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, 1997
                                  ----------------------------------------------
                                       or
[   ]  Transition  Report  Pursuant  to  Section  13 or  15(d) of the Securities
       Exchange  Act of 1934
        For the transition period from                  to
                                       -----------------   ---------------------

                         Commission file 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 incorporation   (I.R.S. Employer Identification)
                   or organization)                                No.)

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, 1997 was 450
units.


<PAGE>


                                     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
"Recent  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
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
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).

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.

In late July 1996,  management  of the  Corporation  determined  that due to the
serious  deterioration  in the  Corporation's  cash flow,  without a significant
improvement in its operating results, it was unlikely that the Corporation would
be able to meet its  obligations  to pay interest on the Notes beyond the August
1996 payment.  In addition to taking steps to conserve cash by reducing  various
operating expenses, the Corporation engaged a financial advisor,  Dillon, Read &
Co.,  Inc.,  to assist in  formulating a proposal to the holders of the Notes to
restructure the Corporation's obligations under the Notes. At the same time, the
Corporation was working with Dillon, Read & Co., Inc. to attempt to find a buyer
of the  Corporation  or an  investor  that  would  be in a  position  to  inject
additional  capital into the  Corporation to enable the  Corporation to meet its
ongoing obligations. The Corporation did not receive any acceptable proposals in
regards to the possible sale of the Corporation.

In November  1996,  while the sales  efforts were  continuing,  the  Corporation
announced  that  there was a strong  likelihood  that the  Corporation  would be
unable to pay the  interest  due on the Notes on February 3, 1997.  Accordingly,
management,  working  together with financial and legal  advisors,  formulated a
plan for restructuring the Corporation's obligations.  The terms of the proposed
plan were presented to the noteholders at a meeting held on December 3, 1996.

On January 12, 1997,  management of the  Corporation  was contacted,  through an
agent, by Hilton Hotel Corporation ("Hilton"),  regarding a possible sale of the
Corporation  to  Hilton,   and  shortly   thereafter,   the  Corporation   began
negotiations  with Hilton.  On January 30, 1997, the Corporation  issued a press
release  indicating that the Corporation would not make the interest payment due
on the  Notes  on  February  3,  1997,  and  that the  Corporation  had  entered
negotiations  with Hilton  regarding  acquisition  of the  Corporation by Hilton
through a prepackaged  bankruptcy plan. At that time, a representative of Hilton
indicated  that Hilton had acquired  approximately  35% to 40% of the Notes.  On
February 5, 1997, three holders of the Notes, who were members of the unofficial
committee  which they had formed,  filed a petition for  involuntary  bankruptcy
against the Corporation in the bankruptcy court for the District of New Jersey.

Contemporaneously,  the same three  holders of the Notes  filed a related  state
court lawsuit against the Corporation,  New Claridge,  the Partnership,  certain
officers  and  directors  of the  Corporation,  and the general  partners of the
Partnership. On March 4, 1997, contrary to earlier expectations, the Corporation
was able to pay the  interest  that was due on the Notes on  February  3,  1997,
under the  30-day  grace  period  allowed  in  accordance  with the terms of the
indenture  governing  the Notes  ("Indenture").  In  addition,  the  Corporation
reached agreement with the unofficial  committee of noteholders,  as well as the
three holders of the Notes, providing for the joint dismissal of the involuntary
bankruptcy  petition and the related state court lawsuit.  On March 19, 1997, an
order was entered  dismissing the involuntary  bankruptcy  petition;  as part of
that order, a settlement  agreement was entered  whereby the state court lawsuit
was also  dismissed.  Negotiations  with  Hilton  regarding  acquisition  of the
Corporation terminated in April 1997.

The Corporation had sufficient cash to pay the interest on the Notes on March 4,
1997 due to  several  events:  (i) cash flow from  operations  for  January  and
February 1997 improved significantly over what had been expected; (ii) effective
March 1, 1997, the Operating Lease and Expansion Operating Lease (defined below)
were  amended to provide for the deferral of basic rent of $1.3 million on March
1, 1997 (see further  discussion  below);  and (iii) on February  28, 1997,  New
Claridge  entered into an agreement with Thermal  Energy  Limited  Partnership I
("Atlantic  Thermal"),  pursuant  to  which  Atlantic  Thermal  was  granted  an
exclusive  license for a period of twenty  years to use,  operate  and  maintain
certain  steam and chilled  water  production  facilities  at the  Claridge.  In
consideration  for this license  agreement,  Atlantic  Thermal paid New Claridge
$1.5 million.

In  December  1997,  New  Claridge  obtained  a  commitment  from PDS  Financial
Corporation  ("PDS") for a $2 million  sale  lease-back  facility  ("Facility").
Under the terms of the  Facility,  New  Claridge  may sell  certain  of its slot
machines to PDS under a sale lease-back arrangement,  for a specified amount per
slot machine, for up to $2 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.

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.


     Operating Lease and Expansion Operating Lease

     New Claridge  leases from the  Partnership the Hotel Assets and the land on
     which the  Claridge is located  for an initial  term of 15 years with three
     10-year renewal  options.  Basic annual rent during the initial term of the
     Operating  Lease in equal monthly  installments  was  $39,030,000  in 1995,
     $39,906,000 in 1996,  $41,775,000  in 1997 and will be $32,531,000  for the
     nine month period ending  September 30, 1998. Basic rent during the renewal
     term will be  calculated  pursuant  to a formula,  with such rent not to be
     more than $29.5 million nor less than $24 million in the lease year October
     1, 1998 through  September 30, 1999, and,  subsequently,  not to be greater
     than 10% more  than the basic  rent for the  preceding  lease  year in each
     lease year thereafter.

     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 on September 30,
     2000,  or at final  maturity  of the  Expandable  Wraparound  Mortgage,  as
     amended. 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.

     On March 17, 1986, New Claridge  entered into a lease with the  Partnership
     whereby New Claridge  leases from the  Partnership  the Claridge  expansion
     improvements  for an initial  term  beginning  March 17, 1986 and ending on
     September 30, 1998 with three 10-year  renewal  options.  Basic annual rent
     during the initial term of the Expansion  Operating Lease was $3,870,000 in
     1986 (prorated based on the number of days that the expansion  improvements
     were open to the public) and was based on the cost of the  construction  of
     the  expansion  improvements.  Annually  thereafter  the  rental  amount is
     adjusted  based on the Consumer Price Index with any increase not to exceed
     two percent per annum.  Basic annual rent for 1997, 1996, and 1995 amounted
     to $4,812,000, $4,718,000, and $4,625,000,  respectively. Basic rent during
     the renewal term will be calculated  pursuant to a formula,  with such rent
     not to be more than $3 million nor less than $2.5 million in the lease year
     October 1, 1998 through  September 30, 1999, and not to be greater than 10%
     more than the basic  rent for the  preceding  lease year in each lease year
     thereafter.

     New Claridge is also required under the Expansion Operating Lease to pay as
     additional  rent certain  expenses and debt service  relating to furniture,
     fixture and equipment replacements and building improvements (collectively,
     "Expansion FF&E  Replacements") for the expanded facility.  The Partnership
     is required during the entire term of the Expansion  Operating  Lease,  and
     any subsequent  renewal terms,  to provide New Claridge with Expansion FF&E
     Replacements and to provide facility  maintenance and engineering  services
     to New Claridge.  New Claridge is obligated to lend to the Partnership,  in
     the form of FF&E Notes,  any amounts  necessary to fund the Expansion  FF&E
     Replacements.  Any  advances  by New  Claridge  for the  foregoing  will be
     secured under the Expandable  Wraparound Mortgage (see discussion below) in
     an amount up to  $25,000,000.  Thereafter,  such advances  shall be secured
     under separate security agreements.

     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 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).  For the years 1999 through 2003,  additional abatements of
     basic rent are to be made to provide the Partnership with the amount needed
     to meet the  Partnership's  cash  requirements  plus an  additional  amount
     ($83,333  per  month in 1999 and  2000,  $125,000  per  month in 2001,  and
     $166,667 per month in 2002 and 2003).  Rents abated  during the years ended
     December  31,  1996  and  1997  amounted  to  $8,307,000  and  $10,802,000,
     respectively.  Cumulative  abated  rents  as of  December  31,  1997  total
     $47,868,000.

     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). In addition, under the March 1,
     1997 restructuring  agreement, New Claridge agreed to exercise the first of
     three ten-year  renewal  options  extending the term of the Operating Lease
     and Expansion Operating Lease through September 30, 2008.

     Under the terms of the Operating Lease, as amended effective March 1, 1997,
     New Claridge has an option to purchase,  on September  30, 1998,  the Hotel
     Assets and the underlying  land for their fair market value at the time the
     option is exercised,  which in no event may be less than an amount equal to
     the amount then outstanding under the Expandable  Wraparound  Mortgage (see
     below)  plus $2.5  million,  plus any  amount of the $1.3  million  of rent
     deferred on March 1, 1997 not then paid.  If New Claridge does not exercise
     this option on September 30, 1998, it may 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.

     If the Partnership should fail to make any payment due under the Expandable
     Wraparound  Mortgage,  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 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,  which matures on September 30, 2000, 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
     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.

     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.

     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. Upon exercise of the option,
     the purchase price of the  Contingent  Payment would have been $10 million,
     plus  interest at 10% per annum for the period from  January 1, 1997 to the
     date of  payment  of the  purchase  price if the  purchase  occurred  after
     December 31, 1996. The purchase price could have increased in an amount not
     to   exceed   $10   million   if   future    distributions   to   Releasing
     Partners/Investors  exceeded $20 million.  It is estimated that at December
     31, 1997, the aggregate  amount owing in respect of the Contingent  Payment
     was $76.2 million.

     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  1,767 slot
     machines and sixty-four table games, including thirty-two blackjack tables,
     eight craps tables, five roulette tables, four Caribbean stud poker tables,
     two mini-baccarat tables and two baccarat tables, and seven 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, a buffet area, 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.


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

     The  Corporation  had a net loss of $5,979,000  for the year ended December
     31,  1997,  as  compared  to a net loss of  $15,389,000  for the year ended
     December 31, 1996.  The overall  decrease in net loss was due mainly to New
     Claridge's cost containment  efforts, as well as additional rent abatements
     made available in 1997. Casino expenses  decreased as a result of lower bus
     program coin incentives paid, as well as lower payroll costs resulting from
     reduced staffing levels.  Food and beverage expenses decreased due to lower
     payroll and other  operating costs as a result of the reduced volume in the
     restaurants  and  cost  containment  efforts.  General  and  administrative
     expenses  decreased  due to lower  advertising  expenditures  and decreased
     payroll costs resulting from lower staffing levels;  1997 expenses included
     approximately  $1.3 million for financial and legal service  related to the
     Corporation's  attempted  reorganization early in the year. Rent expense to
     the Partnership in 1997 was lower than 1996 expense due to the abatement of
     rent pursuant to the March 1, 1997  amendments  to the Operating  Lease and
     Expansion  Operating  Lease.  Prior  to  these  amendments,  lease  expense
     (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. Since
     the  amount of  abatements  permitted  in  accordance  with the March  1997
     amendments  varies  depending on the  Partnership's  cash flow,  the actual
     amount  abated on a monthly  basis was  recorded  as a  reduction  to lease
     expense.  For the year ended  December  31,  1997,  the  reduction to lease
     expense resulting from the abatement of rent was approximately $9 million.

     Factors Which May Influence New Claridge's Future Operating Results

     As discussed,  the  Corporation  experienced  recurring  losses and serious
     deterioration in its cash flow in 1996. Since the Corporation does not have
     substantial  cash reserves or access to a line of credit,  the  Corporation
     needed to experience  significant  improvement 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,   limited   capital
     expenditures,  and other cost containment initiatives.  Although management
     of the Corporation believes that operating results will continue to improve
     over 1996 levels,  no assurances as to the continuation of this improvement
     can be given.  Management  will continue to conserve  cash through  various
     cost containment measures,  including limiting capital expenditures in 1998
     to approximately  $2 million.  Given the various  improvements  made to the
     property in recent years,  including the casino  expansion in 1994, and the
     construction  of the  self-parking  garage,  the current  condition  of the
     property is such that the above-mentioned  level of capital expenditures is
     deemed adequate. Management will also consider various refinancing efforts,
     including a sale of the Corporation. In addition, New Claridge has retained
     the law firm of Zelle and Larson LLP of Minneapolis, Minnesota to assist in
     the recovery of certain  expenses  incurred in reopening  the  self-parking
     garage and potential  lost profit claims as a result of the accident  which
     occurred in the self-parking garage on July 10, 1996. On July 22, 1997, New
     Claridge filed a Complaint and Demand for  Arbitration in the amount of $10
     million   against  the  general   contractor  and  the  architect  for  the
     self-parking garage;  recovery of these claims would have a positive impact
     on New Claridge's  financial  results and liquidity.  However,  there is no
     assurance  that  the  Corporation  will  be  successful  in  realizing  any
     recovery.

     Competition

     Competition  in the Atlantic  City  casino-hotel  market is intense.  As of
     December  31,  1997,  the  twelve   existing  casino   facilities   offered
     approximately  1,173,000  square feet of gaming space, a 8.6% increase over
     the  casino  square  footage  as of  December  31,  1996  of  approximately
     1,080,000 square feet. In July 1997, Bally's Wild Wild West Casino (located
     at the existing Bally's at Park Place Casino) commenced operations,  adding
     approximately  74,000  square feet of gaming space to the existing  market.
     The increase in casino square  footage in 1996 over 1995 was  approximately
     12.5%,  resulting  from the  opening of the Trump  World's  Fair casino and
     minor casino expansions at several other properties. However, for the years
     ended December 31, 1997 and 1996,  citywide gaming  revenues,  as reported,
     increased only 2.4% and 1.8%, respectively, over prior year levels.

     The  Atlantic  City gaming  market is expected  to  experience  significant
     growth  beginning  over the next several years as Atlantic City  transforms
     itself 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  nearing
     completion,  and features a wide,  landscaped  boulevard  with a reflecting
     pool, an expanded park area, and a 60-foot  lighthouse which is intended to
     be 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.

     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.
     During 1996, 9.8 million casino patrons arrived in Atlantic City by bus, an
     11% increase over 1995 levels.  The increased  competition took the form of
     higher coin incentives, which New Claridge matched, thus increasing its per
     patron average coin cost to  approximately  $19 in 1996 from  approximately
     $13 in 1995.  New Claridge  has relied  heavily on  attracting  patrons who
     travel to Atlantic  City by bus because the  Claridge  previously  lacked a
     self-parking  facility,  and has therefore had to remain  competitive  with
     other casino operators in regards to the incentives offered.  Even with its
     1,200-space parking facility, New Claridge will continue to rely on its bus
     customers as a significant source of business. In 1997, the total number of
     patrons   arriving  in  Atlantic  City  by  bus  decreased   slightly,   to
     approximately  9.4 million.  In addition,  bus package pricing  competition
     eased  somewhat;  the average  coin cost per patron  arriving by bus to the
     Claridge decreased to $16 in 1997.

     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,  the fastest  growing  segment of gaming  play.  In 1996,  75% of the
     Claridge's  casino  revenue came from slot play as compared to 69% reported
     for all Atlantic City properties.  The trend has continued in 1997 with 76%
     of the Claridge's casino revenue generated from slot play,  compared to 69%
     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
     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.

     Beginning in the Fall of 1988,  three events occurred that  accelerated the
     presence of casino  gaming in the United  States"  (i) a  statewide  ballot
     issue in South Dakota approved  limited-stakes gaming in Deadwood; (ii) the
     state  legislature  approved  river boat gaming in Iowa in early 1989;  and
     (iii)  Congress  passed the Indian  Gaming  Regulatory  Act of 1988,  which
     permits unrestricted gaming on Indian land in any state that already allows
     similar  gaming (for  example,  if the state allows  charitable  gaming for
     non-profit  organizations,  the federally-recognized  Indian tribes can run
     similar operations on their land). Since these events occurred,  the gaming
     industry rapidly expanded;  during 1996 and 1997, however, the expansion of
     gaming slowed  considerably.  In 1996, although voters in Michigan approved
     casino gaming for the city of Detroit,  gambling  measures were defeated in
     several other states.  In January 1997,  the New York State Senate voted to
     deny a  statewide  referendum  to  legalize  casino  gaming in that  state.
     However,  in  1997  the New  York  City  Gambling  Control  Commission  was
     established  to regulate the  operation of cruises  leaving out of New York
     harbor which offer gambling once the boat is beyond the three-mile limit of
     city  jurisdiction  and in  international  waters  ("cruises to  nowhere").
     Currently one company is operating an overnight gambling cruise under these
     regulations,  and several more have  applied to the New York City  Gambling
     Control  Commission  for  licenses.  Legislation  to put the  issue  before
     Pennsylvania  voters  has  been  introduced  several  times in the past few
     years, but none has so far succeeded.  The current  Pennsylvania  Governor,
     Tom Ridge,  has indicated  that he will require a statewide vote on gaming,
     as well as local referendum;  the requirement for statewide vote would make
     the  legalization  of casino gaming in  Pennsylvania  a more  difficult and
     expensive  possibility  than previously  anticipated.  Management  believes
     that, should casino gaming be legalized in the future in Philadelphia,  the
     effects on Atlantic City casinos and on the Claridge  would depend upon the
     form and scope of such gaming.  In 1995,  two  racetracks in Delaware began
     offering slot machines at the facilities,  with a third racetrack opening a
     slot machine  facility in August 1996.  Total  combined  revenues for these
     three  facilities  in 1996 was reported to be $184.4  million,  and in 1997
     increased to a reported $298.9 million

     Indian gaming is currently  authorized  in many states  including New York,
     Michigan, Minnesota, California, and most notably, Connecticut. In February
     1992, the Foxwoods High Stakes Casino and Bingo Hall ("Foxwoods"), operated
     by the Mashantucket Pequot Indian tribe in Ledyard,  Connecticut  commenced
     operations,  offering  the table games  found in  Atlantic  City as well as
     bingo  rooms.  In January  1993,  approval  was granted by the  Connecticut
     government  for Foxwoods to offer slot  machines;  as of December 31, 1997,
     this facility,  owned by the Mohegan Indians,  had approximately 3,000 slot
     machines, as well as table games. In 1997, these two properties reported an
     average win per slot machine per day of $326, compared to the Atlantic City
     average win per slot machine per day of $220.

     The  continued  expansion  of casino  gaming,  lotteries,  including  video
     lottery  terminals  (VLTs) , and offtrack  betting in other  nearby  states
     could also have a negative effect on the Atlantic City market.


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 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 1997.



                                                  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 479 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.


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, 1997.
<TABLE>
<CAPTION>


                                              As of or for the year ended December 31,
                                        -------------------------------------------------------
                                          1997     1996     1995    1994    1993
                                          ----     ----     ----    ----    ----
                                       (not covered by Independent Auditors' Report) (a)
<S>                                   <C>       <C>      <C>      <C>       <C>    <C>

                                                       (in thousands)

Net income ...........................$  2,937    4,753    2,723    1,782       309
Net income per limited
partnership unit (b)..................$   6.42    10.39     5.95     3.90      0.68
Total assets  ........................$118,244  130,417  135,175  140,309   138,524
Long term obligations,
   net of current portion  ...........$ 75,465   92,120  104,315  114,268   115,563
Partners' capital accounts (deficit)   $21,825   18,888   14,135   11,412     9,630
</TABLE>

(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.



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


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.

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.


Results of Operations for the Year Ended December 31, 1996
as Compared to the Year Ended December 31, 1995

Rental  income  for the year ended  December  31,  1996  increased  $881,000  as
compared to the year ended  December 31, 1995 . New Claridge  pays as additional
rent,  certain  expenses and debt  service  relating to  furniture,  fixture and
equipment  replacements and building  improvements  ("FF&E").  During 1996, FF&E
note  principal  and interest  payments  were higher than in 1995,  resulting in
increased rents in 1996.

Investment  income earned on repurchase  agreements  for the year ended December
31, 1996 decreased $30,000 as compared to the year ended December 31, 1995. This
decrease   reflects  the  decrease  in  the  interest  rate  offered  for  these
investments during 1996 as compared to 1995.

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  increased  $400,000 for the year ended December 31, 1996
as compared to 1995 due primarily to an increase in New  Claridge's  maintenance
and engineering salaries and wages and payroll related expenses.

For the year ended December 31, 1996, interest expense decreased $1,205,000 from
the prior year due to principal  payments made during 1995 and 1996 that reduced
the average  outstanding  balance of the wraparound and expansion  mortgages and
FF&E notes.

General and  administrative  expenses  decreased  $21,000  during the year ended
December 31, 1996 as compared to 1995. Insurance expense increased approximately
$44,000 due to an increase in the insurance premium. The decrease in general and
administrative  expense is  primarily  due to a $46,000  loss on the disposal of
assets  that  was   recognized   in  1995  and   classified  as  a  general  and
administrative expense, as well as a decrease in professional fees. Professional
fees during 1995 included additional fees incurred with regard to the Contingent
Payment.

Refer to the  "Liquidity  and  Capital  Resources"  section  below  for  further
discussion on the Partnership's operations.

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 continued this deferral or abatement
of excess cash flow through 1998. 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
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).  For the years 1999 through 2003, additional abatements of basic
rent are to be made to provide the  Partnership  with the amount  needed to meet
the Partnership's cash requirements plus an additional amount ($83,333 per month
in 1999 and 2000, $125,000 per month in 2001, and $166,667 per month in 2002 and
2003).  Rents abated during the years ended  December 31, 1996 and 1997 amounted
to  $8,307,000  and  $10,802,000,  respectively.  Cumulative  abated rents as of
December 31, 1997 total $47,868,000.

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).  In  addition,  under the  March 1,  1997  restructuring
agreement,  New Claridge agreed to exercise the first of three ten-year  renewal
options extending the term of the Operating Lease and Expansion  Operating Lease
through September 30, 2008.

Under the terms of the Operating Lease, as amended  effective March 1, 1997, New
Claridge has an option to purchase,  on September 30, 1998, the Hotel Assets and
the  underlying  land for  their  fair  market  value at the time the  option is
exercised, which in no event may be less than an amount equal to the amount then
outstanding  under the  Expandable  Wraparound  Mortgage  (see  below) plus $2.5
million,  plus any amount of the $1.3 million of rent  deferred on March 1, 1997
not then paid.  If New Claridge  does not exercise  this option on September 30,
1998,  it may 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.

Basic rent during the renewal  term of the  Operating  Lease will be  calculated
pursuant to a formula, with such rent not to be more than $29.5 million nor less
than $24 million in the lease year October 1, 1998 through  September  30, 1999,
and  subsequently,  not to be greater  than 10% more than the basic rent for the
preceding  lease  year in each  lease year  thereafter.  Basic  rent  during the
renewal term of the Expansion  Operating Lease will also be calculated  pursuant
to a formula,  with such rent not to be more than $3 million  nor less than $2.5
million in the lease year  October  1, 1998  through  September  30,  1999,  and
subsequently,  not to be  greater  than 10% more  than  the  basic  rent for the
preceding  lease year in each lease year  thereafter.  Therefore,  the aggregate
basic rent  payable  during the initial  years of the renewal term of the leases
will be significantly below the 1997 level.

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.

The Partnership had a working capital deficiency of approximately $19,147,000 as
of  December  31, 1997 and  $17,084,000  as of December  31,  1996.  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  1998  in 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 is in the process of
developing  a plan  to  deal  with  this  issue  and  does  not  anticipate  any
significant costs associated with these system changes. 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 that is has addressed  this
issue and does not  expect  the  amounts  required  to be  expensed  related  to
correcting this problem over the next two years to have a material effect on its
financial position or results of operations.

Recently Issued Accounting Pronouncements

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128,  "Earnings per Share" (SFAS 128). SFAS
128, which is effective for financial  statements for annual and interim periods
ending after December 15, 1997,  changes the  calculation of earnings per share,
and requires dual presentation of "basic" and "diluted"  earnings per share. The
adoption  of SFAS  128 did  not  have a  material  effect  on the  Partnership's
earnings per limited partnership unit.

Statement of Financial  Accounting  Standards  No. 130,  "Comprehensive  Income"
(SFAS  130),  was  issued  in June  1997.  SFAS 130  becomes  effective  for the
Partnership's  fiscal  year  1998,  and  requires  reclassification  of  earlier
financial statement for comparative  purposes.  SFAS 130 requires that all items
defined as  comprehensive  income,  including  changes in the amounts of certain
items, foreign currency translation adjustments, and gains and losses on certain
securities,  be shown in a  financial  statement.  SFAS 130 does not  require  a
specific format for the financial  statements in which  comprehensive  income is
reported,  but does  require  that an amount  representing  total  comprehensive
income be reported in that  statement.  Management of the  Partnership  believes
that the adoption of SFAS 130 will not have a material  effect on the  financial
statements.

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standard No. 131  "Disclosures  About Segment of an  Enterprise  and
Related  Information." This statement  supersedes  Statement No. 14 and provides
accounting guidance for reporting information about operating segments in annual
financial statements and requires public business enterprises to report selected
information  about  operating  segments  in  interim  financial  reports.   This
statement is effective  for financial  statements  for periods  beginning  after
December 15, 1997.  Segment  information for earlier years that is presented for
comparative  purposes is to be restated  to conform to the  requirements  of the
Statement unless it is impracticable to do so. The required interim  disclosures
are not required to be made in the initial year of  application.  Management  of
the Partnership  believes that this recently issued  standard will not result in
expanded  disclosure  regarding  reporting  the  results  of  the  Partnership's
operations.


Item 8. Financial Statements and Supplementary Data.

The  Financial  Statements  and Financial  Statement  Schedules are set forth at
pages F-1 to F-19 of this report.



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

None.



                                    PART III


Item 10. Directors and Executive Officers of the Registrant.

        Name                            Position                           Age

        Anthony C. Atchley              General Partner                     56
        Gerald C. Heetland              General Partner                     57

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., from January 1997 to present and served
as a private  consultant  and attorney  from  December  1995 to January 1997. 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, 1997, 1996 and 1995.


                                                                   Other  Annual
   Individual                     Capacity         Year            Compensation

   Anthony C. Atchley        General Partner       1997             $65,000
                                                   1996             $65,000
                                                   1995             $65,000

   Gerald C. Heetland        General Partner       1997             $65,000
                                                   1996             $65,000
                                                   1995             $65,000



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.


                                     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****

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

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

*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, 1998             /s/  ANTHONY C. ATCHLEY
         --------------          ---------------------------------------
                               by   Anthony C. Atchley, General Partner

Date:    March 30, 1998             /s/  GERALD C. HEETLAND
         --------------          ---------------------------------------
                               by   Gerald C. Heetland, General Partner

Date:    March 30, 1998             /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, 1998                    /s/  GERALD C. HEETLAND
         --------------                  ---------------------------------------
                                      by Gerald C. Heetland, General Partner and
                                                     Chief Financial Officer

Date:    March 30, 1998                    /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, 1996 and 1997            ....    F-3

Statements of Operations For the Years Ended
     December 31, 1995, 1996 and 1997         .................    F-4

Statements of Partners' Capital Accounts (Deficit)
     For the Years Ended December 31, 1995, 1996 and 1997          F-5

Statements of Cash Flows For the Years Ended
     December 31, 1995, 1996 and 1997         .................    F-6

Notes to Financial Statements For the Years Ended
     December 31, 1995, 1996 and 1997         .................    F-7

Financial Statement Schedule:

     Schedule III - Real Estate and Accumulated Depreciation...   F-19

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 1996, and the related statements of
operations,  stockholders  equity  (deficit)  and cash flows for the  three-year
period ended  December 31, 1997. 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 1996,  and the  results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December 31, 1997,  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 16, 1998


<PAGE>

<TABLE>
<CAPTION>

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                                           Balance Sheets
                                                     December 31, 1996 and 1997

                                                                                      1996                  1997
<S>                                                                          <C>    <C>                  <C>
                                                                                ---------------       --------------
                  Assets

Current assets:
     Cash and cash equivalents                                                $        1,446,000             552,000
     Rent due from New Claridge                                                          408,000             810,000
     Interest receivable from partners                                                    35,000              41,000
     Prepaid expenses                                                                    264,000             254,000
      Other assets                                                                       172,000             150,000
                                                                                 ---------------     ---------------
              Total current assets                                                     2,325,000           1,807,000
                                                                                 ---------------     ---------------

Hotel Assets (notes 4 and 5)                                                         183,529,000         183,707,000
Less:  Accumulated depreciation and amortization                                    (100,281,000)       (105,660,000)
                                                                                     -----------         -----------
              Net Hotel Assets                                                        83,248,000          78,047,000
                                                                                 ---------------     ---------------

Note receivable from New Claridge, including accrued interest  of
     $3,258,000 and $3,690,000 in 1996 and 1997, respectively                          6,858,000           7,290,000
Deferred rent from New Claridge (notes 3 and 6)                                       37,807,000          31,022,000
Intangibles, net of accumulated amortization of
     $3,626,000 and $3,727,000 in 1996 and 1997, respectively                            179,000              78,000
                                                                                 ---------------     ---------------

                                                                              $      130,417,000         118,244,000
                                                                                     ===========         ===========
                  Liabilities and Partners' Capital Accounts

Current liabilities:
     Accounts payable                                                         $        1,035,000           1,391,000
     Accrued interest due New Claridge                                                 1,147,000             948,000
     Current portion of long-term debt due principally to
         New Claridge (note 5)                                                        17,227,000          18,615,000
                                                                                 ---------------     ---------------
              Total current liabilities                                               19,409,000          20,954,000

Long-term debt due principally to New Claridge, including
     accrued interest of $20,000,000 in 1996 and 1997 (note 5)                        92,120,000          75,465,000
                                                                                    ------------        ------------
              Total liabilities                                                      111,529,000          96,419,000
                                                                                     -----------        ------------

Partners' capital accounts (deficit):
     New general partners                                                                105,000             134,000
     Former general partners                                                             173,000             191,000
     Special limited partners                                                           (187,000)           (158,000)
     Investor limited partners                                                        18,797,000          21,658,000
                                                                                 ---------------     ---------------

         Total partners' capital accounts (deficit)                                   18,888,000          21,825,000

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

                                                                              $      130,417,000         118,244,000

                                                                                     ===========         ===========
</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>


                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                                      Statements of Operations
                                        For the Years Ended December 31, 1995, 1996, and 1997

<S>                                                             <C>                     <C>                 <C>

                                                                         1995                1996                   1997
                                                                    ---------------     ---------------         ---------
Revenues:
     Rent from New Claridge for the
         lease of Hotel Assets (notes 3 and 6)                   $       38,517,000          39,398,000         34,560,000
     Interest from New Claridge                                             432,000             432,000            432,000
     Interest from Special Limited Partners                                  36,000              36,000             36,000
     Investment                                                             130,000             100,000             34,000
     Other                                                                  -                   -                    2,000
                                                                 ------------------    ----------------     --------------

                                                                         39,115,000          39,966,000         35,064,000
                                                                    ---------------     ---------------     --------------


Expenses:
     Cost of maintaining and repairing
         Hotel Assets paid to New Claridge                               11,716,000          12,116,000          11,637,000
     Interest, principally on mortgages to
         New Claridge (note 5)                                           17,239,000          16,034,000          14,242,000
     General and administrative                                             630,000             609,000             611,000
     General Partners' management fee                                       130,000             130,000             130,000
     Depreciation and amortization                                        6,677,000           6,324,000           5,507,000
                                                                    ---------------     ---------------      --------------

                                                                         36,392,000          35,213,000          32,127,000
                                                                    ---------------     ---------------      --------------

Net income                                                       $        2,723,000           4,753,000           2,937,000
                                                                    ===============     ===============      ==============

Net income per limited partnership unit
     -- basic and diluted (note 1)
     (450 units outstanding at the end of each year)             $            5,953              10,391              6,422
                                                                    ===============     ===============      ==============


See accompanying notes to financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                         Statements of Partners' Capital Accounts (Deficit)
                                        For the Years Ended December 31, 1995, 1996 and 1997

<S>                       <C>              <C>            <C>          <C>           <C>               <C>              <C>

                                                           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


Partners' Capital
Accounts (Deficit),
December 31, 1994         $   30,000         127,000       (17,000)     (244,000)      2,806,000        8,710,000        11,412,000

Net income                    27,000          17,000         2,000        25,000         651,000        2,001,000         2,723,000
                            --------        --------       -------      --------      ----------      -----------       -----------

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
                             =======         =======        ======       =======       =========       ==========        ==========

See accompanying notes to financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                                      Statements of Cash Flows
                                        For the Years Ended December 31, 1995, 1996, and 1997


<S>                                                                      <C>                     <C>                <C>
                                                                              1995                1996                  1997
                                                                           -------------       -------------         ----------
Cash flows from operating activities:
     Net income                                                          $     2,723,000           4,753,000          2,937,000
         Adjustments to reconcile net income to
         net cash provided by operating activities:
              Depreciation and amortization                                    6,677,000           6,324,000           5,507,000
              Accretion of discount on mortgage note                           1,327,000           1,524,000           1,752,000
              Loss on disposal of assets                                          46,000             -                     3,000
              Decrease in deferred rent                                        1,598,000           2,049,000           6,785,000
              Deferred interest on receivable from New Claridge                 (432,000)           (432,000)           (432,000)
              Changes in current assets and liabilities:
                  Increase in rent due from New Claridge,
                      interest receivable from partners,
                      prepaid expenses and other assets                         (188,000)            (41,000)           (376,000)
                  Increase (decrease) in accounts payable and
                      accrued interest due New Claridge                          100,000            (492,000)            157,000
                                                                          --------------        -------------       ------------

                      Net cash provided by operating activities               11,851,000          13,685,000          16,333,000
                                                                              ----------          ----------          ----------

Cash flows from investing activities:
     Purchase of Hotel Assets                                                 (2,160,000)         (3,231,000)           (208,000)
     Proceeds from sale of Hotel Assets                                           21,000             -                   -
                                                                           -------------       -------------          -----------

                      Net cash used in investing activities                   (2,139,000)         (3,231,000)           (208,000)
                                                                             -----------         -----------          ------------

Cash flows from financing activities:
     Proceeds of borrowings from New Claridge                                  2,483,000           3,508,000             208,000
     Principal payments of debt, principally to New Claridge                 (12,324,000)        (14,051,000)        (17,227,000)
                                                                             -----------         -----------         -----------

                      Net cash used in financing activities                   (9,841,000)        (10,543,000)        (17,019,000)
                                                                             -----------          ----------          ----------

Net decrease in cash and cash equivalents                                       (129,000)            (89,000)           (894,000)
Cash and cash equivalents, beginning of period                                 1,664,000           1,535,000           1,446,000
                                                                             -----------         -----------         -----------

Cash and cash equivalents, end of period                               $       1,535,000           1,446,000             552,000
                                                                             ===========         ===========        ============


Supplemental cash flow information:
     Interest paid                                                     $      16,022,000          14,637,000          12,668,000
                                                                              ==========          ==========          ==========


See accompanying notes to financial statements.

</TABLE>


<PAGE>


                    ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                          Notes to Financial Statements
              For the Years Ended December 31, 1995, 1996, and 1997


(1)      The Partnership

    (a)  General

         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 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.

         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. Upon receipt
         of the cash,  the  Partnership  will reflect this  contribution  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.


(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:

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

         o  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;

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

         o  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:


                                    1996                         1997
                          ---------------------         -------------------
                            GAAP        Tax                    GAAP        Tax
                            Basis      Basis                  Basis       Basis
                                          (in thousands)
     Total assets         $ 130,417      61,521            $  118,244     50,766
     Total liabilities    $ 111,529     114,906            $   96,419     98,946


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


     b.  The Partnership  adopted the provisions of SFAS No. 121, Accounting for
         the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be
         Disposed  Of,  on  January  1,  1996.  This  Statement   requires  that
         long-lived assets and certain identifiable  intangibles be 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  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. Adoption of this Statement did
         not have a material  impact on the  Partnership's  financial  position,
         results of operations, or liquidity.

     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.

(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.


         o    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.


         o    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.


         o    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.


         o    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.

(4)  Hotel Assets

  A summary of Hotel Assets at December 31, 1996 and 1997 is as follows:
                                                   Accumulated
                                                Depreciation and         Net
   December 31, 1996               Cost           Amortization      Hotel Assets
   -----------------         -----------------    ------------      ------------
   Building                   $  101,353,000  $   33,362,000    $   67,991,000
   Building improvements          28,287,000      20,071,000         8,216,000
   Furniture, fixtures and
     equipment                    52,736,000      46,160,000         6,576,000
   Capital lease asset             1,153,000         688,000           465,000
                               -------------   -------------      ------------
                              $  183,529,000  $  100,281,000    $   83,248,000
                                 ===========     ===========        ==========

                                                   Accumulated
                                                Depreciation and         Net
   December 31, 1997            Cost               Amortization     Hotel Assets
   -----------------         --------------       ------------      ------------

   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
                                 ===========     ===========        ==========


(5)      Long-term Debt

         At  December  31,  1996  and  1997,  long-term  debt  consisted  of the
following:

                                                        1996             1997
                                                        ----             ----

         14% Wraparound mortgage, net of          $  84,709,000   $  74,461,000
              unaccreted discount of $8,291,000
              and $6,539,000, respectively
         14% Expansion mortgage                       4,496,000       2,167,000
         14% FF&E notes                              20,035,000      17,452,000
         Capital lease obligations                      107,000             -
                                                    -----------     -----------
                                                    109,347,000      94,080,000
         Less: Current portion of long-term debt    (17,227,000)    (18,615,000)
                                                    -----------      -----------

                                                  $  92,120,000    $  75,465,000
                                                    ===========     ============

         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.  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.  Monthly  principal  and  interest  payments
         continue  through 1998 with  interest  only  payments from January 1999
         until  October  2000 at which time a balloon  principal  payment of $47
         million and the $20 million of deferred  interest is due. The expansion
         mortgage has  principal  and interest  payments of $234,000 due monthly
         through September 30, 1998.

         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 come due on
         September  30, 2000.  All FF&E notes are secured  under the  wraparound
         mortgage up to $25 million.

         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.  During 1991 the  Partnership
         financed  the  purchase of a Hotel Asset  through a 14% capital  lease.
         This five year lease required monthly  principal and interest  payments
         of approximately $4,000 until its maturity in June 1996.

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

                   1998                         $    18,615,000
                   1999                               2,046,000
                   2000                              77,996,000
                   2001                               1,858,000
                   2002                                 104,000
                   Thereafter                             -
                                                 --------------

                                                    100,619,000
                   Less: Discount                    (6,539,000)
                                                 ---------------
                                                $    94,080,000
                                                 ==============



(6)      Leases

         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 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 September 30, 1998.

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


                  1998                    $   47,557,000
                  1999                        30,504,000
                  2000                        38,540,000
                  2001                        28,503,000
                  2002                        26,611,000
                  Thereafter                 152,375,000
                                            ------------

                 Minimum future rentals   $  324,090,000
                                             ===========

          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) full or partial  satisfaction of
          the Expandable Wraparound Mortgage; and (iii) 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).  For the
          years 1999 through 2003, additional abatements of basic rent are to be
          made to provide  the  Partnership  with the amount  needed to meet the
          Partnership's cash requirements plus an additional amount ($83,333 per
          month in 1999 and 2000,  $125,000 per month in 2001,  and $166,667 per
          month in 2002 and 2003).  Rents abated during the years ended December
          31,  1996  and  1997   amounted   to   $8,307,000   and   $10,802,000,
          respectively.  Cumulative  abated  rents as of December 31, 1997 total
          $47,868,000.

         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.  In addition,  under the
         March 1, 1997 restructuring  agreement, New Claridge agreed to exercise
         the first of three ten-year  renewal options  extending the term of the
         Operating  Lease and Expansion  Operating  Lease through  September 30,
         2008.

         Under the terms of the Operating  Lease, as amended  effective March 1,
         1997,  New Claridge has an option to purchase,  on September  30, 1998,
         the Hotel Assets and the underlying land for their fair market value at
         the time the option is exercised, which in no event may be less than an
         amount  equal to the  amount  then  outstanding  under  the  Expandable
         Wraparound  Mortgage  plus $2.5  million,  plus any  amount of the $1.3
         million  of rent  deferred  on March 1,  1997  not  then  paid.  If New
         Claridge  does not exercise  this option on September  30, 1998, it may
         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.

         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. As of
         December  31,  1997 and  December  31,  1996,  deferred  rent  from New
         Claridge   included  rental  income  of  $15,470,000  and  $22,729,000,
         respectively, that was earned in excess of actual rent receipts.


(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 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  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.

         In late July 1996, management of the Corporation determined that due to
         the serious  deterioration in the Corporation's cash flow, that without
         a significant  improvement  in its operating  results,  it was unlikely
         that  the  Corporation  would be able to meet  its  obligations  to pay
         interest on the Notes  beyond the August 1996  payment.  In addition to
         taking steps to conserve cash by reducing various  operating  expenses,
         the Corporation engaged a financial advisor,  Dillon, Read & Co., Inc.,
         to assist in  formulating  a  proposal  to the  holders of the Notes to
         restructure the Corporation's  obligations under the Notes. At the same
         time,  the  Corporation  was working with Dillon,  Read & Co.,  Inc. to
         attempt to find a buyer of the Corporation or an investor that would be
         in a position to inject  additional  capital  into the  Corporation  to
         enable the  Corporation to meet its ongoing  obligations.  To date, the
         Corporation has not received any acceptable proposals in regards to the
         possible sale of the Corporation.

         In  November  1996,  while  the  sales  efforts  were  continuing,  the
         Corporation  announced  that  there  was a strong  likelihood  that the
         Corporation  would be  unable to pay the  interest  due on the Notes on
         February  3,  1997.  Accordingly,  management,  working  together  with
         financial and legal advisors,  formulated a plan for  restructuring the
         Corporation's  obligations.   The  terms  of  the  proposed  plan  were
         presented to the noteholders at a meeting held on December 3, 1996.

         On January 12,  1997,  management  of the  Corporation  was  contacted,
         through an agent, by Hilton Hotel Corporation  ("Hilton"),  regarding a
         possible sale of the Corporation to Hilton, and shortly thereafter, the
         Corporation  began  negotiations  with Hilton. On January 30, 1997, the
         Corporation  issued a press  release  indicating  that the  Corporation
         would not make the  interest  payment  due on the Notes on  February 3,
         1997, and that the  Corporation  had entered  negotiations  with Hilton
         regarding   acquisition   of  the   Corporation  by  Hilton  through  a
         prepackaged  bankruptcy plan. At that time, a representative  of Hilton
         indicated  that  Hilton had  acquired  approximately  35% to 40% of the
         Notes.  On  February  5, 1997,  three  holders  of the Notes,  who were
         members of the  unofficial  committee  which they had  formed,  filed a
         petition for  involuntary  bankruptcy  against the  Corporation  in the
         bankruptcy court for the District of New Jersey.

         Contemporaneously,  the same three holders of the Notes filed a related
         state  court  lawsuit  against  the  Corporation,   New  Claridge,  the
         Partnership, certain officers and directors of the Corporation, and the
         general  partners  of the  Partnership.  On March 4, 1997,  contrary to
         earlier expectations, the Corporation was able to pay the interest that
         was due on the Notes on February 3, 1997, under the 30-day grace period
         allowed in  accordance  with the terms of the  indenture  governing the
         Notes  ("Indenture").  In addition,  the Corporation  reached agreement
         with the  unofficial  committee  of  noteholders,  as well as the three
         holders  of  the  Notes,  providing  for  the  joint  dismissal  of the
         involuntary bankruptcy petition and the related state court lawsuit. On
         March  19,  1997,  an order  was  entered  dismissing  the  involuntary
         bankruptcy petition;  as part of that order, a settlement agreement was
         entered   whereby   the  state  court   lawsuit  was  also   dismissed.
         Negotiations  with  Hilton  regarding  acquisition  of the  Corporation
         terminated in April 1997.

         The Corporation had sufficient cash to pay the interest on the Notes on
         March 4, 1997 due to several events:  (i) cash flow from operations for
         January and February  1997  improved  significantly  over what had been
         expected;  (ii)  effective  March 1,  1997,  the  Operating  Lease  and
         Expansion  Operating  Lease (defined below) were amended to provide for
         the  deferral  of basic  rent of $1.3  million  on March 1,  1997  (see
         further discussion below); and (iii) on February 28, 1997, New Claridge
         entered into an agreement  with Thermal  Energy  Limited  Partnership I
         ("Atlantic Thermal"), pursuant to which Atlantic Thermal was granted an
         exclusive  license  for a period of twenty  years to use,  operate  and
         maintain certain steam and chilled water  production  facilities at the
         Claridge. In consideration for this license agreement, Atlantic Thermal
         paid New Claridge $1.5 million.

         In December 1997, New Claridge obtained a commitment from PDS Financial
         Corporation   ("PDS")  for  a  $2  million  sale  lease-back   facility
         ("Facility").  Under the terms of the  Facility,  New Claridge may sell
         certain  of  its  slot   machines  to  PDS  under  a  sale   lease-back
         arrangement,  for a  specified  amount per slot  machine,  for up to $2
         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.

         Management  of  the  Corporation  will  consider  various  refinancing
         efforts, including a sale of the Corporation.

(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
         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.

         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.  Upon exercise of
         the option,  the purchase  price of the  Contingent  Payment would have
         been $10  million,  plus  interest at 10% per annum for the period from
         January  1, 1997 to the date of payment  of the  purchase  price if the
         purchase  occurred  after  December 31, 1996.  The purchase price could
         have  increased  in an  amount  not to  exceed  $10  million  if future
         distributions to Releasing  Partners/Investors exceeded $20 million. It
         is estimated that at December 31, 1997,  the aggregate  amount owing in
         respect of the Contingent Payment was $76.2 million.

         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.

<TABLE>
<CAPTION>

<PAGE>


                                                            SCHEDULE III

                                              ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
                                              Real Estate and Accumulated Depreciation
                                            Years Ended December 31, 1995, 1996 and 1997

                                                                                                                        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.$28,391,000  Impr.    28,391,000         1997     N/A    10 yrs
                                   (11,147,000)  Mortgage  FF&E  53,963,000  FF&E     53,963,000         N/A   1983-1997  7 yrs
                                   ------------                  ----------           ----------
Hotel &
Casino
Atlantic
City, NJ     $94,080,000     -     $101,353,000                 $ 82,354,000       $ 183,707,000 $105,660,000
             -----------  -------  ------------                   ----------         -----------  -----------


</TABLE>


NOTES:

(A)  Encumbrances  represents  the amount owed at December 31, 1997
     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, 1997 for Federal
     income tax purposes is $196,359,000.

(D)  Reconciliation of Real Estate Carrying Costs:

                                       1995        1996          1997
                                       ----        ----          ----

 Balance at beginning of year    $ 177,682,000 $180,298,000 $183,529,000
     Building improvements             259,000    2,376,000      104,000
     Furniture, fixtures and
       equipment (FF&E) acquired     2,459,000      855,000      104,000
     FF&E retired                     (102,000)       -          (30,000)
                                   -----------  ----------- ------------

 Balance at end of year          $ 180,298,000 $183,529,000 $183,707,000
                                   ===========  ===========  ===========


(E)  Reconciliation of Accumulated Depreciation:

                                     1995            1996         1997
                                     ----            ----         ----

 Balance at beginning of year    $87,541,000    $94,057,000  $100,281,000
     Provision for depreciation    6,550,000      6,224,000     5,407,000
     Accumulated depreciation
       of FF&E retired               (34,000)         -           (28,000)
                                  ----------    -----------   -----------
 Balance at end of year          $94,057,000   $100,281,000  $105,660,000
                                  ==========    ===========   ===========