<PAGE>
















                           AMERICAN INCOME PARTNERS V


















                American Income Partners V-B Limited Partnership


                Annual Report to the Partners, December 31, 1998





<PAGE>






                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                     INDEX TO ANNUAL REPORT TO THE PARTNERS

<TABLE>
<CAPTION>

                                                                                                                      Page 
                                                                                                                      ---- 


<S>                                                                                                                   <C>
SELECTED FINANCIAL DATA                                                                                                  2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                                                                    3-9


FINANCIAL STATEMENTS:

Report of Independent Auditors                                                                                          10

Statement of Financial Position
at December 31, 1998 and 1997                                                                                           11

Statement of Operations
for the years ended December 31, 1998, 1997 and 1996                                                                    12

Statement of Changes in Partners' Capital
for the years ended December 31, 1998, 1997 and 1996                                                                    13

Statement of Cash Flows
for the years ended December 31, 1998, 1997 and 1996                                                                    14

Notes to the Financial Statements                                                                                    15-27



ADDITIONAL FINANCIAL INFORMATION:

Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed                                                                                 28

Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings                                                                                 29

Schedule of Costs Reimbursed to the General
Partner and its Affiliates as Required by
Section 10.4 of the Amended and Restated
Agreement and Certificate of Limited Partnership                                                                        30
</TABLE>



<PAGE>

                             SELECTED FINANCIAL DATA


     The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements.

     For each of the five years in the period ended December 31, 1998:


<TABLE>
<CAPTION>
         SUMMARY OF
         OPERATIONS                   1998                1997               1996                1995                1994
-----------------------------    --------------      --------------     --------------      ---------------     ---------

<S>                              <C>                 <C>                <C>                 <C>                 <C>           
Lease revenue                    $    1,323,344      $    3,033,098     $    2,823,191      $     3,901,359     $    9,280,336

Net income                       $      580,743      $      717,643     $      710,319      $       458,868     $    2,878,380

Per Unit:
     Net income                  $         0.36      $         0.44     $         0.44      $          0.28     $         1.77

     Cash distributions          $         0.53      $         0.66     $         2.42      $          2.50     $         2.50


     FINANCIAL POSITION
-----------------------------

Total assets                     $    8,089,683      $    5,715,354     $    7,289,920      $    11,486,422     $   15,848,219

Total long-term obligations      $           --      $       24,608     $      707,842      $     1,157,906     $    1,858,684

Partners' capital                $    5,326,675      $    5,385,006     $    5,953,024      $     9,177,708     $   12,792,340
</TABLE>

                                       2


<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                Year ended December 31, 1998 compared to the year
          ended December 31, 1997 and the year ended December 31, 1997
                  compared to the year ended December 31, 1996


     Certain statements in this annual report of American Income Partner's V-B
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
outcome of the Class Action Lawsuit described in Note 7 to the accompanying
financial statements, the collection of all rents due under the Partnership's
lease agreements and the remarketing of the Partnership's equipment.

YEAR 2000 ISSUE

     The Year 2000 Issue generally refers to the capacity of computer
programming logic to correctly identify the calendar year. Many companies
utilize computer programs or hardware with date sensitive software or embedded
chips that could interpret dates ending in "00" as the year 1900 rather than the
year 2000. In certain cases, such errors could result in system failures or
miscalculations that disrupt the operations of the affected businesses. The
Partnership uses information systems provided by EFG and has no information
systems of its own. EFG has adopted a plan to address the Year 2000 Issue that
consists of four phases: assessment, remediation, testing, and implementation
and has elected to utilize principally internal resources to perform all phases.
EFG completed substantially all of its Year 2000 project by December 31, 1998 at
an aggregate cost of less than $50,000 and at a di minimus cost to the
Partnership. Remaining items are expected to be minor and be completed by March
31, 1999. All costs incurred in connection with EFG's Year 2000 project have
been expensed as incurred.

     EFG's primary information software was coded by IBM at the point of
original design to use a four digit field to identify calendar year. All of the
Partnership's lease billings, cash receipts and equipment remarketing processes
are performed using this proprietary software. In addition, EFG has gathered
information about the Year 2000 readiness of significant vendors and third party
servicers and continues to monitor developments in this area. All of EFG's
peripheral computer technologies, such as its network operating system and
third-party software applications, including payroll, depreciation processing,
and electronic banking, have been evaluated for potential programming changes
and have required only minor modifications to function properly with respect to
dates in the year 2000 and thereafter. EFG understands that each of its and the
Partnership's significant vendors and third-party servicers are in the process,
or have completed the process, of making their systems Year 2000 compliant.
Substantially all parties queried have indicated that their systems would be
Year 2000 compliant by the end of 1998.

     Presently, EFG is not aware of any outside customer with a Year 2000 Issue
that would have a material effect on the Partnership's results of operations,
liquidity, or financial position. The Partnership's equipment leases were
structured as triple net leases, meaning that the lessees are responsible for,
among other things, (i) maintaining and servicing all equipment during the lease
term, (ii) ensuring that all equipment functions properly and is returned in
good condition, normal wear and tear excepted, and (iii) insuring the assets
against casualty and other events of loss. Non-compliance with lease terms on
the part of a lessee, including failure to address Year 2000 Issues, could
result in lost revenues and impairment of residual values of the Partnership's
equipment assets under a worst-case scenario.

     EFG believes that its Year 2000 compliance plan will be effective in
resolving all material Year 2000 risks in a timely manner and that the Year 2000
Issue will not pose significant operational problems with respect to its
computer systems or result in a system failure or disruption of its or the
Partnership's business operations. However, EFG has no means of ensuring that
all customers, vendors and third-party servicers will conform ultimately to Year
2000 standards. The effect of this risk to the Partnership is not determinable.

                                       3


<PAGE>

OVERVIEW

     The Partnership was organized in 1989 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. The value of the Partnership's equipment
portfolio decreases over time due to depreciation resulting from age and usage
of the equipment, as well as technological changes and other market factors. In
addition, the Partnership does not replace equipment as it is sold; therefore,
its aggregate investment value in equipment declines from asset disposals
occurring in the normal course of business. Presently, the Partnership is a
Nominal Defendant in a Class Action Lawsuit, the outcome of which could
significantly alter the nature of the Partnership's organization and its future
business operations. See Note 7 to the accompanying financial statements.
Pursuant to the Restated Agreement, as amended, the Partnership is scheduled to
be dissolved by December 31, 2000.

RESULTS OF OPERATIONS

     For the year ended December 31, 1998, the Partnership recognized lease
revenue of $1,323,344 compared to $3,033,098 and $2,823,191 for the years ended
December 31, 1997 and 1996, respectively. The decrease in lease revenue from
1997 to 1998 was expected and resulted principally from lease term expirations
and the sale of equipment. The increase in lease revenue from 1996 to 1997
reflects the receipt in 1997 of prepaid contractual rental obligations of
$1,142,614 associated with the exchange of the Partnership's interest in a
vessel (see discussion below). Lease revenue in 1996 included the receipt of
lease termination rents of $265,796 received in connection with the sale of the
Partnership's interest in two Boeing 727-Advanced aircraft in July 1996 (see
below).

     The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enabled the Partnership to
further diversify its equipment portfolio at inception by participating in the
ownership of selected assets, thereby reducing the general levels of risk which
could have resulted from a concentration in any single equipment type, industry
or lessee. The Partnership and each affiliate individually report, in proportion
to their respective ownership interests, their respective shares of assets,
liabilities, revenues, and expenses associated with the equipment.

     Interest income for the year ended December 31, 1998 was $267,765 compared
to $138,683 and $178,642 for the years ended December 31, 1997 and 1996,
respectively. Interest income is typically generated from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments.
Interest income in 1998 and 1997 included $88,884 and 17,530, respectively,
earned on a note receivable from Semele Group, Inc. (formerly Banyan Strategic
Land Fund II) ("Semele") (see below and Note 4 to the financial statements
herein). The amount of future interest income is expected to fluctuate in
relation to prevailing interest rates, the collection of lease revenue and the
proceeds from equipment sales.

     In 1998, the Partnership sold equipment having a net book value of $873,626
to existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $775,111 compared to a net gain in 1997 of
$138,167 on equipment having a net book value of $21,692. During 1997, the
Partnership also exchanged its interest in a vessel with an original cost and
net book value of $4,205,030 and $1,597,566, respectively. In connection with
this transaction, the Partnership realized proceeds of $1,183,401, which
resulted in a net loss for financial statement purposes of $414,165. In
addition, as this vessel was disposed of prior to the expiration of the related
lease term, the Partnership received a prepayment of the remaining contracted
rent due under the vessel's lease agreement, as described above.

     On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by Gearbulk Shipowning Ltd
(formerly Kristian Gerhard Jebsen Skipsrederi A/S) (the "Lessee"), exchanged
their ownership interests in the Vessels for aggregate consideration of
$11,565,375, consisting of 1,987,000 newly issued shares (at $1.50 per share) of
common stock in Semele, a purchase money note of $8,219,500 (the "Note") and
cash of $365,375. Semele is a Delaware corporation organized on April 14, 1987
and has its common stock listed on NASDAQ (NASDAQ SmallCap Market 


                                       4
<PAGE>

effective January 5, 1999). At the date of the exchange transaction, the common
stock of Semele had a net book value of approximately $1.50 per share and
closing market value of $1.00 per share. Semele has one principal real estate
asset consisting of an undeveloped 274 acre parcel of land near Malibu,
California ("Rancho Malibu").

     The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Semele and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Semele or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May 6,
1997 and May 12, 1997. The Note was repaid with $3,800,000 of cash and delivery
of a $4,419,500 note from Semele (the "Semele Note").

     As a result of the exchange transaction and its original 53.54% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $847,080 in cash, became the beneficial owner of 393,394 shares of
Semele common stock (valued at $590,091 ($1.50 per share) at the time of the
exchange transaction) and received a beneficial interest in the Semele Note of
$888,844. The Semele Note bears an annual interest rate of 10% and will be
amortized over three years with mandatory principal reductions, if and to the
extent that net proceeds are received by Semele from the sale or refinancing of
Rancho Malibu.

     Cash equal to the amount of the Semele Note was placed in escrow for the
benefit of Semele in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Semele agreed to
seek consent ("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Semele's net operating loss
carry-forwards, and (3) engage EFG to provide administrative services to Semele,
which services EFG will provide at cost. On October 21, 1997, such Consent was
obtained from Semele's shareholders. The Consent also allowed for (i) the
election of a new Board of Directors nominated by EFG for terms of up to three
years and an increase in the size of the Board to as many as nine members,
provided a majority of the Board shall consist of members independent of Semele,
EFG or any affiliate; and (ii) an amendment extending Semele's life to perpetual
and changing its name from Banyan Strategic Land Fund II. Contemporaneously with
the Consent being obtained, Semele declared a $0.20 per share dividend to be
paid on all shares, including those beneficially owned by the Partnership. A
dividend of $78,679 was paid to the Partnership on November 17, 1997. This
dividend represented a return of equity to the Partnership, which
proportionately reduced the Partnership's investment in Semele.

     In 1996, the Partnership sold equipment having a net book value of $664,268
to existing lessees and third parties. These sales resulted in a net gain, for
financial statement purposes, of $875,782. These equipment sales included the
sale of the Partnership's interest in two Boeing 727-Advanced jet aircraft with
an original cost and net book value of $2,404,163 and $431,852, respectively,
which the Partnership sold to the existing lessee in July 1996. In connection
with these sales, the Partnership realized sale proceeds of $615,218, which
resulted in a net gain, for financial statement purposes, of $183,366. This
equipment was sold prior to the expiration of the related lease term. The
Partnership also realized lease termination rents in connection with the sale of
its interests in these aircraft, as described above. In addition, cash
consideration of $62,539 (classified as Contractual Right for Equipment at
December 31, 1995) was recognized as proceeds from equipment sales in 1996 and
the Partnership recognized the related gain, for financial statement purposes,
of $31,546, which had been deferred at December 31, 1995.

     It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG 


                                       5
<PAGE>

attempts to monitor these changes in order to identify opportunities which may
be advantageous to the Partnership and which will maximize total cash returns
for each asset.

     The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership classifies
such residual rental payments as lease revenue. Consequently, the amount of gain
or loss reported in the financial statements is not necessarily indicative of
the total residual value the Partnership achieved from leasing the equipment.

     Depreciation expense was $512,339, $1,461,252, and $2,024,625 for the years
ended December 31, 1998, 1997 and 1996, respectively. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the
Partnership depreciates the difference between (i) the cost of the asset and
(ii) the estimated residual value of the asset on a straight-line basis over
such term. For purposes of this policy, estimated residual values represent
estimates of equipment values at the date of primary lease expiration. To the
extent that an asset is held beyond its primary lease term, the Partnership
continues to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.

     Interest expense was $24,825 or less than 1% of lease revenue in 1997 and
$76,800, or 2.7% of lease revenue in 1996. The Partnership's notes payable were
fully amortized by non-cancelable rents at January 1, 1998.

     Management fees were approximately 4.9%, 5.0% and 5.1% of lease revenue
during the years ended December 31, 1998, 1997 and 1996, respectively.
Management fees for the year ended December 31, 1996 included $7,780, resulting
from an under accrual in 1995. Management fees are based on 5% of gross lease
revenue generated by operating leases and 2% of gross lease revenue generated by
full payout leases.

     Write-down of investment securities-affiliate was $349,139 for the year 
ended December 31, 1998. The General Partner determined that the decline in 
market value of the Semele common stock was other-than-temporary at December 
31, 1998. As a result, the Partnership wrote down the cost of the Semele 
common stock from $15 per share to $4.125 per share (the quoted price of 
Semele stock on NASDAQ at December 31, 1998).

     Operating expenses were $859,244, $541,774 and $953,258 for the years ended
December 31, 1998, 1997 and 1996, respectively. During the year ended December
31, 1998, the Partnership incurred or accrued approximately $319,400 for certain
legal and administrative expenses related to the Class Action Lawsuit described
in Note 7 to the financial statements. In addition, the Partnership expensed
$224,400 in 1998 related to the refurbishment of an aircraft engine and engine
leasing costs (see Notes 3 and 7 to the financial statements). Significant
operating expenses were incurred during the years ending December 31, 1997 and
1996 due to heavy maintenance costs incurred in connection with the
Partnership's interests in two Boeing 727 aircraft. In 1996, the Partnership
entered into a new 36 month lease agreement with Sunworld International
Airlines, Inc. to re-lease one of the aircraft at a base rent to the Partnership
of $39,000 per month. The second aircraft was re-leased to Transmeridian
Airlines beginning April 1997 at a base rent to the Partnership of $48,000 per
month for 8 months and $42,000 per month for 10 months. Other operating expenses
consist principally of administrative charges, professional service costs, such
as audit and other legal fees, as well as printing, distribution and other
remarketing expenses. In certain cases, equipment storage or repairs and
maintenance costs may be incurred in connection with equipment being remarketed.

LIQUIDITY AND CAPITAL RESOURCES AND DISCUSSION OF CASH FLOWS

     The Partnership by its nature is a limited life entity. As an equipment
leasing program, the Partnership's principal operating activities derive from
asset rental transactions. Accordingly, the Partnership's principal source of
cash from operations is generally provided by the collection of periodic rents.
These cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated net cash inflows of $1,187,218, $2,430,133 and $1,781,983
in 1998, 1997 and 1996, respectively. Net cash from operating activities in both
1997 and 1996 included lease termination rents as described above. Future
renewal, re-lease and equipment sale activities will cause a decline in the
Partnership's lease revenue and corresponding sources of operating cash.
Overall, expenses associated with rental activities, such as management fees,
and net cash flow from operating activities will also decline as the Partnership
experiences a higher frequency of remarketing events.


                                       6
<PAGE>

     Cash expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During the year ended December 31, 1998,
the Partnership realized net cash proceeds of $1,648,737 compared to $159,858
and $1,602,589 in 1997 and 1996, respectively. Future inflows of cash from asset
disposals will vary in timing and amount and will be influenced by many factors
including, but not limited to, the frequency and timing of lease expirations,
the type of equipment being sold, its condition and age, and future market
conditions. During the year ended December 31, 1996, the Partnership expended
$657,000 to replace certain aircraft engines to facilitate the re-lease of an
aircraft, in which the Partnership had an ownership interest, to Transmeridian
Airlines (as discussed above). There were no equipment acquisitions during 1998
or 1997.

     In November 1998, the Partnership and certain affiliated investment
programs (collectively, the "Programs") entered into an agreement to sell their
ownership interests in a Boeing 727-251 ADV aircraft and three engines
(collectively the "Aircraft") to a third party (the "Purchaser"). The Programs
will receive gross sale proceeds of $4,350,000. Previously, the Aircraft had
been leased to Transmeridian Airlines ("Transmeridian"). In December 1998, the
Purchaser remitted $3,350,000 for the Aircraft, excluding one of three engines
which had been damaged while the Aircraft was leased to Transmeridian. (See Note
7 regarding legal action undertaken by the Programs related to Transmeridian and
the damaged engine). The Purchaser also deposited $1,000,000 into a third-party
escrow account (the "Escrow") pending repair of the damaged engine and
re-installation of the refurbished engine on the Aircraft. Upon installation,
the escrow agent will transfer the Escrow amount plus interest thereon to the
Programs. Currently, the engine is being refurbished at the expense of the
Programs. The associated cost is estimated to be approximately $260,000, of
which the Partnership's share is approximately $156,000. All of the
Partnership's costs were accrued at December 31, 1998 in connection with the
Partnership's legal action against Transmeridian discussed in Note 7.

     The Programs also are required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine is being
repaired. This cost is expected to be approximately $114,000, of which the
Partnership's share is $68,400, all of which has been accrued in 1998 in
connection with the litigation referenced above. If the engine repair and
re-installation do not occur on or before May 11, 1999, the Escrow plus all
interest thereon will be returned to the Purchaser and the Programs' obligation
to pay for the cost of a substitute engine will be terminated.

     In addition, the purchase and sale agreement permits the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. In
addition, the Escrow funds must have been released to the Programs, assuming the
repaired engine is reinstalled on the Aircraft by May 11, 1999. The Purchaser's
return option expires on May 15, 1999.

     Due to the contingent nature of the sale, the Partnership has deferred
recognition of the sale and a resulting gain at December 31, 1998 until
expiration of the Purchaser's return option on May 15, 1999. The Partnership's
share of the December proceeds was $2,010,000, which amount was deposited into
EFG's customary escrow account and transferred to the Partnership, together with
the Partnership's other December rental receipts, in January 1999. At December
31, 1998, the entire amount was classified as accounts receivable affiliate,
with an equal amount reflected in other liabilities on the accompanying
Statement of Financial Position. The remainder of the sale consideration, or
$1,000,000, will be paid to the Programs upon release of the Escrow discussed
above. The Partnership's share of this payment will be $600,000. Based upon
current information, the Partnership expects to recognize a gain for financial
reporting purposes of approximately $2,610,000 in connection with this
transaction. The Partnership's interest in the Aircraft had a cost of $6,484,110
and was fully depreciated at December 31, 1998.

     Pursuant to a purchase option contained in the lease agreement, the lessee,
Sunworld International Airlines, Inc., purchased the Partnership's interest in a
Boeing 727-251 ADV aircraft for approximately $1,470,000 in January 1999, at the
expiration of the existing lease term (see Note 8 Subsequent Event for
additional discussion).


                                       7
<PAGE>

     At December 31, 1998, the Partnership was due aggregate future minimum
lease payments of $200,684 from contractual lease agreements (see Note 2 to the
financial statements). At the expiration of the individual lease terms
underlying the Partnership's future minimum lease payments, the Partnership will
sell the equipment or enter re-lease or renewal agreements when considered
advantageous by the General Partner and EFG. Such future remarketing activities
will result in the realization of additional cash inflows in the form of
equipment sale proceeds or rents from renewals and re-leases, the timing and
extent of which cannot be predicted with certainty. This is because the timing
and extent of remarketing events often is dependent upon the needs and interests
of the existing lessees. Some lessees may choose to renew their lease contracts,
while others may elect to return the equipment. In the latter instances, the
equipment could be re-leased to another lessee or sold to a third party.
Accordingly, as the terms of the currently existing contractual lease agreements
expire, the cash flows of the Partnership will become less predictable. In
addition, the Partnership will need cash outflows to pay management fees and
operating expenses.

     As a result of the vessel exchange (see Results of Operations), the
Partnership became the beneficial owner of 393,394 shares of Semele common stock
(valued at $590,091 ($1.50 per share) at the time of the exchange transaction).
This investment was reduced by a dividend of $78,679 received in November 1997
representing a return of equity to the Partnership. The Partnership also
received a beneficial interest in the Semele Note of $888,844 in connection with
the exchange.

     On June 30, 1998, Semele effected a 1-for-300 reverse stock split 
followed by a 30-for-1 forward stock split resulting in a reduction of the 
number of shares of Semele common stock owned by the Partnership to 39,339 
Shares.In accordance with the Financial Accounting Standard Board's Statement 
No. 115, Accounting for Certain Investments in Debt and Equity Securities, 
marketable equity securities classified as available-for-sale are required to 
be carried at fair value. During the year December 31, 1998, the Partnership 
decreased the carrying value of its investment in Semele common stock to 
$4.125 per share (the quoted price of the Semele stock on NASDAQ at December 
31, 1998) resulting in an unrealized loss in 1998 of $132,773. In 1997, the 
Partnership recorded an unrealized loss of $216,366 relate to its investment 
in the Semele common stock. Each of these losses was reported as a component 
of comprehensive income, included in partners' capital. At December 31, 1998, 
the General Partner determined that the decline in market value of the Semele 
common stock was other-than-temporary. As a result, the Partnership wrote 
down the cost of the Semele common stock to $4.125 per share (the quoted 
price of the Semele stock on NASDAQ at December 31, 1998) for a total 
realized loss of $349,139 in 1998.

     The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities. The Partnership's notes payable
were fully amortized at January 1, 1998.

     There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets. In particular,
the Partnership's ownership interests in commercial aircraft involve unique
risks resulting from the specialized nature of these assets and the potential
for the Partnership to incur significant remarketing costs at lease expiration.
Accordingly, the General Partner has maintained significant cash reserves within
the Partnership in order to minimize the risk of a liquidity shortage primarily
in connection with the Partnership's aircraft. At December 31, 1998, the
Partnership owned interests in two Boeing 727 aircraft, one of which was under
contract to be sold to a third party buyer subject to the buyer's right to
return the aircraft on or before May 15, 1999. See Notes 3 and 7 of the
accompanying financial statements concerning this aircraft. See also Note 8 of
the accompanying financial statements concerning the sale of the second aircraft
in January 1999.

     In addition, the Partnership is a Nominal Defendant in a Class Action
Lawsuit described in Note 7 to the accompanying financial statements. A
preliminary settlement agreement will allow the Partnership to invest in new


                                       8
<PAGE>

equipment or other activities, subject to certain limitations, effective March
22, 1999. To the extent that the Partnership has exposure to aircraft
investments that could require capital reserves, the General Partner does not
anticipate that the Partnership will invest in new assets, regardless of its
authority to do so. Until the Class Action Lawsuit is adjudicated, the General
Partner does not expect that the level of future quarterly cash distributions
paid by the Partnership will be increased above amounts paid in the fourth
quarter of 1998. In addition, the proposed settlement, if effected, will
materially change the future organizational structure and business interests of
the Partnership, as well as its cash distribution policies. See Note 7 to the
accompanying financial statements.

     Cash distributions to the General Partner and Recognized Owners are
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is presented as a component
of financing activities. For the year ended December 31, 1998, the Partnership
declared total cash distributions of $855,440. In accordance with the Restated
Agreement, as amended, the Recognized Owners were allocated 95% of these
distributions, or $812,668, and the General Partner was allocated 5%, or
$42,772. The fourth quarter 1998 cash distribution was paid on January 15, 1999.

     Cash distributions paid to the Recognized Owners consist of both a return
of and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date.

     The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing treatments
of income and expense items for income tax purposes in comparison to financial
reporting purposes (generally referred to as permanent or timing differences;
see Note 6 to the accompanying financial statements). For instance, selling
commissions, organization and offering costs pertaining to syndication of the
Partnership's limited partnership units are not deductible for federal income
tax purposes, but are recorded as a reduction of partners' capital for financial
reporting purposes. Therefore, such differences are permanent differences
between capital accounts for financial reporting and federal income tax
purposes. Other differences between the bases of capital accounts for federal
income tax and financial reporting purposes occur due to timing differences.
Such items consist of the cumulative difference between income or loss for tax
purposes and financial statement income or loss, the difference between
distributions (declared vs. paid) for income tax and financial reporting
purposes, and the treatment of unrealized gains or losses on investment
securities, if any, for book and tax purposes. The principal component of the
cumulative difference between financial statement income or loss and tax income
or loss results from different depreciation policies for book and tax purposes.

     For financial reporting purposes, the General Partner has accumulated a
capital deficit at December 31, 1998. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital contribution
of $1,000 and its allocation of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the General Partner for
financial reporting purposes is not indicative of any further capital
obligations to the Partnership by the General Partner. The Amended and Restated
Agreement and Certificate of Limited Partnership requires that upon the
dissolution of the Partnership, the General Partner will be required to
contribute to the Partnership an amount equal to any negative balance which may
exist in the General Partner's tax capital account. At December 31, 1998, the
General Partner had a positive tax capital account balance.

     The future liquidity of the Partnership will be influenced by, among other
factors, prospective market conditions, technological changes, the ability of
EFG to manage and remarket the assets, and many other events and circumstances,
that could enhance or detract from individual asset yields and the collective
performance of the Partnership's equipment portfolio. However, the outcome of
the Class Action Lawsuit described in Note 7 to the accompanying financial
statements will be the principal factor in determining the future of the
Partnership's operations.


                                       9
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Partners of American Income Partners V-B Limited Partnership:

     We have audited the accompanying statements of financial position of
American Income Partners V-B Limited Partnership, as of December 31, 1998 and
1997, and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Income Partners V-B
Limited Partnership at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

     Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Additional Financial
Information identified in the Index to Annual Report to the Partners is
presented for purposes 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 our audits 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.






                                                               ERNST & YOUNG LLP






Boston, Massachusetts
March 10, 1999





                                       10
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                         STATEMENT OF FINANCIAL POSITION
                           December 31, 1998 and 1997


<TABLE>
<CAPTION>

                                                                            1998                                 1997
                                                                   -------------------                  -------------------
<S>                                                                <C>                                  <C>                
ASSETS

Cash and cash equivalents                                          $         4,762,386                  $         2,806,479

Rents receivable                                                                 2,978                                4,563

Accounts receivable - affiliate                                              2,103,987                              165,242

Note receivable - affiliate                                                    888,844                              888,844

Investment securities - affiliate                                              162,273                              295,046

Equipment at cost, net of accumulated
     depreciation of $13,395,899 and $17,907,433
     at December 31, 1998 and 1997, respectively                               169,215                            1,555,180
                                                                   -------------------                  -------------------

        Total assets                                               $         8,089,683                  $         5,715,354
                                                                   -------------------                  -------------------
                                                                   -------------------                  -------------------
LIABILITIES AND PARTNERS' CAPITAL

Notes payable                                                      $                --                  $            24,608
Accrued interest                                                                    --                                  209
Accrued liabilities                                                            504,900                                9,200
Accrued liabilities - affiliate                                                  9,548                               26,753
Deferred rental income                                                          24,700                               55,718
Other liabilities                                                            2,010,000                                   --
Cash distributions payable to partners                                         213,860                              213,860
                                                                   -------------------                  -------------------

        Total liabilities                                                    2,763,008                              330,348
                                                                   -------------------                  -------------------

Partners' capital (deficit):
     General Partner                                                        (1,450,202)                          (1,447,285)
     Limited Partnership Interests
     (1,547,930 Units; initial purchase
     price of $25 each)                                                      6,776,877                            6,832,291
                                                                   -------------------                  -------------------

        Total partners' capital                                              5,326,675                            5,385,006
                                                                   -------------------                  -------------------

        Total liabilities and partners' capital                    $         8,089,683                  $         5,715,354
                                                                   -------------------                  -------------------
                                                                   -------------------                  -------------------
</TABLE>

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


                                       11
<PAGE>


                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                             STATEMENT OF OPERATIONS
              for the years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                          1998                      1997                      1996
                                                   ------------------        ------------------        ------------------
<S>                                                <C>                       <C>                       <C>               
Income:

     Lease revenue                                 $        1,323,344        $        3,033,098        $        2,823,191

     Interest income                                          178,881                   121,153                   178,642

     Interest income - affiliate                               88,884                    17,530                        --

     Gain on sale of equipment                                775,111                   138,167                   907,328

     Loss on exchange of equipment                                 --                  (414,165)                       --
                                                   ------------------        ------------------        ------------------

         Total income                                       2,366,220                 2,895,783                 3,909,161
                                                   ------------------        ------------------        ------------------


Expenses:

     Depreciation                                             512,339                 1,461,252                 2,024,625

     Interest expense                                              --                    24,825                    76,800

     Equipment management fees - affiliate                     64,755                   150,289                   144,159

     Writedown of investment securities - affiliate           349,139                        --                        --

     Operating expenses - affiliate                           859,244                   541,774                   953,258
                                                   ------------------        ------------------        ------------------

         Total expenses                                     1,785,477                 2,178,140                 3,198,842
                                                   ------------------        ------------------        ------------------


Net income                                         $          580,743        $          717,643        $          710,319
                                                   ------------------        ------------------        ------------------
                                                   ------------------        ------------------        ------------------


Net income
     per limited partnership unit                  $             0.36        $             0.44        $             0.44
                                                   ------------------        ------------------        ------------------
                                                   ------------------        ------------------        ------------------

Cash distributions declared
     per limited partnership unit                  $             0.53        $             0.66        $             2.42
                                                   ------------------        ------------------        ------------------
                                                   ------------------        ------------------        ------------------
</TABLE>

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




                                       12
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                  STATEMENT OF CHANGES IN PARTNERS' CAPITAL for
                the years ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>

                                                         General                   Recognized Owners
                                                         Partner                   -----------------
                                                         Amount               Units               Amount               Total
                                                     --------------      --------------     ----------------      ---------------

<S>                                                  <C>                 <C>                <C>                   <C>            
Balance at December 31, 1995                         $   (1,257,650)          1,547,930     $     10,435,358      $     9,177,708

     Net income - 1996                                       35,516                  --              674,803              710,319
                                                     --------------      --------------     ----------------      ---------------

Comprehensive income                                         35,516                  --              674,803              710,319
                                                     --------------      --------------     ----------------      ---------------

Cash distributions declared                                (196,750)                 --           (3,738,253)          (3,935,003)
                                                     --------------      --------------     ----------------      ---------------

Balance at December 31, 1996                             (1,418,884)          1,547,930            7,371,908            5,953,024

     Net income - 1997                                       35,882                  --              681,761              717,643

     Unrealized loss on investment securities               (10,818)                 --             (205,548)            (216,366)
                                                     --------------      --------------     ----------------      ---------------

Comprehensive income                                         25,064                  --              476,213              501,277
                                                     --------------      --------------     ----------------      ---------------

Cash distributions declared                                 (53,465)                 --           (1,015,830)          (1,069,295)
                                                     --------------      --------------     ----------------      ---------------

Balance at December 31, 1997                             (1,447,285)          1,547,930            6,832,291            5,385,006

     Net income - 1998                                       29,037                  --              551,706              580,743

     Unrealized loss on investment securities                (6,639)                 --             (126,134)            (132,773)

     Less: reclassification adjustment for
       write-down of investment securities                   17,457                  --              331,682              349,139
                                                     --------------      --------------     ----------------      ---------------

Comprehensive income                                         39,855                  --              757,254              797,109
                                                     --------------      --------------     ----------------      ---------------

Cash distributions declared                                 (42,772)                 --             (812,668)            (855,440)
                                                     --------------      --------------     ----------------      ---------------


Balance at December 31, 1998                            $(1,450,202)          1,547,930     $      6,776,877      $     5,326,675
                                                     --------------      --------------     ----------------      ---------------
                                                     --------------      --------------     ----------------      ---------------
</TABLE>

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



                                       13
<PAGE>


                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                             STATEMENT OF CASH FLOWS
              for the years ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                                                  1998                     1997                   1996
                                                            ----------------        ----------------       -----------
<S>                                                         <C>                     <C>                    <C>             
Cash flows from (used in) operating activities:
Net income                                                  $        580,743        $        717,643       $        710,319

Adjustments to reconcile net income 
  to net cash from operating activities:
       Depreciation                                                  512,339               1,461,252              2,024,625
       Gain on sale of equipment                                    (775,111)               (138,167)              (907,328)
       Write-down of investment securities - affiliate               349,139                      --                     --
       Loss on exchange of equipment                                      --                 414,165                     --
       Decrease in allowance for doubtful accounts                        --                 (10,000)                    --
       Non-cash proceeds on termination rents                             --                (295,533)                    --

Changes in assets and liabilities:
     Decrease (increase) in:
       Rents receivable                                                1,585                 239,006                (52,960)
       Accounts receivable - affiliate                            (1,938,745)                293,796               (235,695)
     Increase (decrease) in:
       Accrued interest                                                 (209)                 (7,219)                  (275)
       Accrued liabilities                                           495,700                 (55,550)                44,750
       Accrued liabilities - affiliate                               (17,205)               (199,544)               196,410
       Deferred rental income                                        (31,018)                 10,284                  2,137
           Other liabilities                                       2,010,000                      --                     --
                                                            ----------------        ----------------       ----------------

          Net cash from operating activities                       1,187,218               2,430,133              1,781,983
                                                            ------------------      ----------------       ----------------

Cash flows from (used in) investing activities:
     Dividend received                                                    --                  78,679                     --
     Purchase of equipment                                                --                      --               (657,000)
     Proceeds from equipment sales                                 1,648,737                 159,858              1,602,589
                                                            ----------------        ----------------       ----------------

Net cash from investing activities                                 1,648,737                 238,537                945,589
                                                            ----------------        ----------------       ----------------

Cash flows used in financing activities:
     Principal payments - notes payable                              (24,608)               (683,234)              (450,064)
     Distributions paid                                             (855,440)             (1,140,580)            (4,668,233)
                                                            ----------------        ----------------       ----------------

          Net cash used in financing activities                     (880,048)             (1,823,814)            (5,118,297)
                                                            ----------------        ----------------       ----------------

Net increase (decrease) in cash and cash equivalents               1,955,907                 844,856             (2,390,725)

Cash and cash equivalents at beginning of year                     2,806,479               1,961,623              4,352,348
                                                            ----------------        ----------------       ----------------

Cash and cash equivalents at end of year                    $      4,762,386        $      2,806,479       $      1,961,623
                                                            ----------------        ----------------       ----------------
                                                            ----------------        ----------------       ----------------



Supplemental disclosure of cash flow information:
     Cash paid during the year for interest                 $            209        $         32,044       $         77,075
                                                            ----------------        ----------------       ----------------
                                                            ----------------        ----------------       ----------------

</TABLE>

       Supplemental schedule of non-cash investing and financing activities: 
         See Note 4 to the financial statements.



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


                                       14
<PAGE>



                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                December 31, 1998





NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS

     American Income Partners V-B Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on September 29, 1989 for the purpose of
acquiring and leasing to third parties a diversified portfolio of capital
equipment. Partners' capital initially consisted of contributions of $1,000 from
the General Partner (AFG Leasing IV Incorporated) and $100 from the Initial
Limited Partner (AFG Assignor Corporation). On December 27, 1989, the
Partnership issued 1,547,930 units, representing assignments of limited
partnership interests (the "Units"), to 2,402 investors. Unitholders and Limited
Partners (other than the Initial Limited Partner) are collectively referred to
as Recognized Owners. The Partnership has one General Partner, AFG Leasing IV
Incorporated, a Massachusetts corporation and an affiliate of Equis Financial
Group Limited Partnership (formerly known as American Finance Group), a
Massachusetts limited partnership ("EFG"). The common stock of the General
Partner is owned by AF/AIP Programs Limited Partnership, of which EFG and a
wholly-owned subsidiary are the 99% limited partners and AFG Programs, Inc.,
which is wholly-owned by EFG, is the 1% general partner. The General Partner is
not required to make any other capital contributions except as may be required
under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement
and Certificate of Limited Partnership (the "Restated Agreement, as amended").

     Significant operations commenced December 28, 1989 when the Partnership
made its initial equipment purchase. Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Recognized Owners and 5% to the
General Partner.

     Under the terms of a management agreement between the Partnership and
AF/AIP Programs Limited Partnership and the terms of an identical management
agreement between AF/AIP Programs Limited Partnership and EFG (collectively, the
"Management Agreement"), management services are provided by EFG to the
Partnership at fees which the General Partner believes to be competitive for
similar services (see Note 5).

     EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
direct-participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.

     The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Mr. Engle
established Equis Corporation and GDE LP in December 1994 for the sole purpose
of acquiring the business of AFG.

     In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym, to a third party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.



                                       15
<PAGE>



                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
the display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Partnership's net income or partners'
capital. Statement 130 requires unrealized gains or losses on the Partnership's
available-for-sale securities, which prior to adoption were reported separately
in partners' capital to be included in comprehensive income (loss). At December
31, 1997, the cumulative amount of other comprehensive losses was $216,366.

STATEMENT OF CASH FLOWS

     The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in federal agency
discount notes and in reverse repurchase agreements with overnight securities.
Under the terms of the agreements, title to the underlying securities passes to
the Partnership. The securities underlying the agreements are book entry
securities. At December 31, 1998, the Partnership had $4,650,950 invested in
federal agency discount notes and in reverse repurchase agreements secured by
U.S. Treasury Bills or interests in U.S. Government securities.

REVENUE RECOGNITION

     Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of $200,684
are due as follows:

<TABLE>
<CAPTION>
        <S>                                    <C>              <C>          
        For the year ending December 31,       1999             $      59,471
                                               2000                    47,071
                                               2001                    47,071
                                               2002                    47,071
                                                                -------------

                                              Total             $     200,684
                                                                -------------
                                                                -------------
</TABLE>

     Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1998, 1997, and 1996 are as
follows:

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

<S>                                                  <C>                       <C>                       <C>               
Transmeridian Airlines                               $          502,600        $          385,400        $               --
Sunworld International Airlines, Inc.                $          468,000        $          468,000        $          443,300
Gearbulk Shipowning Ltd.                             $               --        $        1,279,436        $          795,855
Northwest Airlines, Inc.                             $               --        $               --        $          481,941
Horizon Air Industries, Inc.                         $               --        $               --        $          297,792
</TABLE>

USE OF ESTIMATES

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. 




                                       16
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)


EQUIPMENT ON LEASE

     All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment Cost means the actual cost paid by the
Partnership to acquire the equipment, including acquisition fees. Where
equipment was acquired from EFG or an Affiliate, Equipment Cost reflects the
actual price paid for the equipment by EFG or the Affiliate plus all actual
costs incurred by EFG or the Affiliate while carrying the equipment, including
all liens and encumbrances, less the amount of all primary term rents earned by
EFG or the Affiliate prior to selling the equipment. Where the seller of the
equipment was a third party, Equipment Cost reflects the seller's invoice price.

DEPRECIATION

     The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset is
held on primary lease term, the Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value. Adjustments to
reduce the net carrying value of equipment are recorded in those instances where
estimated net realizable value is considered to be less than net carrying value.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time.

INVESTMENT SECURITIES - AFFILIATE

     The Partnership's investment in Semele Group, Inc. is considered to be 
available-for-sale and as such is carried at fair value with unrealized gains 
and losses reported as a separate component of Partner's Capital. Other-than-
temporary declines in market value are recorded as write down of investment in 
the Statement of Operations (see Note 4).

ACCRUED LIABILITIES - AFFILIATE

     Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges and management fees are reported as
Accrued Liabilities - Affiliate (see Note 5).

ALLOCATION OF PROFITS AND LOSSES

     For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the
Recognized Owners and 5% to the General Partner). See Note 6 concerning
allocation of income or loss for income tax purposes.

NET INCOME AND CASH DISTRIBUTIONS PER UNIT

     Net income and cash distributions per Unit are based on 1,547,930 units
outstanding during the years ended December 31, 1998, 1997 and 1996 and computed
after allocation of the General Partner's 5% share of net income and cash
distributions. 



                                       17
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)



PROVISION FOR INCOME TAXES

     No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.


NOTE 3 - EQUIPMENT

     The following is a summary of equipment owned by the Partnership at
December 31, 1998. Remaining Lease Term (Months), as used below, represents the
number of months remaining from December 31, 1998 under contracted lease terms
and is presented as a range when more than one lease agreement is contained in
the stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or re-lease or being leased on a month-to-month
basis. In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.


<TABLE>
<CAPTION>
                                             Remaining
                                             Lease Term            Equipment
       Equipment Type                         (Months)              At Cost                     Location
--------------------------------             ----------        -----------------      ----------------------------
<S>                                          <C>               <C>                    <C>
Aircraft                                            1          $      12,311,220      KY/TX
Materials handling equipment                        0                    435,341      CA/DE/GA/LA/MO/MI/NC/OK/TX
Construction and mining                             4                    433,283      OH
Trailers/intermodal containers                     48                    299,643      OK
Retail store fixtures                               0                     30,320      NC/SC
Energy systems                                      0                     29,996      IL
Tractors and heavy duty trucks                      0                     18,426      IN
Computers & peripherals                             0                      6,885      AL/GA/KY/MS/NC/SC/TN/VA
                                                               -----------------
                                Total equipment cost                  13,565,114

                            Accumulated depreciation                 (13,395,899)
                                                               -----------------
          Equipment, net of accumulated depreciation           $         169,215
                                                               -----------------
                                                               -----------------
</TABLE>


     In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or an
affiliated equipment leasing program sponsored by EFG. The Partnership and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. Proportionate equipment ownership
enabled the Partnership to further diversify its equipment portfolio at
inception by participating in the ownership of selected assets, thereby reducing
the general levels of risk which could have resulted from a concentration in any
single equipment type, industry or lessee. At December 31, 1998, the
Partnership's equipment portfolio included equipment having a proportionate
original cost of $12,617,748, representing approximately 93% of total equipment
cost.

     Generally, the costs associated with maintaining, insuring and operating
the Partnership's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Partnership.

     As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds


                                       18
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)


realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms.

     At December 31, 1998, the Partnership had fully depreciated equipment held
for sale with a cost of approximately $12,311,000. This equipment represents the
Partnership's proportionate interests in two Boeing 727-251 ADV aircraft. In
January 1999, at the expiration of the existing lease term, the Partnership sold
its interest in one of these aircraft having a cost of $5,827,110 (see Note 8 -
Subsequent Event). See below for discussion related to the Partnership's
interest in the second aircraft. The summary above also includes equipment being
leased on a month to month basis.

DEFERRED SALE

     In November 1998, the Partnership and certain affiliated investment
programs (collectively, the "Programs") entered into an agreement to sell their
ownership interests in a Boeing 727-251 ADV aircraft and three engines
(collectively the "Aircraft") to a third party (the "Purchaser"). The Programs
will receive gross sale proceeds of $4,350,000. Previously, the Aircraft had
been leased to Transmeridian Airlines ("Transmeridian"). In December 1998, the
Purchaser remitted $3,350,000 for the Aircraft, excluding one of three engines
which had been damaged while the Aircraft was leased to Transmeridian. (See Note
7 regarding legal action undertaken by the Programs related to Transmeridian and
the damaged engine). The Purchaser also deposited $1,000,000 into a third-party
escrow account (the "Escrow") pending repair of the damaged engine and
re-installation of the refurbished engine on the Aircraft. Upon installation,
the escrow agent will transfer the Escrow amount plus interest thereon to the
Programs. Currently, the engine is being refurbished at the expense of the
Programs. The associated cost is estimated to be approximately $260,000, of
which the Partnership's share is approximately $156,000. All of the
Partnership's costs were accrued at December 31, 1998 in connection with the
Partnership's legal action against Transmeridian discussed in Note 7.

     The Programs also are required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine is being
repaired. This cost is expected to be approximately $114,000, of which the
Partnership's share is $68,400, all of which has been accrued in 1998 in
connection with the litigation referenced above. If the engine repair and
re-installation do not occur on or before May 11, 1999, the Escrow plus all
interest thereon will be returned to the Purchaser and the Programs' obligation
to pay for the cost of a substitute engine will be terminated.

     In addition, the purchase and sale agreement permits the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. In
addition, the Escrow funds must have been released to the Programs, assuming the
repaired engine is reinstalled on the Aircraft by May 11, 1999. The Purchaser's
return option expires on May 15, 1999.

     Due to the contingent nature of the sale, the Partnership has deferred
recognition of the sale and a resulting gain at December 31, 1998 until
expiration of the Purchaser's return option on May 15, 1999. The Partnership's
share of the December proceeds was $2,010,000, which amount was deposited into
EFG's customary escrow account and transferred to the Partnership, together with
the Partnership's other December rental receipts, in January 1999. At December
31, 1998, the entire amount was classified as accounts receivable affiliate,
with an equal amount reflected in other liabilities on the accompanying
Statement of Financial Position. The remainder of the sale consideration, or
$1,000,000, will be paid to the Programs upon release of the Escrow discussed
above. 



                                       19
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)

The Partnership's share of this payment will be $600,000. The Partnership's
interest in the Aircraft had a cost of $6,484,110 and was fully depreciated at
December 31, 1998.


NOTE 4 - INVESTMENT SECURITIES - AFFILIATE / NOTE RECEIVABLE - AFFILIATE

     On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by Gearbulk Shipowning Ltd
(formerly Kristian Gerhard Jebsen Skipsrederi A/S) (the "Lessee"), exchanged
their ownership interests in the Vessels for aggregate consideration of
$11,565,375, consisting of 1,987,000 newly issued shares (at $1.50 per share) of
common stock in Semele Group, Inc. ("Semele") (formerly Banyan Strategic Land
Fund II), a purchase money note of $8,219,500 (the "Note") and cash of $365,375.
Semele is a Delaware corporation organized on April 14, 1987 and has its common
stock listed on NASDAQ (NASDAQ SmallCap Market effective January 5, 1999). At
the date of the exchange transaction, the common stock of Semele had a net book
value of approximately $1.50 per share and closing market value of $1.00 per
share. Semele has one principal real estate asset consisting of an undeveloped
274-acre parcel of land near Malibu, California ("Rancho Malibu").

     The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Semele and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Semele or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May 6,
1997 and May 12, 1997. The Note was repaid with $3,800,000 of cash and delivery
of a $4,419,500 note from Semele (the "Semele Note").

     As a result of the exchange transaction and its original 53.54% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $847,080 in cash, became the beneficial owner of 393,394 shares of
Semele common stock (valued at $590,091 ($1.50 per share) at the time of the
exchange transaction) and received a beneficial interest in the Semele Note of
$888,844. The Semele Note bears an annual interest rate of 10% and will be
amortized over three years with mandatory principal reductions, if and to the
extent that net proceeds are received by Semele from the sale or refinancing of
Rancho Malibu. The Partnership recognized interest income of $88,884 and $17,530
related to the Semele Note during 1998 and 1997, respectively. The Partnership's
interest in the vessel had an original cost and net book value of $4,205,030 and
$1,597,566, respectively. The proceeds realized by the Partnership of $1,183,401
resulted in a net loss, for financial statement purposes, of $414,165. In
addition, as this vessel was disposed of prior to the expiration of the related
lease term, the Partnership received a prepayment of the remaining contracted
rent due under the vessel's lease agreement of $1,142,614.

     Cash equal to the amount of the Semele Note was placed in escrow for the
benefit of Semele in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Semele agreed to
seek consent ("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Semele's net operating loss
carry-forwards, and (3) engage EFG to provide administrative services to Semele,
which services EFG will provide at cost. On October 21, 1997, such Consent was
obtained from Semele's shareholders. The Consent also allowed for (i) the
election of a new Board of Directors nominated by EFG for terms of up to three
years and an increase in the size of the Board to as many as nine members,
provided a majority of the Board shall consist of members independent of Semele,
EFG or any affiliate; and (ii) an amendment extending Semele's life to perpetual
and changing its name from Banyan Strategic Land Fund II. Contemporaneously with
the Consent being obtained, Semele declared a $0.20 per share dividend to be
paid on all shares, including those beneficially 



                                       20
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)

owned by the Partnership. A dividend of $78,679 was paid to the Partnership on
November 17, 1997. This dividend represented a return of equity to the
Partnership, which proportionately reduced the Partnership's investment in
Semele. Subsequent to the exchange transaction, Gary D. Engle, President and
Chief Executive Officer of EFG, was elected to the Board of Directors and
appointed Chief Executive Officer of Semele and James A. Coyne, Executive Vice
President of EFG was appointed Semele's President and Chief Operating Officer,
and was elected to the Board of Directors.

     On June 30, 1998, Semele effected a 1-for-300 reverse stock split 
followed by a 30-for-1 forward stock split resulting in a reduction of the 
number of shares of Semele common stock owned by the Partnership to 39,339 
Shares. In accordance with the Financial Accounting Standard Board's 
Statement No. 115, Accounting for Certain Investments in Debt and Equity 
Securities, marketable equity securities classified as available-for-sale are 
required to be carried at fair value. During the year December 31, 1998, the 
Partnership decreased the carrying value of its investment in Semele common 
stock to $4.125 per share (the quoted price of the Semele stock on NASDAQ at 
December 31, 1998) resulting in an unrealized loss in 1998 of $132,773. In 
1997, the Partnership recorded an unrealized loss of $216,366 relate to its 
investment in the Semele common stock. Each of these losses was reported as a 
component of comprehensive income, included in partners' capital. At December 
31, 1998, the General Partner determined that the decline in market value of 
the Semele common stock was other-than-temporary. As a result, the Partnership
wrote down the cost of the Semele common stock to $4.125 per share (the quoted
price of the Semele stock on NASDAQ at December 31, 1998) for a total realized
loss of $349,139 in 1998.

NOTE 5 - RELATED PARTY TRANSACTIONS

     All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
1998, 1997 and 1996, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:

<TABLE>
<CAPTION>
                                                          1998                      1997                      1996
                                                   ------------------        ------------------        -------------------
<S>                                                <C>                       <C>                       <C>               
Equipment management fees                          $           64,755        $          150,289        $          144,159
Administrative charges                                         59,736                    56,929                    37,037
Reimbursable operating                                                                              
    Expenses due to third parties                             799,508                   484,845                   916,221
                                                   ------------------        ------------------        ------------------

                              Total                $          923,999        $          692,063        $        1,097,417
                                                   ------------------        ------------------        ------------------
                                                   ------------------        ------------------        ------------------
</TABLE>


     As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include acquisition and
management of equipment. For acquisition services, EFG is compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenues and 2% of gross full payout lease rental
revenues received by the Partnership. Both acquisition and management fees are
subject to certain limitations defined in the Management Agreement.

     Administrative charges represent amounts owed to EFG, pursuant to Section
10.4 of the Restated Agreement, as amended, for persons employed by EFG who are
engaged in providing administrative services to the Partnership. Reimbursable
operating expenses due to third parties represent costs paid by EFG on behalf of
the Partnership which are reimbursed to EFG at actual cost.

     All equipment was acquired from EFG, one of its affiliates, including other
equipment leasing programs sponsored by EFG, or from third-party sellers. The
Partnership's Purchase Price was determined by the method described in Note 3,
Equipment on Lease.



                                       21
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)

     All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At December 31, 1998, the Partnership was owed $2,103,987 by EFG for such funds
and the interest thereon. Included in this balance is the sale proceeds from the
sale of the Boeing 727-251 aircraft (see Note 3 for additional discussion).
These funds were remitted to the Partnership in January 1999.

     Certain affiliates of the General Partner own Units in the Partnership as
follows:

<TABLE>
<CAPTION>
         ------------------------------------------------ ---------------------- -----------------------
                                                                Number of           Percent of Total
                            Affiliate                          Units Owned         Outstanding Units
         ------------------------------------------------ ---------------------- -----------------------
         <S>                                              <C>                    <C>

         Atlantic Acquisition Limited Partnership                        94,570                   6.11%
         ------------------------------------------------ ---------------------- -----------------------

         Old North Capital Limited Partnership                           17,594                   1.14%
         ------------------------------------------------ ---------------------- -----------------------
</TABLE>

     Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995 and affiliates of EFG. The general partners of AALP and ONC are
controlled by Gary D. Engle. In addition, the limited partnership interests of
ONC are owned by Semele Group, Inc. ("Semele"). Gary D. Engle is Chairman and
CEO of Semele.


NOTE 6 - INCOME TAXES

     The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.

     For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Recognized Owners and 5% to the General Partner). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or net
loss in accordance with the provisions of such agreement. The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account balance. At December 31, 1998, the General Partner had a
positive tax capital balance.

     The following is a reconciliation between net income reported for financial
statement and federal income tax reporting purposes for the years ended December
31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>

                                                             1998                     1997                     1996
                                                      ------------------       ------------------       --------------------
<S>                                                   <C>                      <C>                      <C>               
Net income                                            $          580,743       $          717,643       $          710,319
     Financial statement depreciation in
       excess of (less than) tax depreciation                   (678,927)                  71,967                 (112,391)
     Deferred rental income                                      (31,018)                  10,284                    2,137
     Other                                                     1,418,759                 (414,936)                 260,417
                                                      ------------------       ------------------       ------------------

Net income for federal income tax
     reporting purposes                               $        1,289,557       $          384,958       $          860,482
                                                      ------------------       ------------------       ------------------
                                                      ------------------       ------------------       ------------------
</TABLE>



                                       22
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)


     The principal component of "Other" consists of the difference between the
tax gain or loss on equipment disposals and the financial statement gain or loss
on disposals.

     The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1998 and 1997:


<TABLE>
<CAPTION>
                                                                                1998                           1997
                                                                         ------------------             ------------------
<S>                                                                      <C>                            <C>               
Partners' capital                                                        $        5,326,675             $        5,385,006

    Unrealized loss on investment securities                                             --                        216,366
    Add back selling commissions and organization                                                       
        and offering costs                                                        4,348,553                      4,348,553
    Financial statement distributions in excess of                                                        
        tax distributions                                                            10,693                         10,693
    Cumulative difference between federal income tax
        and financial statement income (loss)                                     1,559,622                        850,808
                                                                         ------------------             ------------------

Partners' capital for federal income tax reporting purposes              $       11,245,543             $       10,811,426
                                                                         ------------------             ------------------
                                                                         ------------------             ------------------
</TABLE>


     Unrealized loss on investment securities, financial statement distributions
in excess of tax distributions and cumulative difference between federal income
tax and financial statement income (loss) represent timing differences.


NOTE 7 - LEGAL PROCEEDINGS 

     In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and
derivative action, captioned LEONARD ROSENBLUM, ET AL. V. EQUIS FINANCIAL GROUP
LIMITED PARTNERSHIP, ET AL., in the United States District Court for the
Southern District of Florida (the "Court") on behalf of a proposed class of
investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned LEONARD ROSENBLUM, ET AL. V. EQUIS
FINANCIAL GROUP LIMITED PARTNERSHIP, ET AL., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit".

     The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.

     On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth terms pursuant to which a settlement of
the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was based upon and superseded a
Memorandum of Understanding between the parties dated March 9, 1998 which
outlined the terms of a possible settlement. The Stipulation of Settlement was
filed with the Court on July 23, 1998 and was preliminarily approved by the
Court on August 20, 1998 when the Court 



                                       23
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)


issued its "Order Preliminarily Approving Settlement, Conditionally Certifying
Settlement Class and Providing for Notice of, and Hearing on, the Proposed
Settlement" (the "August 20 Order"). Prior to issuing a final order, the Court
will hold a fairness hearing that will be open to all interested parties and
permit any party to object to the settlement. The investors of the Partnership
and all other plaintiff class members in the Class Action Lawsuit will receive a
Notice of Settlement and other information pertinent to the settlement of their
claims that will be mailed to them in advance of the fairness hearing. Since
first executing the Stipulation of Settlement, the Court has scheduled two
fairness hearings, the first on December 11, 1998 and the second on March 19,
1999, each of which was postponed because of delays in finalizing certain
information materials that are subject to regulatory review prior to being
distributed to investors.

     On March 15, 1999, counsel for the Plaintiffs and the Defendants entered
into an amended stipulation of settlement (the "Amended Stipulation") which was
filed with the Court on March 15, 1999. The Amended Stipulation was
preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
For Notice of, and Hearing On, the Proposed Settlement" dated March 22, 1999
(the "March 22 Order"). The Amended Stipulation, among other things, divides the
Class Action Lawsuit into two separate sub-classes that can be settled
individually. This revision is expected to expedite the settlement of one
sub-class by the middle of 1999. However, the second sub-class, involving the
Partnership and 10 affiliated partnerships (collectively referred to as the
"Exchange Partnerships"), is expected to remain pending for a longer period due,
in part, to the complexity of the proposed settlement pertaining to this class.

     Specifically, the settlement of the second sub-class is premised on the
consolidation of the Exchange Partnerships' net assets (the "Consolidation"),
subject to certain conditions, into a single successor company ("Newco"). Under
the proposed Consolidation, the partners of the Exchange Partnerships would
receive both common stock in Newco and a cash distribution; and thereupon the
Exchange Partnerships would be dissolved. In addition, EFG would contribute
certain management contracts, operations personnel, and business opportunities
to Newco and cancel its current management contracts with all of the Exchange
Partnerships. Newco would operate as a finance company specializing in the
acquisition, financing and servicing of equipment leases for its own account and
for the account of others on a contract basis. Newco also would use its best
efforts to list its shares on the Nasdaq National Market or another national
exchange or market as soon after the Consolidation as Newco deems that market
conditions and its business operations are suitable for listing its shares and
Newco has satisfied all necessary regulatory and listing requirements. The
potential benefits and risks of the Consolidation will be presented in a
Solicitation Statement that will be mailed to all of the partners of the
Exchange Partnerships as soon as the associated regulatory review process is
completed and at least 60 days prior to the fairness hearing. A preliminary
Solicitation Statement was filed with the Securities and Exchange Commission on
August 24, 1998 and remains pending. Class members will be notified of the
actual fairness hearing date when it is confirmed.

     One of the principal objectives of the Consolidation is to create a company
that would have the potential to generate more value for the benefit of existing
limited partners than other alternatives, including continuing the Partnership's
customary business operations until all of its assets are disposed in the
ordinary course of business. To facilitate the realization of this objective,
the Amended Stipulation provides, among other things, that commencing March 22,
1999, the Exchange Partnerships may collectively invest up to 40% of the total
aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believe to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations, including that the Exchange Partnerships retain
sufficient cash balances to pay their respective shares of the cash distribution
referenced above in connection with the proposed Consolidation.

     In the absence of the Court's authorization to enter into such activities,
the Partnership's Restated Agreement, as amended, would not permit new
investment activities without the approval of limited partners owning a majority



                                       24
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)

of the Partnership's outstanding Units. Accordingly, to the extent that the
Partnership invests in new equipment, the Manager (being EFG) will (i) defer,
until the earlier of the effective date of the Consolidation or December 31,
1999, any acquisition fees resulting therefrom and (ii) limit its management
fees on all such assets to 2% of rental income. In the event that the
Consolidation is consummated, all such acquisition and management fees will be
paid to Newco. To the extent that the Partnership invests in other business
activities not consisting of equipment acquisitions, the Manager will forego any
acquisition fees and management fees related to such investments. In the event
that the Partnership has acquired new investments, but the Partnership does not
participate in the Consolidation, Newco will acquire such new investments for an
amount equal to the Partnership's net equity investment plus an annualized
return thereon of 7.5%. Finally, in the event that the Partnership has acquired
new investments and the Consolidation is not effected, the General Partner will
use its best efforts to divest all such new investments in an orderly and timely
fashion and the Manager will cancel or return to the Partnership any acquisition
or management fees resulting from such new investments.

     The Amended Stipulation and previous Stipulation of Settlement prescribe
certain conditions necessary to effecting final settlements, including providing
the partners of the Exchange Partnerships with the opportunity to object to the
participation of their partnership in the Consolidation. Assuming the proposed
settlement is effected according to present terms, the Partnership's share of
legal fees and expenses related to the Class Action Lawsuit is estimated to be
approximately $85,300 all of which was accrued and expensed by the Partnership
in 1998. In addition, the Partnership's share of fees and expenses related to
the proposed Consolidation is estimated to be approximately $234,100, all of
which was accrued and expensed by the Partnership in 1998.

     While the Court's August 20 Order enjoined certain class members, including
all of the partners of the Partnership, from transferring, selling, assigning,
giving, pledging, hypothecating, or otherwise disposing of any Units pending the
Court's final determination of whether the settlement should be approved, the
March 22 Order permits the partners to transfer Units to family members or as a
result of the divorce, disability or death of the partner. No other transfers
are permitted pending the Court's final determination of whether the settlement
should be approved. The provision of the August 20 Order which enjoined the
General Partners of the Exchange Partnerships from, among other things,
recording any transfers not in accordance with the Court's order remains
effective.

     There can be no assurance that settlement of either sub-class of the Class
Action Lawsuit will receive final Court approval and be effected. There also can
be no assurance that all or any of the Exchange Partnerships will participate in
the Consolidation because if limited partners owning more than one-third of the
outstanding Units of a partnership object to the Consolidation, then that
partnership will be excluded from the Consolidation. The General Partner and its
affiliates, in consultation with counsel, concur that there is a reasonable
basis to believe that final settlements of each sub-class will be achieved.
However, in the absence of final settlements approved by the Court, the
Defendants intend to defend vigorously against the claims asserted in the Class
Action Lawsuit. Neither the General Partner nor its affiliates can predict with
any degree of certainty the cost of continuing litigation to the Partnership or
the ultimate outcome.

     In addition to the foregoing, the Partnership is a party to other lawsuits
that have arisen out of the conduct of its business, principally involving
disputes or disagreements with lessees over lease terms and conditions. The
following actions had not been finally adjudicated at December 31, 1998:

ACTION INVOLVING NATIONAL STEEL CORPORATION

     EFG, on behalf of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in the Commonwealth
of Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Partnership, National Steel Corporation ("National Steel"). The
Complaint seeks reimbursement from National Steel of certain 



                                       25
<PAGE>



sales and/or use taxes paid to the State of Illinois in connection with
equipment leased by National Steel from the Plaintiffs and other remedies
provided under the Master Lease Agreement ("MLA"). On August 30, 1995, National
Steel filed a Notice of Removal, which removed the case to United States
District Court, District of Massachusetts. On September 7, 1995, National Steel
filed its Answer to the Plaintiff's Complaint along with Affirmative Defenses
and Counterclaims and sought declaratory relief, alleging breach of contract,
implied covenant of good faith and fair dealing, and specific performance. The
Plaintiffs filed an Answer to National Steel's Counterclaims on September 29,
1995. The parties discussed settlement with respect to this matter for some
time; however, the negotiations were unsuccessful. The Plaintiffs filed an
Amended and Supplemental Complaint alleging further default under the MLA and
filed a motion for Summary Judgment on all claims and Counterclaims. The Court
held a hearing on the Plaintiff's motion in December 1997 and later entered a
decision dismissing certain of National Steel's Counterclaims, finding in favor
of the Plaintiffs on certain issues and in favor of National Steel on other
issues. In March 1999, the Plaintiffs obtained payment for certain of the
disputed items and have resumed settlement discussions to resolve remaining
issues. The General Partner does not believe that the resolution of the
remaining claims will have a material adverse effect on the Partnership's
financial position or results of operations.

ACTION INVOLVING NORTHWEST AIRLINES, INC.

     On September 22, 1995, Investors Asset Holding Corp. and First Security
Bank, N.A., trustees of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in United States
District Court for the District of Massachusetts against a lessee of the
Partnership, Northwest Airlines, Inc. ("Northwest"). The Complaint alleges that
Northwest did not fulfill its maintenance obligations under its Lease Agreements
with the Plaintiffs and seeks declaratory judgment concerning Northwest's
obligations and monetary damages. Northwest filed an Answer to the Plaintiffs'
Complaint and a motion to transfer the venue of this proceeding to Minnesota.
The Court denied Northwest's motion. On June 29, 1998, a United States
Magistrate Judge recommended entry of partial summary judgment in favor of the
Plaintiffs. Northwest appealed this decision and a hearing was scheduled for
January 1999 by the District Judge to consider arguments and review the
Magistrate's recommendation. A ruling by the District Judge remains pending. The
General Partner believes that the Plaintiff's claims ultimately will prevail and
that the Partnership's financial position will not be adversely affected by the
outcome of this action.

ACTION INVOLVING TRANSMERIDIAN AIRLINES

     On November 9, 1998, First Security Bank, N.A., as trustee of the
Partnership and certain affiliated investment programs (collectively, the
"Plaintiffs), filed an action in Superior Court of the Commonwealth of
Massachusetts in Suffolk County against Prime Air, Inc. d/b/a Transmeridian
Airlines ("Transmeridian"), Atkinson & Mullen Travel, Inc., and Apple Vacations,
West, Inc., both d/b/a Apple Vacations, asserting various causes of action for
declaratory judgment and breach of contract. The action subsequently was removed
to United States District Court for the District of Massachusetts. Transmeridian
filed counterclaims for breach of contract, quantum meruit, conversion, breach
of the implied covenant of good faith and fair dealing, and violation of M.G.L.
c. 93A. The Plaintiffs subsequently filed an Amended Complaint asserting claims
for breaches of contract and covenant of faith and fair dealing against
Transmeridian and breach of guaranty against Apple Vacations.

     The Plaintiffs are seeking damages for, among other things, breach of
contract arising out of Transmeridian's refusal to repair or replace burned
engine blades found in one engine during a pre-return inspection of an aircraft
leased by Transmeridian from the Plaintiffs, a Boeing 727-251 ADV aircraft (the
"Aircraft"). The estimated cost to repair the engine and lease a substitute
engine during the repair period is approximately $374,000. The Plaintiffs intend
to enforce written guarantees issued by Apple Vacations that absolutely and
unconditionally guarantee Transmeridian's performance under the lease agreement
and are seeking recovery of all costs, lost revenue and monetary damages in
connection with this matter. Notwithstanding the foregoing, the Plaintiffs will
be required to 



                                       26
<PAGE>

                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
                        Notes to the Financial Statements

                                   (Continued)


advance the cost of repairing the engine and leasing a substitute engine and
cannot be certain whether the guarantees will be enforced. Therefore, the
Partnership has accrued and expensed its share of these costs, or $224,400, in
1998. Discovery has not yet commenced, and although the General Partner plans to
vigorously pursue this action, it is too early to predict the Plaintiffs'
likelihood of success. This Aircraft was fully depreciated at December 31, 1998
for financial reporting purposes (See Note 3 concerning the remarketing of this
Aircraft).


NOTE 8 - SUBSEQUENT EVENT 

     On January 19, 1999, at the expiration of the aircraft's lease term, the
Partnership sold its proportional interest in a Boeing 727-251 aircraft to the
lessee, Sunworld International Airlines, Inc. The Partnership received net sale
proceeds of approximately $1,470,000 for its interest in this aircraft which had
a cost of $5,827,110 and was fully depreciated at December 31, 1998.





                                       27
<PAGE>





                        ADDITIONAL FINANCIAL INFORMATION




<PAGE>




                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

         SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
                              OF EQUIPMENT DISPOSED

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


     The Partnership classifies all rents from leasing equipment as lease
revenue. Upon expiration of the primary lease terms, equipment may be sold,
rented on a month-to-month basis or re-leased for a defined period under a new
or extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenues, represent the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition, may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.

     The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1998, 1997 and 1996.


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

<S>                                                <C>                       <C>                       <C>               
Rents earned prior to disposal of
     equipment, net of interest charges            $        6,558,696        $        2,422,146        $       10,677,177

Sale proceeds realized upon disposition
     of equipment                                           1,648,737                   159,858                 1,602,589
                                                   ------------------        ------------------        ------------------

Total cash generated from rents                                                                     
     and equipment sale proceeds                            8,207,433                 2,582,004                12,279,766

Original acquisition cost of equipment
     disposed                                               5,897,499                 1,968,246                11,569,023
                                                   ------------------        ------------------        ------------------

Excess of total cash generated to cost

     of equipment disposed                         $        2,309,934        $          613,758        $          710,743
                                                   ------------------        ------------------        ------------------
                                                   ------------------        ------------------        ------------------
</TABLE>





                                       28
<PAGE>


                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

            STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
                             SALES AND REFINANCINGS

                      for the year ended December 31, 1998



<TABLE>
<CAPTION>
                                                                                     Sales and
                                                           Operations              Refinancings                 Total
                                                       ------------------       ------------------       ------------------
<S>                                                    <C>                      <C>                      <C>               
Net income                                             $         (194,368)      $          775,111       $          580,743

Add:
     Depreciation                                                 512,339                       --                  512,339
     Management fees                                               64,755                       --                   64,755
     Write-down as investment securities - affiliate              349,139                       --                  349,139      
     Book value of disposed equipment                                  --                  873,626                  873,626

Less:
     Principal reduction of notes payable                         (24,608)                      --                  (24,608)
                                                       ------------------       ------------------       ------------------

     Cash from operations, sales and
        refinancings                                              707,257                1,648,737                2,355,994

Less:
     Management fees                                              (64,755)                      --                  (64,755)
                                                       ------------------       ------------------       ------------------

Distributable cash from operations,
        sales and refinancings                                    642,502                1,648,737                2,291,239

Other sources and uses of cash:
     Cash at beginning of year                                  2,806,479                       --                2,806,479
     Net change in receivables and
        accruals                                                  520,108                       --                  520,108

Less:                                                                            
     Cash distributions paid                                           --                 (855,440)                (855,440)
                                                       ------------------       ------------------       ------------------

Cash at end of year                                    $        3,969,089       $          793,297       $        4,762,386
                                                       ------------------       ------------------       ------------------
                                                       ------------------       ------------------       ------------------
</TABLE>




                                       29
<PAGE>


                AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP

                       SCHEDULE OF COSTS REIMBURSED TO THE
                 GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED
                   BY SECTION 10.4 OF THE AMENDED AND RESTATED
                AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP

                                December 31, 1998


     For the year ended December 31, 1998, the Partnership reimbursed the
General Partner and its Affiliates for the following costs:



<TABLE>
<CAPTION>
     <S>                                                          <C>           
     Operating expenses                                           $      376,189
</TABLE>




                                       30