SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the Fiscal Year Ended                                Commission File Number
    December 31, 1999                                            0-24906

                        LARCHDALE OWNERSHIP COMPANY, LTD.
             (Exact name of registrant as specified in its charter)


        California                                          95-3932760
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

6355 Topanga Canyon Boulevard, Suite 428, Woodland Hills, California   91367
    (Address of principal executive offices)                        (Zip code)

                                 (818) 346-0509
               Registrant's telephone number, including area code

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

Securities registered pursuant to Section 12(g) of the Act: Units of Limited
                                                            Partnership Interest

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

                                               YES [ x ]     NO [   ]

As of March 15, 2000,  the  aggregate  market value (as computed by reference to
the price at which the securities  were sold) of the voting  securities  held by
non-affiliates of the registrant was $6,189,167.


<PAGE>


ITEM 1.           BUSINESS.
                  --------

         Larchdale  Ownership  Company,  Ltd. (the  Partnership) is a California
limited  partnership  formed in June 1984.  Effective  December  31,  1994,  the
general partner is LMH Realty,  Inc., a California  corporation  which is wholly
owned by L. Mark Hammerschmitt, the President of Preferred Financial Corporation
whose business address and telephone  number are those of the Partnership:  6355
Topanga Canyon  Boulevard,  Suite 428, Woodland Hills,  California 91367,  (818)
346-0509. See Item 4.

         The Partnership was formed to acquire, operate, and hold for investment
the Larchdale Woods Apartments located at 13178 Larchdale Road, Laurel, Maryland
(the Property).

         The  Partnership  has  retained  Preferred  Financial  Corporation,  an
affiliate of the general partner,  as Property Manager to conduct the day-to-day
operations of the Property and the Partnership.  Preferred Financial Corporation
employs all personnel supplying management services to the Partnership, of which
nine (9) people are employed full-time at the Property location.

ITEM 2.           PROPERTY.
                  --------

LARCHDALE WOODS APARTMENT COMPLEX
---------------------------------

         On June  29,  1984,  the  Partnership  purchased  the  Larchdale  Woods
Apartments  from  an  unrelated  third  party.  Larchdale  Woods  is a 526  unit
multi-family  apartment  building located on 40.09 acres of wooded land with two
lakes.  The  apartment  complex was  constructed  in 1967.  The  exterior of the
buildings  is brick  construction  with  vertical  wood  siding over wood frame,
supported  by block  foundation  walls.  The  Property  has 41 garden  apartment
buildings of which 16 have three stories and 25 have four  stories.  The complex
consists of 371 one  bedroom/one  bath, 102 two  bedroom/one  bath, and 53 three
bedroom/one and a half bath apartments.

         Property  amenities  include  expansive  landscaped  grounds  with  two
playground  areas,  an  outdoor  Olympic-sized  pool  and  cabana,  and  laundry
facilities in each building.

ITEM 3.           LEGAL PROCEEDINGS.
                  -----------------

         The  Partnership  has, from time to time, been a party to various legal
proceedings  consisting of routine  litigation  incidental to its business,  but
believes that any potential  liabilities  resulting from these  proceedings  are
adequately covered by insurance or are otherwise immaterial.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                  ---------------------------------------------------

         Under terms of a Solicitation  of Consents dated November 10, 1994, the
limited  partners  authorized  the  addition of LMH Realty,  Inc.,  a California
corporation which is wholly owned by

                                       -2-
<PAGE>

L. Mark Hammerschmitt,  the President of Preferred Financial Corporation, as the
new general partner of the  Partnership.  The previous  general  partners,  Alex
Gershunoff and Lawrence M. Silk, became limited partners of the Partnership with
no management authority for the Partnership.

         In addition,  the limited partners authorized the payment of a deferred
asset management fee to LMH Realty,  Inc., payable upon the sale of the Property
as a management incentive, equal to 1.5% of the sales price.

         Both proposals  were effective as of December 31, 1994 (the  "Admission
Date").

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND
`                 RELATED STOCKHOLDER MATTERS.
                  -----------------------------------------

         There  currently  is no  established  public  market  for  the  limited
partnership  units of Larchdale  Ownership  Company,  Ltd., nor is such a market
likely to develop in the future.

         There has been no distribution  of cash to the unit holders,  and there
is not expected to be a cash  distribution  until the  Partnership has available
cash from operations on a regular basis.


ITEM 6.           SELECTED FINANCIAL DATA.
                  -----------------------

<TABLE>
<CAPTION>
<S>                                            <C>                  <C>                     <C>
                                               Year Ended           Year Ended              Year Ended
                                               December 31,         December 31,            December 31,
                                                  1999                 1998                    1997
                                               ------------         ------------            ------------

Revenue                                         $ 3,214,375          $ 3,148,113             $ 3,245,778
Net loss                                        $  (859,291)         $  (487,283)            $  (396,784)
Per limited partnership interest                $       (24)         $       (14)            $       (11)
Total assets                                    $ 4,031,375          $ 4,759,879             $ 5,469,965
Long-term obligations                           $13,667,414          $13,797,082             $13,916,575
</TABLE>















                                       -3-


<PAGE>


ITEM 7.           MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.
                  -----------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         The  Partnership's  primary  source of  liquidity  has been  funds from
operations,  proceeds  from the  initial  capitalization,  and the  exercise  of
warrants in 1986 and 1987. With the completion of the 1987 warrant offering, the
Partnership is fully capitalized. Future capital requirements are expected to be
primarily provided by operations.

         On  November  10,  1986,  the  Partnership   obtained  a  new  loan  of
$12,750,000 from an institutional third-party lender. The note bears interest at
a variable  rate of 225 basis  points over the 11th  District  Federal Home Loan
Bank cost of funds, with a floor of 10%.

         In May 1992, the  Partnership  completed a modification  of the payment
terms of the loan for a one year period  commencing with the payment due January
1, 1992.  Under the terms of the  modification,  monthly  interest only payments
were made at the reduced rate of 5%, with the difference between interest at the
full rate and the  reduced  payment  rate added to the  principal  amount of the
loan. In addition, payments for property taxes were impounded by the lender on a
monthly basis.  After the end of the modification  period,  the Partnership made
partial  monthly  payments  until April 6, 1993 when payment in full of past due
amounts was made and the loan reverted to its unmodified terms.

         In May 1994, the  Partnership  completed a second  modification  of the
loan payment terms for a one year period  commencing on November 1, 1993.  Under
the terms of the second  modification,  monthly interest only payments were paid
at the reduced rate of 9%, with the difference between interest at the full rate
of 10% and the reduced  payment rate added to the principal  amount of the loan.
In  addition,  payments  for  property  taxes were  impounded by the lender on a
monthly  basis.  In March 1995,  the  modification  was  extended for a one year
period commencing on November 1, 1994.

         Starting  with the payment due on  November 1, 1995,  the  modification
expired  and monthly  payments at the full rate of 10% per annum plus  principal
amortization  were required under the original terms of the note.  However,  the
lender continued to bill the Partnership under the terms of the modification and
the Partnership paid the amounts as billed. The Partnership contacted the lender
in  September  1996 to initiate  negotiations  to resolve the billing  disparity
which had  accumulated  to $281,000 and the  problems of the property  taxes due
starting in September  1996 and the deferred  maintenance  of the  property.  In
November  1996,  the  Partnership  and the  lender  entered  into a  forbearance
agreement  under which the Partnership  agreed to make full monthly  payments of
$124,031  beginning  November  1, 1996 and the lender  agreed to  forestall  any
foreclosure proceedings while negotiations continued.

         In December 1996, the lender agreed to accept $11,800,000 as payment in
full on its loan under the  conditions,  among others,  that payment be received
before April 15, 1997,  that the  property  taxes be paid,  and that the loan be
purchased by a third party  independent of the  Partnership.  The purchase price
was reduced by the principal  portion of the monthly  payments made from January
1,  1997  through  the  purchase  date.  The  property  taxes  were  paid by the
Partnership in December 1996.

                                       -4-
<PAGE>

         On February 28, 1997, the Partnership  completed the refinancing of the
property  and paid off the  existing  loan  which had a balance  at  closing  of
$13,245,725  with a cash payment of $11,767,496  for a gain of  $1,481,229.  The
Partnership paid a fee of $50,000 to a third party to purchase the existing loan
from the lender and  subsequently  sell the loan to the Partnership and a fee of
$25,213 to a consultant  for  assistance in making the initial  contact with the
appropriate lender  representative.  In addition,  the Partnership paid a fee of
$140,602 to the general partner,  LMH Realty, Inc., equal to 10% of the net gain
of $1,406,016 for success in the  negotiating of the loan discount and arranging
the third party purchase of the loan. The  Partnership  recognized the remaining
gain of $1,265,414 in 1997.

         The loan was purchased and the refinancing  completed with funds from a
new loan to the  Partnership of $14,000,000 at 8.20% per annum maturing on March
1,  2007  with  monthly  principal  and  interest  payments  of  $104,686.   The
Partnership  paid fees to the lender and loan  broker of  $280,000,  loan costs,
title  insurance,  transfer taxes and recording  fees of $50,996,  and estimated
legal fees of $25,000.  The new loan  provided  for reserves for the initial two
monthly payments, property taxes and insurance. In addition, the new lender held
a reserve of $493,000 for deferred property maintenance items. After the payment
of $11,767,496 to the prior lender,  the Partnership  received net proceeds from
the refinancing of $1,316,015.

         In September  1997, the  Partnership  completed the pay off of advances
due to an affiliate of the general partner of $664,596 plus accrued  interest of
$430,295.

         As of the date of this  Report,  the  Partnership  does not foresee any
trends,  demands,  commitments,  events,  or uncertainties  which are reasonably
likely  to  result in a  material  increase  or  decrease  in the  Partnership's
liquidity.

         RESULTS OF OPERATIONS.
         ---------------------

         The partnership has made progress in addressing its various problems in
1999. The on-site  management  team has been stabilized with the hiring of a new
manager  who had managed  Larchdale  in 1997  before  leaving to pursue  another
business  interest.  The local rental market is positive which,  combined with a
stronger  management  team and other  improvements,  has  resulted  in  steadily
improving  rental  collections  through the second half of 1999.  Rental  income
increased by $74,086, or 2.4%, to $3,130,937 in 1999, which reversed the decline
incurred in 1998.

         The second issue was related to the completion of the exterior cosmetic
improvements,  which  began in 1997 and  were  finished  in  December  1999,  as
evidenced by the issuance of the County biannual operating permit after clearing
all of the County inspection deficiencies.  License expenses in 1999 include the
County biannual license fee of $26,300.

         But, by far, the most serious problem for Larchdale has been the ground
shifting  affecting  five  buildings  in the 526  unit  apartment  complex.  The
shifting  caused  foundation  failures in two buildings  requiring the buildings
consisting of 25 units to be closed and tenants  transferred to other  buildings
plus two units in two other buildings to be unrentable.  In addition,  there are
surface runoff drainage  problems that  periodically  cause water damage to four
other units.

                                       -5-
<PAGE>

         In March 2000,  work  commenced to repair the buildings and improve the
surface  drainage  systems at a total cost of  approximately  $700,000  in 2000,
including  repairs  to the  interior  of  these  31  units,  with  an  estimated
completion  date at the end of May 2000.  These  costs will be funded in 2000 by
additional loans from an affiliate of the general partner which loaned Larchdale
$273,000  in 1999 for  completion  of the  exterior  cosmetic  improvements  and
preliminary  engineering and  construction  activity on the structural  building
problems.

         A dispute with the water utility  company was resolved with the utility
installing  a new water  meter  which  resulted  in  reduced  water  consumption
billings and lower utility costs in 1999.

         Rental  income  decreased by $67,169,  or 2.2%,  to  $3,056,851 in 1998
compared with $3,124,020 for 1997. This decrease was caused by several  factors,
including  lower  occupancy  related to a change in terms of tenancy wherein all
tenants are now responsible for an allocation of gas utility costs.

         Another  factor in the decreased  rental  revenue was the disruption to
the  property  caused by the  County's  widening  of the  street  leading to the
property. This street improvement, which was completed in February 1998, will be
a  benefit  in the  long  run by  improving  access  to the  property  with  the
installation  of a  traffic  signal  and  greater  visibility  for the  property
signage.

         Rental  delinquencies  increased  starting in the third quarter of 1997
and 1998 as a result of a slowdown by the County Sheriff in processing evictions
in the entire area during the winter months which also had a negative  impact on
rental revenue until the Sheriff catches up on the backlog of evictions starting
in the spring.

         A substantial  increase in billing for water  consumption has more than
offset the savings in gas utility costs.  The water billings are currently being
contested with the utility company.  The utility expense for the period reflects
the full amount billed by the water utility company.

         In 1995,  the county  enacted a solid waste service  charge on property
tax bills.  However, the county did not bill the charge for 1996, 1997, and 1998
until May 1998.  The  property  tax expense  reflects  this three year charge of
$81,530 that was paid in July 1998. An affiliate of the general partner advanced
$80,000 to the  Partnership  to provide the funds for payment of these  property
tax bills.

         Interest  expense  declined  in 1998 from 1997 as a result of the lower
interest rate on the  partnership's new financing which was obtained on February
28,  1997 and the payment of the  advances  due to an  affiliate  of the general
partner in September 1997.  Amortization expense in 1997 includes the expense of
writing  off  the  remaining   balance  of  loan  fees   originating   from  the
partnership's prior financing.

         As part of the refinancing,  funds were provided for the rehabilitation
of the property. Work was initiated on this project during the second quarter of
1997, including street,  driveway, and parking lot pavement,  additional parking
spaces,  concrete and brick repairs,  hallway carpeting and painting, and gutter
and  downspout   repairs.   This  phase  of  the  property   rehabilitation  was
substantially  completed by the end of 1997. Repairs and maintenance expenses in
1998 are partially offset by a gain of $105,000 from the settlement of a dispute
with the contractor who performed the property rehabilitation.

                                       -6-
<PAGE>

         Rental  income  decreased by $155,534,  or 4.7%,  to $3,124,020 in 1997
compared with $3,279,554 in 1996.  This decrease was caused by several  factors,
including  lower  occupancy  related to a change in terms of tenancy wherein all
tenants are now responsible  for an allocation of gas utility costs.  Tenant gas
utility  reimbursements  for 1997  amounted  to  $85,408  plus  gas  consumption
decreased by $61,556 which almost offset the decrease in rental income.

         Another  factor in the decreased  rental  revenue was the disruption to
the  property  caused by the  County's  widening  of the  street  leading to the
property. This street improvement, which was completed in February 1998, will be
a  benefit  in the  long  run by  improving  access  to the  property  with  the
installation  of a  traffic  signal  and  greater  visibility  for the  property
signage.

         Rental delinquencies increased starting in the third quarter of 1997 as
a result of a slowdown  by the County  Sheriff in  processing  evictions  in the
entire area which also had a negative impact on rental revenue.  The Sheriff has
caught up on the backlog and  evictions  in March 1998 are now  processed on the
normal timetable. Rental delinquencies have started to decline in 1998.

         Other income in 1997 includes  approximately $29,000 of interest income
on excess funds from the property refinancing that were invested on a short term
basis pending expenditure for the rehabilitation of the property.

         A  substantial  increase  in billing  for water  consumption  partially
offset the savings in gas utility costs.  The water billings are currently being
contested with the utility  company.  If the billings are upheld,  an additional
water utility charge may be incurred.

         Interest  expense  declined  in 1997 from 1996 as a result of the lower
interest rate on the  partnership's new financing which was obtained on February
28,  1997 and the payment of the  advances  due to an  affiliate  of the general
partner in September 1997.  Amortization expense includes the expense of writing
off the remaining balance of loan fees originating from the partnership's  prior
financing.

         As part of the refinancing,  funds were provided for the rehabilitation
of the property. Work was initiated on this project during the second quarter of
1997, including street,  driveway, and parking lot pavement,  additional parking
spaces,  concrete and brick repairs,  hallway carpeting and painting, and gutter
and  downspout   repairs.   This  phase  of  the  property   rehabilitation  was
substantially completed by the end of 1997.

         License  expenses in 1997  include the County  biannual  license fee of
$26,300.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
                  -------------------------------------------

         The Financial Statements and Schedules listed in the accompanying Index
to  Financial  Statements  are  incorporated  herein  and  filed as part of this
Report.

                                       -7-
<PAGE>

ITEM 9.           DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
                  ----------------------------------------------------

         None.

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS.
                  --------------------------------

         The registrant is a limited  partnership and has no executive  officers
or directors.  Effective  December 31, 1994, the general  partner is LMH Realty,
Inc., a California  corporation which is wholly owned by L. Mark  Hammerschmitt,
the President of Preferred Financial Corporation. The previous general partners,
Alex Gershunoff and Lawrence M. Silk, became limited partners of the partnership
with no management  authority for the  Partnership.  See Item 4. Alex Gershunoff
died on February 5, 1995.

ITEM 11.          EXECUTIVE COMPENSATION.
                  ----------------------

         None.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  --------------------------------------------------------------

         As of March 15, 2000, no person of record was known to the  Partnership
to own beneficially more than 5% of the outstanding units.

         The  Partnership  is a  limited  partnership  and  has no  officers  or
directors.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
                  ----------------------------------------------

         Affiliates of the  registrant's  General Partner  received certain fees
for services and financing provided to the Partnership.

         Concurrent with the purchase of the Property,  the Partnership  engaged
PFC to manage the Property and the affairs of the Partnership for a combined fee
of 6% of the gross rental receipts.  Management fees paid in 1997, 1998 and 1999
amounted  to  $193,197,  $189,050  and  $192,263  respectively.  PFC was further
reimbursed for accounting,  data processing, tax preparation services, and other
out-of-pocket expenses of $25,278 in 1997, $24,015 in 1998 and $37,298 in 1999.

                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                  REPORTS ON FORM 8-K.
                  -------------------------------------------

         (a) The financial  statements and schedules  listed in the accompanying
Index to Financial  Statements  and Schedules  are attached  hereto and filed as
part of this Report.

         (b) Exhibits:

         None.


                                       -8-
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements of Section 12 of the Securities  Exchange
Act of 1934,  the  Partnership  has duly  caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  March 31, 2000

                                  LARCHDALE OWNERSHIP COMPANY, LTD.


                                  By: /s/L.Mark Hammerschmitt
                                      --------------------------------
                                      L. Mark Hammerschmitt, President
                                      LMH REALTY, INC.
                                      GENERAL PARTNER



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report  has been  signed  below by the  following  person on behalf of the
Partnership in the capacity and on the date indicated.

SIGNATURE                                TITLE                    DATE
---------                              -----------              ----------



/s/L. Mark Hammerschmitt
------------------------
L. Mark Hammerschmitt, President
LMH Realty, Inc.                     General Partner           March 31, 2000









                                       -9-


<PAGE>

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

Financial Statements - Under Item 14(a)


Report of Cohen, Pagano & Associates,
 Certified Public Accountants                                              F-1

Balance Sheets - December 31, 1999 and 1998                                F-2


Statements of Operations - for the Years
Ended December 31, 1999, 1998 and 1997                                     F-3


Statement  of Changes in  Partners'  Capital
- for the Years Ended  December 31,
1999, 1998 and 1997                                                        F-4

Statement of Cash Flows - for the Years Ended
December 31, 1999, 1998 and 1997                                           F-5

Notes to Financial Statements -
December 31, 1999 and 1998                                                 F-6




Financial Statement Schedule - Under Item 14(a)

Schedule XI - Properties and Accumulated  Depreciation
- December 31, 1999, 1998 and 1997                                         F-10

All other  schedules  are  omitted,  since they are either not  required  or not
applicable, or the required information is set forth in the Financial Statements
or the related notes.


                                      -10-
<PAGE>

                         COHEN PAGANO ACCOUNTANCY, INC.
                          Certified Public Accountants
                        12100 Wilshire Blvd., Suite 645
                         Los Angeles, California 90025
                                 -------------
                              Tel: (310) 826-3400
                              Fax: (310) 826-3405


March 27, 2000

To the Partners
Larchdale Ownership Company, Ltd.
Woodland Hills, California

We have audited the accompanying  balance sheets of Larchdale Ownership Company,
Ltd., (A California Limited Partnership) as of December 31, 1999 and the related
statements of profit and loss, changes in partners' capital,  and cash flows for
the year then  ended.  These  financial  statements  are the  responsibility  of
Larchdale Ownership Company, Ltd.'s management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Larchdale  Ownership Company,
Ltd. as of December 31, 1999, and the results of its operations, its cash flows,
and its changes in partners'  capital for the year then ended in conformity with
generally accepted accounting principles.

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

/s/Cohen Pagano Accountancy

COHEN PAGANO ACCOUNTANCY
Certified Public Accountants
Los Angeles, California


                                      F-1
<PAGE>
<TABLE>
<CAPTION>


                                              LARCHDALE OWNERSHIP COMPANY, LTD.
                                             (A California Limited Partnership)
                                                       Balance Sheets

<S>                                                                       <C>                       <C>
                                                                                       DECEMBER 31,
                                                                          ------------------------------------
                                                                               1999                       1998
                                                                          ------------              -------------
                                                           ASSETS

PROPERTY AT COST - Notes 1 and 3
Land                                                                         $ 1,679,198              $  1,679,198
Buildings and improvements                                                    11,949,710                11,949,710
Furniture and fixtures                                                           410,845                   410,845
                                                                             -----------               -----------
                                                                              14,039,753                14,039,753
Less accumulated depreciation                                                 10,545,817                 9,882,405
                                                                             -----------               -----------
                                                                               3,493,936                 4,157,348


CASH - Note 2                                                                      1,276                    47,564

LOAN FEES -
net of accumulated amortization of
$102,723 at December 31, 1999 and
$66,466 at December 31, 1998                                                     259,830                   296,085

PREPAID EXPENSES AND OTHER ASSETS                                            $   276,333               $   258,882
                                                                             -----------               -----------
                                                                             $ 4,031,375               $ 4,759,879
                                                                             ===========               ===========


                                              LIABILITIES AND PARTNERS' CAPITAL

NOTE PAYABLE - Note 3                                                        $13,667,414               $13,797,082

ACCOUNTS PAYABLE AND ACCRUED
EXPENSES                                                                         389,345                   451,578

ADVANCE DUE TO AFFILIATE - Note 4                                                392,870                    80,000

TENANT SECURITY DEPOSITS                                                         121,157                   111,339

PARTNERS' CAPITAL (DEFICIT)                                                  (10,539,411)               (9,680,120)
                                                                             -----------               -----------
                                                                             $ 4,031,375               $ 4,759,879
                                                                             ===========               ===========




                    The accompanying notes are an integral part of the financial statements.

                                                      F-2
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                           LARCHDALE OWNERSHIP COMPANY, LTD.
                                           (A California Limited Partnership)
                                                Statements of Operations
                                            For The Years Ended December 31,

<S>                                                 <C>                         <C>                       <C>
                                                         1999                       1998                      1997
                                                     ------------               ------------              ------------
REVENUE

Rental income                                         $ 3,130,937                $ 3,056,851               $ 3,124,020
Other income                                               83,438                     91,262                   121,758
                                                     ------------                -----------               -----------
                                                        3,214,375                  3,148,113                 3,245,778
                                                      -----------                -----------               -----------

EXPENSES
      Interest                                          1,167,620                  1,138,835                 1,225,497
      Depreciation and amortization                       699,668                    699,668                   756,572
      Repairs and maintenance                             818,660                    383,531                 1,571,688
      Utilities                                           346,228                    423,632                   372,221
      Salaries and related expenses                       407,664                    334,596                   356,556
      Management and administrative fee                   193,263                    189,050                   193,187
      Property taxes                                      221,854                    290,665                   200,294
      Professional services                                85,390                     58,867                    56,977
      Insurance                                            54,653                     70,639                    77,924
      Administrative costs                                 30,368                     28,557                    50,239
      Advertising and promotion                            21,128                     16,856                    19,826
      Licenses                                             27,170                        500                    26,995
                                                       ----------                -----------              ------------
                                                        4,073,666                  3,635,396                 4,907,976

NET LOSS before gain
  on debt discount                                    $  (859,291)               $  (487,283)              $(1,662,198)
                                                      ===========                ===========               ===========

Gain on debt discount                                                                                        1,265,414
                                                      -----------                -----------               -----------

NET INCOME (LOSS)                                     $  (859,291)               $  (487,283)              $  (396,784)
                                                      ===========                ===========               ===========

Net loss per weighted number of
      limited partnership interests
      outstanding (35,371 in 1999,
      1998 AND 1997)                                  $       (24)               $       (14)              $       (11)
                                                      ===========                ===========               ===========







                       The accompanying notes are an integral part of the financial statements.

                                                          F-3
</TABLE>
<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                    Statement of Changes in Partners' Capital
              for the Years Ended December 31, 1999, 1998 and 1997

                                      Limited
                                      Partner
                                     Interests    Limited   General
                                    Outstanding  Partners  Partners    Total
                                      -------  ----------- --------  -----------

PARTNERS' CAPITAL BALANCE
December 31, 1996                     35,371   (8,730,395) (65,658)  (8,796,053)

NET LOSS for the year ended
December 31, 1997                                (396,744)     (40)    (396,784)
                                      -------  ----------- --------  -----------

PARTNERS' CAPITAL BALANCE
December 31, 1997                     35,371   (9,127,139) (65,698)  (9,192,837)

NET LOSS for the year ended
December 31, 1998                                (487,234)     (49)    (487,283)
                                      -------  ----------- --------  -----------

PARTNERS' CAPITAL BALANCE
December 31, 1998                     35,371   (9,614,373) (65,747)  (9,680,120)

NET LOSS for the year ended
December 31, 1999                                (859,205)     (86)    (859,291)
                                      ------   ----------  --------  -----------

PARTNERS' CAPITAL BALANCE
  December 31, 1999                   35,371  (10,473,578) (65,833) (10,539,411)
                                      ======   ==========  ========  ==========
















    The accompanying notes are an integral part of the financial statements.

                                      F-4
<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                            Statements of Cash Flows
                        For The Years Ended December 31,


                                       1999           1998            1997
                                   ------------   -----------     ------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from operations           $ (859,291)    $ (487,283)     $ (396,784)

Adjustments to reconcile net loss
to net cash provided (used) by
operating activities
Depreciation and amortization         699,668        699,668         756,572
(Increase) decrease in:
Prepaid expenses and other assets     (17,451)        27,341        (173,856)
Increase (decrease) in:
Accounts payable and accrued expenses (62,234)      (188,384)        118,082
Accrued interest to affiliate          39,870                       (379,618)
                                   ------------   -----------     ------------
Net cash provided (used) by
operating activities                 (199,438)        51,342         (75,604)



CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in note payable  (129,668)      (119,494)        742,310

Advance due to affiliate              273,000         80,000        (664,596)
Increase (decrease) in tenant
security deposits                       9,818          5,074          10,488
                                   ------------   -----------     ------------

Net cash provided (used) by financing
activities                            153,150        (34,420)         88,202
                                   ------------   -----------     ------------

Net increase (decrease) in cash       (46,288)        16,922          12,598
Cash beginning of year                 47,564         30,642          18,044
                                   ------------   -----------     ------------

Cash at end of year                $    1,276   $     47,564    $     30,642
                                   ============   ===========     ============








    The accompanying notes are an integral part of the financial statements.

                                      F-5
<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION
------------

Larchdale  Ownership Company,  Ltd. (the Partnership) was formed as a California
limited  partnership on June 13, 1984.  Effective December 31, 1994, the general
partner is LMH Realty, Inc., which is wholly owned by L. Mark Hammerschmitt, the
President  of  Preferred  Financial  Corporation  (PFC).  The  previous  general
partners became limited partners of the Partnership.  The Partnership was formed
to  acquire,   on  June  28,  1984,  a  526-unit  garden  apartment  project  on
approximately forty acres in Laurel, Maryland, known as Larchdale Woods.

The term of the Partnership is 31 years,  but it may be dissolved  earlier under
certain  circumstances.  The partners  share in operating  profits and losses in
proportion to their respective capital contributions.  Any proceeds arising from
the sale or  refinancing of the  Partnership  property that are in excess of the
limited  partners'  initial  capital   contributions,   plus  a  12%  per  annum
noncompounded  cumulative return,  will be allocated 25% to the general partners
and 75% to the limited partners.

DEPRECIATION AND AMORTIZATION
-----------------------------

Depreciation  is provided  using the  straight-line  method  over the  estimated
useful lives of the related assets as follows:

         Building and improvements - 18 Years

         Furniture and fixtures - 5 Years

Loan fees are amortized over the life of the related loan.

NOTE 2 - CASH

The Partnership  participates in a consolidated cash account administered by PFC
to receive and hold cash from various  entities it manages and controls in order
to make  disbursements  on behalf of these  entities.  Amounts so  received  are
accounted for separately,  although PFC does not maintain separate bank accounts
for the various companies.

                                      F-6
<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                           December 31, 1999 and 1998

NOTE 3 - NOTE PAYABLE SECURED BY REAL PROPERTY

On November 10, 1986, the Partnership refinanced the property by obtaining a new
loan of $12,750,000 from an institutional  third-party lender secured by a first
trust deed on the  property.  The note bore  interest at a variable  rate of 225
basis points over the 11th District Federal Home Loan Bank Cost of Funds, with a
floor of 10% and maximum of 15% and was due December 1, 1998.

In May 1992, the  Partnership  completed a modification  of the payment terms of
the loan for a one year  period  commencing  with the  payment due in January 1,
1992. Under the terms of the  modification,  monthly interest only payments were
made at the reduced rate of 5%, with the difference between interest at the full
rate and the reduced payment rate added to the principal  amount of the loan. In
addition,  payments for property taxes were impounded by the lender on a monthly
basis.  After the end of the modification  period,  the Partnership made partial
monthly  payments  until April 6, 1993 when  payment in full of past due amounts
was made and the loan reverted to its unmodified terms.

In May 1994, the Partnership completed a second modification of the loan payment
terms for a one year period  commencing on November 1, 1993.  Under the terms of
the second modification, monthly interest only payments were paid at the reduced
rate of 9%, with the difference between interest at the full rate of 10% and the
reduced  payment rate added to the  principal  amount of the loan.  In addition,
payments for property taxes were impounded by the lender on a monthly basis.  In
March 1995, the  modification  was extended for a one year period  commencing on
November 1, 1994.

Starting with the payment due on November 1, 1995, the modification  expired and
monthly  payments at the full rate of 10% per annum plus principal  amortization
were  required  under  the  original  terms of the  note.  However,  the  lender
continued to bill the Partnership  under the terms of the  modification  and the
Partnership paid the amounts as billed. The Partnership  contacted the lender in
September 1996 to initiate  negotiations to resolve the billing  disparity which
had  accumulated to $281,000 and the problems of the property taxes due starting
in September  1996 and the deferred  maintenance  of the  property.  In November
1996, the Partnership and the lender entered into a forbearance  agreement under
which the Partnership agreed to make full monthly payments of $124,031 beginning
November 1, 1996 and the lender agreed to forestall any foreclosure  proceedings
while negotiations continued.

                                      F-7

<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                           December 31, 1999 and 1998

NOTE 3 - NOTE PAYABLE SECURED BY REAL PROPERTY (CONTINUED)


In December 1996, the lender agreed to accept  $11,800,000 as payment in full on
its loan under the  conditions,  among others,  that payment be received  before
April 15, 1997,  that the property taxes be paid, and that the loan be purchased
by a third party  independent  of the  Partnership.  The loan payoff  amount was
reduced by the  principal  portion of the monthly  payments made from January 1,
1997 through the purchase date. The property taxes were paid by the  Partnership
in December 1996.

On February 28, 1997, the Partnership  completed the refinancing of the property
and paid off the  existing  loan which had a balance  at closing of  $13,248,725
with a cash payment of $11,767,496.  The Partnership  paid a fee of $50,000 to a
third party to purchase the existing loan from the lender and subsequently  sell
the loan to the Partnership, a referral fee of 25,214 to a consultant, and a fee
of $140,602 to the general partner, LMH Realty, Inc. for services related to the
loan discount.  The  Partnership  recognized the remaining gain of $1,265,414 in
1997.

The loan was purchased and the refinancing  completed with funds from a new loan
to the  Partnership  of $14,000,000 at 8.20% per annum maturing on March 1, 2007
with monthly principal and interest  payments of $104,686.  The Partnership paid
fees to the lender and loan broker of  $280,000,  loan costs,  title  insurance,
transfer  taxes and  recording  fees of  $50,996,  and  estimated  legal fees of
$25,000.  The new  loan  provided  for  reserves  for the  initial  two  monthly
payments,  property  taxes and  insurance.  In  addition,  the new lender held a
reserve of $493,000 for deferred property maintenance items.

In September  1997, the  Partnership  completed the payoff of advances due to an
affiliate of the general partner of $664,596 plus accrued  interest of $430,295.
(See Note 4).

NOTE 4 - ADVANCE DUE TO AFFILIATE

Starting  at  the  end  of  1990  and  continuing  through  January,  1995,  the
Partnership has borrowed funds from an affiliate of the general partners to meet
operating  capital needs. On September 12, 1997 these advances totalled $664,596
plus interest  accrued at 12% of $430,295 and were paid utilizing funds from the
refinancing of the property. (See Note 3).

In 1995,  the County enacted a solid waste service charge on property tax bills.
However,  the County  did not bill the charge for 1996,  1997 and 1998 until May
1998. The  Partnership  paid this charge of $81,530 in July 1998 utilizing funds
from a $80,000 loan from an affiliate of the general partner.

                                      F-8
<PAGE>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                           December 31, 1999 and 1998

NOTE 4 - ADVANCE DUE TO AFFILIATE (CONTINUED)

In 1999 an additional  $273,000 was loaned to the Partnership by an affiliate of
the  general  partner  for  completion  of exterior  cosmetic  improvements  and
preliminary   engineering  and  construction  activity  on  structural  building
problems  affecting  several  buildings  involving  27 of the 526  units  in the
apartment  complex.  Accrual  interest  on these  advances  totalled  $39,870 at
December 31, 1999.

NOTE 5 - INCOME TAXES

Under  provisions of the Internal  Revenue Code and the  California  Revenue and
Taxation Code,  partnerships  are not subject to income taxes;  however they are
subject to a minimum  California  tax. As the minimum  tax is not  material,  no
provision  have  been  made  for  such  taxes  in  the  accompanying   financial
statements.  For income tax reporting purposes,  income or loss is includable in
the tax returns of the individual partners.

The net loss reported for financial  reporting  purposes is different  from that
reported for income tax purposes, as shown below:

                                                     1999              1998
                                                  ------------      -----------

Net loss for financial reporting purposes         $   859,291       $   487,283
Tax depreciation difference                          (173,248)         (173,248)
Interest                                              (39,870)
                                                  -----------       -----------

Net loss for income tax reporting purposes        $   646,173       $   314,035


NOTE 6 - RELATED PARTY TRANSACTIONS

Concurrent  with the purchase of the property,  the  Partnership  engaged PFC to
manage the property and the affairs of the  Partnership for a combined fee of 6%
of the gross  rental  receipts.  Management  fees paid or  accrued  amounted  to
$193,263 in 1999, $189,050 in 1998, and $193,197 in 1997.  Professional  service
expenses  include  $37,298 in 1999,  $24,015 in 1998 and $25,278 in 1997 paid to
PFC for accounting, data processing, tax services and out-of-pocket expenses.

                                      F-9
<PAGE>
<TABLE>
<CAPTION>

                        LARCHDALE OWNERSHIP COMPANY, LTD.
                       (A California Limited Partnership)
              SCHEDULE XI - PROPERTIES AND ACCUMULATED DEPRECIATION
              for the Years Ended December 31, 1999, 1998 and 1997


<S>                                                 <C>                 <C>               <C>                  <C>
                                                                           Buildings         Furniture
                                                                              and               and
                                                          Land            Improvements        Fixtures             Total
                                                       ----------         ------------        --------          -----------

COST

Balance at December 31, 1996                          $ 1,679,198          $11,949,710       $ 410,845          $14,039,753
Additions during the year
                                                    -------------       --------------     -----------       --------------
Balance at December 31, 1997                            1,679,198           11,949,710         410,845           14,039,753
Additions during the year
                                                    -------------       --------------     -----------       --------------
Balance at December 31, 1998                            1,679,198           11,949,710         410,845           14,039,753
Additions during the year
                                                    -------------       --------------     -----------       --------------
Balance at december 31, 1999                            1,679,198           11,949,710         410,845           14,039,753
                                                    =============       ==============     ===========       ==============


ACCUMULATED DEPRECIATION

Balance at December 31, 1996                                                 8,144,736         410,845            8,555,581
Add depreciation charged to expense
  during the year                                                              663,412                              663,412
                                                                        --------------     -----------       --------------
Balance at December 31, 1997                                                 8,808,148         410,845            9,218,993
Add depreciation charged to expense
  during the year                                                              663,412                              663,412
                                                                        --------------     -----------       --------------
Balance at December 31, 1998                                                 9,471,560         410,845            9,882,405
Add depreciation charged to expense
  during the year                                                              663,412                              663,412
                                                                        --------------     -----------       --------------
Balance At December 31, 1999                                                10,134,972         410,845           10,545,817
                                                                        --------------     -----------       --------------

Net Book Value At December 31, 1999                   $ 1,679,198           $1,814,738         $    -0-         $ 3,493,936
                                                    =============       ==============     ===========       ==============



                                      F-10

</TABLE>