1

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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


                   For the fiscal year ended December 31, 1998
                                             -----------------

                                       OR

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

                         Commission file number: 0-18333
                                                 -------


            VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP
            ---------------------------------------------------------
              Exact name of registrant as specified in its charter


           Delaware                                               13-3516912
           --------                                               ----------
State or other jurisdiction of                                 I.R.S. Employer
incorporation or organization                                 Identification No.

Attn.:  Andre Anderson
3 World Financial Center, 29th Floor, New York, New York            10285
-------------------------------------------------------             -----
Address of principal executive offices                             Zip code

Registrant's telephone number, including area code:  (212) 526-3183

Securities registered pursuant to Section 12(b) of the Act:  None

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


                     Beneficial Assignee Certificates (BACs)
                     ---------------------------------------
                                 Title of Class

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

                              Yes   X     No      
                                  -----      -----

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

As of December 31, 1998, 2,140,000 beneficial assignee certificates (BACs) had
been issued at a subscription price of $10 per BAC. The BACs are not currently
being traded in any market and as such, the BACs have neither a market selling
price nor an average bid or asked price.

Documents Incorporated by Reference:

Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to BAC Holders for the year ended December 31, 1998,
filed as an exhibit under Item 14.
<PAGE>
2

                                     PART I

Item 1. Business

(a)  General Development of Business
     -------------------------------

Victory Tax Exempt Realty Income Fund Limited Partnership (the "Partnership" or
"Registrant") was organized January 15, 1988 under the Delaware Revised Uniform
Limited Partnership Act and will continue until December 31, 2018, unless
dissolved earlier in accordance with the Agreement of Limited Partnership (the
"Partnership Agreement"). The Partnership was formed for the purpose of
acquiring tax-exempt mortgage revenue bonds issued by one or more state or local
governments or their agencies or authorities, the proceeds of which are used to
make participating first mortgage loans on multifamily residential rental
developments and to make, in limited circumstances, taxable working capital
loans to owners of such developments.

The general partner of the Partnership is CA Victory Inc. (the "General
Partner"), formerly Shearson/Victory Inc., a Delaware corporation and an
affiliate of Lehman Brothers Inc. ("Lehman"), formerly Shearson Lehman Brothers
Inc. (see section entitled "Certain Matters Involving Affiliates" contained in
Item 10. "Directors and Executive Officers of the Registrant"). The assignor
limited partner is CA Victory Assignor Corp. (the "Assignor Limited Partner"),
formerly Shearson/Victory Assignor Corp. (see section entitled "Certain Matters
Involving Affiliates" contained in Item 10. "Directors and Executive Officers of
the Registrant"), which is an affiliate of Lehman.

The Assignor Limited Partner has assigned certain of the ownership attributes of
its limited partnership interests, including rights to a percentage of the
income, gains, losses, deductions and distributions of the Partnership to the
BAC Holders on the basis of one unit of limited partnership for one BAC.

The business objectives of the Partnership were:

    (1)  to preserve and protect the Partnership's capital;

    (2)  to provide to BAC Holders quarterly cash distributions from payments of
         base interest on the mortgage revenue bond which has been acquired by
         the Partnership, that are excludable from gross income for federal
         income tax purposes, and in certain instances, nontaxable distributions
         from the Partnership's Interest Reserve Account;

    (3)  to provide to BAC Holders additional cash distributions from payments
         of contingent interest on the mortgage revenue bond that are excludable
         from gross income for Federal income tax purposes which are derived to
         the extent allocable from participation in project cash flow and sale
         or repayment proceeds; and

    (4)  to provide additional cash distributions from payments of taxable
         interest pursuant to working capital loans, which will constitute no
         more than 10% of the Partnership's invested assets.

On April 28, 1989, the Partnership acquired a mortgage revenue bond (the "Bond")
issued by the city of Fresno, California in the original principal amount of
$15,515,000. The Bond is secured by a first mortgage loan (the "Loan") on
Camelot Lakes Apartments (the "Property") located in Fresno. In conjunction with
the investment in the Bond, the Partnership also made a working capital loan on
the Property in the amount of $420,000 (the "Working Capital Loan") which was
secured by a second deed of trust encumbering the Property. The owner of the
Property at the time the Partnership purchased the Bond was Camelot Lakes
Associates ("Camelot Lakes"), an unaffiliated California limited partnership. On
February 1, 1994, the General Partner finalized a restructuring with Camelot
Lakes, which included transferring the Property to a new owner, entering into a
Forbearance Agreement with the new owner, amending the second deed of trust, and
replacing the original property management company. Pursuant to the
restructuring, the current owner and borrower is ConCam Associates, LP ("ConCam"
or the "New Borrower"), an unaffiliated California limited partnership, and the
current property manager is ConAm Management Corporation ("ConAm"), an affiliate
of ConCam. In conjunction with this restructuring, the Partnership also made a
capital improvements loan (the "Capital Improvements Loan") of $500,000 during
1994, which was also secured by the second deed of trust encumbering the
Property. Additional information regarding the Bond, the Working Capital Loan
and the Capital Improvements Loan is incorporated by reference to Note 4
"Mortgage Revenue Bond, Working Capital Loan, and Capital Improvements Loan" of
the Notes to the Financial Statements contained in the Partnership's Annual
Report to BAC Holders for the year ended December 31, 1998, filed as an exhibit
under Item 14.
<PAGE>
3

During 1997, the General Partner and ConCam agreed to pursue a sale of the
Property and/or 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. A detailed discussion of the proposed sale (the "Sale") is
incorporated by reference to Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained herein.

(b)  Employees
     ---------

The Partnership does not have any employees. Services are performed for the
Partnership by affiliates of the General Partner and agents retained by them.

(c)  Competition
     -----------

The Property is subject to competition in its renting and leasing activity from
several similar properties also located within the southeast submarket of Fresno
County. Many one and two family houses in the area are also available for rent
or purchase and compete with the Property for prospective tenants.

Because the Property offers amenities such as a swimming pool and tennis courts,
it demands rents that are at the upper end of the Fresno market. The General
Partner believes that the sluggish economy in Fresno and a demographic shift in
the region have somewhat shifted demand for housing in Southeastern Fresno to
the lower end of the rate structure. This shift, combined with competitive
forces and modest growth in demand, has caused limited or virtually no rental
rate growth at many area properties, including the Property.


Item 2. Properties

The Partnership does not own any property. The Partnership has, however,
invested in the Bond for which an underlying first mortgage on the Property has
been assigned to the Partnership as collateral and the Partnership has made the
initial Working Capital Loan and the Capital Improvements Loan to the owner.
Additional information regarding the Bond, Working Capital Loan, the Capital
Improvements Loan and the Property is incorporated by reference to Note 4
"Mortgage Revenue Bond, Working Capital Loan, and Capital Improvements Loan" of
the Notes to the Financial Statements contained in the Partnership's Annual
Report to BAC Holders for the year ended December 31, 1998, filed as an exhibit
under Item 14.


Item 3. Legal Proceedings

The Partnership is not the subject of any material legal proceedings.


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

No matters were submitted to the BAC Holders to be voted on during the fourth
quarter of the year for which this report was filed.

In February 1999, the Partnership entered into a binding agreement to sell the
Bond (see Item 7). The proposed Sale will require the consent of a
majority-in-interest of the BAC Holders to direct the consent of the Assignor
Limited Partner to the Sale. Consent of 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.
<PAGE>
4

                                     Part II

Item 5. Market for Registrant's Limited Partnership
        Units and Related Unitholder Matters

(a)  Market Information.
     ------------------

There is no established public market in which the BACs are currently traded.

(b)  Approximate Number of Security Holders.
     --------------------------------------

As of December 31, 1998, there were 1,032 BAC Holders.

(c)  Dividend History and Restrictions.
     ---------------------------------

Information on the Partnership's cash distributions is incorporated by reference
to Item 7., "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained herein, and Note 6 "Distributions Payable" of
the Notes to the Financial Statements in the Partnership's Annual Report to BAC
Holders for the year ended December 31, 1998, filed as an exhibit under Item 14.

Quarterly cash distributions per $10 BAC are shown below for the years ended
December 31, 1998 and 1997.

<TABLE>
<CAPTION>
           (Based on 2,140,000 BACs outstanding)

                     First     Second     Third      Fourth
                   Quarter    Quarter    Quarter    Quarter      Total
           -----------------------------------------------------------
           <S>     <C>        <C>        <C>        <C>        <C>    
           1997    $0.0740    $0.0370    $0.0000    $0.0000    $0.1110
           1998     0.0000     0.0000     0.0000     0.0000     0.0000
           -----------------------------------------------------------
</TABLE>

Cash distributions were suspended beginning with the 1997 third quarter
distribution, which would have been paid in November 1997. In light of the
decision to sell the Property and/or the Bond, quarterly distributions will not
be reinstated. Following the Sale, the General Partner will distribute to the
BAC Holders the net proceeds received on the Bond together with the
Partnership's remaining cash reserves (after payment of, or provision for, the
Partnership's liabilities and expenses), and dissolve the Partnership.


Item 6. Selected Financial Data

Selected Partnership financial data as of and for each of the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 are shown below. This data should
be read in conjunction with the Partnership's financial statements and the
related notes included herein, filed as an exhibit under Item 14.

<TABLE>
<CAPTION>
                                        1998          1997          1996          1995           1994
-----------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>           <C>            <C>        
Total Revenues                   $   713,166   $   440,246   $   646,191   $    71,044    $   406,502

Net Income (Loss)                    482,048    (2,692,230)      514,121       (30,145)       211,582

Net Income (Loss) per BAC(1)             .23         (1.25)          .24          (.01)           .10

Total Assets as of December 31    10,918,467    10,422,735    13,493,316    14,044,167     15,168,426

Total Cash Distributions
  declared per BAC(1)                   0.00         0.111         0.449         0.500          0.500

<FN>
(1) 2,140,000 BACs outstanding.
</FN>
</TABLE>
<PAGE>
5

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

Liquidity and Capital Resources
-------------------------------

The Partnership's operating income is derived from its investment in a mortgage
revenue bond (the "Bond") in the original principal amount of $15,515,000
secured by a first mortgage loan (the "Loan") on Camelot Lakes Apartments (the
"Property").

Operating difficulties at the Property resulted in Camelot Lakes Associates, an
unaffiliated limited partnership (the "Original Borrower"), defaulting on the
November 1993 through January 1994 Bond payments. On February 1, 1994, the
General Partner reached a restructuring agreement with the Original Borrower,
whereby the ownership of the Property was transferred to ConCam Associates, LP
("ConCam"), and property management was transferred to ConAm Management
Corporation ("ConAm"), a major property management company and an affiliate of
ConCam. In addition to ownership, ConCam assumed the obligations under the Bond
and Loan documents on a nonrecourse basis. Pursuant to the restructuring, the
Partnership entered into a forbearance agreement (the "Forbearance Agreement")
with ConCam pursuant to which the Partnership, for a limited period, agreed to
forbear from exercising certain remedies against ConCam and the Property
provided certain conditions were met.

Pursuant to the Forbearance Agreement, the minimum interest payment on the Bond
increased to 7.0% on February 1, 1996 from the previous rate of 6.5%. In
February 1996, ConCam indicated that the Property's operations could not support
debt service payments at the increased rate in 1996. On May 8, 1996, as a result
of negotiations with ConCam, the Partnership executed a standstill agreement
(the "Agreement") to generally allow a continuance of the terms of the
Forbearance Agreement provided that in lieu of the minimum pay rate, ConCam pays
as debt service all available cash flow generated by the Property. The Agreement
remained in effect until the Forbearance Agreement expired on December 31, 1996.
At such time, the parties were engaged in good faith negotiations and therefore,
the Partnership extended the Agreement with ConCam through December 31, 1997.
Effective January 1, 1998, the Partnership executed an extension of the
Agreement with ConCam until the earlier to occur of December 31, 1998 or the
closing of a sale of the Property. The Agreement was subsequently extended to
the earlier to occur of June 30, 1999, or the closing of a sale of the Bond and
the Property.

The General Partner's objective is to maximize the recovery of the Partnership's
investment. After careful consideration, the General Partner has determined that
a sale of the Property and an accelerated repayment of the Bond, or a sale of
the Bond in conjunction with a sale of the Property, are the most viable means
to achieve this objective. Therefore, the Partnership 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 is subject to the consent of the City of
Fresno, California and of a majority-in-interest of the outstanding BAC Holders
evidencing economic and certain other rights attributable to the limited
partnership interests in the Partnership and to the satisfaction or waiver of
the other customary closing conditions. 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. Subject to closing of the Sale, the Partnership
has agreed to allow ConCam to cease making "cash-flow" debt payments from
January 1, 1999, and instead use the cash flow generated by the Property to pay
ConCam's expenses in connection with the operation and sale of the Property to
the buyer, which is intended to occur simultaneously with the sale of the Bond.

During 1997, the Partnership wrote down the carrying value of its investment in
the mortgage revenue bond, working capital loan, and capital improvements loan
to its estimated fair value as determined by management at that time. At
December 31, 1998, the carrying value totaled $9,826,236. If the proposed Sale
is consummated on the announced terms, it is expected to result in a gain in the
amount of approximately $1.2 million.
<PAGE>
6

In anticipation of a potential sale, ConCam has been concentrating its efforts
on stabilizing Property operations and positioning the Property in the Fresno
market. To this end, the Partnership authorized ConCam in 1997 to utilize a
portion of operating cash flow to make certain Property improvements deemed
necessary to increase occupancy and ensure that the Property is well-positioned
for sale. The level of debt service payments made by ConCam to the Partnership
decreased to an average annual pay rate of 3.3% during 1997 as a result of these
additional capital expenses at the Property level. However, debt service
payments during 1998 were made at an average annual rate of 5.1%. This
improvement primarily was due to efforts to stabilize Property operations, as
discussed above.

Effective as of 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.

At December 31, 1998, the Partnership had cash and cash equivalents, which are
invested in tax-exempt money market accounts, of $1,078,440, compared with
$366,144 at December 31, 1997. The increase primarily is due to an increase in
net cash flow from operations due to ConCam making higher minimum interest
payments to the Partnership and the discontinuation of quarterly cash
distributions.

Due to the Property's operating difficulties, the General Partner reduced the
cash distribution paid to the partners commencing in 1993, and subsequently
suspended cash distributions beginning with the 1997 third quarter distribution,
which would have been paid in November 1997. In light of the decision to sell
the Property and/or the Bond, quarterly distributions will not be reinstated.
Following a sale of the Bond, the General Partner will distribute to the BAC
Holders the net proceeds received on the Bond together with the Partnership's
remaining cash reserves (after payment of, or provision for, the Partnership's
liabilities and expenses), and dissolve the Partnership. As of December 31,
1998, total cash distributions paid to the Limited Partners since inception have
been funded 77% from operating cash flow and 23% from the Partnership's cash
reserves. Other than from a sale of the Bond, the sources of the Partnership's
future cash flows absent a sale of the Property or the Bond, are expected to be
interest earned on cash and cash equivalents.

Year 2000 Initiatives
---------------------
The Year 2000 compliance issue concerns the ability of computerized information
systems to accurately calculate, store or use a date after 1999. This could
result in computer system failures or miscalculations causing disruptions of
operations. The Year 2000 issue affects almost all companies and organizations.

The Partnership has entered into a binding agreement to sell the Bond, and it is
anticipated that the Sale will be completed and the Partnership dissolved prior
to December 31, 1999. In the event that the Partnership is not dissolved prior
to December 31, 1999, potential Year 2000 issues relate to the outside vendors
which provide the Partnership's administrative services, including accounting,
tax preparation and transfer agent services. Such services are reliant on
computer systems, software products and equipment which are expected to be Year
2000 compliant prior to December 31, 1999. The General Partner continues to
discuss Year 2000 compliance with these outside vendors. It is anticipated that
the cost of vendor compliance with Year 2000 issues will be borne primarily by
these vendors. Although it is not possible at present to estimate the cost of
this remediation work based on available information, the General Partner does
not expect such costs to have a material adverse impact on the Partnership's
business, results of operations or financial condition.

The Partnership may have potential Year 2000 issues related to ConCam's own
vendors which provide accounting and property management services to them as
well as Year 2000 issues related to property operating systems. Such problems
may impair the ability of ConCam to make its debt service payments. Due to the
General Partner's intent to dissolve the Partnership before December 31, 1999,
no assessment has been made by the General Partner as to potential adverse
impact of ConCam's failure to prepare for the Year 2000.

Due to the General Partner's intent to dissolve the Partnership before December
31, 1999, the General Partner currently does not have Year 2000 contingency
plans. In the event the Sale is not completed, the General Partner intends to
develop and implement contingency plans in 1999. However, there is no certainty
such plans would fully mitigate any Year 2000 problems.
<PAGE>
7

Market Risk
-----------

The Partnership's principal market risk exposure is interest rate risk. Interest
income from the Partnership's cash and cash equivalents is subject to interest
rate risk in that such funds consist of short-term, highly liquid investments
invested at short-term rates. Since the General Partner expects the Partnership
to dissolve in 1999, such risk is not considered to be material to the
Partnership's operations.

Results of Operations
---------------------

1998 versus 1997
----------------
The Partnership accounts for its investment in the Bond using the equity method
of accounting. Accordingly, the Partnership reports as income its share of the
Property's results of operations.

For the year ended December 31, 1998, the Partnership generated net income of
$482,048, compared with a net loss of $2,692,230 for the year ended December 31,
1997. The change from net loss to net income is primarily due to the write-down
in the amount of $2,892,415 during 1997 of the carrying value of the investment
in the mortgage revenue bond, working capital loan, and capital improvements
loan to its estimated fair value at December 31, 1997. The improvement is also
due to an increase in the Partnership's share of earnings from its investment in
the Bond.

The Partnership's share of earnings from investment in the Bond is based on the
Property's earnings before debt service, which increased for the year ended
December 31, 1998 relative to 1997. The Partnership's equity interest in the
Property's earnings in 1998 was $688,788 compared to $426,352 in 1997. The
increase is primarily due to higher rental income and the containment of
expenses incurred at the Property. Total income at Camelot Lakes Apartments was
$2,134,358 for the year ended December 31, 1998, compared to $1,993,837 for the
year ended December 31, 1997. The increase primarily is due to an increase in
rental income as a result of higher average occupancy at the Property. Total
expenses at Camelot Lakes Apartments, net of debt service, depreciation and
amortization and impairment loss were $1,200,732 for the year ended December 31,
1998 compared with $1,223,351 for the year ended December 31, 1997.

Other interest totaled $24,378 for the year ended December 31, 1998, compared to
$13,894 for the year ended December 31, 1997. The increase primarily is due to
higher average cash balances maintained by the Partnership during the 1998
period.

Total expenses for the year ended December 31, 1998 were $231,118 compared to
$240,061 in 1997, excluding the $2,892,415 loss on write-down of investment in
revenue bond, working capital loan and capital improvements loan, discussed
above. The slight decrease primarily reflects lower general and administrative
expenses. General and administrative expenses totaled $188,318 in 1998 compared
to $197,261 in 1997. The decrease is primarily due to lower management and legal
fees, partially offset by higher audit and administrative servicing fees.

Interest received on the mortgage revenue bond was $862,552 for the year ended
December 31, 1998, compared with $517,413 for the year ended December 31, 1997.
The increase is largely due to higher property cash flow, averaging 5.1% for the
1998 period.

Average occupancy at the Property for the year ended December 31, 1998 was
93.6%, compared with 86.1% for the year ended December 31, 1997. As of December
31, 1998, the Property was 91.7% occupied, compared with 90.9% as of December
31, 1997.

1997 versus 1996
----------------
For the year ended December 31, 1997, the Partnership had a net loss of
$2,692,230, compared with net income of $514,121 for the year ended December 31,
1996. The change is primarily due to the loss on the Partnership's write-down in
1997 of the investment in mortgage revenue bond, working capital loan, and
capital improvements loan of $2,892,415. Excluding the loss on the write-down,
the Partnership generated net income of $200,185 for the year ended December 31,
1997, compared with net income of $514,121 for the year ended December 31, 1996.
The decrease primarily is due to a decrease in the Partnership's share of
earnings from its investment in the Bond, an increase in general and
administrative expenses and a slight decrease in other interest.
<PAGE>
8

The Partnership's share of earnings from investment in the Bond is based on the
Property's earnings before debt service, which decreased for the year ended
December 31, 1997 relative to 1996. The Partnership's equity interest in the
Property's earnings for the year ended December 31, 1997 was $426,352, compared
to $627,378 for the year ended December 31, 1996. The Partnership's equity
interest in the Property's earnings decreased for the 1997 period, primarily due
to lower rental income and higher expenses incurred at the Property. Total
income at Camelot Lakes Apartments was $1,993,837 for the year ended December
31, 1997, compared to $2,056,281 for the year ended December 31, 1996. The
decrease primarily is due to a decrease in rental income as a result of lower
average rental rates and increased concessions, as well as a slight decrease in
average occupancy at the Property. Total expenses at Camelot Lakes Apartments,
net of debt service, were $1,223,351 for the year ended December 31, 1997,
compared to $1,111,401 for the year ended December 31, 1996. The increase
primarily is due to higher security, advertising and promotion and utilities
expenses, higher property taxes, and higher administrative and repairs and
maintenance expenses, which were partially offset by lower management fees,
insurance and other property expenses.

For the year ended December 31, 1997, other interest was $13,894, compared to
$18,813 for the year ended December 31, 1996. The decrease primarily is due to
lower cash balances maintained by the Partnership during 1997.

Total Partnership expenses for the year ended December 31, 1997, excluding the
loss on write-down of investment in mortgage revenue bond, working capital loan,
and capital improvements loan of $2,892,415, were $240,061, compared to $132,070
for the year ended December 31, 1996. The increase is attributable to higher
general and administrative expenses for the 1997 period. General and
administrative expenses for the year ended December 31, 1997 were $197,261,
compared to $89,270 for the year ended December 31, 1996. Effective January 1,
1997, certain expenses incurred by the General Partner, its affiliates, and an
unaffiliated third party service provider in servicing the Partnership, which
were voluntarily absorbed by affiliates of the General Partner in prior periods,
were reimbursable to the General Partner and its affiliates. The change is also
due to an increase in other professional fees during 1997.

Interest received on the mortgage revenue bond was $517,413 for the year ended
December 31, 1997, compared with $866,258 for the year ended December 31, 1996.
The decrease is largely due to ConCam providing for debt service at a lower rate
averaging 3.3% for 1997, due to the current operating and market constraints
mentioned above.

Average occupancy at the Property for the year ended December 31, 1997 was
86.1%, compared with 86.6% for the year ended December 31, 1996. As of December
31, 1997, the Property was 90.9% occupied, compared with 83.5% as of December
31, 1996.


Item 8. Financial Statements and Supplementary Data

Incorporated by reference to the Partnership's Annual Report to BAC Holders for
the year ended December 31, 1998, filed as an exhibit under Item 14.


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

None.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The Partnership has no directors, executive officers or employees of its own.

The names, ages and business experience for the directors and executive officers
of the General Partner as of the filing date are as follows:
<PAGE>
9

           Name                    Office
           ----                    ------

           Daphne H. Aronson       Director, President & Chief Financial Officer
           Rocco F. Andriola       Director
           Jaime Fuertes           Vice President

Daphne H. Aronson, 35, Vice President, joined Lehman Brothers in February 1996,
and has worked with the firm's Expense Management, Legal Department, Purchasing
Unit, Diversified Asset Group and Real Estate Department on a variety of
matters, including acquisition and disposition of various real estate interests.
Ms. Aronson graduated Phi Beta Kappa and received a B.A. in Music magna cum
laude from New York University in 1986. She received a J.D. and an LL.M. in
Taxation from New York University School of Law in 1989 and 1992, respectively.
Prior to joining Lehman Brothers, Ms. Aronson practiced real estate law from
1994 to 1996 at Thatcher Proffitt & Wood in New York, working on originations of
securitized loans.

Rocco F. Andriola, 40, is a Managing Director of Lehman Brothers Inc. in its
Diversified Asset Group and has held such position since October 1996. Since
joining Lehman in 1986, Mr. Andriola has been involved in a wide range of
restructuring and asset management activities involving real estate and other
direct investment transactions. From June 1991 through September 1996, Mr.
Andriola held the position of Senior Vice President in Lehman's Diversified
Asset Group. From June 1989 through May 1991, Mr. Andriola held the position of
First Vice President in Lehman's Capital Preservation and Restructuring Group.
From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman, Mr. Andriola practiced corporate and securities law at
Donovan Leisure Newton & Irvine in New York. Mr. Andriola received a B.A. from
Fordham University, a J.D. from New York University School of Law, and an LL.M
in Corporate Law from New York University's Graduate School of Law.

Jaime Fuertes, 32, is a Senior Associate at Lehman Brothers Inc. He joined
Lehman in 1997 as the Controller of the Diversified Asset Group and since then
has also been engaged in the analysis and negotiations of Lehman's worldwide
current and future lease commitments. Prior to joining Lehman, Mr. Fuertes held
various positions in Finance and Treasury at Chase Manhattan Bank between 1990
and 1996 and at GE Capital Services between 1996 and 1997. Mr. Fuertes received
Bachelor of Science and Master of Science degrees in Finance from Fairfield
University.

Certain officers and directors of CA Victory Inc., formerly Shearson/Victory,
Inc. (see below) are now serving as officers or directors of entities which act
as general partners of a number of real estate limited partnerships which have
sought protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the markets in which that
real estate is located and, consequently, the partnerships sought the protection
of the bankruptcy laws to protect the partnerships' assets from loss through
foreclosure.


Item 11. Executive Compensation

Neither the General Partner nor any of its directors and officers received any
compensation from the Registrant. See Item 13 below with respect to a
description of certain transactions of the General Partner and its affiliates
with the Registrant.


Item 12. Security Ownership of Certain Beneficial Owners and Management

    (a)  Security ownership of certain beneficial owners
         -----------------------------------------------

To the knowledge of the General Partner, no person or group owned more than 5%
of the outstanding BACs as of December 31, 1998.
<PAGE>
10

    (b)  Security ownership of management
         --------------------------------

As of December 31, 1998, none of the officers and directors of the General
Partner owned any BACs.

    (c)  Changes in control
         ------------------

None.


Item 13. Certain Relationships and Related Transactions

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. In prior years, affiliates
of the General Partner had voluntarily absorbed these expenses.

Additional information is incorporated by reference to Note 5 "Transactions with
Related Parties" of Notes to the Financial Statements contained in the
Partnership's Annual Report to BAC Holders for the year ended December 31, 1998,
filed as an exhibit under Item 14.
<PAGE>
11

                                     PART IV

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

(a) (1)  Financial Statements:

                                                                           Page
                                                                          Number
                                                                          ------

         Report of Independent Auditors...................................  (1)

         Balance Sheets - As of December 31, 1998 and 1997................  (1)

         Statements of Operations -
         For the years ended December 31, 1998, 1997 and 1996.............  (1)

         Statements of Partners' Capital (Deficit) -
         For the years ended December 31, 1998, 1997 and 1996.............  (1)

         Statements of Cash Flows -
         For the years ended December 31, 1998, 1997 and 1996.............  (1)

         Notes to the Financial Statements................................  (1)

(1) Incorporated by reference to the Partnership's Annual Report to BAC
    Holders for the year ended December 31, 1998, which is filed as an
    exhibit under Item 14.

(a) (2)  Financial Statement Schedules:

         ConCam Associates, LP, a California Limited Partnership

         Independent Auditors' Report.....................................  A-1
         Financial Statements:

             Balance Sheets at December 31, 1998 and 1997.................  A-2
             Statements of Operations and Partners' Deficit for
             the years ended December 31, 1998, 1997 and 1996.............  A-3
             Statements of Cash Flows for the years ended
             December 31, 1998, 1997 and 1996.............................  A-4
             Notes to the Financial Statements............................  A-5

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

(a) (3)  Exhibits:

3.1      Certificate of Limited Partnership of Victory Tax Exempt Realty Income
         Fund Limited Partnership. (Incorporated by reference from Exhibit 3 to
         the Registrant's Post-Effective Amendment No. 2, dated February 14,
         1989, to the Registration Statement on Form S-11.)

3.2      Agreement of Limited Partnership of Victory Tax Exempt Realty Income
         Fund Limited Partnership. (Incorporated by reference from Exhibit 3 to
         the Registrant's Post-Effective Amendment No. 2, dated February 14,
         1989, to the Registration Statement on Form S-11.)

3.3      Beneficial Assignee Certificate.  (Incorporated by reference from
         Exhibit 3 to the Registrant's Registration Statement on Form S-11.)
<PAGE>
12

10.1     Forbearance Agreement between Victory Tax Exempt Realty Income Fund
         Limited Partnership and ConCam Associates, LP dated January 31, 1994.
         (Incorporated by reference from Exhibit 10.1 to the Registrant's Annual
         Report on Form 10-K for the year ended December 31, 1993.)

10.2     First Amendment to Working Capital Loan Agreement between Victory Tax
         Exempt Realty Income Fund Limited Partnership and ConCam Associates, LP
         dated February 1, 1994. (Incorporated by reference from Exhibit 10.2 to
         the Registrant's Annual Report on Form 10-K for the year ended December
         31, 1993.)

10.3     Property Management Agreement between ConCam Associates, LP and ConAm
         Management Corporation dated January 31, 1994. (Incorporated by
         reference from Exhibit 10.3 to the Registrant's Annual Report on Form
         10-K for the year ended December 31, 1993.)

10.4     Termination and Release Agreement between Victory Tax Exempt Realty
         Income Fund Limited Partnership, Camelot Lakes Associates and James
         Hendricks and Associates, Inc. dated February 1, 1994. (Incorporated by
         reference from Exhibit 10.4 to the Registrant's Annual Report on Form
         10-K for the year ended December 31, 1993.)

10.5     Standstill Agreement between Victory Tax Exempt Realty Income Fund
         Limited Partnership and ConCam Associates, LP dated May 8, 1996.
         (Incorporated by reference from Exhibit 10.5 to the Registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended March 1,
         1996.)

10.6     Extension Letter between Victory Tax Exempt Realty Income Fund Limited
         Partnership and ConCam Associates, LP dated January 1, 1997.
         (Incorporated by reference to Exhibit 10.6 to the Registrant's Annual
         Report on Form 10-K for the year ended December 31, 1996).

10.7     Amendment to Standstill Agreement Between Victory Tax Exempt Realty
         Income Fund Limited Partnership and ConCam Associates, LP.

13.1     Annual Report to BAC Holders for the year ended December 31, 1998.

27.1     Financial Data Schedule.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the fourth quarter of fiscal
         1998.

         On February 23, 1999, the Partnership filed a report on Form 8-K
         reporting that the Partnership had entered into a binding agreement to
         sell the Bond.
<PAGE>
13

                                   SIGNATURES

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



                           VICTORY TAX EXEMPT REALTY INCOME
                           FUND LIMITED PARTNERSHIP

                           BY: CA Victory Inc.,
                               General Partner


Date:  March 31, 1999          BY:    /s/Daphne H. Aronson
                                      --------------------
                               Name:  Daphne H. Aronson
                               Title: President, Director and
                                      Chief Financial Officer
<PAGE>
14

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:



                               CA VICTORY INC.
                               General Partner


Date:  March 31, 1999          BY:    /s/Daphne H. Aronson
                                      --------------------
                               Name:  Daphne H. Aronson
                               Title: President, Director and
                                      Chief Financial Officer


Date:  March 31, 1999          BY:    /s/Rocco F. Andriola
                                      --------------------
                               Name:  Rocco F. Andriola
                               Title: Director


Date:  March 31, 1999          BY:    /s/Jaime Fuertes
                                      ----------------
                               Name:  Jaime Fuertes
                               Title: Vice President