UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-K

(Mark One)

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

                   For the fiscal year ended December 31, 1998

                                       or

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

           For the transition period from           to                

                         Commission file number 33-27399
                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         New Jersey                                    22-2469174 
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation  or organization)

    Indiana Avenue & the Boardwalk,             Atlantic City, New Jersey 08401
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code         (609) 340-3400      

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

     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 ]

     All issued and outstanding  partnership  units of the Partnership have been
offered and sold in reliance on exemptions from the registration requirements of
the  Securities  Act of 1933 as  amended.  Therefore,  there  is no  established
trading  market  for any  class of  partnership  units of the  Partnership.  The
Partnership did, in 1989, jointly with the Claridge Hotel and Casino Corporation
("Corporation") and Del Webb Corporation  ("Webb"),  register certain Contingent
Payment  Units.  As stated in the  Prospectus  dated May 5, 1989, the Contingent
Payment  Rights  may or may  not be  securities.  None of the  Partnership,  the
Corporation  or Webb  has  admitted  that  the  Contingent  Payment  Rights  are
securities or that any of them is the issuer of any such securities.

     Registrant's  Partnership  Units  outstanding  on December 31, 1998 was 450
units.


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                                     PART I

Item 1.       Business.

THE  FOLLOWING  DISCUSSION  CONTAINS   INFORMATION  AND  OTHER   FORWARD-LOOKING
STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES.  THE ACTUAL RESULTS
OF THE  OPERATIONS  OF ATLANTIC CITY  BOARDWALK  ASSOCIATES,  L.P.  COULD DIFFER
MATERIALLY  FROM  HISTORICAL  RESULTS OF OPERATIONS  AND THOSE  DISCUSSED IN THE
FORWARD-LOOKING  STATEMENTS.  FACTORS THAT COULD CAUSE ACTUAL  RESULTS TO DIFFER
MATERIALLY  INCLUDE,  BUT ARE NOT  LIMITED  TO,  THOSE  IDENTIFIED  BELOW IN THE
DISCUSSION  ENTITLED  "CURRENT  FINANCIAL  SITUATION OF THE  CLARIDGE  HOTEL AND
CASINO  CORPORATION"  AND IN "ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

General Development of the Business

Atlantic City Boardwalk Associates,  L.P.  ("Partnership") was formed on October
31, 1983 to acquire the buildings,  parking facility and non-gaming depreciable,
tangible property ("Hotel Assets") of The Claridge Hotel and Casino ("Claridge")
located in Atlantic City, New Jersey;  to hold a leasehold  interest in the land
on which  the  Claridge  is  located;  and to engage in  activities  related  or
incidental  thereto.  On June 16,  1989,  as part of a  financial  restructuring
("Restructuring  Agreement"),  the Partnership acquired all of the rights to the
land  underlying  the Hotel  Assets,  the air rights and related  easement.  The
Partnership's  principal  business  is to lease the Hotel  Assets,  land and air
rights  to  The  Claridge  at  Park  Place,  Incorporated  ("New  Claridge"),  a
wholly-owned   subsidiary   of  The  Claridge   Hotel  and  Casino   Corporation
("Corporation"),  under operating leases. All revenues of the Partnership, other
than immaterial investment income, are derived from those leases.

The  Partnership  maintains  offices at The Claridge  Hotel and Casino,  Indiana
Avenue and the  Boardwalk,  Atlantic City,  New Jersey 08401,  telephone  number
(609)  340-3400;  and at 2880 West Meade  Avenue,  Suite 204, Las Vegas,  Nevada
89102, telephone number (702) 253-7662.

Relationship with the Claridge

Substantially  all of the  revenues of the  Partnership  are derived from leases
with New Claridge.  Accordingly,  the ability of the  Partnership to fulfill its
obligations is dependent upon the ability of New Claridge to pay rental payments
when due. The financial stability of the Partnership is therefore dependent upon
the financial  condition of New Claridge.  The  following  discussions  entitled
"Current  Developments  at New Claridge,"  "Current  Financial  Situation of The
Claridge  Hotel  and  Casino  Corporation"  and the  discussion  concerning  New
Claridge in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," are taken from the Annual Report on Form 10-K of the
Corporation,  and the Partnership  disclaims any  responsibility for the content
thereof,  except  for the  information  also  included  in  Item  8,  "Financial
Statements and Supplementary  Data." While the Partnership was formed to own and

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to lease to the Corporation and its affiliates,  certain real estate and related
assets,  the  Partnership  is separate and distinct  from the  Corporation.  Any
person or entity seeking  information  regarding the  Corporation or its debt or
equity  securities  should review the reports,  statements and other information
filed by the Corporation with the Securities and Exchange Commission, and should
not rely upon the Partnership's discussion of the Corporation.

New Claridge's Corporate Structure

In 1983,  New Claridge  acquired the  Claridge's  casino  license and its gaming
equipment  (collectively,  "Casino  Assets")  from Del E. Webb New Jersey,  Inc.
("DEWNJ"),  a wholly-owned  subsidiary of Del Webb Corporation ("Webb");  leased
the Hotel  Assets and  subleased  the land on which the Claridge is located from
the Partnership; and assumed certain liabilities related to the acquired assets.
In connection with those  transactions,  the Partnership  granted the Expandable
Wraparound  Mortgage  (defined below) to New Claridge.  These  transactions were
entered into in connection with the private placement of equity interests in the
Partnership and the Corporation.  Following the 1983 transactions,  Webb and its
affiliates retained  significant  interest in the Claridge.  The common stock of
the Corporation and the limited  partnership  interests of the Partnership  were
sold  together  in a private  placement  as units,  and  because  there has been
relatively  little  trading  in the stock or  partnership  interest,  there is a
substantial  similarity  between the equity ownership of the Corporation and the
Partnership.  Although  the  Partnership  and the  Corporation  are  independent
entities,  approximately  93% of the  Corporation's  common  stock  is  owned by
persons who also own  limited  partnership  interests  in the  Partnership.  The
Partnership  does not currently  engage in any significant  business  activities
other than those relating to the Claridge.

In October 1988, the Partnership,  the Corporation and New Claridge entered into
the Restructuring  Agreement.  The restructuring,  which was consummated in June
1989 (the "Closing"), resulted in (i) a reorganization of the ownership interest
in the Claridge;  (ii)  modifications  of the rights and  obligations of certain
lenders;  (iii)  satisfaction and termination of the obligations and commitments
of Webb and DEWNJ under the original structure;  (iv) modifications of the lease
agreements between New Claridge and the Partnership;  and (v) the forgiveness by
Webb of substantial indebtedness.

On January 31,  1994,  the  Corporation  completed an offering of $85 million of
First Mortgage Notes ("Notes") due 2002,  bearing interest at 11 3/4%. The Notes
are  secured  by  (i)  a  non-recourse   mortgage  granted  by  the  Partnership
representing  a first lien on the Hotel Assets and the underlying  land,  (ii) a
pledge granted by the Corporation of all outstanding  shares of capital stock of
New Claridge, and (iii) a guarantee by New Claridge. New Claridge's guarantee of
the Notes is secured by a collateral  assignment  of the second lien  Expandable
Wraparound  Mortgage  (described  below), and by a lien on the Claridge's gaming
and other assets, which lien will be subordinated to liens that may be placed on
those  gaming  and other  assets to secure  any  future  revolving  credit  line
arrangement.  On January 28,  1997,  New  Claridge  entered into an agreement to
subject the new self-parking garage to the lien of the mortgage;  such lien will
not be  subordinated  to any liens which may be placed on New Claridge's  gaming
and other  assets to secure  any  future  revolving  credit  line  arrangements.
Interest on the Notes is payable semiannually on February 1 and August 1 of each
year.

The net proceeds of the Notes,  totaling $82.2 million net of fees and expenses,
were  used  as  follows:  (i)  to  repay  in  full  on  January  31,  1994,  the
Corporation's  then  outstanding  debt under the Revolving  Credit and Term Loan
Agreement  ("Loan   Agreement"),   including  the  outstanding  balance  of  the
Corporation's revolving credit line, which was secured by a first mortgage; (ii)
to  expand  New  Claridge's  casino  capacity  by  12,000  square  feet in 1994,
including the addition of approximately  500 slot machines and the relocation of

<PAGE>

two restaurants and their related  kitchens;  (iii) to purchase property in 1995
and construct on that property a self-parking  garage, which opened in mid-1996;
and (iv) to acquire the Contingent  Payment Option (described  below).  With the
completion of the construction of the self-parking  garage,  the proceeds of the
offering of the Notes had largely been expended.

Current Developments at New Claridge

The Claridge has reported as follows:

     During 1995, the cash provided by operations of the Claridge was sufficient
     to meet the Corporation's obligations to pay interest on the Notes, as well
     as to make at least some moderate capital  improvements.  Commencing in the
     latter  part of 1995,  however,  competition  in the  Atlantic  City casino
     market for bus customers,  a principal source of customers for the Claridge
     at the time, increased;  this competition intensified even more during 1996
     as  additional  casino  square  footage was added,  principally  due to the
     opening of the Trump  World's  Fair casino.  During 1996,  the average coin
     incentive issued per bus patron at the Claridge  increased to approximately
     $19,  from  approximately  $13 in 1995.  Total  cash  incentives  issued to
     Claridge's  casino  patrons (in the form of coin to play slot  machines and
     gaming chips to play table games) increased to approximately  $30.5 million
     in 1996, from approximately  $25.2 million in 1995. While the Corporation's
     promotional  costs have increased  significantly,  total casino revenues in
     1996 actually  decreased from 1995 levels.  It had been the  expectation of
     the Corporation that, upon the opening of its new self-parking  garage, the
     Corporation  would be able to reduce its reliance on the bus patron market;
     however,  the  Corporation  was forced to close the garage facility on July
     10,  1996,  only ten days after its  opening  following  a fatal  accident.
     Because  the  facility  was not able to reopen  until the end of  September
     1996, the Corporation  lost any possible benefit of the facility during the
     normally busy summer  season.  In addition,  severe  winter  weather in the
     first  quarter  of 1996  adversely  affected  revenues.  As a  result,  the
     Corporation experienced a net loss for 1996 of $15.4 million, compared to a
     net loss of $1.9 million in 1995.

     The Corporation has experienced  recurring losses and serious deterioration
     in  its  cash  flow  since  1996.  Since  the  Corporation  does  not  have
     substantial  cash reserves or access to a line of credit,  the  Corporation
     needed to experience significant  improvements in operating results in 1997
     over 1996 levels in order to meet its on-going  obligations,  including the
     interest due on the Notes.  Operating results in 1997 did improve over 1996
     levels,  due primarily to the positive  impact of the  availability  of the
     self-parking  garage, lower bus package pricing, and other cost containment
     initiatives.  However, operating results in 1998 fell below 1997 levels due
     to increased  competition  for casino  customers.  In 1998, the Corporation
     experienced  a net  loss of $9.4  million,  compared  to a net loss of $6.0
     million  in 1997.  In the fall of 1998,  New  Claridge  redirected  its bus
     program to reduce the number of customers who arrive by bus, and,  thereby,
     related  costs.  Total  coin  issued  to bus  passengers  in 1998 was $13.5
     million,  compared  to $15.0  million of coin issued to bus  passengers  in
     1997.  Marketing  efforts  are being  directed  toward the  mid-level  slot
     customer  through  the use of  promotions  and  advertising.  Additionally,
     management  continues  to conserve  cash through  various cost  containment
     measures.  Management will also consider various refinancing  alternatives,
     including a sale of the  Corporation,  or a restructuring  of its financial
     obligations.

     In view of the operating  results of New Claridge in 1998,  and in order to
     meet its  obligations,  management of the Corporation took several steps to

<PAGE>

     enhance its cash position,  through both operational changes, including the
     previously   mentioned   redirection  of  the  bus  program,   and  certain
     transactions  with PDS  Financial  Corporation  ("PDS")  and the New Jersey
     Casino Reinvestment  Development  Authority ("CRDA"),  as further discussed
     below.

     In December  1997, New Claridge  obtained a commitment  from PDS for a sale
     lease-back  facility  ("Facility").  Under the terms of the  Facility,  New
     Claridge  could  sell  certain  of its slot  machines  to PDS  under a sale
     lease-back arrangement,  for a specified amount per slot machine, for up to
     $1.8 million.  In February 1998, New Claridge sold 370 slot machines to PDS
     for  approximately  $1 million  under this  Facility.  The machines will be
     leased back to New Claridge under an operating  lease  arrangement  for two
     years.  After two years,  New Claridge has an option to either purchase the
     machines,  renew the lease  arrangement  for twelve  months,  or return the
     equipment to PDS. In December 1998,  New Claridge  completed the sale of an
     additional 379 slot machines to PDS for approximately $776,000, under terms
     similar to those  described  above.  No  additional  financing is available
     under this Facility.

     In October 1998,  the CRDA  approved the direct  investment of New Claridge
     funds,  already on deposit  with the CRDA,  and the  completion  of certain
     donations of New Claridge funds also already on deposit. These transactions
     resulted in the receipt by New Claridge of approximately  $930,000 from the
     CRDA in December 1998.

     In addition, in February 1999, the Corporation and New Claridge agreed to a
     settlement of  approximately  $2.3 million in the  arbitration  proceedings
     concerning  the accident  which took place in New  Claridge's  self-parking
     garage in July 1996. The settlement  proceeds were received by New Claridge
     in late February 1999.

     As a result of these transactions,  on March 2, 1999, New Claridge was able
     to pay the interest due on the Notes on February 1, 1999,  under the 30-day
     grace  period  allowed  in  accordance  with  the  terms  of the  indenture
     governing the Notes.

Certain Agreements between the Partnership, the Corporation and New Claridge

The  current   relationships  and  agreements   between  the  Partnership,   the
Corporation and New Claridge are described below:

     Property Ownership and Related Leases and Mortgage

     The  Casino  Assets  are  owned  by New  Claridge.  In  addition,  the  new
     self-parking  garage and the land on which it is  located  are owned by New
     Claridge. The Hotel Assets, the underlying land and air rights are owned by
     the Partnership  and leased by the  Partnership to New Claridge.  The lease
     obligations  are set  forth  in an  operating  lease  ("Operating  Lease"),
     originally  entered  into on October 31, 1983,  and an expansion  operating
     lease ("Expansion  Operating  Lease"),  covering  additions to the Claridge
     made in 1986.  The initial  terms of both leases  expired on September  30,
     1998;  each  lease  provides  for three  ten-year  renewal  options  at the
     election  of  New  Claridge.   In   connection   with  the  March  1,  1997
     restructuring  agreement (discussed below), New Claridge agreed to exercise
     the  first  of the  ten-year  renewal  options,  extending  the term of the
     Operating Lease and Expansion Operating Lease through September 30, 2008.

<PAGE>

     Operating Lease and Expansion Operating Lease

     Basic rent during the renewal term of each lease is calculated  pursuant to
     a defined formula,  with such rent for the lease year commencing October 1,
     1998 through  September 30, 1999 not to be more than $29.5 million nor less
     than  $24  million  for the  Operating  Lease,  and not to be more  than $3
     million nor less than $2.5 million for the Expansion  Operating  Lease.  In
     addition,  in each subsequent  year, rent will be calculated  pursuant to a
     defined  formula,  but may not  exceed 10% more than the basic rent for the
     immediately preceding lease year. Basic rent, as calculated pursuant to the
     defined formula, for the lease year commencing October 1, 1998, will be $24
     million  for the  Operating  Lease  and  $2.5  million  for  the  Expansion
     Operating Lease.

     New Claridge is also required to pay, as additional  rent,  certain  taxes,
     insurance and other charges relating to the occupancy of the land and Hotel
     Assets,  certain expenses and debt service  relating to furniture,  fixture
     and equipment replacements and building improvements  (collectively,  "FF&E
     Replacements")  and  certain  general  and  administrative   costs  of  the
     Partnership.  The  Partnership  is  required  during the entire term of the
     Operating Lease, and any subsequent  renewal terms, to provide New Claridge
     with FF&E Replacements and to provide facility  maintenance and engineering
     services to New Claridge. New Claridge is obligated to lend the Partnership
     any amounts  necessary  to fund the cost of FF&E  Replacements,  and if the
     Partnership's  cash flow,  after  allowance for certain  distributions,  is
     insufficient to provide the facility  maintenance and engineering  services
     required of it, New Claridge is also required to lend the Partnership  such
     necessary funds  (collectively,  "FF&E Notes").  The FF&E Notes are secured
     under the Expandable  Wraparound  Mortgage (see discussion  below), and are
     payable  as  follows.  Generally,  one half of the  principal  is due in 48
     months  and the  remainder  is due 60  months  from the  issue  date of the
     individual notes, with the following exception. As required by the offering
     of $85 million of Notes on January 31, 1994, $8 million was used to finance
     internal  improvements  at  the  Claridge.  In  connection  therewith,  the
     Expandable  Wraparound  Mortgage  as well as the  Operating  Lease  and the
     Expansion  Operating  Lease were  amended  to  provide  that the $8 million
     principal on these  additional FF&E Notes will be payable at final maturity
     of the Expandable Wraparound Mortgage. All FF&E Notes are secured under the
     Wraparound Mortgage up to $25 million.  Thereafter,  such advances shall be
     secured under separate  security  agreements.  New Claridge is obligated to
     pay as  additional  rent to the  Partnership  the debt  service on all FF&E
     Notes.

     The Operating Lease and the Expansion  Operating Lease were amended as part
     of the  Restructuring  Agreement to provide for the deferral of $15,078,000
     of rental  payments during the period July 1, 1988 through the beginning of
     1992, and to provide for the abatement of $38,820,000 of basic rent through
     1998,  thereby reducing the Partnership's  cash flow to an amount estimated
     to be necessary only to meet the Partnership's  cash  requirements.  During
     the third  quarter of 1991,  the maximum  deferral of rent was reached.  On
     August 1, 1991, the Operating Lease and the Expansion  Operating Lease were
     amended  further to revise the  abatement  provisions  so that,  commencing
     January 1, 1991, for each calendar year through 1998, the lease  abatements
     could not exceed $10 million in any one calendar year,  nor  $38,820,000 in
     the aggregate.  All of the  $38,820,000  of available  rent  abatements was
     fully utilized by the end of the first quarter of 1997.

     The Fifth Amendment to the Operating Lease and the Fourth  Amendment to the
     Expansion  Operating Lease, which were effective on March 1, 1997, provided
     for the  abatement  of  $867,953  of  basic  rent and for the  deferral  of
     $1,300,000  of basic rent on March 1, 1997,  and  provides  for  additional

<PAGE>

     abatements  of basic rent,  commencing  on April 1, 1997,  as  necessary to
     reduce  the  Partnership's  cash  flow to an amount  necessary  to meet the
     Partnership's  cash  requirements  through  December  31, 1998  (determined
     without regard to the repayment of the deferred rent).  The $1.3 million of
     basic rent  deferred on March 1, 1997 is to be paid to the  Partnership  in
     monthly  installments  of  $25,000  for the  period  April 1, 1997  through
     December 31, 1997,  and monthly  installments  of $50,000 for the year 1998
     and thereafter  until paid in full (subject to  acceleration  under certain
     circumstances).

     In  conjunction  with the Fifth  Amendment to the  Operating  Lease and the
     Fourth Amendment to the Expansion  Operating Lease, as discussed above, the
     Corporation,  New Claridge and the Partnership entered into a restructuring
     agreement,  effective  March  1,  1997,  to  modify  certain  terms  of the
     Expandable Wraparound Mortgage (see below).

     Under the terms of the Operating Lease, as amended effective March 1, 1997,
     New  Claridge  had an  option  to  purchase  (the  "Purchase  Option"),  on
     September 30, 1998, the Hotel Assets and the  underlying  land. To exercise
     the  Purchase  Option,  New  Claridge  was  required  to give notice to the
     Partnership, at least nine months prior to the option date, of its election
     to do so. Based on the current  financial  situation,  New Claridge did not
     give such notice to the  Partnership  in respect of the  September 30, 1998
     option  date.  However,  New  Claridge  may also  exercise  an  option,  on
     September 30, 2003, to purchase the Hotel Assets and the underlying land on
     January 1,  2004,  for their  fair  market  value at the time the option is
     exercised.

     Effective  September 30, 1998, the Operating Lease and Expansion  Operating
     Lease were further amended,  pursuant to a Sixth Amendment to the Operating
     Lease and Fifth  Amendment  to the  Expansion  Operating  Lease (the "Sixth
     Amendment"),  to allow for the  deferral of $1.1  million of rent in either
     February 1999 or March 1999,  dependent upon certain  conditions being met.
     These conditions,  which must have occurred prior to March 2, 1999, include
     (i) New  Claridge  having  received  the  proceeds in  connection  with its
     settlement of the parking garage  litigation,  and (ii) the  Corporation or
     New Claridge having paid the interest due on the Notes on February 1, 1999.
     New  Claridge  received  the proceeds  from the  settlement  of the Parking
     garage  litigation in February 1999, and paid the interest due on the Notes
     on March 2, 1999, within the 30-day grace period allowed in accordance with
     the terms of the Indenture. The $1.1 million of basic rent deferred in 1999
     is to be  paid  to the  partnership  in  monthly  installments  of  $25,000
     commencing January 1, 2000 until paid in full. This amendment also provides
     for additional  abatements of rent, through December 31, 2004, as necessary
     to reduce the  Partnership's  cash flow to an amount necessary only to meet
     the Partnership's cash requirements;  these abatements,  however, are to be
     reduced by specified amounts for each period commencing January 1, 2000 and
     ending December 31, 2004 ($83,333 per month in 2000,  $130,000 per month in
     2001, $180,000 per month in 2002 and 2003, and $130,000 per month in 2004).

     In addition to the  deferral  and  abatements  of rent  provided for in the
     Sixth Amendment,  the amendment provides for the payment of $3.5 million of
     additional  basic  rent  on the  earlier  of (i) the  maturity  date of the
     Expandable Wraparound Mortgage Note (see below), (ii) such earlier date, if
     any, as the entire principal amount of the Expandable  Wraparound  Mortgage
     becomes  due  and  payable,   or  (iii)  the  date  on  which  any  merger,
     consolidation,  or  similar  transaction  to which the  Corporation  or New
     Claridge is a party, or any sale of all or substantially  all of the assets
     of the Corporation or New Claridge is consummated, or any change in control
     of the Corporation or New Claridge occurs.

     If the Partnership should fail to make any payment due under the Expandable
     Wraparound  Mortgage  (see  below),  New  Claridge  may exercise a right of
     offset  against rent or other  payments due under the  Operating  Lease and
     Expansion Operating Lease to the extent of any such deficiency. In turn, if

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     the Claridge  should fail to make any lease payment due under the Operating
     Lease and Expansion  Operating  Lease,  the  Partnership is not required to
     make mortgage payments due under the Expandable Wraparound Mortgage.

     Expandable Wraparound Mortgage

     On October 31, 1983, the Partnership executed and delivered to New Claridge
     a mortgage on the Hotel Assets ("Expandable Wraparound Mortgage") which was
     subordinate to an $80 million first mortgage ("First  Mortgage") granted by
     the Partnership to a group of banks and a $47 million purchase money second
     mortgage  ("Purchase Money Second Mortgage")  granted by the Partnership to
     DEWNJ. The Purchase Money Second  Mortgage,  which was due on September 30,
     2000, was canceled upon satisfaction of certain  conditions set forth in an
     agreement  entered  into  at  the  time  of  the  1989  restructuring.   In
     conjunction  with the offering of $85 million of Notes on January 31, 1994,
     the  outstanding  debt under the Loan  Agreement,  which included the First
     Mortgage and a revolving credit line, was satisfied in full.

     By its  terms,  the  Expandable  Wraparound  Mortgage  may secure up to $25
     million of additional  borrowings by the  Partnership  from New Claridge to
     finance  FF&E   Replacements  and  facility   maintenance  and  engineering
     shortfalls.  The Expandable  Wraparound  Mortgage provides that, so long as
     the Partnership is not in default on its  obligations  under the Expandable
     Wraparound  Mortgage,  New Claridge is obligated to make payments  required
     under any senior mortgage  indebtedness.  The  indebtedness  secured by the
     Expandable  Wraparound  Mortgage  bears interest at an annual rate equal to
     14% with certain  interest  installments  that accrued in 1983 through 1988
     totaling $20 million  being  deferred  until  maturity.  In  addition,  the
     Partnership is required under the  Expandable  Wraparound  Mortgage to make
     payments of principal  and interest in respect of any loans made to finance
     FF&E Replacements or facility maintenance or engineering costs as described
     above. To the extent those  borrowings  exceed $25 million in the aggregate
     outstanding  at any time,  they will be  secured  under  separate  security
     agreements and not by the lien of the Expandable Wraparound Mortgage.

     On March 17,  1986,  the First  Mortgage  was  amended  and  assumed by New
     Claridge.  The  amount  of the  amended  and  assumed  First  Mortgage  was
     increased  to secure  up to $96.5  million  to  provide  financing  for the
     Expansion  Improvements.  Indebtedness secured by the Expandable Wraparound
     Mortgage  was  increased  by an amount up to $17  million  to  provide  the
     Partnership with the necessary funding.

     Effective  August 28, 1986, the Partnership  commenced making level monthly
     payments of principal and interest so as to repay on September 30, 1998, in
     full, the principal  balance of this $17 million increase in the Expandable
     Wraparound  Mortgage.  The  Expandable  Wraparound  Mortgage was amended to
     require  that the $127 million  aggregate  principal  amount  secured by it
     would be  repayable in  installments  during the years 1988 through 1998 in
     escalating  amounts totaling $80 million,  with a balloon principal payment
     of $47 million and the $20 million of deferred  interest  due on  September
     30, 2000.

     Effective March 1, 1997, the Corporation, New Claridge, and the Partnership
     entered  into a  restructuring  agreement,  pursuant to which New  Claridge
     agreed to use its best efforts to cause a  modification  of the  Expandable
     Wraparound Mortgage ("Wraparound Modification") that is permitted by, or is
     in  compliance   with,   the  terms  of  the   Indenture.   The  Wraparound
     Modification,  if so  permitted,  will  provide  for  an  extension  of the
     maturity date of the Expandable Wraparound Mortgage from September 30, 2000
     to January 1, 2004. If the Wraparound  Modification  is not permitted by or

<PAGE>

     in compliance  with the terms of the Indenture,  New Claridge has agreed to
     effect the Wraparound  Modification at such time as the Notes are no longer
     outstanding.

     In connection  with the offering of $85 million of the Notes on January 31,
     1994, the  Corporation  agreed to use not less than $8 million from the net
     proceeds of the offering to finance  certain  internal  improvements to the
     Claridge which were funded  through  additional  FF&E Notes.  In connection
     therewith, the Expandable Wraparound Mortgage Loan Agreement as well as the
     Operating Lease, and the Expansion  Operating Lease were amended to provide
     that the principal on these  additional FF&E Notes will be payable at final
     maturity of the Expandable Wraparound Mortgage.

     Effective  September  30, 1998,  the  Corporation,  New  Claridge,  and the
     Partnership  agreed to amend  the March  1997  restructuring  agreement  to
     provide for an extension of the maturity date of the Expandable  Wraparound
     Mortgage  to  January 1,  2005.  In  addition,  the  Expandable  Wraparound
     Mortgage  Agreement and Note were amended to defer the  principal  payments
     which  were  payable  during  the fourth  quarter  of 1998  (totaling  $3.5
     million)  to the  earlier  of  (i)  the  maturity  date  of the  Expandable
     Wraparound  Mortgage Agreement and Note, (ii) such earlier date, if any, as
     the entire  principal  amount of the  Expandable  Wraparound  Mortgage Note
     becomes  due  and  payable,   of  (iii)  the  date  on  which  any  merger,
     consolidation,  or  similar  transaction  to which the  Corporation  or New
     Claridge is a party, or any sale of all or substantially  all of the assets
     of the Corporation or New Claridge is consummated, or any change of control
     of the Corporation or New Claridge occurs.

     Note Receivable from New Claridge

     Pursuant  to  the  Restructuring  Agreement  the  Partnership  lent  to New
     Claridge $3.6 million  representing,  at the Closing,  substantially all of
     the  Partnership's  cash and cash equivalents in excess of amounts required
     to pay Partnership  expenses.  The loan bears interest at 12% per annum and
     is due and  payable,  along  with  the  principal,  upon  (i)  the  sale or
     refinancing  of the  Claridge;  (ii) full or  partial  satisfaction  of the
     Expandable  Wraparound  Mortgage;  and (iii) full satisfaction of any first
     mortgage then in place.

     Contingent Payment Rights

     The Restructuring  Agreement  provided for Webb to retain an interest equal
     to $20 million plus  interest from December 1, 1988 accruing at the rate of
     15% per annum compounded quarterly  ("Contingent  Payment") in any proceeds
     ultimately  recovered from the operations and/or the sale or refinancing of
     the  Claridge  facility  in  excess of the  First  Mortgage  loan and other
     liabilities. To give effect to this Contingent Payment, the Corporation and
     the  Partnership  agreed not to make any  distributions  to the  holders of
     their equity  securities,  whether  derived from operations or from sale or
     refinancing proceeds, until Webb had received the Contingent Payment. It is
     estimated that at December 31, 1998, the aggregate  amount owing in respect
     of the Contingent Payment was approximately $88.3 million.

     In  connection  with the 1989  restructuring,  Webb agreed to permit  those
     partners/investors   in  the  Partnership   and   Corporation   ("Releasing
     Partners/Investors")  from whom Webb had received written releases from all
     liabilities,  rights  ("Contingent  Payment  Rights")  to  receive  certain
     amounts to the extent available for application to the Contingent  Payment.

<PAGE>

     Approximately 84% in interest of the  partners/investors  provided releases
     and   became   Releasing   Partners/Investors.    Payments   to   Releasing
     Partners/Investors  are  to be  made  in  accordance  with  a  schedule  of
     priorities, as defined in the Restructuring Agreement.

     On April 2, 1990, Webb  transferred its interest in the Contingent  Payment
     to an  irrevocable  trust for the  benefit  of the Valley of the Sun United
     Way, and upon such transfer Webb was no longer  required to be qualified or
     licensed by the New Jersey Casino Control Commission.

     On February 23, 1996, the Corporation acquired an option to purchase,  at a
     discount from the carrying  value,  the  Contingent  Payment.  The purchase
     price  of the  option  was $1  million,  and the  option  could  have  been
     exercised any time prior to December 31, 1997.  Given the recent  operating
     results at New Claridge (see Item 1. Business - "Recent Developments at New
     Claridge"),  the  Corporation  was not  able to  exercise  this  Contingent
     Payment Option, and it expired in accordance with its terms on December 31,
     1997.

     Current Financial Situation of The Claridge Hotel and Casino Corporation

     The Claridge has reported as follows:

     The Claridge

     The Claridge, located in the Boardwalk casino section of Atlantic City, New
     Jersey, is a 26-story  building that contains the Corporation's  casino and
     hotel facilities.  The Claridge's  casino consists of approximately  59,000
     square  feet of casino  space on three main levels  with  various  adjacent
     mezzanine levels.  The casino currently contains  approximately  1,752 slot
     machines and sixty-four table games, including thirty-six blackjack tables,
     eight craps  tables,  five  roulette  tables,  three  Caribbean  stud poker
     tables,  two mini-baccarat  tables and two baccarat tables, and eight other
     specialty  games.  The hotel with related  amenities  consists of 502 guest
     rooms  (including  28 corner  suites,  26  specialty  suites and five tower
     penthouse  suites),  four  restaurants,  three lounges,  a private player's
     club, a 600-seat  theater,  limited  meeting  rooms,  a gift shop, a beauty
     salon and a health club with an indoor swimming pool.

     Built  in  1929  as a  hotel,  the  Claridge  was  remodeled  at a cost  of
     approximately  $138  million  prior to its  reopening  as a casino hotel in
     1981. The Claridge was further  renovated and expanded in 1986 at a cost of
     approximately $20 million,  which provided approximately 10,000 square feet
     of casino  space  together  with a 3,600  square  foot  lounge  ("Expansion
     Improvements"). In 1994, approximately $12.7 million was expended to expand
     the Claridge's casino square footage by approximately 12,000 feet. In 1996,
     New Claridge  constructed a self-parking  garage facility  connected to its
     existing  valet-parking garage, at a cost of approximately $28 million. The
     combined garage facility provides parking for approximately 1,200 vehicles.

     New Claridge experiences a seasonal fluctuation in demand, which is typical
     of casino-hotel operations in Atlantic City. Historically,  peak demand has
     occurred during the summer season.  New Claridge's  principal market is the
     Mid-Atlantic  area of the United States.  Casino gaming in Atlantic City is
     highly  competitive  and is strictly  regulated under the New Jersey Casino
     Control Act (the "Act") and regulations  thereunder  which affect virtually
     all aspects of casino operations.

<PAGE>

     Results of Operations  for the Year Ended  December 31, 1998 as Compared to
     the Year Ended December 31, 1997

     The  Corporation  had a net loss of $9,415,000  for the year ended December
     31,  1998,  as  compared  to a net loss of  $5,979,000  for the year  ended
     December  31, 1997.  The overall  increase in net loss was due mainly to an
     increase in Casino operating  expenses offset by a decrease in rent expense
     to the Partnership.  Casino operating expenses increased approximately $5.4
     million, resulting from higher payroll costs and marketing costs related to
     the initiatives to increase table games business, higher costs of providing
     promotional  allowances,  and higher  equipment rental costs as a result of
     the limited  capital  expenditure  funding  available  and certain  popular
     varieties  of slots being  available  for lease only.  Rent  expense to the
     Partnership  decreased  primarily from increased  abatements of rent, which
     are  recorded as a reduction  to rent  expense.  During 1998  approximately
     $11.1 million of rent was abated, compared to approximately $9.0 million in
     1997.

     Liquidity and Capital Resources

     At December 31, 1998, the Corporation  had a working capital  deficiency of
     $23,685,000,  as compared to a working capital  deficiency of $4,138,000 at
     December  31,  1997.  The  increase in the working  capital  deficiency  is
     principally  attributable  to  decreases  in cash and cash  equivalents  of
     $2,626,000,  a decrease in receivables  of $15,906,000  (primarily due to a
     decrease in the current portion of the Expandable  Wraparound  Mortgage due
     from  the  Partnership  resulting  from  principal  payments  received),  a
     decrease in prepaid  expenses  and other  current  assets of  $200,000,  an
     increase in other current liabilities of $209,000,  an increase in accounts
     payable of  $333,000,  and an increase in the current  portion of long term
     debt (which  represents  capital lease  obligations)  of $312,000.  Current
     liabilities at December 31, 1998 and 1997 included deferred rental payments
     of $15,078,000,  and the $3,600,000 loan from the Partnership  plus accrued
     interest  thereon of  $4,122,000  and  $3,690,000  at December 31, 1998 and
     1997,  respectively.  The deferred  rental payments and the $3,600,000 loan
     will only be payable upon (i) a sale or refinancing  of the Claridge;  (ii)
     full or partial  satisfaction of the Expandable  Wraparound  Mortgage;  and
     (iii)  full  satisfaction  of any first  mortgage  then in place.  If these
     amounts were not included in current liabilities, the Corporation's working
     capital  deficiency  at December 31, 1998 would have been  $885,000 and the
     Corporation  would have had working  capital of $18,230,000 at December 31,
     1997.

     Competition

     Competition  in the Atlantic  City  casino-hotel  market is intense.  As of
     December  31,  1998,  the  twelve   existing  casino   facilities   offered
     approximately  1,212,000  square feet of gaming space, a 3.3% increase over
     the  casino  square  footage  as of  December  31,  1997  of  approximately
     1,173,000  square  feet.  This  increase  was  primarily  due  to a  casino
     expansion at Caesars Atlantic City Casino,  which added  approximately  800
     slot  machines to its existing  casino in the second  quarter of 1998.  The
     increase in casino square footage in 1997 over 1996 was approximately 8.6%,
     resulting  from the opening of Bally's  Wild Wild West Casino in July 1997.
     However,  for the years ended December 31, 1998 and 1997,  citywide  gaming
     revenues,  as reported,  increased only 3.6% and 2.4%,  respectively,  over
     prior year levels.

     The Atlantic City gaming  market is not expected to experience  significant
     growth over the next several years until  Atlantic City  transforms  itself

<PAGE>

     from a "day-trip" market to a "destination  resort." As a result of current
     high room occupancy rates, a more favorable regulatory climate, the reduced
     threat  of  competition  from  potential  new  gaming  jurisdictions,   and
     significant   infrastructure   developments   making   Atlantic  City  more
     accessible,  over $4.6  billion of new  investment  has been  announced  or
     recently  completed  in the  Atlantic  City gaming  market.  In addition to
     recent  increases in casino space and hotel rooms at the existing  casinos,
     several Las Vegas casino  operators have  announced  plans to construct new
     casinos in Atlantic City.

     In addition to the major casino  expansions  and the announced new casinos,
     major infrastructure improvements have begun. A new $268 million convention
     center,  which was completed in May 1997,  contains  approximately  500,000
     square feet of exhibition space, 45 meeting rooms, food service  facilities
     and a 1,600-car  underground  parking garage.  The new convention center is
     the  largest  exhibition  space  between  Boston  and  Atlanta.  A 500-room
     non-casino  hotel  which  is  linked  to the new  convention  center  by an
     elevated walkway,  opened in November 1997. The development of the corridor
     which links the convention  center to the boardwalk  area is complete,  and
     features a wide,  landscaped  boulevard with a reflecting pool, an expanded
     park area, and a 60-foot  lighthouse  which is illuminated  each night by a
     light show.  In February  1997,  construction  of the new $7.5  million bus
     terminal,  which is a major component of this corridor, was completed.  The
     State of New Jersey is also  implementing  a capital plan of  approximately
     $125 million to upgrade and expand the Atlantic City International Airport.
     Construction of a $300 million  tunnel,  which will provide access from the
     Atlantic City Expressway to the marina casino district, began in late 1998.

     All  casinos  in  Atlantic  City are part of  hotels  which  offer  dining,
     entertainment,  and  other  guest  facilities.  As the  size of the  gaming
     facilities continue to grow, the need for additional hotel rooms has become
     evident.  During  1996,  the  number  of  hotel  rooms  available  citywide
     increased with the opening of the Trump World's Fair casino  (approximately
     500 rooms) and the Tropicana's new 600-room hotel tower.  Several  existing
     Atlantic City casinos also increased  their hotel space in 1997,  including
     Harrah's  (approximately 400 rooms),  Hilton (approximately 300 rooms), and
     Caesars  (approximately  600  rooms),  for a  total  increase  in  1997  of
     approximately   1,500  hotel   rooms.   Competition   among  the   existing
     casino-hotels  is based  on  factors  such as  promotional  allowances  and
     incentives;  the attractiveness of the casino area;  advertising;  customer
     service; the availability,  quality and price of rooms, food, and beverage;
     ease  and   availability  of  parking  and  accessing  the  facility;   and
     entertainment.

     The Atlantic City business is seasonal,  with the highest level of activity
     occurring during the summer months, and the lowest level of activity during
     the winter months. The primary markets for Atlantic City casino patrons are
     Philadelphia,  New Jersey and New York City,  together  with the  secondary
     markets of central Pennsylvania,  Delaware,  Baltimore and Washington, D.C.
     Casinos  offer  incentives,  in the  form of cash and  complimentaries  for
     rooms,  food and beverages,  to their customers based on their casino play.
     In recent years,  competition for, and as a result,  incentives offered to,
     customers has increased  significantly.  Many Atlantic City casino  patrons
     arrive by bus and stay for approximately six hours.  Competitive factors in
     Atlantic  City require the payment of cash  incentives  and coupons for use
     towards the price of meals to patrons arriving under bus programs sponsored
     by the casino operators.  Competition for bus patrons  intensified in 1996,
     in the form of higher coin incentives; New Claridge was forced to match the
     citywide  increases,  thus  increasing  its per patron average coin cost to
     approximately  $19 in 1996 from  approximately  $13 in 1995.  New  Claridge
     relied  heavily on  attracting  patrons who travel to Atlantic  City by bus
     because  the  Claridge  previously  lacked  a  self-parking  facility,  and
     therefore had to remain  competitive with other casino operators in regards
     to the incentives offered. Even with its 1,200-space parking facility,  New

<PAGE>

     Claridge  continued to rely on its bus customers as a significant source of
     business  in  1997  and  1998.  In  1997,   citywide  bus  package  pricing
     competition  eased  somewhat;  the average coin cost per patron arriving by
     bus to the Claridge decreased to $16 in 1997. However, in 1998, bus package
     pricing  competition  began to increase  again,  fueled by the expansion at
     Caesars Atlantic City Casino (which added  approximately  800 slot machines
     in  early  1998),  as  well  as the  opening  of  Bally  Park  Place's  bus
     transportation  center  in the  third  quarter  of  1998.  In  response  to
     increasing  bus package  pricing,  New Claridge  redirected  its  marketing
     efforts to reduce the number of customers who arrive by bus, and,  thereby,
     related  costs.  In the fourth  quarter of 1998,  130,000  passengers  were
     brought to the Claridge by bus,  compared to 207,000 bus  passengers in the
     same period of 1997, a reduction of approximately 37%. Instead, efforts are
     being directed toward the mid-level slot customer through the use of direct
     marketing  promotions and advertising,  as well as the continued efforts to
     increase the table games segment of the business.

     The Claridge has positioned itself as the "smaller, friendlier" alternative
     to the other Atlantic City casinos. This strategy,  implemented in 1989, is
     designed to capitalize on the Claridge's  unique physical  facility,  which
     the Corporation  believes  retains the atmosphere of a grand hotel,  and on
     the Claridge's smaller,  more intimate size relative to the larger Atlantic
     City casinos. By emphasizing an environment that is intimate,  friendly and
     service-oriented,  the Claridge  targets a market niche different than that
     of a majority of its competitors.  The Claridge seeks to attract and retain
     a customer base whose wagering spans the same market  segments  serviced by
     other casino hotels, but primarily targets the middle, leaving the high-end
     business to its  competitors.  New Claridge  believes it is uneconomical to
     pursue  the  high-end  market  as its  core  business  because  of the high
     maintenance cost and potential  volatility in table game "hold" percentages
     (the ratio of win to the amount of gaming chips purchased by patrons).  The
     majority of the  Claridge's  casino  revenue is  generated  by slot machine
     play,  although  efforts have been taken in recent years to increase  table
     games play. In 1997,  76% of the  Claridge's  casino revenue came from slot
     play as compared to 69% reported for all Atlantic City properties. In 1998,
     74% of the Claridge's casino revenue generated from slot play,  compared to
     70% for all Atlantic City casinos.

     The key  elements  of New  Claridge's  marketing  plan  include  the use of
     complimentaries,   promotional  activities,  entertainment  events,  player
     development  hosts, a bus program,  and the use of  commissioned  agents to
     attract  groups from outside the company's  traditional  market areas.  New
     Claridge  also  operates a direct  marketing  program to attract and retain
     customers.  New Claridge's  Compcard Gold Program,  which allows patrons to
     earn  various  complimentaries,  including  coins for slot machine play and
     gaming  chips for table  play,  based on their  levels of gaming  activity,
     provides  a  valuable  database  of  information  on  playing  preferences,
     frequency  and  denominations  of play,  and the amount of gaming  revenues
     produced  by  gaming  patrons.  Because  of  the  expanded  facilities  and
     amenities now offered at the Claridge,  the "Because Smaller is Friendlier"
     positioning  statement  was  changed to  "Smaller,  Friendlier  and So Much
     More." This position retains the equity in the intimacy-seeking patron, but
     extends it to communicate  that the Claridge now has a facility  capable of
     comfortably  servicing  a  larger  customer  base,  and  offering  the same
     amenities and entertainment found at larger Atlantic City casino hotels.

     Competition  in Atlantic City also extends to the  employment  market.  The
     Commission has  promulgated  regulations  which require  staffing levels at
     Atlantic  City  casinos  which are higher than those for  casino-hotels  in
     Nevada.  In addition,  although the January 1995 amendments to the Act have
     eased the licensing requirements for some employees,  all of New Claridge's
     casino  employees  must be  licensed.  Partly as a result of the  licensing
     requirements,  there has been intense  competition for  experienced  casino
     employees in Atlantic City.  Difficulties in hiring  personnel  licensed by
     the Commission have elevated labor costs, and licensed personnel frequently

<PAGE>

     leave their current  positions for higher paying jobs in other casinos.  In
     addition,  the  expansion  of casino  gaming into other  jurisdictions  has
     increased the competition for experienced casino management personnel.

     Casino competition outside of New Jersey includes land-based casinos, river
     boat gaming,  slot machines at racetracks,  and Indian gaming.  By far, the
     most  competitive  threat  to  Atlantic  City has been  the  Indian  gaming
     operations at Foxwoods and the Mohegan Sun casinos in Connecticut,  and the
     slot machine facilities at the Delaware  racetracks.  The two Indian gaming
     casinos in Connecticut,  with a combined total of approximately  8,700 slot
     machines as of December 31, 1998,  reported  total slot win of $1.1 billion
     for 1998,  an 18%  increase  over 1997 slot  revenue  of $945  million.  In
     Delaware,  the three  tracks that are  currently  authorized  to offer slot
     machine gaming had a combined total of approximately 3,000 slot machines as
     of the end of 1998. These machines generated $350.8 million of slot revenue
     during the year,  an increase of 17% over 1997  revenue.  The  Pennsylvania
     Senate recently voted against a bill,  which would have allowed the state's
     voters to consider the authorization of riverboat casinos, slot machines at
     racetracks, and video poker in drinking establishments. It is unlikely that
     Pennsylvania's  Legislature  will consider  another gambling bill while the
     current Governor,  whose term ends in January 2003, is in office.  However,
     the effect of any future  legalization  of casino gaming in Pennsylvania on
     the Atlantic City market would depend on the form and scope of such gaming.

     Current Licensing Status of the Partnership and New Claridge

     The ownership and operation of casino-hotel facilities in Atlantic City are
     subject to extensive  state  regulation  under the Casino Control Act under
     the  direction  of the New Jersey  Casino  Control  Commission.  The Casino
     Control  Act  provides  that  various  categories  of  entities  must  hold
     appropriate  casino licenses.  The Partnership  currently  operates under a
     four-year casino service industry license effective October 31, 1995, while
     New Claridge operates under a four-year casino license effective  September
     30, 1995.


     Employees

     The Partnership has one part-time employee who assists the General Partners
     with  investor-related  matters.  The General  Partners are paid management
     fees pursuant to the Partnership  Agreement,  as amended.  See Items 10 and
     11,  "Directors and Executive  Officers of the  Registrant"  and "Executive
     Compensation."


     Item 2. Properties.

     The  Claridge  hotel was  constructed  in 1929 at the  northeastern  end of
     Absecon  Island,  on which  Atlantic  City is  located.  After  remodeling,
     modernization  and expansion at a cost of approximately  $138 million,  the
     Claridge  opened as a casino-hotel  in July 1981.  Located in the Boardwalk
     Casino  section of Atlantic City on Brighton Park,  approximately  550 feet
     north of the Boardwalk, the Claridge occupies three parcels of property. In
     October 1983 the Partnership  acquired the building,  parking  facility and

<PAGE>

     non-gaming depreciable,  tangible property of the Claridge casino-hotel. On
     June 16, 1989,  as part of the  Restructuring  Agreement,  the  Partnership
     acquired all of the rights to the land underlying the Hotel Assets, the air
     rights and related easement.

     The  casino-hotel,  situated on the main parcel of land (41,408 square feet
     with 138 feet  fronting  the park and 300 feet deep),  is a concrete  steel
     frame structure,  26 stories high at its highest point.  The  valet-parking
     garage, situated on an adjacent parcel of land (21,840 square feet) west of
     the  casino-hotel  site,  is  an  eight-level   reinforced   concrete  ramp
     structure,  built in 1981.  Including  the bus  drive-through  area,  a bus
     patron  waiting  room and  electrical  room,  it totals an area of  197,100
     square feet and provides  parking for  approximately  475  automobiles.  In
     1996, New Claridge  completed the  construction  of a self-parking  garage,
     located on a parcel of land (29,120 square feet)  connected to its existing
     valet-parking  garage.  The combined garage facility  provides  parking for
     approximately 1,200 vehicles. The office building,  situated on an adjacent
     parcel of land (7,766 square feet), is a two-story  reinforced concrete and
     brick  structure  with a flat  roof.  Constructed  over 50 years  ago,  its
     interior has been modernized. The building is utilized as an administration
     facility,  and totals an area of 14,020 square feet.  With the exception of
     the self-parking  garage,  all of the existing  facilities are owned by the
     Partnership  and are leased to New Claridge  under the Operating  Lease and
     the Expansion  Operating Lease. The self-parking garage and the property on
     which it is located are owned by New Claridge.


Item 3. Legal Proceedings.

The Partnership is not involved in any material litigation.


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

There were no matters  submitted to a vote of security holders during the fourth
quarter of 1998.

                                     PART II


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     No partnership  interests in the Partnership have been registered under the
     Securities  Act of 1933, as amended  ("Securities  Act").  All  outstanding
     partnership  interests have been offered and sold in reliance on exemptions
     from the registration requirements of the Securities Act. Therefore,  there
     is no established trading market for any class of partnership  interests of
     the Partnership.  Two partnership interests equal one partnership unit, and
     there are approximately 481 holders of partnership interests.

     The Contingent Payment Rights received by Releasing  Partners/Investors may
     or may not be securities. The Partnership, the Corporation and Webb filed a
     registration  statement  under  the  Securities  Act  with  respect  to the
     Contingent  Payment  Rights  as if they  were  securities  and  each of the
     Corporation,  the Partnership  and Webb were an issuer of such  securities.
     However, by such actions, none of the Partnership,  the Corporation or Webb
     admitted that the  Contingent  Payment Rights are securities or that any of
     them is the  issuer  of any such  securities.  There is no  market  for the
     Contingent Payment Rights.

<PAGE>

Item 6. Selected Financial Data.

     Set forth below is selected  financial data regarding the Partnership as of
     or for each of the years in the five-year period ended December 31, 1998.

<TABLE>
<CAPTION>

                                                As of or for the year ended December 31, 
                                          --------------------------------------------------------
                                          1998         1997         1996         1995         1994
                                          ----         ----         ----         ----         ----
                                               (not covered by Independent Auditors' Report) (a)

                                                                    (in thousands)
<S>                                       <C>            <C>          <C>           <C>          <C>  
Net income (loss)...................      $  (1,754)     2,937        4,753       2,723        1,782
Net income (loss) per limited
partnership unit (b)..................    $   (3.83)      6.42        10.39        5.95         3.90
Total assets  ........................    $ 104,713    118,244      130,417     135,175      140,309
Long term obligations,
   net of current portion  ...........    $  79,622     75,465       92,120     104,315      114,268
Partners' capital accounts (deficit)      $  20,401     21,825       18,888      14,135       11,412



(a)  The above selected  financial  data should be read in conjunction  with the
     consolidated financial statements and the related notes appearing elsewhere
     in this annual report.

(b)  450 limited partnership units were outstanding at the end of each period.

</TABLE>


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


Results of Operations for the Year Ended December 31, 1998
as Compared to the Year Ended December 31, 1997

Rental  income for the year ended  December  31, 1998  decreased  $7,086,000  as
compared to the year ended December 31, 1997.  This decrease is primarily due to
the  abatement  of rent  pursuant  to the March 1, 1997 and  September  30, 1998
amendments to the Operating Lease and Expansion  Operating Lease (see "Liquidity
and Capital Resources"). Prior to these amendments, rental income (including the
effect of the $38.8 million of rent  abatements  provided in accordance with the
1989 Restructuring Agreement) was recognized on a leveled basis over the initial
lease term  (ending  September  30,  1998),  in  accordance  with  Statement  of
Financial  Accounting Standards No. 13. Since the amount of abatements permitted
in accordance  with these  amendments  will vary depending on the  Partnership's
cash flow, leveling of these abatements over the lease term is not possible; the
actual  amount  abated on a monthly  basis is recorded as a reduction  of rental
income.  For the year  ended  December  31,  1997 the  amount of rent  abated in
accordance  with  the  March  1997   amendments  was  $9,048,000,   compared  to
$11,145,000  in 1998 in  accordance  with  the  March  1997 and  September  1998
amendments.  In connection with the March 1, 1997 restructuring  agreement,  New
Claridge agreed to exercise the first of the ten-year renewal options, extending
the term of the Operating Lease and Expansion  Operating Lease through September
30,  2008.  The renewal  rates were for an amount  significantly  lower than the
original lease amounts. Basic rent for the lease year commencing October 1, 1998

<PAGE>

is $24  million  for the  Operating  Lease and $2.5  million  for the  Expansion
Operating  Lease. In addition to the basic rent, New Claridge pays as additional
rent,  certain  expenses and debt  service  relating to  furniture,  fixture and
equipment  replacements and building  improvements  ("FF&E").  During 1997, FF&E
note  principal  and  interest  payments  were higher than in 1998  resulting in
decreased  additional rents in 1998. The overall decrease in rents is due to the
abatement of rents,  the renewal of the Operating Lease and Expansion  Operating
Lease at significantly lower rent amounts, as well as the decrease in additional
rents.

For the year ended December 31, 1998, interest expense decreased $2,070,000 from
the prior year due to principal  payments made during 1997 and 1998 that reduced
the average  outstanding  balance of the wraparound and expansion  mortgages and
FF&E notes.

General  and  administrative  expenses  for the year  ended  December  31,  1998
decreased  $105,000 when compared to the same period in 1997.  Professional fees
during 1997 were significant due to the Corporation's  attempted  reorganization
last year,  resulting in reduced fees in 1998. Also, insurance expense decreased
due to a decrease in the insurance premium.

Results of Operations for the Year Ended December 31, 1997
as Compared to the Year Ended December 31, 1996

Rental  income for the year ended  December  31, 1997  decreased  $4,838,000  as
compared to the year ended December 31, 1996.  This decrease is primarily due to
the abatement of rent pursuant to the March 1, 1997  amendments to the Operating
Lease and Expansion  Operating  Lease (see  "Liquidity and Capital  Resources").
Prior to these  amendments,  rental  income  (including  the effect of the $38.8
million of rent abatements  provided in accordance  with the 1989  Restructuring
Agreement) was recognized on a leveled basis over the initial lease term (ending
September  30,  1998),  in  accordance  with  Statement of Financial  Accounting
Standards  No. 13. Since the amount of abatements  permitted in accordance  with
the March 1997  amendments will vary depending on the  Partnership's  cash flow,
leveling of these  abatements  over the lease term is not  possible;  the actual
amount  abated on a monthly  basis is recorded as a reduction of rental  income.
For the year ended  December  31, 1997 the amount of rent  abated in  accordance
with the March 1997  amendments was  $9,048,000.  In addition to the basic rent,
New Claridge pays as additional rent, certain expenses and debt service relating
to  furniture,  fixture and  equipment  replacements  and building  improvements
("FF&E").  During 1997,  FF&E note  principal and interest  payments were higher
than in 1996  resulting  in  increased  additional  rents in 1997.  The  overall
decrease in rents is due to the  abatement  of rents  offset by the  increase in
additional rents.

Investment income earned on repurchase agreements decreased $66,000 for the year
ended  December  31,  1997 as  compared  to the year ended  December  31,  1996.
Investment  income decreased due to a reduction in cash available to invest.  On
March 1, 1997 the  Partnership's  cash flow was reduced $1.3 million as a result
of deferred rent from New Claridge  which is to be paid to the  Partnership on a
monthly basis through October 1999.

<PAGE>

The Partnership has an agreement with New Claridge whereby New Claridge provides
facility  and  maintenance  and  engineering  services  for  the  Claridge.  The
agreement calls for the  reimbursement of the actual  facilities and maintenance
costs  incurred  on the  Partnership's  behalf.  The  cost  of  maintaining  and
repairing  Hotel Assets  decreased  $479,000  during the year ended December 31,
1997 as compared to the same period in 1996.  This decrease is due to an overall
decrease in New Claridge's repairs and maintenance  expenditures in an effort to
conserve cash.

For the year ended December 31, 1997, interest expense decreased $1,792,000 from
the prior year due to principal  payments made during 1996 and 1997 that reduced
the average  outstanding  balance of the wraparound and expansion  mortgages and
FF&E notes.

Depreciation  and  amortization  expense  for the year ended  December  31, 1997
decreased  $817,000 as compared  to the same  period in 1996.  Assets  purchased
during the 1986  expansion  became fully  depreciated  in  mid-1996.  Therefore,
depreciation expense taken on these assets during the first half of 1996 was not
available during 1997, resulting in decreased depreciation expense in 1997.

Liquidity and Capital Resources

The  ability of the  Partnership  to  continue  to fulfill  its  obligations  is
dependent  upon the ability of New Claridge to continue to make rental  payments
when due.  Current lease payments from New Claridge,  as recently  amended,  are
sufficient to pay the Partnership's debt service and operating expenses. As part
of the 1989 Restructuring  Agreement,  rental payments in excess of monthly cash
flow requirements were deferred or abated so that excess cash did not accumulate
in  the  Partnership.   The  1997   restructuring  and  1998  amendment  to  the
restructuring  continue  this  deferral or abatement of excess cash flow through
2004.  At the  Closing  of the 1989  restructuring  the  Partnership  loaned New
Claridge $3.6 million.  The note,  including interest,  along with those rentals
deferred  under the amendment to the operating  leases,  are to be repaid to the
Partnership  upon (i) the sale or  refinancing  of the  Claridge;  (ii)  full or
partial  satisfaction  of the  Expandable  Wraparound  Mortgage;  and (iii) full
satisfaction  of any first mortgage then in place.  The deferral of $1.3 million
of rental  obligation as part of the 1997  restructuring  leaves the Partnership
with minimal liquidity.

The Operating  Lease and the Expansion  Operating  Lease were amended as part of
the Restructuring Agreement to provide for the deferral of $15,078,000 of rental
payments  during the period July 1, 1988 through the  beginning of 1992,  and to
provide for the abatement of  $38,820,000  of basic rent through  1998,  thereby
reducing the Partnership's cash flow to an amount estimated to be necessary only
to meet the Partnership's cash  requirements.  During the third quarter of 1991,
the maximum deferral of rent was reached. On August 1, 1991, the Operating Lease
and the Expansion  Operating  Lease were amended further to revise the abatement
provisions so that,  commencing  January 1, 1991, for each calendar year through
1998,  the lease  abatements  could not exceed $10  million in any one  calendar
year, nor $38,820,000 in the aggregate. All of the $38,820,000 of available rent
abatements was fully utilized by the end of the first quarter of 1997.

The Fifth  Amendment  to the  Operating  Lease and the Fourth  Amendment  to the
Expansion  Operating Lease, which were effective on March 1, 1997,  provided for
the  abatement of $867,953 of basic rent and for the deferral of  $1,300,000  of
basic rent on March 1, 1997,  and provides for  additional  abatements  of basic
rent, commencing on April 1, 1997, as necessary to reduce the Partnership's cash
flow to an amount necessary to meet the Partnership's cash requirements  through
December 31, 1998  (determined  without  regard to the repayment of the deferred
rent). The $1.3 million of basic rent deferred on March 1, 1997 is to be paid to

<PAGE>

the Partnership in monthly  installments of $25,000 for the period April 1, 1997
through December 31, 1997, and monthly installments of $50,000 for the year 1998
and  thereafter  until  paid in full  (subject  to  acceleration  under  certain
circumstances).

In conjunction  with the Fifth  Amendment to the Operating  Lease and the Fourth
Amendment to the Expansion Operating Lease, as discussed above, the Corporation,
New  Claridge  and  the  Partnership  entered  into a  restructuring  agreement,
effective  March 1, 1997, to modify certain terms of the  Expandable  Wraparound
Mortgage (see below).

Under the terms of the Operating Lease, as amended  effective March 1, 1997, New
Claridge had an option to purchase,  on September 30, 1998, the Hotel Assets and
the underlying land. To exercise this option,  New Claridge was required to give
notice to the Partnership, at least nine months prior to the option date, of its
election to do so. Based on the current  financial  situation,  New Claridge did
not give such notice to the  Partnership  in respect of the  September  30, 1998
option date. However, New Claridge may also exercise an option, on September 30,
2003, to purchase the Hotel Assets and the  underlying  land on January 1, 2004,
for their fair market value at the time the option is exercised.

Effective  September 30, 1998, the Operating Lease and Expansion Operating Lease
were further  amended,  pursuant to a Sixth Amendment to the Operating Lease and
Fifth  Amendment to the Expansion  Operating  Lease (the "Sixth  Amendment"), to
allow for the deferral of $1.1 million of rent in either  February 1999 or March
1999, dependent upon certain conditions being met. These conditions,  which must
have occurred prior to March 2, 1999,  include (i) New Claridge  having received
the proceeds in connection with its settlement of the parking garage litigation,
and (ii) the  Corporation  or New  Claridge  having paid the interest due on the
Notes  on  February  1,  1999.  New  Claridge  received  the  proceeds  from the
settlement  of the Parking  garage  litigation  in February  1999,  and paid the
interest  due on the Notes on March 2,  1999,  within the  30-day  grace  period
allowed in accordance with the terms of the Indenture. The $1.1 million of basic
rent deferred in 1999 is to be paid to the  partnership in monthly  installments
of $25,000  commencing  January 1, 2000 until paid in full.  This amendment also
provides for  additional  abatements  of rent,  through  December  31, 2004,  as
necessary to reduce the  Partnership's  cash flow to an amount necessary only to
meet the Partnership's cash requirements;  these abatements,  however, are to be
reduced by  specified  amounts  for each period  commencing  January 1, 2000 and
ending December 31, 2004 ($83,333 per month in 2000, $130,000 per month in 2001,
$180,000 per month in 2002 and 2003, and $130,000 per month in 2004).

In addition to the deferral  and  abatements  of rent  provided for in the Sixth
Amendments, the amendment provides for the
payment of $3.5  million  of  additional  basic  rent on the  earlier of (i) the
maturity date of the Expandable  Wraparound Mortgage Note (see below), (ii) such
earlier  date,  if  any,  as the  entire  principal  amount  of  the  Expandable
Wraparound  Mortgage  becomes  due and  payable,  or (iii) the date on which any
merger,  consolidation,  or similar  transaction to which the Corporation or New
Claridge is a party,  or any sale of all or  substantially  all of the assets of
the Corporation or New Claridge is consummated,  or any change in control of the
Corporation or New Claridge occurs.

The  Partnership  funds the  purchase of  additional  Hotel  Assets by borrowing
funds, at a 14% interest rate, from New Claridge.  The ensuing notes are secured
under the  Expandable  Wraparound  Mortgage  up to $25  million.  Principal  and
interest  on  these  notes  are  then  reimbursed  to  the  Partnership  through
additional rentals from New Claridge. Under the Operating Lease, New Claridge is
required to reimburse the Partnership for all taxes, assessments,  insurance and
general and administrative costs of the Partnership.

<PAGE>

The Partnership  had a working  capital  deficiency of $1,973,000 as of December
31, 1998 and $19,147,000 as of December 31, 1997. The decrease in the deficiency
is primarily the result of the maturity of the  Expansion  Mortgage on September
30, 1998, in addition to a change in the Wraparound  Mortgage  payment  schedule
from principal and interest  payments in 1998 to interest only payments for 1999
through  2004.  The  working  capital  deficiency  primarily  results  from  the
consummation  of  the  1989  Restructuring   Agreement.  As  part  of  the  1989
restructuring,  the Partnership's  cash flow was reduced to an amount no greater
than what the  Partnership  needs to pay  Partnership  expenses,  including debt
service. Such concept was continued through 2004 in the September 1998 amendment
to the 1997  restructuring  (see Item 1. Business - "Recent  Developments at New
Claridge"). Thus, so long as the Claridge is financially viable and New Claridge
continues to make all  payments  under the  operating  leases,  the  Partnership
expects to be able to pay its current liabilities.

The Partnership is aware of the issue  associated  with the programming  code in
existing  computer systems as the year 2000 approaches.  The "year 2000" problem
is the result of computer  programs  which were written  using two digits rather
than four to define the applicable  year,  which could cause certain  systems to
recognize the year 2000 as the year 1900.  The  Partnership  has addressed  this
issue and does not anticipate any significant costs associated with these system
changes.  The  Partnership has also updated its computer  accounting  system and
software  with  confirmation  from the  vendors of their  year 2000  compliance.
Substantially  all of the  Partnership's  revenues  are  derived  from  the  New
Claridge,  therefore any year 2000 issues  impacting on New Claridge  could also
impact the Partnership's  financial condition.  The New Claridge has reported in
its  Annual  Report  that it has  addressed  this  issue and does not expect the
amounts  required to be expensed  related to  correcting  this problem to have a
material  effect on its financial  position or results of  operations.  Although
management of the Corporation  anticipates completion of this project by the end
of 1999,  there  can be no  assurances  of this.  If the  modifications  are not
complete  timely,  the year 2000  problem  could have a  material  impact on the
Corporation's and the Partnership's ability to conduct business. The Partnership
does not have a contingency plan, but is currently discussing such a plan.


Item 7a. Quantitative and Qualitative Disclosures About Market Risk.

The  Partnership  has no exposure to market risks as all debt  instruments  have
fixed interest rates and the Partnership does not have any investment portfolios
that may be exposed to market risk due to interest changes.


Item 8.  Financial Statements and Supplementary Data.

The  Financial  Statements  and Financial  Statement  Schedules are set forth at
pages F-1 to F-20 of this report.


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

          None.

<PAGE>

                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.

         Name                     Position                         Age
Anthony C. Atchley              General Partner                     57
Gerald C. Heetland              General Partner                     58

Mr.  Atchley has served as General  Partner  since June 16,  1989.  He served as
President  and  Chief  Executive  Officer  of  Consolidated   Casinos  Corp.,  a
subsidiary  of Webb,  and of the Del Webb  Hotel  Group  from  November  1985 to
September  1989.  He  served  as  Executive  Vice  President  of  Sahara  Nevada
Corporation,  a subsidiary  of Webb,  from October 1982 to November  1985 and as
President  and General  Manager of the High Sierra Casino and Hotel from October
1983 to November 1985.  Mr.  Atchley served as President and General  Manager of
the Claridge  from April 1982 to November  1982,  as well as Vice Chairman and a
member of the Board of Directors of the  Corporation  from November 1986 to July
1989.

Mr. Heetland has served as General Partner since June 16, 1989. He has served as
General  Counsel of Becker  Gaming,  Inc.,  and its wholly  owned  subsidiaries,
including Arizona  Charlie's,  Inc., from January 1997 to January 1999, at which
time he ceased to represent  Becker  Gaming,  Inc. due to change in ownership at
Arizona  Charlie's,  Inc., which he continues to serve as General Counsel to the
present  time.  He served as Vice  President  General  Counsel and  Secretary of
Fitzgeralds Casino & Hotel in Las Vegas,  Nevada and Fitzgeralds Casino & Hotel,
Harolds  Club and Nevada Club in Reno,  Nevada from  September  1990 to November
1995. He served as Vice  President,  Secretary  and General  Counsel of Del Webb
Hotels and all affiliated hotel group subsidiaries from March 1986 to June 1989.
He  served  as  Vice  President,  General  Counsel-Casino/Hotels  and  Assistant
Secretary  of Webb and Vice  President  and  Secretary  of all Webb hotel  group
subsidiaries from April 1985 to March 1986, as Vice President, Associate General
Counsel and Assistant Secretary of Webb from November 1983 to March 1985, and as
Associate  General  Counsel and  Assistant  Secretary  of Webb from July 1981 to
November  1983.  He  served  in  similar  capacities  in all  Webb  hotel  group
subsidiaries during the 1981 to 1985 periods noted. From June 1984 through March
1986,  Mr.  Heetland was the Secretary of the  Corporation,  and from March 1986
through May 1987 he was Assistant Secretary of the Corporation.


Item 11.      Executive Compensation.

The following table shows the general  partners'  management fee which is all of
the  compensation  paid by the Partnership to all of its executive  officers for
the years ended December 31, 1998, 1997 and 1996.

                                                                Other  Annual
 Individual                Capacity              Year            Compensation

Anthony C. Atchley      General Partner          1998             $65,000
                                                 1997             $65,000
                                                 1996             $65,000

Gerald C. Heetland      General Partner          1998             $65,000
                                                 1997             $65,000
                                                 1996             $65,000

<PAGE>

Item 12.      Security Ownership of Certain Beneficial Owners and
              Management.

Security ownership of certain beneficial owners

Not applicable.

Security ownership of management

Per the terms of the Partnership  agreement,  the General Partners,  as a group,
are  entitled  to a 1%  general  partnership  interest  in  the  Partnership  as
described below:

   Name and Address                                     Amount and Nature
  of Beneficial Owner                                of Beneficial Ownership

   Anthony C. Atchley
   2880 W. Meade Avenue  Suite 204
   Las Vegas, NV  89102                             0.5% Partnership Interest

   Gerald C. Heetland
   2880 W. Meade Avenue  Suite 204
   Las Vegas, NV  89102                             0.5% Partnership Interest

Changes in Control

Not applicable.

Item 13. Certain Relationships and Related Transactions.

The Partnership does not currently engage in any significant business activities
other than those  relating to the Claridge.  New Claridge has a direct  material
interest in the Expandable Wraparound Mortgage and Operating Leases. See Item 1.
Business - "Current Financial Condition of The Partnership."

The common stock of the Corporation and the limited partnership interests of the
Partnership  were sold  together in a private  placement  as units,  and because
there has been relatively  little trading in the stock or partnership  interest,
there  is  a  substantial   similarity  between  the  equity  ownership  of  the
Corporation  and the  Partnership.  Although the Partnership and the Corporation
are independent entities, approximately 93% of the Corporation's common stock is
owned by persons who also own limited partnership interests in the Partnership.

The Partnership has an agreement with New Claridge whereby New Claridge provides
facility  and  maintenance  and  engineering  services  for  the  Claridge.  The
agreement calls for the  reimbursement of the actual  facilities and maintenance
costs incurred on the  Partnership's  behalf,  as well as an annual fee equal to
10% of such  facility  and  maintenance  costs,  but not to exceed  $530,000 per
annum.  The agreement is in effect during the entire term of the Operating Lease
including any subsequent renewal terms.

<PAGE>

                                     PART IV

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

(a) (1) and (2):  The  response  to this  portion of Item 14 is  submitted  as a
separate  section of this report beginning on page F-1. All other schedules have
been omitted as inapplicable or not required because the required information is
included in the financial statements or notes thereto.

(a) (3)       Exhibits

      3  (a) Agreement of Limited Partnership of the Partnership, as amended*

      10 (a) Form of Amended and Restated Loan Agreement*

      10 (b) Form of Amendment to Operating Lease and Expansion Operating Lease*

      10 (c) Form of  Amendment  to  Wraparound  Mortgage  Loan  and  Wraparound
             Mortgage*

      10 (d) Form of Note from New Claridge to the Partnership*

      10 (e) Form of Restructuring Agreement*

      10 (f) Form of Second Amendment to Operating Lease and Expansion Operating
             Lease**

      10 (g) Form of Third Amendment to Operating Lease and Expansion  Operating
             Lease**

      10 (h) Form of Fourth Amendment to Operating Lease and Expansion Operating
             Lease***

      10 (i)  Form  of  Mortgage,  Assignment  of  Leases  and  Rents,  Security
              Agreement and Financing Statement***

      10 (j) Form of Option Agreement****

      10 (k) Form of Side Agreement****

      10 (l) Form of First Amendment to the Option Agreement****

      10 (m) Form of First Amendment to the Side Agreement****

<PAGE>

      10 (n) Form of Fifth  Amendment to Operating  Lease  Agreement  and Fourth
             Amendment to Expansion Operating Lease Agreement*****

      10 (o) Form of Restructuring Agreement*****

      10 (p) Form of Sixth  Amendment to  Operating  Lease  Agreement  and Fifth
             Amendment to Expansion Operating Lease Agreement

      10 (q) Form of Amendment to Restructuring Agreement

      10 (r) Form of Amendment to Wraparound Mortgage Agreement and Note

*Exhibits  are   incorporated   by  reference  to  the  Exhibits  filed  with  a
Registration  Statement  filed with the  Securities  and Exchange  Commission on
March 13, 1989 (Registration #33-27399)

**Exhibits  are  incorporated  by reference to the Exhibits filed with Form 10-K
for the fiscal  year ended  December  31,  1991  filed with the  Securities  and
Exchange Commission on March 26, 1992.

***Exhibits  are  incorporated by reference to the Exhibits filed with Form 10-K
for the fiscal  year ended  December  31,  1993  filed with the  Securities  and
Exchange Commission on March 30, 1994.

****Exhibits  are incorporated by reference to the Exhibits filed with Form 10-K
for the fiscal  year ended  December  31,  1995  filed with the  Securities  and
Exchange Commission on March 29, 1996.

*****Exhibits are incorporated by reference to the Exhibits filed with Form 10-K
for the fiscal  year ended  December  31,  1996  filed with the  Securities  and
Exchange Commission on April 14, 1997.


(b) Reports on Form 8-K

   The  Partnership  filed no reports on Form 8-K during the last quarter of the
   period covered by this report.

Supplemental Information

No proxy materials are being or have been sent to the Limited Partners.

<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.

                                     Atlantic City Boardwalk Associates, L.P.
                                                 Registrant



Date:    March 30, 1999                    /s/  ANTHONY C. ATCHLEY        
                                           ___________________________________
                                      by   Anthony C. Atchley, General Partner

Date:    March 30, 1999                    /s/  GERALD C. HEETLAND        
                                           ___________________________________
                                      by   Gerald C. Heetland, General Partner

Date:    March 30, 1999                    /s/  ANTHONY C. ATCHLEY        
                                           ____________________________________
                                      by   AC Boardwalk Partners Corporation, 
                                           General Partner
                                      by   Anthony C. Atchley, President

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.



Date:    March 30, 1999                    /s/  GERALD C. HEETLAND        
                                    by   Gerald C. Heetland, General Partner and
                                         Chief Financial Officer

Date:    March 30, 1999                    /s/  ANTHONY C. ATCHLEY        
                                    by   Anthony C. Atchley, General Partner


<PAGE>

                          INDEX TO FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES



                                                                  Page
                                                               Reference in
                                                                Report on
                                                               Form 10-K   

Independent Auditors' Report ................................        F-2

Balance Sheets as of December 31, 1997 and 1998 .............        F-3

Statements of Operations For the Years Ended
     December 31, 1996, 1997 and 1998 .......................        F-4

Statements of Partners' Capital Accounts (Deficit)
     For the Years Ended December 31, 1996, 1997 and 1998 ...        F-5

Statements of Cash Flows For the Years Ended
     December 31, 1996, 1997 and 1998.........................       F-6

Notes to Financial Statements For the Years Ended
     December 31, 1996, 1997 and 1998.........................        F-7

Financial Statement Schedule:

     Schedule III - Real Estate and Accumulated Depreciation...     F-20

All other schedules have been omitted as  inapplicable  or not required  because
the  required  information  is included  in the  financial  statements  or notes
thereto.


<PAGE>

                          Independent Auditors' Report



The General Partners
Atlantic City Boardwalk Associates, L.P.:


We have audited the accompanying financial statements of Atlantic City Boardwalk
Associates, L.P. as of December 31, 1997 and 1998, and the related statements of
operations,  partners'  capital  accounts  (deficit)  and  cash  flows  for  the
three-year  period ended December 31, 1998. In connection with our audits of the
financial  statements,  we also have audited the  financial  statement  schedule
listed in the accompanying  index. These financial  statements and the financial
statement schedule are the responsibility of the Partnership's  management.  Our
responsibility  is to express an opinion on these  financial  statements and the
financial statement schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Atlantic  City  Boardwalk
Associates,  L.P.  as of  December  31,  1997 and 1998,  and the  results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 7 to the
financial statements, New Claridge has suffered recurring losses from operations
and has experienced  diminishing liquidity as a result of a deterioration in its
cash flow and limited  availability of working capital sources.  The Partnership
is dependent upon New Claridge making its contractual  lease payments to provide
the Partnership the ability to make its  contractual  debt service  payments and
other  obligations.  These  circumstances  raise  substantial  doubt  about  the
Partnership's  ability to continue  as a going  concern.  Management's  plans in
regard to these matters are also  described in Note 7. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplementary information included in
Schedule  III is  presented  for  purposes of  additional  analysis and is not a
required  part of the basic  financial  statements.  Such  information  has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic financial statements taken as a whole.




                                                      /s/ KPMG Peat Marwick LLP

Las Vegas, Nevada
March 9, 1999

<PAGE>

<TABLE>
<CAPTION>


                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                 Balance Sheets
                           December 31, 1997 and 1998

                                                                                              1997                1998
                                                                                              ----                ----
      Assets

Current assets:
<S>                                                                                   <C>                          <C>      
     Cash and cash equivalents                                                        $          552,000           1,527,000
     Rent due from New Claridge                                                                  810,000             786,000
     Interest receivable from partners                                                            41,000              35,000
     Prepaid expenses                                                                            254,000             210,000
      Other assets                                                                               150,000             159,000
                                                                                               ---------           ---------
              Total current assets                                                             1,807,000           2,717,000
                                                                                             -----------         -----------
Hotel Assets (notes 4 and 5)                                                                 183,707,000         184,318,000
Less:  Accumulated depreciation and amortization                                            (105,660,000)       (110,952,000)
                                                                                             -----------         -----------
              Net Hotel Assets                                                                78,047,000          73,366,000
                                                                                             -----------         -----------
Note receivable from New Claridge, including accrued interest  of
     $3,690,000 and $4,122,000 in 1997 and 1998, respectively                                  7,290,000           7,722,000
Deferred rent from New Claridge (notes 3 and 6)                                               31,022,000          20,905,000
Intangibles, net of accumulated amortization of
     $3,727,000 and $3,802,000 in 1997 and 1998, respectively                                     78,000               3,000
                                                                                             -----------         -----------
                                                                                      $      118,244,000         104,713,000
                                                                                             ===========         ===========
                  Liabilities and Partners' Capital Accounts

Current liabilities:
     Accounts payable                                                                 $        1,391,000           1,764,000
     Accrued interest due to New Claridge                                                        948,000             861,000
     Current portion of long-term debt due principally to
         New Claridge (note 5)                                                                18,615,000           2,065,000
                                                                                              ----------          ----------
              Total current liabilities                                                       20,954,000           4,690,000

Long-term debt due principally to New Claridge, including                                     
    accrued interest of $20,000,000 in 1997 and 1998 (note 5)                                 75,465,000          79,622,000
                                                                                              ----------          ----------
              Total liabilities                                                               96,419,000          84,312,000
                                                                                              ----------          ----------
Partners' capital accounts (deficit):
     New general partners                                                                        134,000             116,000
     Former general partners                                                                     191,000             180,000
     Special limited partners                                                                   (158,000)            155,000
     Investor limited partners                                                                21,658,000          19,950,000
                                                                                              ----------          ----------
         Total partners' capital accounts (deficit)                                           21,825,000          20,401,000

Commitments and contingencies (notes 5, 6, 7 and 9)                                          -----------          ----------

                                                                                      $      118,244,000         104,713,000
                                                                                        ================         ===========
                See accompanying notes to financial statements.

</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                            Statements of Operations
              For the Years Ended December 31, 1996, 1997, and 1998


                                                                          1996                1997                1998
                                                                          ----                ----                ----
Revenues:
<S>                                                              <C>                         <C>                 <C>  
     Rent from New Claridge for the
         lease of Hotel Assets (notes 3 and 6)                    $       39,398,000          34,560,000          27,474,000
     Interest from New Claridge                                              432,000             432,000             432,000
     Interest from Special Limited Partners                                   36,000              36,000              27,000
     Investment                                                              100,000              34,000              52,000
     Other                                                                   -                     2,000               1,000
                                                                          ----------          ----------          ----------
                                                                          39,966,000          35,064,000          27,986,000
                                                                          ----------          ----------          ----------

Expenses:
     Cost of maintaining and repairing
         Hotel Assets paid to New Claridge                                12,116,000          11,637,000          11,565,000
     Interest, principally on mortgages to
         New Claridge (note 5)                                            16,034,000          14,242,000          12,172,000
     General and administrative                                              609,000             611,000             506,000
     General Partners' management fee                                        130,000             130,000             130,000
     Depreciation and amortization                                         6,324,000           5,507,000           5,367,000
                                                                          ----------           ---------          ----------

                                                                          35,213,000          32,127,000          29,740,000
                                                                          ----------          ----------          ----------
Net income (loss)                                                 $        4,753,000           2,937,000          (1,754,000)
                                                                          ==========          ==========          ===========
Net income (loss) per limited partnership unit
  - basic and diluted (note 1)
  (450 units outstanding at the end of each year)                 $           10,391               6,422              (3,833)
                                                                          ==========          ==========           ==========
</TABLE>

                See accompanying notes to financial statements.


<PAGE>

<TABLE>
<CAPTION>

                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
               Statements of Partners' Capital Accounts (Deficit)
              For the Years Ended December 31, 1996, 1997 and 1998


                                                            Class A       Class B         Class A        Class B            Total
                                New           Former        Special       Special        Investor       Investor          Partners'
                              General         General       Limited       Limited         Limited        Limited           Capital
                             Partners        Partners      Partners      Partners         Partners       Partners         Accounts
                             --------        --------      --------      --------        ---------      ---------         ---------

<S>                        <C>                <C>           <C>                <C>           <C>          <C>              <C>      
Partners' Capital
Accounts (Deficit),
December 31, 1995          $   57,000         144,000       (15,000)     (219,000)        3,457,000     10,711,000        14,135,000

Net income                     48,000          29,000         3,000        44,000         1,136,000      3,493,000         4,753,000
                               ------         -------       --------      -------         ---------      ---------        ----------
Partners' Capital
Accounts (Deficit),
December 31, 1996             105,000         173,000       (12,000)     (175,000)        4,593,000     14,204,000        18,888,000

Net income                     29,000          18,000         2,000        27,000           702,000      2,159,000         2,937,000
                              -------         -------        -------      -------         ---------     ----------         ---------
Partners' Capital
Accounts (Deficit),
December 31, 1997             134,000         191,000       (10,000)     (148,000)        5,295,000     16,363,000        21,825,000

Capital contributions            -               -           26,000       304,000           -               -                330,000

Net loss                      (18,000)        (11,000)       (1,000)      (16,000)         (419,000)    (1,289,000)      (1,754,000)
                              --------        --------       -------      --------         ---------    -----------      -----------
Partners' Capital
Accounts (Deficit),
December 31, 1998           $ 116,000         180,000        15,000       140,000         4,876,000     15,074,000        20,401,000
                             ========         =======        ======       =======         =========     ==========       ===========
</TABLE>


                 See accompanying notes to financial statements.
<PAGE>

<TABLE>

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                                      Statements of Cash Flows
                                        For the Years Ended December 31, 1996, 1997, and 1998

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

<S>                                                                          <C>                         <C>               <C>      
Cash flows from operating activities:
     Net income (loss)                                                       $       4,753,000           2,937,000       (1,754,000)
         Adjustments to reconcile net income (loss) to
         net cash provided by operating activities:
              Depreciation and amortization                                          6,324,000           5,507,000        5,367,000
              Accretion of discount on mortgage note                                 1,524,000           1,752,000        2,014,000
              Loss on disposal of assets                                               -                     3,000             -
              Decrease in deferred rent                                              2,049,000           6,785,000       10,117,000
              Deferred interest on receivable from New Claridge                       (432,000)           (432,000)        (432,000)
              Changes in current assets and liabilities:
                  (Increase) decrease in rent due from New
                      Claridge, interest receivable from partners,
                      prepaid expenses and other assets                                (41,000)           (376,000)          65,000
                  Increase (decrease) in accounts payable and
                      accrued interest due New Claridge                               (492,000)            157,000          286,000
                                                                                    -----------         ----------       -----------
                      Net cash provided by operating activities                     13,685,000          16,333,000       15,663,000
                                                                                    -----------         ----------       -----------
Cash flows from investing activities:
     Purchase of Hotel Assets                                                       (3,231,000)           (208,000)        (544,000)
                                                                                    -----------          ----------      -----------
Cash flows from financing activities:
     Capital contributions                                                             -                   -                330,000
     Proceeds from borrowings from New Claridge                                      3,508,000             208,000          660,000
     Principal payments of debt, principally to New Claridge                       (14,051,000)        (17,227,000)     (15,134,000)
                                                                                   ------------        ------------     ------------
                      Net cash used in financing activities                        (10,543,000)        (17,019,000)     (14,144,000)
                                                                                   ------------        ------------     ------------
Net increase (decrease) in cash and cash equivalents                                   (89,000)           (894,000)         975,000
Cash and cash equivalents, beginning of period                                       1,535,000           1,446,000          552,000
                                                                                   ------------        ------------     ------------
Cash and cash equivalents, end of period                                     $       1,446,000             552,000        1,527,000
                                                                                   ============        ============     ============

Supplemental cash flow information:
     Interest paid                                                           $      14,637,000          12,688,000       10,245,000
                                                                                   ============        ============      ===========
Supplemental noncash investing and financing activities:
     Capital lease obligation incurred to acquire Hotel Assets               $           -                 -                67,000
                                                                                   ============        ============      ===========
</TABLE>

                See accompanying notes to financial statements.

<PAGE>

                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                          Notes to Financial Statements
                        December 31, 1996, 1997, and 1998


(1)      The Partnership

     (a)  General / Segments

          Atlantic City Boardwalk Associates, L.P. ("Partnership") was formed on
          October  31,  1983 to acquire  the  buildings,  parking  facility  and
          non-gaming  depreciable,   tangible  property  (collectively,   "Hotel
          Assets")  of The  Claridge  Hotel and Casino  ("Claridge")  located in
          Atlantic City, New Jersey; to hold a leasehold interest in the land on
          which the Claridge is located  ("Land"),  which Land was  subsequently
          acquired  by the  Partnership  as  part of a  financial  restructuring
          ("Restructuring  Agreement");  and to engage in activities  related or
          incidental  thereto.  The  Partnership  operates in one segment as its
          only  operation is to leases the Land and Hotel Assets to The Claridge
          at  Park  Place,   Incorporated   ("New  Claridge"),   a  wholly-owned
          subsidiary   of   The   Claridge   Hotel   and   Casino    Corporation
          ("Corporation"), under operating leases.

    (b)   Relationship with the Claridge

          Substantially  all of the revenues of the Partnership are derived from
          leases with New Claridge.  Accordingly, the ability of the Partnership
          to  fulfill  its  obligations  is  dependent  upon the  ability of New
          Claridge to pay rental  payments when due. The financial  stability of
          the Partnership is therefore dependent upon the financial condition of
          New Claridge.  While the Partnership was formed to own and to lease to
          the Corporation  and its  affiliates,  certain real estate and related
          assets, the Partnership is separate and distinct from the Corporation.
          Any person or entity seeking information  regarding the Corporation or
          its debt or equity  securities  should review the reports,  statements
          and other information filed by the Corporation with the Securities and
          Exchange  Commission,  and  should  not rely  upon  the  Partnership's
          discussion of the Corporation.

    (c)   Current Licensing Status

          The  ownership and  operation of  casino-hotel  facilities in Atlantic
          City are  subject  to  extensive  state  regulation  under the  Casino
          Control  Act under the  direction  of the New  Jersey  Casino  Control
          Commission. The Casino Control Act provides that various categories of
          entities  must  hold  appropriate  casino  licenses.  The  Partnership
          currently  operates under a four-year  casino service industry license
          effective  October  31,  1995,  while New  Claridge  operates  under a
          four-year casino license effective September 30, 1995.

    (d)   General Partners

          The General Partners of the Partnership are Anthony C. Atchley, Gerald
          C.  Heetland  and AC  Boardwalk  Partners  Corporation,  a New  Jersey
          corporation  formed on August 26, 1983, all of whose shares of capital
          stock are owned by Messrs.  Atchley and Heetland. The General Partners
          receive, in the aggregate, an annual compensation of $130,000 from the
          Partnership  as well as a 1%  interest  in the  Partnership's  income,
          gains,   losses  and   deductions   for  periods   subsequent  to  the
          restructuring.  The  Partnership  maintains  insurance  to protect the
          General  Partners  against  certain  liabilities  arising  from  their
          actions as General Partners.  Del Webb Corporation ("Webb"),  formerly
          affiliated  with the  Claridge,  has agreed to  indemnify  the General
          Partners for claims and  liabilities  resulting from acts or omissions
          occurring as a result of or prior to the restructuring.

<PAGE>

          The general partners prior to the Restructuring  Agreement executed on
          June 16, 1989 were Robert K. Swanson,  Everett L. Mangam and T. Edward
          Plant ("Former  General  Partners").  The Former General Partners were
          entitled  to  receive,  in  the  aggregate,   a  1%  interest  in  the
          Partnership's  income,  gains,  losses and  deductions for the periods
          prior to the  restructuring,  and now are  entitled  to receive a 0.6%
          interest  for  periods  subsequent  to the  restructuring,  as limited
          partners.  The Partnership and Del E. Webb New Jersey, Inc. ("DEWNJ"),
          a wholly-owned subsidiary of Webb, have agreed to indemnify the Former
          General  Partners  against  certain  liabilities  arising  from  their
          actions as general partners.

    (e)   Special Limited Partners

          Oppenheimer  Holdings,  Inc. and officers and  employees of affiliated
          Oppenheimer  & Co., Inc.  ("Special  Limited  Partners")  committed to
          contribute  $400,000  by  issuing  9% notes  maturing  in  1998.  This
          contribution  entitles  them to an  aggregate  of 1%  interest  in the
          Partnership's  income,  gains, losses and deductions until the Limited
          Partners,  as described below,  receive  aggregate cash  distributions
          equal to their capital contributions.  Thereafter, the Special Limited
          Partners are  entitled to an  aggregate of 10% of each item.  Payments
          received by the  Partnership  are  reflected as  contributions  in its
          financial statements.

          Subsequent  to  the  Restructuring   Agreement,  the  Special  Limited
          Partners were classified into two categories,  those not consenting to
          the  restructuring  ("Class A  Special  Limited  Partners")  and those
          consenting to the restructuring  ("Class B Special Limited Partners").
          Class A Special Limited Partners'  interest after the restructuring is
          .065%, in the aggregate,  representing their same proportionate  share
          as  before  the  restructuring.  Class  B  Special  Limited  Partners'
          interest  subsequent to the  restructuring was reduced by a portion of
          the 0.6%  interest  issued to the  Former  General  Partners,  thereby
          entitling the Class B Special Limited Partners to a .927% interest, in
          the aggregate.

    (f)   Investor Limited Partners

          Investor  Limited  Partners  contributed  $37,151,000  in  cash to the
          Partnership  for a 98% interest in the  Partnership's  income,  gains,
          losses  and  deductions,  to be  reduced  to 89% upon  receipt of cash
          distributions equal to their capital contributions.  Subsequent to the
          restructuring  the Investor  Limited Partners were classified into two
          categories,  those  not  consenting  to the  restructuring  ("Class  A
          Investor Limited  Partners") and those consenting to the restructuring
          ("Class  B  Investor  Limited  Partners").  Class A  Investor  Limited
          Partners'  interest  after  the  restructuring  is  23.912%,   in  the
          aggregate,  representing their same proportionate  share as before the
          restructuring.  Class B Investor Limited Partners' interest subsequent
          to the  restructuring  was  reduced by a portion of the 0.6%  interest
          issued to the Former General  Partners,  thereby entitling the Class B
          Investor Limited Partners to a 73.496% interest, in the aggregate.

<PAGE>

(2)       Basis of Presentation and Summary of Significant Accounting Policies

          The  Partnership's  policy is to  maintain  its books and  records and
          prepare  its income tax  returns on the  accrual  basis of  accounting
          ("Tax Basis").  The accompanying  financial statements are prepared in
          accordance with generally accepted accounting  principles ("GAAP") and
          differ from Tax Basis as follows:

               Certain  property and  equipment are  depreciated  on a different
               basis and over  different  lives for GAAP than those used for Tax
               Basis;

               In 1994 the Claridge  facilities  were  remodeled  and  expanded.
               During the construction  period interest was incurred on the debt
               related to this project.  This interest was  capitalized for GAAP
               and is being  amortized,  while for Tax Basis  the  interest  was
               expensed in full in 1994;

               The Expandable  Wraparound  Mortgage was discounted for GAAP as a
               result of the effect on the obligation of $20 million of deferred
               interest;

               Tax Basis rental income is  recognized  according to the terms of
               the Operating Lease, whereas for GAAP rental payments are leveled
               so that each period reflects the same basic rent.

               Following  are  the  Partnership's   assets  and  liabilities  as
               determined  in  accordance  with GAAP and for federal  income tax
               reporting purposes at December 31:

<TABLE>
<CAPTION>

                                                     1997                                        1998           
                                              -----------------------                    -----------------------
                                              GAAP            Tax                        GAAP            Tax
                                              Basis          Basis                       Basis           Basis  
                                              -----          -----                       -----           -----
                                                                       (in thousands)
<S>                                     <C>                    <C>                  <C>                   <C>   
         Total assets                   $     118,244          50,766               $     104,713         46,899
         Total liabilities              $      96,419          98,946               $      84,312         86,054

</TABLE>

          The significant  accounting  policies used to prepare the accompanying
          GAAP financial statements are as follows:

          a.   Hotel Assets are stated at cost and are  depreciated or amortized
               on a  straight-line  basis over the  following  estimated  useful
               lives:

                Building                                               40 years
                Building improvements                                  10 years
                Furniture, fixtures and equipment                       7 years
                Capital lease asset                                     7 years

<PAGE>

          b.   Long-lived  assets  and  certain  identifiable   intangibles  are
               reviewed   for   impairment   whenever   events  or   changes  in
               circumstances  indicate that the carrying  amount of an asset may
               not be recoverable.  Recoverability of assets to be held and used
               is measured by a comparison of the carrying amount of an asset to
               future  net  cash  flows   (undiscounted  and  without  interest)
               expected  to be  generated  by the  asset.  If  such  assets  are
               considered  to be impaired,  the  impairment  to be recognized is
               measured by the amount by which the carrying amount of the assets
               exceed the fair value of the assets. Assets to be disposed of are
               reported at the lower of the  carrying  amount or fair value less
               costs to sell.

          c.   Deferred  financing  costs are being amortized on a straight-line
               basis over 5 to 17 years.

          d.   The  Expandable  Wraparound  Mortgage  Note has  been  discounted
               utilizing  a  14%  interest  rate.  The  resulting   discount  is
               reflected in the basis of the Hotel Assets.

          e.   The  accompanying  financial  statements  do not reflect  federal
               income tax expense or benefit since such  liability or benefit is
               that of the individual partners and not the Partnership.

          f.   Cash equivalents are composed of investments in  interest-bearing
               repurchase  agreements  with initial or remaining  maturities  of
               less than three months at the time the investment is made.

          g.   Due to the nature of the  relationships  between the  Partnership
               and New Claridge and the Partnership and the partners, estimation
               of the fair value of the financial  instruments  due from and due
               to these related  parties is not practical as there is no trading
               market for these financial  instruments.  See Notes 3 and 5 for a
               description  of  the  terms  of  these  instruments.   For  other
               financial  instruments,  their carrying value  approximates their
               fair value.  The  carrying  amount of cash and cash  equivalents,
               interest   receivable  from  partners  and  current   liabilities
               approximates  fair value  because of the  short-term  maturity of
               these instruments.

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

<PAGE>

(3)       Restructuring Agreement

          On October 27, 1988, the Partnership,  the Corporation,  New Claridge,
          Webb  and  the  mortgage   lenders  entered  into  the   Restructuring
          Agreement.  On June 13, 1989 the  required  majority  of the  partners
          approved  the  Restructuring  Agreement  and  on  June  16,  1989  the
          restructuring was concluded (the "Closing").  The following paragraphs
          are an  overview  of the  events  that  took  place as a result of the
          restructuring.

          Webb  transferred  all of its rights to the land  underlying the Hotel
          Assets,  the air rights and the related  easement to the  Partnership.
          The Partnership's  book value of the Hotel Assets was not affected due
          to the uncertainty of the incremental value, if any, of the land.

          The operating and expansion  operating  leases were amended to add the
          land and air rights,  defer  portions of rent  through  1992  totaling
          $15,078,000 otherwise payable to the Partnership by New Claridge,  and
          to abate approximately $39,820,000 of future rents commencing in 1992.
          In  addition,  the  Partnership  lent  to New  Claridge  $3.6  million
          representing,  at the Closing,  substantially all of the Partnership's
          cash and  cash  equivalents  in  excess  of  amounts  required  to pay
          Partnership  expenses.  The loan bears  interest at 12% per annum that
          becomes  payable at the time the principal is paid.  The deferred rent
          and the $3,600,000 loan become due upon (i) the sale or refinancing of
          the  Claridge;  (ii) full or partial  satisfaction  of the  Expandable
          Wraparound Mortgage; and (iii) full satisfaction of any first mortgage
          then  in  place.  The  Restructuring   Agreement   requires  that  the
          Partnership   maintain   cash  flows  in  amounts   necessary  to  pay
          Partnership expenses,  including debt service, only, and prohibits the
          Partnership  from making  distributions  to partners for an indefinite
          period of time.

          The  Partnership  (as successor in interest to DEWNJ) and New Claridge
          terminated  the Land  Option  Agreement  which gave New  Claridge  the
          option to purchase from the Partnership  certain parcels and tracts of
          land in  Atlantic  City,  New  Jersey.  This  termination  resulted in
          payment of $100,000 by the Partnership to New Claridge.

          New General  Partners  were  admitted to the  Partnership.  The Former
          General  Partners  became limited  partners with an aggregate  limited
          partnership  interest of 0.6%. This limited  partnership  interest was
          made  available by reducing  proportionately  the limited  partnership
          interests of those limited partners  consenting to the  restructuring.
          In addition,  for nominal  consideration,  the Former General Partners
          transferred to the General  Partners all of the outstanding  shares of
          the common stock of AC Boardwalk Partners  Corporation,  the corporate
          general partner of the Partnership.

<PAGE>

(4)  Hotel Assets

         A summary of Hotel Assets at December 31, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>

                                                                        Accumulated
                                                                     Depreciation and             Net
         December 31, 1997                          Cost               Amortization          Hotel Assets
         -----------------                          ----             -----------------       -------------
<S>     <C>                                    <C>                    <C>                 <C>
         Building                              $     101,353,000     $    35,896,000       $    65,457,000
         Building improvements                        28,391,000          21,214,000             7,177,000
         Furniture, fixtures and
           equipment                                  52,810,000          47,749,000             5,061,000
         Capital lease asset                           1,153,000             801,000               352,000
                                                     -----------         -----------           -----------
                                               $     183,707,000     $   105,660,000       $    78,047,000
                                                     ===========         ===========           ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                        Accumulated
                                                                     Depreciation and             Net
         December 31, 1998                          Cost               Amortization          Hotel Assets
         -----------------                          ----             ----------------        ------------
<S>                                            <C>                <C>                   <C>               
         Building                              $     101,353,000  $       38,430,000    $       62,923,000
         Building improvements                        28,572,000          22,327,000             6,245,000
         Furniture, fixtures and
           equipment                                  53,173,000          49,288,000             3,885,000
         Capital lease asset                           1,220,000             907,000               313,000
                                                ----------------   -----------------      ----------------
                                               $     184,318,000  $      110,952,000    $       73,366,000
                                                ================   =================      ================
</TABLE>

<PAGE>

(5)    Long-term Debt 

       At December 31, 1997 and 1998, long-term debt consisted of the following:

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

<S>      <C>                                                      <C>                   <C>               
         14% Wraparound mortgage, net of                          $       74,461,000        $   65,975,000
              unaccreted discount of $6,539,000
              and $4,525,000, respectively
         14% Expansion mortgage                                            2,167,000               -
         14% FF&E notes                                                   17,452,000            15,665,000
         Capital lease obligations                                           -                      47,000
                                                                          ----------           -----------
                                                                          94,080,000            81,687,000
         Less: Current portion of long-term debt                         (18,615,000)         (  2,065,000)
                                                                          ----------           -----------
                                                                  $       75,465,000        $   79,622,000
                                                                          ==========           ===========
</TABLE>

          The wraparound and expansion mortgages are non-recourse obligations as
          neither the Partnership nor its partners are personally  liable to New
          Claridge  for  non-payment  of any  principal  of, or interest on, the
          notes. Various restrictions are placed upon the Partnership's  ability
          to  sell  assets  and  incur  additional  obligations.  The  expansion
          mortgage had principal  and interest  payments of $234,000 due monthly
          through September 30, 1998.

          Included  in  the  wraparound  mortgage  is  $20  million  of  accrued
          interest,  discounted at 14%,  which accrued from 1983 to 1988 and has
          been deferred without interest until maturity. Scheduled principal and
          interest   payments  were  made  monthly  from  January  1988  through
          September 1998.  Effective  September 30, 1998, the  Partnership,  the
          Corporation and New Claridge  agreed to amend the Wraparound  Mortgage
          Agreement and Note to provide for an extension of the maturity date of
          the  Expandable  Wraparound  Mortgage to January 1, 2005. In addition,
          principal  payments  which were payable  during the fourth  quarter of
          1998  (totaling  $3.5 million) were deferred to the earlier of (i) the
          maturity  date of the  Expandable  Wraparound  Mortgage  Agreement and
          Note, (ii) such earlier date, if any, as the entire  principal  amount
          of the Expandable Wraparound Mortgage Note becomes due and payable, or
          (iii)  the  date  on  which  any  merger,   consolidation  or  similar
          transaction to which the  Corporation  or New Claridge is a party,  or

<PAGE>

          any sale of all or substantially  all of the assets of the Corporation
          or New  Claridge  is  consummated,  or any  change of  control  of the
          Corporation  or New Claridge  occurs.  As a result of this  amendment,
          interest  only is payable  from January 1999 until  January  2005,  at
          which time a balloon  principal  payment of $50.5  million and the $20
          million of deferred interest is due.

          The Partnership funds the purchase of additional  furniture,  fixtures
          and  equipment  ("FF&E")  by  borrowing  from  New  Claridge  at a 14%
          interest rate. In addition, during the term of the Expansion Operating
          Lease,  the  Partnership  is  required to provide  New  Claridge  with
          expansion  FF&E  replacements  under the same  borrowing  arrangement.
          Generally,  one  half of the  principal  is due in 48  months  and the
          remainder  is due 60  months  from the  issue  date of the  individual
          notes, with the following  exception.  As required by the terms of the
          Claridge's $85 million debt  offering,  $8 million was used to finance
          internal  improvements  at the Claridge.  The $8 million  principal on
          these  notes  will be  payable  at final  maturity  of the  Expandable
          Wraparound  Mortgage.  All FF&E notes are secured under the wraparound
          mortgage up to $25 million.

          During 1998 the Partnership  financed the purchase of a building alarm
          system  through a 11.3% capital  lease.  This  thirty-six  month lease
          requires  monthly  principal  and interest  payments of  approximately
          $2,000 until its maturity in March 2001.  During 1995 the  Partnership
          financed  the  purchase  of some  computer  equipment  through  a 6.5%
          capital  lease.  This  thirty-six  month lease  required the final six
          month's  payments  be made at its  inception  and that  principal  and
          interest  payments of approximately  $17,000 be made monthly until its
          maturity in July 1997.

          Aggregate  maturities  of debt for each of the next five  years are as
follows:

                               1999                          $    2,065,000
                               2000                               3,018,000
                               2001                               1,864,000
                               2002                                 435,000
                               2003                                 330,000
                               Thereafter                        78,500,000
                                                                 ----------
                                                                 86,212,000
                               Less: Discount                   ( 4,525,000)
                                                                 ----------
                                                             $   81,687,000
                                                                 ==========
<PAGE>

(6)       Leases

          The  Partnership  accounts for leases in accordance with the Financial
          Accounting   Standards  Board's  Statement  of  Financial   Accounting
          Standards  No. 13,  Accounting  for Leases,  whereby  rental income is
          recognized on a  straight-line  basis over the life of the lease.  The
          Partnership leases the Land and the Hotel Assets,  excluding the FF&E,
          to New Claridge under an operating lease expiring  September 30, 1998,
          with three 10-year renewal  options.  The Partnership  also leases the
          FF&E to New  Claridge  for an amount  sufficient  to fund  payment  of
          principal  and interest on the FF&E notes.  The operating  leases,  as
          amended,  provide that New  Claridge  will have the option to purchase
          the Hotel Assets and the leasehold interest in the land and air rights
          at their fair market value on January 1, 2004.

          Minimum  future rental  receipts for each of the next five years under
          leases to New Claridge are as follows:


                           1999                                  $    30,596,000
                           2000                                       31,192,000
                           2001                                       29,716,000
                           2002                                       28,131,000
                           2003                                       27,973,000
                           Thereafter                                133,745,000
                                                                     -----------
                           Minimum future rentals                 $  281,353,000
                                                                     ===========

          Future Partnership activities including anticipated purchases of Hotel
          Assets and payments of related debt may cause actual future rentals to
          differ  from  those  presented  above.  Rents  are  used to fund  debt
          service,  facilities and maintenance costs and fees, general partners'
          management  fees  and  general  and  administrative  expenses  of  the
          Partnership. The Restructuring Agreement requires that the Partnership
          maintain cash flows in amounts  necessary to pay Partnership  expenses
          including  debt  service,   only,   and  is  prohibited   from  making
          distributions to partners for an indefinite  period of time. Any rents
          not  required  for the cash flow  needs of the  Partnership  are to be
          deferred up to  $15,078,000.  As of December 31, 1991,  $15,078,000 in
          rents had been  deferred,  and excess rents are now being  abated,  as
          described  below.  The deferred rent becomes payable upon (i) the sale
          or refinancing of the Claridge; (ii) upon full or partial satisfaction
          of  the   Expandable   Wraparound   Mortgage;   and  (iii)  upon  full
          satisfaction of any first mortgage then in place.

          The Fifth Amendment to the Operating Lease and the Fourth Amendment to
          the Expansion  Operating Lease, which were effective on March 1, 1997,
          provided  for the  abatement  of  $867,953  of basic  rent and for the
          deferral of  $1,300,000  of basic rent on March 1, 1997,  and provides
          for additional  abatements of basic rent, commencing on April 1, 1997,
          as  necessary  to  reduce  the  Partnership's  cash  flow to an amount
          necessary to meet the Partnership's cash requirements through December
          31, 1998  (determined  without regard to the repayment of the deferred
          rent).  The $1.3 million of basic rent deferred on March 1, 1997 is to
          be paid to the Partnership in monthly  installments of $25,000 for the
          period  April  1,  1997  through   December  31,  1997,   and  monthly
          installments of $50,000 for the year 1998 and thereafter until paid in
          full (subject to acceleration under certain circumstances).

          In conjunction with the Fifth Amendment to the Operating Lease and the
          Fourth Amendment to the Expansion Operating Lease, as discussed above,
          the  Corporation,  New  Claridge  and the  Partnership  entered into a
          restructuring  agreement,  effective  March 1, 1997, to modify certain
          terms of the Expandable Wraparound Mortgage (see below).

<PAGE>

          Under the terms of the Operating Lease, as amended  effective March 1,
          1997,  New Claridge had an option to purchase,  on September 30, 1998,
          the Hotel Assets and the underlying land. To exercise this option, New
          Claridge was required to give notice to the Partnership, at least nine
          months  prior to the option  date,  of its election to do so. Based on
          the current financial situation, New Claridge did not give such notice
          to the  Partnership  in respect of the September 30, 1998 option date.
          However,  New Claridge may also  exercise an option,  on September 30,
          2003, to purchase the Hotel Assets and the underlying  land on January
          1,  2004,  for  their  fair  market  value at the time the  option  is
          exercised.

          Effective  September  30,  1998,  the  Operating  Lease and  Expansion
          Operating Lease were further amended, pursuant to a Sixth Amendment to
          the Operating  Lease and Fifth  Amendment to the  Expansion  Operating
          Lease  (the  "Sixth  Amendment"),  to allow for the  deferral  of $1.1
          million of rent in either February 1999 or March 1999,  dependent upon
          certain  conditions  being  met.  These  conditions,  which  must have
          occurred  prior to March 2,  1999,  include  (i) New  Claridge  having
          received the proceeds in connection with its settlement of the parking
          garage  litigation,  and (ii) the  Corporation or New Claridge  having
          paid the interest  due on the Notes on February 1, 1999.  New Claridge
          received  the  proceeds  from the  settlement  of the  Parking  garage
          litigation in February 1999, and paid the interest due on the Notes on
          March 2, 1999,  within the 30-day grace period  allowed in  accordance
          with  the  terms of the  Indenture.  The $1.1  million  of basic  rent
          deferred  in  1999  is  to be  paid  to  the  partnership  in  monthly
          installments of $25,000 commencing January 1, 2000 until paid in full.
          This  amendment  also  provides  for  additional  abatements  of rent,
          through  December 31, 2004,  as necessary to reduce the  Partnership's
          cash flow to an amount necessary only to meet the  Partnership's  cash
          requirements;   these  abatements,  however,  are  to  be  reduced  by
          specified  amounts  for each  period  commencing  January  1, 2000 and
          ending  December  31, 2004  ($83,333  per month in 2000,  $130,000 per
          month in 2001,  $180,000 per month in 2002 and 2003,  and $130,000 per
          month in 2004).  GAAP  Basis  rents  abated  during  the  years  ended
          December 31, 1997 and 1998 amounted to  $10,802,000  and  $11,145,000,
          respectively.  Cumulative  abated GAAP Basis rents as of December  31,
          1998 total $59,013,000.

          In addition to the deferral and abatements of rent provided for in the
          Sixth  Amendment,  the  amendment  provides  for the  payment  of $3.5
          million of  additional  basic rent on the earlier of (i) the  maturity
          date of the Expandable Wraparound Mortgage Note (see below), (ii) such
          earlier date, if any, as the entire principal amount of the Expandable
          Wraparound  Mortgage  becomes  due and  payable,  or (iii) the date on
          which any merger,  consolidation,  or similar transaction to which the
          Corporation  or  New  Claridge  is a  party,  or  any  sale  of all or
          substantially  all of the assets of the Corporation or New Claridge is
          consummated,  or any  change  in  control  of the  Corporation  or New
          Claridge occurs.


(7)       Current Developments at New Claridge

          The ability of the Partnership to fulfill its obligations is dependent
          upon the  ability of New  Claridge  to pay rental  payments  when due.
          Accordingly,  the financial  stability of the Partnership is dependent
          upon the financial condition of New Claridge. The recurring losses and
          diminishing   liquidity  of  the   Corporation  has  resulted  in  the
          Corporation's  auditors' report for fiscal year end to include a going
          concern  paragraph.  The  General  Partners  of  the  Partnership  are
          continually  in  contact  with  the  management  of  the   Corporation
          concerning  various  refinancing  efforts,  including  a  sale  of the
          Corporation  and  Partnership  assets,  or a  restructuring  of  their
          related financial obligations.

<PAGE>

          The Claridge has reported as follows:

          During  1995,  the cash  provided by  operations  of the  Claridge was
          sufficient to meet the  Corporation's  obligations  to pay interest on
          the  Notes,  as  well  as to  make  at  least  some  moderate  capital
          improvements.   Commencing  in  the  latter  part  of  1995,  however,
          competition  in the Atlantic City casino market for bus  customers,  a
          principal source of customers for the Claridge at the time, increased;
          this  competition  intensified  even more  during  1996 as  additional
          casino square footage was added, principally due to the opening of the
          Trump  World's Fair casino.  During 1996,  the average coin  incentive
          issued per bus patron at the Claridge  increased to approximately $19,
          from  approximately  $13 in 1995.  Total  cash  incentives  issued  to
          Claridge's  casino  patrons (in the form of coin to play slot machines
          and gaming chips to play table games) increased to approximately $30.5
          million in 1996, from  approximately  $25.2 million in 1995. While the
          Corporation's  promotional costs have increased  significantly,  total
          casino  revenues in 1996 actually  decreased from 1995 levels.  It had
          been the expectation of the Corporation  that, upon the opening of its
          new self-parking  garage,  the Corporation would be able to reduce its
          reliance on the bus patron market; however, the Corporation was forced
          to close the garage facility on July 10, 1996, only ten days after its
          opening following a fatal accident.  Because the facility was not able
          to reopen until the end of September  1996, the  Corporation  lost any
          possible  benefit of the  facility  during the  normally  busy  summer
          season.  In addition,  severe  winter  weather in the first quarter of
          1996  adversely  affected  revenues.  As  a  result,  the  Corporation
          experienced  a net loss for 1996 of $15.4  million,  compared to a net
          loss of $1.9 million in 1995.

          The  Corporation  has   experienced   recurring   losses  and  serious
          deterioration  in its cash flow since 1996. Since the Corporation does
          not have substantial cash reserves or access to a line of credit,  the
          Corporation needed to experience significant improvements in operating
          results  in 1997  over  1996  levels  in order  to meet  its  on-going
          obligations,  including  the  interest  due  on the  Notes.  Operating
          results in 1997 did improve  over 1996  levels,  due  primarily to the
          positive impact of the availability of the self-parking  garage, lower
          bus package pricing, and other cost containment initiatives.  However,
          operating  results  in 1998 fell below  1997  levels due to  increased
          competition for casino customers. In 1998, the Corporation experienced
          a net loss of $9.4 million,  compared to a net loss of $6.0 million in
          1997. In the fall of 1998, New Claridge  redirected its bus program to
          reduce  the  number of  customers  who  arrive by bus,  and,  thereby,
          related  costs.  Total coin issued to bus passengers in 1998 was $13.5
          million, compared to $15.0 million of coin issued to bus passengers in
          1997.  Marketing  efforts are being directed toward the mid-level slot
          customer through the use of promotions and advertising.  Additionally,
          management continues to conserve cash through various cost containment
          measures.   Management   will  also   consider   various   refinancing
          alternatives,  including a sale of the Corporation, or a restructuring
          of its financial obligations.

          In view of the operating results of New Claridge in 1998, and in order
          to meet its  obligations,  management of the Corporation  took several
          steps to enhance its cash position,  through both operational changes,
          including the previously mentioned redirection of the bus program, and
          certain  transactions with PDS Financial  Corporation  ("PDS") and the
          New Jersey Casino  Reinvestment  Development  Authority  ("CRDA"),  as
          further discussed below.

          In December  1997, New Claridge  obtained a commitment  from PDS for a
          sale  lease-back  facility  ("Facility").   Under  the  terms  of  the
          Facility,  New Claridge could sell certain of its slot machines to PDS
 
<PAGE>

          under a sale lease-back  arrangement,  for a specified amount per slot
          machine,  for up to $1.8 million.  In February 1998, New Claridge sold
          370 slot  machines  to PDS for  approximately  $1  million  under this
          Facility.  The machines  will be leased back to New Claridge  under an
          operating  lease  arrangement  for two  years.  After two  years,  New
          Claridge  has an option to either  purchase  the  machines,  renew the
          lease  arrangement for twelve months,  or return the equipment to PDS.
          In December 1998, New Claridge completed the sale of an additional 379
          slot machines to PDS for approximately  $776,000,  under terms similar
          to those described  above. No additional  financing is available under
          this Facility.

          In  October  1998,  the CRDA  approved  the direct  investment  of New
          Claridge  funds,  already on deposit with the CRDA, and the completion
          of certain  donations of New  Claridge  funds also already on deposit.
          These  transactions  resulted  in  the  receipt  by  New  Claridge  of
          approximately $930,000 from the CRDA in December 1998.

          In addition, in February 1999, the Corporation and New Claridge agreed
          to a  settlement  of  approximately  $2.3  million in the  arbitration
          proceedings concerning the accident which took place in New Claridge's
          self-parking  garage  in  July  1996.  The  settlement  proceeds  were
          received by New Claridge in late February 1999.

          As a result of these transactions,  on March 2, 1999, New Claridge was
          able to pay the interest  due on the Notes on February 1, 1999,  under
          the 30-day grace period  allowed in  accordance  with the terms of the
          indenture governing the Notes.

(8)       Related Party Transactions

          The  common  stock  of the  Corporation  and the  limited  partnership
          interests of the Partnership were sold together in a private placement
          as units, and because there has been relatively  little trading in the
          stock or  partnership  interests,  there is a  substantial  similarity
          between the equity  ownership of the Corporation and the  Partnership.
          Although the Partnership and the Corporation are independent entities,
          approximately  93% of the  Corporation's  common  stock  is  owned  by
          persons who also own limited partnership interests in the Partnership.

          The  Partnership  has an  agreement  with  New  Claridge  whereby  New
          Claridge  provides  facility and maintenance and engineering  services
          for the Claridge.  The agreement  calls for the  reimbursement  of the
          actual  facilities and maintenance costs incurred on the Partnership's
          behalf,  as well as an annual  fee equal to 10% of such  facility  and
          maintenance  costs not to exceed $530,000 per annum.  The agreement is
          in effect during the entire term of the Operating  Lease including any
          subsequent renewal terms.

(9)       Contingencies

          The  Restructuring  Agreement  provided for Webb to retain an interest
          equal to $20 million plus  interest  from December 1, 1988 accruing at
          the rate of 15% per annum compounded quarterly  ("Contingent Payment")
          in any proceeds  ultimately  recovered from the operations  and/or the
          sale or  refinancing  of the Claridge  facility in excess of the First
<PAGE>

          Mortgage loan and other liabilities. To give effect to this Contingent
          Payment,  the Corporation  and the Partnership  agreed not to make any
          distributions  to the  holders  of their  equity  securities,  whether
          derived from  operations or from sale or refinancing  proceeds,  until
          Webb had  received the  Contingent  Payment.  It is estimated  that at
          December  31,  1998,  the  aggregate  amount  owing in  respect of the
          Contingent Payment was approximately $88.3 million.

          In connection with the 1989 restructuring, Webb agreed to permit those
          partners/investors  in the  Partnership  and  Corporation  ("Releasing
          Partners/Investors") from whom Webb had received written releases from
          all  liabilities,  rights  ("Contingent  Payment  Rights")  to receive
          certain  amounts  to  the  extent  available  for  application  to the
          Contingent   Payment.   Approximately   84%   in   interest   of   the
          partners/investors    provided    releases   and   became    Releasing
          Partners/Investors. Payments to Releasing Partners/Investors are to be
          made in accordance  with a schedule of  priorities,  as defined in the
          Restructuring Agreement.

          On April 2, 1990,  Webb  transferred  its  interest in the  Contingent
          Payment to an  irrevocable  trust for the benefit of the Valley of the
          Sun United Way, and upon such transfer Webb was no longer  required to
          be qualified or licensed by the New Jersey Casino Control Commission.

          On February 23, 1996, the Corporation  acquired an option to purchase,
          at a discount from the carrying  value,  the Contingent  Payment.  The
          purchase price of the option was $1 million, and the option could have
          been  exercised any time prior to December 31, 1997.  Given the recent
          operating  results at New Claridge (see Note 7, "Current  Developments
          at New  Claridge"),  the  Corporation  was not able to  exercise  this
          Contingent Payment Option, and it expired in accordance with its terms
          on December 31, 1997.

<PAGE>


<TABLE>
<CAPTION>



                                                            SCHEDULE III

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                              Real Estate and Accumulated Depreciation
                                            Years Ended December 31, 1996, 1997 and 1998

                                                                                                                        Life on
                                                                                                                         Which
                                                                                                                     Depreciation
                                                                                                            Date       in Latest
                                                                             Gross Amount                   of        Statement of
                            Initial Cost                   Cost Capitalized  at which            Accumu-    Con         Operations
                            to Partnership                 Subsequent to     Carried at Close    lated      struc-  Date    is
Description Encumbrances(A) Land(B) Building               Acquisition       of Period (C)(D)    Deprec.(E) tion    Acq.  Computed
-----------------------------------------------------------------------------------------------------------------------------------
<S>          <C>            <C>    <C>         <C>        <C>    <C>        <C>         <C>                <C>    <C>    
                                               Initial
                                  $112,500,000 Cost
                                               Less:
                                                 Original                    Bldg. $ 101,353,000         N/A   10/31/83  40 yrs
                                                 Discount  Bldg.             Bldg.                       1983- 
                                                 on        Impr.$28,572,000  Impr.    28,572,000         1998     N/A    10 yrs
                                   (11,147,000)  Mortgage  FF&E  54,393,000  FF&E     54,393,000         N/A   1983-1998  7 yrs
                                   ------------                  ----------           ----------                                
Hotel & 
Casino
Atlantic 
City, NJ     $81,687,000     -     $101,353,000                 $ 82,965,000       $ 184,318,000 $110,952,000
             -----------  -------  ------------                   ----------         -----------  -----------


</TABLE>


NOTES:

(A)  Encumbrances  represents  the  amount  owed  at  December  31,  1998 on the
     Wraparound  Mortgage,  Expansion  Mortgage,  FF&E Notes and  Capital  lease
     obligations.

(B)  The land under the  building  was  acquired  from DEWNJ,  at no cost to the
     Partnership, as part of the 1989 Restructuring.

(C)  The  aggregate  cost of real estate  owned at December 31, 1998 for Federal
     income tax purposes is $196,970,000.

<PAGE>

(D)  Reconciliation of Real Estate Carrying Costs:

                                       1996        1997          1998
                                       ----        ----          ----

 Balance at beginning of year    $ 180,298,000  $183,529,000 $183,707,000
     Building improvements           2,376,000      104,000       181,000
     Furniture, fixtures and
       equipment (FF&E) acquired       855,000      104,000      430,000
     FF&E retired                          -        (30,000)         -
                                   -----------  ----------- ------------

 Balance at end of year          $ 183,529,000 $183,707,000 $184,318,000
                                   ===========  ===========  ===========


(E)  Reconciliation of Accumulated Depreciation:

                                     1996            1997         1998
                                     ----            ----         ----

 Balance at beginning of year    $94,057,000    $100,281,000  $105,660,000
     Provision for depreciation    6,224,000       5,407,000     5,292,000
     Accumulated depreciation
       of FF&E retired                -              (28,000)       -
                                  ----------      -----------   -----------
 Balance at end of year         $100,281,000     $105,660,000  $110,952,000
                                  ==========      ===========   ===========