June 29, 1998


Securities and Exchange Commission
Filer Support, Edgar
Operation Center, Stop 0-7
6432 General Green Way
Alexandria, VA 22312


        Boston Financial Qualified Housing Tax Credits L.P. III
        Form 10-K Annual Report for Year Ended March 31, 1998
        File Number 01-18462


Gentlemen:

Pursuant to the requirements of Section 15(d) of the Securities  Exchange Act of
1934, there is filed herewith one copy of subject report.


Very truly yours,


/s/Dianne Groark
Dianne Groark
Assistant Controller

QH310K-K



<PAGE>



                                                   UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              Washington, D.C. 20549

                                                     FORM 10-K

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

For the fiscal year ended                               Commission file number
March 31, 1998                                                      01-18462

                BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                (Exact name of registrant as specified in its charter)

      Delaware                                                04-3032106
----------------------                                    --------------------
(State of organization)                                      (I.R.S. Employer
                                                           Identification No.)
  101 Arch Street, 16th Floor
  Boston, Massachusetts                                          02110-1106
--------------------------------------                           ----------
(Address of Principal executive office)                          (Zip Code)

Registrant's telephone number, including area code 617/439-3911
                                                   -----------
Securities registered pursuant to Section 12(b) of the Act:

                                                     Name of each exchange on
          Title of each class                              which registered
          -------------------                        -------------------------
                 None                                              None

Securities registered pursuant to Section 12(g) of the Act:

                                       UNITS OF LIMITED PARTNERSHIP INTEREST
                                                 (Title of Class)
                                                      100,000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                     Yes X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (Subsection  229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]

State the aggregate sales price of partnership units held by nonaffiliates of 
the registrant.
                 $99,610,000 as of March 31, 1998


<PAGE>


                                                       K-29

DOCUMENTS INCORPORATED BY REFERENCE:  LIST THE FOLLOWING DOCUMENTS IF 
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE
DOCUMENT IS INCORPORATED:  (1) ANY ANNUAL REPORT TO SECURITY HOLDERS;
(2) ANY PROXY OR  INFORMATION  STATEMENT;  AND (3) ANY  PROSPECTUS  FILED  
PURSUANT TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.
 

                                                           Part of Report on
                                                           Form 10-K into
                                                           Which the Document
Documents incorporated by reference                        is Incorporated

Post-effective Amendment No. 1 to the Form S-11
  Registration Statement, File # 33-24175                  Part I, Item 1

Supplement No. 4 to the Prospectus, dated May 9, 1989      Part I, Item 1

Report on Form 8-K dated November 21, 1989                 Part I, Item 1

Acquisition Reports                                        Part I, Item 1

Prospectus - Sections Entitled:

  "Investment Objectives and Policies -
   Principal Investment Policies                           Part I, Item 1

  "Estimated Use of Proceeds"                              Part III, Item 13

  "Management Compensation and Fees"                       Part III, Item 13

  "Profits and Losses for Tax Purposes, Tax
   Credits and Cash Distributions"                         Part III, Item 13




<PAGE>


               BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                               (a Limited Partnership)

             ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1998


                                   TABLE OF CONTENTS


PART I                                                                 Page No.

  Item 1     Business                                                  K-3
  Item 2     Properties                                                K-7
  Item 3     Legal Proceedings                                         K-19
  Item 4     Submission of Matters to a
             Vote of Security Holders                                  K-19


PART II

  Item 5     Market for the Registrant's Units
             and Related Security Holder Matters                       K-19
  Item 6     Selected Financial Data                                   K-20
  Item 7     Management's Discussion and Analysis of
             Financial Condition and Results of Operations             K-21
  Item 8     Financial Statements and Supplementary Data               K-25
  Item 9     Changes in and Disagreements with
             accountants on Accounting and Financial
             Disclosure                                                K-25


PART III

  Item 10    Directors and Executive Officers
             of the Registrant                                         K-25
  Item 11    Management Remuneration                                   K-27
  Item 12    Security Ownership of Certain Beneficial
             Owners and Management                                     K-27
  Item 13    Certain Relationships and Related
             Transactions                                              K-27


PART IV

  Item 14    Exhibits, Financial Statement Schedule
             and Reports on Form 8-K                                   K-29

            SIGNATURES                                                 K-31


<PAGE>


                                                      PART I

Item 1.  Business

Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") is a
limited  partnership  formed  on  August  9,  1988  under  the  Uniform  Limited
Partnership  Act of the State of  Delaware.  The  Certificate  and  Agreement of
Limited  Partnership  ("Partnership  Agreement")  authorized  the  sale of up to
100,000  units of Limited  Partnership  Interest  ("Units")  at $1,000 per Unit,
adjusted for certain  discounts.  The  Partnership  raised  $99,610,000  ("Gross
Proceeds"),  net of discounts of  $390,000,  through the sale of 100,000  Units.
Such amounts exclude five unregistered  Units previously  acquired for $5,000 by
the Initial  Limited  Partner,  which is also one of the General  Partners.  The
offering  of Units  terminated  on May 30,  1989.  No  further  sale of Units is
expected.

As described more fully under Item 7 -  Management's  Discussion and Analysis of
Financial  Condition  and  Results of  Operations,  affiliates  of the  Managing
General  Partner  assumed the Local  General  Partner  interest in several Local
Limited Partnerships in which the Partnership has invested:  1) BF Harbour View,
Inc.  assumed the Local General Partner  interest in 241 Pine Street  Associates
L.P.  ("241 Pine  Street");  2) BF Willow Lake,  Inc.  assumed the Local General
Partner interest in Willow Lake Partners II, L.P.  ("Willow Lake");  3) BF Texas
Limited  Partnership  was admitted as an  additional  Local  General  Partner to
thirteen Local Limited Partnerships ("Texas Partnerships") and assumed the Local
General Partner  interest in the Temple Kyle,  L.P.,  Ltd. (the "Kyle");  and 4)
Boston  Financial  GP-I,  LLC.  assumed the Local  General  Partner  interest in
Breckenridge  Creste  Apartments,  L.P.  ("Breckenridge").   As  a  result,  the
Partnership  is deemed to have control over 241 Pine  Street,  Willow Lake,  the
Texas Partnerships, the Kyle and Breckenridge (the "Combined Entities"), and the
accompanying financial statements are presented in combined form to conform with
the  required   accounting   treatment  under  generally   accepted   accounting
principles.   However,  these  changes  only  affect  the  presentation  of  the
Partnership's   operating   results,   not  the  business  of  the  Partnership.
Accordingly,  a  presentation  of  information  about  industry  segments is not
applicable and would not be material to an  understanding  of the  Partnership's
business  taken as a whole.  As  described  more fully in Item 7 -  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations,  the
Managing  General  Partner  has  transferred  all of the assets of twelve  Texas
Partnerships subject to their liabilities to unaffiliated  entities. As of March
31, 1998, the remaining Texas Partnership is presented in combined form.

The Partnership  has invested as a limited  partner in fifty-five  other limited
partnerships  ("Local Limited  Partnerships")  which own and operate residential
apartment  complexes  ("Properties"),  some of which  benefit  from some form of
federal,  state or local  assistance  programs and all of which  qualify for the
low-income  housing tax credits ("Tax  Credits") that were added to the Internal
Revenue  Code by the  Tax  Reform  Act of  1986  (the  "Code").  The  investment
objectives of the Partnership include the following:  (i) to provide current tax
benefits in the form of Tax Credits which qualified  limited partners may use to
offset  their  federal  income tax  liability;  (ii) to preserve and protect the
Partnership's capital; (iii) to provide limited cash distributions from property
operations  which are not  expected  to  constitute  taxable  income  during the
expected  duration of the  Partnership's  operations;  and (iv) to provide  cash
distributions  from  sale  or  refinancing  transactions.  There  cannot  be any
assurance  that the  Partnership  will  attain  any or all of  these  investment
objectives.

A more detailed discussion of these investment objectives,  along with the risks
in  achieving  them,  is  contained  in the section of the  prospectus  entitled
"Investment  Objectives and Policies - Principal  Investment  Policies" which is
herein incorporated by this reference.

Table A on the  following  pages  lists the  Properties  owned by Local  Limited
Partnerships  in which  the  Partnership  has  invested.  Item 7 of this  Report
contains  other  significant  information  with  respect to such  Local  Limited
Partnerships.  As required by applicable  rules, the terms of the acquisition of
Local Limited  Partnership  interests  have been described in supplements to the
Prospectus  and collected in one  post-effective  amendment to the  Registration
Statement,  in another  supplement to the Prospectus and in a report on Form 8-K
listed in Part IV of this Report (collectively, the "Acquisition Reports"); such
descriptions are incorporated herein by this reference.


<PAGE>
<TABLE>
<CAPTION>


                                                      TABLE A

                                              SELECTED LOCAL LIMITED
                                                 PARTNERSHIP DATA
                                                    (Unaudited)

Properties Owned by                                                                                         Date
Local Limited                                                                                             Interest
Partnerships                                                 Location                                      Acquired

<S>                                                       <C>                                              <C>   
West Dade                                                 Miami, FL                                        12/31/88
West Dade II                                              Miami, FL                                        12/31/88
Regency Square ***                                        Dayton, OH                                       03/13/89
Westwood Manor                                            Flint, MI                                        02/21/89
Rolling Hills ***                                         Dayton, OH                                       03/13/89
Boulevard Commons II                                      Chicago, IL                                      04/04/89
Boulevard Commons IIA                                     Chicago, IL                                      04/04/89
Fox Run Housing                                           Victoria, TX                                     04/07/89
Waterfront                                                Buffalo, NY                                      04/28/89
Shoreline                                                 Buffalo, NY                                      04/28/89
Colony Apartments*                                        Columbia, SC                                     05/19/89
Admiral Court                                             Philadelphia, PA                                 06/07/89
Crestwood**                                               Bridgeport, TX                                   06/05/89
Elmwood                                                   Aurora, CO                                       05/16/89
El Jardin                                                 Davie, FL                                        06/14/89
Ashley Place                                              Orlando, FL                                      06/23/89
Willowick**                                               Gainesville, TX                                  06/30/89
Kirkendall Heights                                        Ellsworth, KS                                    07/19/89
Bentley Hill                                              Syracuse, KS                                     06/30/89
Columbia Townhouses                                       Burlington, IA                                   07/28/89
Quartermill                                               Richmond, VA                                     08/02/89
Ponca Manor                                               Satanta, KS                                      07/28/89
Pearl Place                                               Rossville, KS                                    07/28/89
Crown Point**                                             Venus, TX                                        08/22/89
Godley Arms**                                             Godley, TX                                       08/25/89
Pilot Point**                                             Pilot Point, TX                                  08/22/89
Sherwood Arms**                                           Keene, TX                                        08/22/89
South Holyoke                                             Holyoke, MA                                      08/29/89
Walker Woods                                              Dover, DE                                        08/30/89
Lakeway Colony**                                          Lake Dallas, TX                                  08/30/89
One Main Place**                                          Little Elm, TX                                   08/22/89
Eaglewood                                                 Covington, TN                                    09/06/89
Harbour View*                                             Staten Island, NY                                09/29/89
Georgetown II                                             Georgetown, DE                                   09/28/89
Granite*                                                  Boston, MA                                       09/29/89
Garden Plain                                              Garden Plain, KS                                 08/09/89
Fulton                                                    Fulton, KY                                       10/05/89
Lone Oak**                                                Graham, TX                                       10/06/89
Hallet West**                                             Hallettsville, TX                                11/20/89

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

Properties Owned by                                                                                         Date
  Local Limited                                                                                            Interest
  Partnerships                                       Location                                              Acquired

<S>                                               <C>                                                      <C>
Glenbrook**                                       St. Jo, TX                                               10/06/89
Eagles Nest**                                     Decatur, TN                                              10/06/89
Billings Family                                   Billings, MO                                             08/09/89
Brownsville                                       Brownsville, TN                                          08/09/89
Sunnyhill Villa                                   Wayne, NE                                                08/09/89
Longview                                          Humboldt, KS                                             10/13/89
Horseshoe Bend                                    Horseshoe Bend, AR                                       08/09/89
Briarwood II                                      Lake Havasua, AZ                                         10/04/89
Quail Run**                                       Iowa Park, TX                                            10/06/89
Smithville                                        Smithville, MO                                           08/09/89
Aurora East                                       Denver, CO                                               11/06/89
Elver Park II                                     Madison, WI                                              11/09/89
Elver Park III                                    Madison, WI                                              11/09/89
Tucson Trails I                                   Madison, WI                                              11/22/89
Tucson Trails II                                  Madison, WI                                              11/23/89
Pleasant Plaza                                    Malden, MA                                               12/01/89
241 Pine Street                                   Manchester, NH                                           12/04/89
Heather Oaks                                      Oak Grove, MO                                            11/24/89
Riverfront                                        Sunbury, PA                                              12/26/89
Susquehanna View                                  Camp Hill, PA                                            12/26/89
Breckenridge*                                     Duluth, GA                                               12/19/89
Wood Creek                                        Calcium, NY                                              12/15/89
Willow Lake*                                      Kansas City, MO                                          12/20/89
Ashton Heights                                    Bolivar, MO                                              12/15/89
Fouche Valley                                     Perryville, AR                                           05/01/90
Altheimer                                         Altheimer, AR                                            04/18/90
Kyle Hotel                                        Temple, TX                                               06/12/90
Diversey Square                                   Chicago, IL                                              12/01/90
Poplar Village                                    Cumberland, KY                                           12/30/90
Lexington                                         Lexington, TN                                            12/29/90
</TABLE>

*     The  Partnership's  interest in profits  and losses of each Local  Limited
      Partnership  arising from normal  operations  is 99% with the exception of
      five Local Limited  Partnerships in which the  Partnership  acquired a 98%
      interest  (Willow  Lake),  98%  interest   (Breckenridge),   97%  interest
      (Granite), 49% interest (Colony Apartments) and a 48.96% interest (Harbour
      View).  Profits and losses arising from sale or  refinancing  transactions
      are allocated in accordance with the respective Local Limited  Partnership
      Agreements.

**    As of March 31, 1998, the Managing  General  Partner has transferred all 
      of the assets of twelve of the Texas Partnerships  subject to their  
      liabilities to unaffiliated entities.  The transfer of Crown Point, Godley
      Arms, Glenbrook Apartments, Quail Run Apartments and Sherwood Arms 
      Housing,  Lone Oak  Apartments,  Hallet West Apartments,  Crestwood Place,
      Eagle Nest Apartments,  One Main Place, Pilot Point Apartments and Lakeway
      Colony were effective  February 21, 1996, February 21, 1996, June 7, 1996,
      July 3, 1996,  November 26, 1996,  August 6, 1997,  September 23, 1997,  
      October 28, 1997,  October 28, 1997, October 28, 1997, October 28, 1997 
      and October 30, 1997,  respectively.  The Partnership plans to transfer  
      title to the one  remaining  Texas Partnership  (Willowick  Apartments) to
      unaffiliated  buyers.  If  negotiations  continue as expected,  this
      transfer will occur in July 1998.  In the meantime, operating deficits  
      continue to be funded from Partnership Reserves.

***   As of March 31, 1998,  the titles of Rolling Hills and Regency Square were
      transferred to the lender. The transfers were effective May 2, 1997.



<PAGE>


Although the  Partnership's  investments in Local Limited  Partnerships  are not
subject to seasonal  fluctuations,  the Partnership's  equity in losses of Local
Limited  Partnerships and rental operating revenues and expenses,  to the extent
they reflect the operations of individual  Properties,  may vary from quarter to
quarter based upon changes in occupancy  and  operating  expenses as a result of
seasonal factors.

With the exception of the Combined Entities, each Local Limited Partnership has,
as its general partners ("Local General  Partners"),  one or more individuals or
entities  not  affiliated  with the  Partnership  or its  General  Partners.  In
accordance  with the  partnership  agreements  under  which  such  entities  are
organized ("Local Limited Partnership  Agreements"),  the Partnership depends on
the Local General Partners for the management of each Local Limited Partnership.
As of March 31, 1998,  the following  Local Limited  Partnerships  have a common
Local General Partner or affiliated group of Local General  Partners  accounting
for the specified percentage of the total capital contributions in Local Limited
Partnerships:  (i) Boulevard Commons II and Boulevard Commons IIA,  representing
2.47%, have Carroll Properties,  Inc. and Robert King as Local General Partners;
(ii) Ellsworth, Syracuse, Satanta, Rossville, Humbolt, Smithville,  Brownsville,
Briarwood,  Billings,  Garden Plain, Wayne,  Horseshoe Bend, Bolivar, Oak Grove,
Westgate and  Altheimer,  representing  2.39%,  have The Lockwood Group as Local
General Partner; (iii) Elver Park II, Elver Park III, Tucson Trails I and Tucson
Trails II,  representing 6.38%, have Gorman Associates as Local General Partner;
(iv) Riverfront  Apartments and Susquehanna View,  representing 6.07%, have NCHP
as Local General Partner;  (v) West Dade and West Dade II,  representing  6.62%,
have Romat,  Inc. and Arbor,  Inc.,  respectively,  both of which have Aristedes
Martinez as  principal,  as Local  General  Partner;  (vi)  Elmwood and Fox Run,
representing  3.94%, have Delwood Ventures,  Inc. and R.S.F.  Ventures,  Inc. as
Local  General  Partners,  respectively,  both of which  have  Raymond  Baker as
principal; (vii) Eaglewood,  Lexington and Fulton, representing .77%, have Tommy
Harper,  Jerry Blurt and Chris  Turskey as Local  General  Partners;  and (viii)
Waterfront  and Shoreline,  representing  6.80%,  have M.B.  Associates as Local
General  Partner.  The Local  General  Partners of the  remaining  Local Limited
Partnerships are identified in the Acquisition  Reports,  which are incorporated
herein by reference.

The Properties owned by Local Limited  Partnerships in which the Partnership has
invested are and will  continue to be subject to  competition  from existing and
future  properties in the same areas.  The continued  success of the Partnership
will  depend  on many  factors,  most of which are  beyond  the  control  of the
Partnership  and which cannot be predicted  at this time.  Such factors  include
general economic and real estate market conditions, both on a national basis and
in those areas where the Properties are located,  the  availability  and cost of
borrowed  funds,  real estate tax rates,  operating  expenses,  energy costs and
government  regulations.  In  addition,  other  risks  inherent  in real  estate
investment may influence the ultimate success of the Partnership, including: (i)
possible  reduction  in rental  income  due to an  inability  to  maintain  high
occupancy  levels or adequate  rental levels;  (ii) possible  adverse changes in
general economic  conditions and adverse local  conditions,  such as competitive
overbuilding,  a decrease in employment  rates or adverse changes in real estate
laws,  including  building codes; and (iii) the possible future adoption of rent
control  legislation  which would not permit  increased costs to be passed on to
the tenants in the form of rent increases or which would suppress the ability of
the Local Limited Partnership to generate operating cash flow. Since most of the
Properties benefit from some form of government  assistance,  the Partnership is
subject  to the risks  inherent  in that  area  including  decreased  subsidies,
difficulties  in finding  suitable  tenants and  obtaining  permission  for rent
increases. In addition, any Tax Credits allocated to investors with respect to a
Property are subject to recapture to the extent that the Property or any portion
thereof  ceases to qualify for the Tax Credits.  Other future changes in Federal
and  state  income  tax  laws  affecting   real  estate   ownership  or  limited
partnerships  could have a material  and adverse  affect on the  business of the
Partnership.

The  Partnership  is managed by Arch  Street III,  Inc.,  the  Managing  General
Partner of the Partnership. The other General Partner of the Partnership is Arch
Street III Limited  Partnership.  To economize  on direct and  indirect  payroll
costs, the Partnership, which does not have any employees, reimburses The Boston
Financial Group Limited Partnership  ("Boston  Financial"),  an affiliate of the
General Partners, for certain expenses and overhead costs. A complete discussion
of the management of the Partnership is set forth in Item 10 of this Report.


<PAGE>



Item 2.  Properties

The Partnership owns limited  partnership  interests in fifty-five Local Limited
Partnerships which own and operate  Properties,  some of which benefit from some
form of federal, state or local assistance programs and all of which qualify for
the  Tax  Credits  added  to the  Code  by the  Tax  Reform  Act  of  1986.  The
Partnership's  ownership interest in each Local Limited Partnership is generally
99%, except for Willow Lake, Breckenridge, Granite, Colony Apartments and 
Harbour View, where the Partnership's ownership interest is 98%, 98%,97%, 49% 
and 48.96%, respectively.

Each of the Local Limited Partnerships has received an allocation of Tax Credits
from its relevant state tax credit agency.  In general,  the Tax Credit runs for
ten years from the date the Property is placed in service.  The required holding
period (the  "Compliance  Period") of the  Properties is fifteen  years.  During
these fifteen  years,  the  Properties  must satisfy rent  restrictions,  tenant
income  limitations  and other  requirements,  as  promulgated  by the  Internal
Revenue Code, in order to maintain  eligibility  for the Tax Credit at all times
during  the  Compliance  Period.  Once a Local  Limited  Partnership  has become
eligible for the Tax Credits,  it may lose such  eligibility and suffer an event
of  recapture  if  its  Property   fails  to  remain  in  compliance   with  the
requirements.

In  addition,  some of the Local  Limited  Partnerships  have  obtained one or a
combination  of different  types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the property is located at favorable  terms; and iii) loans which have repayment
terms that are based on a percentage of cash flow.

The schedules on the  following  pages provide  certain key  information  on the
Local Limited Partnership interests acquired by the Partnership.


<PAGE>

<TABLE>
<CAPTION>


                                                     Capital Contributions
                                                                             
                                                           Total         Total         Mtge. Loans                             
Local Limited Partnership                 Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                               of             March          March      at December 31,   Type of            March
Property Location                         Apt. Units       31, 1998     31, 1998          1997        Subsidy*            31, 1998
---------------------------------------- ------------ ---------------  ------------ ---------------- ------------   ----------------

<S>                                      <C>         <C>               <C>          <C>                 <C>                <C>
West Dade LTD, A Limited Partnership
West Dade
Miami, FL                                122          $1,513,936       $ 1,513,936  $ 4,069,062          Section 8         90%

West Dade LTD II, A Limited Partnership
West Dade II
Miami, FL                                209           3,039,442         3,039,442    8,322,852          Section 8         95%

Westwood Manor Limited Dividend
    Housing Association L.P.
Westwood Manor
Flint, MI                                144           1,165,925         1,165,925    3,300,541          Section 8         94%

Rolling Hills Associates L.P. (B)
Rolling Hills
Dayton, OH

Regency Square Limited Partnership (B)
Regency Square
Dayton, OH

Shoreline Limited Partnership
Shoreline
Buffalo, NY                              142           1,079,318         1,079,318    6,764,993          None              82%

Waterfront Limited Partnership
Waterfront
Buffalo, NY                              472           3,597,307         3,597,307   24,198,938          None              83%
</TABLE>

<PAGE>


<TABLE>
<CAPTION>


                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------ ---------------- ------------   ----------------
<S>                                   <C>          <C>             <C>           <C>                <C>               <C> 
Fox Run Housing
Fox Run
Victoria, TX                          150          1,605,775       1,605,775     4,119,338          Section 8          98%

Boulevard Commons Limited
    Partnership II
Boulevard Commons II
Chicago, IL                            61            517,175         517,175       704,976          Section 8         100%

The Colony Apartments, L.P.
    A Limited Partnership
Colony Apartments
Columbia, SC                          300          1,762,500       1,762,500     8,596,401          Section 8          98%

Boulevard Commons Limited
    Partnership IIA
Boulevard Commons IIA
Chicago, IL                            42           1,179,812      1,179,812     1,516,400          Section 8          53%

Ashley Place, LTD
    A Florida Limited Partnership
Ashley Place
Orlando, FL                            96           2,002,560      2,002,560     2,809,702            None             97%

Admiral Housing Limited Partnership
Admiral Court
Philadelphia, PA                       46           1,900,000      1,900,000     2,551,928          Section 8          73%


</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                    <C>        <C>             <C>           <C>                <C>                <C>

Prarieland Property of Syracuse, L.P.
Bentley Hill
Syracuse, KS                             8           52,150          52,150       240,939            FmHA             100%

El Jardin of Davie, Ltd.
El Jardin
Davie, FL                              236        2,022,100       2,022,100     6,702,965          Section 8           95%

EDM Housing Associates LTD
    A Limited Partnership
Elmwood Delmar
Aurora, CO                              95        1,102,025       1,102,025     3,133,280          Section 8           92%

Bridgeport Housing Associates, LTD(A)
Crestwood
Bridgeport, TX

Willowick Housing Associates, LTD**(A)
Willowick
Gainesville, FL                         60          311,761         311,761     1,150,688            FmHA              28%

Ellsworth Senior Housing, L.P.
Kirkendall Heights
Ellsworth, KS                           12           69,658          69,658       328,587            FmHA             100%

Prairieland Properties of Satanta, L.P.
Ponca Manor
Satanta, KS                              8           49,915          49,915       223,804            FmHA              87%
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------

<S>                                  <C>          <C>             <C>           <C>               <C>                <C>
Rossville Senior Housing L.P.
Pearl Place
Rossville, KS                         10             58,855          58,855       279,389           FmHA              80%

Columbia Townhouse Associates, L.P.
Columbia Townhouses
Burlington, IA                        56            752,450         752,450     1,395,897         Section 8           86%

Quartermill Associates, L.P.
    A Virginia Limited Partnership
Quartermill
Richmond, VA                         266          7,705,500       7,705,500     7,152,267            None            100%

One Main Place Housing
    Associates, LTD(A)
One Main Place
Little Elm, TX

Pilot Point Housing Associates, LTD(A)
Pilot Point
Pilot Point, TX

Sherwood Arms Housing
    Associates, LTD (A)
Sherwood Arms
Keene, TX

</TABLE>



<PAGE>

<TABLE>
<CAPTION>
                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------

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

Crown Point Housing
    Associates, LTD (A)
A Texas Limited Partnership
Crown Point
Venus, TX

Godley Arms Housing
    Associates, LTD (A)
Godley Arms
Godley, TX

South Holyoke Limited Partnership
South Holyoke
Holyoke, MA                           48           1,119,330       1,119,330    2,727,618          None               88%

Harbour View
    A Limited Partnership
Harbour View
Staten Island, NY                    122           1,350,000       1,350,000    9,549,824          None              100%

Walker Woods Partners, L.P.
Walker Woods
Dover, DE                             51           1,452,380       1,452,380    2,347,633          None               90%

Boston Financial Texas Properties
    Limited Partnership III(A)
Lakeway Colony
Lake Dallas, TX

</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                    <C>        <C>             <C>           <C>               <C>               <C>
Eaglewood VIII, L.P.
    A Limited Partnership
Eaglewood
Covington, TN                           40          255,000         255,000     1,115,356           FmHA            100%

Georgetown Associates II, L.P.
Georgetown II
Georgetown, DE                          50        1,200,000       1,200,000     1,736,325           None             94%

Blue Mountain Associates, L.P.
    A Massachusetts Limited Partnership
Granite V
Boston, MA                             217        5,774,113       5,774,113     9,821,059         Section 8          98%

Garden Plain Senior Apts., LTD
Garden Plain
Garden Plain, KS                        12           70,030          70,030       303,429           FmHA            100%

Fulton Associates I, L.P.
    A Limited Partnership
Fulton, KY                              24          180,000         180,000       799,988           FmHA             96%

Lone Oak Housing Associates, LTD (A)
Lone Oak
Graham, TX

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------

<S>                                  <C>          <C>              <C>          <C>                <C>                   <C>
West Hallettsville Housing
    Associates, LTD(A)
Hallet-West
Hallettsville, TX

Glenbrook Housing Associates, LTD (A)
Glenbrook
St. Jo, TX

Eagles Nest Housing
    Associates, LTD(A)
Eagles Nest
Decatur, TX

Billings Family Housing, L.P.
Cedar Tree
Billings, MO                         12            58,855           58,855      283,313            FmHA                  100%

Brownsville Associates, L.P.
Brownsville
Brownsville, TN                      28           161,665          161,665      786,207            FmHA                  100%

Wayne Senior Housing, L.P.
Sunnyhill Villa
Wayne, NE                            15            81,205           81,205      429,047            FmHA                  100%

Longview Apartments, L.P.
Longview
Humbolt, KS                          14            91,635           91,635      398,864            FmHA                   50%

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                  <C>           <C>            <C>           <C>               <C>             <C>
Horseshoe Bend Associates I, L.P.
Horseshoe Bend
Horseshoe Bend, AR                    24             143,785        143,785       649,773            FmHA         100%

Briarwood Associates II, L.P.
Briarwood II
Lake Havasua, AZ                      32             219,030        219,030     1,111,603            FmHA         100%

North Quail Run Housing
    Associates, LTD (A)
Quail Run
Iowa Park, TX

Smithville Rural Housing
    A Limited Partnership
Smithville
Smithville, MO                        24             108,025        108,025       545,783            FmHA         100%

Aurora Properties, LTD.
    A Limited Partnership
Aurora East Apartments
Denver, CO                           125             765,000        765,000     3,990,938         Section 8        98%

Elver Park Limited Partnership II
Elver Park II
Madison, WI                           56           1,246,385      1,246,385     1,692,255             None         79%



</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                   <C>           <C>             <C>         <C>               <C>                <C>
Elver Park Limited Partnership III
Elver Park III
Madison, WI                            48           1,047,470       1,047,470    1,455,941          None             80%

Tuscon Trails Limited Partnership I
Tuscon Trails I
Madison, WI                            48           1,047,470       1,047,470    1,422,159          None             96%

Tuscon Trails Limited Partnership II
Tuscon Trails II
Madison, WI                            48           1,047,470       1,047,470    1,428,872          None             94%

Pleasant Plaza Housing L.P.
Pleasant Plaza
Malden, MA                            125           3,340,138       3,340,138   12,285,989        Section 8          97%

241 Pine Street Associates, L.P.**
241 Pine Street
Manchester, NH                         50           1,374,298       1,374,298            0          None             96%

Missouri Rural Housing of
    Oak Grove, L.P.
Heather Oaks
Oak Grove, MO                          24             118,828         118,828      562,597          FmHA             88%

Wood Creek Associates
    A New York Limited Partnership
Wood Creek
Calcium, NY                           104           1,850,000       1,850,000    3,276,957          None             83%


</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                    <C>         <C>             <C>          <C>               <C>             <C>
Breckenridge Creste Apartments, L.P.**
Breckenridge
Duluth, GA                             164         3,520,000       3,520,000    4,765,180            None            92%

Willow Lake Partners II, L.P.**
    A Limited Partnership
Willow Lake
Kansas City, MO                        132         2,130,700       2,130,700    2,723,285            None            91%

Bolivar Senior Housing, L.P.
Ashton Heights
Bolivar, MO                             20            95,360          95,360      467,424            FmHA           100%

Lexington Associates I L.P.
    A Limited Partnership
Lexington Civic
Lexington, TN                           24            95,000          95,000      817,827            FmHA            92%

Riverfront Apartments, L.P.
Riverfront
Sunbury, PA                            200         1,984,908       1,984,908    7,498,417         Section 8         100%

Susquehanna View L.P.
Susquehanna View
Camp Hill, PA                          201         2,194,314       2,194,314    9,051,781         Section 8         100%

Westgate Associates I, L.P.
Fouche Valley
Perryville, AR                          20           131,865         131,865      639,652            FmHA            95%

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                    Capital Contributions
                                                                             
                                                     Total         Total         Mtge. Loans                             
Local Limited Partnership            Number        Committed at   Paid through      Payable                       Occupancy at
Property Name                          of              March          March      at December 31,   Type of            March
Property Location                    Apt. Units      31, 1998     31, 1998          1997           Subsidy*          31, 1998
----------------------------------- ------------ ---------------  ------------  ---------------- ------------   ----------------
<S>                                 <C>          <C>             <C>          <C>                    <C>               <C>

Altheimer Associates I, L.P.
Altheimer
Altheimer, AR                           20            130,375         130,375           598,519        FmHA             90%

The Temple-Kyle L.P.**
Kyle Hotel
Temple, TX                              64          1,624,100       1,624,100         1,406,251      Section 8          98%

Diversey Square Associates II
Diversey Square II
Chicago, IL                             48          1,031,825       1,031,825         2,574,830      Section 8         100%

Poplar Village, LTD
Poplar Village
Cumberland, KY                          36            283,945         283,945         1,202,859        None             98%
                                    ------       ------------    ------------   ---------------
                                     4,805         68,812,668      68,812,668       178,030,502
                                    ======
Less: **Combined Entities                           8,960,859       8,960,859        10,045,404
                                                 ------------    ------------   ---------------
                                                 $ 59,851,809    $ 59,851,809   $   167,985,098
                                                 ============    ============   ===============
</TABLE>

*FmHA      This subsidy, which is authorized under Section 515 of the Housing 
           Act of 1949, can be one or a combination of different types of
           financing.  For instance,  FmHA may provide:  1) direct  below-market
           -rate  mortgage loans for rural rental housing;  2) mortgage interest
           subsidies which  effectively  lower the interest rate of the loan to 
           1%; 3) a rental  assistance  subsidy to tenants which allows them to 
           pay no more than 30% of their monthly income as rent with the balance
           paid by the federal government; or 4) a combination of any of the 
           above.

 Section   8 This subsidy,  which is  authorized  under Section 8 of Title II of
           the Housing and Community  Development Act of 1974,  allows qualified
           low- income  tenants to pay 30% of their monthly  income as rent with
           the balance paid by the federal government.

 (A)       As of March 31, 1998, the Managing  General  Partner has  transferred
           all of the  assets of twelve of the  Texas  Partnerships  subject  to
           their liabilities.  The one remaining Texas  Partnership,  Willowick,
           will  be   transferred   after  March  31,  1998.  The  twelve  Texas
           Partnerships  had total capital  contributions  and mortgage  payable
           amounts  of  $1,268,737  and  $5,365,807,  respectively,  as  of  the
           transfer dates.

(B)        As of March 31, 1998, the Managing  General  Partner has  transferred
           the title of  Rolling  Hills  Associates,  L.P.  and  Regency  Square
           Limited  Partnership to the lender.  These two Partnerships had total
           capital contributions and mortgagee payable amounts of $5,655,000 and
           $ 6,409,457, respectively, as of the transfer dates.


<PAGE>


One Local Limited Partnership,  Quarter Mill Associates L.P., invested in by the
Partnership  represents more than 10% of the total capital  contributions  to be
made  to  Local  Limited  Partnerships  by the  Partnership.  Quarter  Mill is a
266-unit construction apartment complex located in Richmond, Virginia.

Quarter Mill is financed by a  combination  of private and public  sources.  The
first mortgage is at 8.75% interest,  has a 40-year term, and is insured by HUD.
The apartment  project is pledged as collateral for the note. In addition to the
first mortgage,  there is a subordinated  nonrecourse  note that is payable each
year only to the extent of 15% of the  property's  net cash flow,  as defined by
the note agreement.

Additional  information  required  under  this  item,  as  it  pertains  to  the
Partnership, is contained in Items 1, 7 and 8 of this report.

Item 3.  Legal Proceedings

Lone Oak Housing Associates, Ltd., as was previously reported, was the defendant
in a lawsuit in which the plaintiff had alleged  negligence and deceptive  Trade
Act violations.  This  litigation has been settled by the insurance  carrier and
the case dismissed.

Willow Lake  Partners  II, L.P.  ("Willow  Lake") is the  defendant in a lawsuit
relating  to  an  earlier  lawsuit   involving  Willow  Lake.  As  part  of  the
Partnership's  settlement with the former management agent, Willow Lake gave the
management  agent  two cash  flow  notes.  The  former  management  agent is now
claiming  that Willow Lake has cash flow (so  payments  should have been made on
the notes) and it is the  Partnership's  position that the property is running a
deficit. On June 25, 1998, the court found for Willow Lake on summary judgement 
and ruled that there has been no default on the note.  This litigation is no 
longer outstanding unless the former management agent decides to appeal.  


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

None.


                                                   PART II

Item 5.  Market for the Registrant's Units and Related Security Holder Matters

There is no public  market for the Units,  and it is not expected  that a public
market will develop.  If a Limited Partner  desires to sell Units,  the buyer of
those Units will be required to comply with the minimum  purchase and  retention
requirements and investor suitability standards imposed by applicable federal or
state  securities  laws and the  minimum  purchase  and  retention  requirements
imposed by the  Partnership.  The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers,  will be subject
to negotiation by the Limited Partner seeking to sell his Units.  Units will not
be redeemed or repurchased by the Partnership.

The  Partnership  Agreement  does not impose on the  Partnership  or its General
Partners any  obligation to obtain  periodic  appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units.

As of  June  15,  1998,  there  were  5,902  record  holders  of  Units  of  the
Partnership.

Cash distributions, when made, are paid annually.  No cash distribution was paid
in the years ended March 31, 1998, 1997 and 1996.


<PAGE>


Item 6.  Selected Financial Data

The following  table sets forth  selected  financial  information  regarding the
Partnership's  financial position and operating results. This information should
be read in conjunction  with  Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations  and the  Financial  Statements  and Notes
thereto, which are included in Items 7 and 8 of this Report.
<TABLE>
<CAPTION>

                                   March 31,       March 31,        March 31,           March 31,        March 31,
                                      1998            1997             1996               1995             1994

<S>                              <C>              <C>             <C>               <C>              <C>            
Revenue (C)                      $    2,733,282   $   2,119,597   $    2,219,261    $    1,926,504   $     1,200,399
Equity in losses of Local
  Limited Partnerships (C)           (3,287,444)     (3,624,984)      (4,670,063)       (5,818,976)       (5,887,566)
Extraordinary gain (loss) on
   cancellation of indebtedness       1,868,051         (51,595)       1,279,618                 -                 -
Per Limited Partnership Unit              18.49            (.51)           12.67                 -                 -
Net loss                             (3,597,835)     (7,208,441)      (5,440,551)       (9,002,539)       (7,684,561)
Per Limited Partnership
  Unit                                   (35.62)         (71.36)          (53.86)           (89.13)           (76.08)
Partner distributions                         -               -                -                 -                 -
Cash and cash equivalents (C)           311,867         379,614          268,040           155,456           252,482
Marketable securities                   275,387         331,319          158,967         2,200,946         3,279,811
Investment in Local Limited
  Partnerships                       20,136,185      23,983,675       30,216,554        36,694,357        43,777,721
Total Assets (A)                     37,131,787      43,791,590       44,371,622        52,653,124        61,386,839
Long-term debt (C)                    8,641,832      11,754,415        7,006,101         9,581,097         9,434,015
Total Liabilities (C)                12,474,903      15,393,975        9,474,777        12,090,444        11,823,888
Other Data:
Passive loss (B)                     (7,960,758)    (10,918,014)     (11,654,006)      (12,660,771)      (12,568,468)
Per Limited Partnership
  Unit (B)                               (78.82)        (108.09)         (115.37)          (125.34)          (124.43)
Portfolio Income  (B)                   415,665         412,136          529,521           470,018           706,189
Per Limited Partnership
  Unit (B)                                 4.12            4.08             5.24              4.65              6.99
Low-Income Housing
  Tax Credits (B)                    12,585,747      13,857,452       14,056,981        14,088,559        14,056,340
Per Limited Partnership
  Unit (B)                               123.94          136.50           138.47            138.78            138.50
Recapture of Low-Income
  Housing Tax Credits (B)            (3,582,142)       (995,750)               -                 -                 -
Per Limited Partnership
  Unit (B)                               (35.46)          (9.86)               -                 -                 -
Local Limited Partnership interests 
owned at end of period (D)                 55              64               69                69                69
</TABLE>


(A) Total assets include the net investment in Local Limited Partnerships.

(B)  Income  tax  information  is as  of  December  31,  the  year  end  of  the
     Partnership for income tax purposes.  The Low-Income Housing Tax Credit per
     Limited Partnership Unit for 1997, 1996, 1995, 1994 and 1993 represents the
     amount  allocated  to  individual   investors.   Corporate  investors  were
     allocated $129.80,  $142.65, $144.62, $144.95 and $144.67 per Unit in 1997,
     1996, 1995, 1994 and 1993, respectively.


<PAGE>


Item 6.  Selected Financial Data (continued)

(C)  Revenue  for the years  ended  March  31,  1998,  1997,  1996,  1995 and
     1994  includes  $2,563,928,  $1,909,683,  $2,224,273,  $1,792,997  and  
     $828,978, respectively,  of rental and other revenues from the Combined 
     Entities that is included in the combined revenue on the Combined 
     Statement of Operations. Equity in losses of Local Limited  Partnerships
     in the years ended March 31, 1998,  1997, 1996, 1995 and 1994 does not 
     include  $(931,727),  $(2,633,475), $608,681,  ($857,248) and ($549,275),  
     respectively,  of income (losses) from the Combined Entities that have been
     combined with the Partnership's loss on the Combined  Statement of  
     Operations.  Cash and cash  equivalents  for the years ended March 31,  
     1998,  1997,  1996,  1995 and 1994  includes  $99,298, $166,606,  $173,408,
     $80,091 and $105,923,  respectively,  from the Combined  Entities that is 
     included on the Combined Balance sheets.  The total amount of long-term  
     debt is related to the  Combined  Entities.  Total  liabilities  for the
     years ended March 31,  1998,  1997,  1996,  1995 and 1994  includes
     $12,068,486,  $15,409,538,  $10,065,592,  $11,499,446 and $10,994,585,  
     respectively,  from the Combined Entities that is included on the Combined 
     Balance Sheets.

(D)  At March 31, 1998, the Managing  General  Partner has transferred the title
     to the lender of Rolling Hills Associates,  L.P. and Regency Square Limited
     Partnership with an original cost amount of $5,655,000.

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

Liquidity and Capital Resources

The  Partnership  (including  the Combined  Entities) had a decrease in cash and
cash  equivalents of $67,747 for the year ended March 31, 1998. This decrease is
attributable to cash used for operations, purchases of marketable securities and
rental property.  These are partially  offset by sales of marketable  securities
and cash distributions received from Local Limited Partnerships.

The Managing  General Partner  initially  designated 3% of the Gross Proceeds as
Reserves.  The Reserves were  established to be used for working  capital of the
Partnership  and  contingencies  related  to  the  ownership  of  Local  Limited
Partnership  interests.  The Managing  General  Partner may increase or decrease
such Reserves from time to time, as it deems appropriate.  During the year ended
March 31, 1993,  the Managing  General  Partner  decided to increase the Reserve
level to  3.75%.  Funds  approximating  $195,000  have been  withdrawn  from the
Reserves  to pay  legal  and  other  costs. Additionally,  professional  fees  
relating  to  various property issues totaling approximately  $1,636,000 have 
been paid from Reserves. This amount includes  approximately  $1,310,000 for the
Texas  Partnerships.  To date, Reserve funds in the amount of approximately  
$349,000 have also been used to make additional capital contributions to two 
Local Limited Partnerships,  and the Partnership has paid approximately 
$1,181,000 (net of paydowns) to purchase the mortgage of a Local Limited  
Partnership.  To date, the Partnership has used approximately  $1,309,000 of 
operating funds to replenish Reserves. At March 31, 1998, approximately $398,000
of cash, cash equivalents and marketable securities have been  designated  as  
Reserves.  Reserves  may be used to fund  Partnership operating deficits,  if 
the Managing General Partner deems funding  appropriate. If  Reserves  are not 
adequate  to  cover  the  Partnership's  operations,  the Partnership will seek 
other financing sources including, but not limited to, the deferral of Asset  
Management Fees paid to an affiliate of the Managing  General Partner or working
with Local Limited Partnerships to increase cash distributions.

In the  event a Local  Limited  Partnership  encounters  operating  difficulties
requiring  additional funds, the Partnership might deem it in its best interests
to provide such funds, voluntarily, in order to protect its investment. To date,
in addition to the $1,310,000  noted above,  the  Partnership  has also advanced
approximately $638,000 to the Texas Partnerships and $662,000 to two other Local
Limited Partnerships to fund operating deficits.

Since the  Partnership  invests as a limited  partner,  the  Partnership  has no
contractual  duty to  provide  additional  funds to Local  Limited  Partnerships
beyond its specified investment. Thus, at March 31, 1998, the Partnership had no
contractual or other obligation to any Local Limited  Partnership  which had not
been paid or provided for.


Cash Distributions

No cash  distributions  were made in the three years ended March 31, 1998. As of
March 31,  1998,  all  required  capital  contributions  have been made to Local
Limited Partnerships. Based on the results of 1997 operations, the Local Limited
Partnerships are not expected to distribute  significant  amounts of cash to the
Partnership  because  such  amounts  will be needed to fund  Property  operating
costs. In addition,  many of the Properties benefit from some type of federal or
state  subsidy  and,  as a  consequence,  are  subject to  restrictions  on cash
distributions. Therefore, it is expected that only a limited amount of cash will
be distributed to investors from this source in the future.

Results of Operations

1998 versus 1997

For the year ended March 31, 1998, Partnership operations resulted in a net loss
of  $3,597,835  as compared to a net loss of  $7,208,441  for the same period in
1997.  The  decrease  in net loss is  primarily  attributable  to a increase  in
extraordinary  gain on  cancellation  of  indebtedness,  an  increase  in rental
revenue,  a decrease in provision for valuation of real estate and a decrease in
equity  in  losses.  These  decreases  in net loss are  partially  offset  by an
increase in bad debt expense, rental operations and interest expense.

1997 versus 1996

For the year ended March 31, 1997, Partnership operations resulted in a net loss
of $7,208,441  as compared to a net loss of $5,440,551  for the year ended 1996.
The  increase  in  net  loss  is  primarily   attributable   to  a  decrease  in
extraordinary  gain on  forgiveness  of  indebtedness  and the  recognition of a
provision  for  valuation  of  real  estate  by the  Texas  Partnerships.  These
increases are partially offset by a decrease in equity in losses.

The decrease in equity in losses of Local Limited  Partnerships is a result of a
decrease  in rental  operations  and  interest  expenses  at the  Local  Limited
Partnerships.  In addition, one of the Local Limited Partnerships contributed to
a decrease in equity in losses due to a reallocation of the net loss between the
Local and General Partners in 1997.

Effect of recently issued Accounting Standard

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards  No. 130,  Reporting  Comprehensive  Income.  The standard
requires that changes in comprehensive  income be shown in a financial statement
that is displayed with the same  prominence as other financial  statements.  The
standard is effective for fiscal years  beginning  after  December 15, 1997. The
Partnership  will adopt the new standard  beginning in the first  quarter of the
fiscal year ending  March 31, 1999, but it is not expected to have a significant
effect on the Partnership's financial position or results of operations.

Low-Income Housing Tax Credits

The 1997,  1996 and 1995 Tax  Credits  per Unit for  individuals  were  $123.94,
$136.50 and $138.47,  respectively. The 1997, 1996 and 1995 Tax Credits per Unit
for corporations were $129.80, $142.65 and $144.62,  respectively.  The credits,
which have  stabilized,  are expected to remain stable for the next three years,
and then they are  expected to decrease as certain  properties  reach the end of
the ten-year credit period.  The transfer of ownership of the Texas Partnerships
will result in nominal  recapture  of tax credits  since the Texas  Partnerships
represent only 2% of the Partnership's tax credits.

The Tax Credits per Unit for corporate investors will be slightly higher for the
remaining years of the credit period than that for individual  investors because
certain of the  Properties  took  advantage  of 1990  federal  legislation  that
allowed the  acceleration  of future tax credits to  individuals in the tax year
ended  December 31, 1990.  For those  Properties  that elected to accelerate the
individual credit, the accelerated portion is being amortized over the remainder
of the credit period,  thereby causing a reduction of this and future year's tax
credits  passed  through by those  Properties.  In total,  both  individual  and
corporate investors will be allocated equal amounts of Tax Credits.

Property Discussions

Prior to the transfer of the Texas Partnerships,  Limited Partnership  interests
had been acquired in sixty-nine Local Limited Partnerships which own and operate
rental properties in twenty-four states.  Forty-two of the properties,  totaling
3,935 units,  were  rehabilitated,  and twenty-seven  properties,  consisting of
1,614  units,  were newly  constructed.  All of the  properties  have  completed
construction  or  rehabilitation  and initial  lease-up.  Many of the  remaining
fifty-five Local Limited Partnerships in which the Partnership has invested have
stable operations and are operating satisfactorily.

Several properties are experiencing  operating  difficulties and generating cash
flow  deficits  due to a variety of reasons.  In most cases,  the Local  General
Partners of these  properties are funding the deficits  through  project expense
loans and  subordinated  loans or payments from escrows.  In instances where the
Local General Partners'  obligations to fund deficits have expired or otherwise,
the  Managing  General  Partner is  working  with the Local  General  Partner to
increase  operating  income,  reduce  expenses  or  refinance  the debt at lower
interest rates.

Boulevard  Commons  IIA,  located in Chicago,  Illinois,  has been  experiencing
operating deficits.  Expenses have been increasing due to increasing maintenance
and capital needs, security issues and high turnover at the property.  The Local
General  Partner is  requesting  that the  Managing  General  Partner  assist in
funding  capital  improvements.  The Managing  General Partner is reviewing this
request and has requested that the Local General  Partner provide a workout plan
detailing  where and how these funds will be used.  In  addition,  the  Managing
General  Partner is working with the Local General  Partner to  restructure  the
current  debt.  Negotiations  between  the  Managing  General  Partner and Local
General Partner are ongoing.

As previously  reported,  Harbour View,  located in Staten Island, New York, had
defaulted on its HUD-insured loan. Subsequently, the lender assigned the loan to
HUD.  In  December  1996,  the  property's  mortgage  was sold at  auction to an
unaffiliated institutional buyer. The Managing General Partner and Local General
Partner  continue  to  participate  in  discussions  with  the new  lender.  The
Partnership's  ability to retain its interest in the property will depend on the
ability of the Local General  Partner or Partnership  affiliates to purchase the
mortgage or negotiate a satisfactory  workout agreement with the new lender. The
Partnership's carrying value of this investment for financial reporting purposes
is zero. Occupancy for this property as of 12/31/97 was 99%.

A  refinancing  application  was  submitted  for Kyle Hotel,  located in Temple,
Texas,  in December 1997. The potential  lender needs to approve  several issues
before the application  will be approved.  The Managing  General Partner will be
monitoring progress.

As previously reported, operations had been improving at Pleasant Plaza, located
in Malden, Massachusetts,  as a result of the 1995 SHARP subsidy restructuring.
The SHARP mortgage  subsidy has been an important part of the property's  annual
income.  However,  effective October 1, 1997, the Massachusetts  Housing Finance
Agency (MHFA),  which  provided  the SHARP  subsidies,  withdrew  future  SHARP
mortgage subsidies from its portfolio of 77 SHARP  subsidized  properties.  The
Managing General  Partner  joined a group of interested  parties and is working
with MHFA to find a solution to the  problems that will occur as a result of
withdrawn subsidies.  Given the dependence on the mortgage  subsidy,  it is
possible that the  property will default on its  mortgage  obligation.  It is
possible that fund  reserves will be used to support the property  until these
issues can be resolved.  The Local General Partner is in  negotiations  with the
MHFA to fund debt service deficits that had been covered by the SHARP  mortgage
subsidies and avoid a default  on its  mortgage.  The  Local  General  Partner
believes it will cover the SHARP subsidy gap by  increasing  rents and some cost
containments.  In the meantime,  the Local General Partner has negotiated a 1998
budget with the MHFA. However, further negotiations to resolve these issues with
the MHFA are expected in the first half of 1998. As we previously reported,  the
Local General Partner was seeking bankruptcy protection. His reorganization plan
was approved in September  1997.  The plan will not materially  affect  property
operations or the Local General Partner's interest in the Partnership.

Another  property  affected by the  withdrawal  of the SHARP  subsidies is South
Holyoke,  located  in  Holyoke,  Massachusetts.  As  previously  reported,  this
property  continues to experience  occupancy  problems  resulting from increased
market competition and local economic conditions. The management agent, which is
currently  funding the deficits,  is trying to address these problems  through a
combination of increased  advertising,  community  outreach and tighter  expense
monitoring.

Waterfront and Shoreline,  both located in Buffalo,  New York,  continue to have
operating deficits as a result of a soft rental market, deferred maintenance and
security issues. As previously reported,  the Managing General Partner and Local
General Partner have successfully negotiated a Drug Elimination Grant (NOFA) for
Shoreline.  The grant  should be funded  during 1998 and will be used to support
drug  prevention,  educational  programs and increase  security on the property.
Waterfront was turned down for the NOFA grant,  however,  they will reapply next
year. For both  Waterfront and Shoreline,  the Management  Agent has applied for
consideration  for a Project  Improvement  Program  (PIP) and applied for a Safe
Neighborhood  Grant.  At this  point,  deficits  continue  to be  funded  by the
management agent. As noted previously,  the viability of the properties  depends
upon funding  deficits until receipt of the grants.  Both  properties  currently
carry cash flow mortgages with New York State.  The Managing  General Partner is
closely monitoring operations.  

As previously reported, Breckenridge Creste. located in Duluth, Georgia has been
operating below breakeven as a result of increased vacancy, a weak rental market
and deferred maintenance issues.  A capital improvement plan has been 
implemented to improve curb appeal of the property.  The capital improvements 
completed to date include exterior painting, exterior wood trim replacement,
landscaping, laundry room decorating and improvements, pool repairs, gutter
installation, interior unit rehab, carpet, vinyl floor and appliance re-
placements.  A special reserve account was set up at the property level to hold 
funds for capital improvements and operating deficits.  Expenditures from these 
funds are carefully monitored by property management and the Managing General
Partner.

Willow Lake,  located in Kansas, is experiencing  operating  difficulties due to
soft rental market  conditions.  As previously  reported,  The Managing  General
Partner had negotiated a workout in 1994. The two year extension to this workout
will expire on June 30, 1998 and a new three year extension has been negotiated 
and will expire on May 31, 2001.  The Managing  General  Partner is working with
the Local General Partner to negotiate  permanent debt service relief,  increase
rents and monitor property expenses.

As previously  reported,  the Managing  General  Partner  transferred all of the
assets of five of the  Texas  Partnerships,  subject  to their  liabilities,  to
unaffiliated entities in 1996. In 1997, The Managing General Partner transferred
all of the  assets of seven  more of the Texas  Partnerships,  subject  to their
liabilities, to unaffiliated entities. Negotiations between the Managing General
Partner, the Lender and prospective buyer for the remaining property, Willowick,
are  continuing  and a transfer is expected in early July 1998. In the meantime,
operating  deficits  continue to be funded from  Partnership  Reserves.  For tax
purposes, these events will result in both Section 1231 gain and cancellation of
indebtedness  income.  In addition,  the transfer of ownership  will result in a
nominal  amount of  recapture  of tax  credits  because  the Texas  Partnerships
represent only 2% of the Partnership's tax credits.

As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were  transferred  to the bank on May 2,  1997  after  prolonged  operating
difficulties  resulting from low occupancy,  capital  rehabilitation needs and a
depressed local economy.  The Local General Partner and Managing General Partner
were  involved in lengthy  workout  negotiations  with HUD, but  ultimately  the
mortgages  for  these  properties  were  sold to a bank  in  HUD's  August  1996
non-performing loan auction. Although negotiations continued with the bank in an
attempt to prevent foreclosure, a workout was not achieved, and the foreclosures
occurred.  This  transfer of title  resulted in a recapture  tax in 1997 and the
allocation of taxable income which was reported on the investors' 1997 K-1.

In accordance with Financial  Accounting  Standard No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of",
which is  effective  for fiscal years  beginning  after  December 15, 1995,  the
Partnership has implemented  policies and practices for assessing  impairment of
its real estate assets and investments in local limited partnerships. Each asset
is analyzed by real  estate  experts to  determine  if an  impairment  indicator
exists. If so, the current value is compared to the fair value and if there is a
significant  impairment  in value,  a provision  to write down the asset to fair
value will be charged against income.

Inflation and Other Economic Factors

Inflation  had no material  impact on the  Partnerships  operations or financial
condition for the years ended March 31, 1998, 1997 and 1996.

As some  Properties  benefit  from  some  form  of  government  assistance,  the
Partnership is subject to the risks  inherent in that area  including  decreased
subsidies, difficulties in finding suitable tenants and obtaining permission for
rent increases. In addition, the Tax Credits allocated to investors with respect
to a Property  are  subject to  recapture  to the extent  that a Property or any
portion thereof ceases to qualify for Tax Credits.

Some of the properties listed in this report are located in areas suffering from
poor economic  conditions.  Such conditions  could have an adverse effect on the
rent or occupancy levels at such Properties.  Nevertheless, the Managing General
Partner  believes that the  generally  high demand for below market rate housing
will tend to negate such  factors.  However,  no assurance  can be given in this
regard.

Item 8.  Financial Statements and Supplementary Data

Information  required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.

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

None.
                                                           PART III

Item 10.  Directors and Executive Officers of the Registrant

The Managing  General  Partner of the  Partnership  is Arch Street III,  Inc., a
Massachusetts  corporation (the "Managing  General Partner" or "Arch Street III,
Inc."), an affiliate of The Boston Financial Group Limited Partnership  ("Boston
Financial"),  a Massachusetts  limited partnership.  George Fantini, Jr., a Vice
President of the Managing General Partner,  resigned his position effective June
30, 1995.  Donna  Gibson,  a Vice  President of the  Managing  General  Partner,
resigned from her position on September  13, 1996.  Georgia  Murray  resigned as
Managing Director,  Treasurer and Chief Financial Officer of the General Partner
on May 25, 1997. Fred N. Pratt, Jr. resigned as Managing Director of the General
Partner on May 28, 1997.  William E. Haynsworth  resigned as a Managing Director
and Chief Operating Officer of the General Partner on March 23, 1998.

The  Managing  General  Partner was  incorporated  in August  1988.  Randolph G.
Hawthorne is the Chief Operating Officer of the Managing General Partner and had
the primary responsibility for evaluating, selecting and negotiating investments
for the  Partnership.  The Investment  Committee of the Managing General Partner
approved all investments.  The names and positions of the principal officers and
the directors of the Managing General Partner are set forth below.

     Name                                           Position

Jenny Netzer                         Managing Director and President
Michael H. Gladstone                 Managing Director, Vice President and Clerk
Randolph G. Hawthorne                Managing Director, Vice President and
                                       Chief Operating Officer
James D. Hart                        Chief Financial Officer and Treasurer
Paul F. Coughlan                     Vice President
Peter G. Fallon, Jr.                 Vice President
William E. Haynsworth                Vice President

The  other  General  Partner  of the  Partnership  is Arch  Street  III  Limited
Partnership,  a Massachusetts  limited partnership ("Arch Street III L.P.") that
was  organized in August 1988.  The General Partner of Arch Street III L.P. is
Arch Street III, Inc.

The Managing General Partner provides day-to-day  management of the Partnership.
Compensation is discussed in Item 11 of this report. Such day-to-day  management
does not include the management of the Properties.

The business experience of each of the persons listed above is described  below.
There is no family  relationship  between any of the persons listed in this
section.

Jenny  Netzer,  age 42,  graduated  from  Harvard  University  (B.A.,  1976) and
received a Master's in Public Policy from Harvard's Kennedy School of Government
in 1982.  She joined  Boston  Financial  in 1987 and is a Senior Vice  President
leading the  Institutional  Tax Credit Team.  She is also a member of the Senior
Leadership  Team.  Previously,  Ms. Netzer led Boston  Financial's  new business
initiatives  and  managed  the  firm's  Asset  Management  division,   which  is
responsible  for the  performance  of 750  properties  and providing  service to
35,000  investors.  Before  joining  Boston  Financial,  she was  Deputy  Budget
Director for the  Commonwealth of  Massachusetts,  where she was responsible for
the Commonwealth's  health care and public pension programs' budgets. Ms. Netzer
was also  Assistant  Controller at Yale  University and has been a member of the
Watertown Zoning Board of Appeals.

Michael H. Gladstone,  age 41,  graduated from Emory  University (B.A. 1978) and
Cornell  University  (J.D.,  MBA 1982). He joined Boston  Financial in 1985, and
currently serves as Vice President and as the company's  General Counsel.  Prior
to joining Boston  Financial,  Mr. Gladstone was associated with the law firm of
Herrick & Smith.  Mr. Gladstone is a member of the National Realty Committee and
has served on the  advisory  board to the Housing and  Development  Reporter,  a
national publication on housing issues.

Randolph G.  Hawthorne,  age 48, is a graduate  of  Massachusetts  Institute  of
Technology (B.S., 1971) and Harvard Graduate School of Business (M.B.A.,  1973).
He has been  associated  with Boston  Financial since 1973 and has served as the
Treasurer of Boston  Financial.  Currently a Senior Vice  President of the firm,
Mr. Hawthorne's primary  responsibility is structuring and acquiring real estate
investments.  Mr.  Hawthorne is Past Chairman of the Board of the National Multi
Housing  Council,  having served on the board since 1989. He is a past president
of the  National  Housing  and  Rehabilitation  Association,  is a member of the
Residential Development Council of the Urban Land Institute, as well as a member
of the Advisory  Board of the Berkeley Real Estate  Center at the  University of
California.  In  addition to  speaking  at  industry  conferences,  he is on the
Editorial Advisory Boards of the Tax Credit Advisor and Multi-Housing News.

James D. Hart,  age 40, earned his Bachelor of Arts degree from Trinity  College
and his Masters of Business Administration from the AmosTuck School at Dartmouth
College.  Mr.  Hart  serves as Chief  Financial  Officer  and is a member of the
Senior Leadership Team. Prior to joining Boston Financial,  Mr. Hart was engaged
in venture capital  management on behalf of institutional  investors,  including
the negotiation and structuring of private equity and mezzanine  transactions as
a Vice President of Interfid Ltd., and later in the operational  management of a
venture-backed  software  company,  as  Managing  Director  and Chief  Financial
Officer of Bitstream  Inc. Mr. Hart has also served on the Board of Directors of
several  investee  companies,  including those that went on to complete  initial
public offerings.

Paul F. Coughlan,  age 54, is a graduate of Brown  University  (B.A.,  1965) and
served in the United  States Navy before  entering  the  securities  business in
1969. He was employed as an Account Executive by Bache & Company until 1972, and
then by Reynolds  Securities  Inc.  He joined  Boston  Financial  in 1975 and is
currently a Senior Vice President on the Institutional Tax Credit Team.

Peter G.  Fallon,  Jr.,  age 59,  graduated  from the  College of the Holy Cross
(B.S.,  1960) and Babson College  (M.B.A.,  1965). He joined Boston Financial in
1970, shortly after its formation,  to raise capital for the firm's investments.
He is currently a Senior Vice  President and a member of the  Institutional  Tax
Credits  Team  with  responsibility  for  marketing  institutional  investments.
Previously,  he has served as  president  of BFG  Securities,  as a director  of
Boston Financial,  and as marketing director for public and corporate funds. Mr.
Fallon has also served as Chairman of the Board of Directors for Boston  College
High School as well as a director of a local bank.

William E. Haynsworth,  age 58, is a graduate of Dartmouth College (B.A.,  1961)
and Harvard Law School (L.L.B.,  1964;  L.L.M.,  1969).  Prior to joining Boston
Financial in 1977,  Mr.  Haynsworth  was Acting  Executive  Director and General
Counsel of the Massachusetts Housing Finance Agency. He was also the Director of
Non-Residential  Development  of  the  Boston  Redevelopment  Authority  and  an
associate  of the law firm of  Goodwin,  Procter & Hoar.  Appointed  Senior Vice
President in 1986, Mr. Haynsworth brings over 25 years of experience structuring
real estate  investments.  Mr. Haynsworth is a member of the Executive Committee
and the Board of Directors of the Affordable Housing Tax Credit Coalition. He is
a member of the Senior  Leadership Team, the firm's Executive  Committee and the
Board of Directors of Boston Financial.



Item 11.  Management Remuneration

Neither the directors or officers of Arch Street III, Inc., the partners of Arch
Street III L.P. nor any other  individual  with  significant  involvement in the
business of the Partnership  receives any current or proposed  remuneration from
the Partnership.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

As of March 31, 1998, the following is the only entity  known to the Partnership
to be the  beneficial  owner of more than 5% of the total number of Units
outstanding:

                                                     Amount
Title of              Name and Address of        Beneficially          Percent
 Class                    Beneficial Owner           Owned             of Class

Limited               AMP, Incorporated          10,000 Units             10%
Partner               P.O. Box 3608
                      Harrisburg, PA


The equity  securities  registered by the Partnership under Section 12(g) of the
Act  consist of 100,000  Units,  all of which have been sold to the public as of
March 31, 1998.  Holders of Units are permitted to vote on matters affecting the
Partnership only in certain unusual  circumstances and do not generally have the
right to vote on the operation or management of the Partnership.

As of March 31, 1998,  Arch Street III L.P. owns five  (unregistered)  Units not
included in the 100,000 units sold to the public.

Except as described in the preceding  paragraph,  neither Arch Street III, Inc.,
Arch Street III L.P.,  Boston  Financial  nor any of their  executive  officers,
directors,  partners or affiliates is the beneficial owner of any Units. None of
the  foregoing  persons  possesses a right to acquire  beneficial  ownership  of
Units.

The Partnership does not know of any existing  arrangement that might at a later
date result in a change in control of the Partnership.


Item 13.  Certain Relationships and Related Transactions

Information  required  under this Item is  contained  in Note 5 to the  Combined
Financial Statements presented in Item 14.

The  Partnership  was  required to pay  certain  fees to and  reimburse  certain
expenses of the Managing  General  Partner or its affiliates  (including  Boston
Financial)  in  connection  with the  organization  of the  Partnership  and the
offering of Units.  The Partnership was also required to pay certain fees to and
reimburse  certain  expenses of the Managing  General  Partner or its affiliates
(including  Boston  Financial)  in  connection  with the  administration  of the
Partnership  and its acquisition and disposition of investments in Local Limited
Partnerships.  In  addition,  the  General  Partners  are  entitled  to  certain
Partnership distributions under the terms of the Partnership Agreement. Also, an
affiliate  of the General  Partners  will receive up to $10,000 from the sale or
refinancing proceeds of each Local Limited Partnership, if it is still a limited
partner at the time of such  transaction.  All such fees and  distributions  are
more fully  described  in the sections  entitled  "Estimated  Use of  Proceeds",
"Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax
Credits  and  Cash   Distributions"   of  the  Prospectus.   Such  sections  are
incorporated  herein  by  reference.  In  addition,  Boston  Financial  Property
Management  ("BFPM"),  an affiliate of the Managing General  Partner,  serves as
property management agent for Harbour View, Willow Lake, The Texas Partnerships,
The Kyle and Breckenridge.

The Partnership is permitted to enter into transactions  involving affiliates of
the Managing General Partner,  subject to certain limitations established in the
Partnership Agreement.

Information regarding the fees paid and expense reimbursements made in the three
years ending March 31, 1998 is presented below.

Organizational fees and expenses

In  accordance  with  the  Partnership  Agreement,  Boston  Financial  is  to be
reimbursed by the Partnership for organizational,  offering and selling expenses
advanced on behalf of the Partnership by Boston  Financial or its affiliates and
for salaries and direct  expenses of certain  employees of the Managing  General
Partner and its affiliates in connection with the  registration and organization
of  the  Partnership.   Such  expenses  include  printing  expenses  and  legal,
accounting,  escrow agent and depository  fees and expenses.  Such expenses also
include a non-accountable  expense allowance for marketing  expenses equal to 1%
of gross offering  proceeds.  $11,832,395 of organization  fees and expenses and
selling expenses  incurred on behalf of the Partnership were paid and reimbursed
to an affiliate of the Managing General Partner. Total organization and offering
expenses did not exceed 5.5% of the gross offering proceeds.
There were no  organization  fees and offering  expenses paid in the three years
ended March 31, 1998.

Acquisition fees and expenses

In accordance with the Partnership Agreement, the Partnership is required to pay
acquisition fees to and reimburse  acquisition  expenses of the Managing General
Partner or its affiliates for selecting,  evaluating,  structuring,  negotiating
and  closing  the  Partnership's  investments  in  Local  Limited  Partnerships.
Acquisition  fees  totaled  7.5% of the  gross  offering  proceeds.  Acquisition
expenses,  which include such  expenses as legal fees and  expenses,  travel and
communications expenses,  costs of appraisals,  accounting fees and expenses did
not  exceed  2% of  the  gross  offering  proceeds.  Acquisition  fees  totaling
$7,500,000  for the  closing  of the  Partnership's  Local  Limited  Partnership
Investments  have been paid to an  affiliate of the  Managing  General  Partner.
Acquisition  expenses totaling $1,587,834 were incurred and have been reimbursed
to an  affiliate  of the  Managing  General  Partner.  In  accordance  with  the
Partnership  Agreement,  15% of the acquisition  fees payable to an affiliate of
the Managing  General Partner is the "Deferred  Acquisition  Fees". The Deferred
Acquisition Fees have been deposited in an interest bearing account and are paid
annually, with interest, at the rate of 10% per year over 10 years. Installments
began on the second  anniversary  of the  Prospectus,  November 23, 1990.  As of
March 31, 1998 and 1997, deferred  acquisition fees payable amounted to $225,000
and $337,500, respectively.

Payments made and expenses reimbursed in each of the three years ended March 31,
1998 are as follows:

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

Acquisition fees and expenses     $        -        $        -        $       -
     Deferred acquisition fees    $ 112,500         $  112,500        $  112,506


Asset Management Fees

In  accordance  with the  Partnership  Agreement,  an  affiliate of the Managing
General  Partner  is paid an annual  fee for  services  in  connection  with the
administration  of the  affairs  of the  Partnership.  The  affiliate  currently
receives  $6,977 (as adjusted by the CPI factor) per Local  Limited  Partnership
annually as the Asset Management Fee.

Asset  Management  Fees incurred in each of the three years ended March 31, 1998
are as follows:

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

     Asset management fees        $  423,223        $  450,678        $  447,110





Property Management Fees

Boston  Financial  Property  Management  ("BFPM"),  an affiliate of the Managing
General  Partner,  currently  manages  Harbour  View,  a  property  in which the
Partnership  has  invested.  Included in  operating  expenses in the  summarized
income  statements  in Note 4 to the Combined  Financial  Statements is $52,220,
$51,956  and  $46,915  of fees  earned  by BFPM  during  1997,  1996  and  1995,
respectively.

On April 2, 1993, BFPM became the management  agent of Willow Lake. In August of
1993, BFPM became the management agent for the Texas Partnerships.  On September
29, 1995, BFPM became the management agent of The Kyle. On August 20, 1996, BFPM
became the management agent of  Breckenridge.  Fees charged in each of the three
years ended December 31, 1997 are as follows:

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

     Property management fees  $  104,878          $  135,472          $  70,315

Salaries and benefits expense reimbursements

An affiliate of the Managing  General  Partner is reimbursed for the cost of the
Partnership's  salaries and benefits expenses. The reimbursements are based upon
the size and complexity of the Partnership's operations.  Reimbursements made in
each of the three years ended March 31, 1998 are as follows:

                                   1998               1997                1996
                                ----------          ----------          -------
Salaries and benefits expense
 reimbursements                 $  180,970          $  170,961        $  182,482

Cash distributions paid to the General Partners

In  accordance  with the  Partnership  Agreement,  the  General  Partners of the
Partnership,  Arch Street  III,  Inc.  and Arch Street III Limited  Partnership,
receive 1% of cash  distributions  made to partners.  No cash distributions were
made to the General Partners in any of the three years ended March 31, 1998.

                                                        PART IV

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

(a) (1) and (a) (2) Documents filed as a part of this Report.

In  response  to this  portion of Item 14, the  combined  financial  statements,
financial  statement  schedule and the  auditors'  report  relating  thereto are
submitted  as a  separate  section  of this  Report.  See Index to the  Combined
Financial Statements and Schedules on page F-1 hereof.

The reports of auditors of the Local Limited Partnership  relating to the audits
of the financial statements of such Local Limited Partnerships appear in Exhibit
(28)(1) of this report.

Other  schedules  have been  omitted  as they are  either  not  required  or the
information  required to be  presented  therein is  available  elsewhere  in the
combined financial statements or the accompanying notes and schedules.

(a)(3)     See Exhibit Index contained herein.

(a)(3)(b)  Reports on Form 8-K
           No  reports on form 8-K were  filed  during the year ended  March 31,
1998.

(a)(3)(c)  Exhibits








Number and Description in Accordance with
Item 601 of Regulation S-K

     27.   Financial Data Schedule

     28.   Additional Exhibits

           (a)  Reports of Other Independent Auditors

           (b)  Audited financial statements of Local Limited Partnerships

                None

(a)(3)(d)       None




<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.

      BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

      By:  Arch Street III, Inc.
           its Managing General Partner




     By:   /s/Randolph G. Hawthorne                    Date: 6/29/98
           Randolph G. Hawthorne,
           Managing Director, Vice President and
           Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed by the  following  persons  on behalf of the  Managing  General
Partner of the Partnership and in the capacities and on the dates indicated:



     By:    /s/Randolph G. Hawthorne                  Date: 6/29/98
           Randolph G. Hawthorne,
           Managing Director, Vice President and
           Chief Operating Officer




     By:   /s/Michael H. Gladstone                    Date: 6/29/98
           Michael H. Gladstone
           A Managing Director


<PAGE>                                      

Item 8.  Financial Statements and Supplementary Data

             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

          Annual Report on Form 10-K for the Year Ended March 31, 1998
                                      Index


                                                                    Page No.
                                                                   ------------

Report of Independent Accountants                                            F-2

Financial Statements

     Combined Balance Sheets - March 31, 1998 and 1997                       F-3

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

     Statements of Changes in Partners' Equity
       (Deficiency) - For the Years Ended March 31, 1998,
       1997 and 1996                                                         F-5

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

     Notes to the Combined Financial Statements                              F-8

Financial Statement Schedule:

     Schedule III - Real Estate and Accumulated Depreciation                F-25



Other  schedules  have been  omitted  as they are  either  not  required  or the
information  required to be  presented  therein is  available  elsewhere  in the
financial statements and the accompanying notes and schedules.




<PAGE>





                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. III
(A Limited Partnership):

We have  audited  the  combined  balance  sheets of Boston  Financial  Qualified
Housing Tax Credits L.P. III (A Limited Partnership) ("BFQHIII") as of March 31,
1998 and 1997 and the related  combined  statements  of  operations,  changes in
partners' equity, and cash flows and the financial  statement schedule listed in
Item 14(a) of this  Report on Form 10-K, for the each of the three  years in the
period ended March 31, 1998. These financial  statements and financial statement
schedule are the responsibility of BFQHIII's  management.  Our responsibility is
to express an opinion on these  financial  statements  and  financial  statement
schedules  based on our audits.  As of March 31, 1998 and 1997,  82% and 72% of
total assets, and for the years ended March 31, 1998,  1997  and  1996,  100%,  
53%  and 88% of  net  loss, reflected in the combined financial statements of 
BFQHIII, relate to Local  Limited  Partnerships  for which we did not audit the
financial   statements.   The  financial   statements  of  these  Local  Limited
Partnerships were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to those investments in Local Limited
Partnerships, is based solely upon the reports of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the combined financial statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and disclosures in the combined 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 and the  reports of other
auditors provide a reasonable basis for our opinion.

In our  opinion,  based on our audits and the  reports  of other  auditors,  the
combined financial  statements referred to above present fairly, in all material
respects,  the financial position of BFQHIII as of March 31, 1998 and 1997, and
the results of its  operations and its cash flows for each of the three years in
the period ended March 31, 1998, in conformity  with  generally  accepted  
accounting principles.  In addition, in our opinion the financial statement  
schedule referred to above,  when considered in relation to the basic combined  
financial statements taken as a whole,  presents  fairly,  in all material  
respects,  the information required to be included therein.






/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 26, 1998




<PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

                                       
                COMBINED BALANCE SHEETS - MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>


                                                                        1998                    1997
                                                                   -------------            --------

<S>                                                                <C>                      <C>    
Assets
Cash and cash equivalents                                          $     311,867            $    379,614
Marketable securities, at fair value (Note 3)                            275,387                 331,319
Investments in Local Limited Partnerships, net
   of reserve for valuation of $1,635,000
   in 1998 and 1997 (Note 4)                                          20,136,185              23,983,675
Accounts receivable, net                                                  90,467                 175,669
Interest receivable                                                       13,298                  17,607
Prepaid expenses                                                          25,247                  40,019
Tenant security deposits                                                  68,292                  66,439
Replacement reserves                                                     194,671                 210,045
Rental property at cost, net of accumulated
   depreciation and reserve for  valuation (Note 6)                   15,451,119              17,884,234
Deferred acquisition fees escrow (Note 5)                                225,000                 337,500
Deferred expenses, net of $104,360 and $111,038
   accumulated amortization in 1998 and 1997                             209,127                 235,339
Other assets                                                             131,127                 130,130
                                                                   -------------            ------------
Total Assets                                                       $  37,131,787             $43,791,590
                                                                   =============             ===========

Liabilities and Partners' Equity
Accounts payable to affiliates (Note 5)                            $   1,702,519            $  1,193,182
Accounts payable and accrued expenses                                    484,817                 611,515
Interest payable                                                         312,091                 377,295
Note payable - affiliate (Note 5)                                        514,968                 514,968
Security deposits payable                                                 70,630                  82,054
Due to affiliate (Note 8)                                                323,046                 323,046
Deferred acquisition fees payable (Note 5)                               225,000                 337,500
General partner advances (Note 9)                                        200,000                 200,000
Mortgage notes payable (Note 7)                                        8,641,832              11,754,415
                                                                   -------------            ------------
   Total Liabilities                                                  12,474,903              15,393,975
                                                                   -------------            ------------

Minority interest in Local Limited Partnerships                          907,515               1,053,122
                                                                   -------------            ------------

General, Initial and Investor Limited Partners' Equity                23,748,605              27,346,440
Net unrealized gains (losses) on marketable securities                       764                  (1,947)
                                                                   -------------            ------------
     Total Partners' Equity                                           23,749,369              27,344,493
                                                                   -------------            ------------
     Total Liabilities and Partners' Equity                        $  37,131,787             $43,791,590
                                                                   =============             ===========
</TABLE>

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

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                        COMBINED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>

                                                               1998              1997           1996
                                                            -----------     ------------     -------
<S>                                                        <C>              <C> 
Revenue:
   Rental                                                  $  2,470,887     $  1,764,258     $ 1,982,497
   Investment                                                    40,340           82,660          85,858
   Other                                                        222,055          272,679         150,906
                                                           ------------     ------------     -----------
     Total Revenue                                            2,733,282        2,119,597       2,219,261
                                                           ------------     ------------     -----------

Expenses:
   Asset management fees, related party (Note 5)                423,223          450,678         447,110
   General and administrative (includes reimbursements
    to affiliates of $180,970, $170,961, and $182,482,
    respectively) (Note 5)                                      493,519          611,810         841,989
   Bad debt expense                                             394,319            8,665          54,351
   Property management fees (Note 5)                            179,980          150,304          84,715
   Rental operations, exclusive of depreciation               1,725,621        1,387,909       1,488,464
   Interest expense (Notes 7 and 9)                             884,758          532,518         593,447
   Provision for valuation of real estate                             -        1,748,708               -
   Depreciation                                                 767,716          605,671         573,735
   Amortization                                                 177,617          182,875         179,003
                                                           ------------     ------------     -----------
     Total Expenses                                           5,046,753        5,679,138       4,262,814
                                                           ------------     ------------     -----------

Loss before equity in losses of Local Limited  Partnerships,  minority interest,
   loss on liquidation of interest in Local Limited Partnerships
   and extraordinary item                                    (2,313,471)      (3,559,541)     (2,043,553)

Equity in losses of Local Limited
   Partnerships (Note 4)                                     (3,287,444)      (3,624,984)     (4,670,063)

Minority interest in (income) losses of
   Local Limited Partnerships                                   153,280           27,679          (6,553)

Loss on liquidation of interests
   in Local Limited Partnerships (Note 10)                      (18,251)               -              -
                                                           ------------     ------------    -----------

Net Loss before extraordinary item                           (5,465,886)      (7,156,846)     (6,720,169)

Extraordinary gain (loss) on cancellation
   of indebtedness (Note 10 and 12)                           1,868,051          (51,595)      1,279,618
                                                           ------------     ------------    ------------

Net Loss                                                   $ (3,597,835)     $(7,208,441)    $(5,440,551)
                                                           ============      ===========     ===========

Net Loss Allocated:
   To General Partners                                     $    (35,978)    $    (72,084)   $    (54,406)
   To Limited Partners                                       (3,561,857)      (7,136,357)     (5,386,145)
                                                           ------------     ------------    ------------
                                                           $ (3,597,835)     $(7,208,441)    $(5,440,551)
                                                           ============      ===========     ===========

Net Loss before extraordinary item
   per Limited Partnership Unit (100,000 Units)            $     (54.11)    $     (70.85)   $     (66.53)
                                                           ============     ============    ============

Extraordinary item per Limited
   Partnership Unit (100,000 Units)                        $       18.49    $       (.51)   $       12.67
                                                           =============    ============    =============

Net loss per Limited Partnership Unit (100,000 Units)      $         (35.62)      $  (71.36 )    $   (53.86)
                                                           ================       ==========     ==========
</TABLE>

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


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>


                                                                                     Net
                                                       Initial       Investor    Unrealized
                                        General        Limited        Limited       Gains
                                       Partners       Partners       Partners     (Losses)        Total

<S>                                   <C>           <C>          <C>           <C>             <C>        
Balance at March 31, 1995           $   (475,891)  $    5,000     $40,466,323   $  (35,145)    $39,960,287

Net change in unrealized losses
    on marketable securities
    available for sale                         -            -               -       35,157          35,157

Net Loss                                 (54,406)           -      (5,386,145)           -      (5,440,551)
                                      ----------      -------    ------------     --------    ------------

Balance at March 31, 1996               (530,297)       5,000      35,080,178           12      34,554,893

Net change in unrealized gains
    on marketable securities
    available for sale                         -            -               -       (1,959)         (1,959)

Net Loss                                 (72,084)           -      (7,136,357)           -      (7,208,441)
                                      ----------      -------    ------------     --------    ------------

Balance at March 31, 1997               (602,381)       5,000      27,943,821       (1,947)     27,344,493

Net change in unrealized losses
    on marketable securities
    available for sale                         -            -               -        2,711           2,711
Net Loss                                 (35,978)           -      (3,561,857)           -      (3,597,835)
                                      ----------      -------    ------------     --------    ------------

Balance at March 31, 1998             $ (638,359)     $ 5,000    $ 24,381,964     $    764    $ 23,749,369
                                      ==========      =======    ============     ========    ============
</TABLE>

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


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                        COMBINED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996

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

<S>                                                        <C>               <C>             <C>         
Net Loss                                                   $ (3,597,835)     $(7,208,441)    $(5,440,551)
Adjustments to reconcile net loss to net
  cash used for operating activities:
   Equity in losses of Local Limited Partnerships             3,287,444        3,624,984       4,670,063
   Bad debt expense                                             394,319            8,665          54,351
   Loss on liquidation of interest in Local Limited
     Partnerships                                                18,251                -               -
   Provision for valuation of real estate                             -        1,748,708               -
   Extraordinary (gain) loss on cancellation
      of indebtedness                                        (1,868,051)          51,595      (1,279,618)
   Cash distribution included in net loss                       (26,674)         (32,610)        (13,456)
   Amortization and depreciation                                945,333          788,546         752,738
   (Gain) loss on sale of marketable securities                  (1,292)           1,291          (4,555)
   Minority interest in income (loss) of Local
    Limited Partnerships                                       (153,280)         (27,679)          6,553
   Increase (decrease) in cash arising from changes
    in operating assets and liabilities:
     Accounts receivable                                            703           19,834          48,262
     Interest receivable                                         50,381          (62,939)         17,964
     Prepaid expenses                                             2,575            5,227          (3,818)
     Tenant security deposits                                   (14,607)           4,099         (27,158)
     Other assets                                               (39,409)         (30,404)         69,403
     Accounts payable to affiliates                             513,799          428,633         408,603
     Accounts payable and accrued expenses                      144,878           43,002         220,130
     Interest payable                                            43,460          198,324         155,370
     Tenant security deposits payable                             1,353               28             980
                                                           ------------      -----------     -----------
Net cash used for operating activities                         (298,652)        (439,137)       (364,739)
                                                           ------------      -----------     -----------

Cash flows from investing activities:
   (Advances to) reimbursements from affiliates                  76,318         (124,294)              -
   Purchases of marketable securities                          (448,522)        (273,754)     (1,700,979)
   Proceeds from sales and maturities of
     marketable securities                                      508,457           98,152       3,782,670
   Cash distributions received from Local
     Limited Partnerships                                       424,737          503,503         345,051
   Cash received upon assumption of General Partner
     interest in a Combined Entity                                    -           18,364          43,646
   Adjustment to cash received
     upon assumption of General
     Partner interest in a Combined Entity                            -          (51,595)              -
   Adjustment to cash upon
     liquidation of General Partner
     interest in a Combined Entity                              (11,821)               -               -
   Decrease in deferred acquisition fee escrow                  112,500          112,500         112,506
   Payment of deferred acquisition fees                        (112,500)        (112,500)       (112,506)
   Releases from (deposits to) replacement reserves               6,916           10,637         (66,521)
   Purchase of rental property                                 (335,745)         (70,940)       (245,961)
                                                           ------------      -----------     -----------
Net cash provided by investing activities                       220,340          110,073       2,157,906
                                                           ------------      -----------     -----------
</TABLE>

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

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                  COMBINED STATEMENTS OF CASH FLOWS (continued)
                FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>


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


Cash flows from financing activities:
<S>                                                         <C>              <C>              <C>   
   Advances from general partner                                      -                -          50,397
   Payments to general partner                                        -                -        (173,500)
   Repayment of mortgage notes payable                         (104,845)         (87,574)       (158,404)
   Advances from affiliate                                      115,410           35,523               -
   Advances on notes payable, affiliate                               -          492,689          22,279
   Advances from developer                                            -                -          13,756
   Capital contributions received                                     -                -          14,522
   Repayment of Local Limited Partnership's mortgage                  -                -      (1,462,693)
   Repayment of notes receivable, affiliate                           -                -          13,060
                                                           ------------      -----------     -----------
Net cash provided by (used for) financing activities             10,565          440,638      (1,680,583)
                                                           ------------      -----------     -----------

Net increase (decrease) in cash and
     cash equivalents                                           (67,747)         111,574         112,584

Cash and cash equivalents, beginning of year                    379,614          268,040         155,456
                                                           ------------      -----------     -----------

Cash and cash equivalents, end of year                     $    311,867      $   379,614     $   268,040
                                                           ============      ===========     ===========

Supplemental Disclosure:
   Cash paid for interest                                  $    910,543      $   360,491     $   646,380
                                                           ============      ===========     ===========

</TABLE>

Non-cash disclosure:

   See  Note  10 for  discussion  of the  transfers  of  certain  Local  Limited
Partnerships.

   See Note 12 for discussion of cancellation of indebtedness income.


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

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


                                      
                   Notes to the Combined Financial Statements

1.   Organization

Boston Financial  Qualified Housing Tax Credits L.P. III (the "Partnership") was
formed on August 9, 1988 under the laws of the State of Delaware for the primary
purpose  of  investing,  as a limited  partner,  in other  limited  partnerships
("Local  Limited  Partnerships"),  most  of  which  own  and  operate  apartment
complexes,  most of which  benefit  from  some form of  federal,  state or local
assistance program and each of which qualify for low-income housing tax credits.
The  Partnership's  objectives  are to: (i) provide  current tax benefits in the
form of tax credits  which  qualified  investors may use to offset their federal
income tax liability;  ii) preserve and protect the Partnership's  capital; iii)
provide limited cash distributions  which are not expected to constitute taxable
income during  Partnership  operations;  and iv) provide cash distributions from
sale or refinancing  transactions.  The General  Partners of the Partnership are
Arch Street III, Inc., which serves as the Managing  General  Partner,  and Arch
Street III L.P., which also serves as the Initial Limited  Partner.  Both of the
General   Partners  are  affiliates  of  The  Boston   Financial  Group  Limited
Partnership  ("Boston  Financial").  The fiscal year of the Partnership  ends on
March 31.

The Certificate and Agreement of Limited Partnership  ("Partnership  Agreement")
authorized  the sale of up to  100,000  units of  Limited  Partnership  Interest
("Units") at $1,000 per Unit,  adjusted for certain  discounts.  The Partnership
raised $99,610,000 ("Gross Proceeds"), net of discounts of $390,000, through the
sale of 100,000 Units. Such amounts exclude five  unregistered  Units previously
acquired  for $5,000 by the Initial  Limited  Partner,  which is also one of the
General  Partners.  The offering of Units terminated on May 30, 1989. No further
sale of Units is expected.

Generally,  profits,  losses,  tax  credits  and cash flow from  operations  are
allocated  99% to the  Limited  Partners  and 1% to the  General  Partners.  Net
proceeds  from a sale  or  refinancing  will  be  allocated  95% to the  Limited
Partners and 5% to the General Partners, after certain priority payments.

Under  the  terms  of  the  Partnership  Agreement,  the  Partnership  initially
designated  3% of the Gross  Proceeds  from the sale of Units as a  reserve  for
working  capital of the Partnership  and  contingencies  related to ownership of
Local Limited Partnership  interests.  During the year ended March 31, 1993, the
Managing  General  Partner  decided to increase the reserve  level to 3.75%.  At
March 31,  1998,  the  Managing  General  Partner has  designated  approximately
$398,000 of cash, cash equivalents and marketable securities as such Reserve.


2.   Significant Accounting Policies

Basis of Presentation and Combination

The Partnership accounts for its investments in Local Limited Partnerships, with
the exception of the Combined  Entities,  using the equity method of accounting,
because the Partnership  does not have a majority control of the major operating
and financial  policies of the Local Limited  Partnerships  in which it invests.
Under the equity  method,  the  investment is carried at cost,  adjusted for the
Partnership's  share  of  income  or loss  of the  Local  Limited  Partnerships,
additional   investments   and  cash   distributions   from  the  Local  Limited
Partnerships.  Equity in income or loss of the  Local  Limited  Partnerships  is
included  currently in the  Partnership's  operations.  The  Partnership  has no
obligation  to fund  liabilities  of the Local Limited  Partnerships  beyond its
investment,  therefore,  a Local Limited  Partnership's  investment  will not be
carried  below zero.  To the extent that equity losses are incurred when a Local
Limited  Partnership's  respective  investment balance has been reduced to zero,
the losses will be  suspended to be used against  future  income.  Distributions
received from Local Limited  Partnerships whose respective  investment value has
been reduced to zero are included in income. For the years ended March 31, 1998,
1997 and 1996,  the  Partnership  did not recognize  $4,878,906,  $5,206,584 and
$5,122,569,   respectively,   of  equity   losses   relating  to  Local  Limited
Partnerships whose cumulative equity in losses and distributions  exceeded their
total investments.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)

2.   Significant Accounting Policies (continued)

Excess investment costs over the underlying net assets acquired have arisen from
acquisition   fees  paid  and  expenses   reimbursed  to  an  affiliate  of  the
Partnership.   These  fees  and  expenses  are  included  in  the  Partnership's
Investment  in  Local  Limited   Partnerships  and  are  being  amortized  on  a
straight-line basis over 35 years.

The Partnership  recognizes a decline in the carrying value of its investment in
Local Limited Partnerships when there is evidence of a non-temporary  decline in
the  recoverable  amount of the investment.  There is the  possibility  that the
estimates relating to reserves for non-temporary  declines in the carrying value
of  investments  in Local Limited  Partnerships  may be subject to material near
term adjustments.

The  Partnership,  as a limited  partner in the Local Limited  Partnerships,  is
subject to risks  inherent in the  ownership  of  property  which are beyond its
control,  such as  fluctuations  in  occupancy  rates  and  operating  expenses,
variations in rental schedules,  proper  maintenance of facilities and continued
eligibility  of tax  credits.  If the cost of  operating a property  exceeds the
rental income earned  thereon,  the Partnership may deem it in its best interest
to voluntarily provide funds in order to protect its investment.

The Managing  General Partner has elected to report results of the Local Limited
Partnerships on a 90-day lag basis because the Local Limited Partnerships report
their results on a calendar year basis.  Accordingly,  the financial information
of the Local Limited Partnerships that is included in the accompanying  combined
financial statements is as of December 31, 1997, 1996 and 1995.

On August 26, 1992, an affiliate of the Partnership's  Managing General Partner,
BF Harbour  View,  Inc.,  became the Local  General  Partner of 241 Pine  Street
Associates,  L.P. ("241 Pine Street"),  a Local Limited Partnership in which the
Partnership has invested. Since the Local General Partner of 241 Pine Street has
a controlling  financial interest in the Partnership,  as set forth in paragraph
22 of ARB 51, these combined financial statements include the detailed financial
activity of 241 Pine  Street for the years ended  December  31,  1995,  1996 and
1997.  All  significant   intercompany   balances  and  transactions  have  been
eliminated.

On April 2, 1993, an affiliate of the Managing General Partner,  BF Willow Lake,
Inc., became the Local General Partner of Willow Lake Partners II, L.P. ("Willow
Lake"). BF Willow Lake, Inc. replaced the previous  management agent with Boston
Financial  Property  Management,  an affiliate of the Managing  General Partner.
Since the Local  General  Partner  of Willow  Lake has a  controlling  financial
interest  in the  Partnership,  as set forth in  paragraph  22 of ARB 51,  these
combined financial  statements include the financial activity of Willow Lake for
the years ended December 31, 1995, 1996 and 1997. All  significant  intercompany
balances and transactions have been eliminated.

On October 6, 1993, an affiliate of the Partnership's  Managing General Partner,
BF Texas  Limited  Partnership,  became  an  additional  Local  General  Partner
responsible for all management  decisions in thirteen Local Limited Partnerships
(the "Texas  Partnerships")  in which the  Partnership  has invested.  Since the
Local General  Partner of the Texas  Partnerships  had a  controlling  financial
interest  in the  Partnership,  as set forth in  paragraph  22 of ARB 51,  these
combined  financial  statements include the financial activity of thirteen Texas
Partnerships for the years ended March 31, 1994 and 1995.  During the year ended
March 31, 1996,  control of six of these Texas  Partnerships were transferred to
unrelated  parties,  and as  such,  as of that  date,  these  partnerships  were
accounted  for on the equity  method (see Note 10).  During the year ended March
31, 1997, the Managing General Partner transferred all of the assets of five out
of these six Texas  Partnerships  subject to their  liabilities to  unaffiliated
entities.  Therefore,  as of March 31, 1997, one Texas Partnership was accounted
for on the equity method and the combined financial statements included detailed
financial  activity of seven Texas  Partnerships for the year ended December 31,
1996.  During  the year ended  March 31,  1998,  the  Managing  General  Partner
transferred  all of the  assets  of seven of the  remaining  Texas  Partnerships
subject  to their  liabilities  to  unaffiliated  entities,  six of  which  were
combined in prior years, one of which had been previously  carried at the equity
method.  Therefore as of March 31, 1998,  these  combined  financial  statements
included the detailed financial activity of one Texas Partnership, Willowick,for
the year ended  December 31, 1997.  All  significant  intercompany  balances and
transactions have been eliminated.



             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


2.  Significant Accounting Policies (continued)

On September 29, 1995, an affiliate of the Managing  General  Partner,  BF Texas
Limited  Partnership,  became  the Local  General  Partner  responsible  for all
management  decisions in The  Temple-Kyle  L.P.  ("The  Kyle").  Since the Local
General  Partner  of  The  Kyle  has a  controlling  financial  interest  in the
Partnership,  (as set forth in paragraph 22 of ARB 51), these combined financial
statements  include the detailed  financial  activity of The Kyle for the period
from October 1, 1995 through  December 31, 1995 and for the years ended December
31, 1996 and 1997. All significant  intercompany  balances and transactions have
been eliminated.

On August 20,  1996,  an  affiliate  of the  Managing  General  Partner,  Boston
Financial GP-1,  L.L.C.,  became the Local General  Partner  responsible for all
management  decisions in Breckenridge  Creste  Apartments,  L.P.  ("Breckenridge
Creste").  Since  the  Local  General  Partner  of  Breckenridge  Creste  has  a
controlling financial interest in the Partnership, (as set forth in paragraph 22
of ARB 51), these combined  financial  statements include the detailed financial
activity of  Breckenridge  Creste for the period from  September 1, 1996 through
December 31, 1996,  and for the year ended  December 31, 1997.  All  significant
intercompany balances and transactions have been eliminated.

The  Partnership  has elected to report the results of 241 Pine  Street,  Willow
Lake,  The Kyle,  Breckenridge  Creste  and  Willowick  on a 90-day  lag  basis,
consistent  with the  presentation  of the  financial  information  of all Local
Limited Partnerships. As used herein, the "Combined Entities" refers to 241 Pine
Street, Willow Lake, The Kyle, Breckenridge Creste and Willowick.

Cash Equivalents

Cash equivalents  consist of short-term money market instruments with maturities
when purchased of ninety days or less.

Marketable Securities

Marketable securities consist primarily of U.S. Treasury instruments and various
asset-backed  investment vehicles.  The Partnership's  marketable securities are
classified  as  "Available  for Sale"  securities  and reported at fair value as
reported by the brokerage  firm at which the securities are held. All marketable
securities  have fixed  maturities.  Realized gains and losses from the sales of
securities are based on the specific identification method. Unrealized gains and
losses are  excluded  from  earnings  and  reported as a separate  component  of
partners' equity.

Effect of recently issued Accounting Standard


The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards  No. 130,  Reporting  Comprehensive  Income.  The standard
requires that changes in comprehensive  income be shown in a financial statement
that is displayed with the same  prominence as other financial  statements.  The
standard is effective for fiscal years  beginning  after  December 15, 1997. The
Partnership  will adopt the new standard  beginning in the first  quarter of the
fiscal year ending March 31, 1999,  but it is not expected to have a significant
effect on the Partnership's financial position or results of operations.

Rental Property

Real estate and  personal  property of the  Combined  Entities  are  recorded in
accordance with SFAS 121. The Combined  Entities provide for depreciation  using
primarily the straight-line method over their estimated useful lives.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


2.  Significant Accounting Policies (continued)


Deferred Expenses

Willow Lake's deferred financing fees are amortized over 180 months, the term of
the related debt, using the straight-line method.

Breckenridge's permanent loan costs are amortized over 10 years, the term of the
related debt, using the straight-line method.

Breckenridge's  compliance  monitoring  fees are  amortized  over the  remaining
12-year term of the tax credit compliance period.

Rental Income

Rental income,  principally  from  short-term  leases on the Combined  Entities'
apartment  units,  is recognized as income under the accrual method as the rents
become due.

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  disclosures  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.

Fair Value of Financial Instruments

Statements  of  Financial   Accounting  Standards  No.  107  ("SFAS  No.  107"),
Disclosures About Fair Value of Financial  Instruments,  requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is  practicable  to estimate  that value.  The scope of SFAS No. 107 excludes
certain  financial  instruments,  such as trade receivable and payables when the
carrying value  approximates the fair value and investments  accounted for under
the equity method, and all nonfinancial  assets,  such as real property.  Unless
otherwise described, the fair values of the Partnership's assets and liabilities
which  qualify as financial  instruments  under SFAS No. 107  approximate  their
carrying amounts in the accompanying balance sheets.

Income Taxes

No provision  for income taxes has been made as the  liability for such taxes is
the obligation of the partners of the Partnership.

Reclassifications

Certain  reclassifications  have been made to prior year financial statements to
conform to the current year presentation.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


3.   Marketable Securities

A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
                                                                 Gross             Gross
                                                              Unrealized        Unrealized      Fair
                                              Cost               Gains            Losses        Value
<S>                                       <C>                 <C>               <C>          <C>
Debt securities issued by
   the US Treasury and other
   US Department agencies                 $   274,623         $       820       $    (56)    $   275,387
                                          -----------         -----------       --------     -----------

Marketable Securities
   at March 31, 1998                      $   274,623          $      820       $    (56)    $   275,387
                                          ===========          ==========       ========     ===========

Debt securities issued by
   the US Treasury                        $   288,740          $       22       $ (1,918)    $   286,844

Mortgage backed securities                     41,271                   -            (51)         41,220

Other debt securities                           3,255                   -              -           3,255
                                          -----------          ----------       --------     -----------

Marketable Securities
   at March 31, 1997                      $   333,266          $       22       $ (1,969)    $   331,319
                                          ===========          ==========       ========     ===========

</TABLE>

The contractual maturities at March 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                                                                Fair
                                                                                 Cost           Value
<S>                                                                          <C>             <C>        
Due in less than one year                                                    $   124,893     $   124,950
Due in one to five years                                                          99,910         100,523
Mortgage backed securities                                                        49,820          49,914
                                                                             -----------     -----------
                                                                             $   274,623     $   275,387
                                                                             ===========     ===========

</TABLE>

Actual maturities may differ from contractual  maturities because some borrowers
have the  right to call or  prepay  obligations.  Proceeds  from the  sales  and
maturities  were  approximately  $508,000,  $98,000 and $3,783,000 for the years
ended March 31, 1998, 1997 and 1996, respectively. Included in investment income
are gross  gains of $1,845 and gross  losses of $553 which were  realized on the
sales during the year ended March 31, 1998,  gross gains of $64 and gross losses
of $1,355 which were  realized on the sales during the year ended March 31, 1997
and gross gains of $24,504 and gross  losses of $19,949  which were  realized on
the sales during the year ended March 31, 1996.


4.   Investments in Local Limited Partnerships

The  Partnership  uses the equity  method to  account  for its  limited  partner
interests in  fifty-five  Local  Limited  Partnerships  (excluding  the Combined
Entities) which own and operate  multi-family  housing complexes,  most of which
are government-assisted.  The Partnership,  as Investor Limited Partner pursuant
to the various  Local  Limited  Partnership  Agreements  which  contain  certain
operating and distribution  restrictions,  has generally acquired a 99% interest
in the profits,  losses,  tax credits and cash flows from  operations of each of
the Local  Limited  Partnerships,  except for  Granite,  Colony  Apartments  and
Harbour View, where the Partnership's ownership interest is 97%, 49% and 48.96%,
respectively.  Upon dissolution,  proceeds will be distributed according to each
respective partnership agreement.



<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


4.   Investments in Local Limited Partnerships (continued)

The following is a summary of Investments in Local Limited Partnerships, 
excluding the Combined Entities, in the years ended March 31:
<TABLE>
<CAPTION>

                                                                       1998               1997            1996
<S>                                                                <C>               <C>               <C> 
Capital contributions to Local Limited Partnerships
   and purchase price paid to withdrawing partners
   of Local Limited Partnerships                                   $  59,851,809     $ 65,667,604      $ 69,606,039

Cumulative equity in loss of Local Limited  Partnerships 
   (excluding  cumulative unrecognized losses of $25,919,160
   $22,111,810, and $17,117,633 at March 31,
   1998, 1997 and 1996, respectively)                                (40,842,874)    (43,991,055)      (42,375,049)

Cumulative cash distributions received from
   Local Limited Partnerships                                         (2,256,711)      (1,831,974)       (1,328,471)
                                                                   -------------     ------------      ------------

Investments in Local Limited Partnerships before adjustment           16,752,224       19,844,575        25,902,519

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                       6,430,577        7,143,344         7,154,323

   Accumulated amortization of acquisition fees and expenses          (1,411,616)      (1,369,244)       (1,205,288)
                                                                   -------------     ------------      ------------

Investments in Local Limited Partnerships                             21,771,185       25,618,675        31,851,554

Reserve for valuation of investments in
   Local Limited Partnerships                                         (1,635,000)      (1,635,000)       (1,635,000)
                                                                   -------------     ------------      ------------
                                                                   $  20,136,185     $ 23,983,675      $ 30,216,554
                                                                   =============     ============      ============
</TABLE>

Summarized  financial  information  from the  financial  statements of all Local
Limited Partnerships  accounted for on the equity method (excluding the Combined
Entities beginning on the date of combination) in which the Partnership holds 
investments is as follows:

Summarized Balance Sheets - December 31,
<TABLE>
<CAPTION>

                                                     1997                  1996                1995
                                                --------------         --------------     -------------
Assets:
<S>                                             <C>                      <C>              <C>          
   Investment property, net                     $  163,031,238           $179,058,410     $ 193,889,556
   Other assets, net                                12,596,647             13,158,108        14,779,669
   Current assets                                    6,395,184              5,977,538         6,462,299
                                                --------------         --------------    --------------
     Total assets                               $  182,023,069           $198,194,056     $ 215,128,524
                                                ==============         ==============    ==============

Liabilities and Partners' Equity:
   Mortgages payable, net of current portion    $  161,870,394           $172,051,946     $ 64,854,884
   Other liabilities                                12,209,220             13,276,728       14,753,253
   Current liabilities (includes current
    portion of mortgages payable)                   18,470,513             17,958,778       26,612,722
                                                --------------         --------------     -------------
     Total liabilities                             192,550,127            203,287,452      206,220,859
                                                --------------         --------------     -------------

Partners' Equity:
   Partnership's equity                            (10,944,390)            (4,360,195)          8,820,206
   Other partners' equity                              417,332               (733,201)             87,459
                                                --------------         --------------     ---------------
     Total partners' equity                        (10,527,058)            (5,093,396)          8,907,665
                                                --------------         --------------     ---------------
   Total liabilities and partners' equity       $  182,023,069           $198,194,056     $   215,128,524
                                                ==============         ===============    ===============

</TABLE>


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


4.   Investments in Local Limited Partnerships (continued)

Summarized Income Statements - For
the year ended December 31,
<TABLE>
<CAPTION>
                                                           
                                                     1997                  1996                1995
                                                 -------------         -------------      --------------
<S>                                              <C>                   <C>                <C>           
Rental and other income                          $  28,897,583         $  29,724,298      $   32,565,287
                                                 -------------         -------------      --------------

Expenses:
   Operating expenses                               16,391,351            17,315,396          18,500,899
   Interest expense                                 13,691,558            14,652,969          16,243,002
   Depreciation and amortization                     7,440,803             8,365,838           8,593,392
                                                 -------------         -------------      --------------
     Total expenses                                 37,523,712            40,334,203          43,337,293
                                                 -------------         -------------      --------------

Net Loss                                         $  (8,626,129)        $ (10,609,905)     $(10,772,006)
                                                 =============         =============      ============

Partnership's share of net loss                  $  (8,139,677)        $  (8,798,958)     $   (9,778,580)
                                                 =============         =============      ==============
Other partners' share of net loss                $    (486,452)        $  (1,810,947)     $     (993,426)
                                                 =============         =============      ==============
</TABLE>

For the years ended  March 31,  1998,  1997 and 1996,  the  Partnership  has not
recognized  $4,878,906,  $5,206,584 and $5,122,569,  respectively,  of equity in
losses relating to certain Local Limited Partnerships in which cumulative equity
in losses  and  distributions  exceeded  its total  investments  in these  Local
Limited Partnerships.

The Partnership's  deficiency as reflected by the Local Limited  Partnerships of
$(10,944,390)  differs  from the  Partnership's  Investments  in  Local  Limited
Partnerships before adjustment of $16,752,224  primarily because the Partnership
has not  recognized  $25,919,160  of equity  losses  relating  to Local  Limited
Partnerships whose cumulative equity in losses exceeded their total investments.


5.   Transactions with Affiliates

In  accordance  with the  Partnership  Agreement,  15% of the  acquisition  fees
payable  to an  affiliate  of the  Managing  General  Partner  is the  "Deferred
Acquisition  Fees".  The  Deferred  Acquisition  Fees have been  deposited in an
interest  bearing account and are paid annually,  with interest,  at the rate of
10% per year over 10 years.  Installments began on the second anniversary of the
Prospectus,  November  23,  1990.  As of  March  31,  1998  and  1997,  deferred
acquisition fees payable amounted to $225,000 and $337,500, respectively.

An affiliate of the  Managing  General  Partner  currently  receives  $6,977 (as
adjusted by the CPI factor) per Local Limited Partnership  annually as the Asset
Management Fee for administering the affairs of the Partnership. Included in the
Combined  Statements  of  Operations  are  Asset  Management  Fees of  $423,223,
$450,678  and  $447,110,  for the years  ended  March 31,  1998,  1997 and 1996,
respectively. Payables to affiliates of the Managing General Partner relating to
the  aforementioned  fees and expenses equal  $1,564,746 and $1,141,523 at March
31, 1998 and 1997, respectively.

An affiliate of the Managing  General  Partner is reimbursed for the actual cost
of the Partnership's operating expenses.  Included in general and administrative
expenses for the years ended March 31, 1998, 1997 and 1996 is $180,970, $170,961
and  $182,482,  respectively,  that  the  Partnership  has  paid or will  pay as
reimbursement for salaries and benefits.



<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


5.  Transactions with Affiliates (continued)

Boston  Financial  Property  Management  ("BFPM"),  an affiliate of the Managing
General  Partner,  currently  manages  Harbour  View,  a  property  in which the
Partnership  has  invested.  Included in  operating  expenses in the  summarized
income  statements  in Note 4 to the Combined  Financial  Statements is $52,220,
$51,956  and  $46,915  of fees  earned  by BFPM  during  1997,  1996  and  1995,
respectively.

On April 2, 1993, BFPM became the management  agent of Willow Lake. In August of
1993, BFPM became the management agent for the Texas Partnerships.  On September
29, 1995, BFPM became the management agent of The Kyle. On August 20, 1996, BFPM
became the management agent of Breckenridge. Included in the Combined Statements
of  Operations  is $104,878,  $135,472 and $70,315 of property  management  fees
charged by BFPM during 1997, 1996 and 1995, respectively. Payables to affiliates
include  $114,045 and $51,659 of property  management  fees at December 31, 1997
and 1996, respectively.

An affiliate of the Managing General Partner advanced the Partnership amounts to
cover operating deficits. A non-interest bearing note was executed.  As of March
31,  1998 and 1997,  $514,968 is due to an  affiliate  of the  Managing  General
Partner.

The  affiliate of the Managing  General  Partner has made a commitment  to defer
collection of past or future asset management  fees,  reimbursement of operating
expenses and property  management  fees, and to defer collection of the $514,968
note described above, to the extent necessary to cover operating deficits of the
Partnership.

6.   Rental Property

Real  estate and  personal  property  belonging  to the  Combined  Entities  are
recorded in accordance  with SFAS 121, the components of which are as follows at
December 31:
<TABLE>
<CAPTION>

                                                                        1997                    1996
                                                                   -------------            --------

<S>                                                                <C>                      <C>         
   Land and improvements                                           $   1,245,805            $  1,375,504
   Building and improvements, net of reserve for valuation            19,018,025              21,390,249
   Equipment                                                             490,526                 544,916
                                                                   -------------            ------------
                                                                      20,754,356              23,310,669

   Less accumulated depreciation                                      (5,303,237)             (5,426,435)
                                                                   -------------            ------------
     Total                                                         $  15,451,119             $17,884,234
                                                                   =============             ===========
</TABLE>

During the year ended  December 31, 1996, an impairment  loss of $1,748,708  was
recognized  on the real estate in the Texas  Partnerships,  which  decreased the
aggregate  carrying value to  $2,920,411.  For the years ended December 31, 1997
and 1996, the net operating results of the Texas Partnerships increased the loss
of the  Partnership  (prior to the  impairment  loss) by $127,794 and  $410,866,
respectively.  See  Note  10  for  further  details  on the  liquidation  of the
interests in the Texas Partnerships.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)

7.   Mortgage Notes Payable

Willow Lake

The original  mortgage  note  payable  consists of a 9.25% per annum note due in
monthly principal and interest installments of $22,878,  maturing on February 1,
2005. The original loan is  collateralized by a first deed of trust covering all
real and  personal  property.  The loan is also  collateralized  by an operating
deficit escrow of $58,387 provided by the Local General Partners as security for
the lender in the event of certain defaults under the mortgage loan agreement.

At December 31, 1993,  Willow Lake was in default of its  principal and interest
payments due under the mortgage agreement;  however,  the lender and Willow Lake
executed a workout  commitment  letter in June of 1993  designed  to address the
default.  On February 17, 1994, the parties closed the final workout  agreement.
The terms of the workout  agreement  which were effective June 1, 1993 include a
reduction  in the  interest  rate  payable to 7.25% for the period from June 1,
1993 through May 1, 1995 and a reduction in the interest rate payable to 8.25%
plus 95% of all net cash  flows,  as defined by the workout  agreement,  for the
period from June 1, 1995 through May 1, 1996.  Willow Lake  resumed  payments at
the original contract rate of 9.25%.  Under the terms of the workout  agreement,
the difference in the interest  payments at the original  contract rate of 9.25%
and the reduced payment rates required over the term of the workout period shall
be  payable  beginning  with  the  expiration  of the  workout  period  over the
remaining  term of the note.  The two year extension to this workout will expire
on June 30,  1998 and  there  are  negotiations  for an  additional  three  year
workout.

All delinquent  amounts under the original  mortgage were paid by Willow Lake on
February 17, 1994 upon closing of the final workout agreement. The delinquencies
were paid out of funds released from an escrow  deposit of $244,000,  which have
been held by an escrow agent pursuant to an operating  reserve escrow  agreement
requiring  deposits  be made to fund  certain  of the  obligations  of the Local
General  Partners  under Willow  Lake's  partnership  agreement,  including  the
payment of operating deficits.

Principal  payments  required under the above mortgage note which has a balance 
at December 31, 1997 and 1996 of $2,723,285 and $2,744,825,  respectively,  for
each of the next five years are as follows:
<TABLE>
<CAPTION>

                                          Years Ending
                                          December 31,

<S>                                         <C>                              <C>        
                                            1998                             $    23,619
                                            1999                                  25,899
                                            2000                                  28,399
                                            2001                                  31,119
                                            2002                                  34,146
</TABLE>

The  terms of the  mortgage  note  and  other  contract  documents  require  the
establishment of restricted deposits and funded reserves to be held and invested
by the mortgagee. These financial instruments potentially subject Willow Lake to
a concentration of credit risk. Due to the  unavailability  of similar loans and
unique terms of the workout agreement, it is not practicable to determine the 
fair value of this note at March 31, 1998.

Texas Partnerships

The Texas  Partnerships  and RECD have entered into  Interest  Credit and Rental
Assistance Agreements that have stated interest rates ranging from 9.5% to 7.25%
and provide for an  effective  interest  rate on the notes  payable to FmHA of 1
percent, plus all rental income over basic rents as determined by the government
(overages)   with   maturities   ranging  from  2016  to  2030.  All  notes  are
collateralized by the respective properties. The principal balances of the Texas
Partnerships'  mortgages  at  December  31,  1997 and 1996  are  $1,150,688  and
$4,189,947,  respectively.  The  decrease is due to the transfer of seven of the
Texas  Partnerships in the year ended March 31, 1998. The Willowick  mortgage is
currently in default and, as a result, the entire balance is being accounted for
as current. Due to the unavailability of similar loans, it is not practicable to
determine the fair value of these notes at March 31, 1997.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)

7.   Mortgage Notes Payable (continued)

The Kyle

The Kyle has a note  payable  to the  Partnership  which  is  eliminated  in the
accompanying  combined  financial  statements.   The  note  is  due  in  monthly
installments of $13,800,  including interest at 7.82%,  through June 1, 1997 and
$17,600,  including  interest  at prime plus 1%,  from July 1, 1997  through its
maturity  date on June 1, 2005.  The note is  collateralized  by the  respective
property.  $1,406,251  and $1,423,253 is outstanding as of December 31, 1997 and
1996, respectively. The current value of this note approximates its fair value.

Breckenridge

Breckenridge's  mortgage note payable  consists of a 9.60% per annum note due in
monthly principal and interest installments of $42,408,  maturing on November 1,
2006. The liability of the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited with
the  lender.  Principal  payments  required  under the above  note,  which has a
balance  at  December  31,  1997  and  1996  of   $4,762,502   and   $4,811,607,
respectively, for each of the next five years are as follows:
<TABLE>
<CAPTION>

                                           Years Ending
                                            December 31,

<S>                                              <C>                         <C>      
                                                 1998                        $  54,032
                                                 1999                           59,454
                                                 2000                           65,419
                                                 2001                           71,983
                                                 2002                           79,206
</TABLE>

Breckenridge's  second note  payable  bears no interest and is payable in annual
installments of $2,679 until April 15, 1999. The outstanding balance at December
31, 1997 and 1996 is $5,357 and $8,036, respectively.

Due to the  unavailability  of similar loans and lack of adequate refinancing 
information, it is not practicable to determine the fair value of this note at 
March 31, 1998.

8.   Due to affiliate

Under the terms of 241 Pine Street's development agreement, the Developer agreed
to  advance  to the  property  such  funds  as may be  required  to pay  certain
operating  expenses.  Any funds so advanced  are to be repaid by 241 Pine Street
upon sale or  refinancing  of the  property.  The  amount  due to  affiliate  at
December 31, 1997 and 1996 represents the net amount advanced to 241 Pine Street
under this  agreement.  In  connection  with these events the  Original  General
Partner, who was also the Developer, was replaced by an affiliated entity of the
Partnership . Therefore,  the amount previously reported as due to developer has
been  reclassified as a due to affiliate.  Due to the  unavailability of similar
loans,  it is not  practicable to determine the fair value of this note at March
31, 1998.

9.   General partner advances

Prior to 1995,  Willow  Lake  incurred  debt of  $662,306  payable to the former
general partners and their affiliates for developer fees,  Partnership  advances
and management fees. As a result of the settlement of litigation in 1995, Willow
Lake agreed to pay  $173,500  and issued two  promissory  notes in the amount of
$100,000 each.  Both notes have an annual interest rate of 6% and are payable in
full,  both as to accrued  interest and principal on January 1, 2005.  Principal
and  interest on these notes are due and payable out of cash flow which began in
June,  1996. If, in the event Willow Lake is unable to make a cash flow payment,
the  Partnership has guaranteed one note. The guarantee of the Partnership is an
interest  payment of $500 per month.  The Partnership paid $6,000 and $5,000 for
interest  during the years  ended  March 31,  1998 and 1997,  respectively.  The
remaining debt ($288,806) was forgiven.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


10.  Liquidation of Interests in Local Limited Partnerships

As previously  reported,  the Managing  General  Partner  transferred all of the
assets of twelve of the Texas  Partnerships  subject  to their  liabilities,  to
unaffiliated entities. Crown Point, Godley Arms, Glenbrook Apartments, Quail Run
Apartments and Sherwood Arms Housing were  transferred  prior to March 31, 1997.
Lone Oak Apartments,  Hallet West Apartments and Lakeway Colony were transferred
on August 6, 1997,  September  23,  1997 and  October  30,  1997,  respectively.
Crestwood  Place,  Eagle  Nest  Apartments,  One  Main  Place  and  Pilot  Point
Apartments  were  transferred on October 28, 1997. If  negotiations  continue as
expected,  transfer of the remaining property will occur during early July 1998.
This property, with a carrying value of $774,053 at year end, incurred a loss of
$127,794 in 1997.  Until the property is transferred,operating deficits will 
continue to be funded from  Partnership Reserves.  For tax purposes,  these 
events will result in both Section 1231 gain and cancellation of indebtedness 
income. In addition,  the transfer of ownership will result in a nominal  amount
of recapture  of tax credits  because the Texas Partnerships represent only 2%
of the Partnership's tax credits.

For financial  reporting  purposes,  loss on  liquidation  of interests in Local
Limited  Partnerships  of $18,251  and  extraordinary  gain on  cancellation  of
indebtedness of $1,868,051 were recognized in the year ended March 31, 1998 as a
result of the transfer of Lone Oak Apartments,  Hallet West Apartments,  Lakeway
Colony,  Crestwood Place, Eagle Nest Apartments,  One Main Place and Pilot Point
Apartments.

As previously discussed, the titles to both Regency and Rolling Hills in Dayton,
Ohio were  transferred  to the lender on May 2, 1997 after  prolonged  operating
difficulties  resulting from low occupancy,  capital  rehabilitation needs and a
depressed local economy.  The Local General Partner and Managing General Partner
were  involved in lengthy  workout  negotiations  with HUD, but  ultimately  the
mortgages  for  these  properties  were sold to a lender  in HUD's  August  1996
non-performing loan auction.  Although negotiations continued with the lender in
an  attempt  to  prevent  foreclosure,  a  workout  was  not  achieved,  and the
foreclosures  occurred.  This  transfer of title  resulted in a recapture tax in
1997 and the  allocation of taxable  income which was reported on the investors'
1997 tax  return  (filed in 1998).  The  Partnership's  carrying  value of these
investments for financial reporting purposes was zero;  therefore,  the transfer
had no impact on the Partnership's operating results.

11.    Litigation

Lone Oak Housing Associates, Ltd., as was previously reported, was the defendant
in a lawsuit in which the plaintiff had alleged  negligence and deceptive  Trade
Act violations.  This  litigation has been settled by the insurance  carrier and
the case dismissed.

Willow Lake  Partners  II, L.P.  ("Willow  Lake") is the  defendant in a lawsuit
relating  to  an  earlier  lawsuit   involving  Willow  Lake.  As  part  of  the
Partnership's  settlement with the former management agent, Willow Lake gave the
management  agent  two cash  flow  notes.  The  former  management  agent is now
claiming  that Willow Lake has cash flow (so  payments  should have been made on
the notes) and it is the  Partnership's  position that the property is running a
deficit.  On June 25, 1998, the court found for Willow Lake on summary judgement
and ruled that there has been no default on the note.  This litigation is no 
longer outstanding unless the former management agent decides to appeal.  


12.  Extraordinary Item

For the year ended March 31, 1996,  the  Partnership  recognized  $1,279,618  of
cancellation of indebtedness  income attributable to three combined entities who
had restructured  their debt. For the year ended March 31, 1997, the Partnership
recognized  $51,595  of loss  which was an  adjustment  to the  cancellation  of
indebtedness income in the previous year. For the year ended March 31, 1998, the
Partnership recognized $1,868,051 of cancellation of indebtedness income.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


13.  Federal Income Taxes

A  reconciliation  of the loss reported in the Combined  Statements of 
Operations  for the years ended March 31, 1998,  1997 and 1996 to the loss 
reported for federal income tax purposes for the year ended December 31, 1997, 
1996 and 1995 is as follows:
<TABLE>
<CAPTION>

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

<S>                                                    <C>               <C>                <C>           
Net loss per Combined Statement of Operations          $   (3,597,835)   $  (7,208,441)     $  (5,440,551)
   Operating expenses not deductible in
     current year for tax purposes                                  -          483,083            452,028
   Other loss recognized for book purposes but not
     recognized for tax purposes                              693,904                -                  -
   Other loss recognized for tax purposes but
     not recognized for book purposes                               -                -           (106,755)
   Amortization of acquisition fees and expenses
     not deductible for tax purposes                          151,405          167,201            168,519
   Adjustment to reflect March 31 fiscal year-
     end to December 31 tax year-end                         (532,450)        (120,542)            27,286
   Adjustment for equity in loss of Local Limited
     Partnerships for financial reporting purposes
     over (under) equity in loss for tax purposes             660,767        1,423,554         (1,091,105)
   Adjustment for equity in loss of Local
     Limited Partnerships not recognized for
     financial reporting purposes                          (4,878,906)      (5,206,584)        (5,122,569)
   Cash distribution included in loss for financial
     reporting purposes                                       (60,229)         (13,687)           (11,338)
   Other                                                       18,251          (30,462)                 -
                                                       --------------    -------------      -------------
Net loss for federal income tax purposes               $   (7,545,093)   $ (10,505,878)     $ (11,124,485)
                                                       ==============    =============      =============

</TABLE>

The  differences in the assets and  liabilities of the Partnership for financial
reporting  purposes and tax reporting purposes for the year ended March 31, 1998
are as follows:
<TABLE>
<CAPTION>

                                                         Financial              Tax
                                                         Reporting           Reporting
                                                         Purposes            Purposes          Differences

<S>                                                    <C>                 <C>                 <C>         
   Investments in Local Limited Partnerships           $ 20,136,185        $   (838,860)       $ 20,975,045
                                                       ============        ============        ============
   Other assets                                        $ 16,995,602        $ 14,555,390        $  2,440,212
                                                       ============        ============        ============
   Liabilities                                         $ 12,474,903        $    938,274        $ 11,536,629
                                                       ============        ============        ============

</TABLE>

The  differences in the assets and  liabilities of the Partnership for financial
reporting  purposes are primarily  attributable  to: i) for financial  reporting
purposes,  the  Partnership  combines  the  financial  statements  of five Local
Limited  Partnerships  with its financial  statements;  for tax purposes,  these
entities are carried on the equity  method;  ii) the  cumulative  equity in loss
from Local  Limited  Partnerships,  including  the  Combined  Entities,  for tax
reporting  purposes is  approximately  $27,716,000  greater  than for  financial
reporting   purposes,   including   approximately   $25,919,000  of  losses  the
Partnership   has  not  recognized   relating  to   twenty-four   Local  Limited
Partnerships whose cumulative equity in losses exceeded their total investments;
iii) the  Partnership  has  provided a provision  for  valuation  of  $1,635,000
against three of its  investments  in Local Limited  Partnerships  for financial
reporting  purposes;  and iv) organizational and offering costs of approximately
$11,832,000 that have been capitalized for tax reporting purposes are charged to
Limited Partners' equity for financial reporting purposes.

           

              BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


13.  Federal Income Taxes (continued)

The  differences in the assets and  liabilities of the Partnership for financial
reporting  purposes and tax reporting purposes for the year ended March 31, 1997
are as follows:
<TABLE>
<CAPTION>

                                                         Financial              Tax
                                                         Reporting           Reporting
                                                         Purposes            Purposes          Differences

<S>                                                    <C>                 <C>                  <C>        
   Investments in Local Limited Partnerships           $ 23,983,675        $  6,130,762         $17,852,913
                                                       ============        ============        ============
   Other assets                                        $ 19,807,915        $ 15,029,786        $  4,778,129
                                                       ============        ============        ============
   Liabilities                                         $ 15,393,975        $    837,199        $ 14,556,776
                                                       ============        ============        ============

</TABLE>

The  differences in the assets and  liabilities of the Partnership for financial
reporting  purposes are primarily  attributable  to: i) for financial  reporting
purposes,  the  Partnership  combines the  financial  statements of eleven Local
Limited  Partnerships  with its financial  statements;  for tax purposes,  these
entities are carried on the equity  method;  ii) the  cumulative  equity in loss
from Local  Limited  Partnerships,  including  the  Combined  Entities,  for tax
reporting  purposes is  approximately  $25,330,000  greater  than for  financial
reporting   purposes,   including   approximately   $22,112,000  of  losses  the
Partnership has not recognized relating to twenty-six Local Limited Partnerships
whose  cumulative  equity in losses exceeded their total  investments;  iii) the
Partnership  has provided a provision for valuation of $1,635,000  against three
of its  investments  in  Local  Limited  Partnerships  for  financial  reporting
purposes; and iv) organizational and offering costs of approximately $11,832,000
that have been  capitalized  for tax  reporting  purposes are charged to Limited
Partners' equity for financial reporting purposes.




<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


14.  Supplemental Combining Schedules

                                 Balance Sheets
<TABLE>
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations       Combined
                                     L.P. III (A)        Entities (B)           (A)              (A)



Assets
<S>                                     <C>             <C>               <C>               <C>         
Cash and cash equivalents               $    212,569    $      99,298     $          -      $    311,867
Marketable securities, at fair value         275,387                -                -           275,387
Investments in Local Limited
   Partnerships, net of reserve
   for valuation                          23,426,701                -       (3,290,516)       20,136,185
Accounts receivable, net                     737,784           90,467         (737,784)           90,467
Interest receivable                           13,298                -                -            13,298
Notes receivable                           1,406,251                -       (1,406,251)                -
Prepaid expenses                               2,831           22,416                -            25,247
Tenant security deposits                           -           68,292                -            68,292
Replacement reserves                               -          194,671                -           194,671
Rental property at cost, net of
   accumulated depreciation                        -       15,451,119                -        15,451,119
Deferred acquisition fees escrow             225,000                -                -           225,000
Deferred expenses, net                             -          209,127                -           209,127
Other assets                                       -          131,127                -           131,127
                                        ------------    -------------     ------------      ------------
     Total assets                       $ 26,299,821    $  16,266,517     $ (5,434,551)     $ 37,131,787
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Accounts payable to affiliates          $  1,588,474    $     851,829     $   (737,784)     $  1,702,519
Accounts payable and accrued
   expenses                                  222,010          262,807                -           484,817
Interest payable                                   -          312,091                -           312,091
Notes payable, affiliate                     514,968                -                -           514,968
Security deposits payable                          -           70,630                -            70,630
Due to affiliate                                   -          323,046                -           323,046
Deferred acquisition fees payable            225,000                -                -           225,000
General partner advances                           -          200,000                -           200,000
Mortgage notes payable                             -       10,048,083       (1,406,251)        8,641,832
                                        ------------    -------------     ------------      ------------
     Total liabilities                     2,550,452       12,068,486       (2,144,035)       12,474,903
                                        ------------    -------------     ------------      ------------

Minority interest in Local
   Limited Partnerships                            -                -          907,515           907,515
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       23,748,605        4,198,031       (4,198,031)       23,748,605

Net unrealized gains on marketable
   securities                                    764                -                -               764
                                        ------------    -------------     ------------      ------------
     Total Partners' Equity               23,749,369        4,198,031       (4,198,031)       23,749,369
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 26,299,821    $  16,266,517    $  (5,434,551)     $ 37,131,787
                                        ============    =============    =============      ============
</TABLE>

(A) As of March 31, 1998. 
(B) As of December 31, 1997 - see Note 2.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


14.  Supplemental Combining Schedules (continued)

                            Statements of Operations
<TABLE>
<CAPTION>

                                   Boston Financial
                                   Qualified Housing
                                      Tax Credits          Combined        Eliminations       Combined
                                     L.P. III (A)        Entities (B)           (A)              (A)

Revenue:
<S>                                     <C>                <C>               <C>            <C>         
   Rental                               $          -       $ 2,470,887       $        -     $  2,470,887
   Investment                                 31,483             8,857                -           40,340
   Other                                     213,116            84,184          (75,245)         222,055
                                        ------------      ------------      -----------     ------------
     Total Revenue                           244,599         2,563,928          (75,245)       2,733,282
                                        ------------      ------------      -----------     ------------

Expenses:
   Asset management fees,
     related party                           423,223                 -                -          423,223
   General and administrative                493,519                 -                -          493,519
   Bad debt expense                          394,319                 -                -          394,319
   Property management fees                        -           179,980                -          179,980
   Rental operations, exclusive
     of depreciation                               -         1,725,621                -        1,725,621
   Interest                                    6,000           954,003          (75,245)         884,758
   Depreciation                                    -           767,716                -          767,716
   Amortization                              151,405            26,212                -          177,617
                                        ------------      ------------      -----------     ------------
     Total Expenses                        1,468,466         3,653,532          (75,245)       5,046,753
                                        ------------      ------------      -----------     ------------

Loss before equity in losses of Local Limited  Partnerships,  minority interest,
   loss on liquidation of interests in Local Limited
    Partnerships and
   extraordinary item                     (1,223,867)       (1,089,604)               -       (2,313,471)

Equity in losses of Local
   Limited Partnerships                   (2,355,717)                -         (931,727)      (3,287,444)

Minority interest in losses of Local
   Limited Partnerships                            -                 -          153,280          153,280

Loss on liquidation of interests
     in Local Limited Partnerships           (18,251)                -                -          (18,251)
                                        ------------      ------------      -----------     ------------

Net loss before extraordinary item        (3,597,835)       (1,089,604)        (778,447)      (5,465,886)

Extraordinary gain on
   cancellation of indebtedness                    -         1,868,051                -        1,868,051
                                        ------------      ------------      -----------     ------------

Net Income (Loss)                       $ (3,597,835)     $    778,447      $  (778,447)    $ (3,597,835)
                                        ============      ============      ===========     ============

</TABLE>

(A) For the year ended March 31, 1998.  
(B) For the year ended December 31, 1997 - see Note 2.


<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)


14.      Supplemental Combining Schedules (continued)

                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                         Boston Financial
                                         Qualified Housing
                                            Tax Credits          Combined         Eliminations          Combined
                                           L.P. III (A)        Entities (B)                 (A)                 (A)

<S>                                       <C>                 <C>                 <C>                <C>           
Net Income (Loss)                         $   (3,597,835)     $     778,447       $   (778,447)      $  (3,597,835)
Adjustments to reconcile net
  income (loss) to net cash
  used for operating activities:
   Equity in losses of Local
     Limited Partnerships                      2,355,717                  -            931,727           3,287,444
   Bad debt expense                              394,319                  -                  -             394,319
   Loss on liquidation of interests
     in Local Limited Partnerships                18,251                  -                  -              18,251
   Provision for valuation of real estate              -                  -                  -                   -
   Extraordinary gain on cancellation of
     indebtedness                                      -         (1,868,051)                 -          (1,868,051)
   Cash distribution included in net loss        (26,674)                 -                  -             (26,674)
   Amortization and depreciation                 151,405            793,928                  -             945,333
   Gain on sale of marketable securities          (1,292)                 -                  -              (1,292)
   Minority interest in loss
     of Local Limited Partnerships                     -                  -           (153,280)           (153,280)
   Increase (decrease) in cash
     arising from changes in operating
     assets and liabilities:
     Accounts receivable                               -                703                  -                 703
     Interest receivable                          50,381                  -                  -              50,381
     Prepaid expenses                              5,662             (3,087)                 -               2,575
     Tenant security deposits                          -            (14,607)                 -             (14,607)
     Other assets                                      -            (39,409)                 -             (39,409)
     Accounts payable to affiliates              446,951             66,848                  -             513,799
     Accounts payable and accrued
     expenses                                     51,899             92,979                  -             144,878
     Interest payable                                  -             43,460                  -              43,460
     Tenant security deposits payable                  -              1,353                  -               1,353
                                          --------------      -------------       ------------       -------------
Net cash used for
   operating activities                         (151,216)          (147,436)                 -            (298,652)
                                          --------------      -------------       ------------       -------------

Cash flows from investing activities:
   (Advances to) reimbursements from
      affiliates                                (350,897)                 -            427,215              76,318
   Purchases of marketable securities           (448,522)                 -                  -            (448,522)
   Proceeds from sales and maturities
     of marketable securities                    508,457                  -                  -             508,457
   Cash distributions received from
     Local Limited Partnerships                  424,737                  -                  -             424,737
   Adjustment to cash upon
     liquidation of General Partner
     interest in a Combined Entity                     -            (11,821)                 -             (11,821)


</TABLE>

<PAGE>
             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)


             Notes to the Combined Financial Statements (continued)

14.  Supplemental Combining Schedules (continued)

                      Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                         Boston Financial
                                         Qualified Housing
                                            Tax Credits          Combined         Eliminations      Combined
                                           L.P. III (A)        Entities (B)          (A)                 (A)

<S>                                       <C>                 <C>                 <C>                <C>    
   Decrease in deferred acquisition fee
     escrow                                      112,500                  -                  -             112,500
   Payment of deferred acquisition fee          (112,500)                 -                  -            (112,500)
   Releases from replacement reserves                  -              6,916                  -               6,916
   Additions to fixed assets                           -           (335,745)                 -            (335,745)
                                          --------------      -------------       ------------       -------------
Net cash provided by (used for)
   investing activities                          133,775           (340,650)           427,215             220,340
                                          --------------      -------------       ------------       -------------
Cash flows from financing
activities:
   Repayment of mortgage notes
      payable                                          -           (121,847)            17,002            (104,845)
   Advances from affiliate                             -            542,625           (427,215)            115,410
   Repayment of notes
     receivable, affiliate                        17,002                  -            (17,002)                  -
                                          --------------      -------------       ------------       -------------
Net cash provided by
   financing activities                           17,002            420,778           (427,215)             10,565
                                          --------------      -------------       ------------       -------------

Net decrease in
   cash and cash equivalents                        (439)           (67,308)                 -             (67,747)

Cash and cash equivalents,
   beginning                                     213,008            166,606                  -             379,614
                                          --------------      -------------       ------------      --------------

Cash and cash equivalents,
   ending                                 $      212,569      $      99,298       $          -      $      311,867
                                          ==============      =============       ============      ==============

</TABLE>

(A) For the year ended March 31, 1998.  
(B) For the year ended December 31, 1997 - see Note 2.

<PAGE>
<TABLE>
<CAPTION>
                                                            COST OF INTEREST             NET IMPROVEMENTS
                           NUMBER        TOTAL             AT ACQUISTION DATE              CAPTIALIZED        GROSS AMOUNT AT
                                                                                                              WHICH CARRIED AT
                                                                                                             DECEMBER 31, 1997
                                                    ----------------------------------                       -------------------
                             OF          ENCUM-                       BUILDINGS AND       SUBSEQUENT TO           LAND AND
      DESCRIPTION           UNITS      BRANCES *         LAND         IMPROVEMENTS          ACQUISITON          IMPROVEMENTS
--------------------------------------------------------------------------------------------------------------------------------

Multi-family residential property:
<S>                          <C>          <C>            <C>              <C>                    <C>                 <C>         
Harbour View                 122          9,549,824      $  406,704       $11,193,508            $   547,457         $  413,140   
Staten Island, NY
Willow Lake Apts**           132          2,723,285         100,000         5,143,801               (43,808)            134,196
 Kansas City, MO
West Dade I                  122          4,069,062         626,698         4,572,095                597,462            626,698
 Miami, FL
West Dade II                 209          8,322,852       1,213,707         8,416,939              2,527,205          1,118,822
 Miami, FL
Westwood Manor               144          3,300,541         191,987         4,091,974                106,937            191,987
 Flint, MI
Rolling Hills (C)             0                   0          10,000         6,791,690            (6,801,690)                  0
 Dayton, OH
Regency Square (C)            0                   0         150,000         6,777,207            (6,927,207)                  0
 Dayton, OH
Buffalo Shoreline            142          6,764,993         153,588         5,106,986                943,067            153,588
 Buffalo, NY
Buffalo Waterfront           472         24,198,938         202,452        17,775,357              2,589,895            202,452
 Buffalo, NY
Fox Run                      150          4,119,338         452,610         5,039,028                116,283            498,304
 Victoria, TX
Boulevard II                 19             704,976               0           965,670                384,682             15,600
 Chicago, IL
The Colony                   300          8,596,401       1,298,638         8,814,688                300,713          1,323,009
 Columbia, SC
Boulevard IIA                42           1,516,400          11,786         2,467,433                621,660             34,400
 Chicago, IL
Ashley Place                 96           2,809,702              10         3,951,009                862,321                 10
 Orlando, FL
Admiral Court                46           2,551,928          60,637         4,751,321                363,894             60,637
 Philadelphia, PA
Syracuse Apartments           8             240,939          17,669           289,821                  3,301             17,669
 Syracuse, KS
El Jardin                    236          6,702,965         742,000         8,480,839                200,862            742,000
 Davie, FL
Elmwood Delmar               95           3,133,280          67,097         4,111,291                 50,856             74,221
 Aurora, CO
Crestwood Place (B)           0                   0           5,000           458,287              (463,287)                  0
 Bridgeport, TX
Willowick Apts**             60             774,053          10,956         1,455,934              (316,883)             60,813
 Gainesville, TX
Ellsworth Apartments         12             328,587          18,000           390,835                  1,647             18,000
 Ellsworth, KS
Satanta Apartments            8             223,804          23,593           264,336                      0              7,500
 Satanta, KS
Rossville Apartments         10             279,389          23,950           259,486                 72,433             23,950
 Rossville, KS
Columbia Town House          56           1,395,897         167,000           885,042              1,078,618            168,303
 Burlington, IA
Quarter Mill                 266          7,152,267       1,139,508         2,530,458             12,666,987          5,571,829
 Richmond, VA
One Main Place (B)            0                   0          19,458           414,803              (434,261)                  0
 Little Elm, TX
Pilot Point (B)               0                   0          24,805           575,107              (599,912)                  0
 Pilot Point, TX
Sherwood Arms (A)             0                   0          32,439           658,300              (690,739)                  0
 Keene, TX
Crown Point (A)               0                   0          13,642           371,717              (385,359)                  0
 Venus, TX
Godley Arms (A)               0                   0          26,156           250,345              (276,501)                  0
 Godley, TX
South Holyoke                48           2,727,618         105,250         4,095,471              (155,386)            105,250
 South Holyoke, MA
Walker Woods                 51           2,347,633         159,104         2,954,196              1,016,692            159,104
 Dover, DE
Shady Shores (B)              0                   0          30,778           723,316              (754,094)                  0
 Lake Dallas, TX
Eagle Wood Apts.             40           1,115,356               0         1,382,855                 52,491             45,510
 Covington, TN
Georgetown II                50           1,736,325               0         1,079,160              1,726,090                  0
 Georgetown, DE
Blue Mountain Apts.          217          9,821,059         618,994        14,308,698                159,434            618,994
 Boston, MA
Garden Plain                 12             303,429          15,849           362,584                     54             15,932
 Garden Plain, KS
Fulton Apartments            24             799,988               0           985,000                 35,000             28,000
 Fulton, KY
Lone Oak (B)                  0                   0          34,437           803,419              (837,856)                  0
 Graham, TX
Hallett-West Apts (B)         0                   0          18,500           322,596              (341,096)                  0
 Hallettsville, TX
Glenbrook (A)                 0                   0          13,636           310,294              (323,930)                  0
 St. Jo, TX
Eagles Nest (B)               0                   0          49,340         1,153,573            (1,202,913)                  0
 Decatur, TX
Billings Family              12             283,313          14,032           327,478                  2,855             14,070
 Billings, MO
Brownsville                  28             786,207          31,000           980,353                  7,480             31,000
 Brownsville, TN
Wayne Senior                 15             429,047          30,949           494,381                  1,660             31,281
 Wayne, NE
Longview                     14             398,864          29,710           461,233                  2,560             29,710
 Humboldt, KS
Horseshoe Bend               24             649,773          21,780           816,289                  1,668             21,780
 Horseshoe Bend, AR
Briarwood II                 32           1,111,603         105,000         1,331,661                  8,587            105,000
 Lake Havasua, AZ
Quail Run (A)                 0                   0           8,158           458,464              (466,622)                  0
 Iowa Park, TX
Smithville                   24             545,783          28,840           585,285                    957             28,840
 Smithville, MO
Aurora East                  125          3,990,938         308,324         4,402,417                194,620            308,324
 Denver, CO
Elver Park II                56           1,692,255         348,138         2,509,630                 18,106            348,138
 Madison, WI
Elver Park III               48           1,455,941         135,465           582,652              1,804,381            217,507
 Madison, WI
Tucson Trails                48           1,422,159         138,240           588,915              1,795,470            193,866
 Madison, WI
Tucson Trails II             48           1,428,872         138,240           281,704              2,104,333            194,388
 Madison, WI
Pleasant Plaza               125         12,285,989         303,775        15,691,150                 95,642            303,775
 Malden, MA
241 Pine Street**            50                   0         130,900         2,564,381            (1,446,741)            130,900
 Manchester, NH
Oak Grove                    24             562,597          35,000           169,708                518,659             35,000
 Oak Grove, MO
Wood Creek                   104          3,276,957         475,000         4,203,585              1,398,056            842,496
 Calcium, NY
Breckenridge Creste**        164          4,765,180         845,000           811,111              7,771,870            822,577
 Duluth, GA
Bolivar Apartments           20             467,424          30,000           190,970                360,983             30,000
 Boliver, MO
Lexington Civic              24             817,827          15,000           650,260                308,677             15,000
 Lexington, TN
Riverfront Apartments        200          7,498,417         140,333         9,845,838                668,398            140,333
 Sunbury, PA
Susquehanna View             201          9,051,781         373,702        10,743,951                677,748            373,702
 Camp Hill, PA
Westgate Associated          20             639,652          45,500           750,700                  1,478             20,000
 Perryville, AR
Altheimer Associates         20             598,519          10,000           725,429                  4,077             10,000
 Altheirmer, AR
The Temple-Kyle **           64           1,406,251          93,564           931,860              2,702,411             97,319
 Temple, TX
Diversey Square              48           2,574,830          50,000         3,253,496                 92,537             50,000
 Chicago, IL
Poplar Village               36           1,202,859          60,000         1,427,725                      0             60,000
 Cumberland, KY

                                     -------------------------------------------------------------------------------------------
                                        177,653,867      12,201,628       211,517,095             25,100,969         16,884,924

Less:  Combined Entities **             (9,668,769)     (1,180,420)      (10,907,087)            (8,666,849)        (1,245,805)

                                     ===========================================================================================
                                        167,985,098     $11,021,208      $200,610,008            $16,434,120        $15,639,119
                                     ===========================================================================================

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                                                                                     LIFE ON WHICH
                                                                                                     DEPRECTIATION
                                    BUILDING AND                          ACCUMULATED      DATE       IS COMPUTED        DATE
          DESCRIPTION               IMPROVEMENTS          TOTAL           DEPRECIATON      BUILT        (YEARS)        ACQUIRED
----------------------------------------------------------------------------------------------------------------------------------

Multi-family residential
property:
<S>                                    <C>                 <C>              <C>            <C>            <C>          <C>
Harbour View                           $ 11,734,529        $12,147,669      $  2,739,681      1990        5-40         09/29/89  
 Staten Island, NY
Willow Lake Apts**                        5,065,797          5,199,993         1,651,724      1989        5-40         12/20/89
 Kansas City, MO
West Dade I                               5,169,557          5,796,255         1,736,764   Various        5-40         12/31/88
 Miami, FL
West Dade II                             11,039,029         12,157,851         3,537,781   Various        5-40         12/31/88
 Miami, FL
Westwood Manor                            4,198,911          4,390,898         1,589,603   Various        5-40         02/21/89
 Flint, MI
Rolling Hills (C)                                 0                  0                 0      1969        5-40         03/13/89
 Dayton, OH
Regency Square (C)                                0                  0                 0      1963        5-40         03/13/89
 Dayton, OH
Buffalo Shoreline                         6,050,053          6,203,641         2,080,631   Various        5-40         04/28/89
 Buffalo, NY
Buffalo Waterfront                       20,365,252         20,567,704         7,140,637   Various        5-40         04/28/89
 Buffalo, NY
Fox Run                                   5,109,617          5,607,921         1,564,640      1975        5-40         04/07/89
 Victoria, TX
Boulevard II                              1,334,752          1,350,352           383,554      1920        5-40         04/04/89
 Chicago, IL
The Colony                                9,091,030         10,414,039         4,010,344      1950        5-40         05/19/89
 Columbia, SC
Boulevard IIA                             3,066,479          3,100,879           834,386   Various        5-40         04/04/89
 Chicago, IL
Ashley Place                              4,813,330          4,813,340         1,470,939      1989        5-40         06/23/89
 Orlando, FL
Admiral Court                             5,115,215          5,175,852         1,009,300      1920        5-40         06/07/89
 Philadelphia, PA
Syracuse Apartments                         293,122            310,791           102,288      1989        5-40         06/30/89
 Syracuse, KS
El Jardin                                 8,681,701          9,423,701         2,643,091      1973        5-40         06/14/89
 Davie, FL
Elmwood Delmar                            4,155,023          4,229,244         1,255,712      1957        5-40         05/16/89
 Aurora, CO
Crestwood Place (B)                               0                  0                 0      1975        5-40         06/05/89
 Bridgeport, TX
Willowick Apts**                          1,089,194          1,150,007           375,954      1975        5-40         06/30/89
 Gainesville, TX
Ellsworth Apartments                        392,482            410,482           124,091      1975        5-40         07/19/89
 Ellsworth, KS
Satanta Apartments                          280,429            287,929            91,289      1989        5-40         07/28/89
 Satanta, KS
Rossville Apartments                        331,919            355,869           100,590      1990        5-40         07/28/89
 Rossville, KS
Columbia Town House                       1,962,357          2,130,660           629,043      1990        5-40         07/28/89
 Burlington, IA
Quarter Mill                             10,765,124         16,336,953         4,185,073      1990        5-40         08/02/89
 Richmond, VA
One Main Place (B)                                0                  0                 0      1989        5-40         08/22/89
 Little Elm, TX
Pilot Point (B)                                   0                  0                 0      1989        5-40         08/22/89
 Pilot Point, TX
Sherwood Arms (A)                                 0                  0                 0      1989        N/A          08/22/89
 Keene, TX
Crown Point (A)                                   0                  0                 0      1989        N/A          08/22/89
 Venus, TX
Godley Arms (A)                                   0                  0                 0      1989        N/A          08/25/89
 Godley, TX
South Holyoke                             3,940,085          4,045,335           937,876      1988        5-40         08/29/89
 South Holyoke, MA
Walker Woods                              3,970,888          4,129,992           777,696      1990        5-40         08/30/89
 Dover, DE
Shady Shores (B)                                  0                  0                 0      1989        5-40         08/30/89
 Lake Dallas, TX
Eagle Wood Apts.                          1,389,836          1,435,346           402,273      1990        5-40         09/06/89
 Covington, TN
Georgetown II                             2,805,250          2,805,250           594,112      1990        5-40         09/28/89
 Georgetown, DE
Blue Mountain Apts.                      14,468,132         15,087,126         4,561,134   Various        5-40         09/29/89
 Boston, MA
Garden Plain                                362,555            378,487           123,064      1990        5-40         08/09/89
 Garden Plain, KS
Fulton Apartments                           992,000          1,020,000           282,664      1990        5-40         10/05/89
 Fulton, KY
Lone Oak (B)                                      0                  0                 0      1990        5-40         10/06/89
 Graham, TX
Hallett-West Apts (B)                             0                  0                 0      1989        5-40         11/20/89
 Hallettsville, TX
Glenbrook (A)                                     0                  0                 0      1989        N/A          10/06/89
 St. Jo, TX
Eagles Nest (B)                                   0                  0                 0      1989        5-40         10/06/89
 Decatur, TX
Billings Family                             330,295            344,365           108,852      1989        5-40         08/09/89
 Billings, MO
Brownsville                                 987,833          1,018,833           382,203      1989        5-40         08/09/89
 Brownsville, TN
Wayne Senior                                495,709            526,990           153,549      1988        5-40         08/09/89
 Wayne, NE
Longview                                    463,793            493,503           126,897      1988        5-40         10/13/89
 Humboldt, KS
Horseshoe Bend                              817,957            839,737           320,252      1988        5-40         08/09/89
 Horseshoe Bend, AR
Briarwood II                              1,340,248          1,445,248           494,318      1989        5-40         10/04/89
 Lake Havasua, AZ
Quail Run (A)                                     0                  0                 0      1989        N/A          10/06/89
 Iowa Park, TX
Smithville                                  586,242            615,082           154,467      1987        5-40         08/09/89
 Smithville, MO
Aurora East                               4,597,037          4,905,361         2,155,806      1972        5-40         11/06/89
 Denver, CO
Elver Park II                             2,527,736          2,875,874           700,593      1989        5-40         11/09/89
 Madison, WI
Elver Park III                            2,304,991          2,522,498           554,725      1990        5-40         11/09/89
 Madison, WI
Tucson Trails                             2,328,759          2,522,625           556,478      1990        5-40         11/22/89
 Madison, WI
Tucson Trails II                          2,329,889          2,524,277           544,349      1990        5-40         11/23/89
 Madison, WI
Pleasant Plaza                           15,786,792         16,090,567         4,994,400      1989        5-40         12/01/89
 Malden, MA
241 Pine Street**                         1,117,640          1,248,540           509,905      1988        5-40         12/04/89
 Manchester, NH
Oak Grove                                   688,367            723,367           147,795      1991        5-40         11/24/89
 Oak Grove, MO
Wood Creek                                5,234,145          6,076,641         1,786,977      1990        5-40         12/15/89
 Calcium, NY
Breckenridge Creste**                     8,605,404          9,427,981         2,196,758      1990        5-40         12/19/89
 Duluth, GA
Bolivar Apartments                          551,953            581,953           160,616      1990        5-40         12/15/90
 Boliver, MO
Lexington Civic                             958,937            973,937           216,898      1990        5-40         12/29/90
 Lexington, TN
Riverfront Apartments                    10,514,236         10,654,569         2,307,440      1990        5-40         12/26/89
 Sunbury, PA
Susquehanna View                         11,421,699         11,795,401         2,553,874      1988        5-40         12/26/89
 Camp Hill, PA
Westgate Associated                         777,678            797,678           223,785      1990        5-40         05/01/90
 Perryville, AR
Altheimer Associates                        729,506            739,506           208,777      1990        5-40         04/18/90
 Altheirmer, AR
The Temple-Kyle **                        3,630,516          3,727,835           568,896      1991        5-40         06/12/90
 Temple, TX
Diversey Square                           3,346,033          3,396,033           972,706      1990        5-40         12/01/90
 Chicago, IL
Poplar Village                            1,427,725          1,487,725           300,085      1991        5-40         12/30/90
 Cumberland, KY

                                 --------------------------------------------------------
                                        231,934,768        248,819,692        70,337,335

Less:  Combined Entities **            (19,508,551)       (20,754,356)       (5,303,237)

                                 ========================================================
                                       $212,426,217       $228,065,336       $65,034,098
                                 ========================================================

</TABLE>

<PAGE>



The   aggregate   cost  for  Federal   Income  Tax  purposes  is   approximately
$250,568,000.

                       * Mortgage notes payable generally represent non-recourse
                         financing of low-income  housing  projects payable with
                         terms of up to 40 years with interest  payable at rates
                         ranging  from  9.75% to 12%.  The  Partnership  has not
                         guaranteed any of these mortgage notes payable.

(A) During the year ended March 31, 1997, the Partnership has  transferrred  all
of the assets of five of the Texas Partnerships  subject to their liabilities to
unaffiliated
entities.

(B) During the year ended March 31, 1998, the Partnership has  transferrred  all
of the assets of seven of the Texas Partnerships subject to their liabilities to
unaffiliated
entities.

(C) During the year ended March 31, 1998, the Partnership has  transferrred  the
titles of Regency and Rolling Hills
to the lender.


<PAGE>



Summary of property owned and accumulated depreciation:

Property Owned  December 31, 1997
--------------------------------------------------------------------------------
Balance at beginning of period                                     $241,747,268 
     Additions during period:
     Acquisitions through foreclosure                     $0
     Other acquisitions                               27,189
     Improvements etc.                             1,267,479
                                            -----------------
                                                                      1,294,668
  Deductions during period:
     Cost of real estate and fixed assets sold         (174)
     Eliminations - 1996 Combined entities       23,310,668
     Eliminations - 1997 Combined Entities      (20,754,356)
     Properties disposed of (B)                  (3,746,454)
     Properties disposed of (C)                 (13,786,284)
                                                                    (14,976,600)
                                                        ------------------------
Balance at close of period                                         $228,065,336
                                                        ========================




Property Owned  December 31, 1996
--------------------------------------------------------------------------------
Balance at beginning of period                                     $252,533,482 
     Additions during period:
     Acquisitions through foreclosure                     $0
     Other acquisitions                              226,465
     Improvements etc.                               623,525
                                            -----------------
                                                                        849,990
  Deductions during period:
     Cost of real estate and fixed assets sold      (33,471)
     Eliminations - 1995 Combined entities       15,852,398
     Eliminations - 1996 Combined Entities      (23,310,668)
     Provision for valuation of real estate      (1,748,708)
     Properties disposed of (A)                  (2,395,755)
                                            -----------------
                                                                    (11,636,204)
                                                        ------------------------
Balance at close of period                                         $241,747,268
                                                        ========================




Property Owned  December 31, 1995
--------------------------------------------------------------------------------
Balance at beginning of period                                     $248,571,597 
     Additions during period:
     Acquisitions through foreclosure                     $0
     Other acquisitions                               77,498
     Improvements etc.                             4,576,477
                                            -----------------
                                                                      4,653,975
  Deductions during period:
     Cost of real estate and fixed assets sold        (1,408)
     Eliminations - 1994 Combined entities        15,161,716
     Eliminations - Combined Entities            (15,852,398)
     Fixed assets of properties disposed of(B)             0
                                            -----------------
                                                                       (692,090)
                                                        ------------------------
Balance at close of period                                         $252,533,482
                                                        ========================


<PAGE>




Accumulated Depreciation  December 31, 1997
---------------------------------------------------------
Balance at beginning of period               $61,965,823 
     Additions during period:
     Eliminations - 1996                       5,426,434
     Eliminations - 1997                     (5,303,237)
     Properties disposed of (B)                (931,508)
     Properties disposed of (C)              (4,045,351)
     Depreciation                              7,921,937
                                       ------------------
Balance at close of period                   $65,034,098
                                       ==================










Accumulated Depreciation  December 31, 1996
---------------------------------------------------------
Balance at beginning of period               $55,943,640 
     Additions during period:
     Eliminations - 1995                       3,034,245
     Eliminations - 1996                     (5,426,434)
     Properties disposed of (A)                (421,819)
     Depreciation                              8,836,191
                                       ------------------
Balance at close of period                   $61,965,823
                                       ==================











Accumulated Depreciation  December 31, 1995
---------------------------------------------------------
Balance at beginning of period               $47,158,822 
     Additions during period:
     Eliminations - 1994                       2,653,279
     Eliminations - 1995                     (3,034,245)
     Properties disposed of (B)                       -                      
     Depreciation                              9,165,784
                                       ------------------
Balance at close of period                   $55,943,640
                                       ==================
<PAGE>

BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                           (A Limited Partnership)

                          Annual Report on form 10-K
                      For The Year Ended March 31, 1996
                       Reports of Independent Auditors
[Letterhead]

FRIDUSS, LUKEE, SCHIFF & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
4747 WEST PETERSON AVENUE
CHICAGO, ILLINOIS 60646
(773) 777-4445
FAX (773) 777-6557

INDEPENDENT AUDITOR'S REPORT

To the Partners of                                   HUD Field Office Director
DIVERSEY SQUARE ASSOCIATES II                         Chicago, Illinois
Chicago, Illinois

We have audited the accompanying balance sheets of DIVERSEY SQUARE ASSOCIATES II
(An Illinois Limited  Partnership),  Project No.  071-35573,  as of December 31,
1997 and 1996, and the related  statements of profit and loss,  partners' equity
and cash flows for the years then  ended.  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
and generally accepted Government Auditing Standards,  issued by the Comptroller
General of the United States.  Those standards  require that we plan and perform
the audits 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 DIVERSEY SQUARE ASSOCIATES II as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.


In accordance with the Government Auditing Standards, we have also issued 
reports dated January 30, 1998 on compliance with specific requirements  
applicable to major  HUD  programs, compliance with specific requirements  
applicable  to Affirmative Fair Housing, our consideration of the internal 
control  structure and on compliance with laws and regulations.

The  supporting  data  included in this  report  shown on pages 19 through 25 is
presented for purposes of additional  analysis and is not a required part of the
basic  financial  statements.  Such  information  has been subjected to the same
auditing procedures applied in the audit of the basic financial statements,  and
in our opinion, are presented fairly in all material respects in relation to the
basic financial statements taken as a whole.

/s/FRIDUSS, LUKEE, SCHIFF & CO., P.C.

FRIDUSS, LUKEE, SCHIFF & CO., P.C.                                 36-3087225
Certified Public Accountants                              Mr. Bruce C. Schiff
                                                               (773) 777-4445
Chicago, Illinois
January 30, 1998

<PAGE>
[Letterhead]

FRIDUSS, LUKEE, SCHIFF & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
4747 WEST PETERSON AVENUE
CHICAGO, ILLINOIS 60646
(773) 777-4445
FAX (773) 777-6557

INDEPENDENT AUDITOR'S REPORT

To the Partners of                                   HUD Field Office Director
DIVERSEY SQUARE ASSOCIATES II                         Chicago, Illinois
Chicago, Illinois

We have audited the accompanying balance sheets of DIVERSEY SQUARE ASSOCIATES II
(An Illinois Limited  Partnership),  Project No.  071-35573,  as of December 31,
1996 and 1995, and the related  statements of profit and loss,  partners' equity
and cash flows for the years then  ended.  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
and generally accepted Government Auditing Standards,  issued by the Comptroller
General of the United States.  Those standards  require that we plan and perform
the audits 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 DIVERSEY SQUARE ASSOCIATES II as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.

In accordance with the Government Auditing Standards,we have also issued reports
dated January 30, 1997 on compliance  with specific  requirements  applicable to
major  HUD  programs,   compliance  with  specific  requirements  applicable  to
Affirmative Fair Housing,  our  consideration of the internal control  structure
and on compliance with laws and regulations.

The  supporting  data  included in this  report  shown on pages 19 through 24 is
presented for purposes of additional  analysis and is not a required part of the
basic  financial  statements.  Such  information  has been subjected to the same
auditing procedures applied in the audit of the basic financial statements,  and
in our opinion, are presented fairly in all material respects in relation to the
basic financial statements taken as a whole.

/s/FRIDUSS, LUKEE, SCHIFF & CO., P.C.
FRIDUSS, LUKEE, SCHIFF & CO., P.C.                                 36-3087225
Certified Public Accountants                              Mr. Bruce C. Schiff
                                                               (773) 777-4445
Chicago, Illinois
January 30, 1997

<PAGE>

[Letterhead]
[LOGO]
Habif, Arogeti & Wynne, P.C.
Certified Public Accountants

INDEPENDENT AUDITORS' REPORT

To the Partners
Breckenridge Creste Apartments, L.P.

We  have  audited  the  accompanying   balance  sheet  of  Breckenridge   Creste
Apartments, L.P., (a Georgia Limited Partnership),  as of December 31, 1997, and
the related  statements  of changes in partners'  equity,  operations,  and cash
flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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 Breckenridge Creste Apartments,
L.P. as of December 31,  1997,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a  whole.  The  accompanying  supplemental  information  is
presented for the purpose of  additional  analysis and is not a required part of
the basic financial  statements.  Such information has not been subjected to the
auditing procedures applied in the audit of the basic financial statements.

/s/Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
January 30, 1998
<PAGE>
[Letterhead]
[LOGO]
Habif, Arogeti & Wynne, P.C.
Certified Public Accountants

INDEPENDENT AUDITORS' REPORT

To the Partners
Breckenridge Creste Apartments, L.P.

We  have  audited  the  accompanying   balance  sheet  of  Breckenridge   Creste
Apartments, L.P., (a Georgia Limited Partnership),  as of December 31, 1996, and
the related  statements  of changes in partners'  equity,  operations,  and cash
flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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 Breckenridge Creste Apartments,
L.P. as of December 31,  1996,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a  whole.  The  accompanying  supplemental  information  is
presented for the purpose of  additional  analysis and is not a required part of
the basic financial  statements.  Such information has not been subjected to the
auditing procedures applied in the audit of the basic financial statements.

/s/Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
January 24, 1997

<PAGE>

[Letterhead]
[LOGO]
Habif, Arogeti & Wynne, P.C.
Certified Public Accountants

INDEPENDENT AUDITOR'S REPORT

To the Partners
Breckenridge Creste Apartments, L.P.

We  have  audited  the  accompanying   balance  sheet  of  Breckenridge   Creste
Apartments,  L.P., (a Georgia Limited Partnership),  as of December 31, 1995 and
the related  statements  of changes in partners'  equity,  operations,  and cash
flows  for  the  years  then  ended.   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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
These standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provided 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 Breckenridge  Creste Apartments,
L.P. as of December 31,  1995,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a  whole.  The  accompanying  supplemental  information  is
presented for purposes of additional  analysis and is not a required part of the
basic  financial  statements.  Such  information  has been subjected to the same
auditing procedures applied in the audit of the basic financial statements.

/s/Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
January 31, 1996

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO
INDEPENDENT AUDITOR'S REPORT

To the Partners of
EDM Housing Associates, Ltd.
Englewood, CO

We have audited the accompanying  balance sheet of EDM Housing Associates,  Ltd.
(a limited partnership),  HUD Project No. 101-94007, as of December 31, 1997 and
the  related  statements  of  profit  and  loss,  changes  in  partners'  equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 EDM Housing Associates,  Ltd., HUD
Project  No.  101-94007,  as of  December  31,  1997,  and  the  results  of its
operations  and the changes in its partners'  equity  (deficiency)  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1998

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO

INDEPENDENT AUDITOR'S REPORT

To the Partners of
EDM Housing Associates, Ltd.
Englewood, Colorado

We have audited the accompanying  balance sheet of EDM Housing Associates,  Ltd.
(a limited partnership),  HUD Project No. 101-94007, as of December 31, 1996 and
the  related  statements  of  profit  and  loss,  changes  in  partners'  equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 EDM Housing Associates,  Ltd., HUD
Project  No.  101-94007,  as of  December  31,  1996,  and  the  results  of its
operations  and the changes in its partners'  equity  (deficiency)  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1997

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO

INDEPENDENT AUDITOR'S REPORT

To the Partners of
EDM Housing Associates, Ltd.
Englewood, Colorado

We have audited the accompanying  balance sheet of EDM Housing Associates,  Ltd.
(a limited partnership),  HUD Project No. 101-94007, as of December 31, 1995 and
the  related  statements  of  profit  and  loss,  changes  in  partners'  equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  These  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provided 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 EDM Housing Associates,  Ltd., HUD
Project  No.  101-94007,  as of  December  31,  1995,  and  the  results  of its
operations and the changes in partners'  equity  (deficiency) and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1996

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Fox Run Housing Associates, Ltd.
Englewood, Colorado

We have audited the  accompanying  balance sheet of Fox Run Housing  Associates,
Ltd. (a limited  partnership),  HUD Project No.  115-94018,  as of December  31,
1997, and the related statements of profit and loss, changes in partners' equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Fox Run Housing Associates,  Ltd.,
HUD  Project No.  115-94018,  as of December  31,  1997,  and the results of its
operations  and the changes in its partners'  equity  (deficiency)  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
February 2, 1998

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Fox Run Housing Associates, Ltd.
Englewood, Colorado

We have audited the  accompanying  balance sheet of Fox Run Housing  Associates,
Ltd. (a limited  partnership),  HUD Project No.  115-94018,  as of December  31,
1996, and the related statements of profit and loss, changes in partners' equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Fox Run Housing Associates,  Ltd.,
HUD  Project No.  115-94018,  as of December  31,  1996,  and the results of its
operations  and the changes in its partners'  equity  (deficiency)  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1997

<PAGE>

[Letterhead]
[LOGO]
STARK TINTER & ASSOCIATES, LLC
Englewood, CO

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Fox Run Housing Associates, Ltd.
Englewood, Colorado

We have audited the  accompanying  balance sheet of Fox Run Housing  Associates,
Ltd. (a limited partnership), HUD Project No. 115-94018, as of December 31, 1995
and the  related  statements  of profit and loss,  changes in  partners'  equity
(deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  These  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provided 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 Fox Run Housing Associates,  Ltd.,
HUD  Project No.  115-94018,  as of December  31,  1995,  and the results of its
operations and the changes in partners'  equity  (deficiency) and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1996

<PAGE>

[Letterhead]
[LOGO]
Dauby O'Conner & Zaleski
A Limited Liability Company
Certified Public Accountants

INDEPENDENT AUDITOR'S REPORT

To the Partners
241 Pine Street Associates, L.P.
Manchester, New Hampshire

We have audited the  accompanying  balance sheet of 241 Pine Street  Associates,
L.P., (a New  Hampshire  Limited  Partnership),  as of December 31, 1997 and the
related  statement of income  (loss),  partners'  capital and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 241 Pine Street Associates, L.P. as
of December 31, 1997, and the results of its' operations for the year then ended
in conformity with generally accepted accounting principles.

                                               /s/Dauby O'Conner & Zaleski

February 1, 1998                                   Dauby O'Conner & Zaleski
Carmel, Indiana                             Certified Public Accountants

<PAGE>

[Letterhead]
[LOGO]
Dauby O'Conner & Zaleski
A Limited Liability Company
Certified Public Accountants

INDEPENDENT AUDITOR'S REPORT

To the Partners
241 Pine Street Associates, L.P.
Manchester, New Hampshire

We have audited the  accompanying  balance sheet of 241 Pine Street  Associates,
L.P., (a New  Hampshire  Limited  Partnership),  as of December 31, 1996 and the
related  statement of income  (loss),  partners'  capital and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 241 Pine Street Associates, L.P. as
of December 31, 1996, and the results of its' operations for the year then ended
in conformity with generally accepted accounting principles.

                                               /s/Dauby O'Conner & Zaleski

January 4, 1996                                   Dauby O'Conner & Zaleski
Carmel, Indiana                             Certified Public Accountants

<PAGE>

[Letterhead]
[LOGO]
Dauby O'Conner & Zaleski
A Limited Liability Company
Certified Public Accountants

INDEPENDENT AUDITOR'S REPORT

To the Partners
241 Pine Street Associates, L.P.
Manchester, New Hampshire

We have audited the  accompanying  balance sheet of 241 Pine Street  Associates,
L.P., (a New  Hampshire  Limited  Partnership),  as of December 31, 1995 and the
related  statements of income (loss),  partners'  capital and cash flows for the
years then ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 241 Pine Street Associates, L.P. as
of December 31, 1995, and the results of its' operations for the year then ended
in conformity with generally accepted accounting principles.

                                               /s/Dauby O'Conner & Zaleski

January 4, 1996                                   Dauby O'Conner & Zaleski
Carmel, Indiana                             Certified Public Accountants

<PAGE>
[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


INDEPENDENT  AUDITORS'REPORT

To the Partners
Brownsville Associates, L.P.
Brownsville, Tennessee

We have audited the accompanying balance sheets of Brownsville Associates,  L.P.
(a Missouri limited partnership),  Rural Development Case No.:  48-038-431399553
as of December 31, 1997 and 1996, and the related statements of loss,  partners'
equity and cash flows for the years then ended.  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
and with Government  Auditing Standards issued by the Comptroller General of the
United  States.  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 Brownsville Associates, L.P. as
of December  31, 1997 and 1996 and the  results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 21, 1998 on our  consideration of Brownsville  Associates,  L.P.'s
internal control structure and a report dated January 21, 1998 on its compliance
with laws and regulations.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
JANUARY 21, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


INDEPENDENT  AUDITORS'REPORT

To the Partners
Brownsville Associates, L.P.
Brownsville, Tennessee

We have audited the accompanying balance sheets of Brownsville Associates,  L.P.
(a Missouri limited partnership),  Rural Development Case No.:  48-038-431399553
as of December 31, 1996 and 1995, and the related statements of loss,  partners'
equity and cash flows for the years then ended.  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
and with Government  Auditing Standards issued by the Comptroller General of the
United  States.  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 Brownsville Associates, L.P. as
of December  31, 1996 and 1995 and the  results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 21, 1997 on our  consideration of Brownsville  Associates,  L.P.'s
internal control structure and a report dated January 21, 1997 on its compliance
with laws and regulations.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
JANUARY 21, 1997

<PAGE>

 [Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


INDEPENDENT AUDITORS' REPORT

To the Partners
Briarwood Associates II, L.P.

We have audited the accompanying balance sheets of Briarwood Associates II, L.P.
(a Missouri limited Partnership),  Rural Development Case No.:  02-027-431303694
as of December 31, 1997 and 1996, and the related statements of loss,  partners'
equity and cash flows for the years then ended.  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
and with Government  Auditing Standards issued by the Comptroller General of the
United  States.  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 Briarwood  Associates II, L.P.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 2, 1998 on our  consideration of Briarwood  Associates II, L.P.'s
internal  control  structure  and a  report  dated  February  10,  1998  on  its
compliance with laws and regulations.

<PAGE>

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole.  The  supplemental  information on pages
9-11 is presented for purposes of additional analysis and is not a required part
of the basic financial  statements.  Such  information has been subjected to the
audit procedures applied in the audit of the basic financial  statements and, in
our opinion,  is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.


/s/Braunsdorf, Carlson and Clinkinbeard, C.P.A.'s, P.A.
Braunsdorf, Carlson and Clinkinbeard, C.P.A.'s,P.A.
TOPEKA, KANSAS
February 2, 1998

<PAGE>

 [Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

INDEPENDENT AUDITORS' REPORT

To the Partners
Briarwood Associates II, L.P.

We have audited the accompanying balance sheets of Briarwood Associates II, L.P.
(a Missouri limited Partnership),  Rural Development Case No.:  02-027-431303694
as of December 31, 1996 and 1995, and the related statements of loss,  partners'
equity and cash flows for the years then ended.  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
and with Government  Auditing Standards issued by the Comptroller General of the
United  States.  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 Briarwood  Associates II, L.P.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 10, 1997 on our consideration of Briarwood  Associates II, L.P.'s
internal  control  structure  and a  report  dated  February  10,  1997  on  its
compliance with laws and regulations.

<PAGE>

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental information on pages 8-9
is presented for purposes of  additional  analysis and is not a required part of
the basic financial statements. Such information has been subjected to the audit
procedures  applied in the audit of the basic  financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.


/s/Braunsdorf, Carlson and Clinkinbeard, C.P.A.'s, P.A.
Braunsdorf, Carlson and Clinkinbeard, C.P.A.'s,P.A.
TOPEKA, KANSAS
February 10, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Altheimer Associates I, L.P.
Altheimer, Arkansas

We have audited the accompanying balance sheets of Altheimer Associates I, L.P.,
(a  Missouri  limited  Partnership),  FmHA  Case  No.:  03-035-431479737,  as of
December 31, 1997 and the related statements of loss,  partners' equity and cash
flows for the year 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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Altheimer Associates I, L.P. as of
December 31, 1997,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
February 3, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Altheimer Associates I, L.P.
Altheimer, Arkansas

We have audited the accompanying balance sheets of Altheimer Associates I, L.P.,
(a  Missouri  limited  Partnership),  FmHA  Case  No.:  03-035-431479737,  as of
December 31, 1996 and the related statements of loss,  partners' equity and cash
flows for the year ended December 31, 1996.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Altheimer Associates I, L.P. as of
December 31, 1996,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
February 3, 1997

<PAGE>

 [Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Altheimer Associates I, L.P.
Altheimer, Arkansas

We have audited the accompanying balance sheets of Altheimer Associates I, L.P.,
(a  Missouri  limited  Partnership),  FmHA  Case  No.:  03-035-431479737,  as of
December 31, 1995 and the related statements of loss,  partners' equity and cash
flows for the year ended December 31, 1995.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Altheimer Associates I, L.P. as of
December 31, 1995,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
February 3, 1996

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Bolivar Senior Housing, L.P.
Wayne, Nebraska

We have audited the accompanying balance sheet of Bolivar Senior Housing,  L.P.,
(a  Missouri  limited  Partnership),  RECD  Case  No.:  29-084-481063570,  as of
December 31, 1997 and the related statements of loss,  partners' equity and cash
flows for the year 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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Bolivar Senior Housing, L.P. as of
December 31, 1997,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
January 31, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Bolivar Senior Housing, L.P.
Wayne, Nebraska

We have audited the accompanying balance sheet of Bolivar Senior Housing,  L.P.,
(a  Missouri  limited  Partnership),  RECD  Case  No.:  29-084-481063570,  as of
December 31, 1996 and the related statements of loss,  partners' equity and cash
flows for the year ended December 31, 1996.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Bolivar Senior Housing, L.P. as of
December 31, 1996,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
January 31, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Bolivar Senior Housing, L.P.
Wayne, Nebraska

We have audited the accompanying balance sheet of Bolivar Senior Housing,  L.P.,
(a  Missouri  limited  Partnership),  RECD  Case  No.:  29-084-481063570,  as of
December 31, 1995 and the related statements of loss,  partners' equity and cash
flows for the year ended December 31, 1995.  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 audit.

We conducted our audit 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
misstatements. 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 audit provided 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 Bolivar Senior Housing, L.P. as of
December 31, 1995,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
January 31, 1996

<PAGE>

February 2, 1994

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Fulton Associates I LP
(A Limited Partnership)

We have audited the  accompanying  balance  sheets of Fulton  Associates I LP (A
Limited Partnership),  a FmHA Project, as of December 31, 1997 and 1996, and the
related  statements of operations,  changes in partners'  capital and cash flows
for the years then ended.  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 Fulton  Associates I LP (A
Limited  Partnership)  as of December 31, 1997 and 1996,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

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

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants

Jackson, Tennessee
January 25, 1998

<PAGE>

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Fulton Associates I LP
(A Limited Partnership)

We have audited the  accompanying  balance  sheets of Fulton  Associates I LP (A
Limited Partnership),  a FmHA Project, as of December 31, 1996 and 1995, and the
related  statements of operations,  changes in partners'  capital and cash flows
for the years then ended.  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 Fulton  Associates I LP (A
Limited  Partnership)  as of December 31, 1996 and 1995,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

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

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
February 10, 1997

<PAGE>

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Eaglewood VIII LP
(A Limited Partnership)

We have audited the accompanying  balance sheets of Eaglewood VIII LP (A Limited
Partnership),  a FmHA Project, as of December 31, 1997 and 1996, and the related
statements of  operations,  changes in partners'  capital and cash flows for the
years then ended.  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
and  Government  Auditing  Standards  issued by the  Comptroller  General of the
United  States.  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  Eaglewood  VIII LP (A Limited
Partnership) as of December 31, 1997 and 1996, and the results of its operations
and its cash  flows  for the  years  then  ended in  conformity  with  generally
accepted accounting principles.

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

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January  26,  1998  on our  consideration  of the  limited  partnership's
internal control structure and a report dated February 9, 1998 on its compliance
with laws and regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
January 26, 1998

<PAGE>

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Eaglewood VIII LP
(A Limited Partnership)

We have audited the accompanying  balance sheets of Eaglewood VIII LP (A Limited
Partnership),  a FmHA Project, as of December 31, 1996 and 1995, and the related
statements of  operations,  changes in partners'  capital and cash flows for the
years then ended.  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
and  Government  Auditing  Standards  issued by the  Comptroller  General of the
United  States.  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  Eaglewood  VIII LP (A Limited
Partnership) as of December 31, 1996 and 1995, and the results of its operations
and its cash  flows  for the  years  then  ended in  conformity  with  generally
accepted accounting principles.

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

In accordance with Government Auditing  Standards,  we have also issued a report
dated  February  11,  1997 on our  consideration  of the  limited  partnership's
internal control structure and a report dated February 9, 1996 on its compliance
with laws and regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
February 11, 1997

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Elver Park Limited Partnership III
Madison, Wisconsin

We  have  audited  the  accompanying   balance  sheets  of  Elver  Park  Limited
Partnership III as of December 31, 1997 and 1996, and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Elver Park Limited Partnership III
as of December 31, 1997 and 1996, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 12, 1998

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Elver Park Limited Partnership III
Madison, Wisconsin

We  have  audited  the  accompanying   balance  sheets  of  Elver  Park  Limited
Partnership III as of December 31, 1996 and 1995, and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Elver Park Limited Partnership III
as of December 31, 1996 and 1995, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.

January 15, 1997

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Elver Park Limited Partnership II
Madison, Wisconsin

We  have  audited  the  accompanying   balance  sheets  of  Elver  Park  Limited
Partnership II as of December 31, 1997 and 1996,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Elver Park Limited  Partnership II
as of December 31, 1997 and 1996, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 13, 1998
<PAGE>
[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Elver Park Limited Partnership II
Madison, Wisconsin

We  have  audited  the  accompanying   balance  sheets  of  Elver  Park  Limited
Partnership II as of December 31, 1996 and 1995,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Elver Park Limited  Partnership II
as of December 31, 1996 and 1995, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 14, 1997

<PAGE>

[Letterhead]
[LOGO]
Robert Ercolini & Company L.L.P.
Certified Public Accountants
Fifty-Five Summer Street
Boston, Massachusetts 02110-1007
Telephone (617) 482-5511
INDEPENDENT AUDITOR'S REPORT

To the Partners of
Blue Mountain Associates Limited Partnership               HUD Area Office
Boston, Massachusetts                                    Boston, Massachusetts

We have  audited the  accompanying  balance  sheet of Blue  Mountain  Associates
Limited  Partnership  (a  Massachusetts  Limited  Partnership),  HUD Project No.
023-36609 as of December 31, 1997, and the related statements of profit and
loss (on HUD Form No. 92410), partners' capital, and cash flows for the years
then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Blue  Mountain  Associates
Limited  Partnership as of December 31, 1997, and the results of its operations,
changes  in  partners'  capital,  and its cash  flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 23, 1998 on our consideration of Blue Mountain  Associates Limited
Partnership's internal control structure, a report dated January 23, 1998 on its
compliance with laws and regulations,  and reports dated January 23, 1998 on its
compliance with specific requirements applicable to HUD Programs.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The additional  information included in this report
(shown on pages 16  through  21 and pages 29 through  42) is  presented  for the
purpose of additional analysis and is not a required part of the basic financial
statements.  Such information has been subjected to the same auditing procedures
applied in the audit of the basic financial  statements and, in our opinion, its
fairly  stated in all  material  respects  in  relation  to the basic  financial
statements taken as a whole.

/s/ Robert Ercolini & Company LLP
Robert Ercolini & Company L.L.P.
January 24, 1998

<PAGE>

[Letterhead]
[LOGO]
Robert Ercolini & Company L.L.P.
Certified Public Accountants
Fifty-Five Summer Street
Boston, Massachusetts 02110-1007
Telephone (617) 482-5511
Fax (617) 426-5252

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Blue Mountain Associates Limited Partnership               HUD Area Office
Boston, Massachusetts                                Boston, Massachusetts

We have  audited the  accompanying  balance  sheet of Blue  Mountain  Associates
Limited  Partnership  (a  Massachusetts  Limited  Partnership),  HUD Project No.
023-36609 as of December 31, 1996, and the related statements of profit and
loss (on HUD Form No. 92410), partners' capital, and cash flows for the years 
then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Blue  Mountain  Associates
Limited  Partnership as of December 31, 1996, and the results of its operations,
changes  in  partners'  capital,  and its cash  flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 23, 1997 on our consideration of Blue Mountain  Associates Limited
Partnership's internal control structure, a report dated January 23, 1997 on its
compliance with laws and regulations,  and reports dated January 23, 1997 on its
compliance with specific requirements applicable to HUD Programs.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The additional  information included in this report
(shown on pages 14  through  19) is  presented  for the  purpose  of  additional
analysis  and is not a required  part of the basic  financial  statements.  Such
information  has been subjected to the same auditing  procedures  applied in the
audit of the basic financial  statements and, in our opinion,  its fairly stated
in all material respects in relation to the basic financial  statements taken as
a whole.

/s/ Robert Ercolini & Company LLP
Robert Ercolini & Company L.L.P.
January 23, 1997

<PAGE>
[Letterhead]
[LOGO]
Robert Ercolini & Company
Certified Public Accountants
Fifty-Five Summer Street
Boston, Massachusetts 02110-1007
Telephone (617) 482-5511
Fax (617) 426-5252

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Blue Mountain Associates Limited Partnership               HUD Area Office
Boston, Massachusetts                                    Boston, Massachusetts

We have  audited the  accompanying  balance  sheet of Blue  Mountain  Associates
Limited Partnership.,  (A Massachusetts  Limited  Partnership),  HUD Project No.
023-36609,  as of December  31, 1995 and the  related  statements  of profit and
loss, partners' capital and cash flows for the years then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and generally accepted  Government  Auditing Standards issued by the Comptroller
General of the United States.  These standards  require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of  material  misstatements.  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  audit  provides  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 Blue Mountain  Associates Limited
Partnership as of December 31, 1995,  and its results of operations,  changes in
partners' capital, and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 26, 1996 on our consideration of Blue Mountain  Associates Limited
Partnership's  internal control  structure,  a reports dated January 26, 1996 on
its compliance with laws and regulations,  and reports dated January 26, 1996 on
its compliance with specific requirements applicable to HUD Programs.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The additional  information included in this report
(shown on pages 14 through 18) is presented for purposes of additional  analysis
and is not a required part of the basic financial  statements.  Such information
has been subjected to the same auditing  procedures  applied in the audit of the
basic  financial  statements  and, in our opinion,  are presented  fairly in all
material  respects  in  relation to the basic  financial  statements  taken as a
whole.

/s/ Robert Ercolini & Company
Robert Ercolini & Company
January 26, 1996

<PAGE>
[Letterhead]
[LOGO]
Haran & Associates Ltd
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

To the Partners                        HUD Field Office Director
Boulevard Commons Limited Partnership                Chicago, Illinois
Chicago, Illinois

We have audited the  accompanying  balance  sheet of Boulevard  Commons  Limited
Partnership  II ( a Limited  Partnership),  as of  December  31,  1997,  and the
related statements of profit and loss, changes in partners' equity and statement
of cash  flows for the year  then  ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
These standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provides 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  BOULEVARD  COMMONS  LIMITED
PARTNERSHIP II as of December 31, 1997, and its operations, changes in partners'
equity,  and its cash flows for the year then ended in conformity with generally
accepted accounting principles.

The  accompanying  supplementary  information  (shown  on  pages  15 to  19)  is
presented for purposes of additional  analysis and is not a required part of the
basic financial statements.  Such information has been subjected to the auditing
procedures  applied in the audit of the basic  financial  statement  and, in our
opinion,  is fairly stated in all material respects in relation to the financial
statements taken as whole.

/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892

January 23, 1998

<PAGE>

[Letterhead]
[LOGO]
Haran & Associates Ltd
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

To the Partners                        HUD Field Office Director
Boulevard Commons Limited Partnership                Chicago, Illinois
Chicago, Illinois

We have audited the  accompanying  balance  sheet of Boulevard  Commons  Limited
Partnership II, Project No. 071-35592,  as of December 31, 1996, and the related
statements of
profit and loss, changes in partners' equity and statement of cash flows for the
year  then  ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the 
United States. These standards require that we plan and perform the audit to 
obtain reasonable  assurance about whether the financial statements are free of
material  misstatements.  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 audit provides 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  BOULEVARD  COMMONS  LIMITED
PARTNERSHIP  II as of  December  31,  1996,  and its profit or loss,  changes in
partners' equity,  and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January  17,  1997 on our  consideration  of  Boulevard  Commons  Limited
Partnership's  internal control  structure and reports dated January 17, 1997 on
its compliance with specific  requirements  applicable to Major HUD Programs and
specific requirements applicable to Affirmative Fair Housing.

The  accompanying  supplementary  information  (shown  on  pages  15 to  19)  is
presented for purposes of additional  analysis and is not a required part of the
basic financial statements.  Such information has been subjected to the auditing
procedures  applied in the audit of the basic  financial  statement  and, in our
opinion,  is fairly stated in all material respects in relation to the financial
statements taken as whole.

/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892

January 17, 1997
<PAGE>
[Letterhead]
[LOGO]
Haran & Associates Ltd
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

To the Partners
Boulevard Commons Limited Partnership IIA
Chicago, Illinois

We have audited the  accompanying  balance  sheet of Boulevard  Commons  Limited
Partnership  IIA.,  (a Limited  Partnership)  as of  December  31,  1997 and the
related  statements of profit and loss (HUD-92419),  changes in partners' equity
and statement of cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and  generally  accepted   Government   Auditing  Standards  for  financial  and
compliance audits issued by the Comptroller General of the United States.  These
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provided a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the assets,  liabilities and partners'  equity of BOULEVARD
COMMONS LIMITED Partnership IIA at December 31, 1997, and its operations,
changes  in  partners'  equity,  and its cash flows for the year then ended , in
conformity with generally accepted accounting principles.

/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892
January 17, 1998

<PAGE>

[Letterhead]
[LOGO]
Haran & Associates Ltd
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

To the Partners
Boulevard Commons Limited Partnership IIA
Chicago, Illinois

We have audited the  accompanying  balance  sheet of Boulevard  Commons  Limited
Partnership  IIA.,  (a Limited  Partnership)  as of  December  31,  1996 and the
related  statements of profit and loss (HUD-92410),  changes in partners' equity
and statement of cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and  generally  accepted   Government   Auditing  Standards  for  financial  and
compliance audits issued by the Comptroller General of the United States.  These
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provided a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the assets,  liabilities and partners'  equity of BOULEVARD
COMMONS LIMITED Partnership IIA at December 31, 1996, and its operations,
changes in  partners'  equity,  and its cash flows for the year then  ended,  in
conformity with generally accepted accounting principles.

/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892
January 17, 1997

<PAGE>

[Letterhead]
[LOGO]
Haran & Associates Ltd
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

To the Partners
Boulevard Commons Limited Partnership IIA
Chicago, Illinois

We have audited the balance sheet of Boulevard Commons Limited Partnership IIA.,
(a Limited  Partnership)  as of December 31, 1995 and the related  statements of
profit and loss  (HUD-92410),  changes in partners' equity and statement of cash
flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and  generally  accepted   Government   Auditing  Standards  for  financial  and
compliance audits issued by the Comptroller General of the United States.  These
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provided a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the assets,  liabilities and partners'  equity of BOULEVARD
COMMONS LIMITED Partnership IIA at December 31, 1995, and its operations,
changes  in  partners'  equity,  and its cash  flows  for the year  then  ended,
conformity with generally accepted accounting principles.

/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892
January 17, 1996

<PAGE>

[Letterhead]
[LOGO]
Reznick, Fedder & Silverman
Certified Public Accountants
Charlotte, North Carolina

INDEPENDENT AUDITORS' REPORT

To the Partners of
El Jardin of Davie, Ltd.
  (A Limited Partnership)
Miami, Florida

We have audited the accompanying  balance sheet of El Jardin of Davie, Ltd. (FHA
Project No.  066-10539-REF) as of December 31, 1997, and the related  statements
of profit and loss (HUD Form 92410),  changes in partners' capital accounts, and
cash  flows  for  the  year  then  ended.  These  financial  statements  are the
responsibility  of the management of the partnership.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects,  the financial position of El Jardin of Davie,  Ltd. (FHA 
Project No. 066-10539-REF) at December 31, 1997, and the results of its 
operations and its cash flows for the year then ended, in conformity with 
generally accepted accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD  Programs  issued by the US  Department  of Housing  and
Urban Development ("HUD"), we have also issued a report dated February 24, 1998,
on our consideration of El Jardin of Davie,  Ltd.'s internal control  structure,
and  reports  dated  February  24,  1998,  on  its   compliance   with  specific
requirements applicable to major HUD programs and specific requirements 
applicable to Affirmative Fair Housing.

<PAGE>

Our audit was  made  for the  purpose  of  forming  an opinion on the financial 
statements taken as a whole. The accompanying supplementary information shown on
pages 16 to 21 are presented for the purpose of additional analysis and are not
a required part of the basic  financial  statements of El Jardin of Davie,  Ltd.
(FHA Project No.  066-10539-REF).  Such  information  has been  subjected to the
auditing procedures applied in the audit of the basic financial  statements and,
in our opinion,  is presented fairly in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Reznick, Fedder & Silverman
Certified Public Accountants
Charlotte, North Carolina
January 16, 1998

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants


INDEPENDENT AUDITORS' REPORT

To the Partners of
El Jardin of Davie, Ltd.
  (A Limited Partnership)
Miami, Florida

We have audited the accompanying  balance sheet of El Jardin of Davie, Ltd. (FHA
Project No.  066-10539-REF) as of December 31, 1996, and the related  statements
of profit and loss (HUD Form 92410),  changes in partners' capital accounts, and
cash  flows  for  the  year  then  ended.  These  financial  statements  are the
responsibility  of the management of the partnership.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects, the financial position  of El Jardin of Davie, Ltd. (FHA 
Project No. 066-10539-REF) at December 31, 1996, and the results of its 
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD  Programs  issued by the US  Department  of Housing  and
Urban Development ("HUD"), we have also issued a report dated February 24, 1997,
on our consideration of El Jardin of Davie,  Ltd.'s internal control  structure,
and  reports  dated  February  24,  1997,  on  its   compliance   with  specific
requirements applicable to major HUD programs and specific requirements 
applicable to Affirmative Fair Housing.

<PAGE>

Our audit was  made  for the  purpose  of  forming  an opinion on the
financial  statements taken as a whole. The accompanying supplementary  
information shown on pages 16 to 21 are presented for the purpose of additional 
analysis and are not a required part of the basic financial statements of El 
Jardin of Davie,  Ltd. (FHA Project No.  066-10539-REF).  Such information  has 
been  subjected to the auditing procedures applied in the audit of the basic 
financial  statements and, in our opinion,  is presented fairly in all material 
respects in relation to the basic financial statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 24, 1997

<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

INDEPENDENT AUDITOR'S REPORT

To the Partners of
El Jardin of Davie, Ltd.

We have audited the accompanying statement of assets, liabilities, and partners'
capital of El Jardin of Davie, Ltd. (the "Partnership"), as of December 31, 1995
and the  related  statements  of revenues  and  expenses,  changes in  partners'
capital and cash flows for the years then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and  Government  Auditing  Standards  issued by the  Comptroller  General of the
United  States.  These  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects,  the  financial  position of El Jardin of Davie,  Ltd. as of
December 31, 1995,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial  statements taken as a whole. The supporting  information  included in
this  report  (shown  on pages 11  through  18) is  presented  for  purposes  of
additional  analysis  and  is  not  a  required  part  of  the  basic  financial
statements.  Such information has been subjected to the same auditing procedures
applied in the audit of the basic financial  statements and, in our opinion, are
presented  fairly in all  material  respects in relation to the basic  financial
statements taken as a whole.

/s/Coopers & Lybrand L.L.P
Miami, Florida
February 23, 1996

<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche
Orlando, Florida

INDEPENDENT AUDITOR'S REPORT

To the General Partner and Limited Partners of
Ashley Place, Ltd.:

We have audited the accompanying  balance sheet of Ashley Place, Ltd. (a Florida
Limited  Partnership),  as of  December  31,  1997  and the  related  statements
operations,  partners'  equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit in accordance  with generally  accepted  auditing . Those
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects,  the  financial  position of Ashley  Place,  Ltd. (a Florida
Limited  Partnership) as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.


/s/Deloite & Touche LLP
February 2, 1998
<PAGE>
[Letterhead]
[LOGO]
Deloitte & Touche
Orlando, Florida

INDEPENDENT AUDITOR'S REPORT

To the General Partner and Limited Partners of
Ashley Place, Ltd.:

We have audited the accompanying  balance sheet of Ashley Place, Ltd. (a Florida
Limited  Partnership),  as of  December  31,  1996  and the  related  statements
operations,  partners'  equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit in accordance  with generally  accepted  auditing . Those
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects,  the  financial  position of Ashley  Place,  Ltd. (a Florida
Limited  Partnership) as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/Deloite & Touche LLP
February 2, 1997

<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche
Orlando, Florida

INDEPENDENT AUDITOR'S REPORT

To the General Partner and Limited Partners of
Ashley Place, Ltd.:

We have audited the accompanying  balance sheet of Ashley Place, Ltd. (a Florida
Limited  Partnership),  as of  December  31,  1995  and the  related  statements
operations,  partners'  equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit in accordance  with generally  accepted  auditing . Those
standards  require  that we plan and  perform  the  audit to  obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material  respects,  the  financial  position of Ashley  Place,  Ltd. (a Florida
Limited  Partnership) as of December 31, 1995, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.


/s/Deloite & Touche LLP
February 2, 1996

<PAGE>

 [Letterhead]
[LOGO]
Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
Certified Public Accountants
Morriston, Tennessee 37815


INDEPENDENT AUDITOR'S REPORT

General Partners                         Mr. Angelo Schioscia, State Coordinator
Partners                                    U.S. Department of Housing and
The Colony Apartments, L.P.                 Urban Development
1504 Riverview Tower                        Strom Thurmond Federal Building
900 S. Gay Street                           1835-45 Assembly Street. 11th Floor
Knoxville, Tennessee                        Columbia, South Carolina 29201

We have audited the accompanying  balance sheet of The Colony Apartments,  L.P.,
FHA Project No.  054-94002-OMC (a limited  partnership) as of December 31, 1997,
and the related  statements  income,  changes in partners' equity and cash flows
for the year then ended.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards,
Government Auditing  Standards,  issued by the Comptroller General of the United
States and the July 1993  Consolidated  Audit  Guide for Audits of HUD  Programs
(the "Guide"),  issued by the U.S.  Department of Housing and Urban Development,
Office  of the  Inspector  General.  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  audit  provides  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 The Colony Apartments,  L.P as
of  December  31,  1997,  and the results of its  operations  and the changes in
partners'  equity  and cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.

<PAGE>
General Partners
The Colony Apartments, L.P.                                          Page 2

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban  Development,  we have also issued a report dated January 21, 1998, on our
consideration of The Colony  Apartments,  L.P.'s internal control  structure and
reports  dated January 21, 1998, on its  compliance  with specific  requirements
applicable  to major  HUD  Programs  and  specific  requirements  applicable  to
Affirmative Fair Housing.

Our audit was  conducted  for the purpose of forming an opinion on the financial
statements  taken as a whole.  The  supplementary  information  included in this
report  (shown on pages 26 to 35) is  presented  for the  purpose of  additional
analysis and is not a required  part of the  financial  statements of The Colony
Apartments,  L.P.  Such  information  has been  subjected  to the same  auditing
procedures applied in the audit of the financial statements and, in our opinion,
is  fairly  stated  in all  material  respects  in  relation  to  the  financial
statements taken as a whole.

We attest that our firm, Purkey, Carter, Compton, Swann & Carter, P.L.L.C. meets
any legal requirements concerning registration by the State of South Carolina.

/s/Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
January 24, 1998

<PAGE>

 [Letterhead]
[LOGO]
Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
Certified Public Accountants
Morriston, Tennessee 37815

INDEPENDENT AUDITOR'S REPORT

General Partners                          Mr. Choice Edward, State Coordinator
Partners                                    U.S. Department of Housing and
The Colony Apartments, L.P.                 Urban Development
1504 Riverview Tower                        Strom Thurmond Federal Building
900 S. Gay Street                           1835-45 Assembly Street. 11th Floor
Knoxville, Tennessee                        Columbia, South Carolina 29201

We have audited the accompanying  balance sheet of The Colony Apartments,  L.P.,
FHA Project No.  054-94002-OMC (a limited  partnership) as of December 31, 1996,
and the related  statements  income,  changes in partners' equity and cash flows
for the year then ended.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards,
Government Auditing  Standards,  issued by the Comptroller General of the United
States and the July 1993  Consolidated  Audit  Guide for Audits of HUD  Programs
(the "Guide"),  issued by the U.S.  Department of Housing and Urban Development,
Office  of the  Inspector  General.  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  audit  provides  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 The Colony Apartments,  L.P as
of  December  31,  1996,  and the results of its  operations  and the changes in
partners'  equity  and cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.

<PAGE>
General Partners
The Colony Apartments, L.P.                                          Page 2

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban  Development,  we have also issued a report dated January 21, 1997, on our
consideration of The Colony  Apartments,  L.P.'s internal control  structure and
reports  dated January 21, 1997, on its  compliance  with specific  requirements
applicable  to major  HUD  Programs  and  specific  requirements  applicable  to
Affirmative Fair Housing.

Our audit was  conducted  for the purpose of forming an opinion on the financial
statements  taken as a whole.  The  supplementary  information  included in this
report  (shown on pages 26 to 35) is  presented  for the  purpose of  additional
analysis and is not a required  part of the  financial  statements of The Colony
Apartments,  L.P.  Such  information  has been  subjected  to the same  auditing
procedures applied in the audit of the financial statements and, in our opinion,
is  fairly  stated  in all  material  respects  in  relation  to  the  financial
statements taken as a whole.

We attest that our firm, Purkey, Carter, Compton, Swann & Carter, P.L.L.C. meets
any legal requirements concerning registration by the State of South Carolina.

/s/Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
Purkey, Carter, Compton, Swann & Carter, P.L.L.C.
January 21, 1997

<PAGE>


[Letterhead]
[LOGO]
Purkey, Carter, Compton, Swann & Carter
Certified Public Accountants
Morriston, Tennessee 37815

INDEPENDENT AUDITOR'S REPORT

General Partners                          Mr. Choice Edward, State Coordinator
Partners                                    U.S. Department of Housing and
The Colony Apartments, L.P.                 Urban Development
1504 Riverview Tower                        Strom Thurmond Federal Building
900 S. Gay Street                           1835-45 Assembly Street. 11th Floor
Knoxville, Tennessee                        Columbia, South Carolina 29201

We have audited the accompanying  balance sheet of The Colony Apartments,  L.P.,
FHA Project No. 054-94002-OMC (a limited  partnership),  as of December 31, 1995
and the related  statements  income,  changes in partners' equity and cash flows
for the year then ended.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards,
Government  Auditing  Standards issued by the Comptroller  General of the United
States and the July 1993  Consolidated  Audit  Guide for Audits of HUD  Programs
(the "Guide"),  issued by the U.S.  Department of Housing and Urban Development,
Office  of the  Inspector  General.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatements. 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  audit  provides  a
reasonable basis for our opinion.

In our opinion the financial  statements  referred above present fairly,  in all
material respects,  the financial  position of The Colony Apartments,  L.P as of
December  31,  1995,  and the  results  of its  operations  and the  changes  in
partners'  equity  and cash  flows for the year then  ended in  conformity  with
generally accepted accounting principles.

<PAGE>
General Partners
The Colony Apartments, L.P.                                          Page 2

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of
Housing and Urban  Development,  we have also issued a report dated  January 22,
1996 on our  consideration  of The Colony  Apartments,  L.P.'s internal  control
structure  and reports dated  January 22, 1996 on its  compliance  with specific
requirements   applicable  to  major  HUD  Programs  and  specific  requirements
applicable to Affirmative Fair Housing.

Our audit was  conducted  for the purpose of forming an opinion on the financial
statements  taken as a whole.  The  supplementary  information  included in this
report  (shown  on pages  26 to 35) is  presented  for  purposes  of  additional
analysis and is not a required  part of the  financial  statements of The Colony
Apartments,  L.P.  Such  information  has been  subjected  to the same  auditing
procedures applied in the audit of the financial statements and, in our opinion,
is  fairly  stated  in all  material  respects  in  relation  to  the  financial
statements taken as a whole.

We attest that our firm, Purkey, Carter, Compton, Swann & Carter meets any legal
requirements concerning registration by the State of South Carolina.

/s/Purkey, Carter, Compton, Swann & Carter
Purkey, Carter, Compton, Swann & Carter
January 22, 1996

<PAGE>
[Letterhead]
[LOGO]
LARRY O'DONNELL, CPA, P.C.
Aurora, CO

Partners
Aurora Properties, Ltd.
d/b/a Aurora East Apartments
Aurora, Colorado

INDEPENDENT AUDITOR'S REPORT


I have audited the accompanying  balance sheets of Aurora  Properties Ltd. d/b/a
Aurora East  Apartments,  Project No.  101-10522 (a Limited  Partnership)  as of
December  31,  1997 and 1996,  and the  related  statements  of profit and loss,
partners'  equity  and cash  flows for the years  then  ended.  These  financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally  accepted  auditing  standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States and the  Consolidated  Audit  Guide for  Audits of HUD  Programs,
issued  by the U.S.  Department  of  Housing  and Urban  Development,  Office of
Inspector General in July, 1993. Those standards require that I 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.  I believe that my audit provides a reasonable basis for
opinion.

In my opinion,  the financial statements referred to above present fairly in all
material  respects,  the financial  position of Aurora  Properties  Ltd.,  d/b/a
Aurora East  Apartments as of December 31, 1997 and 1996, and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

In accordance with Government  Auditing  Standards,  I have also issued a report
dated February 10, 1998 on my  consideration  of Aurora  Properties  Ltd., d/b/a
Aurora East Apartments, internal control structure and reports dated February 3,
1998 on its  compliance  with  laws  and  regulations  applicable  to the  basic
financial statements and the major HUD program.

/s/ Larry O'Donnell, CPA, PC
Larry O'Donnell, CPA, PC
February 10, 1998
Federal Identification Number 84-1075467


<PAGE>
[Letterhead]
[LOGO]
LARRY O'DONNELL, CPA, P.C.
Aurora, CO

Partners
Aurora Properties, Ltd.
d/b/a Aurora East Apartments
Aurora, Colorado

INDEPENDENT AUDITOR'S REPORT


I have audited the accompanying  balance sheets of Aurora  Properties Ltd. d/b/a
Aurora East  Apartments,  Project No.  101-10522 (a Limited  Partnership)  as of
December  31,  1996 and 1995,  and the  related  statements  of profit and loss,
partners'  equity  and cash  flows for the years  then  ended.  These  financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally  accepted  auditing  standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States and the  Consolidated  Audit  Guide for  Audits of HUD  Programs,
issued  by the U.S.  Department  of  Housing  and Urban  Development,  Office of
Inspector General in July, 1993. Those standards require that I 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.  I believe that my audit provides a reasonable basis for
opinion.

In my opinion,  the financial statements referred to above present fairly in all
material  respects,  the financial  position of Aurora  Properties  Ltd.,  d/b/a
Aurora East  Apartments as of December 31, 1996 and 1995, and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

In accordance with Government  Auditing  Standards,  I have also issued a report
dated February 3, 1997 on my  consideration  of Aurora  Properties  Ltd.,  d/b/a
Aurora East Apartments, internal control structure and reports dated February 3,
1997 on its  compliance  with  laws  and  regulations  applicable  to the  basic
financial statements and the major HUD program.

/s/ Larry O'Donnell, CPA, PC
Larry O'Donnell, CPA, PC
February 3, 1997
Federal Identification Number 84-1075467

<PAGE>

[Letterhead]
[LOGO]
VMCHC&S Vroman, McGowen, Hurst, Clark & Smith, P.C.
Certified Public Accountants and Business Advisors

INDEPENDENT AUDITOR'S REPORT

To the Partners
Columbia Townhouse Associates Limited Partnership
Des Moines, Iowa

We have audited the accompanying balance sheets of Columbia Townhouse Associates
Limited  Partnership,  HUD Project No.  074-35189,  as of December  31, 1997 and
1996, and the related statements of profit and loss, partners' capital (deficit)
and cash flows for the years then  ended.  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 audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 Columbia Townhouse  Associates
Limited Partnership as of December 31, 1997 and
1996, and the results of its operations,  changes in partners' capital (deficit)
and cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban  Development,  we have also issued a report dated January 31, 1998, on our
consideration of the Partnership's internal control structure and reports, dated
January 31, 1998, on its  compliance  with specific  requirements  applicable to
major HUD Programs and specific  requirements  applicable  to  Affirmative  Fair
Housing.

As discussed in Note A, the accompanying financial statements have been prepared
assuming that the Partnership will continue as a going concern.  As shown in the
financial  statements,  the Partnership has incurred  substantial  losses before
depreciation for each of the passed two years.  The financial  statements do not
include any adjustments  relating to the  recoverability  and  classification of
recorded assets, or the amounts of  classifications of liabilities that might be
necessary in the event the Partnership cannot continue in existence.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The accompanying supplemental information
(shown in Section II) is presented for the purpose of additional analysis and is
not a required  part of the basic  financial  statements  of Columbia  Townhouse
Associates Limited Partnership.  Such information has been subjected to the same
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are presented fairly in all material respects in relation to the
basic financial statements taken as a whole.

/s/Vroman, McGowen, Hurst, Clark & Smith, P.C.
Des Moines, Iowa
January 31, 1998

<PAGE>

[Letterhead]
[LOGO]
VMCHC&S Vroman, McGowen, Hurst, Clark & Smith, P.C.
Certified Public Accountants and Business Advisors

INDEPENDENT AUDITOR'S REPORT

To the Partners
Columbia Townhouse Associates Limited Partnership
Des Moines, Iowa

We have audited the accompanying balance sheets of Columbia Townhouse Associates
Limited  Partnership,  HUD Project No.  074-35189,  as of December  31, 1996 and
1995, and the related statements of profit and loss, partners' capital (deficit)
and cash flows for the years then  ended.  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 audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 Columbia Townhouse  Associates
Limited Partnership as of December 31, 1996 and
1995, and the results of its operations,  changes in partners' capital (deficit)
and cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban  Development,  we have also issued a report dated January 31, 1997, on our
consideration of the Partnership's internal control structure and reports, dated
January 31, 1997, on its  compliance  with specific  requirements  applicable to
major HUD Programs and specific  requirements  applicable  to  Affirmative  Fair
Housing.

As discussed in Note A, the accompanying financial statements have been prepared
assuming that the Partnership will continue as a going concern.  As shown in the
financial  statements,  the Partnership has incurred  substantial  losses before
depreciation for each of the passed two years.  The financial  statements do not
include any adjustments  relating to the  recoverability  and  classification of
recorded assets, or the amounts of  classifications of liabilities that might be
necessary in the event the Partnership cannot continue in existence.

<PAGE>
Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The accompanying supplemental information
(shown in Section II) is presented for the purpose of additional analysis and is
not a required  part of the basic  financial  statements  of Columbia  Townhouse
Associates Limited Partnership.  Such information has been subjected to the same
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are presented fairly in all material respects in relation to the
basic financial statements taken as a whole.

/s/Vroman, McGowen, Hurst, Clark & Smith, P.C.
Des Moines, Iowa
January 31, 1997

Other auditor information:
Lead Auditor - Michael W. McNichols
Federal ID Number- 42-1104473

<PAGE>

[Letterhead]
[LOGO]
Fishbein & Company
Certified Public Accountants                              February 5, 1998
Elkins Park, PA

INDEPENDENT AUDITOR'S REPORT

Partners
Admiral Housing Limited Partnership

We have  audited the  accompanying  balance  sheets of ADMIRAL  HOUSING  LIMITED
PARTNERSHIP,  as of  December  31,  1997  and 1996  and the  related  statements
operations,  partners'  equity and cash flows for the years  then  ended.  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 audits 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 provides 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 Admiral Housing Limited Partnership
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental  information included in
this report  (shown on pages 10 and 11) is presented  for purposes of additional
analysis and is not a required  part of the basic  financial  statements  of the
Partnership.  Such  information  has been  subjected to the auditing  procedures
applied in the audit of the basic financial  statements and, in our opinion,  is
fairly stated in all material  respects in relation to the financial  statements
taken as a whole.

/s/Fishbein & Company P.C.

<PAGE>

[Letterhead]
[LOGO]
Fishbein & Company
Certified Public Accountants                              January 31, 1997
Elkins Park, PA

INDEPENDENT AUDITOR'S REPORT

Partners
Admiral Housing Limited Partnership

We have  audited the  accompanying  balance  sheets of ADMIRAL  HOUSING  LIMITED
PARTNERSHIP,  as of  December  31,  1996  and 1995  and the  related  statements
operations,  partners'  equity  and cash  flows for the year then  ended.  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 audits 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 provides 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 Admiral Housing Limited Partnership
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental  information included in
this report  (shown on pages 9 and 10) is presented  for purposes of  additional
analysis and is not a required  part of the basic  financial  statements  of the
Partnership.  Such  information  has been  subjected to the auditing  procedures
applied in the audit of the basic financial  statements and, in our opinion,  is
fairly stated in all material  respects in relation to the financial  statements
taken as a whole.

/s/Fishbein & Company P.C.

<PAGE>

[Letterhead]
[LOGO]
HALBERT, KATZ & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Philadelphia, PA

INDEPENDENT AUDITOR'S REPORT

To the Partners
Georgetown Associates II, L.P.
Wilmington, Delaware

We have audited the  accompanying  balance  sheets of Georgetown  Associates II,
L.P., as of December 31, 1997 and December 31, 1996, and the related  statements
of loss,  partners'  capital  (capital  deficiency) and cash flows for the years
then ended.  These financial  statements are the responsibility of the project'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 audits 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 Georgetown Associates II, L.P.,
as of December 31, 1997 and December 31, 1996, and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole. The supporting  information  included in
the  report  (shown on pages 13  through  15) is  presented  for the  purpose of
additional analysis and is not a required part of the basic financial
statements of Georgetown Associates II, L.P. Such information has been subjected
to the same  auditing  procedures  applied in the audits of the basic  financial
statements  and in our opinion,  is fairly  stated in all  material  respects in
relation to the financial statements taken as a whole.

/s/Halbert, Katz & Co., P.C.
January 30, 1998

<PAGE>

[Letterhead]
[LOGO]
HALBERT, KATZ & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Philadelphia, PA

INDEPENDENT AUDITOR'S REPORT

To the Partners
Georgetown Associates II, L.P.
Wilmington, Delaware

We have audited the  accompanying  balance  sheets of Georgetown  Associates II,
L.P., as of December 31, 1996 and December 31, 1995, and the related  statements
of loss,  partners'  capital  (capital  deficiency) and cash flows for the years
then ended.  These financial  statements are the responsibility of the project'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 audits 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 Georgetown Associates II, L.P.,
as of December 31, 1996 and December 31, 1995, and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole. The supporting  information  included in
the  report  (shown on pages 12  through  14) is  presented  for the  purpose of
additional analysis and is not a required part of the basic financial
statements of Georgetown Associates II, L.P. Such information has been subjected
to the same  auditing  procedures  applied in the audits of the basic  financial
statements  and in our opinion,  is fairly  stated in all  material  respects in
relation to the financial statements taken as a whole.

/s/Halbert, Katz & Co., P.C.
January 30, 1997

<PAGE>

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Lexington Associates, I LP
(A Limited Partnership)

We have audited the accompanying balance sheets of Lexington Associates, I LP (A
Limited Partnership),  a FmHA Project, as of December 31, 1997 and 1996, and the
related  statements of operations,  changes in partners'  capital and cash flows
for the years then ended.  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  Lexington  Associates  I LP (A
Limited  Partnership)  as of December 31, 1997 and 1996,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

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

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January  26,  1998  on our  consideration  of the  limited  partnership's
internal control structure and a report dated January 26, 1998 on its compliance
with laws and regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
January 26, 1998

<PAGE>

[Letterhead]
[LOGO]
CRAIN
& COMPANY
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners
Lexington Associates, I LP
(A Limited Partnership)

We have audited the accompanying balance sheets of Lexington Associates, I LP (A
Limited Partnership),  a FmHA Project, as of December 31, 1996 and 1995, and the
related  statements of operations,  changes in partners'  capital and cash flows
for the years then ended.  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  Lexington  Associates  I LP (A
Limited  Partnership)  as of December 31, 1996 and 1995,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.

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

In accordance with Government Auditing  Standards,  we have also issued a report
dated  February  12,  1997 on our  consideration  of the  limited  partnership's
internal  control  structure  and a  report  dated  February  12,  1997  on  its
compliance with laws and regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
February 12, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Longview Apartments, L.P.
Humboldt, Kansas

We have audited the accompanying balance sheet of Longview  Apartments,  L.P. (a
Kansas limited partnership), RECD Case No.: 18-001-431454412, as of December 31,
1997 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Longview  Apartments,  L.P. as of
December 31, 1997,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
January 31, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Longview Apartments, L.P.
Humboldt, Kansas

We have audited the accompanying balance sheet of Longview  Apartments,  L.P. (a
Kansas limited partnership), RECD Case No.: 18-001-431454412, as of December 31,
1996 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Longview  Apartments,  L.P. as of
December 31, 1996,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
January 31, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Longview Apartments, L.P.
Humboldt, Kansas

We have audited the accompanying balance sheet of Longview  Apartments,  L.P. (a
Kansas limited partnership), RECD Case No.: 18-001-431454412, as of December 31,
1995 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Longview  Apartments,  L.P. as of
December 31, 1995,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
January 31, 1996

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Missouri Rural Housing of Oak Grove, L.P.
Oak Grove, Missouri

We have audited the accompanying  balance sheet of Missouri Rural Housing of Oak
Grove,  L.P. (a Missouri limited  partnership),  as of December 31, 1997 and the
related  statements of loss,  partners'  equity and cash flows for the year then
ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Missouri  Rural  Housing of Oak
Grove,  L.P. as of December 31, 1997,  and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 9, 1998

<PAGE>
[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Missouri Rural Housing of Oak Grove, L.P.
Oak Grove, Missouri

We have audited the accompanying  balance sheet of Missouri Rural Housing of Oak
Grove,  L.P. (a Missouri limited  partnership),  as of December 31, 1996 and the
related  statements of loss,  partners'  equity and cash flows for the year then
ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Missouri  Rural  Housing of Oak
Grove,  L.P. as of December 31, 1996,  and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 9, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Missouri Rural Housing of Oak Grove, L.P.
Oak Grove, Missouri

We have audited the accompanying  balance sheet of Missouri Rural Housing of Oak
Grove,  L.P. (a Missouri limited  partnership),  as of December 31, 1995 and the
related  statements of loss,  partners'  equity and cash flows for the year then
ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Missouri  Rural  Housing of Oak
Grove,  L.P. as of December 31, 1995,  and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 9, 1996

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Smithville Rural Housing, A Limited Partnership
Wayne, Nebraska

We have audited the accompanying  balance sheet of Smithville  Rural Housing,  A
Limited   Partnership   (a  Missouri   limited   partnership),   RECD  Case  No:
29-024-480975973  as of December  31, 1997 and the related  statements  of loss,
partners'  equity  and cash  flows  for the year  then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Smithville Rural Housing, A Limited
Partnership  as of December 31, 1997,  and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 7, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Smithville Rural Housing, A Limited Partnership
Wayne, Nebraska

We have audited the accompanying  balance sheet of Smithville  Rural Housing,  A
Limited   Partnership   (a  Missouri   limited   partnership),   RECD  Case  No:
29-024-480975973  as of December  31, 1996 and the related  statements  of loss,
partners'  equity  and cash  flows  for the year  then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Smithville Rural Housing, A Limited
Partnership  as of December 31, 1996 and the results of its  operations  and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 7, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Smithville Rural Housing, A Limited Partnership
Wayne, Nebraska

We have audited the accompanying  balance sheet of Smithville  Rural Housing,  A
Limited   Partnership   (a  Missouri   limited   partnership),   RECD  Case  No:
29-024-480975973  as of December  31, 1995 and the related  statements  of loss,
partners'  equity  and cash  flows  for the year  then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Smithville Rural Housing, A Limited
Partnership  as of December 31, 1995,  and the results of its operations and its
cash  flows  for the year  then  ended in  conformity  with  generally  accepted
accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 7, 1996

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Westgate Associates I, L.P.
Perryville, Arkansas

We have audited the accompanying balance sheet of Westgate Associates I, L.P. (a
Missouri limited partnership), FmHA Case No: 03-053-431477863 as of December 31,
1997 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Westgate  Associates I, L.P. as of
December 31, 1997,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 6, 1998

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Westgate Associates I, L.P.
Perryville, Arkansas

We have audited the accompanying balance sheet of Westgate Associates I, L.P. (a
Missouri limited partnership), FmHA Case No: 03-053-431477863 as of December 31,
1996 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Westgate  Associates I, L.P. as of
December 31, 1996,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 6, 1997

<PAGE>

[Letterhead]
[LOGO]
BCC
Braunsdorf, Carlson and Clinkinbeard
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL ASSOCIATION


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
Westgate Associates I, L.P.
Perryville, Arkansas

We have audited the accompanying balance sheet of Westgate Associates I, L.P. (a
Missouri limited partnership), FmHA Case No: 03-053-431477863 as of December 31,
1995 and the related statements of loss, partners' equity and cash flows for the
year then  ended.  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 audit.

We conducted our audit 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
misstatements. 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 audit provides 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 Westgate  Associates I, L.P. as of
December 31, 1995,  and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard,  CPA's, P.A.
TOPEKA, KANSAS
February 6, 1996

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Tucson Trails Limited Partnership I
Madison, Wisconsin

We have  audited  the  accompanying  balance  sheets  of Tucson  Trails  Limited
Partnership  I as of December 31, 1997 and 1996,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects, the financial position of Tucson Trails Limited Partnership I
as of December 31, 1997 and 1996, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 12, 1998

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Tucson Trails Limited Partnership I
Madison, Wisconsin

We have  audited  the  accompanying  balance  sheets  of Tucson  Trails  Limited
Partnership  I as of December 31, 1996 and 1995,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects, the financial position of Tucson Trails Limited Partnership I
as of December 31, 1996 and 1995, and the results of its operations,  changes in
partners'  equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 17, 1997

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI

INDEPENDENT AUDITOR'S REPORT

To the Partners
Tucson Trails Limited Partnership II
Madison, Wisconsin

We have  audited  the  accompanying  balance  sheets  of Tucson  Trails  Limited
Partnership II as of December 31, 1997 and 1996,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Tucson Trails Limited  Partnership
II as of December 31, 1997 and 1996, and the results of its operations,  changes
in  partners'  equity and its cash flows for the years then ended in  conformity
with generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 17, 1997

<PAGE>

[Letterhead]
[LOGO]
Suby, Von Haden
& Associates, S.C.
CERTIFIED PUBLIC ACCOUNTANTS
Business and Management Consultants
Madision, WI
INDEPENDENT AUDITOR'S REPORT

To the Partners
Tucson Trails Limited Partnership II
Madison, Wisconsin

We have  audited  the  accompanying  balance  sheets  of Tucson  Trails  Limited
Partnership II as of December 31, 1996 and 1995,  and the related  statements of
loss,  partners' equity and cash flows for the years then ended. 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 above present fairly, in all
material respects,  the financial position of Tucson Trails Limited  Partnership
II as of December 31, 1996 and 1995, and the results of its operations,  changes
in  partners'  equity and its cash flows for the years then ended in  conformity
with generally accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 17, 1997

<PAGE>

[Letterhead]
[LOGO]
PATTERSON & KELLY
PROFESSIONAL ASSOCIATION
CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of
Walker Woods Partners, L.P.
Dover, Delaware 19901

INDEPENDENT AUDITORS' REPORT


We have audited the accompanying  balance sheets of Walker Woods Partners,  L.P.
as of December 31, 1997 and 1996, and the  statements of income,  cash flows and
owners' equity and for the years then ended. These financial  statements are the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements referred above present fairly, in all
material respects,  the financial position of Walker Woods Partners,  L.P. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
and  owners'  equity  for the years  then  ended in  conformity  with  generally
accepted accounting principles.

/s/Patterson & Kelly, P.A.
Patterson & Kelly, P.A.
Dover, Delaware
February 12, 1998


<PAGE>

[Letterhead]
[LOGO]
PATTERSON & KELLY
PROFESSIONAL ASSOCIATION
CERTIFIED PUBLIC ACCOUNTANTS


To the Partners of
Walker Woods Partners, L.P.
Dover, Delaware 19901

INDEPENDENT AUDITORS' REPORT


We have audited the accompanying  balance sheets of Walker Woods Partners,  L.P.
as of December 31, 1996 and 1995, and the  statements of income,  cash flows and
owners' equity and for the years then ended. These financial  statements are the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements referred above present fairly, in all
material respects,  the financial position of Walker Woods Partners,  L.P. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
and  owners'  equity  for the years  then  ended in  conformity  with  generally
accepted accounting principles.

/s/Patterson & Kelly, P.A.
Patterson & Kelly, P.A.
Dover, Delaware
February 15, 1997

<PAGE>

[Letterhead]
[LOGO]
Reznick, Fedder & Silverman

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Waterfront Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Waterfront Limited Partnership, DHCR No.: UDC-13 as of December 31, 1997 and the
related  statements  of  income  and  expenses  (on DHCR  Form  No.  HAA-77-3a),
partners'  (deficiency)  and cash flows as of 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  Those  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the 1997 financial statements referred to above present fairly,
in  all  material  respects,   the  financial  position  of  Waterfront  Limited
Partnership,  DHCR No.: UDC-13,  as of December 31, 1997, and the results of its
operations,  the changes in partners'  (deficiency)  and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 6 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  8.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 30, 1998 on our consideration of Waterfront Limited  Partnership's
internal control structure and a report dated January 30, 1998 on its compliance
with laws and regulations.

/s/Reznick, Fedder & Silverman
Boston, Massachusetts
January 30, 1998

<PAGE>
[Letterhead]
[LOGO]
Coopers & Lybrand

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Waterfront Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Waterfront Limited Partnership, DHCR No.: UDC-13 as of December 31, 1996 and the
related  statements  of  income  and  expenses  (on DHCR  Form  No.  HAA-77-3a),
partners'  (deficiency)  and cash flows as of December 31, 1996. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  Those  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the 1996 financial statements referred to above present fairly,
in  all  material  respects,   the  financial  position  of  Waterfront  Limited
Partnership,  DHCR No.: UDC-13,  as of December 31, 1996, and the results of its
operations,  the changes in partners'  (deficiency)  and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 8 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  8.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 10, 1997 on our consideration of Waterfront Limited Partnership's
internal  control  structure  and a  report  dated  February  10,  1997  on  its
compliance with laws and regulations.

/s/Coopers & Lybrand L.L.P
Boston, Massachusetts
February 10, 1997

<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Waterfront Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Waterfront Limited Partnership, DHCR No.: UDC-13 as of December 31, 1995 and the
related  statements  of  income  and  expenses  (on DHCR  Form  No.  HAA-77-3a),
partners'  (deficiency)  and cash flows as of December 31, 1995. 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 audit. The financial statements of Waterfront Limited Partnership, DHCR No.:
UDC-13 as of  December  31, 1994 were  audited by other  auditors  whose  report
thereon  dated  January  31,  1995  expressed  an  unqualified  opinion on those
financial statements.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  Those  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provide a  reasonable  basis for our
opinion.

In our opinion,  the 1995 financial statements referred to above present fairly,
in  all  material  respects,   the  financial  position  of  Waterfront  Limited
Partnership,  DHCR No.: UDC-13,  as of December 31, 1995, and the results of its
operations,  changes in partners'  (deficiency) and cash flows for the year then
ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 7 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  7.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 6, 1996 on our consideration of Waterfront Limited  Partnership's
internal control structure and a report dated February 6, 1996 on its compliance
with laws and regulations.

/s/Coopers & Lybrand L.L.P
Boston, Massachusetts
February 6, 1996

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

To the Partners of
West Dade, Ltd.
(A Limited Partnership)
Miami, Florida

We have audited the accompanying balance  sheet of West Dade, Ltd.(FHA  Project
No.  066-94021)  as of December  31,  1997,  and the related  statements  of 
profit and loss (HUD Form  92410),  changes in partners' capital  accounts, and 
cash  flows for the year  then  ended.  These  financial statements  are the  
responsibility  of the management of the  partnership.  Our responsibility is to
express an opinion on these financial  statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position West Dade, Ltd. (FHA Project No.
066-94021) at December 31, 1997,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban Development  ("HUD"), we have also issued a report dated February 5, 1998,
on our  consideration  of West Dade,  Ltd.'s  internal  control  structure,  and
reports dated  February 5, 1998, on its  compliance  with specific  requirements
applicable  to major  HUD  programs  and  specific  requirements  applicable  to
Affirmative Fair Housing.

<PAGE>

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The accompanying  supplemental information shown on
pages 17 to 22 are presented for the purpose of additional  analysis and are not
a  required  part of the basic  financial  statements  of West Dade,  Ltd.  (FHA
Project No.  066-94021).  Such  information  has been  subjected to the auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 5, 1998

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

To the Partners of
West Dade, Ltd.
(A Limited Partnership)
Miami, Florida

We have audited the  accompanying  balance  sheet of West Dade, Ltd.(FHA Project
No.  066-94021)  as of December  31,  1996,  and the related  statements  of 
profit and loss (HUD Form  92410),  changes in partners' capital  accounts, and 
cash  flows for the year  then  ended.  These  financial statements  are the  
responsibility  of the management of the  partnership.  Our responsibility is to
express an opinion on these financial  statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position West Dade, Ltd. (FHA Project No.
066-94021) at December 31, 1996,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban Development  ("HUD"), we have also issued a report dated January 31, 1997,
on our  consideration  of West Dade,  Ltd.'s  internal  control  structure,  and
reports  dated January 31, 1997, on its  compliance  with specific  requirements
applicable  to major  HUD  programs  and  specific  requirements  applicable  to
Affirmative  Fair Housing.  <PAGE> Our audit was made for the purpose of forming
an opinion on the basic financial  statements taken as a whole. The accompanying
supplemental  information  shown on pages 17 to 22 are presented for the purpose
of  additional  analysis  and are not a  required  part of the  basic  financial
statements of West Dade, Ltd. (FHA Project No. 066-94021).  Such information has
been  subjected  to the auditing  procedures  applied in the audits of the basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the financial statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
January 31, 1997

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

West Dade, Ltd.
(A Limited Partnership)
Miami, Florida

We have audited the  accompanying  balance  sheet of West Dade,  Ltd. (A Limited
Partnership)  (FHA  Project No.  066-94021)  as of December  31,  1995,  and the
related  statements  of profit and loss (HUD Form  92410),  changes in partners'
capital  accounts,  and cash  flows for the year  then  ended.  These  financial
statements  are the  responsibility  of the management of the  partnership.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit  also  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 audit provides a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position West Dade, Ltd. (FHA Project No.
066-94021) as of December 31, 1995,  and the results of its  operations  and its
cash  flows for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supporting schedules and data shown on pages 15
through 29 are presented  for the purposes of  additional  analysis and is not a
required part of the basic financial  statements of West Dade, Ltd. (FHA Project
No. 066-94021).  Such information has been subjected to the auditing  procedures
applied in the audits of the basic financial  statements and, in our opinion, is
fairly stated in all material  respects in relation to the financial  statements
taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
January 26, 1996

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

To the Partners of
West Dade, Ltd. II
(A Limited Partnership)
Miami, Florida

We have  audited  the  accompanying  balance  sheet of West Dade,  Ltd.  II (FHA
Project No.  066-94022) as of December 31, 1997,  and the related  statements of
profit and loss (HUD Form 92410), changes in partners' capital accounts, and 
cash flows for the year then ended.  These financial statements are the  
responsibility of the management of the partnership.  Our responsibility is to 
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the financial  position West Dade, Ltd. II (FHA Project No.
066-94022) at December 31, 1997,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban Development ("HUD") we have also issued a report dated February 6, 1998 on
our  consideration  of West Dade,  Ltd. II's  internal  control  structure,  and
reports dated  February 6, 1998, on its  compliance  with specific  requirements
applicable  to major  HUD  programs  and  specific  requirements  applicable  to
Affirmative Fair Housing.

<PAGE>

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The accompanying supplementary information shown on
pages 17 to 22 are presented for the purpose of additional  analysis and are not
a required part of the basic  financial  statements  of West Dade,  Ltd. II (FHA
Project No.  066-94022).  Such  information  has been  subjected to the auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 6, 1998

<PAGE>

[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

To the Partners of
West Dade, Ltd. II
(A Limited Partnership)
Miami, Florida

We have  audited  the  accompanying  balance  sheet of West Dade,  Ltd.  II (FHA
Project No.  066-94022) as of December 31, 1996,  and the related  statements of
profit and loss (HUD Form 92410), changes in partners' capital accounts, and 
cash flows for the year then ended.  These financial statements are the 
responsibility of the management of the partnership.  Our responsibility is to 
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the financial  position West Dade, Ltd. II (FHA Project No.
066-94022) at December 31, 1996,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban Development ("HUD") we have also issued a report dated January 31, 1997 on
our  consideration  of West Dade,  Ltd. II's  internal  control  structure,  and
reports  dated January 31, 1997, on its  compliance  with specific  requirements
applicable  to major  HUD  programs  and  specific  requirements  applicable  to
Affirmative  Fair Housing.  <PAGE> Our audit was made for the purpose of forming
an opinion on the basic financial  statements taken as a whole. The accompanying
supplementary  information shown on pages 17 to 22 are presented for the purpose
of  additional  analysis  and are not a  required  part of the  basic  financial
statements of West Dade, Ltd. II (FHA Project No.  066-94022).  Such information
has been subjected to the auditing procedures applied in the audits of the basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the financial statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
January 31, 1997

<PAGE>
[Letterhead]
[LOGO]
BDO Seidman, LLP
Accountants and Consultants

Independent Auditors' Report

West Dade, Ltd. II
(A Limited Partnership)
Miami, Florida

We have audited the accompanying  balance sheet of West Dade, Ltd. II (A Limited
Partnership)  (FHA  Project No.  066-94022)  as of December  31,  1995,  and the
related  statements  of profit and loss (HUD Form  92410),  changes in partners'
capital  accounts,  and cash  flows for the year  then  ended.  These  financial
statements  are the  responsibility  of the management of the  partnership.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit  also  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 audit provides a reasonable  basis
for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the financial  position West Dade, Ltd. II (FHA Project No.
066-94022) as of December 31, 1995,  and the results of its  operations  and its
cash  flows for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supporting schedules and data shown on pages 16
through 30 are presented  for the purposes of  additional  analysis and is not a
required  part of the basic  financial  statements  of West Dade,  Ltd.  II (FHA
Project No.  066-94022).  Such  information  has been  subjected to the auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
January 26, 1996

<PAGE>
[Letterhead]
[LOGO]
CHAPMAN, COLLINS, AGOSTINELLI & SHAW, P.C.  A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
Rochester, NY

INDEPENDENT AUDITORS' REPORT

To the Partners of
Wood Creek Associates

We have audited the balance sheets of Wood Creek  Associates (A New York Limited
Partnership)  as of December 31, 1997 and 1996,  and the related  statements  of
operations,  changes  in  partners'  capital,  and cash flows for the years then
ended.  These  financial   statements  are  the  responsibility  of  Wood  Creek
Associates'  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 Wood Creek Associates as of December
31, 1997 and 1996,  and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

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

/s/CHAPMAN, COLLINS, AGOSTINELLI & SHAW, P.C.
February 4, 1998

<PAGE>

[Letterhead]
[LOGO]
CHAPMAN, COLLINS, AGOSTINELLI & SHAW, P.C.  A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
Rochester, NY

INDEPENDENT AUDITORS' REPORT

To the Partners of
Wood Creek Associates

We have audited the balance sheets of Wood Creek  Associates (A New York Limited
Partnership)  as of December 31, 1996 and 1995,  and the related  statements  of
operations,  changes  in  partners'  capital,  and cash flows for the years then
ended.  These  financial   statements  are  the  responsibility  of  Wood  Creek
Associates'  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 Wood Creek Associates as of December
31, 1996 and 1995,  and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

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

/s/CHAPMAN, COLLINS, AGOSTINELLI & SHAW, P.C.
January 31, 1997

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants, Business Consultants
A Professional Corporation

INDEPENDENT AUDITORS' REPORT

To the Partners
Westwood Manor Limited Dividend Housing
       Association Limited Partnership

We have  audited  the  accompanying  balance  sheet of  Westwood  Manor  Limited
Dividend Housing  Association  Limited  Partnership as of December 31, 1997, and
the related  statements  of profit and loss (on HUD Form No.  92410),  partners'
equity and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Westwood Manor Limited  Dividend
Housing Association Limited Partnership as of December 31, 1997, and the results
of its operations,  the changes in partners'  equity and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supplemental  information on pages 20 though 25
is presented for purposes of  additional  analysis and is not a required part of
the basic  financial  statements.  Such  information  has been  subjected to the
auditing procedures applied in the audit of the basic financial  statements and,
in our opinion,  is fairly  stated in all  material  respects in relation to the
financial statements taken as a whole.

<PAGE>

In accordance with Government Auditing Standards and the " Consolidated Audit 
Guide for Audits of HUD Programs,  we have also issued reports dated February 5,
1998 on our  consideration  of Westwood Manor Limited Dividend Housing 
Association Limited Partnership's  internal control structure and on its
compliance  with  specific  requirements   applicable  to  major  HUD  Programs,
affirmative fair housing,  and laws and regulations  applicable to the financial
statements.

/s/Reznick Fedder & Silverman
Bethesda, Maryland                              Federal Employer
February 5, 1998                                       Identification Number:
                                                                 52-1088612

Audit Principal:   Renee G. Scruggs
<PAGE>
[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants, Business Consultants
A Professional Corporation

INDEPENDENT AUDITORS' REPORT

To the Partners
Westwood Manor Limited Dividend Housing
       Association Limited Partnership

We have  audited  the  accompanying  balance  sheet of  Westwood  Manor  Limited
Dividend Housing  Association  Limited  Partnership as of December 31, 1996, and
the related  statements  of profit and loss (on HUD Form No.  92410),  partners'
equity and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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 audit  provides 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 Westwood Manor Limited  Dividend
Housing Association Limited Partnership as of December 31, 1996, and the results
of its operations,  the changes in partners'  equity and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supplemental  information on pages 20 though 25
is presented for purposes of additional  analysis and is not a required part
of the basic financial  statements.  Such  information has been subjected to the
auditing procedures applied in the audit of the basic financial  statements and,
in our opinion,  is fairly  stated in all  material  respects in relation to the
financial statements taken as a whole.
<PAGE>
In accordance with Government  Auditing  Standards and the " Consolidated Audit
Guide for Audits of HUD Programs, we have also issued reports dated February 14,
1997 on our  consideration  of Westwood Manor Limited Dividend Housing 
Association Limited Partnership's  internal control structure and on its
compliance  with  specific  requirements   applicable  to  major  HUD  Programs,
affirmative fair housing,  and laws and regulations  applicable to the financial
statements.

/s/Reznick Fedder & Silverman

Bethesda, Maryland                              Federal Employer
February 14, 1997                                       Identification Number:
                                                                 52-1088612
Audit Principal:   Renee G. Scruggs

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants, Business Consultants
A Professional Corporation

INDEPENDENT AUDITORS' REPORT

To the Partners
Westwood Manor Limited Dividend Housing
       Association Limited Partnership

We have  audited  the  accompanying  balance  sheet of  Westwood  Manor  Limited
Dividend Housing  Association  Limited  Partnership as of December 31, 1995, and
the related  statements  of profit and loss (on HUD Form No.  92410),  partners'
equity and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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  also  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 audit provides a reasonable  basis
for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the financial  position  Westwood  Manor  Limited  Dividend
Housing Association Limited Partnership as of December 31, 1995, and the results
of its  operations,  the changes in partners'  equity and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supplemental  information on pages 19 though 24
is presented for the purposes of additional  analysis and is not a required part
of the basic financial  statements.  Such  information has been subjected to the
auditing procedures applied in the audit of the basic financial  statements and,
in our opinion,  is fairly  stated in all  material  respects in relation to the
financial statements taken as a whole.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated February 2, 1996 on our  consideration  of Westwood Manor Limited Dividend
Housing Association Limited Partnership's  internal control structure and on its
compliance  with  specific  requirements   applicable  to  major  HUD  Programs,
affirmative fair housing,  and laws and regulations  applicable to the financial
statements.

/s/Reznick Fedder & Silverman
Bethesda, Maryland                              Federal Employer
February 2, 1996                                       Identification Number:
                                                                 52-1088612

Audit Principal:   Renee G. Scruggs


<PAGE>
[Letterhead]
[LOGO]
Pannell Kerr Forster PC
Certified Public Accountants
Boston, MA

Independent Auditors' Report

To the Partners
Pleasant Plaza Housing Limited Partnership

We have audited the accompanying balance sheet of Pleasant Plaza Housing Limited
Partnership,  MHFA Project No:  85-004,  as of December 31, 1997 and the related
statements of loss, changes in partners' equity  (deficiency) and cash flows for
the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  These  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 audit  provides 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 Pleasant Plaza Housing Limited
Partnership  at December 31, 1997 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 8, 1998, on our  consideration  of Pleasant Plaza Housing Limited
Partnership's internal control structure, and a report dated February 9, 1998 on
its compliance with laws and regulations.

/s/Pannell Kerr Forster PC
February 8, 1998

<PAGE>

[Letterhead]
[LOGO]
Pannell Kerr Forster PC
Certified Public Accountants
Boston, MA

Independent Auditors' Report

To the Partners
Pleasant Plaza Housing Limited Partnership

We have audited the accompanying balance sheet of Pleasant Plaza Housing Limited
Partnership,  MHFA Project No:  85-004,  as of December 31, 1996 and the related
statements of loss, changes in partners' equity  (deficiency) and cash flows for
the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  These  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 audit  provides 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 Pleasant Plaza Housing Limited
Partnership  at December 31, 1996 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 9, 1997, on our  consideration  of Pleasant Plaza Housing Limited
Partnership's internal control structure, and a report dated February 9, 1997 on
its compliance with laws and regulations.

/s/Pannell Kerr Forster PC
February 9, 1997

<PAGE>

[Letterhead]
[LOGO]
Pannell Kerr Forster PC
Certified Public Accountants
Boston, MA

Independent Auditors' Report

To the Partners
Pleasant Plaza Housing Limited Partnership

We have audited the accompanying balance sheet of Pleasant Plaza Housing Limited
Partnership, MHFA Project No: 85-004-5, as of December 31, 1995, and the related
statements of loss, changes in partners' equity  (deficiency) and cash flows for
the year then ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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  also  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 audit provides a reasonable  basis
for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material  respects,  the  financial  position  Pleasant  Plaza  Housing  Limited
Partnership at December 31, 1995, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated February 9, 1996 on our  consideration  of Pleasant Plaza Housing  Limited
Partnership's internal control structure, and a report dated February 9, 1996 on
its compliance with laws and regulations.

/s/Pannell Kerr Forster PC
February 9, 1996

<PAGE>

[Letterhead]
[LOGO]
Reznick, Fedder & Silverman


INDEPENDENT AUDITORS' REPORT

To the Partners of Shoreline Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Shoreline  Limited  Partnership,  DHCR No.: UDC-03, as of December 31, 1997, and
the related  statements  of income and  expenses  (on DHCR Form No.  HAA-77-3a),
partners'  capital  deficit and cash flows for the year then 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 audit.

We conducted our audit 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
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 1997 financial statements referred to above present fairly,
in  all  material   respects,   the  financial  position  of  Shoreline  Limited
Partnership,  DHCR No.:  UDC-03 as of December 31, 1997,  and the results of its
operations,  changes in partners'  capital  deficit,  and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 8 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  8.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 10, 1998 on our consideration of Shoreline Limited  Partnership's
internal  control  structure  and a  report  dated  February  10,  1998  on  its
compliance with laws and regulations.

/s/Reznick, Fedder & Silverman
Boston, Massachusetts
January 30, 1998

<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Shoreline Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Shoreline  Limited  Partnership,  DHCR No.: UDC-03, as of December 31, 1996, and
the related  statements  of income and  expenses  (on DHCR Form No.  HAA-77-3a),
partners'  capital  deficit and cash flows for the year then ended  December 31,
1996. 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 audit.

We conducted our audit 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
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 1996 financial statements referred to above present fairly,
in  all  material   respects,   the  financial  position  of  Shoreline  Limited
Partnership,  DHCR No.:  UDC-03 as of December 31, 1996,  and the results of its
operations,  changes in partners'  capital  deficit,  and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 8 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  8.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 10, 1997 on our consideration of Shoreline Limited  Partnership's
internal  control  structure  and a  report  dated  February  10,  1997  on  its
compliance with laws and regulations.

/s/Coopers & Lybrand L.L.P
Boston, Massachusetts
February 10, 1997

<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Shoreline Limited Partnership:

We have audited the accompanying  balance sheet (on DHCR Form No.:  HAA-77.2) of
Shoreline Limited Partnership,  DHCR No.: UDC-03 as of December 31, 1995 and the
related  statements  of  income  and  expenses  (on DHCR  Form  No.  HAA-77-3a),
partners'  capital  deficit and cash flows for the year then ended  December 31,
1995. 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 audit.  The financial  statements of Shoreline  Limited
Partnership,  DHCR No.:  UDC-03 as of December  31,  1994 were  audited by other
auditors  whose report  thereon dated January 28, 1995  expressed an unqualified
opinion on those financial statements.

We conducted our audit 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
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 1995 financial statements referred to above present fairly,
in  all  material   respects,   the  financial  position  of  Shoreline  Limited
Partnership,  DHCR No.: UDC-03,  as of December 31, 1995, and the results of its
operations,  changes in  partners'  capital  deficit and cash flows for the year
then ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 7 to the
financial statements, the Partnership has experienced recurring operating losses
and working capital  deficiencies that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also  described  in  Note  7.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

In accordance with Government Auditing  Standards,  we have also issued a report
dated February 6, 1996 on our consideration of Shoreline  Limited  Partnership's
internal control structure and a report dated February 6, 1996 on its compliance
with laws and regulations.

/s/Coopers & Lybrand L.L.P
Boston, Massachusetts
February 6, 1996

<PAGE>

[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants

[Letterhead]
[LOGO]
MILLER, MAYER, SULLIVAN & STEVENS LLP
CERTIFIED PUBLIC ACCOUNTANTS


INDEPENDENT AUDITORS' REPORT

To the Partners                                      Rural Development
Poplar Village, Ltd.                                  London, Kentucky

We have audited the  accompanying  balance  sheets of Poplar  Village,  Ltd., (a
limited partnership) Case No. 20-048-611170806, as of December 31, 1997 and 1996
and the related statements of operations, changes in partners' equity (deficit),
and cash  flows for the year then  ended.  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 audit in accordance with generally accepted auditing
standards and the standards for financial audits contained in Government 
Auditing  Standards  issued by the Comptroller General of the United  States.  
Those  standards  require  that we plan and  perform the audits 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 Poplar  Village,  Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.

In accordance with Government Auditing Standards, we have also issued reports
dated January 29, 1998 on our consideration of Poplar Village,  Ltd. 's internal
control structure and compliance with laws and regulations.

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

/s/Miller, Mayer, Sullivan, & Stevens
Lexington, Kentucky
January 29, 1998

<PAGE>

[Letterhead]
[LOGO]
MILLER, MAYER, SULLIVAN & STEVENS LLP
CERTIFIED PUBLIC ACCOUNTANTS


INDEPENDENT AUDITORS' REPORT

To the Partners                                      Rural Development
Poplar Village, Ltd.                                  London, Kentucky

We have audited the  accompanying  balance  sheets of Poplar  Village,  Ltd., (a
limited partnership) Case No. 20-048-611170806, as of December 31, 1996 and 1995
and the related statements of operations, changes in partners' equity (deficit),
and cash  flows for the year then  ended.  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 audit in accordance with generally accepted auditing
standards and the standards for financial audits contained in Government
Auditing  Standards  issued by the Comptroller General of the United  States.  
Those standards require  that we plan and  perform the audits 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 Poplar  Village,  Ltd. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated January 31, 1997 on our consideration of Poplar Village,  Ltd. 's internal
control structure and compliance with laws and regulations.

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

/s/Miller, Mayer, Sullivan, & Stevens
Lexington, Kentucky
January 31, 1997

<PAGE>

[Letterhead]
[LOGO]
JOSEPH B. COHAN
& ASSOCIATES, P.C.
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners of
South Holyoke Housing Limited Partnership

We have audited the accompanying  balance sheet of South Holyoke Housing Limited
Partnership  as of  December  31,  1997 and the  related  statements  of income,
changes  in  partners'  equity  (deficiency),  and cash  flows for the year then
ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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  also  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 audit provides 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 South Holyoke Housing Limited
Partnership as of December 31, 1997, and the results of its operations,  changes
in  partners  equity and its cash  flows for the years then ended in  conformity
with generally accepted accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs,  issued by the U.S.  Department of Housing and
Urban  Development,  we have also issued a report dated  February 7, 1996 on our
consideration of South Holyoke Housing Limited  Partnership's  internal control,
and reports dated February 7, 1998 on its compliance  with laws and  regulations
and specific requirements applicable to nonmajor HUD program transactions.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  shown on pages 11 to 21 is  presented  for  purposes of  additional
analysis  and is not a required  part of the basic  financial  statements.  Such
information has been subjected to the auditing  procedures  applied in the audit
of the basic financial  statements and, in our opinion,  is fairly stated in all
material respects in relation to the financial statements taken as a whole.

/s/Joseph B. Cohan & Assoc PC
Worcester, Massachusetts
February 7, 1998

<PAGE>

[Letterhead]
[LOGO]
JOSEPH B. COHAN
& ASSOCIATES, P.C.
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners of
South Holyoke Housing Limited Partnership

We have audited the accompanying  balance sheet of South Holyoke Housing Limited
Partnership  as of  December  31,  1996 and the  related  statements  of income,
changes  in  partners'  equity  (deficiency),  and cash  flows for the year then
ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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  also  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 audit provides 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 South Holyoke Housing Limited
Partnership as of December 31, 1996, and the results of its operations,  changes
in  partners  equity and its cash  flows for the years then ended in  conformity
with generally accepted accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs,  issued by the U.S.  Department of Housing and
Urban  Development,  we have also issued a report dated  February 7, 1997 on our
consideration of South Holyoke Housing Limited  Partnership's  internal control,
and reports dated February 7, 1997 on its compliance  with laws and  regulations
and specific requirements applicable to nonmajor HUD program transactions.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  shown on pages 11 to 21 is  presented  for  purposes of  additional
analysis  and is not a required  part of the basic  financial  statements.  Such
information has been subjected to the auditing  procedures  applied in the audit
of the basic financial  statements and, in our opinion,  is fairly stated in all
material respects in relation to the financial statements taken as a whole.

/s/Joseph B. Cohan & Assoc PC
Worcester, Massachusetts
February 7, 1997

<PAGE>

[Letterhead]
[LOGO]
JOSEPH B. COHAN
& ASSOCIATES, P.C.
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Partners of
South Holyoke Housing Limited Partnership

We have audited the accompanying  balance sheet of South Holyoke Housing Limited
Partnership  as of  December  31,  1995 and the  related  statements  of income,
changes  in  partners'  equity  (deficiency),  and cash  flows for the year then
ended.  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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  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  also  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 audit provides 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 South Holyoke Housing Limited
Partnership as of December 31, 1995, and the results of its operations,  changes
in  partners  equity and its cash  flows for the years then ended in  conformity
with generally accepted accounting principles.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs,  issued by the U.S.  Department of Housing and
Urban  Development,  we have also issued a report dated  February 7, 1996 on our
consideration of South Holyoke Housing Limited  Partnership's  internal control,
and reports dated February 7, 1996 on its compliance  with laws and  regulations
and specific requirements applicable to nonmajor HUD program transactions.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  shown on pages 11 to 21 is  presented  for  purposes of  additional
analysis  and is not a required  part of the basic  financial  statements.  Such
information has been subjected to the auditing  procedures  applied in the audit
of the basic financial  statements and, in our opinion,  is fairly stated in all
material respects in relation to the financial statements taken as a whole.

/s/Joseph B. Cohan & Assoc PC
Worcester, Massachusetts
February 7, 1996


<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

Report of Independent Accountants

To the Partners of Quarter Mill Associates L.P.:

We have audited the accompanying balance sheet of Quarter Mill Associates, L.P.,
a Virginia Limited Partnership (the  "Partnership"),  FHA Project No. 051-35404,
as of December  31,  1997,  and the related  statements  of changes in partners'
capital accounts, profit and loss, and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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 Quarter Mill Associates,  L.P.
as of December 31, 1997,  and the results of its  operations  and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.

/s/Coopers & Lybrand L.L.P

Richmond, Virginia
January 20, 1998


<PAGE>
[Letterhead]
[LOGO]
Coopers
& Lybrand

Report of Independent Accountants

To the Partners of Quarter Mill Associates L.P.:

We have audited the accompanying balance sheet of Quarter Mill Associates, L.P.,
a Virginia Limited Partnership (the  "Partnership"),  FHA Project No. 051-35404,
as of December  31,  1996,  and the related  statements  of changes in partners'
capital accounts, profit and loss, and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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 Quarter Mill Associates,  L.P.
as of December 31, 1996,  and the results of its  operations  and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.

/s/Coopers & Lybrand L.L.P
Richmond, Virginia
January 27, 1997

<PAGE>

[Letterhead]
[LOGO]
Coopers & Lybrand

Report of Independent Accountants

To the Partners of Quarter Mill Associates L.P.:

We have audited the accompanying  balance sheet of Quarter Mill Associates L.P.,
a Virginia Limited Partnership (the  "Partnership"),  FHA Project No. 051-35404,
as of  December  31,  1995 and the related  statements  of changes in  partners'
capital accounts, profit and loss, and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally  accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United  States.  Those  standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 audit  provides 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 Quarter Mill Associates L.P. as
of December 31, 1995,  and the results of its  operations and its cash flows for
the  year  then  ended,  in  conformity  with  generally   accepted   accounting
principles.

Our audit was conducted for the  purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
this report is  presented  for the purpose of  additional  analysis and is not a
required part of the basic financial  statements of Quarter Mill Associates L.P.
Such  information has been subjected to the auditing  procedures  applied in the
audit of the basic financial statements and, in our opinion, is fairly stated in
all material respects in relation to the financial statements taken as a whole.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 30, 1996,  on our consideration of the  Partnership's internal
control structure,  a report dated January  30, 1996 on its compliance  with
specific requirements applicable  to its major  Housing and Urban Development
program  and a report dated January  30,  1996 on compliance with specific
requirements applicable to affirmative fair housing.

/s/Coopers & Lybrand L.L.P
Richmond, Virginia
January 30, 1996

<PAGE>

[Letterhead]
[LOGO]
MUELLER & WALLA, P.C.
Certified Public Accountants
Kirkwood, MI

INDEPENDENTS AUDITORS' REPORT

The Partners
Horseshoe Bend Associates I, L.P.
St. Louis, Missouri

We have audited the  accompanying  balance sheet of Horseshoe Bend Associates I,
L.P. (a limited  partnership)  as of December 31, 1997 and 1996, and the related
statements of operations,  partners' capital,  and cash flows for the years then
ended.  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 provides a reasonable basis for our opinion.

In our opinion,  financial  statements  referred to above present fairly, in all
material respects, the financial position of Horseshoe Bend Associates I, L.P. 
as of  December  31, 1997 and 1996 and the results of its operations, changes in
partners' capital and cash flows for the years then ended in  conformity  with
generally accepted accounting principles.

 /s/Mueller, Walla & Albertson, P.C.
Mueller, Walla & Albertson, P.C.
Certified Public Accountants
February 11, 1998

<PAGE>

[Letterhead]
[LOGO]
MUELLER & WALLA, P.C.
Certified Public Accountants
Kirkwood, MI

ACCOUNTANTS' COMPILATION REPORT

The Partners
Horseshoe Bend Associates I, L.P.
St. Louis, Missouri

We have compiled the accompanying  balance sheet of Horseshoe Bend Associates I,
L.P. (a limited partnership) as of December 31, 1995, and the related statements
of operations,  partners'  capital,  and cash flows for the year then ended,  in
accordance  with  Statements on Standards  for  Accounting  and Review  Services
issued by the American Institute of Certified Public Accountants.

A  compilation  is limited to  presenting  in the form of  financial  statements
information  that is the  representation  of management.  We have not audited or
reviewed the accompanying financial statements, and, accordingly, do not express
an opinion or any other form of assurance on them.

The financial  statements for the year ended December 31, 1994,  were audited by
us, and we expressed an unqualified opinion on them in our report dated February
6, 1995, but we have not performed any auditing procedures since that date.

/s/Mueller & Walla, P.C.
Mueller & Walla, P.C.
Certified Public Accountants
February 6, 1996

<PAGE>

 [Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants, Business Consultants
A Professional Corporation

INDEPENDENT AUDITORS' REPORT

To the Partners
Harbour View Associates

We have audited the accompanying balance sheets of Harbour View Associates as of
December 31, 1997 and 1996, and the related statements of operations,  partners'
deficit and cash flows for the years then ended. 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 audit.

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.

As more fully described in Note C to the financial  statements,  the Partnership
has not  recorded  certain  accrued  interest  on the  mortgage  payable  in the
accompanying  financial  statements which, in our opinion,  should be accrued in
order to conform with generally accepted accounting principles. If this interest
were  recorded,  accrued  interest  payable  would be increase  by $122,803  and
partners'  deficit  would be  increased  by $122,803 as of December 31, 1997 and
1996.

In our  opinion,  except for the  effects of not  accruing
certain  interest on the mortgage as discussed in the preceding  paragraph,  the
financial statements referred to above present fairly, in all material respects,
the financial position Harbour View Associates as of December 31, 1997 and 1996,
and the results of its operations, the changes in partners' deficit and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

<PAGE>

The  accompanying   financial   statements  have  been  prepared   assuming  the
Partnership  will  continue as a going  concern.  As  discussed in Note B to the
financial  statements,  the  Partnership  is in default of its  mortgage  due to
substantial  losses from operations and the unauthorized  withdrawal of funds by
the  former  managing  general  partner  and the  former  managing  agent of the
Partnership's   property.   These  events  raise  substantial  doubt  about  the
Partnership's  ability to  continue as a going  concern.  The  Management'  plan
regarding this matter is also  described in Note B. The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/Reznick Fedder & Silverman
Boston, Massachusetts                              Federal Employer
February 2, 1998                                       Identification Number:
                                                                 52-1088612

Audit Principal:   Phillip A. Weitzel

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants, Business Consultants
A Professional Corporation

INDEPENDENT AUDITORS' REPORT

To the Partners
Harbour View Associates

We have audited the accompanying balance sheets of Harbour View Associates as of
December 31, 1996 and 1995, and the related statements of operations,  partners'
deficit and cash flows for the years then ended. 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 audit.

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.

As more fully described in Note C to the financial  statements,  the Partnership
has not  recorded  certain  accrued  interest  on the  mortgage  payable  in the
accompanying  financial  statements which, in our opinion,  should be accrued in
order to conform with generally accepted accounting principles. If this interest
were  recorded,  accrued  interest  payable  would be increase  by $122,803  and
partners' deficit would be increased by $122,803 as of December 31, 1996.

In our  opinion,  except for the  effects of not  accruing
certain  interest on the mortgage as discussed in the preceding  paragraph,  the
financial statements referred to above present fairly, in all material respects,
the financial position Harbour View Associates as of December 31, 1996 and 1995,
and the results of its operations, the changes in partners' deficit and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.

<PAGE>

The  accompanying   financial   statements  have  been  prepared   assuming  the
Partnership  will  continue as a going  concern.  As  discussed in Note B to the
financial  statements,  the  Partnership  is in default of its  mortgage  due to
substantial  losses from operations and the unauthorized  withdrawal of funds by
the  former  managing  general  partner  and the  former  managing  agent of the
Partnership's   property.   These  events  raise  substantial  doubt  about  the
Partnership's  ability to  continue as a going  concern.  The  Management'  plan
regarding this matter is also  described in Note B. The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/Reznick Fedder & Silverman
Boston, Massachusetts                              Federal Employer
January 23, 1997                                       Identification Number:
                                                                 52-1088612

Audit Principal:   Phillip A. Weitzel

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants Business Consultants

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners
Willow Lake Partners II, L.P.

We have audited the accompanying balance sheet of Willow Lake Partners II, L.P.,
as of December 31, 1997, and the related statements of operations,  partners'  
equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position Willow Lake Partners II, L.P. as
of  December  31,  1997,  and the  results  of its  operations,  the  changes in
partners'  equity and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.


/s/Reznick Fedder & Silverman
Boston, Massachusetts
January 30, 1998

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants Business Consultants

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners
Willow Lake Partners II, L.P.

We have audited the accompanying balance sheet of Willow Lake Partners II, L.P.,
as of December 31, 1996, and the related statements of operations,  partners'  
equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position Willow Lake Partners II, L.P.
 as of December  31,  1996,  and the results of its  operations,  the changes in
partners'  equity and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.


/s/Reznick Fedder & Silverman

Boston, Massachusetts
January 16, 1997

<PAGE>

[Letterhead]
[LOGO]
Reznick Fedder & Silverman
Certified Public Accountants Business Consultants

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners
Willow Lake Partners II, L.P.

We have audited the accompanying balance sheet of Willow Lake Partners II, L.P.,
as of December 31, 1995, and the related statements of operations,  partners'  
equity  and cash  flows for the year then  ended.  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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position Willow Lake Partners II, L.P.
 as of December  31,  1995,  and the results of its  operations,  the changes in
partners'  equity and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/Reznick Fedder & Silverman
Boston, Massachusetts
January 16, 1996

<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche LLP
McLean, VA

INDEPENDENT AUDITORS' REPORT

To the Partners of
River Front Apartments Limited
Partnership
Washington, D.C.

We have audited the accompanying statements of financial position of River Front
Apartments Limited Partnership, A Limited Partnership,  PHFA Project No. R458-8E
as of December 31, 1997 and 1996, and the related  statements of profit and loss
(on HUD Form No.  92410),  partners'  equity  (deficit),  and cash flows for the
years then ended.  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 and Government Auditing Standards, issued by the Comptroller General
of the United States..  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  also  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,  such  financial  statements  present  fairly,  in all material
respects,  the financial position of River Front Apartments Limited  Partnership
at December 31, 1997 and 1996,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

/s/Deloitte & Touche LLP
January 8, 1998

<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche LLP
McLean, VA

INDEPENDENT AUDITORS' REPORT

To the Partners of                         Pennsylvania Housing Finance Agency
River Front Apartments Limited             2101 North Front Street
Partnership                                P.O. Box 8029
Washington, D.C.                           Harrisburg, PA

We have audited the accompanying statements of financial position of River Front
Apartments Limited Partnership, A Limited Partnership,  PHFA Project No. R458-8E
as of December 31, 1996 and 1995, and the related  statements of profit and loss
(on HUD Form No.  92410),  partners'  equity  (deficit),  and cash flows for the
years then ended.  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 and Government Auditing Standards, issued by the Comptroller General 
of the United States..  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  also  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,  such  financial  statements  present  fairly,  in all material
respects,  the financial position of River Front Apartments Limited  Partnership
at December 31, 1996 and 1995,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The additional  information,  as referred
to in the Table of Contents,  is presented for purposes of  additional  analysis
and is not a required part of the basic  financial  statements.  This additional
information  is the  responsibility  of  the  Partnership's  management's.  Such
information has been subjected to the auditing  procedures applied in the audits
of  the  basic  financial   statements  and,  in  our  opinion,  the  additional
information is fairly stated, in all material respect , in relation to the basic
financial statements taken as a whole.

<PAGE>

Riverfront Apartments Limited Partnerships
Page 2

In accordance with Government Auditing Standards,  we have issued a report dated
January 22, 1997 on our  consideration  of the  Partnership's  internal  control
structure  and a report dated January 22, 1997 on its  compliance  with laws and
regulations.

/s/Deloitte & Touche LLP
January 22, 1997

<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche LLP
McLean, VA

INDEPENDENT AUDITORS' REPORT

To the Partners of
Susquehanna View Limited
Partnership
Washington, D.C.

We have audited the accompanying statements of financial position of Susquehanna
View Limited Partnership, A Limited Partnership,  PHFA Project No. R451-8E as of
December 31, 1997 and 1996,  and the related  statements  of profit and loss (on
HUD Form No. 92410),  partners' equity  (deficit),  and cash flows for the years
then  ended.   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  also  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,  such  financial  statements  present  fairly  in all  material
respects, the financial position of Susquehanna View Limited Partnership,  as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.

/s/Deloitte & Touche LLP
January 30, 1998


<PAGE>

[Letterhead]
[LOGO]
Deloitte & Touche LLP
McLean, VA

INDEPENDENT AUDITORS' REPORT

To the Partners of                     Pennsylvania Housing Finance Agency
Susquehanna View Limited               2101 North Front Street
Partnership                                        P.O. Box 8029
Washington, D.C.                              Harrisburg, PA

We have audited the accompanying statements of financial position of Susquehanna
View Limited Partnership, A Limited Partnership,  PHFA Project No. R451-8E as of
December 31, 1996 and 1995,  and the related  statements  of profit and loss (on
HUD Form No. 92410),  partners' equity  (deficit),  and cash flows for the years
then  ended.   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  also  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,  such  financial  statements  present  fairly  in all  material
respects, the financial position of Susquehanna View Limited Partnership,  as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The additional  information,  as referred
to in the Table of Contents,  is presented for purposes of  additional  analysis
and is not a required part of the basic  financial  statements.  This additional
information  is the  responsibility  of  the  Partnership's  management's.  Such
information has been subjected to the auditing  procedures applied in the audits
of  the  basic  financial   statements  and,  in  our  opinion,  the  additional
information is fairly stated, in all material respect , in relation to the basic
financial statements taken as a whole.

Page 2

In accordance with Government Auditing Standards,  we have issued a report dated
January 16, 1997 on our  consideration  of the  Partnership's  internal  control
structure  and a report dated January 16, 1997 on its  compliance  with laws and
regulations.

/s/Deloitte & Touche LLP
January 17, 1997
<PAGE>

[Letterhead]
[LOGO]
Plante & Morgan, LLP
East Lansing, Michigan

INDEPENDENT AUDITORS' REPORT

To the Partners of
The Temple Kyle Limited Partnership, LTD

We have  audited  the  accompanying  balance  sheet of The Temple  Kyle  Limited
Partnership,  Ltd (a Texas  limited  partnership),  as of December  31, 1997 and
1996, and the related statements of operations, partners' equity, and cash flows
for the years then ended.  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  also  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 The Temple  Kyle  Limited
Partnership,  Ltd.  at  December  31,  1997 and  1996,  and the  results  of its
operations,  changes in partners' equity,  and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/Plante & Moran LLP
February 16, 1998






<PAGE>