Material 
Adverse Effect.

        (i) 			 Contracts; Debt Instruments.

              (i) 				The Partnership is not in violation of or in default 
under, in any material respect (nor does there exist any condition which upon 
the passage of time or the giving of notice or both would cause such a 
violation of or default under), any material loan or credit agreement, note, 
bond, mortgage, indenture, lease, permit, concession, franchise or license, or 
any agreement to acquire real property, or any other material contract, 
agreement, arrangement or understanding, to which it is a party or by which it 
or any of its properties or assets is bound, except for violations or defaults 
that would not, individually or in the aggregate, result in a Partnership 
Material Adverse Effect.

              (ii) 			Except for any of the following expressly identified in 
the most recent financial statements contained in the Partnership Filed SEC 
Documents and except as permitted by Section 4.1, there are no loan or credit 
agreements, notes, bonds, mortgages, indentures and other agreements and 
instruments outstanding pursuant to which the Partnership is indebted in an 
aggregate principal amount in excess of $2,000,000 per item or pursuant to 
which such indebtedness may be incurred.  For purposes of this Section 
3.1(i)(ii), "indebtedness" shall mean, with respect to any person, without 
duplication, (A) all indebtedness of such person for borrowed money, whether 
secured or unsecured, (B) all obligations of such person under conditional 
sale or other title retention agreements related to property purchased by such 
person, (C) all capitalized lease obligations of such person, (D) all 
obligations of such person under interest rate or currency hedging 
transactions (valued at the termination value thereof), (E) all guarantees of 
such person of any such indebtedness of any other person and (F) any 
agreements to provide any of the foregoing.

        (j) 			 Tangible Property and Assets.  The Partnership has good and 
marketable fee simple title to, those assets set forth in its most recent 
report filed with the SEC on Form 10- Q, free and clear of all Liens other 
than (i) any statutory Lien arising in the ordinary course of business by 
operation of law with respect to a liability that is not yet due or delinquent 
and (ii) any easement, restriction or minor imperfection of title or similar 
Lien which individually or in the aggregate with other such Liens does not 
materially impair the value of the property or asset subject to such Lien or 
the use of such property or asset in the conduct of the business of the 
Partnership.


<PAGE>                               -8-
        (k) 			 Books and Records.

              (i) 				The books of account and other financial records of the 
Partnership are in all material respects true, complete and correct, have been 
maintained in accordance with good business practices, and are accurately 
reflected in all material respects in the financial statements included in the 
Partnership Filed SEC Documents.

              (ii)				The Partnership has made available to the other 
Partnerships true and correct copies of the partnership agreement and, if 
applicable, certificate of limited partnership of the Partnership as amended 
to date.

        (l) 			 Registration Statement.  The information furnished by the 
Partnership for inclusion in the Registration Statement will not, as of the 
effective date of the Registration Statement, contain an untrue statement of a 
material fact or omit to state a material fact required to be stated therein 
or necessary to make the statements therein not misleading.

        (m) 			 Vote Required.  The affirmative vote of at least a majority of 
the outstanding Units of the Partnership is the only vote of any security 
holder in the Partnership (under applicable law or otherwise) to approve the 
Merger, this Agreement and the other transactions contemplated hereby.

ARTICLE IV

Covenants

     SECTION 4.1	    Conduct of Business by the Partnerships.  During the 
period from the date of this Agreement to the Effective Time, the Partnerships 
shall carry on their respective businesses in the usual, regular and ordinary 
course in substantially the same manner as heretofore conducted and, to the 
extent consistent therewith, use commercially reasonable efforts to preserve 
intact its current business organization, goodwill,  ongoing businesses and 
its status as a partnership within the meaning of the Code.  Without limiting 
the generality of the foregoing, the following additional restrictions shall 
apply.  During the period from the date of this Agreement to the Effective 
Time, except as otherwise contemplated by this Agreement, each Partnership 
shall not (and shall not authorize or commit or agree to):

        (a) 		(i) split, combine or reclassify any Units or partnership 
interests or issue or authorize the issuance of any other securities in 
respect of, in lieu of or in substitution for Units or partnership interests 
or (ii) purchase, redeem or otherwise acquire any Units or partnership 
interests;

        (b) 			 issue, deliver or sell, or grant any option or other right, 
in respect of, any Units or partnership interests, any other voting or 
redeemable securities of the Partnership or any securities convertible into, 
or any rights, warrants or options to acquire, any such voting securities or 
convertible or redeemable securities, except to the respective Partnership;

        (c)  			amend the partnership agreement of the respective Partnership;

        (d)  			merge or consolidate with any Person;

        (e)  			make any tax election (unless required by law or necessary to 
preserve the respective Partnership's status as a partnership);

        (f) 		(i) change in any material manner any of its methods, principles 
or practices of accounting, except as may be required by the SEC, applicable 
law or GAAP or (ii) make or rescind any express or deemed election relating to 
tax matters; or

        (g) 			 pay any distribution except regular quarterly distributions 
that are not in excess of $.2649, $.3354 or $.3314 per Unit of Prep Fund 1, 
Prep Fund 2 or Pension Fund, respectively.

     SECTION 4.2	    Other Actions.  Each of the Partnerships shall not take 
any action that would result in (i) any of the representations and warranties 
of such party (without giving effect to any "knowledge" qualification) set 
forth in this Agreement that are qualified as to materiality becoming untrue, 
(ii) any of such representations and warranties (without giving effect to any 
"knowledge" qualification) that are not so qualified becoming untrue in any 
material respect or (iii) except as contemplated by Section 7.1, any of the 
conditions to the Merger set forth in Article VI not being satisfied.
<PAGE>                               -9-
     SECTION 4.3	   Payments of Dividends By the Company.  The Company has 
set, for the first year following the Merger, the rate of its quarterly 
distributions to stockholders at $.265 per share of Common Stock ($1.06 on an 
annual basis); provided, however, the payment of such distributions shall be 
subject to the provisions of Section 2-311 of the MGCL.


ARTICLE V

Additional Covenants

     SECTION 	5.1     Preparation of the Registration Statement and the 
Consent Solicitation Statement/Prospectus.

        (a) 			 As soon as practicable following the date of this Agreement, 
the Partnerships shall prepare and file with the SEC a preliminary 
Registration Statement in form and substance satisfactory to each of the 
Partnerships in which the Consent Solicitation Statement/Prospectus will be 
included as a prospectus.  Each of the Partnerships shall use its best efforts 
to (i) respond to any comments of the SEC and (ii) have the Registration 
Statement declared effective under the Securities Act and the rules and 
regulations promulgated thereunder as promptly as practicable after such 
filing and to keep the Registration Statement effective as long as is 
necessary to consummate the Merger.  Each Partnership shall use its best 
efforts to mail the Consent Solicitation Statement/Prospectus to the 
Unitholders as promptly as practicable after the Registration Statement is 
declared effective.  Each party will notify the other promptly of the receipt 
of any comments from the SEC and of any request by the SEC for amendments or 
supplements to the Registration Statement the Consent Solicitation 
Statement/Prospectus or for additional information and will supply the other 
Partnerships with copies of all correspondence between such party or any of 
its representatives and the SEC with respect to the Registration Statement or 
the Consent Solicitation Statement/Prospectus.  The Registration Statement and 
the Consent Solicitation Statement/Prospectus shall comply in all material 
respects with all applicable requirements of Law.  Whenever any event occurs 
which is required to be set forth in an amendment or supplement to the 
Registration Statement or the Consent Solicitation Statement/Prospectus, the 
Partnership, as the case may be, shall promptly inform the other Partnerships 
of such occurrences and cooperate in filing with the SEC, and/or mailing to 
the Unitholders such amendment or supplement in a form reasonably acceptable 
to the Partnerships.

        (b)  			Each Partnership covenants that the Consent Solicitation 
Statement/Prospectus shall include the recommendation of the General Partner 
of such Partnership to the effect the Merger and this Agreement are fair to, 
and in the best interests of, Unitholders and a recommendation of the Special 
Committee (the "Special Committee") of the board of Managers of America First 
Companies L.L.C. in favor of the Merger and this Agreement; provided, however, 
that the recommendation of such General Partner or the Special Committee may 
not be included or may be withdrawn, modified or amended if such General 
Partner or the Special Committee shall approve or recommend a Superior 
Competing Transaction (as defined below) or enter into an agreement with 
respect to such Superior Competing Transaction and the General Partner of such 
Partnership and the Special Committee determines in good faith that they are 
in compliance with Section 7.1.

     SECTION 	5.2     Best Efforts; Notification.

        (a) 			 Upon the terms and subject to the conditions set forth in this 
Agreement, each of the Partnerships agrees to use its best efforts to take, or 
cause to be taken, all actions, and to do, or cause to be done, and to assist 
and cooperate with the other Partnerships in doing all things necessary, 
proper or advisable to fulfill all conditions applicable to such party 
pursuant to this Agreement and to consummate and make effective, in the most 
expeditious manner practicable, the Merger and the other transactions 
contemplated hereby, including (i) the obtaining of all necessary actions or 
nonactions, waivers, consents and approvals from Governmental Entities and the 
making of all necessary registrations and filings and the taking of all 
reasonable steps as may be necessary to obtain an approval, waiver or 
exemption from, or to avoid an action or proceeding by, any Governmental 
Entity, (ii) the obtaining of all necessary consents, approvals, waivers or 
exemption from non-governmental third parties, (iii) the defending of any 
lawsuits or other legal proceedings, whether judicial or administrative, 
challenging the Merger, this Agreement or the consummation of the Merger and 
the other transactions contemplated hereby, including seeking to have any stay 
or temporary restraining order entered by any court or other Governmental 
<PAGE>                               -10-
Entity vacated or reversed, and (iv) the execution and delivery of any 
additional instruments necessary to consummate the Merger and the other 
transactions contemplated by, and to fully carry out the purposes of, this 
Agreement; provided, however, that a party shall not be obligated to take any 
action pursuant to the foregoing if the taking of such action or the obtaining 
of any waiver, consent, approval or exemption is reasonably likely to result 
in the imposition of a condition or restriction of the type referred to in 
Section 6.1(e).

        (b) 			 Each Partnership shall give prompt notice to the other 
Partnerships, if (i) any representation or warranty made by it contained in 
this Agreement that is qualified as to materiality becomes untrue or 
inaccurate in any respect or any such representation or warranty that is not 
so qualified becomes untrue or inaccurate in any material respect or (ii) it 
fails to comply with or satisfy in any material respect any covenant, 
condition or agreement to be complied with or satisfied by it under this 
Agreement; provided, however, that no such notification shall affect the 
representations, warranties, covenants or agreements of the parties or the 
conditions to the obligations of the parties under this Agreement.

     SECTION 5.3    	No Solicitation of Transactions.  Subject to Section 7.1, 
each of the Partnerships shall not directly or indirectly, through any 
officer, director, employee, agent, investment banker, financial advisor, 
attorney, accountant, broker, finder or other representative, initiate or 
solicit (including by way of furnishing non-public information or assistance) 
any inquiries or the making of any proposal that constitutes, or may 
reasonably be expected to lead to, any Competing Transaction (as defined 
below), or authorize or permit any of its partners, Unitholders, officers, 
directors, employees or agents, attorneys, investment bankers, financial 
advisors, accountants, brokers, finders or other representatives retained by 
it to take any such action.  Each of the Partnerships shall notify the other 
parties in writing (as promptly as practicable) of all of the relevant details 
relating to all inquiries and proposals which it or any such officer, 
director, employee, agent, investment banker, financial advisor, attorney, 
accountant, broker, finder or other representative may receive relating to any 
of such matters and if such inquiry or proposal is in writing, each of the 
Partnerships shall deliver to the other parties a copy of such inquiry or 
proposal.  For purposes of this Agreement, "Competing Transaction" shall mean 
any of the following (other than the Merger and the other transactions 
contemplated by this Agreement):  (i) any merger, consolidation, share 
exchange, business combination, or similar transaction involving a 
Partnership; (ii) any sale, lease, exchange, mortgage, pledge, transfer or 
other disposition of 30% or more of the assets of such Partnership in a single 
transaction or series of related transactions, excluding any bona fide 
financing transactions which do not, individually or in the aggregate, have as 
a purpose or effect the sale or transfer of control of such assets; (iii) any 
tender offer or exchange offer for 30% or more of the outstanding Units of 
such Partnership or the filing of a registration statement under the 
Securities Act in connection therewith; or (iv) any public announcements of a 
proposal, plan or intention to do any of the foregoing or any agreement to 
engage in any of the foregoing.

     SECTION 5.4    	Public Announcements.  Each Partnership and the Company 
will consult with the other parties before issuing, and provide the other 
parties the opportunity to review and comment upon, any press release or other 
public statements with respect to the Merger and shall not issue any such 
press release or make any such public statement prior to such consultation, 
except as may be required by applicable law, court process or by obligations 
pursuant to any listing agreement with any national securities exchange.  The 
parties agree that the initial press release to be issued with respect to the 
Merger will be in the form agreed to by the parties hereto prior to the 
execution of this Agreement.

     SECTION 5.5	    Listing of Common Stock.  The Company will promptly 
prepare and submit to the NYSE a listing application covering the Common Stock 
issuable in the Merger.  Prior to the Effective Time, the Company shall use 
its best efforts to have the NYSE approve for listing, upon official notice of 
issuance, the Common Stock to be issued in the Merger.








<PAGE>                               -11-
     SECTION 5.6    	Indemnification.

        (a)   (i)	    Each Partnership and, from and after the Effective Time, 
the Company shall, indemnify, defend and hold harmless each person who is now 
or has been at any time prior to the date hereof or who becomes prior to the 
Effective Time, a General Partner or an affiliate of such General Partner of 
such Partnership or an officer or a member of the board of managers or board 
of directors, (or any regular or Special Committee thereof, including the 
Special Committee) or any committee thereof of any such general partner or 
affiliate (the "Indemnified Parties") against all losses, claims, damages, 
costs, expenses (including attorneys' fees and expenses), liabilities or 
judgments or amounts that are paid in settlement of, with the approval of the 
indemnifying party (which approval shall not be unreasonably withheld), or 
otherwise in connection with any threatened or actual claim, action, suit, 
proceeding or investigation based on or arising out of the fact that such 
person is or was a General Partner or an affiliate of such General Partner of 
such Partnership or an officer or a member of the board of managers or board 
of directors (or any regular or special committee thereof, including the 
Special Committee) or any committee thereof of any such general partner or 
affiliate at or prior to the Effective Time, whether asserted or claimed prior 
to, or at or after, the Effective Time ("Partnership Indemnified 
Liabilities"), including all Partnership Indemnified Liabilities based on, or 
arising out of, or pertaining to this Agreement or the Merger, in each case to 
the full extent a Partnership is permitted under its Partnership Agreement to 
indemnify its own partners or the Company is permitted under Maryland law to 
indemnify such persons, as the case may be, (and such Partnership or the 
Company, as the case may be, will pay expenses in advance of the final 
disposition of any such action or proceeding to each Indemnified Party to the 
full extent permitted by law, subject to the limitations set forth in Section 
5.6(a)(iii)).

              (ii) 			Any Indemnified Parties proposing to assert the right to 
be indemnified under this Section 5.6 shall, promptly after receipt of notice 
of commencement of any action against such Indemnified Parties in respect of 
which a claim is to be made under this Section 5.6 against any Partnership 
and/or the Company (collectively, the "Indemnifying Parties"), notify the 
Indemnifying Parties of the commencement of such action, enclosing a copy of 
all papers served.  If any such action is brought against any of the 
Indemnified Parties and such Indemnified Parties notify the Indemnifying 
Parties of its commencement, the Indemnifying Parties will be entitled to 
participate in and, to the extent that they elect by delivering written notice 
to such Indemnified Parties promptly after receiving notice of the 
commencement of the action from the Indemnified Parties, to assume the defense 
of the action and after notice from the Indemnifying Parties to the 
Indemnified Parties of their election to assume the defense, the Indemnifying 
Parties will not be liable to the Indemnified Parties for any legal or other 
expenses except as provided below and except for the reasonable costs of 
investigation subsequently incurred by the Indemnified Parties in connection 
with the defense.  If the Indemnifying Parties assume the defense, the 
Indemnifying Parties shall have the right to settle such action without the 
consent of the Indemnified Parties; provided, however, that the Indemnifying 
Parties shall be required to obtain such consent (which consent shall not be 
unreasonably withheld) if the settlement includes any admission of wrongdoing 
on the part of the Indemnified Parties or any decree or restriction on the 
Indemnified Parties or their partners, officers or directors; provided, 
further, that no Indemnifying Parties, in the defense of any such action 
shall, except with the consent of the Indemnified Parties (which consent shall 
not be unreasonably withheld), consent to entry of any judgment or enter into 
any settlement that does not include as an unconditional term thereof the 
giving by the claimant or plaintiff to such Indemnified Parties of a release 
from all liability with respect to such action.  The Indemnified Parties will 
have the right to employ their own counsel in any such action, but the fees, 
expenses and other charges of such counsel will be at the expense of such 
Indemnified Parties unless (i) the employment of counsel by the Indemnified 
Parties has been authorized in writing by the Indemnifying Parties, (ii) the 
Indemnified Parties have reasonably concluded (based on advice of counsel) 
that there may be legal defenses available to them that are different from or 
in addition to those available to the Indemnifying Parties, (iii) a conflict 
or potential conflict exists (based on advice of counsel to the Indemnified 
Parties) between the Indemnified Parties and the Indemnifying Parties (in 
which case the Indemnifying Parties will not have the right to direct the 
defense of such action on behalf of the Indemnified Parties) or (iv) the 
Indemnifying Parties have not in fact employed counsel to assume the defense 
of such action within a reasonable time after receiving notice of the 
commencement of the action, in each of which cases the reasonable fees, 

<PAGE>                               -12-
disbursements and other charges of counsel will be at the expense of the 
Indemnifying Parties.

              (iii) 		It is understood that the Indemnifying Parties shall 
not, in connection with any proceeding or related proceedings in the same 
jurisdiction, be liable for the reasonable fees, disbursements and other 
charges of more than one separate firm admitted to practice in such 
jurisdiction at any one time for all such Indemnified Parties unless (a) the 
employment of more than one counsel has been authorized in writing by the 
Indemnifying Parties, (b) any of the Indemnified Parties have reasonably 
concluded (based on advice of counsel) that there may be legal defenses 
available to them that are different from or in addition to those available to 
other Indemnified Parties or (c) a conflict or potential conflict exists 
(based on advice of counsel to the Indemnified Parties) between any of the 
Indemnified Parties and the other Indemnified Parties, in each case of which 
the Indemnifying Parties shall be obligated to pay the reasonable fees and 
expenses of such additional counsel or counsels.

              (iv) 			The Indemnifying Parties will not be liable for any 
settlement of any action or claim effected without their written consent 
(which consent shall not be unreasonably withheld).

        (b) 			 The provisions of this Section 5.6 are intended to be for the 
benefit of, and shall be enforceable by, each Indemnified Party, his or her 
heirs and personal representatives and shall be binding on all successors and 
assigns of the Partnerships and the Company.


ARTICLE VI

Conditions Precedent

     SECTION 6.1	    Conditions to Each Party's Obligation to Effect the 
Merger.  The respective obligation of each party to effect the Merger and to 
consummate the other transactions contemplated by this Agreement to occur on 
the Closing Date is subject to the satisfaction or waiver on or prior to the 
Effective Time of the following conditions:

        (a) 			 Approval of Unitholders of Prep Fund 1 and Prep Fund 2.  The 
approval of Unitholders representing a majority in interest of the Prep Fund 1 
Units and Unitholders representing a majority in interest of the Prep Fund 2 
BUCs.

        (b) 			 Listing of Common Stock.  The NYSE or another National 
Exchange shall have approved for listing the Common Stock to be issued in the 
Merger and such approval shall remain in effect at the Effective Time.

        (c) 			 Absence of Certain Conditions.  The absence at the Effective 
Time of (a) any suspension of trading of, or limitation on prices for, 
securities generally on the NYSE, (b) a declaration of a banking moratorium by 
federal or state authorities or any suspension of payments by banks in the 
United States (whether mandatory or not) or of the extension of credit by 
lending institutions in the United States, or (c) in the case of any of the 
foregoing existing on the date of the Consent Solicitation 
Statement/Prospectus, any material acceleration or worsening thereof.

        (d) 			 Registration Statement.  The Registration Statement shall have 
become effective under the Securities Act and shall not be the subject of any 
stop order or proceedings by the SEC seeking a stop order.

        (e) 			 No Injunctions or Restraints.  No temporary restraining order, 
preliminary or permanent injunction or other order issued by any court of 
competent jurisdiction or other legal restraint or prohibition preventing the 
consummation of the Merger or any of the other transactions contemplated by 
this Agreement shall be in effect.

        (f) 			 Opinion Related to Partnership Status of the Partnership.  
The Partnerships shall have received an opinion dated as of the Closing Date 
of Rogers & Wells, subject to certificates, letters and assumptions, 
reasonably satisfactory to the Partnerships that each Partnership was 
organized and has operated in conformity with the requirements for 
qualification as a partnership within the meaning of the Code since 1986 in 
the case of Prep Fund 1, 1987 in the case of Prep Fund 2 and 1988 in the case 
of Pension Fund, and not as a corporation or an association taxable as a 
corporation.

<PAGE>                               -13-
        (g) 			 Opinion Related to REIT Status of the Company.  The 
Partnerships shall have received an opinion dated as of the Closing Date of 
Rogers & Wells, subject to certificates, letters and assumptions, reasonably 
satisfactory to the Partnerships that following the Merger (after giving 
effect thereto), the Company's proposed method of operation will enable it to 
meet the requirements for qualification and taxation as a REIT under the Code. 

        (h)  			The Investment Company Act Opinion.  The Partnerships shall 
have received an opinion dated as of the Closing Date of Rogers & Wells, 
subject to certificates, letters and assumptions, reasonably satisfactory to 
the Partnerships, to the effect that neither the Company nor any of its 
Subsidiaries is an "investment company" or an entity "controlled" by an 
"investment company" as such terms are defined in the Investment Company Act 
of 1940, as amended.

        (i) 			 Consents and Approvals.  The receipt of all necessary consents 
and approvals on or before (and remaining in effect at) the Effective Time.

        (j) 			 Absence of Material Adverse Effects.  The absence of any event 
or any matter brought to the attention of the General Partners that, in the 
sole judgment of the General Partners, materially affects, whether adversely 
or otherwise, the Partnerships, the Company or the Merger.

     SECTION 6.2 	   Conditions to Obligations of the Partnerships.  The 
obligations of each of the Partnerships to effect the Merger and to consummate 
the other transactions contemplated in this Agreement to occur on the Closing 
Date are further subject to the following conditions, any one or more of which 
may be waived by such Partnership:

        (a) 			 Representations and Warranties.  The representations and 
warranties of the other Partnerships (without giving effect to any 
"materiality" qualification or limitation) set forth in this Agreement shall 
be true and correct as of the Closing Date, as though made on and as of the 
Closing Date, except to the extent the representation or warranty is expressly 
limited by its terms to another date, and the other Partnerships shall have 
received a certificate (which certificate may be qualified by knowledge to the 
same extent as such representations and warranties are so qualified) signed on 
behalf of such Partnership by the General Partner of such entity to such 
effect.  This condition shall be deemed satisfied notwithstanding any failure 
of a representation or warranty of such Partnership to be true and correct as 
of the Closing Date (without giving effect to any materiality qualification) 
if the aggregate amount of Economic Losses (as defined below) that would 
reasonably be expected to arise as a result of the failures of such 
representations and warranties to be true and correct as of the Closing Date 
does not exceed the greater of $1,000,000 or 5% of the Net Asset Value of such 
Partnership (such amount to be calculated by counting in all cases from the 
first dollar of such Economic Losses without giving effect to the $1,000,000 
or 5% of the Net Asset Value limitation set forth in Section 3.1(e)).  
"Economic Losses,"  as used in this Section 6.2, shall mean any and all net 
damage, net loss (including diminution in the value of properties or assets 
which diminution, with regard to permanent cash flow losses from any property 
or assets that produces cash flow, shall be measured by multiplying the annual 
net cash flow produced by such property or asset over the 12-month period 
preceding the date of the applicable loss by a factor of 10), net liability or 
expense suffered by such Partnership, but shall not include any claims, 
damages, loss, expense or other liability resulting from any class action or 
Unitholders' or partners' derivative lawsuits relating to the Transactions 
against such Partnership, if any, filed subsequent to the date of this 
Agreement or any amounts paid or expenses incurred by such Partnership in 
obtaining non- governmental third party consents, as contemplated by Section 
5.2.

        (b) 			 Performance of Obligations of the Other Partnerships.  The 
other Partnerships shall have performed in all material respects all 
obligations required to be performed by them under this Agreement at or prior 
to the Effective Time, and each Partnership shall have received a certificate 
signed on behalf of each of the other Partnerships by the General Partner of 
each of the other Partnerships to such effect.

        (c) 			 Material Adverse Change.  Since the date of this Agreement, 
there has been no material adverse change in the business, results of 
operations or financial condition of any of the other Partnerships, that have 
resulted or would result, individually or in the aggregate, in Economic Losses 
of the greater of $1,000,000 or 5% of the Net Asset Value of such to any of 
the Partnerships or the Company.  Each Partnership shall have received a 

<PAGE>                               -14-
certificate of the General Partner of each of the other Partnerships to the 
effect that there has been no such material adverse change.

        (d) 			 Consents.  All consents and waivers from third parties 
necessary in connection with the consummation of the Merger and the other 
transactions contemplated by this Agreement shall have been received, other 
than such consents and waivers from third parties, which, if not obtained, 
would not result, individually or in the aggregate, in Economic Losses of the 
greater of $1,000,000 or 5% of the Net Asset Value of the Partnerships or the 
Company.

     SECTION 6.3	    Conditions to Obligations of Pension Fund.  The 
obligation of Pension Fund to effect the Merger and to consummate the other 
Transactions contemplated to occur on the Closing Date is further subject to 
the approval of the Merger by a majority in interest of Unitholders holding 
the outstanding Pension BUCs.

ARTICLE VII

General Partner Actions

     SECTION 7.1	    General Partner Actions.  Notwithstanding Section 5.3 or 
any other provision of this Agreement to the contrary, to the extent required 
by the fiduciary obligations of the General Partner of any Partnership, as 
determined in good faith based on the advice of outside counsel, such General 
Partner may:

        (a) 			 disclose to its Unitholders any information required to be 
disclosed under applicable law;

        (b) 			 in response to an unsolicited request therefor, participate in 
discussions or negotiations with, or furnish information with respect to 
itself pursuant to a customary confidentiality agreement (as determined by its 
outside counsel) to, any person in connection with a Competing Transaction 
proposed by such person; and

        (c) 			 approve or recommend (and in connection therewith withdraw or 
modify its approval or recommendation of the Merger or this Agreement) a 
Superior Competing Transaction (as defined below) or enter into an agreement 
with respect to such Superior Competing Transaction (for purposes of this 
Agreement, "Superior Competing Transaction" means a bona fide proposal of a 
Competing Transaction made by a third party which the applicable General 
Partner determines in good faith (based on the advice of its investment 
banking firm) to be more favorable to its Unitholders than the Merger), as the 
case may be.


ARTICLE VIII

Termination, Amendment and Waiver

     SECTION 8.1	    Termination.  This Agreement may be terminated at any 
time prior to the Effective Date whether before or after Unitholder Approvals 
are obtained:

        (a)  			by mutual written consent of the Partnerships duly authorized 
by their respective General Partners and approved by the Special Committee;

        (b)  			by any Partnership, upon a breach of any representation or 
warranty on the part of Pension Fund 1 or Pension Fund 2 or the breach in any 
material respect of any covenant or agreement of Pension Fund 1 or Pension 
Fund 2  set forth in this Agreement; or (ii) by any Partnership (but such 
termination shall only be with regard to the obligations of Pension Fund 
hereunder), upon a breach of any representation or warranty on the part of 
Pension Fund or the breach in any material respects of any covenant or 
agreement of Pension Fund set forth in this Agreement; provided, however, that 
the right to cause a termination of this Agreement or to cause the termination 
of the obligations of Pension Fund under this Section 8.1(b) shall not be 
available to any party that has breached its representations or warranties or 
has breached in any material respects any of its covenants or agreements 
hereunder;

        (c) 	 		by any Partnership, if the Merger shall not have been 
consummated before June 30, 1998;


<PAGE>                               -15-
        (d) 		 	by any of the Partnerships, if the approval of a majority in 
interest of the holders of outstanding Prep Fund 1 Units or a majority in 
interest of the holders of Prep Fund 2 BUCs shall not have been obtained on or 
prior to June 30, 1998; 

        (e) 			 by any of the Partnerships (but such termination shall only be 
with regard to the obligations of Pension Fund hereunder), if the approval of 
a majority in interest of the holders of Pension Fund shall not have been 
obtained on or prior to June 30, 1998;

        (f) 		 	by any Partnership, if prior to the approval of the 
Unitholders of such Partnership the General Partner of Prep Fund 1 or Prep 
Fund 2 (or the Special Committee acting with respect to such Partnership) 
shall have, in compliance with the provisions of this Agreement, changed its 
recommendation with respect to or withdrawn or modified its approval of the 
Merger or this Agreement; or

        (g) 			 by any Partnership (but such termination shall only be with 
regard to the obligations of Pension Fund hereunder), if the General Partner 
of Pension Fund (or the Special Committee acting with respect to Pension Fund) 
shall have, in compliance with the provisions of this Agreement, changed its 
recommendation with respect to or withdrawn or modified its approval of the 
Merger or this Agreement.

     SECTION 8.2	    Expenses.

        (a) 		 	Except as otherwise specified in this Section 8.2 or agreed in 
writing by the parties, all costs and expenses incurred in connection with 
this Agreement, the Merger and the other transactions contemplated hereby 
shall be paid by the Partnerships (pro rata in accordance with their aggregate 
Net Asset Values from cash on hand) whether or not the Merger is consummated.  
If, however, the Merger is consummated, the Company will be allocated the 
entire amount of the expenses referred to in this paragraph (a).

        (b)  			Notwithstanding the foregoing, each Partnership agrees that, 
if this Agreement shall be terminated pursuant to Section 8.1(d) or (f) (or 
the obligations of Pension Fund shall have been terminated pursuant to Section 
8.1(e) or (g)) and such Partnership (each such Partnership being referred to 
herein as the "Competing Transaction Partnership") shall have, on or prior to 
the date of such termination, received a proposal constituting a Competing 
Transaction that has not been offered on substantially equivalent terms (as 
determined in good faith by the Special Committee) to any of the other 
Partnerships (each such other Partnership being referred to herein as an 
"Excluded Partnership"), then the Competing Transaction Partnerships agree to 
reimburse each Excluded Partnership for such Excluded Partnership's share of 
the out-of-pocket expenses incurred in connection with this Agreement and the 
other transactions contemplated hereby (including, without limitation, all 
attorneys', accountants' and investment banking fees and expenses), plus any 
expenses incurred in enforcing the provisions of this Section 8.2.

     SECTION 8.3	    Effect of Termination.  In the event of termination of 
this Agreement by any Partnership as provided in Section 8.1, this Agreement 
shall forthwith become void and have no effect, without any liability or 
obligation on the part of any Partnership, other than Section 8.2, this 
Section 8.3 and Article IX and except to the extent that such termination 
results from a willful breach by a party of any of its representations, 
warranties, covenants or agreements set forth in this Agreement.

     SECTION 8.4	     Amendment.  This Agreement may be amended by the parties 
in writing by appropriate instrument executed at any time before or after any 
Unitholder Approvals are obtained and prior to the Effective Date; provided, 
however, that, after Unitholder Approvals are obtained, no such amendment, 
modification or supplement shall alter the amount or change the form of the 
consideration to be delivered to such Unitholders or alter or change any of 
the terms or conditions of this Agreement if such alteration or change would 
adversely affect such Unitholders.

     SECTION 8.5	     Extension; Waiver.  At any time prior to the Effective 
Time, each of the Partnerships or the Company may (a) extend the time for the 
performance of any of the obligations or other acts of another party, (b) 
waive any inaccuracies in the representations and warranties of another party 
contained in this Agreement or in any document delivered pursuant to this 
Agreement or (c) subject to the proviso of Section 8.4, waive compliance with 
any of the agreements or conditions of another party contained in this 


<PAGE>                               -16-
Agreement.  Any agreement on the part of a party to any such extension or 
waiver shall be valid only if set forth in an instrument in writing signed on 
behalf of such party.


ARTICLE IX

General Provisions

     SECTION 9.1	    Nonsurvival of Representations and Warranties.  None of 
the representations and warranties in this Agreement or in any instrument 
delivered pursuant to this Agreement shall survive the Effective Time.  This 
Section 9.1 shall not limit any covenant or agreement of the parties which by 
its terms contemplates performance after the Effective Time.

     SECTION 9.2	    Notices.  All notices, requests, claims, demands and 
other communications under this Agreement shall be in writing and shall be 
deemed given if delivered personally, sent by overnight courier (providing 
proof of delivery) to the parties or sent by telecopy (providing confirmation 
of transmission) at the following addresses or telecopy numbers (or at such 
other address or telecopy number for a party as shall be specified by like 
notice):

        (a) 			 if to the Partnerships or any of the General Partners, to

             			1004 Farnam Street
             			Omaha, Nebraska 68102
             			Attn:  Maurice E. Cox, Jr.
              		Fax:  (402) 345-8966

             			with a copy to:

             			Rogers & Wells
             			200 Park Avenue
             			New York, New York 10166
             			Attn:	 Alan L. Gosule, Esq.
                  				 Jay L. Bernstein, Esq.
              		Fax:  (212) 878-8375

        (b) 			 if to the Company or Partnership Merger Sub, to

             			399 Park Avenue
             			19th Floor
             			New York, New York 10022
             			Attn:  Stewart Zimmerman
              		Fax:  (212) 935-8760

             			with a copy to:

             			Rogers & Wells
             			200 Park Avenue
             			New York, NY  10166
             			Attn:	 Alan L. Gosule, Esq.
                  				 Jay L. Bernstein, Esq.
             			Fax:  (212) 878-8375


     SECTION 9.3	    Interpretation.  When a reference is made in this 
Agreement to a Section, such reference shall be to a Section of this Agreement 
unless otherwise indicated. The table of contents and headings contained in 
this Agreement are for reference purposes only and shall not affect in any way 
the meaning or interpretation of this Agreement.  Whenever the words 
"include," "includes" or "including" are used in this Agreement, they shall be 
deemed to be followed by the words "without limitation."

     SECTION 9.4	    Counterparts.  This Agreement may be executed in one or 
more counterparts, all of which shall be considered one and the same agreement 
and shall become effective when one or more counterparts have been signed by 
each of the parties and delivered to the other parties.

     SECTION 9.5	    Entire Agreement; No Third-Party Beneficiaries.  
This Agreement and the other agreements entered into in connection with the 
Transactions (a) constitute the entire agreement and supersedes all prior 
agreements and understandings, both written and oral, between the parties with 
respect to the subject matter of this Agreement and, (b) except for the 

<PAGE>                               -17-
provisions of Article II and Section 5.6, are not intended to confer upon any 
person other than the parties hereto any rights or remedies.

     SECTION 9.6	    Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND 
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF 
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT 
OF LAWS THEREOF.

     SECTION 9.7	    Assignment.  Neither this Agreement nor any of the 
rights, interests or obligations under this Agreement shall be assigned or 
delegated, in whole or in part, by operation of law or otherwise by any of the 
parties without the prior written consent of the other parties.  Subject to 
the preceding sentence, this Agreement will be binding upon, inure to the 
benefit of, and be enforceable by, the parties and their respective successors 
and assigns.

     SECTION 9.8	    Enforcement.  The parties agree that irreparable damage 
would occur in the event that any of the provisions of this Agreement were not 
performed in accordance with their specific terms or were otherwise breached.  
It is accordingly agreed that the parties shall be entitled to an injunction 
or injunctions to prevent breaches of this Agreement and to enforce 
specifically the terms and provisions of this Agreement in any court of the 
United States located in the State of Delaware or in any Delaware state court, 
this being in addition to any other remedy to which they are entitled at law 
or in equity.  In addition, each of the parties hereto (a) consents to submit 
itself (without making such submission exclusive) to the personal jurisdiction 
of any federal court located in the State of Delaware or any Delaware state 
court in the event any dispute arises out of this Agreement or any of the 
Transactions contemplated by this Agreement and (b) agrees that it will not 
attempt to deny or defeat such personal jurisdiction by motion or other 
request for leave from any such court.


ARTICLE X

Certain Definitions

     SECTION 10.1	    Certain Definitions.  For purposes of this Agreement:

   		"Affiliate" of any person means another person that directly or 
indirectly, through one or more intermediaries, controls, is controlled by, or 
is under common control with, such first person.

   		"Exchange Units" means the Units (except for those Pension BUCs held by 
Unitholders electing the Retention Option) of those Partnerships participating 
in the Merger.

		   "Net Asset Value" means the net asset value of the Partnerships 
calculated by the General Partners for purposes of allocating the shares of 
Common Stock to be issued in the Merger.

		   "Pension BUCs" means Beneficial Unit Certificates representing assigned 
limited partnership interests in Pension Fund.

		   "Person" means an individual, corporation, partnership, limited liability 
company, joint venture, association, trust, unincorporated organization or 
other entity.

		   "Prep Fund 1 Units" means Exchangeable Units representing assigned 
limited partnership interests in Prep Fund 1.

		   "Prep Fund 2 BUCs" means Beneficial Unit Certificates representing 
assigned limited partnership interests in Prep Fund 2.

		   "Subsidiary" of any person means any corporation, partnership, limited 
liability company, joint venture or other legal entity of which such person 
(either directly or through or together with another Subsidiary of such 
person) owns 50% or more of the voting stock or other equity interests of such 
corporation, partnership, limited liability company, joint venture or other 
legal entity.

	   	"Unitholders" means the holders of Units.

	   	"Units" means Prep Fund 1 Units, Prep Fund 2 BUCs and Pension BUCs.
 		

<PAGE>                               -18-

     IN WITNESS WHEREOF, Prep Fund 1, Prep Fund 2, Pension Fund, the Company 
and Partnership Merger Sub have caused this Agreement to be signed by their 
respective officers thereunto duly authorized, all as of the date first 
written above.


	                                  AMERICA FIRST PARTICIPATING/PREFERRED
                                  	EQUITY MORTGAGE FUND LIMITED
                                  	PARTNERSHIP

                                  	By:	AMERICA FIRST CAPITAL ASSOCIATES
                                     		LIMITED PARTNERSHIP THREE,
                                     		its general partner

                                 		    By:	AMERICA FIRST COMPANIES L.L.C.,
                                    			    its general partner


                                    			    By: /s/ Michael Thesing
                                              --------------------------------
                                   			        Name: Michael Thesing
                                      				    Title: Vice President


                                   AMERICA FIRST PREP FUND 2 LIMITED
                                  	PARTNERSHIP

                                  	By:	AMERICA FIRST CAPITAL ASSOCIATES
                                     		LIMITED PARTNERSHIP SIX,
                                     		its general partner

                                     		By:	AMERICA FIRST COMPANIES L.L.C.,
                                        			its general partner

 
                                        			By:	/s/ Michael Thesing
                                              --------------------------------
                                          				Name: Michael Thesing
                                          				Title: Vice President




































<PAGE>                               -19-

                                  	AMERICA FIRST PREP FUND 2 PENSION
                                  	SERIES LIMITED PARTNERSHIP

                                  	By:	AMERICA FIRST CAPITAL ASSOCIATES
                                     		LIMITED PARTNERSHIP SIX,
                                     		its general partner

                                     		By:	AMERICA FIRST COMPANIES L.L.C.,
                                        			its general partner

 
                                        			By:	/s/ Michael Thesing
                                              --------------------------------
                                          				Name: Michael Thesing
                                          				Title: Vice President


	                                  AMERICA FIRST MORTGAGE INVESTMENTS, INC.


                                  	By:	/s/ Stewart Zimmerman
                                      ----------------------------------------
                                    		Name: Stewart Zimmerman
                                    		Title: President


                                  	AF MERGER, L.P.

                                  	By:	AMERICA FIRST MORTGAGE INVESTMENTS, INC.,
                                       its general partner


                                     		By:	/s/ Stewart Zimmerman
                                          ------------------------------------
                                       			Name: Stewart Zimmerman
                                       			Title: President
 






































<PAGE>                               -20-