SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 1997

                                       OR

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

      For the transition period from __________________ to ________________

                           Commission File No. 0-13556

          Cluster Housing Properties (A California Limited Partnership)
              (formerly Berry and Boyle Cluster Housing Properties)
             (Exact name of registrant as specified in its charter)

                              California 04-2817478
--------------------------------------------------------------------------------
                     (State or other jurisdiction of (I.R.S.
                     Employer incorporation or organization)
                               Identification No.)

                  5110 Langdale Way, Colorado Springs CO 80906
-------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (719) 527-0544
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 and 15(d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes _X_ No ___

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

Aggregate  market  value  of  voting  securities  held  by  non-affiliates:  Not
applicable, since securities are not actively traded on any exchange.

Documents incorporated by reference:  None

The Exhibit Index is located on page F-20




<PAGE>


PART I

ITEM 1.   BUSINESS

This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.  Actual  results could differ  materially  from those  projected in the
forward-looking  statements as a result of a number of factors,  including those
identified herein.

Cluster Housing Properties (the "Partnership"), formerly Berry and Boyle Cluster
Housing  Properties,  is a California  limited  partnership  formed on August 8,
1983.  The General  Partners are Stephen B. Boyle and GP L'Auberge  Communities,
L.P., a California limited partnership, formerly Berry and Boyle Management.

The primary business of the Partnership is to operate and ultimately  dispose of
a diversified portfolio of income-producing residential real properties directly
or  through  its  joint  venture  interest  in joint  venturers  which  own such
properties. The Partnership currently owns one property,  Pinecliff, having sold
two of its properties during 1997.  Descriptions of such properties are included
below  in  "Item 2.  Properties"  as well as in note 5 of Notes to  Consolidated
Financial  Statements  included  in  this  report  and  incorporated  herein  by
reference thereto.

As  further  discussed  in Item 2  below  and in  Note  9 of the  Notes  to the
Consolidated Financial Statements,  after taking into consideration such factors
as the price to be realized,  the possible risks of continued  ownership and the
anticipated  advantages  to be gained for the  partners,  the  General  Partners
determined during 1997 that it would be in the best interests of the Partnership
and the partners to dissolve the  Partnership  and  liquidate its assets in 1998
(the  "Dissolution").  Under the  provisions  of the  Partnership's  Partnership
Agreement, the Dissolution of the Partnership requires the consent of a majority
in interest  of the  limited  partners.  In March  1998,  the  General  Partners
requested the consent of the limited  partners to the Dissolution  pursuant to a
Consent Solicitation  Statement first mailed to the limited partners on or about
March 18, 1998. Such consents will be solicited until April 15, 1998, which date
may be extended by the General  Partners  until not later than June 1, 1998. The
property  owned by the  Partnership  is under contract to be sold to a purchaser
unaffiliated with the General Partners.  Net proceeds from the sales will not be
reinvested by the  Partnership,  but will be distributed to the partners so that
the Partnership will, in effect, be self-liquidating.

The Partnership  sold the Villas Sin Vacas and Villa Antigua  properties  during
1997  (see  Item 2.  Properties  and Note 5 of Notes to  Consolidated  Financial
Statements) and  distributed the net proceeds from such sales. In addition,  the
Partnership  has  entered  into a  Purchase  and  Sales  Agreement  to sell  the
Partnership's remaining property, Pinecliff, to an unaffiliated third party (see
Note 9 of Notes to Consolidated  Financial  Statements).  Proceeds from the sale
will  not be  reinvested  by the  Partnership,  but will be  distributed  to the
partners, so that the Partnership will, in effect, be self-liquidating.

On-site  management  of the  Partnership's  property,  Pinecliff,  is  currently
provided by an affiliate  of the General  Partners.  The terms of such  property
management services between the Partnership and property manager are embodied in
a written management  agreement.  Property management fees equal 4% of the gross
revenues from the property,  plus  reimbursement  for  allocable  expenses.  The
property  manager  is  responsible  for  on-site   operations  and  maintenance,
generation and collection of rental income and payment of operating expenses.

The  difference  between  rental  income and  expenses  related  to  operations,
including  items  such as local  taxes  and  assessments,  utilities,  insurance
premiums,  maintenance,   repairs  and  improvements  (and  reserves  therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other  expenses  incurred,  constitute the  properties'  operating cash
flow.   The   Partnership's   administrative   expenses  are  paid  out  of  the
Partnership's share of such cash flow from the various properties.

The success of the  Partnership  will depend upon factors which are difficult to
predict  and many of which are  beyond  the  control  of the  Partnership.  Such
factors  include,   among  others,  general  economic  and  real  estate  market
conditions,  both on a national basis and in those areas where the Partnership's
investments  are located,  competitive  factors,  the  availability  and cost of
borrowed  funds,  real  estate tax  rates,  federal  and state  income tax laws,
operating  expenses  (including   maintenance  and  insurance),   energy  costs,
government   regulations,   and  potential   liability   under  and  changes  in
environmental  and  other  laws,  as well as the  successful  management  of the
properties.


The  Partnership's  investment  in  real  estate  is  also  subject  to  certain
additional  risks  including,  but not limited to, (i) competition from existing
and  future  projects  held by other  owners in the  areas of the  Partnership's
property,  (ii)  possible  reduction  in rental  income due to an  inability  to
maintain  high  occupancy  levels,  (iii) adverse  changes in mortgage  interest
rates, (iv) possible adverse changes in general economic  conditions and adverse
local conditions, such as competitive overbuilding,  or a decrease in employment
or adverse  changes in real estate zoning laws, (v) the possible future adoption
of rent control  legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent  increases,  and (vi) other
circumstances over which the Partnership may have little or no control.

The Partnership's  investment is subject to competition in the rental, lease and
sale of similar types of  properties in the locality in which the  Partnership's
real property  investment is located.  Furthermore,  the General Partners of the
Partnership are affiliated with other partnerships  owning similar properties in
the vicinity in which the Partnership's property is located.

The  Partnership  considers  itself to be engaged in only one industry  segment,
real estate investment.


ITEM 2.   PROPERTIES

In 1997, the Partnership owned and operated three properties:  (1) Villas at Sin
Vacas, a 72-unit multifamily rental property in Tucson,  Arizona, which was sold
in November 1997; (2) L'Auberge Pinecliff,  formerly Autumn Ridge ("Pinecliff"),
a 96-unit multifamily rental property in Colorado Springs,  Colorado, subject to
first mortgage  financing in the original  principal amount of $3,072,739;  and,
(3) Villa  Antigua,  an  88-unit  multifamily  rental  property  in  Scottsdale,
Arizona,  which was sold in October  1997.  The  ownership of each  property was
formerly structured as a Joint Venture in which the Partnership owned a majority
interest.  With regard to the termination of the Joint Ventures and the sales of
properties, see Note 5 of Notes to Consolidated Financial Statements.

Villas at Sin Vacas

On October 25, 1985, the Partnership  acquired a majority joint venture interest
in the Sin Vacas Joint Venture,  which owned and operated Villas Sin Vacas.  The
Partnership contributed $2,520,954 to the Sin Vacas Joint Venture which was used
to repay a portion of the construction loan on the property.  The balance of the
construction loan was repaid through the proceeds of a $2,575,000 permanent loan
from a third  party  lender.  In  accordance  with the terms of the  Partnership
Agreement,  the Partnership  paid an acquisition fee of $250,000 to GP L'Auberge
Communities,   L.P.  for  its  services  in  structuring   and  negotiating  the
acquisition.  The Partnership also incurred acquisition expenses relating to the
acquisition which totaled $168,686.

On November 25, 1997,  Villas Sin Vacas was sold pursuant to the terms of a Sale
Agreement and Escrow Instruction dated May 6, 1997, as amended. Villas Sin Vacas
was sold to Villas Sin Vacas Townhome Ventures Limited  Partnership,  an Arizona
Limited Partnership unaffiliated with the Partnership. The net selling price for
Villas Sin Vacas was $4,952,091  subject to certain customary  adjustments.  The
Partnership  repaid  first  mortgage  financing in the amount of  $2,396,000  at
closing utilizing a portion of proceeds from the sale. The Partnership  recorded
a gain on sale of approximately $975,000.

Pinecliff

On July 16, 1986, the Partnership  assigned its right to acquire Pinecliff,  the
Autumn Ridge Joint Venture,  which acquired the property for a purchase price of
$7,320,760. The Partnership simultaneously contributed to the Autumn Ridge Joint
Venture  an amount  equal to the total  purchase  price less the  proceeds  of a
$3,300,000  permanent  loan.  In  accordance  with the terms of the  Partnership
Agreement,  the Partnership  paid an acquisition fee of $400,000 to GP L'Auberge
Communities,   L.P.  for  its  services  in  structuring  and  negotiating  this
acquisition.  The Partnership also incurred acquisition expenses relating to the
acquisition which totaled $97,475.






As of  January  27,  1998,  the  property  was  87%  occupied,  compared  to 86%
approximately  one year ago. At December 31, 1997 and 1996, the market rents for
the various unit types were as follows:

                                                               Market Rents
                                                               December 31,
     Unit Type ...........................................     1997     1996
------------------------------------------------------------   ------   ------
One bedroom one bath .......................................   $  930   $  921
Two bedroom two bath .......................................    1,155    1,125

As discussed in Note 9 of the Notes to the Consolidated Financial Statements, on
January 15, 1998,  the  Partnership  entered into a purchase and sale  agreement
(the "Agreement") to sell Pinecliff to an unaffiliated  third party. The selling
price for  Pinecliff is  approximately  $6,700,000.  The Agreement is subject to
completion of customary due diligence to the satisfaction of the purchaser,  and
the purchaser obtaining a financing commitment on commercially  reasonable terms
and conditions.  The  Partnership  expects to consummate this sale in the second
quarter of 1998.  The sale is contingent on the consent of the Limited  partners
to the dissolution. If closing of the sale were to occur, any proceeds from sale
will  be  allocated  to  the  Partners  in  accordance  with  the  terms  of the
Partnership Agreement and the Partnership will be liquidated.

Villa Antigua

On June 11, 1987, the Partnership  acquired a majority joint venture interest in
the Villa  Antigua Joint Venture  which owned and operated  Villa  Antigua.  The
Partnership  contributed $2,494,677 to the Villa Antigua Joint Venture which was
used to repay a portion of the construction loan on the property. The balance of
the construction loan was repaid through the proceeds of a $3,200,000  permanent
loan from a third party lender.  In accordance with the terms of the Partnership
Agreement,  the Partnership  paid an acquisition fee of $350,000 to GP L'Auberge
Communities,   L.P.  for  its  services  in  structuring   and  negotiating  the
acquisition.  The Partnership also incurred acquisition expenses relating to the
acquisition which totaled $31,729.

On October 10,  1997,  Villa  Antigua  was sold  pursuant to the terms of a Sale
Agreement and Escrow  Instructions dated May 6, 1997, as amended.  Villa Antigua
was sold to Villa Sin  Antigua  Condominium  Ventures  Limited  Partnership,  an
Arizona Limited Partnership unaffiliated with the Partnership.  The net selling
price for Villa Antigua was $6,141,526 subject to certain customary adjustments.
The Partnership  repaid first mortgage  financing in the amount of $3,010,362 at
closing utilizing a portion of proceeds from the sale. The Partnership  recorded
a gain on sale of approximately $1,307,000.


ITEM 3.   LEGAL PROCEEDINGS

There are no material  pending legal  proceedings to which the Partnership or of
which any of the properties is the subject.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of 1997.



<PAGE>



                                                      PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
          SHAREHOLDER MATTERS

The  transfer  of Units is  subject  to  certain  limitations  contained  in the
Partnership  Agreement.  There is no public  market  for the Units and it is not
anticipated that any such public market will develop.

The number of holders of Units as of December 31, 1997 was 1,903.

Distributions  are made to the Partners on a quarterly basis based upon Net Cash
from Operations,  as calculated  under Section 10 of the Partnership  Agreement.
Total cash  distributions  to the Limited Partners for 1997 and 1996, as well as
the Distributions from Proceeds of Sale were paid as follows:

                                                  Date of
Quarter Ended ................................   Payment                 Amount
----------------------------------------------   -----------------   ----------
March 31, 1996 ..............................   May 15, 1996        $   97,263
June 30, 1996 ...............................   August 15, 1996     $   97,263
September 30, 1996 ..........................   December 11, 1996   $   97,263
December 31, 1996 ...........................   February 28, 1997   $   97,263
March 31, 1997 ..............................   May 15, 1997        $   97,263
June 30, 1997 ...............................   August 15, 1997     $   97,263
September 30, 1997 ..........................                       $        0
December 31, 1997 ...........................   December 31, 1997   $5,349,465

ITEM 6.   SELECTED FINANCIAL DATA

The  following  selected  financial  data of the  Partnership  and  consolidated
subsidiaries has been derived from consolidated  financial statements audited by
Coopers & Lybrand,  L.L.P.,  whose  reports for the periods  ended  December 31,
1997, 1996 and 1995 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated  financial  statements of the Partnership
including the Notes thereto.

<TABLE>
                                                                                Year Ended
                                                   ---------------------------------------------------------------------
                                                      12/31/97      12/31/96       12/31/95      12/31/94      12/31/93
<S>                                                 <C>           <C>            <C>           <C>           <C>
Rental income                                       $2,255,625    $2,615,350     $2,725,119    $2,572,947    $2,391,911
Net income (loss)                                   $2,009,610    ($167,778)       $309,115      $260,976      $141,982

Net income (loss) allocated to Partners:
   Limited Partners - Per Unit- Basic and diluted:
      Aggregate 32,421 Units                            $59.52       ($5.12)          $9.06         $7.65         $4.16
   General Partners                                    $79,805      ($1,678)        $15,456       $13,049        $7,099

Cash distributions to Partners:
   Limited Partners:
      Weighted average per Unit                        $174.00        $12.00         $15.50        $17.75         $9.50
   General Partners                                    $15,358       $20,476        $26,449       $30,288       $16,211

Total assets                                        $6,383,338   $15,644,667    $16,274,801   $16,587,271   $17,032,336
Long term obligations                               $3,058,800    $8,559,930     $8,695,278    $8,818,891    $8,931,713

Long term  obligations  become due in 1998. The Partnership  intends to sell the
property or refinance this note prior to the due date.

</TABLE>


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

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations contains  forward-looking  statements  including those concerning the
General Partners' expectations regarding future financial performance and future
events.   These   forward-looking   statements  involve  significant  risks  and
uncertainties,  including  those  described  herein.  Actual  results may differ
materially from those anticipated by such forward-looking statements.


Liquidity; Capital Resources

In connection with its  capitalization,  the Partnership  admitted investors who
purchased  a total of  32,421  Units  aggregating  $16,210,500.  These  offering
proceeds,  net of  organizational  and offering  costs of  $2,431,575,  provided
$13,778,925  of net  proceeds to be used for the  purchase  of  income-producing
residential properties, including related fees and expenses, and working capital
reserves.  The Partnership expended $10,410,263 to (i) acquire its joint venture
interests in the Sin Vacas Joint Venture,  the Villa Antigua Joint Venture,  and
the Autumn Ridge Joint  Venture,  (ii) to pay  acquisition  expenses,  including
acquisition fees to one of the General Partners,  and (iii) to pay certain costs
associated with the refinancing of the Pinecliff permanent loan. The Partnership
distributed  $1,731,681 to the Limited Partners as a return of capital resulting
from  construction  cost savings with  respect to the Sin Vacas,  Pinecliff  and
Villa Antigua  projects and other excess  offering  proceeds.  The remaining net
proceeds of $1,636,981 were used to establish  initial working capital reserves.
These reserves have been used periodically to enable the Partnership to meet its
various  financial  obligations  including  contributions  to the various  Joint
Ventures that may be required.  Cumulatively through December 31, 1997, $513,611
was contributed to the Joint Ventures for this purpose.

In addition to the proceeds generated from the public offering,  the Partnership
utilized  external  sources of financing at the joint  venture level to purchase
properties. The Partnership Agreement limits the aggregate mortgage indebtedness
which  may be  incurred  in  connection  with  the  acquisition  of  Partnership
properties to 80% of the purchase price of such properties.

The  working  capital  reserves  of the  Partnership  consist  of cash  and cash
equivalents  and  short-term  investments.  Together  these amounts  provide the
Partnership with the necessary  liquidity to carry on its day-to-day  operations
and to make necessary  contributions to the various Joint Ventures. In 1997, the
aggregate net decrease in working capital  reserves was $644,275.  This decrease
resulted primarily from cash provided by operations of $60,516 and proceeds from
the sale of  property of  $11,093,617,  offset by  distributions  to partners of
$5,656,612  and  $5,501,130  of principal  payments on mortgage  notes  payable,
$490,710 of fixed asset  additions,  $131,413 funds held in escrow in connection
with the sale of the properties and $21,025 for loan refinancing costs.

In 1996,  the aggregate net increase in working  capital  reserves was $585,466.
This increase  resulted  primarily  from cash provided by operations of $349,757
and  maturities of short-term  investments  of $1,043,580  offset by $281,346 of
fixed asset  additions,  distributions  to partners of $389,052  and $135,348 of
principal payments on mortgage notes payable.

On October 10,  1997,  Villa  Antigua  was sold  pursuant to the terms of a Sale
Agreement and Escrow  Instructions dated May 6, 1997, as amended.  Villa Antigua
was sold to Villa Sin  Antigua  Condominium  Ventures  Limited  Partnership,  an
Arizona Limited Partnership unaffiliated with the  Partnership.  The net selling
price for Villa Antigua was $6,141,526 subject to certain customary adjustments.
The Partnership  repaid first mortgage  financing in the amount of $3,010,362 at
closing utilizing a portion of proceeds from the sale. The Partnership  recorded
a gain on sale of approximately $1,307,000.

On November 25, 1997,  Villas Sin Vacas was sold pursuant to the terms of a Sale
Agreement  and Escrow  Instructions  dated May 6, 1997,  as amended.  Villas Sin
Vacas was sold to Villas Sin Vacas Townhome  Ventures  Limited  Partnership,  an
Arizona Limited Partnership unaffiliated with the  Partnership.  The net selling
price  for  Villas  Sin  Vacas  was  $4,952,091  subject  to  certain  customary
adjustments.  The Partnership  repaid first mortgage  financing in the amount of
$2,396,000  at  closing  utilizing  a portion  of  proceeds  from the sale.  The
Partnership recorded a gain on sale of approximately $975,000.

With regard to a certain  balloon  payment on existing  first mortgage debt (see
Note 6 of the Notes to Consolidated  Financial  Statements) on the Partnership's
property  which is due and  payable in 1998,  the  General  Partners  anticipate
repaying  the loan  utilizing a portion of the sales  proceeds  from the pending
sale of the  property.  See Item 2 above.  In the event the pending  sale is not
consummated,  the General  Partners will seek to renegotiate  this mortgage note
with its existing lender or seek new sources of financing for this property.  To
date,  the General  Partners have neither  sought to extend or  renegotiate  the
existing  mortgage  debt nor have they sought new financing for the property and
there can be no assurance that they would be successful in doing so. The General
Partners believe that existing cash flow from the property will be sufficient to
support a level of borrowing that is at least equal to the amount outstanding as
of December 31, 1997.  If the general  economic  climate for real estate in this
location  were to  deteriorate  resulting  in an increase in interest  rates for
mortgage  financing or a reduction in the  availability  of real estate mortgage
financing  or a decline  in the market  values of real  estate it may affect the
Partnership's  ability to complete this  refinancing.  See also  projected  1998
operating results.

In the event that Pinecliff is not sold pursuant to the Purchase Agreement,  the
Partnership would continue to operate the property until a substitute sale could
be  negotiated  and  consummated.  The  Partnership's  ability to generate  cash
adequate to meet its needs is dependent primarily on the successful operation of
its real estate  investment.  Such ability may also be dependent upon the future
availability of bank borrowings, and upon the future refinancing and sale of the
Partnership's  real  estate  investment  and  the  collection  of  any  mortgage
receivable which may result from such a sale. These sources of liquidity will be
used  by the  Partnership  for  payment  of  expenses  related  to  real  estate
operation,  debt service and professional and management fees and expenses.  Net
Cash From  Operations  and Net Proceeds,  if any, as defined in the  Partnership
Agreement, will then be available for distribution to the Partners in accordance
with Section 10 of the Partnership Agreement.  The General Partners believe that
the current working capital reserves  together with projected cash flow for 1998
are adequate to meet the  Partnership's  operating cash needs in the coming year
if the  Partnership  is required  to  continue  to own and operate its  property
assuming the existing mortgage debt can be extended, renegotiated or refinanced.

Results of Operations

For the year ended December 31, 1997, the  Partnership's  operating results were
comprised  of its share of the  income  and  expenses  from the Villas Sin Vacas
(through date of sale),  Pinecliff and Villa Antigua properties (through date of
sale),  as well as  Partnership  level  interest  income  earned  on  short-term
investments,  reduced by administrative  expenses.  A summary of these operating
results (unaudited) appears below:
<TABLE>

                                  Sin                         Villa       Investment    Consolidated
                                 Vacas       Pinecliff       Antigua      Partnership      Total
<S>                            <C>              <C>           <C>             <C>         <C>
Total revenue                  $1,617,267       $952,750      $1,973,680      $73,177     $4,616,874

Expenses:
  General and administrative          -             -              -          227,785        227,785
  Operations                      364,115        469,256         370,078          -        1,203,449
  Depreciation and                126,222        200,626          98,092          -          424,940
     Amortization
  Interest                        220,852        284,112         246,126          -          751,090
                              ------------ -------------- --------------- ------------ --------------
                                  711,189        953,994         714,296      227,785      2,607,264
                              ------------ -------------- --------------- ------------ --------------
                              ------------ -------------- --------------- ------------ --------------

Net income (loss)                $906,078       ($1,244)      $1,259,384   ($154,608)     $2,009,610
                              ============ ============== =============== ============ ==============



<PAGE>



For the year ended December 31, 1996, the  Partnership's  operating results were
comprised  of its share of the income and  expenses  from the Sin Vacas,  Autumn
Ridge and Villa Antigua Joint  Ventures,  as well as partnership  level interest
income earned on short term investments,  reduced by administrative  expenses. A
summary of these operating results (unaudited) appears below:

                                  Sin                          Villa       Investment   Consolidated
                                 Vacas        Pinecliff       Antigua        Total         Total
<S>                               <C>          <C>              <C>            <C>        <C>
Total revenue                     $694,550     $1,022,283       $901,463       $53,445    $2,671,741

Expenses:
  General and administrative         1,686        -                  259       381,328       383,273
  Operations                       410,622        437,646        363,192        26,368     1,237,828
  Depreciation and                 126,677        181,804        122,636          -          431,117
amortization
  Interest                         223,411        286,313        277,577          -          787,301
                              ------------- -------------- -------------- ------------- -------------
                                   762,396        905,763        763,664       407,696     2,839,519
                              ------------- -------------- -------------- -------------- ------------
Net income (loss)                ($67,846)       $116,520       $137,799    ($354,251)    ($167,778)
                              ============= ============== ============== ============= =============

For the year ended December 31, 1995, the  Partnership's  operating results were
comprised  of its share of the income and  expenses  from the Sin Vacas,  Autumn
Ridge and Villa Antigua Joint  Ventures,  as well as partnership  level interest
income earned on short term investments,  reduced by administrative  expenses. A
summary of these operating results (unaudited) appears below:

                                  Sin                          Villa       Investment   Consolidated
                                 Vacas        Pinecliff       Antigua        Total         Total
<S>                               <C>          <C>              <C>            <C>        <C>
Total revenue                     $755,680     $1,041,402       $930,236       $81,023    $2,808,341

Expenses:
  General and administrative         7,200          7,244          7,200       183,245       204,889
  Operations                       353,533        420,726        310,611       -           1,084,870
  Depreciation and                 118,909        173,174        118,217       -             410,300
amortization
  Interest                         226,761        290,606        281,800       -             799,167
                              ------------- -------------- -------------- ------------- -------------
                                   706,403        891,750        717,828       183,245     2,499,226
                              ------------- -------------- --------------  ------------ ------------

Net income (loss)                  $49,277       $149,652       $212,408    ($102,222)      $309,115
                              ============= ============== ============== ============= =============
</TABLE>

Comparison of 1997 and 1996 Operating Results:

Total revenue increased by $1,945,133 or 73%, primarily due to gains recorded on
the sale of Villas Sin Vacas and Villa  Antigua on November 25, 1997 and October
10,  1997,  respectively.  The  total  gain  on  both  sales  was  approximately
$2,300,000.  Operating  expenses decreased by $34,379 or 3% primarily due to the
sale of  those  properties,  as such  reflecting  only a  portion  of the  years
expenses in 1997.  This was offset by one-time costs of preparing the properties
for  disposition,  including an increase in repairs and  maintenance of $77,779.
General and administrative  expenses have decreased by $155,488 or 41%, of which
$73,775 was due to the Evans Withycombe  termination fee in 1996. A contributing
factor to the additional reduction of $81,713 was due to the re-stabilization of
costs  associated  with  Partnership  administrative,   financial  and  investor
services  functions   following  the  office  relocation  to  Colorado  Springs,
Colorado.

Comparison of 1996 and 1995 Operating Results:

In accordance with its dispositions  strategy, the Partnership incurred one time
costs associated with the Evans Withycombe termination  ($73,775),  the Highland
termination  (($7,718) and their related legal costs.  (Refer to Note 5 of Notes
to Consolidated  Financial  Statements.) In addition,  the Partnership  incurred
one-time costs associated with its property interior and exterior  refurbishment
program,  the  change in  on-site  management  following  the  Evans  Withycombe
termination, the outsourcing of much of the Partnership's administration work to
an  administrative  agent and the  relocation of the  remaining  administration,
financial and investor services  functions to a more cost efficient  location in
Colorado   Springs,   Colorado.   Consequently,    competitive   pressures   and
disposition-related  activities  led to  rental  operating  expenses  (including
advertising,  promotion,  apartment locator and concession costs) to increase by
$152,958  or 14% over  the  prior  year and  total  general  and  administrative
expenses of the Partnership  increased $178,384 (87%) over the prior year. Fixed
asset purchases increased $281,346 from $141,735 in the prior year and consisted
of such items as carpet, appliances,  equipment for fitness and business centers
facilities, and remodeling features. As a result of the factors described above,
distributions to partners decreased  $119,446,  or 23%, from $528,974 in 1995 to
$409,528 in 1996.

Projected 1998 Operating Results:

As  further  discussed  in Item 2  above  and in  Note  9 of the  Notes  to the
Consolidated  Financial  Statements,  the property  owned by the  Partnership is
under contract to be sold to a purchaser unaffiliated with the General Partners.
Under the terms of the Purchase  Agreement,  it is anticipated  that the closing
would  occur  during  the  second  quarter  of 1998.  If the sale does  occur as
anticipated,  the Partnership will likely be liquidated in 1998.  Although there
can be no assurance  the  Partnership  will dispose of its property  during 1998
pursuant to the Purchase Agreement or otherwise,  if the Dissolution is approved
by the Limited Partners, the Partnership will continue to seek to dispose of its
property.  In the event that the  Partnership  were to  dispose of its  property
during 1998,  operating results of the Partnership would vary significantly from
those achieved in prior periods.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Appendix A to this Report.

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None


<PAGE>


                                    PART III


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership is a limited partnership and, as such, has no executive officers
or directors.  The General  Partners of the Partnership are Stephen B, Boyle and
GP  L'Auberge  Communities,  L.P., a California  limited  partnership,  of which
L'Auberge   Communities   Inc.   (formerly   known  as  Berry  and  Boyle  Inc.)
("L'Auberge") is the general partner.

Individual General Partners

Stephen B.  Boyle,  age 57, is  President,  Executive  Officer  and  Director of
L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge
Communities,  a California  Limited  Partnership  (formerly Berry and Boyle),  a
limited  partnership  formed  in 1983 to  provide  funds to  various  affiliated
general  partners  of real  estate  limited  partnerships,  one of  which  is GP
L'Auberge Communities, L.P.

In September  1995, with the consent of Limited  Partners  holding a majority of
the outstanding  Units,  as well as the consent of the mortgage  lenders for the
Partnership's  three properties,  Richard G. Berry resigned as a general partner
of the Partnership.

GP L'Auberge Communities, L.P.

GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of acting as a
general partner in partnerships  formed to invest directly or indirectly in real
property.  L'Auberge  is the sole general  partner of GP L'Auberge  Communities,
L.P. The following sets forth certain  biographical  information with respect to
the executive  officers and  directors of L'Auberge  other than Stephen B. Boyle
who is discussed above. There are no familial relationships between or among any
officer or director and any other officer or director.

Name                                                         Position

Stephen B. Boyle            President, Executive Officer and Director
Earl C. Robertson           Executive Vice President and Chief Financial Officer
Donna Popke                 Vice President and Secretary

Earl C. Robertson,  age 50, has been Executive Vice President of L'Auberge since
April 1995 and its Chief  Financial  Officer of  L'Auberge  since May 1996.  Mr.
Robertson joined  L'Auberge in April 1995 as Executive Vice President.  Prior to
joining  L'Auberge,  Mr.  Robertson  had  over 20 years  experience  as a senior
development  officer,  partner and  consultant in several  prominent real estate
development companies,  including Potomac Investment Associates,  a developer of
planned golf course communities  nationwide,  where he was employed from 1989 to
June 1993. He also served as a consultant to Potomac Sports Properties from July
1993 to April 1995. Mr.  Robertson was also a key member of the management  team
that developed the nationally acclaimed Inn at the Market in Seattle.

Donna Popke,  age 38, has been Vice President of L'Auberge  since November 1995.
Ms. Popke joined L'Auberge in June 1994 as Accounting Manager.  Prior to joining
L'Auberge,  Ms. Popke was  Accounting  Manager for David R. Sellon & Company,  a
Colorado Springs land development company, from August 1989 to June 1994 and for
Intermec of the Rockies from September 1985 to July 1989.


ITEM 11. EXECUTIVE COMPENSATION

None of the General Partners or any of their officers or directors  received any
compensation  from  the  Partnership.  See  Item  13  below  with  respect  to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

As of March 21,  1998,  no person  of record  owned or was known by the  General
Partners  to own  beneficially  more  than 5% of the  Partnership's  outstanding
Units.  Neither of the General  Partners nor any of their directors and officers
owns Units.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During  the year  ended  December  31,  1997,  the  Partnership  paid or accrued
remuneration to the General  Partners or their affiliates as set forth below. In
addition to the information provided herein,  certain transactions are described
in notes 7 and 8 in the Notes to Financial  Statements  appearing in Appendix A,
which are  included  in this  report and are  incorporated  herein by  reference
thereto.

Net Cash from Operations distributed in 1997
  to the General Partners ......................   $15,358

Allocation of Income
 to the General Partners .......................   $79,805

Property management fees paid to an affiliate of
the General Partners ...........................   $87,724

Reimbursements to General Partners .............   $64,209



<PAGE>


                                                      PART IV

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

(a)      1,2          See Page F-2
         3            See Exhibit Index contained herein

(b)      Reports on Form 8-K

         The  Partnership  reported the sale of Villa  Antigua on Form 8-K filed
         October  23,  1997 and the sale of Villa  Sin  Vacas on Form 8-K  filed
         December 8, 1997.


 (c)     See Exhibit Index contained herein

(d)      See Page F-2.



<PAGE>


                                                    SIGNATURES


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




                CLUSTER HOUSING PROPERTIES

              By: GP L'Auberge Communities, L.P., a California
                      Limited Partnership, General Partner

              By: L'Auberge Communities, Inc., its General Partner


              By: __/s/ Earl C. Robertson_________________________________
                   Earl C. Robertson, Executive Vice President
                           and Chief Financial Officer

                              Date: March 26, 1998




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

       Signature                            Title                  Date



__/s/ Stephen B. Boyle________     Director, President and        March 26, 1998
    STEPHEN B. BOYLE                Principal Executive
                                    Officer of L'Auberge
                                    Communities, Inc.



__/s/ Earl C. Robertson_____      Executive Vice President and    March 26, 1998
    EARL C. ROBERTSON              Principal Financial Officer of
                                   L'Auberge Communities, Inc.



<PAGE>


                                                                F-8








                                   APPENDIX A

                           CLUSTER HOUSING PROPERTIES
                       (A California Limited Partnership)
                                AND SUBSIDIARIES
                                    ---------










                        CONSOLIDATED FINANCIAL STATEMENTS

                  ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
              COMMISSION For the Years Ended December 31, 1997 and
                                December 31, 1996




<PAGE>





                           CLUSTER HOUSING PROPERTIES
                       (A California Limited Partnership)
                                AND SUBSIDIARIES
                                    ---------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Accountants                                           F-3


Consolidated Balance Sheets at December 31, 1997 and 1996                   F-4


Consolidated Statements of Operations for the years
ended December 31, 1997, 1996 and 1995                                      F-5


Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1997, 1996 and 1995                        F-6

Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995                                F-7 -- F-8


Notes to Consolidated Financial Statements                           F-9 -- F-19


All  Schedules are omitted,  as they are not  applicable,  not required,  or the
information is provided in the financial statements or the notes thereto.



<PAGE>











                        Report of Independent Accountants


To the Partners of
Cluster Housing Properties
(a California Limited Partnership):

         We have audited the accompanying consolidated balance sheets of Cluster
Housing  Properties (a California  Limited  Partnership)  and subsidiaries as of
December  31,  1997  and  1996,  and  the  related  consolidated  statements  of
operations,  partners'  equity  (deficit)  and cash  flows for each of the three
years in the period ended December 31, 1997. These financial  statements are the
responsibility of the General Partners of the Partnership. 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 the
General Partners of the Partnership, 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 consolidated financial position of Cluster
Housing  Properties (a California  Limited  Partnership)  and subsidiaries as of
December 31, 1997 and 1996 and the consolidated  results of their operations and
their cash flows for each of the three years in the period  ended  December  31,
1997 in conformity with generally accepted accounting principles.

         As discussed in Note 9, the General  Partners of the  Partnership  have
entered  into  a  sales  agreement  to  sell  the  remaining   property  of  the
Partnership.  If closing of this sale were to occur, any proceeds from sale will
be  allocated to the Partners in  accordance  with the terms of the  Partnership
Agreement and the Partnership will likely be liquidated.



Coopers & Lybrand, L.L.P.
Denver, Colorado
February 27, 1998



<PAGE>

<TABLE>


                           CLUSTER HOUSING PROPERTIES
                       (a California Limited Partnership)
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1997 and 1996
                                 ---------------

                                     ASSETS


                                                                                           1997            1996
                                                                                   ------------    ------------
Assets held for sale/Property, at cost (Notes 3, 9)
<S>                                                                                <C>             <C>
  Land .........................................................................   $  1,242,061    $  3,677,028
  Buildings and improvements ...................................................      6,063,055      14,067,757
  Equipment, furnishings and fixtures ..........................................        642,239       1,576,836
                                                                                   ------------    ------------

                                                                                      7,947,355      19,321,621
  Less accumulated depreciation ................................................     (2,152,207)     (4,810,314)
                                                                                   ------------    ------------

                                                                                      5,795,148      14,511,307

Cash and cash equivalents ......................................................        421,580       1,065,855
Real estate tax escrows ........................................................         24,037          41,632
Deposits and prepaid expenses ..................................................        133,285           3,818
Accounts receivable ............................................................          1,400           2,605
Deferred expenses, net of accumulated
  amortization of $205,147 and $175,041 ........................................          7,888          19,450
                                                                                   ------------    ------------

         Total assets ..........................................................   $  6,383,338    $ 15,644,667
                                                                                   ============    ============

                                      LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Mortgage notes payable .........................................................   $  3,058,800    $  8,559,930
Accounts payable ...............................................................         83,637         115,410
Accrued expenses ...............................................................        131,588         195,794
Due to affiliates (Note 8) .....................................................         16,076           8,975
Rents received in advance ......................................................          1,984           4,538
Tenant security deposits .......................................................         33,555          55,320
                                                                                   ------------    ------------

         Total liabilities .....................................................      3,325,640       8,939,967


General Partners' deficit ......................................................       (127,847)       (192,294)
Limited Partners' equity .......................................................      3,185,545       6,896,994
                                                                                   ------------    ------------

        Total liabilities and partners' equity .................................   $  6,383,338    $ 15,644,667
                                                                                   ============    ============



                                              CLUSTER HOUSING PROPERTIES
                                          (a California Limited Partnership)
                                                   AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF OPERATIONS

                                 For the years ended December 31, 1997, 1996, and 1995
                                                     -------------


                                                                                          1997          1996           1995
                                                                                   -----------   -----------    -----------
Revenue:
<S>                                                                                <C>           <C>            <C>
   Rental income ...............................................................   $ 2,255,625   $ 2,615,350    $ 2,725,119
   Interest income .............................................................        79,666        56,391         83,222
   Gain from sale of properties ................................................     2,281,583          --             --
                                                                                   -----------   -----------    -----------

Total Revenue ..................................................................     4,616,874     2,671,741      2,808,341

Expenses:
   Operations ..................................................................     1,203,449     1,237,828      1,084,870
   Interest expense ............................................................       751,090       787,301        799,167
   Depreciation and amortization ...............................................       424,940       431,117        410,300
   General and administrative ..................................................       227,785       383,273        204,889

                                                                                   -----------   -----------    -----------
Total Expenses .................................................................     2,607,264     2,839,519      2,499,226
                                                                                   -----------   -----------    -----------

Net income (loss) ..............................................................   $ 2,009,610   ($  167,778)   $   309,115
                                                                                   ===========   ===========    ===========

Net income (loss) allocated to:
  General Partners .............................................................   $    79,805   ($    1,678)   $    15,456

  Basic and diluted per unit Net income  (loss)  allocated  to Investor  Limited
    Partner interest:
       32,421 units issued .....................................................   $     59.52   ($     5.12)   $      9.06








<PAGE>






                                           CLUSTER HOUSING PROPERTIES
                                       (a California Limited Partnership)
                                                AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

                             For the years ended December 31, 1997, 1996, and 1995
                                                 -------------

                                                                                   Investor           Total
                                                                    General        Limited          Partners'
                                                                   Partners        Partners           Equity

<S>                                                                  <C>             <C>               <C>
Balance at December 31, 1994                                         (159,147)       7,669,907         7,510,760

Cash distributions                                                    (26,449)       (502,525)         (528,974)

Net income                                                              15,456         293,659           309,115
                                                                 -------------- ---------------   ---------------

Balance at December 31, 1995                                        ($170,140)      $7,461,041        $7,290,901

Minority interest                                                          -           (8,895)           (8,895)
absorbed

Cash distributions                                                    (20,476)       (389,052)         (409,528)

Net loss                                                               (1,678)       (166,100)         (167,778)
                                                                     -------------- ---------------   ---------------

Balance at December 31, 1996                                         (192,294)       6,896,994         6,704,700

Cash distributions                                                    (15,358)     (5,641,254)       (5,656,612)

Net income                                                              79,805       1,929,805         2,009,610
                                                                 -------------- ---------------   ---------------

Balance at December 31, 1997                                        ($127,847)      $3,185,545        $3,057,698
                                                                 ============== ===============   ===============



<PAGE>








                                                  CLUSTER HOUSING PROPERTIES
                                              (a California Limited Partnership)
                                                       AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                      for the years ended December 31, 1997, 1996, 1995
                                                        -------------

Cash flows from operating activities: ...............           1997            1996            1995
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
  Interest received .................................   $     79,666    $     80,257    $     82,408
  Cash received from rental income ..................      2,231,306       2,607,383       2,716,163
  General and administrative expenses ...............       (243,185)       (370,245)       (201,143)
  Operations expense ................................     (1,235,265)     (1,179,822)     (1,039,036)
  Interest paid .....................................       (772,006)       (787,816)       (799,636)
                                                        ------------    ------------    ------------
Net cash provided by operating activities ...........         60,516         349,757         758,756

Cash flows from investing activities:
  Proceeds from sale of properties ..................     11,093,617            --              --
  Capital improvements ..............................       (490,710)       (281,346)       (148,127)
  Deposit with escrow agent .........................       (131,413)           --              --
  Cash received from short-term investments .........           --         1,043,580         327,298
                                                        ------------    ------------    ------------

Net cash provided by investing activities ...........     10,471,494         762,234         179,171

Cash flows from financing activities:
  Distributions to partners .........................     (5,656,612)       (389,052)       (528,974)
  Deposits ..........................................          2,482          (2,125)           (358)
  Cash paid for loan refinancing ....................        (21,025)           --              --
  Principal payments on mortgage notes payable ......     (5,501,130)       (135,348)       (123,613)
                                                        ------------    ------------    ------------

Net cash used by financing activities ...............    (11,176,285)       (526,525)       (652,945)
                                                        ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents        (644,275)        585,466         284,982

Cash and cash equivalents at beginning of  the period      1,065,855         480,389         195,407
                                                        ------------    ------------    ------------

Cash and cash equivalents at end of the period ......   $    421,580    $  1,065,855    $    480,389
                                                        ============    ============    ============

Non cash financing activities:
   Accrual of distributions to partners .............   $          0    $     20,476    $          0



<PAGE>




                                              CLUSTER HOUSING PROPERTIES
                                          (a California Limited Partnership)
                                                   AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS


                                   for the years ended December 31, 1997, 1996, 1995

                                                     -------------

Reconciliation   of  net  income  (loss)  to  net  cash  provided  by  operating
activities:


                                                                                          1997           1996           1995
                                                                                   -----------    -----------    -----------
<S>                                                                                <C>            <C>            <C>
Net income (loss) ..............................................................   $ 2,009,610    ($  167,778)   $   309,115

Adjustments to  reconcile  net income  (loss) to net cash  provided by operating
  activities:
  Depreciation and amortization ................................................       424,940        431,117        410,300
  Gain from sale of property ...................................................    (2,281,583)          --             --
Change in assets  and  liabilities  net of effects of  investing  and  financing
activities:
    Decrease in real estate tax escrows ........................................        17,595          2,423          7,750
    Decrease in deposits and prepaid expenses ..................................         1,946           --            2,033
    (Increase) decrease in accounts receivable .................................         1,205         21,951         (1,445)
    (Decrease) increase in accounts payable and accrued expenses ...............       (95,979)        84,185         35,871
    (Decrease) increase in due to affiliates ...................................         7,101        (14,198)         4,088
    Decrease in rent received in advance .......................................        (2,554)        (5,957)        (3,526)
    Decrease in tenant security deposits .......................................       (21,765)        (1,986)        (5,430)
                                                                                   -----------    -----------    -----------

Net cash provided by operating activities ......................................   $    60,516    $   349,757    $   758,756
                                                                                   ============    ===========   ===========
</TABLE>


<PAGE>


                           CLUSTER HOUSING PROPERTIES
                       (A California Limited Partnership)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------




1.  Organization of Partnership:

Cluster   Housing   Properties   (a   California   Limited   Partnership)   (the
"Partnership"),  formerly Berry and Boyle Cluster Housing Properties, was formed
on August  8,  1983.  The  Partnership  issued  all of the  General  Partnership
Interests  to three  General  Partners  in exchange  for  capital  contributions
aggregating  $2,000.  Stephen B. Boyle and GP L'Auberge  Communities,  L.P.,  (a
California Limited  Partnership),  formerly Berry and Boyle Management,  are the
General  Partners.  In  September,  1995,  with the consent of Limited  Partners
holding a  majority  of the  outstanding  Units,  as well as the  consent of the
mortgage  lenders  for the  Partnership's  three  properties,  Richard  G. Berry
resigned as a general partner of the Partnership.

A  total  of  2,000  individual   Limited  Partners  owning  32,421  units  have
contributed $16,210,500 of capital to the Partnership. At December 31, 1997, the
total  number of  Limited  Partners  was 1,903.  Except  under  certain  limited
circumstances, as defined in the Partnership Agreement, the General Partners are
not required to make any additional capital contributions.  The General Partners
or their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.

The Partnership will continue until December 31, 2010, unless terminated earlier
by the sale of all, or substantially  all, of the assets of the Partnership,  or
otherwise in accordance  with the  provisions  of Section 16 of the  Partnership
Agreement (See Note 9.)

2.  Significant Accounting Policies:

         A.  Basis of Presentation

         The  consolidated  financial  statements  include  the  accounts of the
         Partnership and its subsidiaries:  Sin Vacas Joint Venture (Sin Vacas),
         Autumn  Ridge Joint  Venture  (Autumn  Ridge) and Villa  Antigua  Joint
         Venture (Villa  Antigua).  All  intercompany  accounts and transactions
         have been  eliminated in  consolidation.  The  Partnership  follows the
         accrual basis of accounting.  Refer to Note 5 regarding the termination
         of the  Joint  Ventures  and the sale of  Villas  Sin  Vacas  and Villa
         Antigua.

         B.  Cash and Cash Equivalents

         The Partnership  considers all highly liquid debt instruments purchased
         with a maturity  of three  months or less to be cash  equivalents.  The
         carrying value of cash and cash equivalents approximates fair value. It
         is  the  Partnership's   policy  to  invest  cash  in  income-producing
         temporary cash  investments.  The  Partnership  mitigates any potential
         risk from such concentration of credit by placing investments with high
         quality financial institutions.

         C. Significant Risks and Uncertainties

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

         D.  Depreciation

         Depreciation  is provided  for by the use of the  straight-line  method
         over estimated useful lives as follows:

                  Buildings and improvements                         39-40 years
                  Equipment, furnishings and fixtures                 5-15 years

         E.  Deferred Expenses

         Costs of obtaining or extending  mortgages on the  properties are being
         amortized over the mortgage term using the straight-line  method, which
         approximates the effective interest method. Fees paid to certain of the
         property  developers  were  amortized  over  the  term of the  services
         provided  using  the  straight-line   method.   Any  unamortized  costs
         remaining  at the date of a  refinancing  are  expensed  in the year of
         refinancing.

         F.  Income Taxes

         The Partnership is not liable for Federal or state income taxes because
         Partnership  income or loss is allocated to the Partners for income tax
         purposes. If the Partnership's tax returns are examined by the Internal
         Revenue  Service  or state  taxing  authority  and such an  examination
         results in a change in Partnership  taxable income (loss),  such change
         will be reported to the Partners.

         G. Rental Income

         Leases require the payment of rent in advance;  however,  rental income
         is recorded as earned.

         H. Long-Lived Assets

         In 1996,  the  Partnership  adopted  Statement of Financial  Accounting
         Standards  No.  121  (SFAS  121),  "Accounting  for the  Impairment  of
         Long-Lived Assets to be Disposed of." SFAS 121 requires that long-lived
         assets  be  reviewed  for  impairment  whenever  events or  changes  in
         circumstances   indicate   that  their   carrying   value  may  not  be
         recoverable. The adoption of SFAS 121 had no effect on reported results
         in 1996.  As further  discussed in Note 9, for the year ended  December
         31, 1997, the Partnership  recorded the assets at the lower of carrying
         value or net realizable  value and has included these amounts as Assets
         Held for Sale.

         For the years ended  December 31, 1997 and 1996,  permanent  impairment
         conditions did not exist at any of the Partnership's properties.

         I. Reclassification

         Certain items in the financial  statements for the years ended December
         31,  1996  and 1995  have  been  reclassified  to  conform  to the 1997
         presentation.
         
         J.  New Accounting Standards

         In 1997,  the  Partnership  adopted  Statement of Financial  Accounting
         Standards  No. 128 (SFAS 128),  "Earnings  Per Share." This  accounting
         standard  specifies  new  computation,   presentation,  and  disclosure
         requirements for earnings per share to be applied retroactively.  Among
         other  things,  SFAS 128  requires  presentation  of basic and  diluted
         earnings per share on the face of the income statement. The computation
         of basic and diluted  earnings per share was based on income  available
         to the Limited Partners divided by the weighted average number of units
         outstanding  during the period.  The  Partnership  has no dilutive type
         securities.  The  adoption  of SFAS 128 had no  effect  on the per unit
         results previously reported.


<PAGE>







3. Assets held for sale:

Assets held for sale consisted of the following at December 31, 1997:
<TABLE>

                            Initial Cost                                  Costs Capitalized                   Gross Amount
                                                                                                               At Which
                                                                                                               Carried
                                 to                                   Subsequent to Acquisition              at Close of
                            Partnership                                                                         Period
               ----------------------------------   ------------------------- ---------------------------------- -------  ----------
                           Buildings   Equipment        Buildings  Equipment           Buildings     Equipment
 Property                  and         Furniture           and     Furniture                and        Furniture  Accum.
 Description   Land     Improvements  & Fixtures   Land Imprvments & Fixtures  Land   Improvements   & Fixtures  Depre.     Total
-------------------------------------------------  -------------------------- ---------------------------------- -------  ----------
Pinecliff,
a 96-unit residential rental
  complex located in
  Colo. Springs, 
  Colorado
 
<S>           <C>        <C>          <C>               <C>       <C>        <C>        <C>         <C>      <C>          <C>       
              $1,242,061 $5,981,166   $380,288     -    $81,889   $261,951   $1,242,061 $6,063,055  $642,239 ($2,152,207) $5,795,148

              ---------------------------------- --------------------------- -------------------------------- ----------- ----------
              $1,242,061 $5,981,166   $380,288     -   $81,889    $261,951   $1,242,061 $6,063,055  $642,239 ($2,152,207) $5,795,148
              =================================== ========================== =============================== ============ ==========
Pinecliff is encumbered by a nonrecourse mortgage note payable (see Note 6).
Villas at Sin Vacas and Villa Antigua were sold in 1997.

The changes in total real estate assets for the years ended              The change in accumulated depreciation for the
  December 31, 1997, 1996, and 1995 are as follows:                          years ended December 31, 1997, 1996, and 1995
                                                                                     are as follows:

                               1997          1996            1995                                  1997          1996           1995
                               -----         -----           -----                                 -----         -----          ----
<S>                          <C>            <C>            <C>                                    <C>         <C>         <C>       
Balance, beginning of year   $19,321,621    $19,040,329    $18,892,202   Bal., beg. of year       $4,810,314  $4,418,093  $4,046,690

Additions during the period:
   Improvements                 $490,710       $281,292      $148,127    Depr for the period         $394,834  $392,221    $371,403

Deductions during the period:
   Sale of Sin Vacas        ($5,593,045)       -               -         Disposition of Sin Vacas ($1,615,565)      -            -
   Sale of Villa Antigua    ($6,271,931)       -               -          Disposition of 
                                                                           Villa Antigua          ($1,437,376)      -            -

                            ==========================================                   ===========================================
Balance at end of           $7,947,355    $19,321,621    $19,040,329     Bal. at end of year     $2,152,207   $4,810,314  $4,418,093
year                        ==========================================                   ===========================================

</TABLE>

<PAGE>


4.  Cash and Cash Equivalents:

Cash and cash  equivalents  at  December  31,  1997  and 1996  consisted  of the
following:


                                1997         1996
                          ----------   ----------
Cash on hand ..........   $  132,330   $  854,769
Certificate of deposits         --        211,086
Money market accounts .      289,250        -
                           ----------  ----------

                          $  421,580   $1,065,855

5.  Joint Venture and Property Acquisitions:

The  Partnership  has invested in three  properties  located in  Scottsdale  and
Tucson,  Arizona and Colorado Springs,  Colorado. The success of the Partnership
will  depend upon  factors  which are  difficult  to predict  including  general
economic and real estate market conditions,  both on a national basis and in the
areas where the Partnership's  investments are located.  The Partnership holds a
majority  interest in these  properties and controls the operations of the joint
ventures.

Villas Sin Vacas

On October 25, 1985,  the  Partnership  acquired a majority  interest in the Sin
Vacas Joint Venture,  which owns and operates the Villas at Sin Vacas, a 72-unit
residential  property located in Tucson,  Arizona.  Since the Partnership owns a
majority interest in the Sin Vacas Joint Venture, the accounts and operations of
the Sin Vacas Joint Venture have been consolidated into the Partnership.

The co-venture  partner was an affiliate of Evans Withycombe,  Inc.  ("EWI"),  a
Phoenix based residential development,  construction and management firm. EWI is
also the developer of the Villas Sin Vacas property.

The Partnership made initial cash payments in the form of capital  contributions
totaling $2,458,507 and funded $398,949 of property acquisition costs which were
treated as a capital  contribution  to the joint  venture.  Since  completion of
construction,   the  Partnership  has  made  additional  contributions  totaling
$275,167.  At December 31, 1997, the total capital contributions and acquisition
costs incurred were $2,713,937 and $418,686, respectively.

JANUARY 1, 1996 THROUGH MAY 13, 1996

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to the  Partnership,  an  amount  equal  to  8.75%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of completion funding) of the Partnership's capital investment, as
         defined in the joint venture agreement;

         Second, the balance 70% to the Partnership and 30% to the co-venturer.

All losses from operations and depreciation for the Sin Vacas Joint Venture were
allocated 99% to the Partnership and 1% to the co-venturer.



All profits from operations,  to the extent of cash distributions were allocated
to  the  Partnership  and  co-venturer  in  the  same  proportion  as  the  cash
distribution. Any remaining profits are allocated 70% to the Partnership and 30%
to the co-venturer.

In the case of certain capital  transactions and distributions as defined in the
joint venture  agreement,  the  allocation of related  profits,  losses and cash
distributions,  if any, would be different than as described  above and would be
effected by the relative balances in the individual partners' capital accounts.

For the years ended December 31, 1997, 1996 and 1995 the Sin Vacas Joint Venture
had net income,  including gain on sale of $906,078, net loss of $67,846 and net
income of $49,277, respectively.

Villa Antigua

On June 11,  1987,  the  Partnership  acquired a majority  interest in the Villa
Antigua  Joint  Venture,  which  owns and  operates  Villa  Antigua,  an 88-unit
residential property located in Scottsdale,  Arizona. Since the Partnership owns
a majority  interest  in the Villa  Antigua  Joint  Venture,  the  accounts  and
operations of the Villa Antigua  Joint Venture have been  consolidated  into the
Partnership.

The co-venture  partner was an affiliate of Evans Withycombe,  Inc.  ("EWI"),  a
Phoenix based residential development,  construction and management firm. EWI is
also the developer of the Villa Antigua property.

The Partnership made initial cash payments in the form of capital  contributions
totaling $2,494,677 and funded $381,729 of property acquisition costs which were
treated as a capital  contribution  to the Villa  Antigua Joint  Venture.  Since
completion of  construction,  the Partnership has made additional  contributions
totaling  $85,440.  At December 31, 1997,  the total capital  contributions  and
acquisition costs incurred were $2,580,117 and $381,729, respectively.

JANUARY 1, 1996 THROUGH MAY 13, 1996

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to  the  Partnership,   an  amount  equal  to  10%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of  completion  funding)  of the  Partnership's  adjusted  capital
         investment, as defined in the joint venture agreement;

Second, the balance 70% to the Partnership and 30% to the co-venturer.

All losses from operations and  depreciation for the Villa Antigua Joint Venture
were allocated 99% to the Partnership and 1% to the co-venturer.

All profits from operations, to the extent of cash distributions, were allocated
to  the  Partnership  and  co-venturer  in  the  same  proportion  as  the  cash
distributions; however, if for any taxable year there are no cash distributions,
profits are allocated 99% to the Partnership and 1% to the co-venturer.

In the case of certain capital  transactions and distributions as defined in the
joint venture  agreement,  the  allocation of related  profits,  losses and cash
distributions,  if any, would be different than as described  above and would be
affected by the relative balances in the individual partners' capital accounts.



<PAGE>




The  Villa  Antigua  Joint  Venture  had net  income  including  gain on sale of
$1,259,384, and net income of $137,799 and $212,408 for the years ended December
31, 1997, 1996 and 1995, respectively.

Sin Vacas and Villa Antigua

MAY 14, 1996 THROUGH DECEMBER 31, 1997

On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans  Withycombe  Management,  Inc. and certain of its affiliates  ("EWI")
which  separated the interests of EWI and the  Partnership,  thus  affording the
Partnership  greater  flexibility  in  the  operation  and  disposition  of  the
properties.  In  consideration of a payment by the Partnership to EWI of $73,775
and delivery of certain mutual  releases,  EWI (i)  relinquished its contract to
manage  Sin Vacas and Villa  Antigua  and its option to  exercise  its rights of
first refusal with regard to the sale of those  properties and (ii) assigned all
of its  interest in the Sin Vacas  Joint  Venture  and the Villa  Antigua  Joint
Venture to the  Partnership  (while  preserving  the  economic  interests of the
venturer in these Joint Ventures),  which resulted in the dissolution of the Sin
Vacas Joint Venture and the Villa Antigua Joint Venture.  EWI may still share in
the cash flow  distributions  or proceeds from sale of the properties if certain
performance levels are met.

On November 25, 1997,  Villa Sin Vacas was sold  pursuant to the terms of a Sale
Agreement  and escrow  Instructions  (the  "Agreement")  dated May 6,  1997,  as
amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited
Partnership,  an Arizona Limited Partnership  unaffiliated with the Partnership,
the assignee of Capital Management  Systems,  Inc., a Pennsylvania  Corporation.
The net  selling  price for Villas Sin Vacas was  $4,952,091  subject to certain
customary  adjustments.  The Partnership  repaid first mortgage financing in the
amount of $2,396,000  at closing  utilizing a portion of proceeds from the sale.
The Partnership recorded a gain on sale of approximately $975,000.

On October 10,  1997,  Villa  Antigua  was sold  pursuant to the terms of a Sale
Agreement  and escrow  Instructions  (the  "Agreement")  dated May 6,  1997,  as
amended.  Villa  Antigua  was sold to Villa  Sin  Antigua  Condominium  Ventures
Limited  Partnership,  an  Arizona  Limited  Partnership  unaffiliated  with the
Partnership,  the assignee of Capital Management  Systems,  Inc., a Pennsylvania
Corporation.  The net selling price for Villa Antigua was $6,141,526  subject to
certain customary  adjustments.  The Partnership repaid first mortgage financing
in the amount of $3,010,362 at closing  utilizing a portion of proceeds from the
sale. The Partnership recorded a gain on sale of approximately $1,307,000.

Pinecliff

On July 16, 1986, the Partnership  acquired Pinecliff (formerly Autumn Ridge), a
96-unit  residential   property  located  in  Colorado  Springs,   Colorado  and
simultaneously  contributed  the  property  to the Autumn  Ridge  Joint  Venture
comprised of the Partnership and an affiliate of the property  developer.  Since
the Partnership owns a majority interest in the Autumn Ridge Joint Venture,  the
accounts and operations of the Autumn Ridge Joint Venture have been consolidated
into the Partnership.

The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado
based residential development,construction and management firm.  Highland
developed the property known as L'Auberge Pinecliff.

The Partnership made initial cash payments in the form of capital contributions
totaling $3,819,397 and funded $546,576 of property acquisition costs which were
treated as a capital contribution to the Autumn Ridge Joint Venture.  Since
completion of construction, the Partnership has made additional contributions
totaling $318,811.


December 31, 1997 the total capital contributions and acquisition costs incurred
were $4,192,309 and $497,475, respectively.

JANUARY 1, 1996 THROUGH JULY 2, 1996:

Net cash from  operations (as defined in the joint venture  agreement) was to be
distributed as available to each joint venture partner quarterly as follows:

         First,  to  the   Partnership,   an  amount  equal  to  8%  per  annum,
         noncumulative  (computed daily on a simple noncompounded basis from the
         date of completion funding) of the Partnership's capital investment, as
         defined in the joint venture agreement;

         Second, the balance 82% to the Partnership and 18% to the co-venturer.

All losses from operations and  depreciation  for the Autumn Ridge Joint Venture
were allocated 100% to the Partnership.

All profits from operations, to the extent of cash distributions, were allocated
to  the  Partnership  and  co-venturer  in  the  same  proportion  as  the  cash
distribution. Any remaining profits are allocated 82% to the Partnership and 18%
to the co-venturer.

In the case of certain capital  transactions and distributions as defined in the
joint venture  agreement,  the  allocation of related  profits,  losses and cash
distributions,  if any, would be different than as described  above and would be
affected by the relative balances in the individual partners' capital accounts.

JULY 3, 1996 THROUGH DECEMBER 31, 1996

On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland  Properties,  Inc.  ("Highland")  which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property.  In consideration of a payment
by the Partnership to Highland  totaling $7,718,  and delivery of certain mutual
releases,  Highland (i)  relinquished its option to exercise its rights of first
refusal  with regard to the sale of the  property  and (ii)  assigned all of its
interest in the L'Auberge  Pinecliff  Joint Venture to the  Partnership,  (while
preserving  the economic  interests  of the  venturer in these Joint  Ventures),
which  resulted in the  dissolution  of the L'Auberge  Pinecliff  Joint Venture.
Highland may still share in the cash flow distributions or proceeds from sale of
the properties if certain performance levels are met.

The Sin Vacas  Joint  Venture,  the Autumn  Ridge  Joint  Venture  and the Villa
Antigua  Joint  Venture  are  sometimes  collectively  referred to as the "Joint
Ventures".  These joint  ventures  were  effectively  terminated on December 31,
1996. The Partnership has eliminated various minority interests related to these
joint ventures,  as such, the Partnership owned 100% of the underlying assets as
of December 31, 1996.

For the years ended  December  31,  1997,  1996 and 1995 the Autumn  Ridge Joint
Venture  had net  loss of  $1,244  and net  income  of  $116,520  and  $149,652,
respectively.

6.  Mortgage Notes Payable:

All of the property  owned by the  Partnership  is pledged as collateral for the
nonrecourse  mortgage  notes payable  outstanding  at December 31, 1997 and 1996
which consisted of the following:

                            1997         1996
                      ----------   ----------
Villas at Sin Vacas   $        0   $2,428,851
Pinecliff .........    3,058,800    3,112,702
Villa Antigua .....            0    3,018,377
                      ----------   ----------
                      $3,058,800   $8,559,930
                      ==========   ==========

Sin Vacas and Villa Antigua
The original  maturity  date for these notes was July 15, 1997. On July 10, 1997
the lender  extended the terms of these mortgage notes for a period of one year.
The monthly  principal and interest  payments for Sin Vacas and Villa Antigua of
$21,830 and $27,128,  respectively,  and the fixed  interest  rate of 9.125% for
each remained  unchanged.  The terms of the agreement  provided for a prepayment
schedule of 0.5% of the outstanding loan balance if the notes were paid prior to
60 days  before the  maturity  date.  As  discussed  in Note 5,  during 1997 the
Partnership sold Sin Vacas and Villa Antigua.  In connection with this sale, the
outstanding  mortgage  debt for the  properties  was paid off.  The  Partnership
incurred prepayment penalty fees of $11,952 and $14,898,  respectively,  for Sin
Vacas and Villa Antigua,  which amounts are included in interest  expense in the
Consolidated Statement of Operations for the year ended December 31, 1997.

Pinecliff
The original  maturity date for these notes was July 15, 1997. On July 10, 1997,
the lender  extended  the terms of the  mortgage  note for a period of one year.
Under the modification agreement,  the monthly principal and interest payment of
$27,976 and the original interest rate of 9.125% remained  unchanged.  The terms
of the  agreement  provide for a prepayment  penalty of 0.5% of the  outstanding
loan  amount in the event the note is paid  prior to 60 days  before it  becomes
due. The balance of the note will be due on July 15, 1998.

As discussed in Note 9, the  Partnership  entered into a Sale Agreement for this
property  with an  unaffiliated  third  party.  The  estimated  sales  price  is
sufficient  to  cover  the  mortgage  note  balance.  However,  there  can be no
assurance that the sale of the property will occur.

In the event that the sale of Pinecliff  does not occur,  the  Partnership  will
seek new sources of financing  for the property on a long-term  basis or seek to
renegotiate the mortgage note with its existing lender.  If the general economic
climate for real estate in this  location  were to  deteriorate  resulting in an
increase in  interest  rates for  mortgage  refinancing  or a  reduction  in the
availability of real estate mortgage financing or a decline in the market values
of real  estate,  it may  affect  the  Partnership's  ability  to  complete  the
refinancing or sell the property.

As discussed in Note 9, the  Partnership  entered into a Sale Agreement for this
property  with an  unaffiliated  third  party.  The  estimated  sales  price  is
sufficient  to  cover  the  mortgage  note  balance.  However,  there  can be no
assurance that the sale of the property will occur.

Interest  included in Accrued  expenses in the  Consolidated  Balance  Sheets at
December 31, 1997 and 1996 consisted of the following:
                         1997      1996
                      -------   -------
Villas at Sin Vacas   $     0   $ 9,235
Pinecliff .........   $11,630    11,835
Villa Antigua .....         0    11,476
                      -------   -------
                      $11,630   $32,546
                      =======   =======

The  principal   balance  of  the  mortgage  notes  payable   appearing  on  the
consolidated  balance sheets at December 31, 1997 and 1996 approximates the fair
value of such notes.

7.  Partners' Equity:

Under the terms of the  Partnership  Agreement  profits are allocated 95% to the
Limited Partners and 5% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.

Cash distributions to the partners are governed by the Partnership Agreement and
are made,  to the extent  available,  95% to the Limited  Partners and 5% to the
General Partners.

Gain  from  the  sale  of  properties  is to be  allocated  as  defined  in  the
Partnership Agreement. The net proceeds on the sale of both Villas Sin Vacas and
Villa Antigua of $5.3 million were  allocated as follows.  The Limited  Partners
received 100% of the cash distribution from sale. The total gain on sale of both
Villas Sin Vacas and Villa Antigua of $2.3 million was allocated as follows. The
General Partner received a gain on sale allocation of approximately  $70,000 and
the Limited Partners  received a gain on sale allocation of  approximately  $2.2
million.  These  distributions/allocations  were in accordance with the terms of
the Partnership Agreement.

8.  Related-Party Transactions:

L'Auberge Communities, Inc. is a  General Partner of L'Auberge Communities,
which owns a 99% interest in GP L'Auberge Communities, L.P.  (formerly Berry and
Boyle Management).   Due to affiliates at December 31, 1997 and
1996 consisted of reimbursable costs payable to L'Auberge Communities, Inc., an
affiliate of the General Partners, in the amounts of $16,076 and $8,975,
respectively.

For the years ended December 31, 1997, 1996 and 1995, general and administrative
expenses  included  $64,209,  $82,881  and  $84,643,   respectively,  of  salary
reimbursements  paid to the  General  Partners  for certain  administrative  and
accounting personnel who perform services for the Partnership.

The officers and principal  shareholders  of EWI, the developer of the Villas at
Sin Vacas and Villa Antigua  properties and an affiliate of the  co-venturers of
those joint ventures, together hold a two and one half percent cumulative profit
or partnership voting interest in LP L'Auberge Communities, a California Limited
Partnership, formerly Berry and Boyle, which is the principal limited partner of
GP L'Auberge Communities, L.P.

During  the years  ended  December  31,  1996 and 1995,  EWI  received  property
management  fees of $32,475  and  $84,187,  respectively.  These fees were 5% of
rental  revenue in each time period.  In addition,  for the years ended December
31, 1997, 1996 and 1995, $87,724, $64,954 and $51,715, respectively, of property
management  fees were paid or accrued to  Residential  Services - L'Auberge,  an
affiliate of the General Partners.  These fees were 4% of rental revenue in 1997
and 1996 and 5% of rental revenue in 1995.

Villa   Antigua   reimbursed   $35,885  and  $34,707,   respectively,   for  its
proportionate  share of the 1996 and 1995  real  estate  taxes to Villa  Antigua
Phase II,  which is an  affiliate  of the General  Partners.  For the year ended
December 31, 1997,  real estate taxes were settled as part of the closing of the
sale.


<PAGE>



9.  Assets held for Sale

During the fourth  quarter of 1997,  the  General  Partners  of the  Partnership
committed to a plan to dispose of Pinecliff in Colorado  Springs,  Colorado.  On
January  15,  1998,  the   Partnership   entered  into  a  Sale  Agreement  (the
"Agreement") to sell Pinecliff to an unaffiliated third party. The selling price
for  Pinecliff  is  approximately  $6,700,000.   The  Agreement  is  subject  to
completion of customary due diligence to the satisfaction of the purchaser,  and
the purchaser obtaining a financing commitment on commercially  reasonable terms
and conditions.  The Partnership  expects to consummate this sale in 1998. Under
certain  conditions,  the sale is  contingent  upon the  approval by the Limited
Partners.

As it is the intent of the General Partners to pursue the sale of this property,
the  Partnership  has recorded the assets at the lower of carrying  value or net
realizable  value and has included  these amounts as Assets Held for Sale on the
Consolidated  Balance Sheets at December 31, 1997. In accordance  with SFAS 121,
the Partnership has stopped depreciating these assets effective January 1, 1998.
If closing of the sale were to occur,  any proceeds  from sale will be allocated
to the Partners in accordance  with the terms of the  Partnership  Agreement and
the Partnership will likely be liquidated.


<PAGE>
                              CASABELLA ASSOCIATES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,

                   INFORMATION WITH RESPECT TO THE YEARS ENDED
                     DECEMBER 31, 1996 AND 1995 IS UNAUDITED
                                 --------------

                              CASABELLA ASSOCIATES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,

                   INFORMATION WITH RESPECT TO THE YEARS ENDED
                     DECEMBER 31, 1996 AND 1995 IS UNAUDITED


1.  Organization of Partnership

Casabella  Associates,  a general  partnership (the "Partnership") was formed on
July 1,  1998.  Development  Partners  (A  Massachusetts  Limited  Partnership),
("DPI"), formerly Berry and Boyle Development Partners, and Development Partners
II (A Massachusetts  Limited  Partnership),  ("DPII"),  formerly Berry and Boyle
Development Partners II, and Development  Partners III (A Massachusetts  Limited
Partnership),  ("DPIII"),  formerly Berry and Boyle Development Partners III are
the  General  Partners.  DPI,  DPII and  DPIII  own an 8.5%,  38.3%,  and  53.2%
interest, respectively in the Partnership.

Casabella  Associates was formed to acquire a majority interest in the Casabella
Joint Venture, which owns Casabella, a 154-unit residential property, located in
Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella
Joint Venture,  the accounts and operations of Casabella Joint Venture have been
consolidated into the Partnership.

The co-venture  partner was an affiliate of Evans Withycombe,  Inc.  ("EWI"),  a
Phoenix based  residential  development,  construction  and management firm. EWI
also developed the property known as Casabella.

The Partnership will continue until December 31, 2018, unless earlier terminated
by the sale of all or substantially all of the assets of the Partnership,  or as
otherwise provided in the Partnership Agreement (See Note 9).

2.  Significant Accounting Policies

         A. Basis of Presentation

         The  consolidated  financial  statements  include  the  accounts of the
         Partnership   and  its  subsidiary   Casabella   Joint   Venture.   All
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation. The Partnership follows the accrual basis of accounting.
         Refer  to Note 5  regarding  the  termination  of the  Casabella  Joint
         Venture.

         B. Cash and Cash Equivalents

         The Partnership  considers all highly liquid debt instruments purchased
         with a maturity  of three  months or less to be cash  equivalents.  The
         carrying value of cash and cash equivalents approximates fair value. It
         is  the  Partnership's   policy  to  invest  cash  in  income-producing
         temporary cash  investments.  The  Partnership  mitigates any potential
         risk from such concentration of credit by placing investments with high
         quality financial institutions.

         C. Significant Risks and Uncertainties

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

         D. Depreciation

         Depreciation  is provided  for by the use of the  straight-line  method
         over the estimated useful lives as follows:

                             Buildings and improvements             39-40 years
                             Equipment, furnishings and fixtures     5-15 years

         E.  Deferred Expenses

         Costs of  obtaining or  extending  the mortgage on Casabella  are being
         amortized over the mortgage term using the straight-line  method, which
         approximates  the effective  interest  method.  Any  unamortized  costs
         remaining  at the  date of  refinancing  are  expensed  in the  year of
         refinancing.

         F.  Income Taxes

         The Partnership is not liable for Federal or state income taxes because
         Partnership  income or loss is allocated to the Partners for income tax
         purposes. If the Partnership's tax returns are examined by the Internal
         Revenue  Service  or state  taxing  authority  and such an  examination
         results in a change in Partnership  taxable income (loss),  such change
         will be reported to the Partners.

         G. Rental Income

         Leases require the payment of rent in advance,  however,  rental income
         is recorded as earned.

         H. Reclassification

         Certain items in the financial  statements for the years ended December
         31,  1996  and 1995  have  been  reclassified  to  conform  to the 1997
         presentation.

         I. Long-Lived Assets

         In 1996,  the  Partnership  adopted  Statement of Financial  Accounting
         Standards  No.  121  (SFAS  121),  "Accounting  for the  Impairment  of
         Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that
         long-lived assets be reviewed for impairment whenever events or changes
         in  circumstances  indicate  that  their  carrying  value  may  not  be
         recoverable. The adoption of SFAS 121 had no effect on reported results
         in 1996.  As further  discussed in Note 9, for the year ended  December
         31, 1997 the Partnership recorded its property at the lower of carrying
         value or net realizable  value and has included these amounts as Assets
         Held for Sale.

         For the years ended  December 31, 1997 and 1996,  permanent  impairment
         conditions did not exist at the Partnership's property.







Note 3 Depreciation

<PAGE>


4.  Cash and cash equivalents

Cash and cash equivalents December 31, 1997 and 1996 consisted of the following:

                              1997       1996
                          --------   --------
Cash on hand ..........   $ 49,163   $ 46,194
Money market accounts .     33,769       --
Certificates of Deposit    ______-    208,201
                                     --------
                          $ 82,932   $254,395
                          ========   ========

5.  Joint Venture and Property Acquisitions

At December 31, 1997, DPI, DPII and DPIII had contributed  $400,000,  $1,800,000
and $2,500,000,  respectively,  to the Partnership.  Of the total contributions,
$3,845,154  was used to purchase the majority  interest in the  Casabella  Joint
Venture  and  $500,000  was used to fund an  escrow  account  maintained  by the
permanent lender. In addition to the $4,700,000 of cash  contributions  referred
to above,  DPI, DPII and DPIII  collectively  incurred  $280,930 of  acquisition
costs which have been recorded as additional capital  contributions to Casabella
Associates.

The  Partnership  has  invested  in a single  property  located  in  Scottsdale,
Arizona.  The success of the  Partnership  will depend  upon  factors  which are
difficult  to  predict   including  general  economic  and  real  estate  market
conditions,  both on a national  basis and in the area  where the  Partnership's
investment is located.

PRIOR TO MAY 13, 1996:

Net  cash  from  operations  of the  Casabella  Joint  Venture,  to  the  extent
available,  shall be  distributed  not less often than quarterly with respect to
each fiscal year, as follows:

           (A)    First,  to  Associates,  an amount  equal to a 10.6% per annum
                  (computed on a simple  noncompounded daily basis from the date
                  of the closing) of their capital investment;

           (B)    Second, the balance 70% to Associates and 30% to the property
                     developer.

All losses from operations and depreciation for the Casabella Joint Venture were
allocated 99.5% to Associates and 0.5% to the property developer.

All profits from  operations  of the Casabella  Joint Venture were  allocated in
accordance with  distributions of net cash from operations;  provided,  however,
that if any fiscal year has no distributable  net cash from operations,  profits
will be allocated 99.5% to Associates and 0.5% to the property developer.

 In the case of certain capital transactions and distributions as defined in the
Casabella joint venture agreement, the allocation of related profits, losses and
cash distributions, if any, would be different than as described above and would
be  affected  by the  relative  balance  in  the  individual  partners'  capital
accounts.

MAY 14, 1996 THROUGH DECEMBER 31, 1997:

On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans  Withycombe  Management,  Inc. and certain of its affiliates  ("EWI")
which  separated the interests of EWI and the  Partnership,  thus  affording the
Partnership  greater  flexibility in the operation and disposition of Casabella.
In consideration of a total



 5.   Joint Venture and Property Acquisitions, continued

payment by DPI, DPII, and DPIII of $71,009 to EWI and delivery of certain mutual
releases,  EWI (i)  relinquished its contract to manage Casabella and its option
to exercise its rights to first  refusal with regard to the sale of the property
and (ii)  assigned all of its  interest in the  Casabella  Joint  Venture to the
Partnership  (while  preserving  the  economic  interest of the venture in these
Joint  Ventures),  which  resulted in the  dissolution  of the  Casabella  Joint
Venture. EWI may still share in the cash flow distributions or the proceeds from
sale of the properties if certain performance levels are met.

6.  Mortgage Note Payable

All of the property  owned by the  Partnership  is pledged as collateral for the
nonrecourse  mortgage  note  payable  pertaining  to  Casabella  in the original
principal  amount of  $7,320,000.  The original  maturity date for this note was
July 15,  1997.  On July 10, 1997 the lender  extended the terms of the mortgage
note for a  period  of one  year.  Under  the  modification  agreement,  monthly
principal and interest  payments of $61,887 and a fixed  interest rate of 9.125%
remain unchanged.  The terms of the agreement provide for a pre-payment  penalty
of 0.5% of the outstanding loan amount in the event the note is paid prior to 60
days before the note  becomes  due.  The balance of the note will be due on July
15, 1998.

As  discussed in Note 9, the  Partnership  entered  into a Sales  Agreement  for
Casabella.  The  estimated  sales price is sufficient to cover the mortgage loan
balance.  However,  there can be no assurance that the sale of the property will
occur.

In the event the sale of the property does not occur,  the Partnership will seek
new  sources of  financing  for the  property  on a  long-term  basis or seek to
renegotiate the mortgage note with its existing lender.  If the general economic
climate  for real  estate  in these  respective  locations  were to  deteriorate
resulting in an increase in interest rates for mortgage financing or a reduction
in the availability of real estate mortgage financing or a decline in the market
values of real estate it may affect the  Partnership's  ability to complete  the
refinancing or sell the property.

Accrued  interest  included  in accounts  payable  and  accrued  expenses on the
Balance Sheet of the Consolidated  Financial Statements at December 31, 1997 and
1996, consisted of $25,727 and $26,180, respectively.

The principal balance of the mortgage note payable appearing on the consolidated
balance sheets approximates the fair value of such note at December 31, 1997 and
1996.

7.  Partners' Equity

Cash distributions and allocations of income and loss from Casabella  Associates
are governed by the  partnership  agreement and are generally based on the ratio
of capital  contributed  by each of the joint  venture  partners,  DPI, DPII and
DPIII.

In the case of certain events as defined in the Partnership  Agreement,  such as
the  sale  of  an  investment  property  or  an  interest  in  a  joint  venture
partnership,  the allocation of the related profits,  losses, and distributions,
if any, would be different than described above.




8.  Related Party Transactions

L'Auberge Communities, Inc.(formerly Berry and Boyle, Inc.) is a General Partner
of L'Auberge Communities, which owns a 99% interest in GP L'Auberge Communities,
L.P. (formerly Berry and Boyle Management).

The officers and principal shareholders of Evans Withycombe, Inc., the developer
of  Casabella,  together  hold a two and one half percent  cumulative  profit or
partnership  voting  interest in LP L'Auberge  Communities,  formerly  Berry and
Boyle, an affiliate of the General Partners.

During the years ended December 31, 1996 and 1995,  property  management fees of
$37,735 and $78,663,  respectively,  were paid to Evans  Withycombe,  Inc.  This
represents 5% of the rental  revenues.  During the years ended December 31, 1997
and 1996,  property  management fees of $59,244 and $6,612,  respectively,  were
paid to  Residential  Services-L'Auberge,  an affiliate of the General  Partner.
This represents 4% of the rental revenues.

9.  Asset Held for Sale

During the fourth  quarter of 1997,  the  General  Partners  of the  Partnership
committed to a plan to dispose of Casabella in Scottsdale,  Arizona. On February
4, 1998, the  Partnership  entered into a Sales  Agreement (the  "Agreement") to
sell Casabella to an unaffiliated  third party.  The selling price for Casabella
is  approximately  $11,700,000.  The  Agreement  is  subject  to  completion  of
customary due diligence to the satisfaction of the purchaser,  and the purchaser
obtaining  a  financing   commitment   for  the  purchase  of  the  property  on
commercially  reasonable  terms  and  conditions.  The  Partnership  expects  to
consummate this sale in 1998.

As it is the intent of the General Partners to pursue the sale of this Property,
the  Partnership  has recorded the assets at the lower of carrying  value or net
realizable  value and has included  these amounts as Assets held for Sale on the
Consolidated  Balance Sheets at December 31, 1997. In accordance  with SFAS 121,
the Partnership has stopped depreciating these assets effective January 1, 1998.
If  closing  of the sale  were to  occur,  any  proceeds  from the sale  will be
allocated  to the  Partners  in  accordance  with the  terms of the  Partnership
Agreement and the Partnership will likely be liquidated.

<PAGE>














                              CASABELLA ASSOCIATES










                              FINANCIAL STATEMENTS

              for the years ended December 31, 1997, 1996, and 1995




<TABLE>

                                   CASABELLA ASSOCIATES


                                CONSOLIDATED BALANCE SHEETS

                                December 31, 1997 and 1996
                                                          

                                                                     1997          1996
                                                                                (unaudited)
                ASSETS
Assets held for sale/Property, at cost (Notes 3, 9)
<S>                                                                <C>           <C>       
  Land                                                             $2,809,851    $2,809,851
  Buildings and improvements                                        7,648,060     7,648,060
  Equipment, furnishings and fixtures                               1,122,596       995,909
                                                                 
                                                                 -------------  ------------

                                                                   11,580,507    11,453,820
  Less accumulated depreciation                                   (2,228,967)   (1,996,504)
                                                                 
                                                                 -------------  ------------

                                                                    9,351,540     9,457,316

Cash and cash equivalents                                              82,932       254,395
Accounts and interest receivable                                        5,907         3,015
Real estate tax escrow and prepaid                                     25,821        24,268
expenses
Deposits                                                                1,950         1,950
Deferred expenses, net of accumulated
  amortization of $123,914 and                                         13,927        11,212
$100,918

                                                                 -------------  ------------
                                                                 
         Total assets                                              $9,482,077    $9,752,156
                                                                 =============  ============
                                                                 

     LIABILITIES AND PARTNERS' EQUITY

Mortgage note payable                                               6,766,437    $6,885,673
Accounts payable and accrued expenses                                 144,493       173,500
Due to affiliates (Note 8)                                              2,195           646
Tenant security deposits                                               23,090        24,834
Rents received in advance                                                             3,507
                                                                         -
                                                                 
                                                                 -------------  ------------
         Total liabilities                                          6,936,215     7,088,160


Partners' equity                                                    2,545,862     2,663,996

                                                                 -------------  ------------
                                                                 

        Total liabilities and                                      $9,482,077    $9,752,156
partners' equity
                                                                 =============  ============
                                                                








                                   CASABELLA ASSOCIATES


                           CONSOLIDATED STATEMENTS OF OPERATIONS

                   For the years ended December 31, 1997, 1996 and 1995
                                                          





                                                      1997           1996          1995
                                                                 (unaudited)    (unaudited)
Revenue:
<S>                                                 <C>            <C>           <C>       
   Rental income                                    $1,507,910     $1,361,622    $1,579,782
   Interest Income                                       8,651         30,226        44,533
                                                  
                                                  -------------  -------------  ------------
                                                    $1,516,561     $1,391,848    $1,624,315
 
Expenses:                                          
   Operating Expenses                                  747,479        665,878       561,516
   Interest                                            625,459        633,360       642,857
   Depreciation and amortization                       255,643        266,730       375,234
   General and administrative                            6,114          6,223        10,200
                                                  
                                                  -------------  -------------  ------------
                                                     1,634,695      1,572,191     1,589,807
                                                  
                                                  -------------  -------------  ------------

Net loss                                             (118,134)      (180,343)       $34,508
                                                  =============  =============  ============
                                                  


Net income (loss) allocated to:
General Partners                                    ($118,134)     ($180,343)       $34,508


                                  CASABELLA ASSOCIATES


                        CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

                    For the years ended December 31, 1997, 1996 and 1995
                                                          

                                                                     Total
                                                                   Partners'
                                                                     Equity

<S>                                                                 <C>      
Balance at December 31, 1994                                         3,464,618
(unaudited)

Cash distributions                                                   (184,000)

Net income                                                              34,508
                                                                  -------------
                                                                  

Balance at December 31, 1995                                         3,315,126
(unaudited)

Cash distributions                                                   (470,787)

Net loss                                                             (180,343)
                                                                  -------------
                                                                  

Balance at December 31, 1996                                         2,663,996
(unaudited)

Cash distributions                                                     -

Net loss                                                             (118,134)
                                                                  -------------
                                                                  

Balance at December 31, 1997                                        $2,545,862
                                                                  =============
                                                                  





                                    CASABELLA ASSOCIATES


                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                    For the years ended December 31, 1997, 1996 and 1995

                                                          
                                                       1997           1996          1995
                                                                  (unaudited)    (unaudited)
Cash flows from operating activities:
<S>                                                     <C>            <C>           <C>    
  Interest received                                     $11,666        $41,626       $42,047
  Cash received from rents                            1,502,659      1,356,103     1,579,281
  Administrative expenses                               (7,472)       (11,916)      (18,901)
  Rental operations expenses                          (780,586)      (577,518)     (549,753)
  Interest paid                                       (625,912)      (633,774)     (643,235)
                                                   -------------  -------------  ------------
                                                   
Net cash provided by operating                          100,355        174,521       409,439
activities

Cash flows from investing activities:
  Capital Improvements                                (126,687)      (156,015)      (47,771)
 Cash received from short-term investments              -              581,813       107,147
                                                   -------------  -------------  ------------
                                                   

Net cash provided (used) by investing                 (126,687)        425,798        59,376
activities

Cash flows from financing activities:
  Distributions to partners                                   -      (470,787)     (184,000)
  Payments on mortgage note payable                   (119,236)      (108,873)      (99,414)
  Cash paid for deposits                                      -        (1,950)        -
  Cash paid for loan refinancing                       (25,895)        -              -
                                                   -------------  -------------  ------------
                                                   

Net cash provided (used) by financing                 (145,131)      (581,610)     (283,414)
activities
                                                   -------------  -------------  ------------
                                                   

Net increase (decrease) in cash and cash              (171,463)         18,709       185,401
equivalents

Cash and cash equivalents at beginning of               254,395        235,686        50,285
year
                                                   -------------  -------------  ------------
                                                   

Cash and cash equivalents at end of                     $82,932       $254,395      $235,686
year
                                                   =============  =============  ============
                                                   


                                   CASABELLA ASSOCIATES


                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                    For the years ended December 31, 1997, 1996 and 1995

                                                          





Reconciliation of net income (loss) to net cash provided by
operating activities:


                                                       1997           1996          1995
                                                                  (unaudited)    (unaudited)
<S>                                                  <C>            <C>              <C>    
Net income (loss)                                    ($118,134)     ($180,343)       $34,508
Adjustments to reconcile net income (loss) to
net cash
  provided by operating activities:
Depreciation and amortization                           255,643        266,730       375,234
Change in assets and liabilities net of
effects
  from investing and financing
activities:
    (Increase) decrease in accounts and                 (2,892)         11,400       (2,486)
interest receivable
    (Increase) decrease in real estate tax              (1,553)          (583)         3,748
escrow and prepaid expenses
    (Decrease) increase in accounts
      payable and accrued expenses                     (29,007)         82,150         8,515
    (Decrease) increase in due to                         1,549            686       (9,579)
affiliates
    (Decrease) increase in rents received in            (3,507)          3,507         (101)
advance
    Decrease in tenant security                         (1,744)        (9,026)         (400)
deposits
                                                   -------------  -------------  ------------
                                                   
Net cash provided by operating                         $100,355       $174,521      $409,439
activities
                                                   =============  =============  ============


</TABLE>




                                                        F-21
                                                   EXHIBIT INDEX
Exhibit
  No.

(4)(a)(1)  Amended and Restated Certificate and Agreement of Limited Partnership
           (included  in  Partnership's   Registration  Statement  No.  2-86262,
           declared effective on March 22, 1984 (the  "Registration  Statement")
           and incorporated herein by reference).

(4)(a)(2)  Seventeenth   Amendment  to  Amended  and  Restated  Certificate  and
           Agreement of Limited  Partnership  dated May 31, 1990 (included as an
           exhibit  to the  Partnership's  Form 10-K for the  fiscal  year ended
           December 31, 1990 and incorporated herein by reference).

(4)(b)     Subscription  Agreement  (included as an Exhibit in the  Registration
           Statement and incorporated herein by reference).

(10)(a)    Property management  agreement between Autumn Ridge Joint Venture and
           Berry and Boyle Residential  Services.(included  as an exhibit to the
           Partnership's  Form 10-K for the fiscal year ended  December 31, 1990
           and incorporated herein by reference).

(10)(b)    Property management agreement regarding Sin Vacas between Cluster
           Housing Properties and L'Auberge Communities Inc. dated May 15, 1996.

(10)(c) Property  management  agreement  regarding Villa Antigua between Cluster
      Housing Properties and L'Auberge Communities Inc. dated November 30, 1996.

(10)(d)    Documents  pertaining to the permanent loan  refinancing  for the Sin
           Vacas Joint Venture (included as an exhibit to the Partnership's Form
           10-K for the fiscal year ended  December  31,  1992 and  incorporated
           herein by reference).

(10)(e)    Documents pertaining to the permanent loan refinancing for the Autumn
           Ridge Joint Venture (included as an exhibit to the Partnership's Form
           10-K for the fiscal year ended  December  31,  1992 and  incorporated
           herein by reference).

(10)(f)    Documents  pertaining to the permanent loan refinancing for the Villa
           Antigua  Joint Venture  (included as an exhibit to the  Partnership's
           Form  10-K  for  the  fiscal  year  ended   December   31,  1992  and
           incorporated herein by reference).

(10)(g)    First  Amendment to Joint  Venture  Agreement of L'Auberge  Pinecliff
           Joint Venture and Related Assignment of Joint Venture Interest.

(10)(h)    Agreement regarding Villa Sin Vacas Joint Venture

(10)(i)    Agreement regarding Villa Antigua Joint Venture

(10)(j)    Purchase and Sale Agreement and Escrow  Instructions  between Cluster
           Housing  Properties  and DRA  Advisors,  Inc.  related to the sale of
           Pinecliff dated January 15, 1998.

(27)       Financial Data Schedule