U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(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: 0-17600


            Common Goal Health Care Participating Mortgage Fund L.P.
        (Exact name of small business issuer as specified in its charter)

              Delaware                                            52-1475268
              --------                                            ----------
   (State or other Jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification Number)

                                215 Main Street
                            Penn Yan, New York 14527
                            ------------------------
               (Address of principal executive offices) (Zip Code)

                                 (315) 536-5985
                                 --------------
                           (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities   registered  under  Section  12(g)  of  the  Exchange  Act:  Limited
Partnership Interests

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB.     [X]

Issuer's revenues for the fiscal year ended December 31, 1997 were $280,134.

The aggregate sales price of the units of Limited  Partnership  Interest held by
non-affiliates  of the  Registrant  as of March 31, 1998 was  $1,991,609  (1,559
investors).  As of March 31,  1998,  there was no market for these  Units and no
market is expected to develop.  The  aggregate  sales price is  accordingly  not
necessarily indicative of the price at which these Units would trade.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Prospectus of the Registrant  dated February 20, 1987, and filed
pursuant to Rule 424(b) and Rule 424(c)  under the  Securities  Act of 1933,  as
amended,  are  incorporated  by reference into Part III of this Annual Report on
Form 10-KSB.
<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                         Page
<S>               <C>                                                                  <C>
PART I
     Item 1.      Description of Business...................................................1
                  -----------------------
     Item 2.      Description of Property..................................................13
                  -----------------------
     Item 3.      Legal Proceedings........................................................13
                  -----------------
     Item 4.      Submission of Matters to a Vote of Security Holders......................13
                  ---------------------------------------------------

PART II
     Item 5.      Market for Units of Limited Partnership Interest and Related
                  Security Holder Matters..................................................14
     Item 6.      Management's Discussion and Analysis or Plan of Operation................14
     Item 7.      Financial Statements.....................................................18
     Item 8.      Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure.................................................18

PART III
     Item 9.      Directors, Executive Officers, Promoters and Control Persons,
                  Compliance With Section 16(a) of the Exchange Act........................19
                  -------------------------------------------------
     Item 10.     Executive Compensation...................................................20
                  ----------------------
     Item 11.     Security Ownership of Certain Beneficial Owners and Management...........21
                  --------------------------------------------------------------
     Item 12.     Certain Relationships and Related Transactions...........................21
                  ----------------------------------------------
     Item 13.     Exhibits and Reports on Form 8-K.........................................21
                  --------------------------------


     FINANCIAL STATEMENTS.................................................................F-1

     SIGNATURES
</TABLE>


                                       (i)
<PAGE>
                                     PART-I
                                     ------
Item 1         Description of Business.

General.
--------

     Common  Goal   Health   Care   Participating   Mortgage   Fund  L.P.   (the
"Partnership")  was organized on August 20, 1986 as a limited  partnership under
the Delaware Revised Uniform Limited Partnership Act. The Partnership's  general
partners are Common Goal Capital  Group,  Inc.  ("Common  Goal" or the "Managing
General  Partner") and Common Goal Limited  Partnership I (the "Minority General
Partner")  (collectively,  the "General  Partners").  With  limited  exceptions,
Common  Goal  has  exclusive  control  over  the  business  of the  Partnership,
including  the  right  to  manage  the  Partnership's  assets.  The  Partnership
commenced  operations on July 21, 1987 after having accepted  subscriptions  for
more  than the  requisite  minimum  of  116,000  depositary  units  representing
beneficial assignments of limited partnership interests (the "Depositary Units")
in a public offering registered with the U.S. Securities and Exchange Commission
on Form  S-11  (the  "Public  Offering").  The  Partnership  raised  a total  of
$19,129,110  in the Public  Offering  which  terminated on February 20, 1989. On
June 25, 1990,  the Managing  General  Partner  caused all holders of Depositary
Units to be admitted to the  Partnership  as Limited  Partners  holding units of
limited partnership interests (the "Units").

     The  Partnership's  primary business has been to invest in or make mortgage
loans (the "Mortgage  Loans"),  comprised of a mix of first and junior  Mortgage
Loans,  secured by health  care-related  real  properties  owned by unaffiliated
entities.  The  Partnership  does not  intend to own or acquire  real  property,
except in the event of foreclosure  when the Managing General Partner deems such
acquisition to be in the best interest of the  Partnership.  The Partnership has
one Mortgage Loan which remained outstanding as of March 31, 1998. See "Existing
Mortgage Loan" below.

     The  Partnership's  objectives in making  investments of the type described
above were:  (i) to preserve  and protect  the  Partnership's  capital;  (ii) to
provide quarterly distributions from investment income; and (iii) to provide for
potential long-term  appreciation of its Mortgage Loan investments,  principally
through  participation payable at maturity of the Mortgage Loan or upon the sale
or  refinancing  of  the  underlying  property  (the  "Participation").  Because
Participation in facility  appreciation is paid only upon maturity of a Mortgage
Loan or a sale of the underlying  facility,  cash  distributions  as a result of
Participation  on the one  remaining  Mortgage Loan are not expected to commence
until  repayment or  maturity.  It is not an  objective  of the  Partnership  to
provide tax-sheltered income.

     Funds held pending distribution may be invested by the Partnership,  at the
direction  of  the  Managing  General  Partner,   in  United  States  government
securities,  certificates  of deposit of United States banks with a net worth of
at least  $20,000,000,  repurchase  agreements  covering the  securities  of the
United  States  government  or  governmental  agencies,   bankers'  acceptances,
commercial paper rated A-1 or better by Moody's Investors  Service,  Inc., money
market funds


                                        1
<PAGE>
having assets in excess of $100,000,000, interest-bearing time deposits in banks
and thrift institutions or any combination of these investments.

     The  Partnership  is  conducting  and  intends to  continue  to conduct its
operations so that it will not become subject to regulation under the Investment
Company Act of 1940. Generally,  the term "investment company" might include the
Partnership if, after a one-year period,  the  Partnership,  among other things,
were to be  engaged  primarily,  or were to hold  itself  out as  being  engaged
primarily, or were to propose to engage primarily, in the business of investing,
reinvesting or trading in securities, or if it were to have more than 40% of its
total assets, excluding cash and government securities,  invested in "investment
securities" as that term is defined in the  Investment  Company Act of 1940. The
Partnership does not currently meet this test.

     Basic Policies for Mortgage Loan Investments. In making Mortgage Loans, the
Managing  General Partner  considers such relevant factors as (1) the geographic
area and type of facility  (nursing home or intermediate care or a mix of both);
(2) the location,  construction,  quality, condition and design of the facility;
(3) the current and  anticipated  cash flow from the facility and its ability to
sufficiently  cover debt service  (including the  Partnership's  Mortgage Loan),
meet operational  needs and generate  revenues  sufficient to provide  investors
with  significant   Additional   Interest,   as  defined  in  the  Partnership's
prospectus,  and potential  value to the  Partnership's  Participation;  (4) the
growth,  tax and regulatory  environment of the community in which a facility is
located;  (5) occupancy and demand for similar health care facilities with which
the facility would compete;  (6) the mix of private and government pay patients;
and (7) the quality and experience of the management operating the facility.  As
a general rule, the Partnership will not make Mortgage Loans on facilities which
are located in states  which do not restrict  the  issuance of  certificates  of
need,  unless  supported by  additional  factors,  such as borrower  guarantees.
Further,  it is intended that Mortgage Loans will be made in various  geographic
locations  in order to achieve  portfolio  diversification,  thereby  minimizing
potential effects of changes in local economic conditions and similar risks.

     Types of  Mortgage  Loans.  The  Partnership  makes  Mortgage  Loans on fee
interests (or other beneficial interests essentially equivalent to a mortgage on
real property).  All real estate underlying Mortgage Loans is used in the health
care industry,  particularly  real estate used as nursing home and  intermediate
care  facilities.  The Partnership  will not make  construction  loans except in
connection with renovation or additions to existing facilities.  The Partnership
may also make Mortgage  Loans to enable  borrowers to acquire newly  constructed
properties  and may commit to invest in or make  Mortgage  Loans with respect to
properties  under  construction  or prior  to  construction,  provided  any such
commitment is subject to satisfactory  completion of construction (and licensure
by regulatory agencies, as applicable) by a specified date. However, in no event
will  such  construction  loans,  other  than  those  made  in  connection  with
renovations or additions to existing facilities, in the aggregate, exceed 20% of
the gross proceeds received from the Public Offering.

                                        2
<PAGE>
     Other Operating and Investment Policies. Affiliates of the General Partners
(including  partners,  officers and directors investing for their own account or
that of others) have formed, and may in the future form, limited partnerships or
other  entities  with  the  same  investment  objectives  and  policies  as  the
Partnership.  The Managing General Partner will attempt to resolve any conflicts
of interest that may arise with respect to the Joint Venture Loan (See "Existing
Mortgage Loan" below) between the  Partnership and others by exercising the good
faith  required  of  fiduciaries.  Such  conflicts  will be resolved in the best
judgment of the Managing  General  Partner.  In connection  therewith,  in 1990,
Common Goal Health Care Pension and Income Fund L.P. II ("Common  Goal II"),  an
affiliated, publicly-offered limited partnership with investment objectives that
are  substantially  identical to those of the  Partnership  and the  Partnership
participated in a ten-year second mortgage loan in the original principal amount
of $3,430,114 to an unaffiliated third party through a joint venture between the
Partnership and Common Goal II (the "Joint Venture Loan").  At December 31, 1997
and 1996, the Partnership's  mortgage loans receivable included one loan with an
outstanding balance of approximately $1,568,000,  representing the Partnership's
participation  in the remaining  $1,618,254 of the loan. See "Existing  Mortgage
Loan" below.

     Federal  Income Taxes.  The  Partnership  is not subject to federal  income
taxes as the  liability  for such taxes is that of the Partners  rather than the
Partnership.

     Closed Mortgage Loans.
     ----------------------

     The Westwood Loan. On March 10, 1988, the  Partnership  funded a $1,300,000
mortgage  loan secured by a second  mortgage on a 120-bed long term nursing care
facility (the "Westwood  Facilities")  in Poplar Bluff,  Missouri (the "Westwood
Loan").  When  the  Westwood  Loan  was  funded,  the  loan-to-value  ratio  was
approximately  91%. The Westwood Loan had a term of 10 years  (maturing in March
1998).  The Westwood  Loan was supported by two separate  guarantees;  the first
provided  by Westwood  Hills  Health  Care  Center,  Inc.  (the  "Westwood  Loan
Borrower")  and  Health  Services  Management  Corporation  (which  manages  the
Westwood Facility) and the second provided by John Rothert and R. William Brece,
Jr. (principals of the Westwood Loan Borrower).  The guarantees were required to
be  maintained  until  certain  loan-to-value  ratios and debt service  coverage
ratios were met. As of November  30,  1992,  the  conditions  for release of the
guarantees were met and the guarantees were released.  The guarantees by Messrs.
Rothert and Brece were subject to reinstatement at any time during the loan term
if the State of Missouri or other regulatory agencies adjusted the reimbursement
rates such that debt  service  coverage  was reduced to less than  1.3:1.0.  Any
reinstated  guarantee would have remained effective until the debt service ratio
returned to the level it was prior to the  adjustment and maintained or exceeded
that level for 12 consecutive months. During 1994, $300,000 of the Westwood Loan
was paid down. On October 25, 1996, the borrower on the Westwood Loan repaid the
principal  balance of  $1,000,000,  and paid the related  prepayment  penalty of
$40,000,  additional  interest of $1,594 based on remaining  1995 gross revenues
and $58,135 based on 1996 gross  revenues  through  October 1996,  and $4,792 in
basic interest.  In addition,  the borrowers paid $110,550 in additional  equity
interest, $3,650 in appraisal fees and

                                        3
<PAGE>
$4,000 in estimated  legal fees.  The October 25, 1996 Westwood  Loan  repayment
totaled $1,222,720.

     The Winthrop  Loan. On March 25, 1988,  the  Partnership  funded a mortgage
loan in the  principal  amount of  $1,000,000  (the  "Winthrop  Loan") which was
secured by a second  mortgage  on a 142-bed  nursing  care  facility in Medford,
Massachusetts  (the  "Medford  Facility").  The  Partnership  has also  received
additional collateral in the form of a second mortgage on a 170-bed nursing care
facility owned by an affiliate of the borrower in Bryn Mawr,  Pennsylvania  (the
"Bryn Mawr  Facility").  The Winthrop  Loan had a term of 10 years  (maturing in
March 1998).  When the Winthrop  Loan was funded,  the  loan-to-value  ratio was
approximately  91%. The Winthrop  Loan was the subject of a guarantee of payment
of principal and interest by Hardie Beloff (a principal of the borrower) and the
Winthrop House Associates Limited  Partnership (the "Winthrop  Borrower").  This
guarantee was to terminate upon the  achievement of debt service  coverage of at
least 1.3:1.0 for 36 consecutive months.

     In  December  of  1991,  the   Partnership   learned  that  state  Medicare
authorities  had notified the Winthrop  Borrower that the state had discovered a
series of overpayments  to the Winthrop  Borrower in connection with the Medford
Facility. The Winthrop Borrower entered into an agreement with the senior lender
on the Medford  Facility,  the  Partnership  and the state Medicare  authorities
whereby such funds would be repaid to the state. Pursuant to the agreement,  the
Winthrop Borrower paid all past due amounts of Additional Interest. The Winthrop
Loan,  which had been performing  according to its original terms, was repaid in
full in February  1996.  The borrower on the Winthrop  Loan repaid the principal
balance of $1,000,000,  and the related prepayment penalty of $55,000, $3,833 in
basic  interest  due, and $47,671 in interest to estimated  gross  revenue,  and
$8,728 in fees.

     Horizon Loan. On July 8, 1988,  the  Partnership  funded a $1,400,000,  ten
year mortgage loan (the "Horizon Loan") to Horizon Healthcare ("HHC"), an Oregon
general  partnership  (the  "Horizon  Borrower"),  secured by a second lien on a
150-bed nursing facility in Moore, Oklahoma and an 89-bed nursing facility and a
200-bed nursing facility each in Norman, Oklahoma (the "Horizon Facilities"). At
the time of funding, the Horizon Facilities were leased on a triple-net basis to
a significant  not-for-profit  corporation.  In November of 1989, an issue arose
between  the Horizon  Borrower  (who is also the  landlord)  and the tenant (the
not-for-profit  corporation),  whereby the tenant  sought a  reduction  in lease
payments and, as a countermeasure,  the Horizon Borrower sought possession.  The
landlord was granted an order for possession of the Horizon Facilities  pursuant
to which it took possession on approximately  February 1, 1990. On or about July
25, 1990, the Partnership  notified the Horizon  Borrower that it was in default
on this loan for failure to make payments and that the  Partnership  intended to
pursue all available  remedies  against the borrower unless the loan was brought
current.  On  September 7, 1990,  the  Partnership  sent the Horizon  Borrower a
notice of intent to  foreclose.  The  Partnership  was advised  that the Horizon
Borrower  also  had  been  in  default  on the  first  mortgage  on the  Horizon
Facilities  since  approximately  July of 1990 and that the first mortgagee (the
"Senior  Lender")  also sent the  borrower a "notice  of intent of  non-judicial
foreclosure."  On September 21, 1990,  the Senior Lender filed a petition in the
District Court of Cleveland
                                        4

<PAGE>
County,  Oklahoma,  against the Horizon Borrower,  seeking,  among other relief,
monetary damages in the amount owed to the Senior Lender and against the Horizon
Borrower,  the  Partnership  and others,  seeking to  foreclose  its lien on the
Horizon  Facilities.  On or  about  November  20,  1990,  the  Horizon  Borrower
transferred legal title to the Horizon  Facilities to an affiliated  corporation
("New Owner")  allegedly in violation of the mortgages of the Partnership and of
the  Senior  Lender,  and  immediately  thereafter,  the  New  Owner  instituted
bankruptcy proceedings for reorganization under Chapter 11 in Federal Bankruptcy
Court in Cleveland County,  Oklahoma.  A plan of reorganization  was approved by
all creditors of the New Owner and confirmed on May 29, 1991 (the "Plan"). Under
the terms of the Plan, the Partnership  received  monthly payments of $15,475.08
which was calculated by amortizing the principal amount of $1,469,000 at 12% per
annum over 25 years. After the Plan was confirmed,  the Partnership received the
modified  payments due it under the Plan  through  February,  1992.  At June 30,
1992,  the  Horizon  Loan was four months  delinquent  as to the  principal  and
interest payments required by, and therefore in default under, the Plan. On June
18, 1992, the  Partnership,  together with two other  creditors of HHC, filed an
involuntary petition in bankruptcy against HHC, the successor in interest to the
assets  of the  Horizon  Borrower.  Common  Goal  intended  to  submit a plan of
reorganization  to the  bankruptcy  court that  would vest title to the  Horizon
Facilities  in an  affiliate  of Common  Goal.  On July 13,  1992,  the Board of
Directors of Common Goal met and decided to proceed no further with  attempts to
obtain  control of the three  properties  collateralizing  the Horizon Loan. The
decision  was made because of the high risk  involved,  the low  probability  of
success and the amount of new  investment  required if the  Partnership  were to
obtain the properties. This action enabled the Senior Lender to proceed with its
foreclosure  proceedings  on  the  properties.  Management  of  the  Partnership
evaluated  the  exposure  with  respect to this  mortgage  loan  receivable  and
provided an  allowance  for loss of  $993,495 in 1992 in order to fully  reserve
against a loan  balance of  $1,393,495.  As of  December  31,  1992,  the entire
mortgage loan  receivable  and the  outstanding  allowance for loss were charged
off.

     At the time the  Partnership  entered  into  its  loan  agreement  with the
Horizon  Borrower in June of 1988,  the  Partnership  received  tenant  estoppel
letters  executed by certain  officers of  Adventist  Living  Centers,  Inc.,  a
Wisconsin  not-for-profit  corporation  ("ALC").  In  these  letters,  ALC  made
representations  to the  Partnership  concerning  certain  leases then in effect
between the Horizon borrower and ALC.

     On November 14,  1990,  ALC filed a Chapter 11  bankruptcy  petition in the
United States Bankruptcy Court for the Northern District of Illinois. On May 20,
1991,  a proof of  claim  was  filed on  behalf  of the  Partnership  in the ALC
bankruptcy  case  alleging  that at the time ALC's  petition was filed,  ALC was
indebted to the Partnership in the amount of $1,629,405 based on ALC's breach of
its  tenant  estoppel  letters.  In March of 1993,  the  Partnership  reached  a
settlement of this claim and on March 19, 1993, the  Partnership  received final
payment of $42,500.  Future  settlements  in the pending  state court action may
require a return of funds to the  creditors  committee  formed under the federal
bankruptcy court.
                                        5
<PAGE>
     On October 23, 1991, a complaint was filed on behalf of the  Partnership in
the  Circuit  Court of DuPage  County,  Illinois.  Named as  defendants  in that
complaint were ALC, the Horizon  Borrower and certain  individuals  and entities
either  currently  or  formerly  affiliated  with ALC or the  Horizon  Borrower,
including the Horizon  Borrower's  general partners.  The complaint alleged that
the defendants made false  representations  of material fact to the Partnership.
The  complaint  sought  recovery  of damages in the  amount of  $1,400,000  plus
interest, costs and attorneys' fees.

     On January 5, 1994,  the DuPage  County  Circuit  Court granted the Horizon
Borrower  and  its  general  partners  leave  to  file  an  amended  answer  and
counterclaim against the Partnership. The Partnership was granted until February
2, 1994 to answer or otherwise  respond to the  counterclaim.  The  counterclaim
asserted that after ALC defaulted on lease payments to Horizon,  the Partnership
interfered with Horizon's  attempts to renegotiate its leases with ALC for three
Oklahoma  nursing home  facilities  for which the  Partnership  provided  second
mortgage financing, and also interfered with the Horizon Borrower's negotiations
with an entity the Horizon Borrower proposed as a substitute tenant for ALC. The
counterclaim   also  asserted  that  the  Partnership   misrepresented   certain
information  regarding a proposal to operate the nursing  home  facilities,  and
breached its loan agreement  with Horizon by  withholding  consent from proposed
rent reductions to ALC. The counterclaim  sought damages from the Partnership in
the amount of approximately $6.8 million. On April 25, 1994 the Circuit Court of
DuPage County entered an order granting the Partnership's  Motion to Dismiss the
counterplaintiffs'  counterclaim  with prejudice in the Horizon Loan Litigation.
The court found that the  counterplaintiffs  did not have standing to assert the
claims against the  Partnership.  Without  determining  the validity of any such
claims,  the Court  determined  that the claims  could only be  asserted by HHC,
Inc., the successor to Horizon  Healthcare (the original borrower) which filed a
bankruptcy  petition in November 1990.  Subsequently,  Horizon moved to have the
above  motion  vacated.  On July 5, 1994,  the Circuit  Court denied the Horizon
Motion to Vacate.  Following  the entry of this Order,  the  parties  engaged in
substantial discovery.  After the completion of discovery, the Partnership filed
an amended  complaint on September 12, 1995.  This pleading named the Lake Union
Conference of Seventh-day  Adventists ("Lake Union") as an additional defendant.
Although Lake Union objected to being added as a defendant,  the Court ruled, on
October 10, 1995, that it should be included in the case.

     In its complaint,  the Partnership  sought $1,400,000  (principal amount of
the loan to Horizon) plus interest owing and punitive damages.  During 1996, the
Partnership  settled the Horizon loan  litigation  for a total of  $480,000.  In
December 1996 the Partnership  received $353,530 as settlement to this suit, net
of $126,470 in attorneys' fees.

     Existing Mortgage Loan.
     -----------------------

     The Joint  Venture  Loan. On September 7, 1989,  the  Partnership  funded a
short-term  mortgage  loan (the  "Honeybrook  Loan") in the  original  principal
amount of $3,370,000,  to two Tennessee limited  partnerships  (individually,  a
"Borrower" and  collectively,  the  "Borrowers").  One of the Tennessee  limited
partnerships owns a 100-bed skilled care and intermediate care

                                        6
<PAGE>
facility  and the  other  limited  partnership  owns a  101-bed  retirement  and
assisted care facility,  both of which are located in  Honeybrook,  Pennsylvania
(collectively,  the "Facilities"). The Honeybrook Loan was originally secured by
a  second  mortgage  on  the  skilled  and  intermediate  care  facility  and by
collateral  assignments of 100% of the general  partners' and limited  partners'
interests in each Borrower.  The security  interest was taken in by the Borrower
that owns the retirement  and assisted care facility  insofar as the facility is
subject to a HUD regulatory agreement which prohibits junior encumbrances on the
facility. The security interest is subject and subordinate to all applicable HUD
regulations.  When the Honeybrook Loan was funded,  the loan-to-value  ratio was
approximately  89%. The  Partnership  elected to extend the original term of the
Honeybrook  Loan and assigned its  obligation  to make the  long-term  loan to a
newly created joint venture with Common Goal II (the "Joint Venture Loan").  The
Joint  Venture  Loan was made on or about August 1, 1990,  with the  Partnership
making a $3,430,114 contribution at that time to fund the Joint Venture Loan. In
1991, Common Goal II contributed  $95,600,  thereby decreasing the Partnership's
contribution by that amount. The Borrowers made a $30,000 repayment of principal
in 1991, bringing the Partnership's  contribution down to $3,304,514 at December
31, 1991 and in December 1992 made a principal  paydown of $211,514 to bring the
balance to $3,093,000 on December 31, 1992. The $211,514 was received on January
7, 1993 and  reclassified  as a short  term  receivable  for year end  1992.  An
additional $70,000 was paid down on the principal on March 29, 1993.

     On November 3, 1993, Life Care Centers of America,  Inc. ("Life Care") paid
a total of  $1,746,790  in a  restructuring  of the Joint  Venture  Loan. Of the
$1,691,477 allocated to the Partnership, $1,455,336 was applied to principal and
$145,534 to a Prepayment  Penalty.  A Refinance  Fee of $72,750 was  negotiated,
while Gross Revenue,  Basic  Interest and Additional  Interest were taken as set
forth in the loan  documents.  The  Partnership's  balance has been paid down to
$1,567,664  while the Common Goal II balance has also been paid down to $50,590.
In connection with the repayment of principal, the Partnership agreed to release
its mortgage on the skilled care and  intermediate  care facility.  Life Care or
its affiliates operate the retirement and assisted care facility,  which secures
the Joint Venture Loan.

     The Joint  Venture Loan is  guaranteed  by Life Care and by the  beneficial
owner of the Borrowers. In connection with the negotiation of the Refinance Fee,
two  individual  guarantors  who are no longer  employees of the Borrowers  were
released from their guaranty obligations. As of December 31, 1997, Life Care had
an audited net worth in excess of $67,000,000, a substantial amount of which was
illiquid.  A substantial portion of the net worth of the individual guarantor is
also illiquid.

     The table set forth below provides  information  concerning the basic terms
and conditions of the Mortgage Loan made and currently  held by the  Partnership
as of the date of this report.

                                        7
<PAGE>
                       Common Goal Existing Mortgage Loans
                       -----------------------------------



                                  Joint Venture
                                      Loan
                                  -------------




Date of Loan                                8/1/90

Type of Loan                                Second Mortgage on
                                            Facility

Outstanding                                 1,567,664 (1)
Principal
Amount

Base                                        13.7% (2)
Interest Rate

Maturity                                    1/1/2000

Type of Property/                           Collateral assignment
Location of Property                        of interest in 101-bed
Securing Loan                               retirement and assisted
                                            care facility in Honeybrook, PA


                                        8
<PAGE>

                                      Notes
                                      -----

(1)  This  amount  reflects  the funding  provided  to the Joint  Venture by the
     Partnership.

(2)  This loan currently  requires  payment of additional  interest at a rate of
     1.95% of gross  revenues from the  Facilities  in excess of $1,694,000  per
     annum.  This  provision is currently the subject of negotiation as a result
     of the refinancing of this loan and the release of the Joint Venture's lien
     on one of the Facilities.  The Partnership  believes that the  negotiations
     will not have a  material  effect  on the  amount  of  additional  interest
     received.  The loan also provides for payment of a  participation  equal to
     30% of the first  $1,000,000 of increase in the fair market value (or gross
     sales  price)  of  the  Facilities  over  aggregate  secured   indebtedness
     (including  the Joint  Venture Loan) as of the date of funding of the Joint
     Venture  Loan and 17% of the balance of any such  increase.  As a result of
     the  refinancing  of this loan, the fair market value of the retirement and
     assisted care facility has been deemed to be $6,400,000  for the purpose of
     calculating  the  participation.  The  participation  would be payable upon
     sale,  refinancing  of a senior  mortgage  loan or at maturity of the Joint
     Venture Loan with the fair market values to be determined at that time.




                                        9

<PAGE>
Partnership Allocation of Income and Loss and Distribution.
-----------------------------------------------------------

     Net Income and Net Loss.  Net income (except with respect to a Disposition,
which includes any  Partnership  transaction  not in the ordinary  course of its
business,  including,  without  limitation,  collections of principal  payments,
equity  participation  payments,   prepayments,   prepayment  penalties,  sales,
exchanges,  foreclosures  or other  dispositions  of Mortgage  Loans held by the
Partnership,  recoveries of damage awards and insurance proceeds (other than the
receipt of subscriptions  for Units, all forms of interest  payments when due on
Mortgage Loans or business or rental interruption  insurance  proceeds)) and net
loss of the  Partnership  are  allocated  98% to Limited  Partners and 2% to the
General  Partners.  Net income  arising from a  Disposition  is allocated 98% to
Limited  Partners  and 2% to the General  Partners to the extent of any negative
balances in the  capital  accounts  of the  Limited  Partners,  and then 100% to
Limited Partners in an amount necessary to bring the Limited  Partners'  capital
accounts up to an amount equal to their Original Contributions,  which means the
amount of $10.00 for each Unit less the return of any amount of uninvested funds
returned,  as  defined  in the  prospectus,  plus  the 11% per  annum  preferred
cumulative  return thereon (less previous  distributions to the Limited Partners
in  repayment  of such  amounts).  The  remainder  of such net  income  shall be
allocated 85% to the Limited Partners and 15% to the General Partners.

     Distributions of Cash From Operations.  Distributions of Adjusted Cash From
Operations,  defined as all receipts of interest payments on Mortgage Loans less
cash receipts used to pay operating  expenses and to repurchase  any Units (Cash
Flow) less any  amount  set aside for the  restoration  or  creation  of working
capital  reserves,  are  distributed  98% to the Limited  Partners and 2% to the
General Partners, and are apportioned quarterly among Limited Partners of record
as of the record date declared  within 30 days after the end of each quarter and
are paid  quarterly.  No  distributions  of Adjusted Cash From  Operations  with
respect  to any  calendar  year  are  made to the  General  Partners  until  the
following occurs:

     First,  distributions  to the  Limited  Partners  equal  to  the 8%  annual
     cumulative  return on their  Adjusted  Contributions,  defined as  Original
     Contributions  attributable  to a  Unit,  reduced  by  the  total  of  cash
     distributed  from Disposition  Proceeds and from working capital  reserves,
     for such year (plus any amounts accrued from prior years) have been made to
     the Limited Partners; and

     Second,  payment of all previously  subordinated  management  fees, if any,
have been made.

     Thereafter,  all  previously  subordinated  amounts  payable to the General
Partners  with respect to their 2% interest are paid in full to the extent funds
are available,  and if not  available,  are deferred and paid out of Disposition
Proceeds, defined as receipts from Dispositions net of related expenses, amounts
necessary for the payment of debts and  obligations of the  Partnership  and any
amount set aside for working capital  reserves.  The Partnership has been making
distributions  to the  Limited  Partners  in excess of the 8% annual  cumulative
return on Adjusted Contributions.
                                       10
<PAGE>
     Distributions of Disposition Proceeds. The Managing General Partner has the
right to reinvest or distribute all Disposition Proceeds, through the end of the
eleventh year after the date of the Prospectus. Non-liquidating distributions of
Disposition Proceeds are distributed in the following order of priority,  except
as otherwise required by law:

         First,  100% to the Limited  Partners  until the Limited  Partners have
     received an amount which, when added to prior  distributions of Disposition
     Proceeds and cash from reserves attributable  thereto,  equals the Original
     Contributions of the Limited Partners;

         Second,  100% to the Limited  Partners  until each Limited  Partner has
     received an amount which, when added to all prior  distributions to Limited
     Partners from all sources (including prior distributions in satisfaction of
     the 8% annual  cumulative  return but excluding  distributions  pursuant to
     above),  equals  the 11% per  annum  preferred  cumulative  return on their
     Adjusted  Contributions,  (calculated  from the first  day of the  calendar
     quarter   succeeding  the  quarter  in  which  Capital   Contributions  are
     received);

         Third,  100% to the General  Partners until they have been paid 100% of
     the subordinated portion, if any, of (a) the Partnership Management Fee, if
     any, and then (b) their 2% interest in Adjusted Cash From Operations; and

         Fourth,  the  remainder,  85% to the  Limited  Partners  and 15% to the
General Partners.

Dissolution and Returns of Principal.
-------------------------------------

     Since it was the intention of the Managing General Partner to liquidate the
Partnership's  assets  between 1999 and 2004, the Managing  General  Partner has
commenced  an orderly  liquidation  and will not reinvest  loan  proceeds in new
Mortgage  Loans.  The  Partnership's  last  remaining  Mortgage  Loan, the Joint
Venture Loan, will mature on January 1, 2000.

     Proceeds  from the  liquidation  shall be applied  and  distributed  in the
following order:

         First,  to the payment of creditors of the  Partnership  but  excluding
     secured   creditors  whose   obligations   will  be  assumed  or  otherwise
     transferred on the liquidation of Partnership assets; and

         Second, after allowance for the expenses of liquidation and the setting
     up of any reserves for  contingencies  which the Managing  General  Partner
     considers  necessary,  to the  General  Partners  and  Limited  Partners in
     proportion  to and to the extent of the positive  balances in their capital
     accounts,  after net income or loss  arising  from a  Disposition  has been
     allocated,  with any excess being  distributed in accordance with the order
     of priority for non-liquidating distributions.

     Notwithstanding  anything to the contrary, the Managing General Partner has
the  right to defer  liquidation  if, in the  opinion  of the  Managing  General
Partner, the sale of Partnership
                                       11
<PAGE>
assets  in  liquidation  would  result  in a  material  underrealization  on the
Partnership's  assets.  The Managing Partner also has the right to determine the
rate at which  returns of  principal  (returns  of  Original  Contribution)  are
distributed to the limited partners.


                                       12
<PAGE>
Item 2.  Description of Property.

     The Partnership owned no real property as of December 31, 1997.

Item 3.        Legal Proceedings.

     The Partnership  settled  certain legal  proceedings in connection with the
default  of the  Horizon  Borrower  on the  Horizon  Loan in 1996.  See "Item 1.
Description of Business - Closed Mortgage Loans- Horizon Loan."

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

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

                                       13
<PAGE>
                                     PART-II
                                     -------

Item 5.  Market for Units of Limited Partnership Interest and Related Security
         Holder Matters.

     The Partnership originally caused depositary receipts representing units of
limited partnership interest to be issued in its public offering which continued
from  February  of 1987 to  February  of  1989,  pursuant  to the  terms of such
depositary  receipts.  On June 25, 1990, the Managing General Partner caused all
holders  of  depositary  units to be  admitted  to the  Partnership  as  Limited
Partners  and  distributed  to  such  Limited  Partners  the  units  of  limited
partnership  interests (the "Units")  represented by their depositary  receipts.
The Units are not readily transferable.  There is no public market for the Units
and it is not currently  expected that any will develop.  There are restrictions
upon the  transferability  of Units,  including the requirement that the General
Partners  consent to any  transferee  becoming a substituted  Unitholder  (which
consent  may be  granted  or  withheld  at the sole  discretion  of the  General
Partners).  In addition,  restrictions  on transfer  may be imposed  under state
securities laws.

     The  Revenue  Act of 1987  contains  provisions  which may have an  adverse
impact  on  investors  in  certain   "publicly  traded   partnerships."  If  the
Partnership  were to be classified as a "publicly  traded  partnership,"  income
attributable  to the Units would be  characterized  as portfolio  income and the
gross  income  attributable  to Units  acquired  by  tax-exempt  entities  after
December 17, 1987 would be unrelated  business income,  with the result that the
Units could be less marketable.  The General  Partners will, if necessary,  take
appropriate  steps to ensure that the Partnership will not be deemed a "publicly
traded partnership."

     At March  31,  1998,  1,911,411  Units  were  outstanding  and were held by
approximately 1,559 holders of record.

     The Partnership made distributions to Limited Partners of $829,446, or $.43
per unit during 1997, $922,965, or $.48 per unit during 1996, $1,261,461 or $.66
per Unit during 1995,  $1,777,746  or $.93 per Unit during 1994,  $1,866,722  or
$.98 per Unit during 1993,  $1,824,848 or $.95 per Unit during 1992,  $1,913,781
or $1.00  per Unit  during  1991,  $2,031,742  or $1.06  per Unit  during  1990,
$1,812,715  or $.96 per Unit during  1989,  and $843,048 or $.73 per Unit during
1988.  In  addition,  principal  distributions  of  $1,000,000  ($.52 per Unit),
$3,000,000  ($1.57 per Unit),  $5,000,000  ($2.62 per Unit),  $500,000 ($.26 per
Unit) and $1,361,360 ($.71 per Unit) were disbursed in December 1993, July 1994,
May 1995,  July 1996 and  January,  April and October  1997,  respectively.  The
Partnership does not intend to make additional Mortgage Loans.

Item 6.        Management's Discussion and Analysis or Plan of Operation.

     Liquidity  and Capital  Resources.  Common  Goal Health Care  Participating
Mortgage Fund L.P., a Delaware  limited  partnership  (the  "Partnership"),  was
formed to make mortgage  loans  secured by real  property  comprised of a mix of
first and junior Mortgage Loans, secured by

                                       14
<PAGE>
health care related  properties.  The Public Offering  commenced on February 20,
1987  and  continued  through  February  20,  1989,  when  the  Public  Offering
terminated. Total gross offering proceeds raised were $19,129,110.

     Partnership  assets  decreased  to  $2,204,339  at  December  31, 1997 from
$4,236,513 at December 31, 1996.  The decrease from 1996 to 1997  ($2,032,174 or
approximately  48%)  resulted  primarily  from  a  decrease  of  cash  and  cash
equivalents  by  $2,060,025,  ($1,361,360  of which was  returned to the Limited
Partners as a principal pay back), an increase of accrued interest receivable by
$30,515,   and  the  fact  that  there  were  no  repayments  of  Mortgage  Loan
receivables. As of December 31, 1997, the Partnership's loan portfolio consisted
of one mortgage loan, the aggregate  outstanding  principal balance of which was
$1,567,664.
       .
     The Partnership has structured its Mortgage Loans to provide for payment of
quarterly  distributions  from investment  income. The interest derived from the
Mortgage  Loans,  repayments of Mortgage Loans and interest earned on short-term
investments contribute to the Partnership's  liquidity.  These funds are used to
make cash distributions to Limited Partners, to pay normal operating expenses as
they arise  and,  in the case of  repayment  proceeds,  may,  subject to certain
exceptions,  be used to make  additional  Mortgage  Loans.  Reference is made to
"Item 1. Description of Business" and the "Notes to the Financial Statements" in
"Item 7. Financial  Statements" for further information  regarding such Mortgage
Loan investments.

     The Partnership's balance of cash and cash equivalents at December 31, 1997
and 1996 was $593,842 and $2,653,867, respectively, which consisted of operating
cash and working  capital  reserves.  The decrease in cash and cash  equivalents
from December 31, 1996  resulted  from a payment of $829,446  ($.43 per Unit) in
dividend  distributions  (which  included  $680,226  ($.36 per  Unit)  return of
capital),  and $1,361,360  ($.71 per Unit) return of principal which were offset
by net income of $149,220.  Dividend  distributions noted as a return of capital
represent those distributions which are in excess of current year earnings.  The
Partnership is required to maintain  reserves not less than 1% of gross offering
proceeds (not less than $191,291),  but currently  maintains a reserve in excess
of that  amount,  $593,842 at  December  31,  1997.  The amount of cash and cash
equivalents  currently  maintained by the Partnership is primarily the result of
proceeds from the repayment of mortgage loans.

     On February 12, 1996, the  Partnership  received  $1,115,232 as a payoff on
the  Winthrop  Loan.  $1,000,000  was  applied  to  principal,  $3,833  to basic
interest,  $55,000 to a  prepayment  penalty,  and  $47,671 to  estimated  gross
revenue.  The  remaining  $8,728  was  used  for  legal  fees  incurred  by  the
transaction  and to the equity  participation  owed in accordance  with the loan
documents.  At the time of payoff, the parties were not able to determine if any
additional  gross revenue and equity  participation  were owed.  Therefore,  the
parties  entered  into two  separate  escrow  arrangements  whereby  funds  were
withheld  pending  further  determination  of whether  said  funds are owed.  In
November  1996,  the  Partnership   received   $29,500,   including  $7,000  for
reimbursement  of legal fees,  of  additional  gross  revenue  from the escrowed
funds, which were agreed to by the parties. On October 25, 1996, the Partnership
received $1,222,720 as a payoff on the Westwood Loan.  $1,000,000 was applied to
principal, $4,792 to basic interest,

                                       15
<PAGE>
$40,000 to a prepayment penalty, and $59,729 to gross revenue. In addition,  the
borrowers paid $110,550 in additional equity interest, $3,650 in appraisal fees,
and $4,000 in estimated legal fees.

     The  Partnership's  success and the resultant rate of return to Unitholders
is dependent upon,  among other things,  the continued  ability of the remaining
borrowers to pay the current interest,  additional interest and principal on the
Mortgage Loans.

     As a result  of the loan  payoffs  to date  (see  "Item 1.  Description  of
Business",  the Partnership's  rates of return have been and will continue to be
impacted, as discussed in Results of Operations below.

     Results of Operations.  The  Partnership  was organized in August 1986. The
Partnership funded seven Mortgage Loans between 1987 and 1990,  including a loan
made by a venture  between the Partnership and Common Goal II in August 1990. As
of December 31, 1997, the  Partnership  had one remaining  Mortgage Loan.  Since
commencement of operations in July of 1987, the Partnership  invested  available
funds  (funds not invested in Mortgage  Loans) in  short-term  investments.  The
interest earned on these  investments has been and is expected to continue to be
less  than  the  interest  rates  achievable  on  Mortgage  Loans  made  by  the
Partnership.  Although  the  Partnership's  earnings  were  expected to increase
slowly once its  portfolio of Mortgage  Loans was  substantially  completed  and
borrowers  commenced  payments  of  Additional  Interest,  the  default  on  the
Partnership's $1,400,000 Horizon Loan (made in July 1988) which occurred in July
of 1990 (as described above), has adversely impacted such expectation.

     During the years ended December 31, 1997,  1996, and 1995, the  Partnership
had net income of $149,220,  $893,250 and $388,420,  based on total  revenues of
$280,134,  $1,072,159,  and $727,059, and total expenses of $130,914,  $178,909,
and $338,639,  respectively.  The  Partnership's  net income per Limited Partner
Unit was $.08 per Unit in 1997, $.46 per Unit in 1996 and $.20 per Unit in 1995.
The  Partnership's  distributions,  including  returns of principal,  to Limited
Partners  were $1.14 per Unit in 1997,  $.74 per unit in 1996 and $3.28 per Unit
in 1995. The 1997 distribution  included  $1,361,360 in principal payments ($.71
per Unit), the 1996 distribution  included a $500,000 principal  repayment ($.26
per Unit), and the 1995 distribution  included a $5,000,000  principal repayment
($2.62 per Unit).  Eliminating  the effect of the  principal  repayments  to the
Limited Partners,  the dividend  distributions to Limited Partners were $.43 per
Unit in 1997, $.48 per Unit in 1996 and $.66 per Unit in 1995. The 1997 dividend
distributions  included a return of capital of $.36 per Unit.  The 1996 dividend
distributions  included a return of capital of $.03 per Unit.  The 1995 dividend
distributions included a return of capital of $.46 per Unit.

     The  distributions  may not remain at the present level  (9.256%  financial
capital)  as a result  of loan  payoffs.  The  General  Partners  are  currently
reviewing the distribution policy and the matters of the additional reserves now
being held. The Partnership receives a lesser rate of return from its short-term
investments  than it  would  receive  from the  loans,  thereby  reducing  funds
available for distribution.
                                       16
<PAGE>
     Expenses  decreased in 1997 by $47,995  primarily  because of a decrease in
miscellaneous  expenses of $31,674 due to the elimination of the Fund Controller
and Fund  Administrator  positions caused by the drop in mortgage balances being
serviced. There was also a decrease of $16,357 in management fees and a decrease
in  mortgage  servicing  fees of  $2,336,  also  caused by the drop in  mortgage
balances being serviced.

     Expenses  decreased in 1996 by $159,730  primarily because of a decrease in
professional fees of $102,365.  In addition,  there was a decrease of $44,740 in
management fees and a decrease in mortgage servicing fees of $13,435 caused by a
drop in mortgage balances being served.

     Additionally, under the terms of the Partnership agreement, the Partnership
is required to reimburse  the  Managing  General  Partner for certain  operating
expenses paid on behalf of the Partnership. In 1997, 1996 and 1995, the Managing
General  Partner was  reimbursed by the  Partnership  for $93,763,  $105,655 and
$47,785 of these expenses,  respectively.  The Managing General Partner believes
that such charges have not  adversely  affected the current yield to the Limited
Partners.

                                       17

<PAGE>



Item 7.  Financial Statements.

     See Financial Statements.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.
     None.


                                       18

<PAGE>
                                    PART-III
                                    --------

Item 9.  Directors Executive Officers, Promoters and Control Persons, Compliance
                  With Section 16(a) of the Exchange Act.

     The  Partnership  does not have  directors or officers.  The following is a
list of the officers and directors of the Managing  General  Partner as of March
31, 1998:

  Name                       Age      Position
  ------------------         ---      ------------------------------------------

  Albert E. Jenkins III      51       Chairman of the Board, Chief Executive
                                      Officer, President, Treasurer and Director

  Richard R. Wood            75       Director

  William Jasper             82       Director

     Albert E. Jenkins III is the President and Chief  Executive  Officer of the
Managing   General   Partner  as  well  as  the  Executive  Vice  President  and
Secretary/Treasurer  of Common Goal Mortgage  Company.  He is also President and
Chief Executive Officer of Common Goal Capital Group, Inc. II ("CG Capital Group
II"), the managing general partner of Common Goal Health Care Pension and Income
Fund L.P. II, a Delaware limited  partnership  which commenced a public offering
of its  securities  in January  1990.  Mr.  Jenkins also serves on the boards of
directors  of the  above-referenced  corporations.  Mr.  Jenkins is a co-general
partner of Common Goal Limited Partnership I and Common Goal Management Company.
Mr. Jenkins is also  President,  Chief  Executive  Officer and a director of St.
Catherine's  of  Seneca,  Inc.,  St.  Catherine's  Care  Center of  Tiffin,  St.
Catherine's  Care  Center of  Bloomville  and St.  Catherine's  Care  Centers of
Fostoria.  In  addition,  Mr.  Jenkins  is  President  and  a  director  of  St.
Catherine's  Health Care  Management,  Inc. and St.  Catherine's Care Centers of
Washington Court House Inc. Mr. Jenkins has been a licensed  securities salesman
since 1971 and an investment  advisor  registered under the Investment  Advisers
Act of 1940 since 1978.

     Richard  R. Wood is a  director  of the  Managing  General  Partner  and is
president,  a  director  and owner of 80% of the  outstanding  stock of  Renwood
Properties,  Inc. Mr. Wood is also a  co-general  partner of Common Goal Limited
Partnership  I and a director of Common Goal Capital Group Inc. II, the managing
general  partner of Common  Goal II. In  addition,  Mr.  Wood is a member of the
board of directors of the St Catherine's  affiliated  companies  which currently
own five health care  facilities in Ohio. Mr. Wood has,  either  individually or
together  with  or  through   Renwood,   sponsored  31  prior  private   limited
partnerships  which have acquired real estate.  These  partnerships  have raised
approximately  $30,762,525,  with  approximately 81% of the properties  acquired
being  government-subsidized  low income  housing  projects for families and the
elderly and handicapped.  In addition, Mr. Wood is a controlling  shareholder of
Renwood,  Inc.  and several of the Renwood  companies,  which act as  co-general
partners  of certain of the  above-referenced  syndications.  He is  currently a
member of the National Leased
                                       19
<PAGE>
Housing  Association,  Council for Rural Housing and the Real Estate  Investment
Association.  Mr.  Wood  received a B.A.  from  Harvard  University  in 1943 and
attended Massachusetts Institute of Technology from 1947-1948.

     William E. Jasper,  Jr. is a director of Common Goal Capital Group, Inc. II
and has been a member  of the  Board of  Directors  of  Madison  Square  Federal
Savings Bank since 1964.  Prior to 1980, when Mr. Jasper retired,  he had served
as president of a multi-line  insurance  agency and  brokerage.  Mr. Jasper is a
Deputy Regional  Director for a fraternal  organization that is dedicated to the
Maryland  Special Olympics which provides  health-care  training and specialized
sports for the mentally handicapped.  Mr. Jasper attended Baltimore City College
and has taken  numerous  extended  courses at Loyola  College and Johns  Hopkins
University  in  real  estate,  appraisals,   inspections,   financial  planning,
mortgages and management.

Item 10.          Executive Compensation.

     The Partnership has no executive officers or directors.  The Partnership is
not  required to pay the  officers  and  directors  of the General  Partners any
current  nor  any  proposed  compensation  in  such  capacities.   However,  the
Partnership is required to pay certain fees, make  distributions  and allocate a
share of the profits or losses of the  Partnership  to the  General  Partners as
described under the caption  "Management  Compensation" on pages 9 through 13 of
the  Partnership's  Prospectus,  which  description  is  incorporated  herein by
reference.  Set forth below are the fees,  compensation and other reimbursements
paid or accrued to Common Goal and its  Affiliates  for the year ended  December
31, 1997.

                             Capacities in
                             Which Compensation
   Name of Affiliate         was Received            Remuneration
   -----------------         ------------------      ------------

   Common Goal               Management fee             $30,496

   Common Goal Mortgage      Mortgage loan              $ 3,919
   Compay                    servicing fees

No form of non-cash remuneration was paid by the Partnership.

For further  information on compensation paid to Common Goal and its Affiliates,
see "Management Compensation" on pages 9-13 of the Prospectus.


                                       20
<PAGE>
Item 11.         Security Ownership of Certain Beneficial Owners and Management.

     The Partnership, as an entity, does not have any directors or officers. The
following is information concerning Unit ownership as of December 31, 1997.

     To the best  knowledge of the  Partnership,  no person owns more than 5% of
the  outstanding  Units.  Messrs.  Jenkins and Wood each own less than 1% of the
total  outstanding  Units and all officers and directors of the Managing General
Partner,  as a group, own less than 1% of the total outstanding  Units. No other
officer or director of the Managing General Partner owns any Units.

Item 12.          Certain Relationships and Related Transactions.

     The  Partnership  has entered into the Joint  Venture Loan with Common Goal
II, an affiliated,  publicly-offered limited partnership. On August 1, 1990, the
joint venture made a $3,430,114 loan to an unaffiliated  third party, which loan
had a remaining  principal  balance of  $1,618,254  at December  31,  1997.  For
further  information  concerning this Mortgage Loan, see "Item 1. Description of
Business" - "Existing Mortgage Loan" - "The Joint Venture Loan."

     The Partnership  engages the services of Common Goal Mortgage  Company,  an
affiliate of the General Partners,  in connection with servicing  Mortgage Loans
for which Common Goal  Mortgage  Company is paid a fee.  See Item 11,  Executive
Compensation, for the information concerning such fees.

Item 13.          Exhibits and Reports on Form 8-K.

  (a)             (1)      Financial Statements

                           The  response to this portion of Item 13 is submitted
                           as a separate  section of this report,  commencing on
                           page F-1.

                  (2)      Financial Statement Schedules

                           Not applicable.

                  (3)      Exhibits

                           See response to Item (c), below.

  (b)                      Reports on Form 8-K

                           The  Partnership did not file any reports on Form 8-K
                           during the quarter ended December 31, 1997.

                                       21
<PAGE>
  (c)                      Exhibits

                           The  following   exhibits  are  included   herein  or
                           incorporated by reference:

                           Number

                           3.1      Second  Amended and  Restated  Agreement  of
                                    Limited  Partnership of Registrant  dated as
                                    of   February  1,  1987   (incorporated   by
                                    reference from the Registrants  Registration
                                    Statement  (File No.  33- 8531) on Form S-11
                                    filed under the  Securities  Act of 1933, as
                                    amended)

                           3.2      Pages   9-13  of  the   Registrant's   final
                                    prospectus dated February 20, 1987, as filed
                                    with the Securities and Exchange  Commission
                                    pursuant to Rule 424(b) under the Securities
                                    Act of 1933, as amended.

  (d)                      Financial Statement Schedules

                           Not applicable.


                                       22
<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.

                         COMMON GOAL HEALTH CARE
                         PARTICIPATING MORTGAGE FUND L.P.

                         By:      Common Goal Capital Group, Inc.,
                                  General Partner


                         By:      /s/ Albert E. Jenkins
                                  ---------------------
                                  Albert E. Jenkins III
                                  Chairman and Chief Executive Officer
Date:    March 31, 1998

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

       Name                         Position                     Date
       ----                         --------                     ----

/s/ Albert E. Jenkins
---------------------          Chairman (Principal          March 31, 1998
Albert E. Jenkins III             Executive Officer),
                                  President, Principal
                                  Financial and
                                  Accounting Officer
                                  and Director of
                                  Managing General
                                  Partner

/s/ Richard R. Wood
-------------------            Director of Managing         March 31, 1998
Richard R. Wood                   General Partner


/s/ William E. Jasper, Jr.
----------------------------   Director of Managing         March 31, 1998
William E. Jasper, Jr.            General Partner


(A Majority of the Board of Directors of the Managing General
Partner)
<PAGE>




                          Independent Auditors' Report
                          ----------------------------


The Partners
Common Goal Health Care
   Participating Mortgage Fund L.P.:

We have  audited  the  accompanying  balance  sheets of Common  Goal Health Care
Participating Mortgage Fund L.P. (a Delaware limited partnership) as of December
31, 1997 and 1996, and the related statements of operations,  partners' capital,
and cash flows for each of the years in the three-year period ended December 31,
1997. These financial  statements are the  responsibility  of the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Common  Goal  Health Care
Participating  Mortgage  Fund 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.


                                      /s/ KPMG Peat Marwick LLP
                                      -------------------------
Denver, Colorado                          KPMG Peat Marwick LLP
March 16, 1998

                                       F-1
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Balance Sheets

December 31, 1997 and 1996
--------------------------------------------------------------------------------

                                                 1997            1996
                                                 ----            ----
<S>                                          <C>              <C>
Assets
Cash and cash equivalents                    $  593,842       $ 2,653,867
Due from affiliates                                 -               2,664
Accrued interest receivable                      42,833            12,318
Mortgage loans receivable (note 2)            1,567,664         1,567,664
                                             ----------       -----------
                                             $2,204,339       $ 4,236,513
                                             ==========       ===========
Liabilities and Partners' Capital

Accounts payable and accrued expenses       $     4,000      $     11,150
Due to affiliates                                29,103            12,541
                                            -----------     -------------
        Total liabilities                        33,103            23,691

Partners' capital (note 4):
     General partners                            64,033            61,050
     Limited partners                         2,107,203         4,151,772
                                             ----------      ------------
        Total partners' capital               2,171,236         4,212,822
                                             ----------      ------------

                                             $2,204,339       $ 4,236,513
                                             ==========       ===========

</TABLE>
See accompanying notes to financial statements.



                                       F-2
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Statements of Operations

Years ended December 31, 1997, 1996 and 1995
-------------------------------------------------------------------------------------------

                                                             1997         1996         1995
                                                       ----------   ----------   ----------
<S>                                                    <C>             <C>          <C>
Revenues:
     Interest income ...............................   $  280,134      513,079      727,059
     Other income:
        Loan prepayment penalties ..................         --         95,000         --
        Equity participation received in pay-off of
            mortgage loan receivable ...............         --        110,550         --
        Recovery of loan receivable previously
            written off ............................         --        353,530         --
                                                       ----------   ----------   ----------
            Total other income .....................         --        559,080         --
                                                       ----------   ----------   ----------
                                                          280,134    1,072,159      727,059

Expenses:
     Professional fees .............................       62,219       59,847      162,212
     Fees to affiliates:
        Management .................................       30,496       46,853       91,593
        Mortgage servicing .........................        3,919        6,255       19,690
     Other .........................................       34,280       65,954       65,144
                                                       ----------   ----------   ----------
                                                          130,914      178,909      338,639
                                                       ----------   ----------   ----------

            Net income .............................   $  149,220      893,250      388,420
                                                       ==========   ==========   ==========

            Net income allocated to general partners   $    2,983       17,865        7,768
            Net income allocated to limited partners      146,237      875,385      380,652
                                                       ----------   ----------   ----------
                                                       $  149,220      893,250      388,420
                                                       ----------   ==========   ==========

            Net income per limited partner unit ....   $      .08         0.46         0.20
                                                       ==========   ==========   ==========

            Weighted average limited partner units
               outstanding .........................    1,911,411    1,911,411    1,911,411
                                                       ==========   ==========   ==========
</TABLE>
See accompanying notes to financial statements.

                                       F-3
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital

Years ended December 31, 1997, 1996 and 1995
--------------------------------------------------------------------------------
                                                                            Total
                                             General        Limited       Partners'
                                             partners       partners       capital
                                             --------       --------       -------

<S>                                       <C>             <C>            <C>
Balance at December 31, 1994 ..........   $   147,247     10,580,161     10,727,408

Net income ............................         7,768        380,652        388,420

Distributions to limited partners
     ($.66 per unit) ..................          --       (1,261,461)    (1,261,461)

Distributions to general partners .....      (111,830)          --         (111,830)

Return of principal to limited partners
     ($2.62 per unit) .................          --       (5,000,000)    (5,000,000)
                                          -----------    -----------    -----------
Balance at December 31, 1995 ..........   $    43,185      4,699,352      4,742,537

Net income ............................        17,865        875,385        893,250

Distributions to limited partners
     ($.48 per unit) ..................          --         (922,965)      (922,965)

Return of principal to limited partners
     ($.26 per unit) ..................          --         (500,000)      (500,000)
                                          -----------    -----------    -----------

Balance at December 31, 1996 ..........   $    61,050      4,151,772      4,212,822

Net income ............................         2,983        146,237        149,220

Distributions to limited partners
     ($.43 per unit) ..................          --         (829,446)      (829,446)

Return of principal to limited partners
     ($.71 per unit) ..................          --       (1,361,360)    (1,361,360)
                                          -----------    -----------    -----------

Balance at December 31, 1997 ..........   $    64,033      2,107,203      2,171,236
                                          ===========    ===========    ===========
</TABLE>

See accompanying notes to financial statements.

                                       F-4
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Statements of Cash Flows

Years ended December 31, 1997, 1996 and 1995
--------------------------------------------------------------------------------

                                                                  1997           1996           1995
                                                                  ----           ----           ----
<S>                                                         <C>                <C>            <C>
Cash flows from operating activities:
     Net income .........................................   $   149,220        893,250        388,420
     Adjustments to reconcile net income to
        net cash provided by operating activities:
            Decrease  (increase) in due from affiliate ..         2,664         (2,098)          --
            Decrease (increase) in interest
              and other receivables .....................       (30,515)       156,400         10,830
            Increase (decrease) in accounts
                payable and accrued expenses ............        (7,150)         6,080        (17,903)
            Increase in due to affiliates ...............        16,562         12,541           --
                                                            -----------    -----------    -----------
                Net cash provided by operating activities       130,781      1,066,173        381,347
                                                            -----------    -----------    -----------

Cash flows from investing activities:
     Proceeds from mortgage loan principal
        repayments ......................................          --        2,000,000           --
                                                            -----------    -----------    -----------
                Net cash provided by investing activities          --        2,000,000           --
                                                            -----------    -----------    -----------

Cash flows from financing activities:
     Distributions and returns of principal to partners .    (2,190,806)    (1,422,965)    (6,373,291)
                                                            -----------    -----------    -----------
                Net cash used in financing activities ...    (2,190,806)    (1,422,965)    (6,373,291)
                                                            -----------    -----------    -----------

Net increase (decrease) in cash and cash
     equivalents ........................................    (2,060,025)     1,643,208     (5,991,944)

Cash and cash equivalents, beginning of year ............     2,653,867      1,010,659      7,002,603
                                                            -----------    -----------    -----------

Cash and cash equivalents, end of year ..................   $   593,842      2,653,867      1,010,659
                                                            ===========    ===========    ===========
</TABLE>

See accompanying notes to financial statements.


                                       F-5
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements

December 31, 1997, 1996 and 1995
--------------------------------------------------------------------------------

(1)  Organization and Summary of Significant Accounting Policies

     (a)  Organization

          Common  Goal  Health  Care  Participating   Mortgage  Fund  L.P.  (the
          Partnership), a Delaware Limited Partnership, was formed on August 20,
          1986 to  invest  in and  make  mortgage  loans  to  third-parties  and
          affiliates  involved  in  health  care.  Having  sold  more  than  the
          specified  minimum  of 116,000  units  ($1,160,000),  the  Partnership
          commenced  operations  on July 21, 1987.  The  Partnership's  offering
          terminated on February 20, 1989, with the Partnership  having sold the
          specified maximum of 1,912,911 units ($19,129,110). There is no active
          public trading market for the units. At December 31, 1997,  there were
          1,559 unit holders.

          The General  Partners  include  Common Goal Capital  Group,  Inc., the
          Managing General Partner,  and Common Goal Limited  Partnership I, the
          Minority  General   Partner.   Under  the  terms  of  the  Partnership
          agreement,   the  General  Partners  are  not  required  to  make  any
          additional   capital   contributions   except  under  certain  limited
          circumstances upon termination of the Partnership.

          Under  the  terms  of  the  Partnership  agreement,   the  Partnership
          reimbursed   the   General   Partners   for   certain   offering   and
          organizational  expenses  incurred in connection with the issuance and
          distribution of the units in an amount fixed at 3.5% of gross offering
          proceeds.   These  offering  and   organizational   expenses  excluded
          broker/dealer   selling  commissions  and  included   accountable  due
          diligence expense reimbursements. Broker/dealer selling commissions of
          9.5% of gross  proceeds  were  paid by the  Partnership.  Common  Goal
          Securities,  Inc.  (CGSI),  an  affiliate  acting as managing  dealer,
          received selling  commissions of 2% of the gross offering proceeds and
          an additional 7.5% of the purchase price of all units sold directly by
          CGSI.  Additionally,  CGSI was reimbursed for all expenses incurred in
          connection  with the offering and also received an amount equal to .5%
          of the gross offering proceeds for accountable expenses.  Offering and
          organizational  expenses  were  recorded as a reduction  of  partners'
          capital.

     (b)  Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements and the reported amounts of revenues
          and expenses during the reporting period.  Actual results could differ
          from those estimates.
                                 F-6 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------

(1)  Continued

          For entities  investing in and making  mortgage loans to businesses in
          the health care  industry,  certain  inherent  risks may  increase the
          possibility of actual results differing from  management's  estimates.
          These inherent risks include, among other things, the following:

          o    Substantial  dependence on revenues derived from reimbursement by
               the Federal Medicare and state Medicaid programs;

          o    Government  regulation,   government  budgetary  constraints  and
               proposed legislative and regulatory changes; and

          o    Lawsuits alleging malpractice and related claims.

     (c)  Partnership Management Fees and Operating Expenses

          Under the  terms of the  Partnership  agreement,  the  Partnership  is
          required to pay a quarterly  management  fee to the  Managing  General
          Partner equal to .75% per annum of adjusted contributions, as defined.
          Additionally,  a mortgage servicing fee equal to .25% per annum of the
          Partnership's outstanding mortgage loan principal amount is to be paid
          to Common Goal Mortgage Company, an affiliate of the General Partners.

          Additionally,  under  the  terms  of the  Partnership  agreement,  the
          Partnership is required to reimburse the Managing  General Partner for
          certain operating expenses paid on behalf of the Partnership. In 1997,
          1996,  and 1995,  the Managing  General  Partner was reimbursed by the
          Partnership  for  $93,763,  $105,655  and  $47,785 of these  expenses,
          respectively.  The  remaining  expenses  were  paid  directly  by  the
          Partnership.

     (d)  Partnership Allocation of Income and Loss and Distributions

          Net Income and Net Loss
          -----------------------

          Net income  (except with respect to a Disposition,  as defined,  which
          includes any Partnership transaction not in the ordinary course of its
          business,  including,  without  limitation,  collections  of principal
          payments,  equity  participation  payments,  prepayments,   prepayment
          penalties,  sales,  exchanges,  foreclosures or other  dispositions of
          Mortgage  Loans held by the  Partnership,  recoveries of damage awards
          and insurance  proceeds (other than the receipt of  subscriptions  for
          Units, all forms of interest payments when

                                 F-7 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------
(1)  Continued

          due on Mortgage  Loans or business  or rental  interruption  insurance
          proceeds)) and net loss of the Partnership is allocated 98% to Limited
          Partners  and 2% to the General  Partners.  Net income  arising from a
          Disposition is allocated 98% to Limited Partners and 2% to the General
          Partners  to  the  extent  of any  negative  balances  in the  capital
          accounts of the Limited Partners, and then 100% to Limited Partners in
          an amount necessary to bring the Limited Partners' capital accounts up
          to an amount equal to their Original Contributions,  as defined, which
          means the amount of $10.00 for each unit less the return of any amount
          of  uninvested  funds  returned,  as  defined,  plus the 11% per annum
          preferred  cumulative  return thereon (less previous  distributions to
          the Limited  Partners in repayment  of such  amounts).  Remaining  net
          income is allocated 85% to the Limited Partners and 15% to the General
          Partners.

          Net income  (loss) per limited  partner unit is computed  based on the
          weighted  average  limited  partner  units  outstanding  for the  year
          divided into the net income (loss) applicable to the Limited Partners.

          Distributions of Cash From Operations

          Distributions  of  Adjusted  Cash  From  Operations,  defined  as  all
          receipts of interest  payments  on Mortgage  Loans less cash  receipts
          used to pay operating expenses and to repurchase any Units (Cash Flow)
          less any amount set aside for the  restoration  or creation of working
          capital  reserves,  are distributed 98% to the Limited Partners and 2%
          to the General Partners,  and are apportioned  quarterly among Limited
          Partners of record as of the record date declared within 30 days after
          the end of each quarter and are paid quarterly.  No  distributions  of
          Adjusted  Cash From  Operations  with respect to any calendar year are
          made to the General Partners until the following occurs:

               First,  distributions  to the  Limited  Partners  equal to the 8%
               annual cumulative return on their Adjusted Contributions, defined
               as Original Contributions  attributable to a Unit, reduced by the
               total of cash  distributed  from  Disposition  Proceeds  and from
               working capital reserves, for such year (plus any amounts accrued
               from prior years) have been made to the Limited Partners; and

               Second, payment of all previously  subordinated  management fees,
               if any, have been made.

          Thereafter, all previously subordinated amounts payable to the General
          Partners  with  respect to their 2%  interest  are paid in full to the
          extent funds are  available,  and if not  available,  are deferred and
          paid out of Disposition Proceeds, defined as receipts from

                                 F-8 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------
(1)  Continued

          Dispositions  net of  related  expenses,  amounts  necessary  for  the
          payment of debts and obligations of the Partnership and any amount set
          aside for working  capital  reserves.  The Partnership has been making
          distributions  to the  Limited  Partners  in  excess  of the 8% annual
          cumulative return on Adjusted Contributions.

          Distributions of Disposition Proceeds
          -------------------------------------

          The Managing  General  Partner has the right to reinvest or distribute
          all Disposition  Proceeds,  through the end of the eleventh year after
          the  date  of  the  Prospectus.   Non-  liquidating  distributions  of
          Disposition  Proceeds  are  distributed  in  the  following  order  of
          priority, except as otherwise required by law:

               First,  100% to the Limited  Partners until the Limited  Partners
               have received an amount which, when added to prior  distributions
               of  Disposition  Proceeds  and cash  from  reserves  attributable
               thereto,   equals  the  Original  Contributions  of  the  Limited
               Partners;

               Second,  100% to the Limited  Partners until each Limited Partner
               has   received  an  amount   which,   when  added  to  all  prior
               distributions  to Limited  Partners  from all sources  (including
               prior  distributions in satisfaction of the 8% annual  cumulative
               return but excluding distributions pursuant to above), equals the
               11% per  annum  preferred  cumulative  return  on their  Adjusted
               Contributions,  (calculated  from the first  day of the  calendar
               quarter succeeding the quarter in which capital contributions are
               received);

               Third,  100% to the  General  Partners  until they have been paid
               100% of the subordinated  portion, if any, of (a) the Partnership
               Management  Fee,  if any,  and then  (b)  their  2%  interest  in
               Adjusted Cash From Operations; and

               Fourth, the remainder, 85% to the Limited Partners and 15% to the
               General Partners.

          Dissolution and Returns of Principal
          ------------------------------------

          Since  it  was  the  intention  of the  Managing  General  Partner  to
          liquidate the Partnership's assets between 1999 and 2004, the Managing
          General  Partner has  commenced  an orderly  liquidation  and will not
          reinvest loan proceeds in new Mortgage Loans. The  Partnership's  last
          remaining  Mortgage  Loan,  the Joint  Venture  Loan,  will  mature on
          January 1, 2000.
                                 F-9 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------
(1)  Continued

          Proceeds from the  liquidation  will be applied and distributed in the
          following order:

               First,  to  the  payment  of  creditors  of the  Partnership  but
               excluding  secured creditors whose obligations will be assumed or
               otherwise  transferred on the liquidation of Partnership  assets;
               and

               Second,  after  allowance for the expenses of liquidation and the
               setting up of any reserves for  contingencies  which the Managing
               General Partner considers necessary,  to the General Partners and
               Limited  Partners  in  proportion  to and to  the  extent  of the
               positive balances in their capital accounts,  after net income or
               loss  arising from a  Disposition  has been  allocated,  with any
               excess being distributed in accordance with the order of priority
               for non-liquidating distributions.

          Notwithstanding anything to the contrary, the Managing General Partner
          has the right to defer  liquidation if, in the opinion of the Managing
          General Partner,  the sale of Partnership  assets in liquidation would
          result in a material underrealization on the Partnership's assets. The
          Managing  General  Partner also has the right to determine the rate at
          which  returns of principal  (returns of Original  Contributions)  are
          distributed to the limited partners.
     (e)  Allowance for Losses
          An allowance  for loan losses is provided,  if  necessary,  at a level
          which the Partnership's  management  considers  adequate based upon an
          evaluation of known and inherent  risks in the loan  portfolio.  There
          was no allowance for losses at December 31, 1997 and 1996.
     (f)  Federal Income Taxes
          No  provision  for  federal  income  taxes  has been  recorded  as the
          liability  for such  taxes  is that of the  partners  rather  than the
          Partnership.
     (g)  Cash and Cash Equivalents
          The Partnership  classifies all short-term investments with maturities
          of three months or less at the date of purchase as cash equivalents.

     (h)  Reclassifications
          Certain 1995 amounts have been reclassified to conform with the 1996
          and 1997 presentation.

                                      F-10
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------
(2)  Mortgage Loans Receivable
<TABLE>
<CAPTION>

     Information  concerning  mortgage loans  receivable as of December 31 is as
follows:
                                                                           Face and carrying
                                                                          amount of mortgages
                               Basic                                      -------------------
                               interest     Maturity        Prior
Description                    rate         date            liens            1997          1996
-------------------------------------------------------------------------------------------------


<S>                            <C>                        <C>           <C>           <C>
Westwood loan ..               11.50%   March 10, 1998    $ 3,200,000          --            --
Winthrop loan ..               11.50%   March 25, 1998      7,200,000          --            --
Honey Brook loan               13.70%   January 1, 2000     8,810,000     1,567,664     1,567,664
                                                          -----------   -----------   -----------

                                                          $19,210,000     1,567,664     1,567,664
                                                          ===========   ===========   ===========
</TABLE>

     The loans are second  mortgage  loans secured by health  care-related  real
     properties.  Interest is payable monthly and the principal balances are due
     at  maturity.  The loans  generally  provide for the payment of  additional
     interest  based upon gross  revenues of the  properties  and the payment of
     participation  interests ranging from 6% to 30% of the increase in the fair
     value of the properties at maturity or redemption,  or pursuant to any sale
     of the  facilities,  as defined.  Participation  interests  are recorded as
     revenue when they are determinable,  generally at maturity or redemption of
     the loan or  pursuant to any sale of the  facilities.  All  properties  are
     subject to a first mortgage lien.

     In 1990,  Common Goal Health Care  Pension and Income Fund L.P. II ("Common
     Goal  II"),  an  affiliated,   publicly-offered  limited  partnership  with
     investment  objectives  that are  substantially  identical  to those of the
     Partnership and the Partnership  participated in a ten-year second mortgage
     loan in the original  principal  amount of  $3,430,114  to an  unaffiliated
     third party through a joint venture between the Partnership and Common Goal
     II (the  "Joint  Venture  Loan").  At  December  31,  1997  and  1996,  the
     Partnership's  mortgage loans receivable included $1,567,664,  representing
     the  Partnership's  participation  of  96.87% in the  remaining  $1,618,254
     principle balance of the loan.

     During 1996,  the Westwood  and  Winthrop  loans were paid off.  Prepayment
     penalties  of $40,000  and  $55,000,  were  received  on the  Westwood  and
     Winthrop  loans,  respectively.  In addition,  the Westwood  borrowers paid
     $110,550 as a result of equity participation interest.

                                F-11 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------
(2)  Continued

     A summary of  activity  in mortgage  loans  receivable  for the years ended
     December 31, 1997 and 1996 is as follows:

     Balance at December 31, 1995               $3,567,664
          Repayment of mortgage loans           (2,000,000)
                                                ----------
     Balance at December 31, 1996                1,567,664
          Repayment of mortgage loans                   -
                                                ----------
     Balance at December 31, 1997               $1,567,664
                                                ==========

     All property securing the Partnership's mortgage loans at December 31, 1997
     is located in Pennsylvania.

     The  fair  value  of the  Partnership's  participation  in  mortgage  loans
     receivable   differed  from  the  carrying  value  of  the  mortgage  loans
     receivable as follows:

                                          Carrying          Fair
                                           Value            Value
                                           -----            -----

     December 31, 1997                  $1,567,664        1,608,405
     December 31, 1996                   1,567,664        1,646,754

     The Partnership  estimates the fair value of its  participation in mortgage
     loans  receivable  by  discounting  future cash flows using an  appropriate
     interest rate.

     The  carrying  amounts  at  December  31,  1997  and 1996 for cash and cash
     equivalents,  accrued interest receivable,  other receivables, due from and
     to affiliates, and accounts payable and accrued expenses approximated their
     fair values due to the short maturity of these instruments.

     In  1996,  the  Partnership   settled  certain  litigation  relating  to  a
     previously  charged-off  mortgage  loan in the  amount of  $480,000.  These
     proceeds were recorded in 1996, net of attorney fees of $126,470.


                                      F-12
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a Delaware limited partnership)

Notes to Financial Statements
--------------------------------------------------------------------------------


(3)  Federal Income Tax Information (Unaudited)

     Net income for financial  reporting purposes did not differ from net income
     for federal income tax purposes for the years ended December 31, 1997, 1996
     and 1995.

(4)  Subsequent Events

     On January 2, 1998, the  Partnership  declared and paid a  distribution  of
     $190,316  ($.10  per  Unit) to  Limited  Partner  unitholders  of record at
     December 15, 1997.





                                      F-13