EXHIBIT 13.1

                      VICTORY TAX EXEMPT REALTY INCOME FUND
                               LIMITED PARTNERSHIP

                        1998 ANNUAL REPORT TO BAC HOLDERS
<PAGE>


--------------------------------------------------------------------------------
            VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP
--------------------------------------------------------------------------------



       Victory Tax Exempt Realty Income Fund Limited Partnership was
       formed in 1989 to acquire a $15,515,000 Mortgage Revenue Bond
       (the "Bond") issued by the city of Fresno, California. Securing
       the Bond is a first mortgage loan (the "Loan") on Camelot Lakes
       Apartments (the "Property"), a 476-unit complex owned by an
       unaffiliated company. The complex consists of 64 buildings
       situated on 30 acres and includes a swimming pool, tennis court
       and covered parking.



                                    Contents

                      1  Message to Investors

                      3  Financial Statements

                      5  Notes to the Financial Statements

                     13  Report of Independent Auditors
<PAGE>
1

--------------------------------------------------------------------------------
                              MESSAGE TO INVESTORS
--------------------------------------------------------------------------------


Presented for your review is the 1998 Annual Report for Victory Tax Exempt
Realty Income Fund Limited Partnership (the "Partnership"). This report includes
a discussion of the Partnership's operations and audited financial statements
for the year ended December 31, 1998.

Current Status
As discussed in prior reports, the General Partner and the Property's owner,
ConCam Associates, LP ("ConCam"), have agreed to pursue a sale of the Property
or the Bond prior to the Loan's scheduled maturity date on April 28, 1999. We
are pleased to report the Partnership has entered into a binding agreement to
sell the Bond to Wasatch Acquisitions LLC, a Utah limited liability company, for
a gross sales price of $11.6 million (the "Sale"). The proposed Sale is subject
to the consent of the City of Fresno, California and a majority-in-interest of
the outstanding limited partners (the "Limited Partners"), and to the
satisfaction or waiver of other customary closing conditions. Approval by the
Limited Partners will be solicited by a consent solicitation, which will be
mailed in the near future to investors upon the completion of a Securities and
Exchange Commission review process. If the Sale is ultimately consummated, we
intend to distribute the net proceeds received for the Bond, together with the
Partnership's remaining cash reserves (after payment of, or provision for, the
Partnership's liabilities and expenses), and subsequently dissolve the
Partnership. There can be no assurance that the sale will be completed in
accordance with the announced terms, if at all.

Property operations improved during 1998, with the Property maintaining an
average occupancy rate of 94% in 1998 compared to 86% in 1997.

Financial Highlights
The following chart highlights the performance of the Partnership for the year
ended December 31st of the indicated years:

<TABLE>
<CAPTION>
                                                       1998        1997
          -------------------------------------------------------------
          <S>                                      <C>         <C>     
          Interest received on the Bond            $862,552    $517,413
          Other interest                             24,378      13,894
          Cash provided by operating activities     712,296     358,539
          -------------------------------------------------------------
</TABLE>

          o   Interest received on the Bond increased primarily due to
              the payment of debt service by ConCam at a higher average
              rate of 5.1% during 1998, compared with an average rate
              of 3.4% during 1997.

          o   Other interest increased slightly due to higher average
              cash balances maintained by the Partnership.

          o   Cash provided by operating activities increased largely
              due to the increase in interest received on the Bond.

General Information
As you are probably aware, several unaffiliated third parties have commenced
tender offers to purchase limited partnership units at prices that are below the
Partnership's estimate of the fair market value per unit. In response, we have
recommended that Limited Partners reject such offers since we believe that they
do not reflect the underlying value of the Partnership's assets.
<PAGE>
2

Summary
We believe that a sale of the Bond is the most effective means for maximizing
the recovery of your investment in the Partnership. If the proposed Sale is
completed, Limited Partners will receive a final liquidating distribution, and
the Partnership will be dissolved during 1999. We will inform you of any
material developments in future investor correspondence. In the interim,
questions regarding the Partnership's performance should be directed to your
Financial Consultant or Partnership Investor Services. All requests for a change
of address or transfer should be submitted in writing to the Partnership's
administrative agent at P.O. Box 7090, Troy, MI 48007-7090. Partnership Investor
Services can be reached at (617) 342-4225, and the Partnership's administrative
agent can be reached at (248) 637-7900.


Very truly yours,

CA Victory Inc.
General Partner


Daphne H. Aronson
President

March 31, 1999
<PAGE>
3

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
BALANCE SHEETS
                                                     At December 31,   At December 31,
                                                               1998              1997
-------------------------------------------------------------------------------------
<S>                                                     <C>               <C>        
Assets
Investment in mortgage revenue bond, working
  capital loan, and capital improvements loan           $ 9,826,236       $10,000,000
Cash and cash equivalents                                 1,078,440           366,144
Mortgage acquisition fees, net of accumulated
  amortization of $414,209 and $371,409 in
  1998 and 1997, respectively                                13,791            56,591
-------------------------------------------------------------------------------------
      Total Assets                                      $10,918,467       $10,422,735
=====================================================================================
Liabilities and Partners' Capital (Deficit)
Liabilities:
  Accounts payable and accrued expenses                 $    68,700       $    51,016
  Due to affiliates                                          18,000            22,000
                                                        -----------------------------
      Total Liabilities                                      86,700            73,016
                                                        -----------------------------
Partners' Capital (Deficit):
  General Partner                                           (87,669)          (92,489)
  BAC Holders (2,140,000 BACS outstanding)               10,919,436        10,442,208
                                                        -----------------------------
      Total Partners' Capital                            10,831,767        10,349,719
-------------------------------------------------------------------------------------
      Total Liabilities and Partners' Capital           $10,918,467       $10,422,735
=====================================================================================
</TABLE>



<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1998, 1997 and 1996
                                              General             BAC
                                              Partner         Holders           Total
-------------------------------------------------------------------------------------
<S>                                          <C>          <C>             <C>        
Balance at December 31, 1995                 $(58,613)    $13,797,670     $13,739,057
Net income                                      5,141         508,980         514,121
Cash distributions                             (9,688)       (960,802)       (970,490)
-------------------------------------------------------------------------------------
Balance at December 31, 1996                 $(63,160)    $13,345,848     $13,282,688
Net loss                                      (26,922)     (2,665,308)     (2,692,230)
Cash distributions                             (2,407)       (238,332)       (240,739)
-------------------------------------------------------------------------------------
Balance at December 31, 1997                 $(92,489)    $10,442,208     $10,349,719
Net income                                      4,820         477,228         482,048
-------------------------------------------------------------------------------------
Balance at December 31, 1998                 $(87,669)    $10,919,436     $10,831,767
=====================================================================================
</TABLE>

See accompanying notes to the financial statements.
<PAGE>
4

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the years ended December 31,
                                                 1998            1997            1996
-------------------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>        
Revenue
Share of earnings from investment
  in mortgage revenue bond                 $  688,788     $   426,352     $   627,378
Other interest                                 24,378          13,894          18,813
                                           ------------------------------------------
      Total Revenue                           713,166         440,246         646,191
-------------------------------------------------------------------------------------
Expenses
Loss on write-down of investment in mortgage
  revenue bond, working capital loan, and
  capital improvements loan                        --       2,892,415              --
General and administrative                    188,318         197,261          89,270
Amortization of mortgage costs                 42,800          42,800          42,800
                                           ------------------------------------------
      Total Expenses                          231,118       3,132,476         132,070
-------------------------------------------------------------------------------------
      Net Income (Loss)                    $  482,048     $(2,692,230)    $   514,121
=====================================================================================
Net Income (Loss) Allocated:
To the General Partner                     $    4,820     $   (26,922)    $     5,141
To the BAC Holders                            477,228      (2,665,308)        508,980
-------------------------------------------------------------------------------------
      Net Income (Loss)                    $  482,048     $(2,692,230)    $   514,121
=====================================================================================
Per BAC
(2,140,000 outstanding)                       $   .23         $ (1.25)        $   .24
-------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the years ended December 31,
                                                 1998            1997            1996
-------------------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>        
Cash Flows From Operating Activities:
Net income (loss)                          $  482,048     $(2,692,230)    $   514,121
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
  Loss on write-down of investment in
    mortgage revenue bond, working
    capital loan, and capital
    improvements loan                              --       2,892,415              --
  Share of earnings from investment
    in mortgage revenue bond                 (688,788)       (426,352)       (627,378)
  Interest received on mortgage
    revenue bond                              862,552         517,413         866,258
  Amortization of mortgage costs               42,800          42,800          42,800
  Increase (decrease) in cash arising
  from changes in operating assets and
  liabilities:
    Accounts payable and accrued expenses      17,684           2,493          15,836
    Due to affiliates                          (4,000)         22,000              --
                                           ------------------------------------------
Net cash provided by operating activities     712,296         358,539         811,637
-------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
  Cash distributions                               --        (402,844)     (1,080,808)
                                           ------------------------------------------
Net cash used for financing activities             --        (402,844)     (1,080,808)
-------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents                              712,296         (44,305)       (269,171)
Cash and cash equivalents,
beginning of year                             366,144         410,449         679,620
                                           ------------------------------------------
Cash and cash equivalents, end of year     $1,078,440     $   366,144     $   410,449
=====================================================================================
</TABLE>

See accompanying notes to the financial statements.
<PAGE>
5

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1. Organization and the Public Offering
Victory Tax Exempt Realty Income Fund L. P. (the "Partnership") was formed under
the Delaware Revised Uniform Limited Partnership Act on January 15, 1988 and
will continue until December 31, 2018, unless dissolved earlier under the
provisions of the Agreement of Limited Partnership. The Partnership was formed
for the purpose of acquiring a pool of tax-exempt Mortgage Revenue Bonds issued
by various state or local governments or their agencies or authorities, and
secured by participating first mortgage loans on multifamily residential rental
developments and/or retirement complexes. The Partnership is also authorized to
have up to ten percent of its invested assets consist of taxable working capital
loans from the Partnership to borrowers of the mortgage loans to cover certain
expenses that are not financed from Mortgage Revenue Bond proceeds.

A Registration Statement on Form S-11 was filed with the Securities and Exchange
Commission and became effective on May 26, 1988 for a maximum offering of
20,000,000 Beneficial Assignee Certificates (the "BACs") at $10 per BAC (the
"Public Offering"). The Public Offering commenced on November 1, 1988 and
terminated on April 28, 1989. Gross proceeds of $21,400,000 were received
representing 2,140,000 BACs. On April 28, 1989, the subscribers of the BACs were
admitted to the Partnership as BAC Holders. The related limited partnership
interests are held by the Assignor Limited Partner, which has assigned certain
ownership attributes of the limited partnership interests to the BAC Holders on
the basis of one unit of limited partnership interest for one BAC.

The General Partner is CA Victory Inc., formerly Shearson/Victory Inc. (see
below), which is a Delaware corporation and an affiliate of Lehman Brothers Inc.
(the "Selling Agent"), formerly Shearson Lehman Brothers Inc., (see below). The
Assignor Limited Partner is CA Victory Assignor Corp., formerly Shearson/Victory
Assignor Corp. (see below), which is wholly-owned by Lehman Brothers.

On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management business to Smith Barney, Harris Upham &
Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. ("Lehman Brothers"). The
transaction did not affect the ownership of the General Partner. However the
assets acquired by Smith Barney included the name "Shearson". Consequently,
effective October 29, 1993, the Shearson/Victory Inc. General Partner and the
Shearson/Victory Assignor Corp. Assignor Limited Partner changed their names to
CA Victory Inc. and CA Victory Assignor Corp., respectively.

On April 28, 1989, the Partnership acquired an investment in a mortgage revenue
bond (the "Bond") from the City of Fresno, California in the principal amount of
$15,515,000 secured by a mortgage loan (the "Loan") on Camelot Lakes Apartments,
a 476 unit apartment complex (the "Property"). Until February 1, 1994, the
original owner of the Property was Camelot Lakes Associates ("Camelot Lakes"),
an unaffiliated California Limited Partnership. The current owner of the
Property is ConCam Associates, LP ("ConCam" or the "Borrower"), an unaffiliated
California Limited Partnership.
<PAGE>
6

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

2. Significant Accounting Policies

Investment in Mortgage Revenue Bond, Working Capital Loan and Capital
Improvements Loan  The Partnership accounts for its investment in the Mortgage
Revenue Bond, the Working Capital Loan and the Capital Improvements Loan (the
"Investment") using the equity method in accordance with AICPA Statement of
Position 78-9. The Partnership is not obligated to fund net operating losses of
the property underlying the Investment. Under this method, the carrying value of
the Bond is (i) reduced for the interest received from Camelot Lakes and (ii)
increased or decreased by the Partnership's share of earnings or losses of
Camelot Lakes. The Partnership generally receives a special allocation of income
equal to the mortgage loan interest due under the bond and loan agreements,
which payments are funded by property operations. Prior to October 1, 1998,
depreciation on the building and personal property funded by the bond and loans
was provided using the straight-line method over 40 years and 5-7 years, for the
amounts allocable to buildings and personal property, respectively. On October
1, 1998, the Partnership committed to sell the investment and, as a result,
ceased depreciation of building and personal property funded by the Bond.

At December 31, 1997, the Partnership completed a review of the recoverability
of the carrying amount of its investment in the Mortgage Revenue Bond, Working
Capital Loan, and Capital Improvements Loan based upon an estimate of
undiscounted cash flows expected to result from the property underlying the
investment's use and eventual disposition. Based upon the review completed at
December 31, 1997 and a change in management's estimated holding period, the
Partnership wrote down the carrying value of its investment in accordance with
Statement of Financial Accounting Standards No. 121 (See Note 4).

Syndication Costs  During 1989, selling commissions paid in connection with the
Public Offering, totaling $1,070,000, and sales and registration costs, totaling
$719,754, were charged against BAC Holders' capital.

Mortgage Acquisition Fees  Mortgage acquisition fees are recorded at cost less
accumulated amortization, and are being amortized using the straight-line method
over the term of the Bond.

Income Taxes  No provision for income taxes has been made in the financial
statements since such taxes are the responsibility of the individual partners
rather than that of the Partnership.

Cash and Cash Equivalents  Cash and cash equivalents consist of short-term
highly liquid investments which have maturities of three months or less from the
date of purchase. The carrying value approximates fair value because of the
short maturity of these instruments.

Fair Value of Financial Instruments  Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments" ("FAS 107"),
requires that the Partnership disclose the estimated fair values of its
financial instruments. Fair values generally represent estimates of amounts at
which a financial instrument could be exchanged between willing parties in a
current transaction other than in forced liquidation.

The carrying amount of cash and cash equivalents, due to affiliates, and
accounts payable and accrued expenses are estimates of their fair value due to
the short-term nature of those instruments.

Use of Estimates  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.

Concentration of Credit Risk  Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institution's insurance limits.
<PAGE>
7

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

3. Partnership Agreement
Pursuant to the terms of the Partnership Agreement, cash available for
distribution from operations will be distributed 99% to the BAC Holders and 1%
to the General Partner for each year until the BAC Holders receive an amount
equal to the Preferred Cash Flow Return, as defined, and, thereafter, 90% to the
BAC Holders and 10% to the General Partner.

Proceeds arising from a sale or other disposition of the mortgaged property or
the repayment of the Bond will be distributed as follows:

(1)  to repay all debts and obligations of the Partnership and to increase the
     working capital reserve as the General Partner deems necessary;

(2)  to each BAC Holder equal to the unpaid portion of any Preferred Cash Flow
     Return up to the amount of income allocated to each BAC holder;

(3)  to the General Partner and to each BAC Holder up to the amount of their
     Adjusted Capital Contributions, as defined; and

(4)  to the General Partner and to each BAC Holder, in accordance with their
     respective capital accounts.

All profits and losses not arising from a sale of a mortgaged property or
repayment of a mortgage loan shall be allocated 99% to the BAC Holders and 1% to
the General Partner until the BAC Holders realize an amount equal to the
Preferred Cash Flow Return. Thereafter, such profits and losses shall be
allocated 90% to the BAC Holders and 10% to the General Partner.

Profits arising from a sale of a mortgaged property or repayment of a mortgage
loan will be allocated to the General Partner and BAC Holders as follows: first,
in proportion to the negative balances in their capital accounts, up to the
amount of the negative balance; second, in proportion to any unpaid portion of
Preferred Cash Flow Return to realize an amount equal to the Preferred Cash Flow
Return; third, in proportion to their Adjusted Capital Contributions up to their
Adjusted Capital Contributions; and fourth, 90% to the BAC Holders and 10% to
the General Partner.

Losses from such sale or repayment will be allocated to the General Partner and
BAC Holders as follows: first, an amount of loss to the General Partner or BAC
Holders to adjust their capital accounts to 1% and 99%, respectively, of total
Partners' Capital; second, 1% to the General Partner and 99% to the BAC Holders
until the BAC Holders capital account is zero; third, to the General Partner.

4. Mortgage Revenue Bond, Working Capital Loan, and Capital Improvements Loan

Mortgage Revenue Bond  The following schedule represents the changes made to the
carrying value of the mortgage revenue bond since its acquisition:
<PAGE>
8

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
  <S>                                                                 <C>      
  Original issue value                                              $15,515,000
    Working Capital Loan                                                420,000
    1989 share of Camelot Lakes earnings                                488,679
    1989 interest received on mortgage revenue bond                    (615,040)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1989                                  15,808,639
    1990 share of Camelot Lakes earnings                                772,557
    1990 interest received on mortgage revenue bond                  (1,039,505)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1990                                  15,541,691
    1991 share of Camelot Lakes earnings                                805,999
    1991 interest received on mortgage revenue bond                  (1,039,505)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1991                                  15,308,185
    1992 share of Camelot Lakes earnings                                677,121
    1992 interest received on mortgage revenue bond                  (1,202,412)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1992                                  14,782,894
    1993 share of Camelot Lakes earnings                                527,857
    1993 interest received on mortgage revenue bond                  (1,172,899)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1993                                  14,137,852
    Capital Improvements Loan                                           500,000
    1994 share of Camelot Lakes earnings                                377,211
    1994 interest received on mortgage revenue bond                    (833,850)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1994                                  14,181,213
    1995 share of Camelot Lakes earnings                                 43,158
    1995 interest received on mortgage revenue bond                  (1,002,015)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1995                                  13,222,356
    1996 share of Camelot Lakes earnings                                627,378
    1996 interest received on mortgage revenue bond                    (866,258)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1996                                  12,983,476
    1997 share of Camelot Lakes earnings                                426,352
    1997 interest received on mortgage revenue bond                    (517,413)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1997, before write down               12,892,415
    Loss on write-down of investment in mortgage revenue
      bond, working capital loan, and capital improvements loan      (2,892,415)
-------------------------------------------------------------------------------
  Carrying value, December 31, 1997                                  10,000,000
    1998 share of Camelot Lakes earnings                                688,788
    1998 interest received on mortgage revenue bond                    (862,552)
-------------------------------------------------------------------------------

  Net carrying value, December 31, 1998                             $ 9,826,236
                                                                    ===========
</TABLE>

Under the original loan documents, the interest rates during the term of the
mortgage loan are as follows:

<TABLE>
<CAPTION>
                                       Base                         Primary    Supplemental
                                   Interest   Deferred Base      Contingent      Contingent
                                       Rate   Interest Rate   Interest Rate   Interest Rate
-------------------------------------------------------------------------------------------
<S>                                   <C>             <C>             <C>             <C>  
April 28, 1989 to April 30, 1992      6.70%           5.30%           4.00%              --
May 1, 1992 to April 30, 1994         8.50%              --           4.25%           3.25%
May 1, 1994 to April 28, 1999         8.75%              --           4.00%           3.25%
-------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

The Loan matures April 28, 1999. Base interest accrued monthly and was payable
in arrears. Deferred base interest and primary contingent interest, which
totaled $2,473,737 and $6,081,880 at December 31, 1998, will be payable monthly
in arrears from excess Net Cash Flow, as defined, from the Property.
Supplemental contingent interest, which totaled $3,361,583 and $2,857,346 at
December 31, 1998 and 1997, respectively, will be payable monthly in arrears to
the extent of 65% of Net Cash Flow remaining after the payment of deferred base
interest and primary contingent interest. Should the Net Cash Flow of the
Property in any year be insufficient to pay any primary or supplemental
contingent interest, the unpaid amounts will be deferred and payable from future
cash flows or upon maturity of the mortgage loan. Based on the current
performance of the Property, it is unlikely that any deferred base interest,
primary contingent interest or supplemental contingent interest payments will be
collected by the Partnership.

To address the possibility of available cash from Property operations being
insufficient to provide the necessary funds for payments of base interest, the
Partnership required at closing that the Borrower establish a Borrower Operating
Reserve in the original amount of $337,326, consisting of cash of $112,326 and
an irrevocable letter of credit of $225,000. In addition, net interim income,
equal to Net Cash Flow from the Property less one month's anticipated operating
expenses, was deposited into the reserve account on a monthly basis, provided
the Property generated sufficient cash flow. In November 1992, the cash balance
in the account reached approximately $187,000, through the addition of net
interim income and the accrued interest income. In November 1992, the
Partnership began withdrawing funds from the Borrower Operating Reserve in order
that Camelot Lakes meet its interest payments. In 1993, funds in the amount of
$232,780 were withdrawn and applied to the payment of base interest. As of
December 31, 1993, a balance of $50,000 remained on the letter of credit; the
Partnership agreed to waive its right to draw on the remaining balance.

Operating difficulties at the Property resulted in Camelot Lakes defaulting on
the November 1993 through January 1994 Bond payments. On February 1, 1994, the
Partnership executed a Termination and Release Agreement with the original owner
of the Property, Camelot Lakes, to relinquish the ownership of the Property and
its cash reserves of approximately $400,000 in return for the Partnership's
agreement to waive its right to draw on the remaining $50,000 of the Borrower's
undrawn letter of credit with the Partnership. Camelot Lakes agreed to transfer
its ownership and management of the Property to ConCam, an affiliate of ConAm
Management Corporation ("ConAm"), a major property management company, whereby
ConCam executed a Forbearance Agreement with the Partnership to assume the
obligations under the Bond and loan documents. ConAm manages the Property and
receives fees for such services. The Forbearance Agreement temporarily modified
the interest payment terms under the Bond to include minimum interest pay rates
as follows:

<TABLE>
<CAPTION>
                                             Minimum Interest
                                                     Pay Rate
                   ------------------------------------------
                   <S>                                 <C>   
                   Per annum rate - 1995                6.50%
                   Per annum rate - 1996                7.00%
                   Per annum rate - 1997                7.50%
                   Per annum rate - 1998                8.00%
                   ------------------------------------------
</TABLE>
<PAGE>
10

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

The unpaid interest from the difference between the original base interest rate
(8.5% through April 30, 1994 and 8.75% thereafter) and the minimum interest pay
rate are being added to the unpaid interest as of February 1, 1994, and are
accrued and compounded monthly at the base interest rate. As of December 31,
1998 and December 31, 1997, the accrued interest differential totaled $3,550,839
and $2,779,324, respectively. Any excess cash flow from the Property after
payment of the minimum interest payment will be allocated to reducing such
accrued interest. During the forbearance period, an annual deposit into the
reserve fund for replacements is required in the amount of $130,900, increasing
3% per annum beginning in January 1995. On April 22, 1994, the General Partner
and ConCam modified the Forbearance Agreement to redirect the monthly deposits
for 1994 to the Partnership as payment of Base Interest, beginning with the
April 1994 payment. Monthly deposits into the replacement reserve were scheduled
to resume effective January 1, 1995, subject to the original terms of the
Forbearance Agreement. However, on October 24, 1994, the Partnership agreed to
allow ConCam to discontinue monthly payments into the reserve fund, including
the remaining 1994 payments that, pursuant to the agreement dated April 22,
1994, were to be redirected as payment of Base Interest. Such payments have
remained discontinued throughout 1998 and reinstatement is at the sole
discretion of the General Partner.

On May 8, 1996, as a result of negotiations with ConCam, the Partnership
executed a Letter Agreement as further amended (the "Agreement") to generally
allow a continuance of the terms of the Forbearance Agreement which originally
became effective January 31, 1994. The Agreement provided that in lieu of the
minimum pay rate, ConCam pay as debt service all available cash flow. The
Agreement was in effect through December 31, 1996, the expiration of the
Forbearance Agreement. At such time, the parties were engaged in good faith
negotiations, and therefore, the Partnership extended the Agreement with ConCam
through December 31, 1997, which was further extended through December 31, 1998.
Payments made by ConCam during 1998 approximated an average pay rate of 5.1%.
Effective December 31, 1998, the Agreement was extended through the earlier of
(i) June 30, 1999, (ii) the closing of the sale of the Bond and the Property or
(iii) the termination of the Agreement upon default by the borrower. Subject to
closing on the sale of the Bond, ConCam will cease making debt service payments
beginning January 1, 1999 and instead will use the cash flow generated by the
property to pay operating expenses and closing costs.

Based on its evaluation of conditions in the Fresno market, the General Partner
concluded there is little indication that job growth, or, consequently, demand
for rental units, will improve substantially in the foreseeable future. Given
these factors, the General Partner and ConCam agreed to pursue a sale of the
Property and/or the Bond prior to the Loan's scheduled maturity date on April
28, 1999. In February 1999, the Partnership entered into a binding agreement to
sell the Bond to Wasatch Acquisitions LLC, a Utah limited liability company, or
its designated affiliate, for a gross sale price of $11.6 million (the "Sale").
The proposed Sale will require the consent of a majority-in-interest of the
outstanding BAC Holders and the City of Fresno, California. Approval by the BAC
Holders will be solicited only by means of a consent solicitation, which will be
mailed to BAC Holders upon the completion of a customary Securities and Exchange
Commission review process. There can be no assurance that the Sale will be
consummated on the announced terms, if at all.

Based upon the decision to pursue a sale of the investment and the resulting
change in the estimated holding period, the Partnership wrote down the carrying
value of its investment in Mortgage Revenue Bond, Working Capital Loan, and
Capital Improvements Loan at December 31, 1997 to $10,000,000, the estimated
fair value of the collateral as determined by management as of that date. At
December 31, 1998, the carrying value totaled $9,826,236.

Working Capital and Capital Improvements Loans  In conjunction with the
investment in the mortgage revenue bond, the Partnership made a working capital
loan to Camelot Lakes in the amount of $420,000, maturing on April 28, 1999 and
bearing interest at the rate of 12.625% per annum. The loan is secured by a
Second Deed of Trust on the Property, which is subordinate to the first mortgage
loan on the Bond.
<PAGE>
11

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

On February 1, 1994, the Partnership executed a First Amendment to the Working
Capital Loan Agreement (the "Amendment") with the current owner of the Property.
Under the Amendment, the Partnership agreed to lend the Property up to the
aggregate amount of $500,000 (the "Capital Improvements Loan") for capital
improvements to be made to the Property in 1994. The Capital Improvements Loan
bears simple interest, non-compounding, at the per annum rate of 6.0% and all
interest shall be due and payable, together with the principal balance of the
Capital Improvements Loan, upon the earlier of the end of the forbearance period
or the Maturity Payment Date. As of December 31, 1998 and December 31, 1997, the
interest receivable on the Capital Improvements Loan totaled $132,725 and
$102,724, respectively. The Amendment also provides that the principal balance
and accrued interest balance of the Working Capital Loan, $420,000 and $13,256,
respectively as of February 1, 1994, plus all future accrued working capital
loan base interest is due and payable on the Maturity Payment Date. All working
capital loan base interest shall continue to accrue at the per annum rate of
6.0%, a reduction in the previous rate of 12.625%. The Borrower shall not be
obligated to pay working capital loan base interest or any other interest
payments that may be required under the Working Capital Loan Agreement until the
Maturity Payment Date. As of December 31, 1998 and December 31, 1997, the
interest receivable on the Working Capital Loan totaled $137,157 and $111,957,
respectively. Based on the Property's performance, it is unlikely that any
interest on Capital Improvements Loan and the Working Capital Loan will be
received by the Partnership. Consequently, the interest receivable amounts are
not recorded on the accompanying financial statements. The obligation to repay
all loans, including the Bond, and interest thereon, is a nonrecourse obligation
of the Borrower and will be repaid only to the extent excess cash flow from
Property operations or proceeds from the sale of the Property are available. If
the sale of the Bond is consummated, upon closing of such sale and compliance by
ConCam of the terms and conditions of the Agreement, ConCam will be released
from all monetary obligations under the Working Capital Loan and Capital
Improvement Loan.

5. Transactions with Related Parties
The Partnership reimbursed Lehman Brothers in the amount of $557,353 for
organizational and offering expenses incurred in connection with the Public
Offering.

The Selling Agent received selling commissions equal to 5% of the gross proceeds
from the Public Offering. The Selling Agent received $1,070,000 for selling
commissions and $321,000 for additional sales and registration costs.

The General Partner was paid a nonrecurring bond acquisition fee equal to 2% of
gross proceeds of the Public Offering in the amount of $428,000 in consideration
for its services in connection with selecting, evaluating and negotiating the
terms of the investment in the Bond.

Commencing January 1, 1997, the Partnership began reimbursing certain expenses
incurred by the General Partner and its affiliates in servicing the Partnership
to the extent permitted by the Partnership Agreement. These expenses totaled
approximately $25,400 and $43,000 in 1998 and 1997, of which $18,000 and $22,000
is due to affiliates at December 31, 1998 and 1997, respectively. In prior
years, affiliates of the General Partner had voluntarily absorbed these
expenses.

6. Distributions Payable
Cash distributions, per the Statements of Partners' Capital (Deficit), are
recorded on the accrual basis, which recognizes specific record dates for
payments within each fiscal year; the Statements of Cash Flows recognize actual
cash paid during the period. The following table discloses the annual
differences as presented on the accompanying financial statements:

<TABLE>
<CAPTION>
           Distributions
              Payable at        Statements of                     Distributions
               Beginning    Partners' Capital    Statements of       Payable at
               of Period            (Deficit)       Cash Flows    End of Period
-------------------------------------------------------------------------------
<S>             <C>                  <C>            <C>                <C>     
1998            $     --             $     --       $       --         $     --
1997             162,105              240,739          402,844               --
1996             272,423              970,490        1,080,808          162,105
-------------------------------------------------------------------------------
</TABLE>
<PAGE>
12

VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP

Cash distributions were suspended beginning with the 1997 third quarter
distribution, which would have been paid in November 1997.

7. Reconciliation of Financial Statement Net Income
   (Loss) to Federal Income Tax Net Income
As discussed in Note 4, the investment in the Bond is accounted for using the
equity method for financial reporting purposes. However, for tax purposes, the
investment in the Bond is treated as a mortgage loan receivable. Primarily as a
result of this difference in accounting and the 1997 impairment loss adjustment,
income for tax purposes, including tax exempt income reported to the BAC Holders
for each of the years ended December 31, 1998 and December 31, 1997 was greater
than net income (loss) per the Statements of Operations by approximately
$115,000 and $2,973,000, respectively. Tax exempt income reported to the BAC
Holders amounted to approximately $887,000 and $531,000 for 1998 and 1997,
respectively.
<PAGE>
13

--------------------------------------------------------------------------------
                         REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------



The Partners
Victory Tax Exempt Realty Income Fund Limited Partnership:

We have audited the accompanying balance sheets of Victory Tax Exempt Realty
Income Fund Limited Partnership (a Delaware limited partnership) as of December
31, 1998 and 1997, and the related statements of operations, partners' capital
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Victory Tax Exempt Realty
Income Fund Limited Partnership as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

                                                KPMG PEAT MARWICK LLP

Boston, Massachusetts
March 15, 1999
<PAGE>



                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                              Financial Statements

                           December 31, 1998 and 1997

                   (With Independent Auditors' Report Thereon)
<PAGE>



                          Independent Auditors' Report


The General Partner
ConCam Associates, LP,
  A California Limited Partnership:


We have audited the accompanying balance sheets of ConCam Associates, LP, A
California Limited Partnership (the Partnership), as of December 31, 1998 and
1997 and the related statements of operations and partners' deficit, and cash
flows for each of the years in the three-year period ended December 31, 1998. In
connection with our audits of the financial statements, we also have audited the
related financial statement schedule III. These financial statements and the
related financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the related financial statement schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ConCam Associates, LP, A
California Limited Partnership, as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, based on our audits, the related
financial statement schedule III, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

The accompanying financial statements and the related financial statement
schedule III have been prepared assuming that the Partnership will continue as a
going concern. As discussed in Note 9 to the financial statements, the ability
of the Partnership to meet its obligations as they become due has been adversely
affected by cash flow deficits from operations. This condition raises
substantial doubt about the Partnership's ability to continue as a going
concern. Management's plans in regard to this matter are also described in Note
9 to the financial statements. The financial statements and financial statement
schedule do not include any adjustments that might result from the outcome of
this uncertainty.


                                                 KPMG LLP
San Diego, California
February 11, 1999, except for Note 11
  to the financial statements, as to which
  the date is March 15, 1999
<PAGE>
2

                             CONCAM ASSOCIATES, LP,
                        A California Limited Partnership

                                 Balance Sheets
                           December 31, 1998 and 1997


<TABLE>
<CAPTION>
                    Assets                               1998               1997
                                                   ----------------   ----------------

<S>                                               <C>                    <C>          
Cash held in trust by ConAm Management
  Corporation including $56,180 and $54,762
  in 1998 and 1997, respectively, in
  interest-bearing accounts                       $       113,142            170,236
Impound deposits and other assets                          58,056             41,752
Prepaid expenses                                            5,093              8,012

Property and equipment, at cost,
  encumbered (notes 3 and 4):
  Land                                                  2,380,000          2,380,000
  Land improvements                                       917,187            913,097
  Buildings                                             6,980,559          6,980,559
  Furnishings and equipment                             1,004,558            889,164
                                                   ----------------   ----------------

                                                       11,282,304         11,162,820

  Less accumulated depreciation                        (1,451,071)        (1,162,820)
                                                   ----------------   ----------------

        Net property and equipment                      9,831,233         10,000,000

Organization costs, less amortization of
  $11,851 and $9,399 in 1998 and 1997,
  respectively                                                407              2,859
                                                   ----------------   ----------------

                                                  $    10,007,931         10,222,859
                                                   ================   ================

          Liabilities and Partners' Deficit

Accounts payable and other liabilities            $        50,526             50,224
Due to affiliate (note 5)                                  27,602             27,602
Rental security deposits                                  143,421            139,022
First trust deed note payable, net of
  discount (Note 4)                                    14,524,270         12,128,111
Working capital loan payable, net of
  discount (Note 4)                                       392,764            328,069
Capital improvement loan payable (Note 4)                 500,000            500,000
Deferred and accrued interest payable, net of          15,448,327         12,455,378
  discount (Note 4)
                                                   ----------------   ----------------

        Total liabilities                              31,086,910         25,628,406
                                                   ----------------   ----------------

Partners' deficit (Notes 7 and 8):
  General partner                                        (210,789)          (154,055)
  Limited partner                                     (20,868,190)       (15,251,492)
                                                   ----------------   ----------------

        Total partners' deficit                       (21,078,979)       (15,405,547)
                                                   ----------------   ----------------

                                                  $    10,007,931         10,222,859
                                                   ================   ================
</TABLE>


See accompanying notes to financial statements.
<PAGE>
3

                             CONCAM ASSOCIATES, LP,
                        A California Limited Partnership

                 Statements of Operations and Partners' Deficit

              For the years ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                                        1998               1997               1996
                                                   ----------------   ----------------    ----------------

<S>                                               <C>                   <C>                 <C>         
Revenue:
  Rent (Note 4)                                   $     1,965,461          1,822,507           1,883,836
  Laundry                                                   9,031             14,787              12,995
  Forfeited deposits                                       67,637             62,057              76,049
  Late charges and other                                   55,051             59,361              47,979
  Carport and garage                                       35,760             33,523              33,772
  Interest                                                  1,418              1,602               1,650
                                                   ----------------   ----------------    ----------------

                                                        2,134,358          1,993,837           2,056,281
                                                   ----------------   ----------------    ----------------
Expenses:
  Salaries                                                244,637            234,062             229,114
  Payroll taxes                                            58,482             50,841              53,345
  Office supplies                                          29,181             36,822              20,108
  Utilities                                               188,641            188,544             182,973
  Repairs and maintenance                                 257,395            306,431             266,556
  Advertising                                              36,968             44,567              25,885
  Management fees (Note 5)                                 86,209             79,919              82,251
  Real estate taxes                                       132,877            145,136             131,108
  Insurance                                                24,103             30,963              34,467
  Professional fees                                        38,948             35,972              39,996
  Security services                                        74,562             58,843              39,121
  Miscellaneous                                            28,729             11,251              36,558
  Interest, including $3,497,022,
   $2,406,902 and $1,609,522 for the
   years ended December 31, 1998, 1997
   and 1996, respectively, of
   amortization of discount                             6,316,355          5,145,445           4,277,558
  Depreciation                                            288,251            305,768             295,962
  Amortization of organization costs                        2,452              2,452               2,452
  Provision for impairment loss (Note 3)                       --          1,196,951                  --
                                                   ----------------   ----------------    ----------------

                                                        7,807,790          7,873,967           5,717,454
                                                   ----------------   ----------------    ----------------

        Net loss                                       (5,673,432)        (5,880,130)         (3,661,173)

Partners' deficit at beginning of year                (15,405,547)        (9,525,417)         (5,864,244)
                                                   ----------------   ----------------    ----------------

Partners' deficit at end of year
  (Notes 7 and 8)                                 $   (21,078,979)       (15,405,547)         (9,525,417)
                                                   ================   ================    ================
</TABLE>


See accompanying notes to financial statements.
<PAGE>
4

                             CONCAM ASSOCIATES, LP,
                        A California Limited Partnership

                            Statements of Cash Flows

                  Years ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                                        1998               1997               1996
                                                   ----------------   ----------------    ----------------

<S>                                               <C>                    <C>                 <C>         
Cash flows from operating activities:
  Net loss                                        $    (5,673,432)        (5,880,130)         (3,661,173)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Depreciation                                        288,251            305,768            295,962
      Amortization of discount on long-term debt        3,497,022          2,406,902          1,609,522
      Amortization of organization costs                    2,452              2,452              2,452
      Provision for impairment loss                            --          1,196,951                 --
      Change in assets and liabilities:
        Impound deposits and other assets                 (16,304)            (5,637)            11,959
        Prepaid expenses                                    2,919              5,453              1,150
        Accounts payable and other liabilities                302             (6,363)                14
        Due to affiliate                                       --             (1,114)            (1,413)
        Rental security deposits                            4,399             17,908            (12,580)
        Deferred and accrued interest                   1,956,781          2,221,130           1,801,778
                                                   ----------------   ----------------    ----------------

            Net cash provided by
              operating activities                         62,390            263,320             47,671

Cash flows from investing activities -
  purchase of fixed assets                               (119,484)          (251,233)            (39,763)
                                                   ----------------   ----------------    ----------------

Net increase (decrease) in cash held in
  trust by ConAm Management Corporation                   (57,094)            12,087               7,908

Cash held in trust by ConAm Management
  Corporation at beginning of year                        170,236            158,149             150,241
                                                   ----------------   ----------------    ----------------

Cash held in trust by ConAm Management
  Corporation at end of year                      $       113,142            170,236             158,149
                                                   ================   ================    ================

Supplemental disclosure of cash flow
  information - cash paid during the
  year for interest                               $       862,552            517,413             866,258
                                                   ================   ================    ================
</TABLE>

See accompanying notes to financial statements.
<PAGE>
5
                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                          Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



(1)  Organization and Summary of Significant Accounting Policies and Practices

     (a)  General

          ConCam Associates, LP (the Partnership), a partnership between ConCam,
          Inc., as the general  partner,  and Continental  American  Properties,
          Ltd.,  as the  limited  partner,  was formed  January 28, 1994 for the
          purpose of acquiring  and  operating  Camelot  Lakes  Apartments  (the
          Property), a 476-unit apartment complex located in Fresno, California.
          The  Partnership  acquired  the  Property  on  February  1, 1994.  The
          Partnership  generally  leases its apartment units with lease terms of
          one year or less. The Property  operations is the  Partnership's  only
          business segment.

     (b)  Basis of Accounting

          The  accompanying  financial  statements  are  prepared on the accrual
          basis of  accounting.  Revenue is recognized  when earned and expenses
          are recognized  when incurred in accordance  with  generally  accepted
          accounting principles.

     (c)  Depreciation

          Depreciation  has been provided over the estimated useful lives of the
          related assets (buildings and improvements - 35 years;  furniture - 10
          years) using the straight-line method with an estimated residual value
          equal to 10% of the original cost.

     (d)  Organization Costs

          Organization costs are amortized using the straight-line method over a
          5-year period.

     (e)  Income Taxes

          No provision  for income taxes has been made as the liability for such
          taxes  is  that of the  partners,  rather  than  the  Partnership.  At
          December 31, 1998 and 1997, the tax basis of the Partnership's  assets
          was  $176,698  and  $222,859,  respectively,  and the tax basis of the
          Partnership's liabilities was $221,549 and $216,848, respectively.

     (f)  Discount on Long-Term Debt

          The  discount  on  long-term  debt is  amortized  over the life of the
          related liabilities using the interest method.
<PAGE>
6

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



     (g)  Impairment of Long-Lived Assets

          The Partnership assesses its long-lived assets for impairment whenever
          events or changes in  circumstances  indicate that the carrying amount
          of an asset  may not be  recoverable.  Recoverability  of assets to be
          held and used is measured by a comparison of the carrying amount of an
          asset to future net cash flows  (undiscounted  and  without  interest)
          expected to be generated by the asset.  If such assets are  considered
          to be impaired,  the  impairment  to be  recognized is measured by the
          amount by which the  carrying  amount of the assets  exceeds  the fair
          value of the assets.  At December 31, 1998,  the Property was an asset
          to be held and used as the  Partnership  did not have the  ability  to
          sell the Property without the approval of the Lender.

     (h)  Loss Per Unit

          The Partnership did not issue units to the limited partner, therefore,
          loss per unit is not applicable.

     (i)  Use of Estimates

          Management  of the  Partnership  has made a number  of  estimates  and
          assumptions  relating to the reporting of assets and liabilities,  the
          disclosure of  contingent  assets and  liabilities  at the date of the
          financial  statements and the reported amounts of revenue and expenses
          during the reporting  period to prepare these financial  statements in
          conformity  with  generally  accepted  accounting  principles.  Actual
          results could differ from those estimates.

     (j)  Concentration of Credit Risk

          The Partnership's  cash held in trust by ConAm Management  Corporation
          is a financial instrument that is exposed to a concentration of credit
          risk.  ConAm  Management  Corporation  places the  Partnership's  cash
          balances with high credit quality and federally insured  institutions.
          Cash balances with any one  institution  may be in excess of federally
          insured  limits or may be invested in a  non-federally  insured  money
          market account. The Partnership has not experienced any losses in such
          accounts  and  believes  it is not exposed to any  significant  credit
          risk.

(2)  Acquisition of Property

     The  Partnership  acquired  the  Property  for $1 plus  the  assumption  of
     existing debt,  and  discounted  the debt and related  deferred and accrued
     interest payable in order to value the liabilities at the fair value of the
     assets  acquired  in  accordance  with APB  Opinion  No. 21,  "Interest  on
     Receivables  and  Payables."  The  Property  was valued at  $11,900,000  on
     February 1, 1994. The $10,449,842 difference between the face amount of the
     notes and the value of the property is shown as a discount.  As of December
     31,  1998,  1997  and  1996,  respectively,   $3,497,022,   $2,406,902  and
     $1,609,522  of  the  discount  was  amortized  as  interest  expense  at an
     effective rate of 23.17% for 1998,  23.12% for 1997 and 23.26% for 1996. At
     December 31, 1998 and 1997, the tax basis of the Partnership's Property was
     zero.
<PAGE>
7

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



(3)  Impairment Loss

     In  1997,  after  the  completion  of the  renovation  of a  number  of the
     Property's apartment units and other property  improvements,  management of
     the Partnership reevaluated the recoverability of the carrying value of the
     Property.  Based on its current and projected  performance,  management did
     not believe the  Partnership  will be able to recover the carrying value of
     its Property.  Therefore,  the  Partnership  recorded an impairment loss of
     $1,196,951.  The loss represented the difference between the carrying value
     and the estimated  fair value of the Property at that time.  The fair value
     was  estimated  based  on  discounted   projected  future  cash  flows  and
     comparable  sales. At December 31, 1998, the  Partnership  believes that it
     will be able to recover the carrying value of its property.

(4)  Long-Term Debt

     On February 1, 1994, the Partnership  executed an assignment and assumption
     agreement  with  the  original   owner  of  the  Property,   Camelot  Lakes
     Associates,  whereby,  in conjunction with the acquisition of the Property,
     the Partnership assumed the first and second trust deed notes payable.

     (a)  First Trust Deed Note Payable

          The funds for the first trust deed were made  available  to the lender
          through  the  issuance  of revenue  bonds  (Revenue  Bonds),  with the
          stipulation  that 20% of the Property's units must be reserved for low
          or very low income  tenants,  as defined.  On December 16,  1997,  the
          Property's  requirement  to  reserve  units for low or very low income
          tenants  expired.  The first trust deed note  payable in the amount of
          $15,515,000, is secured by property and equipment and an assignment of
          rents.  The note bears  interest at 16% per annum  consisting  of base
          interest,  deferral period deferred base interest,  primary contingent
          interest and supplemental contingent interest. Unamortized discount on
          the first trust deed note  payable at  December  31, 1998 and 1997 was
          $990,730 and $3,386,889, respectively.

          Under the original loan  agreement,  interest rates during the term of
          the note are as follows:

<TABLE>
<CAPTION>
                                                           Deferral
                                                            period
                                                           deferred     Primary      Supplemental
                                                 Base        base      contingent     contingent
                                               interest    interest     interest       interest
                                              ----------  ----------  ------------  --------------

<S>                                              <C>         <C>          <C>            <C>  
     April 28, 1989 through April 30, 1992       6.70%       5.30%        4.00%             --
     May 1, 1992 through April 30, 1994          8.50%          --        4.25%          3.25%
     May 1, 1994 through April 28, 1999          8.75%          --        4.00%          3.25%
</TABLE>

          In conjunction  with the acquisition of the Property,  the Partnership
          executed a forbearance agreement with Victory Tax Exempt Realty Income
          Fund Limited Partnership (the Lender).  The forbearance  agreement was
          effective  from  February 1, 1995 through  December 31, 1996, at which
          time the Lender had the  option to extend  the  forbearance  period or
          reinstate  the original  terms of the first trust deed note  agreement
          (Note 11).
<PAGE>
8

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



          In  accordance  with  the  forbearance  agreement,  the  minimum  base
          interest  pay rate in 1998,  1997 and 1996 was  8.0%,  7.5% and  7.0%,
          respectively.  The unpaid  interest  from the  difference  between the
          original  base interest rate and the minimum base interest pay rate is
          to be added  to the  unpaid  interest  as of  February  1,  1994,  and
          compounds monthly at the base interest rate.  Deferral period deferred
          base  interest  is  payable  on April  28,  1999.  Primary  contingent
          interest is payable in arrears from excess Net Cash Flow,  as defined.
          Supplemental  contingent interest is payable from 65% of Net Cash Flow
          remaining  after the payment of  deferred  base  interest  and primary
          contingent interest.  Interest only payments are scheduled until April
          28, 1999,  at which time all  outstanding  principal  and interest are
          payable.  Beginning  in February  1996,  payments of the minimum  base
          interest  were  less  than the  amounts  required  by the  forbearance
          agreement.  As such,  on May 8, 1996,  the Lender  issued a standstill
          letter  effective  through  December 31, 1996. The  standstill  letter
          allowed for the continuance of the forbearance  agreement however, the
          Partnership  was required to pay debt service  based on all  available
          cash flow,  in lieu of the minimum base interest pay rate, as required
          in the  forbearance  agreement.  On February 26, 1997,  the standstill
          letter was extended  through  December 31, 1997. On May 11, 1998,  the
          standstill  letter was extended  through  December 31, 1998 (Note 11).
          Accrued base interest, deferral period deferred base interest, primary
          contingent  interest and supplemental  contingent interest at December
          31,  1998 were  $3,689,256,  $2,473,737,  $6,081,880  and  $3,362,095,
          respectively.  Accrued base interest,  deferral  period  deferred base
          interest,  primary  contingent  interest and  supplemental  contingent
          interest at December 31, 1997 were $2,913,025,  $2,473,737, $5,416,280
          and  $2,857,346,  respectively.  Unamortized  discount on accrued base
          interest,  deferral period deferred base interest,  primary contingent
          interest and supplemental contingent interest at December 31, 1998 and
          1997 was $428,523 and $1,464,691, respectively.

          In accordance with the forbearance  agreement,  monthly  deposits were
          required  to be made to a  replacement  reserve.  In April  1994,  the
          Lender  agreed  to allow  the  Partnership  to  redirect  the funds to
          payment of base interest.  The  reinstatement  of monthly  replacement
          reserve deposits is at the sole discretion of the Lender (Note 11).

     (b)  Working Capital Loan Payable

          The working capital loan payable has an outstanding  principal  amount
          of $420,000 at  December  31, 1998 and 1997.  The loan is secured by a
          second trust deed on the  Partnership's  property and equipment and an
          assignment of rents. Based on the original terms of the note, interest
          only  payments  are due  until  April  28,  1999,  at  which  time all
          outstanding  principal and interest are payable.  The note was amended
          on February 1, 1994,  resulting in a reduction  of the  interest  rate
          from  12.625% to 6.00%,  simple  interest.  In  addition,  no interest
          payments  are due until April 28, 1999 (Note 11). At December 31, 1998
          and 1997,  accrued  interest on the note was  $137,157  and  $111,957,
          respectively. Unamortized discount on the working capital loan payable
          at December 31, 1998 and 1997 was $27,236 and $91,931, respectively.
<PAGE>
9

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



     (c)  Capital Improvement Loan Payable

          In  conjunction  with the  amendment  to the  second  trust  deed note
          payable,  the  Lender  agreed to lend the  Partnership  an  additional
          $500,000 for capital  improvements to be made to the Property in 1994.
          The  loan is  secured  by a  second  trust  deed on the  Partnership's
          property  and  equipment  and an  assignment  of  rents.  The  capital
          improvement  loan bears simple  interest at 6.0% per annum.  Principal
          and  interest  are due and  payable  at the  earlier of the end of the
          forbearance  period  as  extended  or April 28,  1999  (Note  11).  At
          December 31, 1998 and 1997,  accrued interest on the note was $132,725
          and $102,724, respectively.

     (d)  Summary of Long-Term Debt

          A  summary  of  long-term  debt at  December  31,  1998 and 1997 is as
          follows:

<TABLE>
<CAPTION>
                                    First            Working          Capital           Deferred
                                 trust deed          capital        improvement        and accrued
                                     note             loan              loan            interest
                                   payable           payable           payable           payable            Total
                                --------------    --------------    --------------    --------------    --------------

<S>                            <C>                    <C>               <C>             <C>              <C>       
Balance, net of discount at
  December 31, 1995            $   9,376,058           253,766           500,000         7,242,402        17,372,226

Deferred and accrued
  interest during the year
  ended December 31, 1996                 --                --                --         1,801,778         1,801,778

Discount amortization
  during the year ended
  December 31, 1996                1,102,844            29,776                --           476,902         1,609,522
                                --------------    --------------    --------------    --------------    --------------

Balance, net of discount at
  December 31, 1996               10,478,902           283,542           500,000         9,521,082        20,783,526

Deferred and accrued
  interest during the year
  ended December 31, 1997                 --                --                --         2,221,130         2,221,130

Discount amortization
  during the year ended
  December 31, 1997                1,649,209            44,527                --           713,166         2,406,902
                                --------------    --------------    --------------    --------------    --------------

Balance, net of discount at       12,128,111           328,069           500,000        12,455,378        25,411,558
  December 31, 1997

Deferred and accrued
  interest during the year                --                --                --         1,956,781          1,956,781
  ended December 31, 1998

Discount amortization
  during the year
  ended December 31, 1998          2,396,159            64,695                --         1,036,168         3,497,022
                                --------------    --------------    --------------    --------------    --------------

Balance, net of discount at
December 31, 1998              $  14,524,270           392,764           500,000        15,448,327        30,865,361
                                ==============    ==============    ==============    ==============    ==============
</TABLE>
<PAGE>
10

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



(5)  General Partner and Management Services

     (a)  Management Agreement

          A management  agreement  between the Partnership and ConAm  Management
          Corporation (CAMC), an affiliate of ConCam, Inc., the general partner,
          provides  for  base  management  fees of 4% of  gross  revenue  and an
          incentive  management  fee,  which  ranges  from 0.5% to 1.5% of gross
          rental  revenue,  based on annual cash flow,  as defined.  If however,
          annual  cash  flow,  as  defined,  does  not  exceed  $1,200,000,  the
          incentive  fee will not be earned.  No  incentive  management  fee was
          earned for the years ended December 31, 1998,  1997 or 1996 (Note 11).
          The  agreement  has an  initial  term  of 35  months,  terminating  on
          December 31,  1996,  and is  automatically  renewable  for  successive
          1-year  terms unless  either  party  elects to terminate  upon written
          notice given at least 90 days prior to the end of the current contract
          year. The Property is operating under the automatic renewal feature of
          the  agreement  in 1999 as  neither  party  elected to  terminate  the
          contract  within the last 90 days of the year ended December 31, 1998.
          Accrued management fees at December 31, 1998 and 1997 were $7,131.

     (b)  Reimbursements to Affiliate

          As of December 31, 1998 and 1997, the  Partnership had accrued a total
          of $20,471 of  reimbursable  expenses  payable to an  affiliate of the
          general partner for costs incurred on behalf of the Partnership.

(6)  Fair Value of Financial Instruments

     The  carrying  amount of funds held in trust,  impound  deposits  and other
     assets,  accounts  payable and other  liabilities,  due to  affiliate,  and
     rental security deposits are reasonable  estimates of their fair values due
     to the short-term nature of those  instruments.  Management  estimates that
     the fair  value of the  Partnership's  first  trust  deed note  payable  is
     $11,600,000. This estimate is based on the fair value offered to the Lender
     by an unrelated party in conjunction  with the proposed sale of the related
     Revenue  Bonds.  Management  estimates  that the fair value of the  working
     capital loan payable,  capital  improvement loan payable,  and deferred and
     accrued interest payable to be zero based on the Partnership's  expectation
     that such debts will not be repaid.

(7)  Allocations of Earnings and Losses

     (1)  Net loss of the  Partnership  is to be  allocated  99% to the  limited
          partner and 1% to the general partner.

     (2)  Net income of the Partnership is to be allocated as follows:

          (i)  First,  to each partner,  an amount equal to (or in proportion to
               if less than) the excess,  if any, of the aggregate amount of net
               loss  allocated to such partner over the aggregate  amount of net
               income allocated to such partner; and

          (ii) Second,  the  balance,  99% to the limited  partner and 1% to the
               general partner.
<PAGE>
11

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996



     Notwithstanding   anything  to  the  contrary,  the  partnership  agreement
     requires  that the  general  partner's  interest in each  material  item of
     partnership  income,  gain, loss,  deduction or credit shall be equal to at
     least 1% of each item at all times during the existence of the Partnership.

(8)  Distributions

     Cash Available for  Distribution,  as defined,  is to be distributed 99% to
     the limited  partner  and 1% to the general  partner.  Cash  Available  for
     Distribution  in  Liquidation,  as  defined,  is to be  distributed  to the
     partners,  pro rata,  in accordance  with each  partner's  capital  account
     balance, to the extent thereof,  after allocation of income, loss and other
     appropriate capital account adjustments.

(9)  Ability to Meet Current Obligations and Management's Plan

     The liquidity of the Partnership  has been adversely  affected by cash flow
     deficits  from  operations.  The  operating  deficits  have  prevented  the
     Partnership  from  meeting its current  obligations  under the  forbearance
     agreement and the standstill letters (Notes 4 and 11).

     Management is currently under contract (Note 10) to sell the Property.  The
     sale is contingent  upon the buyer assuming the  Partnership's  first trust
     deed note payable and  purchasing the Revenue Bonds from the Lender and the
     Lender  forgiving  all other  outstanding  debts due from the  Partnership.
     There is no assurance  that the sale will be  completed.  If the sale isn't
     completed,   the  Partnership's  ability  to  continue  its  operations  is
     dependent upon the restructuring of the long-term debt.

(10) Potential Sale of Property

     On February  5, 1999,  the  Partnership  entered  into a purchase  and sale
     agreement  with an  unrelated  party to sell the  Property  for $1 plus the
     assumption of the principal balance of the  Partnership's  first trust deed
     note payable.

     The sale is contingent on the buyer's ability to simultaneously acquire the
     Revenue Bonds at a discount for $11,600,000 from the Lender.

(11) Subsequent Event

     On March 15, 1999,  the  standstill  letter  discussed in Notes 4 and 9 was
     extended through the earlier of: (i) June 30, 1999; (ii) the closing of the
     sale or other  disposition of all or substantially  all of the Property and
     the Revenue Bonds; or (iii) the termination of the standstill letter by the
     Lender upon a default by the  Partnership  of the terms and  conditions  of
     this agreement.

     In  connection  with this  extension,  which is  effective as of January 1,
     1999,  the  Partnership  ceased  making  payments  to the  Lender  and  the
     Partnership is to use any excess cash flow generated by the Property to pay
     the Property's operating expenses and the Partnership's  expenses including
     those related to the sale of the Property.  In the event that the cash flow
     generated by the Property for the period of this  extension  together  with
     any  Property-level  cash balances are insufficient to cover such expenses,
     the  Lender  is to  reimburse  the  Partnership  for  such  difference.  In
     addition,  a $232,000  incentive  management fee is to be paid to CAMC from
     the proceeds from the sale of the Revenue Bonds.

     Upon the closing of the sale of the  Property  and the Revenue  Bonds,  the
     Lender is to  forgive  all of the  Partnership's  obligations  to repay any
     principal or interest due to the Lender.
<PAGE>
12

                             CONCAM ASSOCIATES, LP,
                        A CALIFORNIA LIMITED PARTNERSHIP

             Schedule III - Real Estate and Accumulated Depreciation

                                December 31, 1998



<TABLE>
<CAPTION>
                                                                       Camelot Lakes
Residential property:                                                    Apartments

<S>                                                                   <C>           
Location                                                                  Fresno, Ca
Construction date                                                             1985
Acquisition date                                                            04/01/94
Life on which depreciation in latest income statements is computed               (3)
Encumbrances                                                          $   32,311,850
Initial cost to the Partnership:
  Land                                                                $    2,380,000
  Land improvements                                                          952,000
  Buildings                                                                7,934,395
  Furnishings and equipment                                                  633,605
Costs capitalized subsequent to acquisition:
  Land, land improvements, buildings, furnishings and equipment              579,255
Write-down of land improvements and buildings                             (1,196,951)

Gross amount at which carried at close of period(1):
  Land                                                                $    2,380,000
  Land improvements                                                          917,187
  Buildings                                                                6,980,559
  Furnishings and equipment                                                1,004,558
                                                                       ---------------

                                                                      $   11,282,304
                                                                       ===============

Accumulated depreciation(2)                                           $    1,451,071
                                                                       ===============

<FN>
(1)    Aggregate cost for federal income tax purposes is $0.
(2)    The amount of accumulated depreciation for federal income tax purposes is $0.
(3)    Land improvements and buildings - 35 years; furnishings and equipment - 10 years.
</FN>
</TABLE>
A reconciliation of the carrying amount of property and equipment and
accumulated depreciation for the years ended December 31, 1998, 1997 and 1996
follows:

<TABLE>
<CAPTION>
                                                        1998               1997               1996
                                                   ----------------   ----------------   ----------------
<S>                                               <C>                     <C>                <C>       
    Property and equipment:
      Beginning of period                         $    11,162,820         12,108,538         12,068,775
      Additions                                           119,484            251,233             39,763
      Write-down of assets                                     --         (1,196,951)                --
                                                   ----------------   ----------------   ----------------

      End of period                               $    11,282,304         11,162,820         12,108,538
                                                   ================   ================   ================

    Accumulated depreciation:
      Beginning of period                         $     1,162,820            857,052            561,090
      Depreciation expense                                288,251            305,768            295,962
                                                   ----------------   ----------------   ----------------

      End of period                               $     1,451,071          1,162,820            857,052
                                                   ================   ================   ================
</TABLE>