June 28, 1999


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, 1999
        File Number 01-18462


Dear Sir/Madam:

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/Stephen Guilmette
Stephen Guilmette
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, 1999                                                   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, 1999


<PAGE>




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, 1999


                                          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 7A.   Quantitative and Qualitative Disclosures about
              Market Risk                                              K-26
   Item 8     Financial Statements and Supplementary Data              K-26
   Item 9     Changes in and Disagreements with
              accountants on Accounting and Financial
              Disclosure                                               K-26


PART III

   Item 10    Directors and Executive Officers
              of the Registrant                                        K-26
   Item 11    Management Remuneration                                  K-28
   Item 12    Security Ownership of Certain Beneficial
              Owners and Management                                    K-28
   Item 13    Certain Relationships and Related
              Transactions                                             K-28


PART IV

  Item 14     Exhibits, Financial Statement Schedule
              and Reports on Form 8-K                                  K-31

SIGNATURES                                                             K-32


<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 The  Texas
Partnerships subject to their liabilities to unaffiliated entities.

The Partnership  has invested as a limited  partner in fifty-four  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 A

                                              SELECTED LOCAL LIMITED
                                                 PARTNERSHIP DATA
                                                    (Unaudited)
<TABLE>

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>

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, 1999, the Managing  General Partner has transferred all of
      the assets of the thirteen Texas Partnerships subject to their liabilities
      to  unaffiliated  entities.  The  transfer of Crown  Point,  Godley  Arms,
      Glenbrook  Apartments,  Quail Run Apartments,  Sherwood Arms Housing, Lone
      Oak  Apartments,  Hallet  West  Apartments,  Crestwood  Place,  Eagle Nest
      Apartments,  One Main Place,  Pilot Point  Apartments,  Lakeway Colony and
      Willowick 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,
      October 30, 1997 and August 4, 1998, respectively.

***   As of March 31, 1999,  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, 1999,  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
2.48%, 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  2.40%,  have The Lockwood Group as Local
General Partner; (iii) Elver Park II, Elver Park III, Tucson Trails I and Tucson
Trails II,  representing 6.41%, have Gorman Associates as Local General Partner;
(iv) Riverfront  Apartments and Susquehanna View,  representing 6.10%, have NCHP
as Local General Partner;  (v) West Dade and West Dade II,  representing  6.65%,
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  3.95%, 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 0.77%, have Tommy
Harper,  Jerry Blurt and Chris  Turskey as Local  General  Partners;  and (viii)
Waterfront  and Shoreline,  representing  6.83%,  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.  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-four 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 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>


                              Capital Contributions
Local Limited Partnership                            Total               Total         Mtge. Loans
Property Name                      Number of   Committed at March  Paid through March   payable          Type of  Occupancy at March
Property Location                  Apt. Units       31, 1999           31, 1999    at December 31, 1998  Subsidy*      31, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>               <C>              <C>                <C>             <C>
West Dade LTD, A Limited Partnership
West Dade
Miami, FL                                122        $1,513,936        $1,513,936       $4,049,203          Section 8         92%

West Dade LTD II, A Limited Partnership
West Dade II
Miami, FL                                209         3,039,442         3,039,442        8,273,811          Section 8         98%

Westwood Manor Limited Dividend
    Housing Association L.P.
Westwood Manor
Flint, MI                                144         1,165,925         1,165,925        3,231,079          Section 8         95%

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        7,087,704          None                72%

Waterfront Limited Partnership
Waterfront
Buffalo, NY                              472         3,597,307         3,597,307       25,342,127          None                72%


<PAGE>





                              Capital Contributions
Local Limited Partnership                             Total              Total         Mtge. Loans
Property Name                        Number of  Committed at March  Paid through March    payable        Type of  Occupancy at March
Property Location                    Apt. Units      31, 1999          31, 1999    at December 31, 1998  Subsidy*      31, 1999
------------------------------------------------------------------------------------------------------------------------------------

Fox Run Housing
Fox Run
Victoria, TX                             150         1,605,775         1,605,775        4,104,694       Section 8              93%

Boulevard Commons Limited
    Partnership II
Boulevard Commons II
Chicago, IL                               61           517,175           517,175          691,775       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              93%

Boulevard Commons Limited
    Partnership IIA
Boulevard Commons IIA
Chicago, IL                               42         1,179,812         1,179,812        1,511,625       Section 8             38%

Ashley Place, LTD
    A Florida Limited Partnership
Ashley Place
Orlando, FL                               96         2,002,560         2,002,560        2,791,025       None                  96%

Admiral Housing Limited Partnership
Admiral Court
Philadelphia, PA                          46         1,900,000         1,900,000        2,619,347       Section 8             87%



<PAGE>



                              Capital Contributions
Local Limited Partnership                              Total              Total        Mtge. Loans
Property Name                        Number of  Committed at March  Paid through March    payable           Type  Occupancy at March
Property Location                    Apt. Units      31, 1999           31, 1999     at December 31, 1998    of        31, 1999
                                                                                                           Subsidy*
------------------------------------------------------------------------------------------------------------------------------------

Prarieland Property of Syracuse, L.P.
Bentley Hill
Syracuse, KS                               8           52,150             52,150          240,431          FmHA              100%

El Jardin of Davie, Ltd.
El Jardin
Davie, FL                                236        2,022,100          2,022,100        6,863,716        Section 8            98%

EDM Housing Associates LTD
    A Limited Partnership
Elmwood Delmar
Aurora, CO                                95        1,102,025          1,102,025        3,230,700        Section 8            90%

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

Willowick Housing Associates, LTD(A)
Willowick
Gainesville, FL

Ellsworth Senior Housing, L.P.
Kirkendall Heights
Ellsworth, KS                             12           69,658             69,658          327,767          FmHA               83%

Prairieland Properties of Satanta, L.P.
Ponca Manor
Satanta, KS                                8           49,915             49,915          223,361          FmHA              100%



<PAGE>



                              Capital Contributions
Local Limited Partnership                               Total              Total         Mtge. Loans
Property Name                          Number of  Committed at March  Paid through March   payable         Type   Occupancy at March
Property Location                    Apt. Units       31, 1999           31, 1999    at December 31, 1998   of         31, 1999
                                                                                                          Subsidy*
------------------------------------------------------------------------------------------------------------------------------------

Rossville Senior Housing L.P.
Pearl Place
Rossville, KS                             10            58,855            58,855          278,728          FmHA               90%

Columbia Townhouse Associates, L.P.
Columbia Townhouses
Burlington, IA                            56           752,450           752,450        1,787,964          Section 8          89%

Quartermill Associates, L.P.
    A Virginia Limited Partnership
Quartermill
Richmond, VA                             266          7,705,500        7,705,500        7,116,270          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




<PAGE>



                              Capital Contributions
Local Limited Partnership                             Total              Total       Mtge. Loans payable
Property Name                   Number of     Committed at March   Paid through March  at December 31,   Type of  Occupancy at March
Property Location              Apt. Units           31, 1999           31, 1999            1998          Subsidy*      31, 1999
-----------------------------------------------------------------------------------------------------------------------------------

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         2,701,132          None              100%

Harbour View
    A Limited Partnership
Harbour View
Staten Island, NY                       122         1,350,000          1,350,000        10,681,534          None               96%

Walker Woods Partners, L.P.
Walker Woods
Dover, DE                                51         1,452,380          1,452,380         2,331,283          None               84%

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




<PAGE>



                              Capital Contributions
Local Limited Partnership                            Total               Total          Mtge. Loans
Property Name                      Number of   Committed at March   Paid through March    payable       Type of   Occupancy at March
Property Location                 Apt. Units       31, 1999             31, 1999  at December 31, 1998  Subsidy*        31, 1999
------------------------------------------------------------------------------------------------------------------------------------

Eaglewood VIII, L.P.
    A Limited Partnership
Eaglewood
Covington, TN                           40             255,000           255,000        1,113,413          FmHA               100%

Georgetown Associates II, L.P.
Georgetown II
Georgetown, DE                          50           1,200,000         1,200,000        1,724,359          None                98%

Blue Mountain Associates, L.P.
    A Massachusetts Limited Partnership
Granite V
Boston, MA                             217           5,774,113         5,774,113        9,718,207          Section 8           99%

Garden Plain Senior Apts., LTD
Garden Plain
Garden Plain, KS                        12             70,030             70,030          302,841          FmHA               100%

Fulton Associates I, L.P.
    A Limited Partnership
Fulton, KY                              24            180,000            180,000          798,123          FmHA               100%

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



<PAGE>



                              Capital Contributions
Local Limited Partnership                             Total               Total       Mtge. Loans payable
Property Name                       Number of   Committed at March  Paid through March  at December 31,  Type of  Occupancy at March
Property Location                   Apt. Units      31, 1999            31, 1999             1998        Subsidy*       31, 1999
------------------------------------------------------------------------------------------------------------------------------------

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          282,556          FmHA                83%

Brownsville Associates, L.P.
Brownsville
Brownsville, TN                        28           161,665              161,665          784,201          FmHA                96%

Wayne Senior Housing, L.P.
Sunnyhill Villa
Wayne, NE                              15            81,205               81,205          427,912          FmHA                93%

Longview Apartments, L.P.
Longview
Humbolt, KS                            14            91,635               91,635          398,009          FmHA               100%


<PAGE>



                              Capital Contributions
Local Limited Partnership                            Total                Total     Mtge. Loans payable
Property Name                     Number of    Committed at March  Paid through March    payable         Type of  Occupancy at March
Property Location                 Apt. Units        31, 1999          31, 1999      at December 31, 1998 Subsidy*      31, 1999
------------------------------------------------------------------------------------------------------------------------------------

Horseshoe Bend Associates I, L.P.
Horseshoe Bend
Horseshoe Bend, AR                     24           143,785              143,785           647,909          FmHA              100%

Briarwood Associates II, L.P.
Briarwood II
Lake Havasua, AZ                       32           219,030              219,030         1,108,853          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           543,708          FmHA              100%

Aurora Properties, LTD.
    A Limited Partnership
Aurora East Apartments
Denver, CO                            125           765,000              765,000         4,098,800          Section 8         92%

Elver Park Limited Partnership II
Elver Park II
Madison, WI                            56         1,246,385            1,246,385         1,680,740          None              95%



<PAGE>



                              Capital Contributions
Local Limited Partnership                             Total              Total         Mtge. Loans
Property Name                       Number of  Committed at March  Paid through March     payable          Type of     Occupancy at
Property Location                  Apt. Units      31, 1999            31, 1999     at December 31, 1998   Subsidy*   March 31, 1999
-----------------------------------------------------------------------------------------------------------------------------------

Elver Park Limited Partnership III
Elver Park III
Madison, WI                            48         1,047,470            1,047,470         1,439,145          None              93%

Tuscon Trails Limited Partnership I
Tuscon Trails I
Madison, WI                            48         1,047,470            1,047,470         1,407,408          None              90%

Tuscon Trails Limited Partnership II
Tuscon Trails II
Madison, WI                            48         1,047,470            1,047,470         1,414,049          None             100%

Pleasant Plaza Housing L.P.
Pleasant Plaza
Malden, MA                            125         3,340,138            3,340,138        17,298,253          Section 8         99%

241 Pine Street Associates, L.P.**
241 Pine Street
Manchester, NH                         50         1,374,298            1,374,298           418,430          None              99%

Missouri Rural Housing of
    Oak Grove, L.P.
Heather Oaks
Oak Grove, MO                          24           118,828              118,828          561,717          FmHA               92%

Wood Creek Associates
    A New York Limited Partnership
Wood Creek
Calcium, NY                           104         1,850,000            1,850,000        3,186,957          None               94%




<PAGE>



                              Capital Contributions
Local Limited Partnership                             Total                Total        Mtge. Loans
Property Name                      Number of    Committed at March  Paid through March   payable at      Type of  Occupancy at March
Property Location                  Apt. Units      31, 1999               31, 1999    December 31, 1998  Subsidy*      31, 1999
------------------------------------------------------------------------------------------------------------------------------------

Breckenridge Creste Apartments, L.P.**
Breckenridge
Duluth, GA                            164         3,520,000            3,520,000         4,708,469          None              97%

Willow Lake Partners II, L.P.**
    A Limited Partnership
Willow Lake
Kansas City, MO                       132         2,130,700            2,130,700         2,699,871          None              91%

Bolivar Senior Housing, L.P.
Ashton Heights
Bolivar, MO                            20            95,360               95,360           466,514          FmHA             100%

Lexington Associates I L.P.
    A Limited Partnership
Lexington Civic
Lexington, TN                          24            95,000               95,000           815,747          FmHA              96%

Riverfront Apartments, L.P.
Riverfront
Sunbury, PA                           200         1,984,908            1,984,908         7,264,214          Section 8         99%

Susquehanna View L.P.
Susquehanna View
Camp Hill, PA                         201         2,194,314            2,194,314         8,955,465          Section 8        100%

Westgate Associates I, L.P.
Fouche Valley
Perryville, AR                         20           131,865              131,865           638,634          FmHA              90%


<PAGE>



                              Capital Contributions
Local Limited Partnership                           Total                Total        Mtge. Loans
Property Name                     Number of   Committed at March  Paid through March    payable          Type of  Occupancy at March
Property Location                Apt. Units       31, 1999           31, 1999     at December 31, 1998   Subsidy*      31, 1999
---------------------------------------------------------   ------------------------------------------------------------------------
Altheimer Associates I, L.P.
Altheimer
Altheimer, AR                          20           130,375              130,375           597,205          FmHA              90%

The Temple-Kyle L.P.**
Kyle Hotel
Temple, TX                             64         1,624,100            1,624,100                 0          Section 8         86%

Diversey Square Associates II
Diversey Square II
Chicago, IL                            48         1,031,825            1,031,825         2,567,130          Section 8        100%

Poplar Village, LTD
Poplar Village
Cumberland, KY                         36           283,945              283,945         1,200,333          None              97%
                                   ------     -------------         ------------   ---------------
                                    4,745        68,500,907           68,500,907       183,350,849
                                   ======
Less: **Combined Entities                         8,649,098            8,649,098         7,826,770
                                              -------------         ------------   ---------------
                                                $59,851,809          $59,851,809   $   175,524,079
                                                ===========          ===========   ===============
</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 GP 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, 1999, the Managing  General  Partner has transferred
            all of the  assets of the  Thirteen  Texas  Partnerships  subject to
            their   liabilities.   The  Texas  Partnerships  had  total  capital
            contributions   and  mortgage  payable  amounts  of  $1,580,498  and
            $6,516,496, respectively, as of the transfer dates.

(B)        As of March 31, 1998, the Managing  General  Partner  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  mortgage   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 was settled by the insurance  carrier and the
case dismissed.

Willow Lake  Partners II, L.P.  ("Willow  Lake") was 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 was 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,  1999,  there  were  5,880  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, 1999, 1998 and 1997.


<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>

                                   March 31,       March 31,        March 31,           March 31,        March 31,
                                      1999            1998             1997               1996             1995

<S>                              <C>              <C>             <C>               <C>              <C>
Revenue (C)                      $    2,977,888   $   2,733,282   $    2,119,597    $    2,219,261   $     1,926,504
Equity in losses of Local
  Limited Partnerships (C)           (3,090,983)     (3,287,444)      (3,624,984)       (4,670,063)       (5,818,976)
Gain (loss) on asset transfers          645,018       1,868,051          (51,595)        1,279,618                 -
Per Limited Partnership Unit               6.38           18.49           (0.51)             12.67                 -
Net loss                             (5,109,931)     (3,597,835)      (7,208,441)       (5,440,551)       (9,002,539)
Per Limited Partnership
  Unit                                   (50.59)         (35.62)          (71.36)           (53.86)           (89.13)
Partner distributions                         -               -                -                 -                 -
Cash and cash equivalents (C)           440,365         311,867          379,614           268,040           155,456
Marketable securities                   721,788         275,387          331,319           158,967         2,200,946
Investment in Local Limited
  Partnerships                       15,789,285      19,319,502       23,647,348        30,174,708        36,622,429
Total Assets (A)                     31,239,750      37,131,787       43,791,590        44,371,622        52,653,124
Long-term debt (C)                    7,832,127       8,641,832       11,754,415         7,006,101         9,581,097
Total Liabilities (C)                11,714,112      12,474,903       15,393,975         9,474,777        12,090,444
Other Data:
Passive loss (B)                     (9,547,678)     (7,960,758)     (10,918,014)      (11,654,006)      (12,660,771)
Per Limited Partnership
  Unit (B)                               (94.52)         (78.82)         (108.09)          (115.37)          (125.34)
Portfolio Income  (B)                   399,857         415,665          412,136           529,521           470,018
Per Limited Partnership
  Unit (B)                                 3.96            4.12             4.08              5.24              4.65
Low-Income Housing
  Tax Credits (B)                    12,743,635      12,585,747       13,857,452        14,056,981        14,088,559
Per Limited Partnership
  Unit (B)                               125.55          123.94           136.50            138.47            138.78
Recapture of Low-Income
  Housing Tax Credits (B)              (244,408)     (3,582,142)        (995,750)                -                 -
Per Limited Partnership
  Unit (B)                                (2.42)         (35.46)           (9.86)                 -                 -
Local Limited Partnership interests
owned at end of period (D)                   54              55               64                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 1998, 1997, 1996, 1995 and 1994 represents the
     amount  allocated  to  individual   investors.   Corporate  investors  were
     allocated $131.03,  $129.80, $142.65, $144.62 and $144.95 per Unit in 1998,
     1997, 1996, 1995 and 1994, respectively.


<PAGE>


Item 6.  Selected Financial Data (continued)

(C)  Revenue for the years ended March 31,  1999,  1998,  1997,  1996  and  1995
     includes $2,484,545, $2,563,928,  $1,909,683,  $2,224,273  and  $1,792,997,
     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,  1999,  1998,  1997,  1996  and  1995  does  not  include
     $1,663,198, $(931,727),$(2,633,475), $608,681 and ($857,248), 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, 1999, 1998, 1997, 1996 and
     1995   includes  $101,372,  $99,298,  $166,606,   $173,408   and   $80,091,
     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,  1999,
     1998, 1997, 1996 and 1995 includes $10,990,506,  $12,068,486,  $15,409,538,
     $10,065,592 and $11,499,446,  respectively, from the Combined Entities that
     is included on the Combined Balance Sheets.

(D)  As of March 31, 1998, the Managing General Partner 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.  As of March 31,
     1999, the Managing  General  Partner also  transferred all of the assets of
     Willowick subject to its liabilities.

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

Certain matters  discussed herein constitute  forward-looking  statements within
the  meaning  of the  Private  Securities  Litigation  Reform  Act of 1995.  The
Partnership  intends such  forward-looking  statements to be covered by the safe
harbor  provisions  for  forward-looking  statements,  and  are  including  this
statement for purposes of complying with these safe harbor provisions.  Although
the Partnership believes the forward-looking  statements are based on reasonable
assumptions,  the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors,  including,  without limitation,  general economic and real
estate conditions,  interest rates, and unanticipated  delays or expenses on the
part of the Partnership and their suppliers in achieving year 2000 compliance.

As previously  reported,  the Managing  General  Partner  transferred all of the
assets of the  thirteen  Texas  Partnerships  subject  to their  liabilities  to
unaffiliated entities. Crown Point, Godley Arms, Glenbrook Apartments, Quail Run
Apartments,  Sherwood Arms Housing, Lone Oak Apartments, Hallet West Apartments,
Lakeway Colony, Crestwood Place, Eagle Nest Apartments, One Main Place and Pilot
Point  Apartments  were  transferred  prior to March  31,  1998.  Willowick  was
transferred on August 4, 1998. For tax purposes,  these events  resulted in both
Section 1231 gain and  cancellation of  indebtedness  income.  In addition,  the
transfer of ownership  resulted in a nominal  amount of recapture of tax credits
because the Texas  Partnerships  represented  only 2% of the  Partnership's  tax
credits.

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).

Liquidity and Capital Resources

The  Partnership  (including the Combined  Entities) had an increase in cash and
cash equivalents of $128,498 for the year ended March 31, 1999. This increase is
attributable to sales of marketable securities, cash distributions received from
Local Limited  Partnership  and cash  provided by  operations  and proceeds from
mortgage note.  These increases are partially  offset by purchases of marketable
securities and reimbursement to developer.

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  $196,000  have been  withdrawn  from the
Reserves to pay legal and other costs. Additionally,  professional fees relating
to various property issues totaling approximately $1,728,000 have been paid from
Reserves.   This  amount  includes   approximately   $1,313,000  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 $1,070,000 (net
of paydowns) to purchase the mortgage of a Local Limited  Partnership.  To date,
the  Partnership  has  used  approximately  $2,038,000  of  operating  funds  to
replenish  Reserves.  At March 31, 1999,  approximately  $983,000 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 $1,313,000  noted above,  the  Partnership  has also advanced
approximately  $622,000  to the Texas  Partnerships  and  $841,000 to four 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, 1999, 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, 1999. As of
March 31,  1999,  all  required  capital  contributions  have been made to Local
Limited Partnerships. Based on the results of 1998 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

1999 versus 1998

For the year ended March 31, 1999, Partnership operations resulted in a net loss
of  $5,109,931  as compared to a net loss of  $3,597,835  for the same period in
1998.  The  increase  in net loss is  primarily  attributable  to an increase in
provision for valuation of real estate related to one of the combined entities.
These  increases  in net loss are  partially  offset by a  decrease  in bad debt
expenses.

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 gains
on transfer of assets,  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.






Low-Income Housing Tax Credits

The 1998,  1997 and 1996 Tax  Credits  per Unit for  individuals  were  $125.55,
$123.94 and $136.50,  respectively. The 1998, 1997 and 1996 Tax Credits per Unit
for corporations were $131.03, $129.80 and $142.65,  respectively.  The credits,
which have stabilized, are expected to remain stable for the next two years, and
then they are  expected to decrease as certain  properties  reach the end of the
ten-year  credit  period.   However,   because  the  compliance  periods  extend
significantly  beyond the tax credit  periods,  the  Partnership  is expected to
retain  most  of  its  interest  in  the  Local  Limited  Partnerships  for  the
foreseeable future. The transfer of ownership of the remaining Texas Partnership
will result in nominal  recapture  of tax credits  since the Texas  Partnerships
represent less than 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.

Many of the  remaining  fifty-four  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 II and IIA, located in Chicago,  Illinois, and both having the
same Local General Partner have been experiencing  operating deficits.  Expenses
have increased due to increasing maintenance, capital needs, security issues and
high  turnover  at the  property.  The  Managing  General  Partner  has  been in
negotiations  with the  Local  General  Partner  to  develop  a plan  that  will
ultimately transfer ownership of the property to the Local General Partner.  The
plan includes provisions to minimize the risk of recapture. Effective January 1,
1999, the Partnership redeemed its interest in Boulevard Commons II to the Local
Limited  Partnership.  The  redemption of the  Partnership's  interest  avoids a
possible recapture event.  However,  the redemption will cause investors to have
minimal taxable gain or loss for the 1999 tax year, depending upon the tax basis
of the property.

The Managing General Partner is still negotiating with the Local General Partner
regarding  Boulevard Commons IIA to develop a plan that will ultimately transfer
ownership of the property to the Local General  Partner and minimize the risk of
recapture, However, given the severity of the operating deficits, it is possible
that the  Partnership  will not be able to retain its  interest in the  property
through 1999. A foreclosure  would result in recapture of credits for investors,
the  allocation  of  taxable  income  to the Fund and  loss of  future  benefits
associated with this property.

Breckenridge  Creste,  located in Duluth,  Georgia,  is  experiencing  operating
deficits  as a result of higher  vacancies  during the  summer of 1998.  However
occupancy for the last two quarters has increased from 90% in September 30, 1998
to 96% in December  31,  1998.  The  Managing  General  Partner is working  with
property  management to review completion of needed capital  improvements and to
review the revised marketing strategy.

Columbia  Townhouses,   located  in  Burlington,  Iowa,  has  been  experiencing
operating  deficits due to consistent  increases in vacancy.  As of December 31,
1998, occupancy was 89%. The Local General Partner, Managing General Partner and
Management  Agent are working  together to review the  marketing,  security  and
long-term strategy for this property. In addition, the Local General Partner has
approached the lender about the  possibility of  refinancing  the mortgage.  The
Managing General Partner is closely monitoring this property.

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  mortgage  was sold at auction to an  unaffiliated
institutional  buyer.  The Managing  General  Partner and Local General  Partner
continue  to  participate  in  workout  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 and  Partnership  affiliates to negotiate a
satisfactory workout agreement with the new lender. However, if the negotiations
are not  successful,  it is possible  that the  Partnership  will not be able to
retain its interest in the property through 1999. A foreclosure  would result in
recapture of credits for  investors,  the  allocation  of taxable  income to the
Partnership  and loss of future  benefits  associated  with this  property.  The
Partnership's carrying value of this investment for financial reporting purposes
is zero. Occupancy for this property as of December 31, 1998 was 98%.

As previously reported, 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 is still  monitoring the progress of the  application  approval
process.

Pleasant  Plaza  located in  Malden,  Massachusetts,  as well as South  Holyoke,
located in Holyoke,  Massachusetts,  receive a subsidy  under the State  Housing
Assistance  Rental Program  (SHARP),  which is an important part of their annual
income. As originally conceived, the SHARP subsidy was scheduled to decline over
time to match  increases  in net  operating  income.  However,  increases in net
operating income failed to keep pace with the decline in the SHARP subsidy. Many
of the SHARP properties  (including Pleasant Plaza and South Holyoke) structured
workouts that  included  additional  subsidies in the form of Operating  Deficit
Loans (ODL's).  Effective  October 1, 1997, the  Massachusetts  Housing  Finance
Agency  (MHFA),  which  provided the SHARP  subsidies,  withdrew  funding of the
Operating  Deficit Loans.  Properties  unable to make full debt service payments
were declared in default by MHFA. The Managing General Partner joined a group of
SHARP property  owners called the  responsible  SHARP Owners,  Inc. (RSO) and is
negotiating with MHFA and the Local General Partners of Pleasant Plaza and South
Holyoke to find a solution to the problems  that will result from the  withdrawn
subsidies.  Given  existing  operating  deficits  and the  dependence  on  these
subsidies  by Pleasant  Plaza and South  Holyoke  House,  it is likely that both
properties  will default on their mortgage  obligations  in the near future.  On
September 16, 1998, the Partnership joined with the RSO and about 20 other SHARP
property  owners and filed suit against the MHFA (Mass.  Sup. Court Civil Action
#98-4720).  Among other  things,  the suit seeks to enforce the MHFA's  previous
financial commitments to the SHARP properties. The lawsuit is complex and in its
early  stages,  so no  predications  can be made at this time as to the ultimate
outcome.  In the meantime,  the Managing  General Partner intends to continue to
participate  in the RSO's  efforts to negotiate a resolution of this matter with
MHFA.

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.  Shoreline  was approved  for the 1998 New Approach  Anti-Drug
Grant.  The Grant was issued in February,  1999 and will be used to support drug
prevention,  educational  programs and increased  security on the property.  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
working  closely  with the Local  General  Partner  to  develop a plan that will
address these concerns.

Willow Lake,  located in Kansas, is experiencing  operating  difficulties due to
soft rental market  conditions.  As previously  reported,  the Managing  General
Partner negotiated a nine year extension to the original workout agreement.  The
nine year  extension  will expire on May 31,  2001.  In  addition,  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 completed the transfer of
the remaining  Texas  Partnership,  Willowick,  effective  August 4, 1998.  This
transfer resulted in tax credit recapture of $2.44 per unit that was reported on
your 1998 K-1. In  addition,  the event also  resulted in both Section 1231 gain
and cancellation of indebtedness income for the tax year 1998.

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",
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 carrying value is compared to the  undiscounted  future cash
flows  expected  to be  derived  from the asset 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, 1999, 1998 and 1997.

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.

Impact of Year 2000

The Managing  General  Partner's  plan to resolve year 2000 issues  involves the
following four phases: assessment,  remediation, testing and implementation.  To
date,  the Managing  General  Partner has fully  completed an  assessment of all
information  systems that may not be operative  subsequent to 1999 and has begun
the remediation,  testing and implementation phase on both hardware and software
systems.  Because the hardware and software  systems of both the Partnership and
Local Limited  Partnerships are generally the  responsibility of obligated third
parties,  the plan primarily  involves  ongoing  discussions  with and obtaining
written  assurances from these third parties that pertinent systems will be 2000
compliant.   In  addition,   neither  the  Partnership  nor  the  Local  Limited
Partnerships are incurring significant  additional costs since such expenses are
principally  covered under the service contracts with vendors.  As of June 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes all major  systems are  compliant;  any systems still being updated are
not considered significant to the Partnership's operations. However, despite the
likelihood that all significant  year 2000 issues are expected to be resolved in
a timely manner,  the Managing General Partner has no means of ensuring that all
systems of outside vendors or other entities that impact operations will be 2000
compliant.  The Managing  General Partner does not believe that the inability of
third  parties to address  their year 2000 issues in a timely manner will have a
material impact on the Partnership.  However,  the effect of  non-compliance  by
third parties is not readily determinable.

Management has also evaluated a worst case scenario  projection  with respect to
the year 2000 and  expects  any  resulting  disruption  of either  the  Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term  inconveniences.  Such  problems,  however,  are not  likely to fully
impede the ability to carry out necessary duties of the  Partnership.  Moreover,
because  expected  problems  under a worst  case  scenario  are not  extensively
detrimental,   and  because  the  likelihood  that  all  systems  affecting  the
Partnership  will be compliant  before 2000,  the Managing  General  Partner has
determined  that a formal  contingency  plan that  responds to  material  system
failures is not necessary.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The table  below  provides  information  about  the  Partnership's  market  risk
sensitive instruments.
<TABLE>

----------------------------------------------------------------------------------------------------------------------
<S>                       <C>         <C>        <C>         <C>          <C>      <C>            <C>
1998                      1999        2000       2001        2002         2003      Thereafter    Face Value
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Debt Obligations
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Long Term Debt:
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
  Fixed Rate             92,398    101,326     111,103       121,609    133,661     7,272,030      7,832,127
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
  Average Interest
  Rate                    9.31%      9.31%       9.31%       9.31%        9.31%       9.31%
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Variable Rate                                                                       1,389,038      1,389,038
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Average Interest Rate                                                                 8.75%
----------------------------------------------------------------------------------------------------------------------

</TABLE>

Due to  difficulties  in obtaining  market  values of  obligations  with similar
characteristics  for  certain  debt  in this  table,  it is not  practicable  to
determine a fair value materially different from face value.

In addition to the debt obligations  included in this table, the Partnership has
invested in  marketable  securities  with  aggregate  fair values of $721,788 at
March 31, 1999; these securities, with rates ranging from 4.87% to 6.49%, do not
subject the  Partnership to significant  market risk because of their short term
maturities and high liquidity.

The  Partnership has no other exposure to market risk associated with activities
in derivative financial instruments,  derivative commodity instruments, or other
financial instruments.

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.  Peter G.
Fallon resigned as a Vice President of the General Partner on June 1, 1999.

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
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 43,  graduated  from  Harvard  University  (B.A.,  1976) and
received a Master's in Public Policy from Harvard's Kennedy School of Government
in 1982.  Ms.  Netzer  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, the firm's Executive Committee.  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 42, graduated from Emory University  (B.A.,  1978) and
Cornell  University  (J.D.;  M.B.A.,  1982).  Mr.  Gladstone  joined Boston
Financial in 1985,  and is Vice  President  and  General  Counsel.  He is also a
member of the Senior Leadership Team, the firm's Executive  Committee.  Prior to
joining Boston Financial, Mr. Gladstone was associated  with the Boston law firm
of Herrick & Smith.  Mr.  Gladstone is on the Advisory Board of the Housing  and
Development Reporter. He is also a member of the Investment Program Association,
The National  Realty  Committee,  Cornell Real Estate Council,  National Housing
Conference, and the Massachusetts Bar.

Randolph G.  Hawthorne,  age 49, is a graduate  of  Massachusetts  Institute  of
Technology (S.B., 1971) and Harvard Graduate School of Business (M.B.A.,  1973).
Mr.  Hawthorne joined Boston Financial in 1973 and is currently a Vice President
responsible for structuring and acquiring real estate  investments.  Previously,
Mr.  Hawthorne  served as Treasurer of Boston  Financial.  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 41,  graduated  from  Trinity  College  (B.A.) and Amos Tuck
School at Dartmouth College  (M.B.A.).  Mr. Hart joined Boston Financial in 1997
and 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  companies,
including those that went on to complete initial public offerings.

Paul F. Coughlan,  age 55, is a graduate of Brown University  (A.B.,  1965). Mr.
Coughlan  joined  Boston  Financial  in 1975  and is  currently  a  Senior  Vice
President and a member of the Investment Management division with responsibility
for  marketing  institutional  investments.  Previously,  he was national  sales
manager for Boston  Financial's retail tax credit funds. Prior to joining Boston
Financial,  Mr.  Coughlan  was an  investment  broker  with Bache & Company  and
Reynolds Securities, Inc.

William E. Haynsworth, age 59, is a graduate of Dartmouth  College (A.B.,  1961)
and Harvard Law School  (L.L.B.,  1964;  L.L.M.,  1969).  Mr. Haynsworth joined
Boston  Financial  in 1977 and is a Senior  Vice President  responsible  for the
structuring of real estate investments and the acquisition of property interests
interests.   Prior  to  joining  Boston  Financial,  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.  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  and  the  Board  of  Directors  of  Boston  Financial.
Mr. Haynsworth has over 25 years of real estate experience.

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, 1999, 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, 1999.  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, 1999,  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, Willowick, 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, 1999 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, 1999.

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, 1999 and 1998, deferred  acquisition fees payable amounted to $112,500
and $225,000, respectively.

Payments made and expenses reimbursed in each of the three years ended March 31,
1999 are as follows:

                                    1999                 1998           1997
                                 ----------------------------------------------

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


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  $7,086 (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, 1999
are as follows:

                                    1999                  1998           1997
                                -----------------------------------------------

     Asset management fees          $   385,702     $   423,223    $   450,678


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, 1999 are as follows:

                                     1999                  1998           1997
                                 ----------------------------------------------
     Salaries and benefits expense
      reimbursements                 $  140,069      $  180,970      $ 170,961

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 $35,917,
$52,220  and  $51,956  of fees  earned  by BFPM  during  1998,  1997  and  1996,
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, 1997, BFPM
became the management agent of  Breckenridge.  Fees charged in each of the three
years ended December 31, 1998 are as follows:

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

     Property management fees        $  102,599      $  104,878      $ 135,472


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, 1999.

Additional  information  concerning  cash  distributions  and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to Boston  Financial and its affiliates  during each
of the three years ended March 31, 1999 is presented in Note 5 to the  Financial
Statements.


<PAGE>




                                                                       F-4
                                                                     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,
1999.

(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

                Kyle Hotel

(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:    June 28, 1999
           ------------------------------                      -------------
           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:    June 28, 1999
           ------------------------------                       -------------
           Randolph G. Hawthorne,
           Managing Director, Vice President and
           Chief Operating Officer




     By:   /s/Michael H. Gladstone                     Date:    June 28, 1999
           ---------------------------------                   ----------------
           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, 1999
                                                                       Index


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

Report of Independent Accountants                                        F-2

Financial Statements

     Combined Balance Sheets - March 31, 1999 and 1998                   F-3

     Combined Statements of Operations - For the Years Ended
       March 31, 1999, 1998 and 1997                                     F-4

     Statements of Changes in Partners' Equity
       (Deficiency) - For the Years Ended March 31, 1999,
       1998 and 1997                                                     F-5

     Combined Statements of Cash Flows - For the Years Ended
       March 31, 1999, 1998 and 1997                                     F-6

     Notes to the Combined Financial Statements                          F-8

Financial Statement Schedule:

     Schedule III - Real Estate and Accumulated Depreciation            F-25


See also Index to  Exhibits  on Page K-30 for the  financial  statements  of the
Local Limited Partnerships  included as a separate exhibit in this Annual Report
on Form 10-K.

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):

In our  opinion,  based on our audits and the  reports  of other  auditors,  the
combined  financial  statements listed in the accompanying index present fairly,
in all material respects,  the financial position of Boston Financial  Qualified
Housing Tax Credits L.P. III (the "Partnership") at March 31, 1999 and 1998, and
the results of its  operations and its cash flows for each of the three years in
the  period  ended  March  31,  1999,  in  conformity  with  generally  accepted
accounting  principles.  In addition,  in our opinion,  the financial  statement
schedule  listed in the  accompanying  index  presents  fairly,  in all material
respects,  the information  set forth therein when read in conjunction  with the
related combined financial statements.  These financial statements and financial
statement schedule are the responsibility of the Partnership's  management;  our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial statement schedule based on our audits. We did not audit the financial
statements  of certain  local  limited  partnerships  for which total  assets of
$26,031,703 and  $31,420,550,  are included in these financial  statements as of
March 31, 1999 and 1998,  respectively,  and for which net losses of $4,736,414,
$2,382,481, and $2,458,710 are included in the accompanying financial statements
for the period ended March 31, 1999, 1998, 1997, respectively. Those statements
were audited by other auditors whose reports  thereon have been furnished to us,
and our opinion expressed  herein,  insofar as it relates to the amounts
included for the Local Limited  Partnerships,  is based solely on the reports of
the other auditors. We conducted our audits of these  statements in accordance
with generally  accepted auditing  standard,  which  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, assessing the accounting principles used and significant  estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable  basis for the opinions expressed above.


/s/PricewaterhouseCoopers LLP
June 18, 1999
Boston, Massachusetts


<PAGE>


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



                     COMBINED BALANCE SHEETS - MARCH 31, 1999 AND 1998

<TABLE>

                                                                                  1999                1998
                                                                             -------------       ---------
Assets

<S>                                                                          <C>                 <C>
Cash and cash equivalents                                                    $     440,365       $     311,867
Marketable securities, at fair value (Note 3)                                      721,788             275,387
Investments in Local Limited Partnerships, net (Note 4)                         15,789,285          19,319,502
Accounts receivable, net                                                           102,755              90,467
Interest receivable                                                                  8,624              13,298
Prepaid expenses                                                                    21,095              25,247
Tenant security deposits                                                            95,105              68,292
Replacement reserves                                                               261,127             194,671
Operating reserves                                                                  41,285                   -
Rental property at cost, net of accumulated
   depreciation and reserve for valuation (Note 6)                              13,216,007          16,267,802
Deferred acquisition fees escrow (Note 5)                                          112,500             225,000
Deferred expenses, net of $134,196 and $104,360
   accumulated amortization in 1999 and 1998                                       219,416             209,127
Other assets                                                                       210,398             131,127
                                                                             -------------       -------------
     Total Assets                                                            $  31,239,750       $  37,131,787
                                                                             =============       =============

Liabilities and Partners' Equity

Accounts payable to affiliates (Note 5)                                      $   2,079,127       $   1,702,519
Accounts payable and accrued expenses                                              574,773             484,817
Interest payable                                                                   312,719             312,091
Note payable, affiliate (Note 5)                                                   514,968             514,968
Security deposits payable                                                           87,898              70,630
Due to affiliate (Note 8)                                                                -             323,046
Deferred acquisition fees payable (Note 5)                                         112,500             225,000
Advances from affiliates (Note 9)                                                  200,000             200,000
Mortgage notes payable (Note 7)                                                  7,832,127           8,641,832
                                                                             -------------       -------------
     Total Liabilities                                                          11,714,112          12,474,903
                                                                             -------------       -------------

Minority interest in Local Limited Partnerships                                    886,727             907,515
                                                                             -------------       -------------

General, Initial and Investor Limited Partners' Equity                          18,638,674          23,748,605
Net unrealized gains on marketable securities                                          237                 764
                                                                             -------------       -------------
     Total Partners' Equity                                                     18,638,911          23,749,369
                                                                             -------------       -------------
     Total Liabilities and Partners' Equity                                  $  31,239,750       $  37,131,787
                                                                             =============       =============
The  accompanying  notes  are an  integral part of these combined financial
  statements.
</TABLE>

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

                                                               COMBINED STATEMENTS OF OPERATIONS

                                                       FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997

                                                               1999              1998           1997
                                                           ------------     ------------     -------
<S>                                                        <C>              <C>              <C>
Revenue:
   Rental                                                  $  2,435,094     $  2,470,887     $ 1,764,258
   Investment                                                    49,563           40,340          82,660
   Recovery of bad debt                                          30,148                -               -
   Other                                                        463,083          222,055         272,679
                                                           ------------     ------------     -----------
     Total Revenue                                            2,977,888        2,733,282       2,119,597
                                                           ------------     ------------     -----------

Expenses:
   Asset management fees, related party (Note 5)                385,702          423,223         450,678
   General and administrative (includes reimbursements
    to affiliates of $140,069, $180,970 and $170,961 in
    1999, 1998 and 1997, respectively) (Note 5)                 361,002          493,519         611,810
   Bad debt expense                                              12,933          394,319           8,665
   Property management fees (Note 5)                            138,452          179,980         150,304
   Rental operations, exclusive of depreciation               1,478,455        1,725,621       1,387,909
   Interest (Notes 7 and 9)                                     760,130          884,758         532,518
   Provision for valuation of real estate (Note 11)           1,693,514                -       1,748,708
   Depreciation                                                 653,671          767,716         605,671
   Amortization                                                 178,783          177,617         182,875
                                                           ------------     ------------     -----------
     Total Expenses                                           5,662,642        5,046,753       5,679,138
                                                           ------------     ------------     -----------

Loss before equity in losses of Local Limited  Partnerships,  minority interest,
   gain (loss) on liquidation of interests in Local Limited
   Partnerships and gain on transfer                         (2,684,754)      (2,313,471)     (3,559,541)

Equity in losses of Local Limited
   Partnerships (Note 4)                                     (3,090,983)      (3,287,444)     (3,624,984)

Minority interest in losses of
   Local Limited Partnerships                                    20,788          153,280          27,679

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

Net Loss before gain (loss) on transfer                      (5,754,949)      (5,465,886)     (7,156,846)

Gain (loss) on transfer of assets                               645,018        1,868,051         (51,595)
                                                           ------------     ------------    ------------

Net Loss                                                   $ (5,109,931)    $ (3,597,835)   $ (7,208,441)
                                                           ============     ============    ============

Net Loss Allocated:
   General Partners                                        $    (51,099)    $    (35,978)   $    (72,084)
   Limited Partners                                          (5,058,832)      (3,561,857)     (7,136,357)
                                                           -------------    ------------    ------------
                                                           $ (5,109,931)    $ (3,597,835)   $ (7,208,441)
                                                           ============     ============    ============
Net Loss before gain (loss) on transfer
   per Limited Partnership Unit (100,000 Units)            $     (56.97)    $     (54.11)   $     (70.85)
                                                           ============     ============    ============

Gain (loss) on transfer per Limited
   Partnership Unit (100,000 Units)                        $       6.38     $      18.49    $      (0.51)
                                                           ============     ============    ============

Net Loss per Limited Partnership Unit (100,000 Units)      $     (50.59)    $     (35.62)   $     (71.36)
                                                           ============     ============       =========
The  accompanying  notes  are an  integral part of these combined financial
  statements.
</TABLE>

<PAGE>
<TABLE>

                                              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, 1999, 1998 AND 1997



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

<S>                                  <C>             <C>        <C>              <C>         <C>
Balance at March 31, 1996             $ (530,297)     $ 5,000    $ 35,080,178     $     12    $ 34,554,893
                                      ----------      -------    ------------     --------    ------------

Comprehensive Loss:
   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)
                                      ----------      -------    ------------     --------    ------------
Comprehensive Loss                       (72,084)           -      (7,136,357)      (1,959)     (7,210,400)
                                      ----------      -------    ------------     --------    ------------

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

Comprehensive Income (Loss):
   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)
                                      ----------   ----------      ----------   ----------      ----------
Comprehensive Income (Loss)              (35,978)           -      (3,561,857)       2,711      (3,595,124)
                                      ----------      -------    ------------     --------    ------------

Balance at March 31, 1998              (638,359)        5,000      24,381,964          764      23,749,369
                                      ---------       -------      ----------     --------      ----------

Comprehensive Loss:
   Net change in unrealized gains
     on marketable securities
     available for sale                        -            -               -         (527)           (527)
   Net Loss                              (51,099)           -      (5,058,832)           -      (5,109,931)
                                      ----------      -------    ------------     --------    ------------
Comprehensive Loss                       (51,099)           -      (5,058,832)        (527)     (5,110,458)
                                      ----------      -------    ------------     --------    ------------

Balance at March 31, 1999             $ (689,458)     $ 5,000    $ 19,323,132     $    237    $ 18,638,911
                                      ==========      =======    ============     ========    ============
The  accompanying  notes  are an  integral part of these combined financial
  statements.
</TABLE>

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

                                                            COMBINED STATEMENTS OF CASH FLOWS


                                                       FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997

                                                               1999              1998           1997
                                                           ------------     ------------    --------

<S>                                                        <C>              <C>              <C>
Net Loss                                                   $ (5,109,931)    $ (3,597,835)    $(7,208,441)
Adjustments to reconcile net loss to net
   cash used for operating activities:
   Equity in losses of Local Limited Partnerships             3,090,983        3,287,444       3,624,984
   Bad debt expense (recoveries)                                (17,215)         394,319           8,665
   Gain (loss) on liquidation of interests in Local
     Limited Partnerships                                             -           18,251               -
   Provision for valuation of real estate                     1,693,514                -       1,748,708
   Gain (loss) on transfer of assets                           (645,018)      (1,868,051)         51,595
   Cash distribution included in net loss                       (68,949)         (26,674)        (32,610)
   Amortization and depreciation                                832,454          945,333         788,546
   (Gain) loss on sales and maturities of
     marketable securities                                         (386)          (1,292)          1,291
   Minority interest in losses of Local
     Limited Partnerships                                       (20,788)        (153,280)        (27,679)
   Increase in operating reserves                               (41,285)               -               -
   Increase  (decrease)  in cash arising  from  changes
   in operating  assets and
     liabilities:
     Accounts receivable                                         (1,052)             703          19,834
     Interest receivable                                          4,674           50,381         (62,939)
     Prepaid expenses                                             3,930            2,575           5,227
     Tenant security deposits                                   (30,910)         (14,607)          4,099
     Other assets                                              (108,760)         (39,409)        (30,404)
     Accounts payable to affiliates                             359,696          513,799         428,633
     Accounts payable and accrued expenses                      208,300          144,878          43,002
     Interest payable                                            35,320           43,460         198,324
     Tenant security deposits payable                            21,365            1,353              28
                                                           ------------     ------------    ------------
Net cash provided by (used for) operating activities            205,942         (298,652)       (439,137)
                                                           ------------     ------------    ------------

Cash flows from investing activities:
   (Advances to) reimbursements from affiliates                (146,898)          76,318        (124,294)
   Purchases of marketable securities                        (1,094,449)        (448,522)       (273,754)
   Proceeds from sales and maturities of
     marketable securities                                      647,907          508,457          98,152
   Cash distributions received from Local
     Limited Partnerships                                       576,309          424,737         503,503
   Cash received upon assumption of General Partner
     interest in a Combined Entity                                    -                -          18,364
   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                               (1,817)         (11,821)              -
   Decrease in deferred acquisition fee escrow                  112,500          112,500         112,500
   Payment of deferred acquisition fees                        (112,500)        (112,500)       (112,500)
   Releases from (deposits to) replacement reserves             (66,875)           6,916          10,637
   Additions to rental property                                 (91,668)        (335,745)        (70,940)
                                                           ------------     ------------    ------------
Net cash provided by (used for) investing activities           (177,491)         220,340         110,073
                                                           ------------     ------------    ------------

The  accompanying  notes  are an  integral part of these combined financial
  statements.
</TABLE>


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

                                                         COMBINED STATEMENTS OF CASH FLOWS (continued)

                                                       FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997



                                                              1999              1998             1997
                                                          -------------    -------------     --------


<S>                                                             <C>             <C>               <C>
Cash flows from financing activities
   Proceeds from mortgage note                                  418,430                -                 -
   Repayment of mortgage notes payable                          (77,446)        (104,845)          (87,574)
   Additions to deferred expenses                               (40,124)               -                 -
   Cash distributions                                           (30,000)               -                 -
   Advances from affiliate                                      152,233          115,410            35,523
   Advances on notes payable, affiliate                               -                -           492,689
   Reimbursement to developer                                  (323,046)               -                 -
                                                          -------------    -------------     -------------
Net cash provided by financing activities                       100,047           10,565           440,638
                                                          -------------    -------------     -------------

Net increase (decrease) in cash and
     cash equivalents                                           128,498          (67,747)          111,574

Cash and cash equivalents, beginning of year                    311,867          379,614           268,040
                                                          -------------    -------------     -------------

Cash and cash equivalents, end of year                    $     440,365    $     311,867     $     379,614
                                                          =============    =============     =============

Supplemental Disclosure:
   Cash paid for interest                                 $     790,301    $     910,543     $     360,491
                                                          =============    =============     =============


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



<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 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,  1999,  the  Managing  General  Partner has  designated  approximately
$983,000 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 (defined below),  using the equity method
of accounting, because the Partnership does not have a majority control over 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 in 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 and 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, 1999,
1998 and 1997, the  Partnership  did not recognize  $20,883,730,  $4,878,906 and
$5,206,584,   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)

Basis of Presentation and Combination (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 investments 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, 1998, 1997 and 1996.

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,  these combined financial
statements  include the detailed  financial  activity of 241 Pine Street for the
years ended  December  31, 1996,  1997 and 1998.  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,  these combined  financial  statements  include the
financial  activity of Willow Lake for the years ended  December 31, 1996,  1997
and 1998.  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,  these combined financial  statements  included 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 was 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

<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)

Basis of Presentation and Combination (continued)

previously  accounted for under the equity  method.  During the year ended March
31, 1999,  the Managing  General  Partner  transferred  all of the assets of the
remaining Texas Partnership subject to its liabilities to unaffiliated entities.
All significant intercompany balances and transactions have been eliminated.

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,  these combined financial statements include the detailed financial
activity of The Kyle for the years ended December 31, 1996, 1997 and 1998.
All significant intercompany balances and transactions have been eliminated.

On August 20,  1997,  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,  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 years
ended  December 31, 1997 and 1998.  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 and  Breckenridge  Creste 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 and Breckenridge Creste.

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  adopted the new standard  effective  April 1, 1998 and its adoption
did not have a significant  effect on the  Partnership's  financial  position or
results of operations. The only component of the Partnership's other accumulated
comprehensive   income  is  net  unrealized   gains  and  losses  on  marketable
securities.



<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)

Rental Property

Real estate and personal property of the Combined Entities are recorded at cost.
The Combined Entities provide for depreciation using primarily the straight-line
method over their estimated useful lives.

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",
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 carrying value is compared to the  undiscounted  future cash
flows  expected  to be  derived  from the asset and,  if there is a  significant
impairment  in value,  a provision to write down the asset to fair value will be
charged against income.

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 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 receivables 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.
<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)

Reclassifications

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

3.   Marketable Securities

A summary of marketable securities is as follows:
<TABLE>
                                                                 Gross             Gross
                                                              Unrealized        Unrealized      Fair
                                              Cost               Gains            Losses        Value

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

Debt securities issued by
   the US Treasury and other
   US government corporations
   and agencies                           $   721,551         $       633       $   (396)    $   721,788
                                          -----------         -----------       --------     -----------

Marketable Securities
   at March 31, 1999                      $   721,551         $       633       $   (396)    $   721,788
                                          ===========         ===========       ========     ===========

Debt securities issued by
   the US Treasury and other
   US government corporations
   and agencies                           $   274,623         $       820       $    (56)    $   275,387
                                          -----------         -----------       --------     -----------

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

</TABLE>

The contractual maturities at March 31, 1999 are as follows:
                                                                      Fair
                                                       Cost           Value
Due in less than one year                        $   597,065     $   597,265
Due in one to five years                             124,486         124,523
                                                 -----------     -----------
                                                 $   721,551     $   721,788
                                                 ===========     ===========


Actual  maturities  for asset  backed  securities  may differ  from  contractual
maturities because some borrowers have the right to call or prepay  obligations.
Proceeds from the sales of marketable  securities  were  approximately  $327,000
during the fiscal  year ended March 31,  1998;  during the years ended March 31,
1999 and 1997  there  were no  proceeds  from  sales of  marketable  securities.
Proceeds  from  the  maturities  of  marketable  securities  were  approximately
$648,000,  $181,000 and $98,000 during the years ended March 31, 1999,  1998 and
1997,  respectively.  Included  in  investment  income are gross  gains of $421,
$1,845 and $64, and gross losses of $35,  $553 and $1,355 that were  realized on
the  sales  during  the  fiscal  years  ended  March  31,  1999,  1998 and 1997,
respectively.

4.   Investments in Local Limited Partnerships

The  Partnership  uses the equity method to account for its limited  partnership
interests in  fifty-four  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  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)
<TABLE>

The following is a summary of Investments in Local Limited Partnerships,
excluding the Combined Entities, for the years ended March 31:
                                                                     1999             1998              1997

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

Capital contributions to Local Limited Partnerships
   and purchase price paid to withdrawing partners
   of Local Limited Partnerships                                $  59,851,809     $  59,851,809    $  65,667,604

Cumulative equity in losses of Local Limited Partnerships
   (excluding cumulative unrecognized losses of $46,802,890
   $25,919,160, and $22,111,810 at March 31,
   1999, 1998 and 1997, respectively)                             (43,864,908)      (40,842,874)     (43,991,055)

Cumulative cash distributions received from
   Local Limited Partnerships                                      (2,645,308)       (2,256,711)      (1,831,974)
                                                                -------------     -------------    -------------

Investments in Local Limited Partnerships before adjustment        13,341,593        16,752,224       19,844,575

Excess of investment cost over the underlying net assets acquired:

   Acquisition fees and expenses                                    5,398,026         5,398,026        6,730,055

   Accumulated amortization of acquisition fees and expenses       (1,315,334)       (1,195,748)      (1,292,282)
                                                                -------------     -------------    -------------

Investments in Local Limited Partnerships                          17,424,285        20,954,502       25,282,348

Reserve for valuation of investments in
   Local Limited Partnerships                                      (1,635,000)       (1,635,000)      (1,635,000)
                                                                -------------     -------------    -------------
                                                                $  15,789,285     $  19,319,502    $  23,647,348
                                                                =============     =============    =============
</TABLE>

Summarized financial  information as of December 31, 1998, 1997 and 1996 (due to
the  Partnership's  policy of reporting the financial  information  of its Local
Limited  Partnership  interests  on a 90 day lag  basis)  of all  Local  Limited
Partnerships  accounted for on the equity method  (excluding the Combined Entity
beginning on the date of  combination)  in which the Partnership has invested is
as follows:

Summarized Balance Sheets - as of December 31,
<TABLE>

                                                     1998                  1997                1996
                                                --------------         --------------     ---------
Assets:
<S>                                             <C>                    <C>                <C>
   Investment property, net                     $  141,245,214         $  163,031,238     $   179,058,410
   Other assets, net                                13,136,870             12,596,647          13,158,108
   Current assets                                    5,683,117              6,395,184           5,977,538
                                                --------------         --------------     ---------------
     Total assets                               $  160,065,201         $  182,023,069     $   198,194,056
                                                ==============         ==============     ===============

Liabilities and Partners' Equity:
   Mortgages payable, net of current portion    $  156,511,842         $  161,870,394     $   172,051,946
   Other liabilities                                16,165,309             12,209,220          13,276,728
   Current liabilities (includes current
    portion of mortgages payable)                   23,138,258             18,470,513          17,958,778
                                                --------------         --------------     ---------------
     Total liabilities                             195,815,409            192,550,127         203,287,452
                                                --------------         --------------     ---------------

Partners' Equity:
   Partnership's deficiency                        (35,369,523)           (10,944,390)         (4,360,195)
   Other partners' equity (deficiency)                (380,685)               417,332            (733,201)
                                                --------------         --------------     ---------------
     Total partners' deficiency                    (35,750,208)           (10,527,058)         (5,093,396)
                                                --------------         --------------     ---------------
     Total liabilities and partners' deficiency   $160,065,201         $  182,023,069     $   198,194,056
                                                  ============      =================     ===============



<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,

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

Rental and other income                          $  29,341,366         $  28,897,583      $   29,724,298
                                                 -------------         -------------      --------------

Expenses:
   Operating expenses                               16,687,176            16,391,351          17,315,396
   Interest expense                                 13,646,680            13,691,558          14,652,969
   Depreciation and amortization                     7,157,754             7,440,803           8,365,838
   Provision for valuation of real estate           16,439,515                     -                   -
                                                 -------------         -------------      --------------
     Total expenses                                 53,931,125            37,523,712          40,334,203
                                                 -------------         -------------      --------------

Net Loss                                         $ (24,589,759)        $  (8,626,129)     $  (10,609,905)
                                                 =============         =============      ==============

Partnership's share of Net Loss                  $ (23,905,766)        $  (8,139,677)     $   (8,798,958)
                                                 =============         =============      ==============
Other partners' share of Net Loss                $    (683,993)        $    (486,452)     $   (1,810,947)
                                                 =============         =============      ==============
</TABLE>

For the years ended  March 31,  1999,  1998 and 1997,  the  Partnership  has not
recognized $20,883,730,  $4,878,906 and $5,206,584,  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
$35,369,523  differs  from  the  Partnership's   Investments  in  Local  Limited
Partnerships before adjustment of $13,341,593  primarily because the Partnership
has not  recognized  $46,802,890  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 which 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, 1999 and 1998, deferred  acquisition fees payable amounted
to $112,500 and $225,000, respectively.

An affiliate of the  Managing  General  Partner  currently  receives  $7,086 (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  $385,702,
$423,223  and  $450,678  for the  years  ended  March 31,  1999,  1998 and 1997,
respectively. Payables to affiliates of the Managing General Partner relating to
the aforementioned  fees and expenses equaled $1,950,448 and $1,564,746 at March
31, 1999 and 1998, 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, 1999, 1998 and 1997 is $140,069, $180,970
and  $170,961,  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 $35,917,
$52,220  and  $51,956  of fees  earned  by BFPM  during  1998,  1997  and  1996,
respectively.  As of August 1998,  Boston Financial was no longer the management
agent for Harbor View.

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, 1997, BFPM
became the management agent of Breckenridge. Included in the Combined Statements
of Operations  is $102,599,  $104,878 and $135,472 of property  management  fees
charged by BFPM during 1998, 1997 and 1996, respectively. Payables to affiliates
include  $82,026 and $114,045 of property  management  fees at December 31, 1998
and 1997, respectively.

An affiliate of the Managing General Partner advanced the Partnership amounts to
cover  operating  deficits  and,  in return,  a  non-interest  bearing  note was
executed.  As of March 31, 1999 and 1998, $514,968 is due to an affiliate of the
Managing General Partner for this note.

This  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 at cost, the components of which,  excluding certain  acquisition costs
of $782,487 and $816,683 as of December 31, 1998 and 1997,  respectively paid by
the Partnership and included in bases, are as follows at December 31:
<TABLE>

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

<S>                                                                <C>                      <C>
   Land and improvements                                           $   1,195,873            $  1,245,805
   Building and improvements                                          16,377,742              19,018,025
   Equipment                                                             428,888                 490,526
                                                                   -------------            ------------
                                                                      18,002,503              20,754,356
   Less: accumulated depreciation                                     (5,568,983)             (5,303,237)
                                                                   -------------            ------------
     Total                                                         $  12,433,520            $ 15,451,119
                                                                   =============            ============
</TABLE>

During the year ended December 31, 1998,  operating  deficiencies at Temple Kyle
indicated  potential  impairment.  Based upon analysis of future cash flows,  an
impairment  loss of  $1,693,514  was  recognized on the real estate owned by The
Kyle, which decreased the aggregate carrying value to $2,034,321, the fair value
of the asset, as determined by an independent third party appraisal.  During the
year ended December 31, 1996, an impairment loss of $1,748,708 was recognized on
real estate  owned by 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 of  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 1993  designed  to
address the default. On May 31, 1998, the original workout agreement was amended
and  extended for a period of  thirty-six  months.  Commencing  June 1, 1998 the
terms of the workout agreement include a reduction in the interest rate to 8.25%
for the period form June 1, 1998 through May 31, 1999, 8.75% for the period from
June 1, 1999  through  May 31,  2000 and 9.00% for the period  from June 1, 2000
through  May 31,  2001.  Thereafter  Willow  Lake will  resume  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 rates  required over the term of the workout period shall be payable
upon expiration of the workout period over the remaining term of the note.

Under the terms of the agreement,  Willow Lake is required to maintain a minimum
balance of $5,000 in an  operating  deficit  escrow  account  for the purpose of
funding any shortfall to the extent that cash flow is  insufficient to cover the
full amount of the modified principal and interest payment.

The  liability  of Willow Lake under the  mortgage is limited to the  underlying
value of the real  estate  collateral  plus  other  amounts  deposited  with the
lender.

Principal  payments  required under the above mortgage note which had a balance
at December 31, 1998 and 1997 of $2,699,871 and $2,723,285,  respectively,  for
each of the next five years are as follows:

                             December 31, 1999      $    25,899
                                          2000           28,399
                                          2001           31,119
                                          2002           34,146
                                          2003           37,442
                                    Thereafter        2,542,866

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, 1999.

Texas Partnerships

The  Texas  Partnerships  and RECD  entered  into  Interest  Credit  and  Rental
Assistance  Agreements that had stated interest rates ranging from 9.5% to 7.25%
and provided 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),   and  maturities   ranging  from  2016  to  2030.  All  notes  were
collateralized  by the  respective  properties.  The  principal  balance  of the
remaining Texas Partnership's mortgage at December 31, 1997 was $1,150,688.


<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, 1998 and
$17,600,  including  interest at prime plus 1% (an  effective  interest  rate of
8.75% at December 31, 1998), from July 1, 1998 through its maturity date on June
1, 2005. The note is collateralized by the respective  property.  $1,389,038 and
$1,406,251 was outstanding as of December 31, 1998 and 1997,  respectively.  The
current value of this note approximates its fair value.

Breckenridge Creste

Breckenridge  Creste'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  Breckenridge  Creste 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 had a balance  at  December  31,  1998 and 1997 of  $4,708,469  and
$4,762,502, respectively, for each of the next five years are as follows:

                                 December 31, 1999    $    59,454
                                              2000         65,419
                                              2001         71,983
                                              2002         79,206
                                              2003         87,152
                                        Thereafter      4,350,612

Breckenridge  Creste'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, 1998 and 1997 is $5,357.

Under current market conditions, the fair value of this mortgage as of March 31,
1999 is estimated to be approximately  $5,400,000.  The Partnership's ability
to refinance is impaired due to a substantial prepayment penalty.

241 Pine Street

241 Pine  Street's  mortgage  payable  consists of a 6.38% per annum note due in
monthly principal and interest  installments of $2,798,  maturing on December 1,
2023. The loan is  collateralized  by the project.  Principal  payments required
under the above note, which has a balance at December 31, 1998 of $418,430,  for
each of the next five years are as follows:

                               December 31, 1999     $     7,045
                                            2000           7,508
                                            2001           8,001
                                            2002           8,257
                                            2003           9,087
                                      Thereafter         378,532

As the terms of the mortgage were  modified  under  current  market  conditions,
management  believes  carrying value of the note  approximates  fair value as of
March 31, 1999.


<PAGE>


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


                        NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)


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 were to be repaid by 241 Pine Street
upon sale or  refinancing  of the  property.  The  amount  due to  affiliate  at
December 31, 1997  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 was
reclassified as a due to affiliate.  241 Pine Street obtained  financing  during
the year ended  December 31, 1998, and used part of the proceeds to satisfy this
obligation.

9.   Advances from affiliates

Prior to 1995,  Willow  Lake  incurred  debt of  $662,306  payable to the former
general partners and their affiliates for development 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. Beginning in
June 1997, principal and interest on these notes are due and payable out of cash
flow.  In the event  Willow  Lake is unable  to make a cash  flow  payment,  the
Partnership  has guaranteed one note to the extent of an interest  payment equal
to $500 per month.  The  Partnership  paid $6,000 for interest  during the years
ended March 31, 1999, 1998 and 1997, respectively. The remaining debt ,$288,806,
was forgiven.

10.  Liquidation of Interests in Local Limited Partnerships

For financial reporting  purposes,  a gain on transfer of assets of $645,018 was
recognized  in the year  ended  March 31,  1999 as a result of the  transfer  of
Willowick.  Loss on  liquidation of interests in Local Limited  Partnerships  of
$18,251 and gain on transfer of assets of $1,868,051 were recognized in the year
ended March 31, 1997 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 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.  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.

 11.  Provision for valuation of real estate

During the year ended  December 31, 1998, The Kyle was deemed to be impaired and
written down to its fair value.  The fair value,  determined  by an  independent
appraisal, was determined using the fair value of comparable apartment complexes
in the area and the estimated discounted future cash flows. The determination of
fair value did not take into  account the value of tax credits  allocated to The
Kyle.  The asset  impairment  loss of $1,693,514 is the  difference  between the
carrying  value and the  estimated  fair  value of The Kyle and was  charged  to
operations during the year ended December 31, 1998.


<PAGE>


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




                     NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)

12.  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.

13.  Federal Income Taxes

A reconciliation  of the loss reported in the Combined  Statements of Operations
for the fiscal  years ended March 31, 1999,  1998 and 1997 to the loss  reported
for federal income tax purposes for the year ended  December 31, 1998,  1997 and
1996 is as follows:
<TABLE>

                                                            1999              1998              1997
                                                       --------------    -------------      --------

<S>                                                    <C>               <C>                <C>
Net Loss per Combined Statement of Operations          $   (5,109,931)   $  (3,597,835)     $  (7,208,441)
   Operating expenses not deductible in
     current year for tax purposes                                  -                -            483,083
   Other loss recognized for book purposes but not
     recognized for tax purposes                              379,660          693,904                  -
   Amortization of acquisition fees and expenses
     not deductible for tax purposes                          148,947          151,405            167,201
   Adjustment to reflect March 31 fiscal year-
     end to December 31 tax year-end                          330,738         (532,450)          (120,542)
   Adjustment for equity in loss of Local Limited
     Partnerships for financial reporting purposes
     over (under) equity in loss for tax purposes          16,228,266          660,767          1,423,554
   Adjustment for equity in loss of Local
     Limited Partnerships not recognized for
     financial reporting purposes                         (20,883,730)      (4,878,906)        (5,206,584)
   Cash distribution included in loss for financial
     reporting purposes                                       (82,101)         (60,229)           (13,687)
   Other                                                     (157,712)          18,251            (30,462)
                                                       --------------    -------------      -------------
Net Loss for federal income tax purposes               $   (9,145,863)   $  (7,545,093)     $ (10,505,878)
                                                       ==============    =============      =============

</TABLE>







<PAGE>





                      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, 1999
are as follows:
<TABLE>

                                                         Financial              Tax
                                                         Reporting           Reporting
                                                         Purposes            Purposes          Differences

<S>                                                    <C>                 <C>                 <C>
   Investments in Local Limited Partnerships           $ 15,789,285        $ (10,538,296)      $ 26,327,581
                                                       ============        =============       ============
   Other assets                                        $ 15,450,465        $  15,049,069       $    401,396
                                                       ============        =============       ============
   Liabilities                                         $ 11,714,112        $     878,380       $ 10,835,732
                                                       ============        =============       ============

</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 four Local
Limited  Partnerships  with its financial  statements;  for tax purposes,  these
entities are carried on the equity method;  ii) the cumulative  equity in losses
from Local  Limited  Partnerships,  including  the  Combined  Entities,  for tax
reporting  purposes is  approximately  $32,139,000  greater  than for  financial
reporting   purposes,   including   approximately   $46,803,000  of  losses  the
Partnership  has  not  recognized   relating  to   twenty-seven   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.

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>
                                                         Financial              Tax
                                                         Reporting           Reporting
                                                         Purposes            Purposes          Differences

<S>                                                    <C>                 <C>                 <C>
   Investments in Local Limited Partnerships           $ 19,319,502        $   (838,860)       $ 20,158,362
                                                       ============        ============        ============
   Other assets                                        $ 17,812,285        $ 14,555,390        $  3,256,895
                                                       ============        ============        ============
   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 eleven Local
Limited  Partnerships  with its financial  statements;  for tax purposes,  these
entities are carried on the equity method;  ii) the cumulative  equity in losses
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.




<PAGE>

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

                     NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)


14.  Supplemental Combining Schedules
<TABLE>
                                                                        Balance Sheets

                                   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               $    338,993    $     101,372     $          -      $    440,365
Marketable securities, at fair value         721,788                -                -           721,788
Investments in Local Limited
   Partnerships, net of reserve
   for valuation                          18,167,136                -       (2,377,851)       15,789,285
Accounts receivable, net                     758,604           91,519         (747,368)          102,755
Interest receivable                            8,624                -                -             8,624
Notes receivable                           1,389,038                -       (1,389,038)                -
Prepaid expenses                               2,240           18,855                -            21,095
Tenant security deposits                           -           95,105                -            95,105
Replacement reserves                               -          261,127                -           261,127
Operating reserves                                 -           41,285                -            41,285
Rental property at cost, net of
   accumulated depreciation                        -       12,433,520          782,487        13,216,007
Deferred acquisition fees escrow             112,500                -                -           112,500
Deferred expenses, net                             -          219,416                -           219,416
Other assets                                       -          210,398                -           210,398
                                        ------------    -------------     ------------      ------------
     Total assets                       $ 21,498,923    $  13,472,597     $ (3,731,770)     $ 31,239,750
                                        ============    =============     ============      ============

Liabilities and Partners' Equity
Accounts payable to affiliates          $  1,977,756    $     848,739     $   (747,368)     $  2,079,127
Accounts payable and accrued
   expenses                                  254,788          319,985                -           574,773
Interest payable                                   -          312,719                -           312,719
Notes payable, affiliate                     514,968                -                -           514,968
Security deposits payable                          -           87,898                -            87,898
Due to affiliate                                   -                -                -                 -
Deferred acquisition fees payable            112,500                -                -           112,500
Advances from affiliates                           -          200,000                -           200,000
Mortgage notes payable                             -        9,221,165       (1,389,038)        7,832,127
                                        ------------    -------------     ------------      ------------
     Total liabilities                     2,860,012       10,990,506       (2,136,406)       11,714,112
                                        ------------    -------------     ------------      ------------

Minority interest in Local
   Limited Partnerships                            -                -          886,727           886,727
                                        ------------    -------------     ------------      ------------

General, Initial and Investor Limited
   Partners' Equity                       18,638,674        2,482,091       (2,482,091)       18,638,674

Net unrealized gains on marketable
   securities                                    237                -                -               237
                                        ------------    -------------     ------------      ------------
     Total Partners' Equity               18,638,911        2,482,091       (2,482,091)       18,638,911
                                        ------------    -------------     ------------      ------------
     Total Liabilities and
        Partners' Equity                $ 21,498,923    $  13,472,597    $  (3,731,770)     $ 31,239,750
                                        ============    =============    =============      ============
</TABLE>

(A) As of March 31, 1999. (B) As of December 31, 1998 - 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)
<TABLE>

                                                       Statements of Operations

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

Revenue:
<S>                                <C>                  <C>               <C>                <C>
   Rental                          $               -    $   2,435,094     $           -      $   2,435,094
   Investment                                 35,638           13,925                 -             49,563
   Recovery of bad debt                       30,148                -                 -             30,148
   Other                                     493,048           35,526           (65,491)           463,083
                                   -----------------      -----------     -------------      -------------
     Total Revenue                           558,834        2,484,545           (65,491)         2,977,888
                                   -----------------      -----------     -------------      -------------

Expenses:
   Asset management fees,
     related party                           385,702                -                 -            385,702
   General and administrative                361,002                -                 -            361,002
   Bad debt expense                          165,810                -          (152,877)            12,933
   Property management fees                        -          138,452                 -            138,452
   Rental operations, exclusive
     of depreciation                               -        1,478,455                 -          1,478,455
   Interest                                    6,000          819,621           (65,491)           760,130
   Provision for valuation of
     real estate                                   -        1,693,514                 -          1,693,514
   Depreciation                                    -          653,671                 -            653,671
   Amortization                              148,947           29,836                 -            178,783
                                   -----------------      -----------     -------------      -------------
     Total Expenses                        1,067,461        4,813,549          (218,368)         5,662,642
                                   -----------------    -------------     -------------      -------------

Loss before equity in losses of Local
   Limited  Partnerships,  minority interest,
   gain on liquidation of interests in Local
    Limited Partnerships and
   gain on transfer                         (508,627)      (2,329,004)          152,877         (2,684,754)

Equity in losses of Local
   Limited Partnerships                   (4,754,181)               -         1,663,198         (3,090,983)
Minority interest in losses of Local
   Limited Partnerships                            -                -            20,788             20,788

Gain on liquidation of interests
     in Local Limited Partnerships           152,877                -          (152,877)                 -
                                   -----------------    -------------     -------------      -------------
Net Loss before gain on transfer          (5,109,931)      (2,329,004)        1,683,986         (5,754,949)

Gain on transfer of assets                         -          645,018                 -            645,018
                                   -----------------    -------------     -------------      -------------

Net Loss                           $      (5,109,931)   $ (1,683,986)     $   1,683,986      $  (5,109,931)
                                   =================    ============      =============      =============
</TABLE>

(A) For the year ended March 31, 1999.  (B) For the year ended December 31, 1998
- 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)
<TABLE>

                                                                     Statements of Cash Flows

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

<S>                                       <C>                 <C>                 <C>                <C>
Net Loss                                  $   (5,109,931)     $  (1,683,986)      $  1,683,986       $  (5,109,931)
Adjustments to reconcile net
  loss to net cash provided by
  (used for) operating activities:
   Equity in losses of Local
     Limited Partnerships                      4,754,181                  -         (1,663,198)          3,090,983
   Bad debt expense (recoveries)                 135,662                  -           (152,877)            (17,215)
   Gain on liquidation of interests
     in Local Limited Partnerships              (152,877)                 -            152,877                   -
   Provision   for  valuation  of  real
     estate                                            -          1,693,514                  -           1,693,514
   Gain on transfer of assets                          -           (645,018)                 -            (645,018)
   Cash distribution income included in cash
     distributions from Local Limited
     Partnerships                                (68,949)                 -                  -             (68,949)
   Amortization and depreciation                 148,947            683,507                  -             832,454
   Gain on sale of marketable
     securities                                     (386)                 -                  -                (386)
   Minority interest in losses
     of Local Limited Partnerships                     -                  -            (20,788)            (20,788)
   Increase in operating reserves                      -            (41,285)                 -             (41,285)
   Increase (decrease) in cash
     arising from changes in operating
     assets and liabilities:
     Accounts receivable                               -             (1,052)                 -              (1,052)
     Interest receivable                           4,674                  -                  -               4,674
     Prepaid expenses                                591              3,339                  -               3,930
     Tenant security deposits                          -            (30,910)                 -             (30,910)
     Other assets                                      -           (108,760)                 -            (108,760)
     Accounts payable to affiliates              389,282            (29,586)                 -             359,696
     Accounts payable and accrued
       expenses                                   32,778            175,522                  -             208,300
     Interest payable                                  -             35,320                  -              35,320
     Tenant security deposits payable                  -             21,365                  -              21,365
                                          --------------      -------------       ------------       -------------
Net cash provided by
   operating activities                          133,972             71,970                  -             205,942
                                          --------------      -------------       ------------       -------------

Cash flows from investing activities:
   Advances to affiliates                       (156,482)                 -              9,584            (146,898)
Purchases of marketable securities            (1,094,449)                 -                  -          (1,094,449)
   Proceeds from sales and maturities
     of marketable securities                    647,907                  -                  -             647,907
   Cash distributions received from
     Local Limited Partnerships                  578,263                  -             (1,954)            576,309
   Adjustment to cash upon
     liquidation of General Partner
     interest in a Combined Entity                     -             (1,817)                 -              (1,817)


<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)

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

   Decrease in deferred acquisition fee
     escrow                                      112,500                  -                  -             112,500
   Payment of deferred acquisition fee          (112,500)                 -                  -            (112,500)
   Deposits to replacement reserves                    -            (66,875)                 -             (66,875)
   Additions to rental property                        -            (91,668)                 -             (91,668)
                                          --------------      -------------       ------------       -------------
Net cash used for investing activities           (24,761)          (160,360)             7,630            (177,491)
                                          --------------      --------------      ------------       -------------

Cash flows from financing activities:
   Proceeds from mortgage note                         -            418,430                  -             418,430
   Repayment of mortgage notes
      payable                                          -            (94,659)            17,213             (77,446)
   Additions to deferred expenses                      -            (40,124)                 -             (40,124)
   Cash distribution                                   -            (31,954)             1,954             (30,000)
   Advances from affiliate                             -            161,817             (9,584)            152,233
   Reimbursement to affiliate                          -           (323,046)                 -            (323,046)
   Repayment of notes
     receivable, affiliate                        17,213                  -            (17,213)                  -
                                          --------------      -------------       ------------       -------------
Net cash provided by
   financing activities                           17,213             90,464             (7,630)            100,047
                                          --------------      -------------       ------------       -------------

Net increase in
   cash and cash equivalents                     126,424              2,074                  -             128,498

Cash and cash equivalents,
   beginning                                     212,569             99,298                  -             311,867
                                          --------------      -------------       ------------      --------------

Cash and cash equivalents,
   ending                                 $      338,993      $     101,372       $          -      $      440,365
                                          ==============      =============       ============      ==============

</TABLE>

(A) For the year ended March 31, 1999.
(B) For the year ended December 31, 1998 - see Note 2.

<PAGE>
Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>
<CAPTION>

                                                                                                            GROSS AMOUNT AT
                                                                                                            WHICH CARRIED AT
                                                                                          NET IMPROVMENTS  DECEMBER 31, 1998
                                                         COST OF INTEREST AT ACQUISTION     CAPTIALIZED
                                 NUMBER       TOTAL                   DATE
                                                         --------------------------------                  -------------------
                                   OF         ENCUM-                     BUILDINGS AND     SUBSEQUENT TO        LAND AND
         DESCRIPTION             UNITS      BRANCES *         LAND        IMPROVEMENTS      ACQUISITON        IMPROVEMENTS
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>             <C>            <C>               <C>                 <C>

Multi-family residential property:
Harbour View                      122         10,681,534       $406,704      $11,193,508          $554,055                  $
                                                                                                                      413,139
 Staten Island, NY
Willow Lake Apts**                132          2,699,871        100,000        5,143,801          (27,594)            140,968
 Kansas City, MO
West Dade I                       122          4,049,203        626,698        4,572,095           597,462            626,698
 Miami, FL
West Dade II                      209          8,273,811      1,213,707        8,416,939         2,527,205          1,118,822
 Miami, FL
Westwood Manor                    144          3,231,079        191,987        4,091,974           114,283            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          7,087,704        153,588        5,106,986       (2,828,280)            153,588
 Buffalo, NY
Buffalo Waterfront                472         25,342,127        202,452       17,775,357       (9,904,825)            202,452
 Buffalo, NY
Fox Run                           150          4,104,694        452,610        5,039,028           116,283            498,304
 Victoria, TX
Boulevard II                       19            691,775              0          965,670           401,256             32,174
 Chicago, IL
The Colony                        300          8,549,239      1,298,638        8,814,688           303,259          1,323,009
 Columbia, SC
Boulevard IIA                      42          1,511,625         11,786        2,467,433           621,660             34,400
 Chicago, IL
Ashley Place                       96          2,791,025             10        3,951,009           862,321                 10
 Orlando, FL
Admiral Court                      46          2,619,347         60,637        4,751,321           404,624             60,637
 Philadelphia, PA
Syracuse Apartments                8             240,431         17,669          289,821             3,301             17,669
 Syracuse, KS
El Jardin                         236          6,863,716        742,000        8,480,839           241,584            742,000
 Davie, FL
Elmwood Delmar                     95          3,230,700         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** (D)               60                  0         10,956        1,455,934       (1,466,890)                  0
 Gainesville, TX
Ellsworth Apartments               12            327,767         18,000          390,835             1,647             18,000
 Ellsworth, KS
Satanta Apartments                 8             223,361         23,593          264,336             3,880              7,500
 Satanta, KS
Rossville Apartments               10            278,728         23,950          259,486            73,440             23,950
 Rossville, KS

</TABLE>

<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>
<CAPTION>

                                                                                                            GROSS AMOUNT AT
                                                                                                            WHICH CARRIED AT
                                                                                         NET IMPROVEMENTS  DECEMBER 31, 1998
                                                         COST OF INTEREST AT ACQUISTION     CAPTIALIZED
                                 NUMBER       TOTAL                   DATE
                                                         --------------------------------                  -------------------
                                   OF         ENCUM-                     BUILDINGS AND     SUBSEQUENT TO        LAND AND
         DESCRIPTION             UNITS      BRANCES *         LAND        IMPROVEMENTS      ACQUISITON        IMPROVEMENTS
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>           <C>              <C>               <C>                <C>

Multi-family residential property:
Columbia Town House                56          1,787,964        167,000          885,042         1,078,618            168,303
 Burlington, IA
Quarter Mill                      266          7,116,270      1,139,508        2,530,458        12,816,569          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          2,701,132        105,250        4,095,471          (97,559)            105,250
 South Holyoke, MA
Walker Woods                       51          2,331,283        159,104        2,954,196         1,016,891            159,104
 Dover, DE
Shady Shores (B)                   0                   0         30,778          723,316         (754,094)                  0
 Lake Dallas, TX
Eagle Wood Apts.                   40          1,113,413              0        1,382,855            52,491             45,510
 Covington, TN
Georgetown II                      50          1,724,359              0        1,079,160         1,726,090                  0
 Georgetown, DE
Blue Mountain Apts.               217          9,718,207        618,994       14,308,698           459,534            618,994
 Boston, MA
Garden Plain                       12            302,841         15,849          362,584                54             15,932
 Garden Plain, KS
Fulton Apartments                  24            798,123              0          985,000            37,657             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            282,556         14,032          327,478             2,855             14,070
 Billings, MO
Brownsville                        28            784,201         31,000          980,353             9,630             31,000
 Brownsville, TN
Wayne Senior                       15            427,912         30,949          494,381             2,889             30,949
 Wayne, NE

</TABLE>

<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>
<CAPTION>

                                                                                                            GROSS AMOUNT AT
                                                                                                            WHICH CARRIED AT
                                                                                          NET IMPROVMENTS  DECEMBER 31, 1998
                                                         COST OF INTEREST AT ACQUISTION     CAPTIALIZED
                               NUMBER         TOTAL                   DATE
                                                         --------------------------------                  -------------------
                                   OF         ENCUM-                     BUILDINGS AND     SUBSEQUENT TO        LAND AND
         DESCRIPTION             UNITS      BRANCES *         LAND        IMPROVEMENTS      ACQUISITON        IMPROVEMENTS
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>             <C>            <C>              <C>                   <C>

Multi-family residential property:
Longview                           14            398,009         29,710          461,233             2,634             29,796
 Humboldt, KS
Horseshoe Bend                     24            647,909         21,780          816,289             1,668             21,780
 Horseshoe Bend, AR
Briarwood II                       32          1,108,853        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            543,708         28,840          585,285             2,427             29,253
 Smithville, MO
Aurora East                       125          4,098,800        308,324        4,402,417           204,985            308,324
 Denver, CO
Elver Park II                      56          1,680,740        348,138        2,509,630            35,605            348,138
 Madison, WI
Elver Park III                     48          1,439,145        135,465          582,652         1,829,636            217,507
 Madison, WI
Tucson Trails                      48          1,407,408        138,240          588,915         1,818,501            193,866
 Madison, WI
Tucson Trails II                   48          1,414,049        138,240          281,704         2,131,272            194,388
 Madison, WI
Pleasant Plaza                    125         17,298,253        303,775       15,691,150           174,944            303,775
 Malden, MA
241 Pine Street**                  50            418,430        130,900        2,564,381       (1,439,141)            130,900
 Manchester, NH
Oak Grove                          24            561,717         35,000          169,708           521,155             35,000
 Oak Grove, MO
Wood Creek                        104          3,186,957        475,000        4,203,585         1,398,056            842,496
 Calcium, NY
Breckenridge Creste**             164          4,708,469        845,000          811,111         7,839,724            826,686
 Duluth, GA
Bolivar Apartments                 20            466,514         30,000          190,970           364,091             30,000
 Boliver, MO
Lexington Civic                    24            815,747         15,000          650,260           310,779             15,000
 Lexington, TN
Riverfront Apartments             200          7,264,214        140,333        9,845,838           735,040            140,333
 Sunbury, PA
Susquehanna View                  201          8,955,465        373,702       10,743,951           743,191            385,602
 Camp Hill, PA
Westgate Associated                20            638,634         45,500          750,700             4,471             20,000
 Perryville, AR
Altheimer Associates               20            597,205         10,000          725,429             6,028             10,000
 Altheirmer, AR
The Temple-Kyle **                 64                  0         93,564          931,860         1,008,897             97,319
 Temple, TX

</TABLE>

<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>
<CAPTION>

                                                                                                            GROSS AMOUNT AT
                                                                                                            WHICH CARRIED AT
                                                                                         NET IMPROVEMENTS  DECEMBER 31, 1998
                                                         COST OF INTEREST AT ACQUISTION     CAPTIALIZED
                                 NUMBER           TOTAL               DATE
                                                         --------------------------------                  -------------------
                                   OF         ENCUM-                     BUILDINGS AND     SUBSEQUENT TO        LAND AND
         DESCRIPTION             UNITS      BRANCES *         LAND        IMPROVEMENTS      ACQUISITON        IMPROVEMENTS
------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>           <C>           <C>                  <C>                <C>

Multi-family residential property:
Diversey Square                    48          2,567,130         50,000        3,253,496           120,835             50,000
 Chicago, IL
Poplar Village                     36          1,200,333         60,000        1,427,725                 0             60,000
 Cumberland, KY

                                          ------------------------------------------------------------------------------------
                                             183,303,687     12,201,628      211,517,095         7,073,164         16,863,632

Less:  Combined Entities **                  (7,826,770)    (1,180,420)     (10,907,087)       (5,914,996)        (1,195,873)

                                          ====================================================================================
                                             175,476,917    $11,021,208     $200,610,008        $1,158,168        $15,667,759
                                          ====================================================================================
</TABLE>


The   aggregate   cost  for  Federal   Income  Tax  purposes  is   approximately
$248,509,000.

                             * 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
                               10.84%  to  6.38%.   The   Partnership   has  not
                               guaranteed any of these mortgage notes payable.

(A) During the year ended March 31, 1997, the Partnership has transferred 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 transferred 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  transferred the
titles of Regency and Rolling Hills
to the lender.

(D) During the year ended March 31, 1999, the Partnership has transferred all of
the assets of Willowick subject to the liabilities to unaffiliated entities.



<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>

                                                                                                   LIFE ON WHICH
                                  GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998               DEPRECTIATION
                               ---------------------------------------------------------
                                  BUILDING AND                           ACCUMULATED      DATE      IS COMPUTED        DATE
         DESCRIPTION              IMPROVEMENTS           TOTAL           DEPRECIATON     BUILT        (YEARS)        ACQUIRED
-------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                <C>               <C>            <C>          <C>         <C>

Multi-family residential property:
Harbour View                                     $                  $                 $     1990        5-40         09/29/89
                                        11,741,128         12,154,267         3,021,519
 Staten Island, NY
Willow Lake Apts**                       5,075,239          5,216,207         1,830,409     1989        5-40         12/20/89
 Kansas City, MO
West Dade I                              5,169,557          5,796,255         1,924,528  Various        5-40         12/31/88
 Miami, FL
West Dade II                            11,039,029         12,157,851         3,939,161  Various        5-40         12/31/88
 Miami, FL
Westwood Manor                           4,206,257          4,398,244         1,741,609  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                        2,278,706          2,432,294         2,099,414  Various        5-40         04/28/89
 Buffalo, NY
Buffalo Waterfront                       7,870,532          8,072,984         7,196,649  Various        5-40         04/28/89
 Buffalo, NY
Fox Run                                  5,109,617          5,607,921         1,756,446     1975        5-40         04/07/89
 Victoria, TX
Boulevard II                             1,334,752          1,366,926           432,627     1920        5-40         04/04/89
 Chicago, IL
The Colony                               9,093,576         10,416,585         4,369,648     1950        5-40         05/19/89
 Columbia, SC
Boulevard IIA                            3,066,479          3,100,879           945,885  Various        5-40         04/04/89
 Chicago, IL
Ashley Place                             4,813,330          4,813,340         1,643,665     1989        5-40         06/23/89
 Orlando, FL
Admiral Court                            5,155,945          5,216,582         1,131,320     1920        5-40         06/07/89
 Philadelphia, PA
Syracuse Apartments                        293,122            310,791           113,404     1989        5-40         06/30/89
 Syracuse, KS
El Jardin                                8,722,423          9,464,423         2,961,213     1973        5-40         06/14/89
 Davie, FL
Elmwood Delmar                           4,155,023          4,229,244         1,407,907     1957        5-40         05/16/89
 Aurora, CO
Crestwood Place (B)                              0                  0                 0     1975        5-40         06/05/89
 Bridgeport, TX
Willowick Apts** (D)                             0                  0                 0     1975        5-40         06/30/89
 Gainesville, TX
Ellsworth Apartments                       392,482            410,482           138,010     1975        5-40         07/19/89
 Ellsworth, KS
Satanta Apartments                         284,309            291,809           101,748     1989        5-40         07/28/89
 Satanta, KS
Rossville Apartments                       332,926            356,876           112,700     1990        5-40         07/28/89
 Rossville, KS


</TABLE>

<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>

                                                                                                   LIFE ON WHICH
                                  GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998               DEPRECTIATION
                               ---------------------------------------------------------
                                  BUILDING AND                           ACCUMULATED      DATE      IS COMPUTED        DATE
         DESCRIPTION              IMPROVEMENTS           TOTAL           DEPRECIATON     BUILT        (YEARS)        ACQUIRED
-------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                <C>               <C>             <C>         <C>          <C>

Multi-family residential property:
Columbia Town House                      1,962,357          2,130,660           697,608     1990        5-40         07/28/89
 Burlington, IA
Quarter Mill                            10,914,706         16,486,535         4,728,136     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                            3,997,912          4,103,162         1,040,076     1988        5-40         08/29/89
 South Holyoke, MA
Walker Woods                             3,971,087          4,130,191           883,133     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           452,164     1990        5-40         09/06/89
 Covington, TN
Georgetown II                            2,805,250          2,805,250           662,293     1990        5-40         09/28/89
 Georgetown, DE
Blue Mountain Apts.                     14,768,232         15,387,226         5,081,981  Various        5-40         09/29/89
 Boston, MA
Garden Plain                               362,555            378,487           135,476     1990        5-40         08/09/89
 Garden Plain, KS
Fulton Apartments                          994,657          1,022,657           318,506     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           120,890     1989        5-40         08/09/89
 Billings, MO
Brownsville                                989,983          1,020,983           418,659     1989        5-40         08/09/89
 Brownsville, TN
Wayne Senior                               497,270            528,219           139,117     1988        5-40         08/09/89
 Wayne, NE


</TABLE>

<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>

                                                                                                   LIFE ON WHICH
                                  GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998               DEPRECTIATION
                               ---------------------------------------------------------
                                  BUILDING AND                           ACCUMULATED      DATE      IS COMPUTED        DATE
         DESCRIPTION              IMPROVEMENTS           TOTAL           DEPRECIATON     BUILT        (YEARS)        ACQUIRED
-------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                  <C>         <C>        <C>          <C>

Multi-family residential property:
Longview                                   463,781            493,577           170,646     1988        5-40         10/13/89
 Humboldt, KS
Horseshoe Bend                             817,957            839,737           350,972     1988        5-40         08/09/89
 Horseshoe Bend, AR
Briarwood II                             1,340,248          1,445,248           544,927     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                                 587,299            616,552           208,352     1987        5-40         08/09/89
 Smithville, MO
Aurora East                              4,607,402          4,915,726         2,325,532     1972        5-40         11/06/89
 Denver, CO
Elver Park II                            2,545,235          2,893,373           786,093     1989        5-40         11/09/89
 Madison, WI
Elver Park III                           2,330,246          2,547,753           629,848     1990        5-40         11/09/89
 Madison, WI
Tucson Trails                            2,351,790          2,545,656           631,412     1990        5-40         11/22/89
 Madison, WI
Tucson Trails II                         2,356,828          2,551,216           619,161     1990        5-40         11/23/89
 Madison, WI
Pleasant Plaza                          15,866,094         16,169,869         5,592,463     1989        5-40         12/01/89
 Malden, MA
241 Pine Street**                        1,125,240          1,256,140           549,797     1988        5-40         12/04/89
 Manchester, NH
Oak Grove                                  690,863            725,863           211,481     1991        5-40         11/24/89
 Oak Grove, MO
Wood Creek                               5,234,145          6,076,641         1,993,044     1990        5-40         12/15/89
 Calcium, NY
Breckenridge Creste**                    8,669,149          9,495,835         2,524,456     1990        5-40         12/19/89
 Duluth, GA
Bolivar Apartments                         555,061            585,061           180,425     1990        5-40         12/15/90
 Boliver, MO
Lexington Civic                            961,039            976,039           252,398     1990        5-40         12/29/90
 Lexington, TN
Riverfront Apartments                   10,580,878         10,721,211         2,602,247     1990        5-40         12/26/89
 Sunbury, PA
Susquehanna View                        11,475,242         11,860,844         2,811,575     1988        5-40         12/26/89
 Camp Hill, PA
Westgate Associated                        780,671            800,671           252,575     1990        5-40         05/01/90
 Perryville, AR
Altheimer Associates                       731,457            741,457           235,453     1990        5-40         04/18/90
 Altheirmer, AR

</TABLE>


<PAGE>



Boston  Financial  Qualified  Housing Tax Credits  L.P.  III Schedule III - Real
Estate  and  Accumulated   Depreciation  of  Property  owned  by  Local  Limited
Partnerships in which Registrant has invested at March 31, 1999
<TABLE>

                                                                                                   LIFE ON WHICH
                                  GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998               DEPRECTIATION
                               ---------------------------------------------------------
                                  BUILDING AND                           ACCUMULATED      DATE      IS COMPUTED        DATE
         DESCRIPTION              IMPROVEMENTS           TOTAL           DEPRECIATON     BUILT        (YEARS)        ACQUIRED
-------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>              <C>            <C>         <C>           <C>

Multi-family residential property:
The Temple-Kyle **                       1,937,002          2,034,321           664,321     1991        5-40         06/12/90
 Temple, TX
Diversey Square                          3,374,331          3,424,331         1,096,328     1990        5-40         12/01/90
 Chicago, IL
Poplar Village                           1,427,725          1,487,725           333,746     1991        5-40         12/30/90
 Cumberland, KY

                               ---------------------------------------------------------
                                       213,928,255        230,791,887        77,113,153

Less:  Combined Entities **           (16,806,630)       (18,002,503)       (5,568,983)

                               =========================================================
                                      $197,121,625       $212,789,384       $71,544,170
                               =========================================================
</TABLE>



<PAGE>


<TABLE>

Summary of property owned and accumulated depreciation:
<S>                                        <C>              <C>            <C>                              <C>

Property Owned  December 31, 1998                                          Accumulated Depreciation  December 31, 1998
-------------------------------------------------------------------------  -----------------------------------------------
Balance at beginning of period                              $228,065,336   Balance at beginning of period     $65,034,098
  Additions during period:                                                   Additions during period:
     Acquisitions through foreclosure                 $0                        Eliminations - 1997             5,303,237

      Other acquisitions                         500,450                        Eliminations -1998             (5,568,983)

     Improvements etc.                           993,990                        Properties disposed of (D)      (375,954)
                                           --------------
                                                               1,494,440        Depreciation                    7,151,772
  Deductions during                                                        Balance at close of period         $71,544,170
period:
                                                                                                           ===============
                                                                                                           ===============
     Cost of real estate and fixed assets      (239,209)
     sold
     Eliminations  - 1997 Combined Entities  20,754,356
     Eliminations  - 1998 Combined Entities (18,002,503)
     Provision for valuation of real        (18,133,029)
     estate
     Properties disposed                     (1,150,007)
     of (D)
                                                            (16,770,392)
                                                         ----------------
Balance at close of period                                  $212,789,384
                                                         ================


Property Owned  December 31, 1997                                          Accumulated Depreciation  December 31, 1997
-------------------------------------------------------------------------  -----------------------------------------------
Balance at beginning of period                              $241,747,268   Balance at beginning of period     $61,965,823
  Additions during period:                                                   Additions during period:
     Acquisitions through foreclosure                 $0                        Eliminations - 1996             5,426,434

      Other acquisitions                          27,189                        Eliminations - 1997            (5,303,237)

     Improvements etc.                         1,267,479                        Properties disposed of (B)      (931,508)
                                           --------------
                                                               1,294,668        Properties disposed of (C)    (4,045,351)
  Deductions during                                                             Depreciation                    7,921,937
period:
                                                                                                           ---------------
     Cost of real estate and fixed assets            (174)                 Balance at close of period         $65,034,098
     sold
                                                                                                           ===============
     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                                          Accumulated Depreciation  December 31, 1996
-------------------------------------------------------------------------  -----------------------------------------------
Balance at beginning of period                              $252,533,482   Balance at beginning of period     $55,943,640
  Additions during period:                                                   Additions during period:
     Acquisitions through foreclosure                 $0                        Eliminations - 1995            3,034,245

     Other acquisitions                          226,465                        Eliminations - 1996           (5,426,434)

     Improvements etc.                           623,525                        Properties disposed of (A)      (421,819)
                                           --------------
                                                                 849,990        Depreciation                    8,836,191
                                                                                                           ---------------
  Deductions during                                                        Balance at close of period         $61,965,823
period:
                                                                                                           ===============
     Cost of real estate and fixed assets       (33,471)
     sold
     Eliminations  - 1995 Combined entities   15,852,398
     Eliminations  - 1996 Combined Entities  (23,310,668)
     Provision for valuation of real          (1,748,708)
     estate
     Properties disposed of (A)              (2,395,755)
                                           --------------
                                                            (11,636,204)
                                                         ----------------
Balance at close of period                                  $241,747,268
                                                         ================
</TABLE>











<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, 1999
                       Reports of Independent Auditors
<PAGE>

Diversey
[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,
1998 and 1997, 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, 1998 and 1997, 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 issuedreports
dated January 27, 1999 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 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 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 27, 1999

<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,
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>

Breckenridge
[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, 1998, and
the related statements of changes in partners' equity [deficit], 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,  1998,  and the  results of its  operations  chanfes in
partners'  equity  [deficit],  and  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 29, 1999

<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>


EDM HOUSING

[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. 101-35513 - PM - EX, as of December 31,
1998 and the related  statement 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. 101-35513 - PM - EX, as of December 31, 1998, 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.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 29, 1999 on our  consideration of EDM Housing  Associates,  Ltd.'s
internal  controls and reports  dated  January 29, 1999 on its  compliance  with
specific requirements applicable to major HUD programs and specific requirements
applicable to Fair Housing and Non-Discrimination.

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 29, 1999

<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>

FOX RUN


[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,
1998, 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,  1998,  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.

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January 30,  1999 on our  consideration  of Fox Run  Housing  Associates,
Ltd.'s  internal  controls and reports dated January 30, 1999 on its  compliance
with specific requirements applicable to Fair Housing and Non-Discrimination..

/s/STARK TINTER & ASSOCIATES
Certified Public Accountants
Financial Consultants
January 30, 1999
<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>


PINE ST
[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, 1998 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, 1998, and the results of its' operations for the year then ended
in conformity with generally accepted accounting principles.

                                               /s/Dauby O'Conner & Zaleski

February 23, 1999                                   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, 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>


BROWNSVILLE
[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, 1998 and 1997,  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 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, 1998 and 1997 and the  results of its  operations,  changes in
partners'  deficit  and 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 20, 1999 on our  consideration of Brownsville  Associates,  L.P.'s
internal control structure and a report dated January 21, 1999 on its 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 accompanying  required  supplementary
information shown on pages 9-11 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
audits of the basic financial  statements,  and in our opinion, is fairly stated
in all material respects in relation to the basic financial  statements taken as
a whole.




/s/Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Braunsdorf, Carlson and Clinkinbeard
TOPEKA, KANSAS
JANUARY 20, 1999
<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>


BRIARWOOD
[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.:  02-008-431303694
as of December  31, 1998 and 1997,  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 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, 1998 and 1997, and the results of its operations,  changes in
partners'  deficit  and 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 20, 1999 on our  consideration of Briarwood  Associates II, L.P.'s
internal control and on its 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 accompanying  required  supplementary
information shown on pages 9-11 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 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
January 20, 1999
<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.

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>



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
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>

FULTON
[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, 1998 and 1997, 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, 1998 and 1997,  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 13, 1999

<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, 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>

EAGLEWOOD
[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, 1998 and 1997, 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, 1998 and 1997, 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  27,  1999  on our  consideration  of the  limited  partnership's
internal  control over financial  reporting and on its compliance  with laws and
regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
January 27, 1999

<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>

ELVER PARK III
[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 balance  sheet of Elver Park Limited  Partnership  III as of
December 31, 1998, 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  audit.  The  financial
statements  of Elver Park Limited  Partnership  III as of December 31, 1997 were
audited by other  auditors  whose  report  dated  January 15, 1998  expressed an
unqualified opinion on those statements.

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, 1998 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 22, 1999

<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 balance  sheet of Elver Park Limited  Partnership  III as of
December 31, 1997 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 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.

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, 1998, 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>

ELVER PAK II
[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 sheet of Elver Park Limited Partnership
II as of December 31, 1998 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  audit.  The  financial
statements  of Elver Park  Limited  Partnership  II as of December 31, 1997 were
audited by other  auditors  whose  report  dated  January 14, 1998  expressed an
unqualified opinion on those statements.

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, 1998, 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 22, 1999

<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>


BLUEMOUNTAIN
[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, 1998,  and the related  statements  of income 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 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, 1998, 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 30, 1999 on our consideration of Blue Mountain  Associates Limited
Partnership's  internal  control,  a  report  dated  January  30,  1999  on  its
compliance with laws and regulations,  and reports dated January 30, 1999 on its
compliance with specific requirements applicable to HUD Programs.


/s/Robert Ercolini & Company L.L.P.
January 30, 1999

<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 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 L.L.P.
January 23, 1997

<PAGE>


BOULEVARD
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,  1998,  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
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 at December 31, 1998, 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 22, 1999

<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>

BOULIVARD II
[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,  1998 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  financial  position  of  BOULEVARD  COMMONS  LIMITED
Partnership IIA at December 31, 1998, 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  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed  in the notes to
financial  statements,  the Partnership is several months delinquent on both its
first and junior mortgages which raises  substantial  doubt about its ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.



/s/Haran & Associates LTD
HARAN & ASSOCIATES LTD.
Certified Public Accountants
Wimette, Illinois
Illinois Certificate No. 060-002892
January 26, 1999

<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>


EL JARDIN
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.
as of December 31, 1998, and the  related  statements  of profit and loss
(on HUD Form 92410), partners' equity, 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 to above present fairly, in all
material  respects,  the  financial  position of El Jardin of Davie,  Ltd. as of
December 31, 1998,  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  financial
statements taken as a whole. 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, 1999

<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.

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.

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>

ASHLEY
[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, 1998 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 . 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  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, 1998, 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, 1999

<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>


COLONY APT
[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, 1998,
and the related statements of 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  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 and the Guide 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,  1998,  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.

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 3, 1999, on our
consideration of The Colony  Apartments,  L.P.'s internal control  structure and
reports dated  February 3, 1999, on its  compliance  with specific  requirements
applicable  to major HUD Programs and specific  requirements  applicable to Fair
Housing and Non-Discrimination.

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 27 to 31
 is presented for the purpose of additional  analysis and is not a required part
of  the  basic  financial  statements  of  The  Colony  Apartments,   L.P.  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.

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.
February 3, 1999

<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.

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.

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>




AURORA
[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,  1998 and 1997,  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.  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, 1998 and 1997, and the results of its
operations  changes in  partners'  capital 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, 1999 on my  consideration  of Aurora  Properties  Ltd., d/b/a
Aurora East Apartments,  internal control and reports dated February 10, 1999 on
its  compliance  with specific  requirements  applicable to the basic  financial
statements  and major HUD  programs  and  specific  requirements  applicable  to
Affirmative Fair Housing.

/s/Larry O'Donnell, CPA, PC
February 10, 1999
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,  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
February 10, 1998
Federal Identification Number 84-1075467


<PAGE>


COLUMBIA
[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,as of December 31, 1998 and 1997, and the related statements
of  operations,  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, 1998 and
1997, 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 30, 1999, on our
consideration of the Partnership's internal control structure and reports, dated
January 30, 1999, on its  compliance  with specific  requirements  applicable to
major HUD  Programs  and specific  requirements  applicable  to Fair Housing and
Non-Discrimination.

As discussed in Note A, the accompanying financial statements have been prepared
assuming that the Partnership will continue as a going concern.  The Partnership
has incurred  substantial  losses before  depreciation  and is in default on its
first  mortgage loan.  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 30, 1999

<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>



ADMIRAL
[Letterhead]
[LOGO]
Fishbein & Company
Certified Public Accountants                              February 4, 1999
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, 1998 and 1997 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 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, 1998 and 1997, 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 supplementary 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                              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>


GEORGETOWN
[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, 1998 and December 31, 1997, 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, 1998 and 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  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 to 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, 1999

<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>


LEXINGTON I
[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, 1998 and 1997, 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, 1998 and 1997,  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,  1999  on our  consideration  of the  limited  partnership's
internal control structure and a report dated January 26, 1999 on its compliance
with laws and regulations

/s/Crain & Company
CRAIN & COMPANY
Certified Public Accountants
Jackson, Tennessee
January 26, 1999

<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>

LONGVIEW

[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
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 Longview 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.

/s/ Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
 Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Topeka, Kansas
January 31, 1998

<PAGE>

LONGVIEW

[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
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 Longview 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.

/s/ Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
 Braunsdorf, Carlson and Clinkinbeard, CPA's, P.A.
Topeka, Kansas
January 31, 1997

<PAGE>

Missouri Rural Housing of Oak Grove, L.P.

[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
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 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>


Missouri Rural Housing of Oak Grove, L.P.

[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
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 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>

Smithville Rural Housing, a Limited Partnership

[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
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 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>

Smithville Rural Housing, a Limited Partnership

[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
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 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>

WESTGATE

[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 Westagte 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
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 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>

WESTGATE

[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 Westagte 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
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 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>






TUCSON

[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,  1998,  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 audits. The financial  statements of Tucson Trails Limited  Partnership I as
of December 31, 1997 were audited by other  auditors  whose report dated January
14, 1998 expressed an unqualified opinion on those statements.

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, 1998, and the results of its operations, changes in partners'
equity and its cash flows for the year then ended in conformity  with  generally
accepted accounting principles.

/s/Suby, Von Haden & Associates, S.C.
January 22, 1999


<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>

TUSCAN II

[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,  1998,  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. The financial  statements of Tucson Trails Limited  Partnership II as
of December 31, 1997 were audited by other  auditors  whose report dated January
14, 1998 expressed an unqualified opinion on those statements.


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,  1998,  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 22, 1999

<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>


WALKER WOODS

[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, 1998 and 1997, 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, 1998 and 1997, 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 25, 1999

<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>

WATERFRONT

[Letterhead]
[LOGO]
Reznick, Fedder & Silverman

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Waterfront Limited Partnership:

We have audited the accompanying  balance sheets of
 Waterfront  Limited  Partnership,  as of  December  31,  1998  and 1997 and the
related statements of income and expenses,  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 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  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 Waterfront Limited Partnership,
as of  December  31,  1998,  and 1997,  and the results of its  operations,  the
changes in  partners'  deficit and its cash flows for the years then  ended,  in
conformity with generally accepted accounting principles.
statements taken as a whole.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note H 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  H.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

Our 1998  audit was made for the  purpose  of  forming  an  opinion on the basic
financial  Statements taken as a whole. The  supplementary  information shown on
pages 18 through 48 is presented  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.

In accordance with Government  Auditing  Standards,  and the "Consolidated Audit
Guide for Audits of HUD  Programs",  we have also issued a report dated February
5,  1999 on our  consideration  of  Waterfront  Limited  Partnership's  internal
control and on its compliance with specific requirements applicable to major HUD
programs,  fair  housing  and   non-discrimination,   and  laws  and  regulation
applicable to the financial statements.

/s/Reznick, Fedder & Silverman
Boston, Massachusetts
February 5, 1999

<PAGE>


WATERFRONT

[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 1998 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, 1998, 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, 1999 on our consideration of Waterfront Limited  Partnership's
internal control structure and a report dated January 30, 1999 on its compliance
with laws and regulations.

/s/Reznick, Fedder & Silverman
Boston, Massachusetts
January 30, 1999

<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>

WEST DADE

[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,  1998,  and the
related  statements of profit and loss,  changes in partners'  capital accounts,
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. 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, 1998,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.


/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 9, 1999

<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.

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.  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>


WEST DADE II

[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. (FHA Project
No. 066-11048) as of December 31, 1998, and the related statements of profit and
loss,  changes in partners' capital  accounts,  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 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.
066-11048) at December 31, 1998,  and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.


/s/BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 9, 1999

<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.

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.   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>

WOOD CREEK

[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, 1998 and 1997,  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, 1998 and 1997,  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  5, 1999

<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>


WESTWOOD

[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, PROJECT NO. 048-10515-REF
 as of December 31, 1998, andthe related  statements of profit and loss, 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
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 in the first  paragraph
present fairly,  in all material  respects,  the financial  position of Westwood
Manor Limited Dividend
Housing  Association Limited Partnership as of December 31, 1998, and its profit
or loss,  changes in partners' equity and 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 3 , 1999 on our  consideration of Westwood Manor Limited Dividend
Housing Association  Limited Partnership  internal control structure and reports
dated February 3, 1999 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  14 to  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 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/Reznick Fedder & Silverman
Bethesda, Maryland                              Federal Employer
February 3, 1999                                       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, 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.

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.

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>



PLEASANT PLAZA

[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, 1998 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, 1998 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 7, 1999, on our  consideration  of Pleasant Plaza Housing Limited
Partnership's internal control structure, and a report dated February 7, 1999 on
its compliance with laws and regulations.

/s/Pannell Kerr Forster PC
February 7, 1999

<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>

SHORELINE

[Letterhead]
[LOGO]
Reznick, Fedder & Silverman


INDEPENDENT AUDITORS' REPORT

To the Partners
Shoreline Limited Partnership:

We  have  audited  the   accompanying   balance  sheets  of  Shoreline   Limited
Partnership,  as  of  December  31,  1998,  and  1997,  and  the  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 audits.

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 Shoreline Limited Partnership,
as of December 31, 1998, and 1997 and the results of its operations,  changes in
partners'  deficit,  and its cash flows for the years  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 H 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  H.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.


/s/Reznick, Fedder & Silverman
Boston, Massachusetts
February 5, 1999

<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>


POPLAR VILLAGE

[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, 1998 and 1997
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, 1998 and 1997, 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 February 4, 1999 on our consideration of Poplar Village,  Ltd. 's internal
control over financial  reporting and our tests of its  compliance  with certain
provisions of laws, regulations, contracts, and grants.

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
February 4, 1999

<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, 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>

SOUTH HOLYOKE

[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, 1998 and the related  statements of  operations,
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.

Except as  discussed  in the  following  paragraph,  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 audits provide a reasonable  basis
for our opinion.

We were unable to obtain a current  appraisal of the property for the purpose of
determining whether an impairment loss should be recognized,  and we were unable
to satisfy ourselves about the fair value of the property.

In our opinion,  except for the effects of such  adjustments,  if any , as might
have been  Determined  to be necessary  had we been able to  determine  the fair
value of the  property,  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,  1998,  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.

The accompanying financial statements have been prepared assuming that the
Partnership will continued as a going concern.  As discussed in Note 8 to the
financial statements, the Partnership currently has insufficient resources and
cash flows to meet its obligations.  There is  substantial  doubt  about the
Partnership's  ability to continue as a going concern. The financial  statements
do not include any  adjustments  that might result from the outcome of this
uncertainty.

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 26, 1999 on our
consideration of South Holyoke Housing Limited  Partnership's  internal control,
and reports dated January 26, 1999 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 13 to 23 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
January 26, 1999

<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>

QUARTER MILL

[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,  1998,  and the related  statements  of changes in partners'
capital,  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  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, 1998,  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  supplemental  data included in the
report 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.

In accordance with Government Auditing  Standards,  we have also issued a report
dated January 25, 1999 on our consideration of the Partnership's
internal  controls on compliance  with specific  requirements  applicable to its
major  Housing and Urban  Development  ("HUD")  program and on  compliance  with
specific requirements applicable to fair housing and non-discrimination.


This report is intended  solely for the  information and use of the partners and
HUD and is not  intended to be and should not be used by anyone other than these
specified individuals. However, this report is a matter of public record and its
distribution is not limited.

/s/Coopers & Lybrand L.L.P

Richmond, Virginia
January 25, 1999

<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]
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

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, 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.

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>

WILLOW LAKE

[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, 1998, 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,  1998,  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, 1999

<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>

RIVER FRONT

[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 balance sheet of River Front Apartments Limited
Partnership,  A Limited Partnership,  Project Number. R458-8E as of December 31,
1998, and the related  statements of profit and 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  audit.  The  financial
statements  of River Front  Apartments  Limited  Partnership  for the year ended
December 31, 1997 were audited by other  auditors whose report dated January 28,
1998, expressed an unqualified opinion on those statements.

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,  the 1998 financial  statements referred to above present fairly
in all  material  respects,  the  financial  position of River Front  Apartments
Limited  Partnership at December 31, 1998, 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
entitled  "Independent  Auditor's  Report on Compliance and on Internal  Control
Over  Financial  Reporting  Based  on an Audit of the  Financial  Statements  in
accordance with Government  Auditing  Standards"  dated February 22, 1999 on our
consideration of the Partnership's  internal control,  over financial  reporting
and our tests of its compliance with certain  provisions of laws regulations and
contracts.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial  statements  taken as a  whole.  The  supporting  data  listed  on the
contents page
is presented for purposes of  additional  analysis and is not a required part of
the financial statements of the Partnership. Such data has been subjected to the
auditing procedures applied in our 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.


/s/Deloitte & Touche LLP
February 22, 1999

<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>


SUSQUEHANNA

[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 balance sheet of Susquehanna
View Limited Partnership,  A Limited Partnership --- Project Number R- 451-8E as
of December 31, 1998, and the related  statements of profit and loss,  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  audit.  The  financial
statements of Susquehana  View Limited  Partnership  for the year ended December
31, 1997 were audited by other  auditors  whose  report  dated  January 30, 1998
expressed an unqualified opinion on those statements.

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,  the 1998 financial statements referred to above present fairly,
in all material  respects,  the financial  position of Susquehanna  View Limited
Partnership,  as of December 31, 1998, 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
entitled  "Independent  Auditor's  Report on Compliance and on Internal  Control
Over  Financial  Reporting  Based  on an Audit of the  Financial  Statements  in
accordance with Government  Auditing  Standards"  dated February 22, 1999 on our
consideration of the Partnership's  internal control,  over financial  reporting
and our tests of its compliance with certain  provisions of laws regulations and
contracts.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the
financial  statements taken as a whole.  The supporting  data listed on the
contents page is presented for purposes of additional  analysis and is not a
required part of the financial statements  of the  Partnership.  Such data has
been  subjected  to the auditing procedures applied in our 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.



/s/Deloitte & Touche LLP
February 22, 1999
<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]
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, 1998 and
1997, 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,  1998 and  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.

/s/Plante & Moran LLP
February 16, 1999

<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>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                                FINANCIAL REPORT
                                DECEMBER 31, 1996


<PAGE>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)



                                    CONTENTS


INDEPENDENT AUDITOR'S REPORT                                                1


FINANCIAL STATEMENTS

    Balance Sheet                                                           2

    Statement of Operations                                                 3

    Statement of Partners' Equity                                           4

    Statement of Cash Flows                                                 5

    Notes to Financial Statements                                           6-7


<PAGE>


[letterhead]
                          Independent Auditor's Report



To the Partners
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, 1996 and
1995, 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 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 The Temple  Kyle  Limited
Partnership,  LTD.  as of  December  31,  1996 and 1995,  and the results of its
operations,  changes  in  partners'  equity,  and cash  flows for the years then
ended, in conformity with generally accepted accounting principles.



/s/ Plante & Moran, LLP



February 12, 1997


<PAGE>



<TABLE>
<CAPTION>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                                  BALANCE SHEET

                                     ASSETS
------------------------------------------------------------------------------------------------------------------------
                                                                                              DECEMBER 31
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>                 <C>
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
                                                                                       1996                 1995
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
Operating cash                                                                     $         5,912     $         60,752
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
Accounts receivable:
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
    Tenants                                                                                    902                5,176
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
    Other                                                                                        -                  481
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
Prepaid insurance                                                                            2,916                5,025
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
Security deposits account - Savings                                                          9,026                8,747
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Tax and insurance escrow account - Savings                                                   9,966                7,312
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
Reserve for replacements - Savings                                                          86,683               75,163
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Property and equipment:
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Land                                                                                    88,000               88,000
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
    Buildings and land improvement                                                       3,605,668            3,604,618
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
    Equipment and fixtures                                                                   7,408                3,100
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
                  Total cost                                                             3,701,076            3,695,718
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
    Less accumulated depreciation                                                        (474,948)              383,932
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------
                  Net carrying value                                                     3,226,128            3,311,786
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
                  Total assets                                                     $     3,341,533     $      3,474,442
------------------------------------------------------------------------------------===============  -------------------
---------------------------------------------------------------------------------------------------  -------------------

----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                        LIABILITIES AND PARTNERS' EQUITY
------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Note payable (Note 2)                                                          $     1,423,253     $      1,454,127
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Accounts payable and accrued expenses:
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
        Trade                                                                                2,373               14,892
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
        Interest                                                                            46,370                    -
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
        Property taxes                                                                           -               42,978
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Prepaid rent                                                                               358                  137
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Tenants' security deposit                                                                9,051                8,704
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
    Due to affiliate (Note 3)                                                                5,165                    -
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
                  Total liabilities                                                      1,486,570            1,520,838
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------

----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
PARTNERS' EQUITY                                                                         1,854,963            1,953,604
---------------------------------------------------------------------------------------------------  -------------------
---------------------------------------------------------------------------------------------------  -------------------

----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
                  Total liabilities and partners' equity                           $     3,341,533     $      3,474,442
------------------------------------------------------------------------------------===============  -------------------
</TABLE>

see notes to Financial Statements.

<PAGE>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                                                          YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>                 <C>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                                                                                         1996                1995
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
INCOME
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Rentals                                                                         $        330,563    $       337,526
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Interest                                                                                   3,595              1,925
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Other                                                                                      2,858              1,820
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
                  Total income                                                               337,016            341,271
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
OPERATING EXPENSES
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Operation and maintenance                                                                 75,616             53,736
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Utilities                                                                                 66,234             70,355
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Administrative                                                                            40,664            110,116
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Taxes and insurance                                                                       49,431             45,499
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
                  Total operating expenses                                                   231,945            279,706
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
OPERATING INCOME                                                                             105,071             61,565
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
OTHER PROJECT EXPENSES
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Depreciation                                                                              91,016             90,329
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
    Interest                                                                                 112,696            122,071
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
                  Other project expenses                                                     203,712            212,400
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
LOSS BEFORE EXTRAORDINARY ITEM                                                              (98,641)          (150,835)
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------
EXTRAORDINARY ITEM (Note 4)                                                                        -            794,492
-----------------------------------------------------------------------------------------------------  -----------------
-----------------------------------------------------------------------------------------------------  -----------------

-----------------------------------------------------------------------------------------------------  -----------------
-------------------------------------------------------------------------------------================  -----------------
NET INCOME                                                                          $       (98,641)    $       643,657
-------------------------------------------------------------------------------------================  -----------------
See notes to Financial Statements.
</TABLE>

<PAGE>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                          STATEMENT OF PARTNERS' EQUITY

<TABLE>
<CAPTION>
<S>                                                    <C>                    <C>                   <C>

---------------------------------------------------------------------------------------------------------------------
                                                       LIMITED PARTNERS      GENERAL PARTNER            TOTAL
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
BALANCE - January 1, 1995                               $      1,312,991      $       (3,044)       $      1,309,947
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Net income                                                       637,220                6,437                643,657
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
BALANCE - December 31, 1995                                    1,950,211                3,393              1,953,604
-------------------------------------------------------
-------------------------------------------------------

-------------------------------------------------------
-------------------------------------------------------
Net income (loss)                                               (97,655)                (986)               (98,641)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------
-------------------------------------------------------
BALANCE - December 31, 1996                             $      1,852,556      $         2,407       $      1,854,963
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.

<PAGE>

<TABLE>
<CAPTION>

                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                             STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------
                                                                                          YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                 <C>
------------------------------------------------------------------------------------------------------------------------
                                                                                          1996               1995
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
    Net income (loss)                                                                $      (98,641)     $      643,657
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
    Adjustments  to  reconcile  net  income  (loss) to net cash  from  operating
        activities:
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
           Depreciation                                                                       91,016             90,329
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
           Gain on forgiveness of indebtedness                                                     -          (794,492)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
           (Increase) decrease in assets:
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Accounts receivable                                                             4,755            (5,657)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Prepaid insurance                                                               2,109            (5,025)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Security deposit account - Savings                                              (279)            (8,747)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Tax and insurance escrow account - Savings                                    (2,654)            (7,312)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
           Increase (decrease) in liabilities:
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Accounts payable and accrued expenses                                         (9,127)             26,758
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Tenant's security deposits                                                        347              6,224
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
               Prepaid rent                                                                      221                137
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                  Net cash used in operating activities                                     (12,253)           (54,128)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
    Purchase of property and equipment                                                       (5,358)           (75,163)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
    Deposits into reserve for replacements                                                  (11,520)            (1,360)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                  Net cash used in investing activities                                     (16,878)           (76,523)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
    Advance received from affiliate                                                            5,165                  -
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
    Principal payments on note payable                                                      (30,874)            (8,566)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                  Net cash used in investing activities                                     (25,709)            (8,566)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH                                                                        (54,840)          (139,217)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CASH - Beginning of year                                                                      60,752            199,969
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
CASH - End of year                                                                   $         5,912     $       60,752
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.

Cash paid for interest was $66,326 in 1996 and $51,609 in 1995.

Significant noncash investing and financing activities are as follows:
    During 1995, in conjunction with the Partnership's plan of reorganization as
    described in Note 4, the  Partnership  recognized a gain on  forgiveness  of
    indebtedness totaling $794,492.


<PAGE>


                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1996 AND 1995




NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             The   Partnership   was  organized  in  1989  as  a  Texas  limited
             partnership for the purpose of acquiring, owning, constructing, and
             operating  a  designated   historic   structure  that  contains  an
             apartment  complex of 64 units for low to  moderate  income  senior
             citizens   and   includes   rental  space  for  office  and  retail
             facilities. The facility is located in Temple, Texas.

             Operations  of  the  Partnership  are  limited  to  the  rental  of
             apartment units, office, and retail space owned by the Partnership.
             Significant accounting policies are as follows:

             Classification of Assets and Liabilities - The financial affairs of
             the  Partnership  do  not  generally   involve  a  business  cycle.
             Accordingly,  the classification of assets and liabilities  between
             current and long-term is not used.

             Land, Buildings, and Equipment - Land, buildings, and equipment are
             recorded  at cost.  Depreciation  is  calculated  using  either the
             straight-line  method or an  accelerated  method over the estimated
             useful lives of 7 to 40 years.  Maintenance and repairs are charged
             to expense when incurred.

             Income  Taxes  - No  provision  has  been  made  in  the  financial
             statements for income taxes because,  as a partnership,  all income
             and expenses are  allocated to the partners for  inclusion on their
             respective income tax returns.

             Allocation  of Profits  and  Losses - Losses  from  operations  are
             allocated to the general partners and limited partners in the ratio
             of 1 and 99 percent, respectively.

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


NOTE 2 - NOTE PAYABLE

             The Partnership has a note payable to the investor limited partner.
             The  note is due in  monthly  installments  of  $13,800,  including
             interest at 7.82 percent through June 1, 1997;  $17,600,  including
             interest at prime plus 1.00  percent  from July 1, 1997 through its
             maturity date on June 1, 2005.  The note is  collateralized  by all
             properties of the Partnership.


<PAGE>


NOTE 2 - NOTE PAYABLE (Continued)

Minimum principal payments to maturity as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
<S>                            <C>                                              <C>

---------------------------------------------------------------------------------------------------------------------
                               1997                                             $         56,306
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                               1998                                                      119,293
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                               1999                                                      127,918
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                               2000                                                      137,163
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                               2001                                                      147,080
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                               2002 and after                                            835,493
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                                                 Total                          $      1,423,253
---------------------------------------------------------------------------------------------------------------------
</TABLE>


NOTE 3 - RELATED PARTY TRANSACTIONS

             The  Partnership  incurred  management  fees of $17,397  and $4,237
             during the years ended December 31, 1996 and 1995, respectively, to
             a management  company affiliated with the investor limited partner.
             The amount  payable to the management  company for management  fees
             totaled   $1,669  and  $4,237  at   December   31,1996   and  1995,
             respectively,  and is included  in accounts  payable - trade in the
             balance sheet.

             Amounts  due to  affiliate  represent  advances  from the  Investor
             Limited  Partner  made to the  Partnership  in excess of the amount
             required to be deposited into the replacement reserve account.  The
             advance is unsecured and noninterest bearing and may be returned to
             the Investor  Limited  Partner upon approval of the Temple  Housing
             Authority.


NOTE 4 - REORGANIZATION

             On May 28,  1993,  certain  creditors of the  Partnership  filed an
             involuntary  petition for  reorganization  under  Chapter 11 of the
             United States Bankruptcy Code in the United States Bankruptcy Court
             for the Western District of Texas,  Waco Division.  The Partnership
             emerged from Chapter 11 effective with the beginning of business on
             September  29,  1995.  In  general,  the  Plan  for  Reorganization
             provided  for  resolution  of  all  previous   claims  against  the
             Partnership as of May 28, 1993, the Chapter 11 filing date. As part
             of the Plan for  Reorganization,  the investor limited partner paid
             $850,000 in cash and entered into a new loan agreement for $612,693
             with  the  mortgagor  for  payment  of  all  claims  due  from  the
             Partnership to the mortgagor (Note 2). This transaction resulted in
             a gain on  forgiveness  of  indebtedness  of $794,492  for the year
             ended December 31, 1995.


<PAGE>













                    THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                                FINANCIAL REPORT
                                DECEMBER 31, 1997



<PAGE>


                                    Contents




Independent Auditor's Report                                               1


Financial Statements

    Balance Sheet                                                          2

    Statement of Operations                                                3

    Statement of Partners' Equity                                          4

    Statement of Cash Flows                                                5

    Notes to Financial Statements                                          6-7





<PAGE>



[letterhead]



                          Independent Auditor's Report



To the Partners
The Temple Kyle Limited Partnership

We have  audited  the  accompanying  balance  sheet of The Temple  Kyle  Limited
Partnership,  LTD. (a Texas  limited  partnership),  as of December 31, 1998 and
1997, 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 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 The Temple  Kyle  Limited
Partnership,  LTD as of  December  31,  1998 and 1997,  and the  results  of its
operations,  changes  in  partners'  equity,  and cash  flows for the years then
ended, in conformity with generally accepted accounting principles.



/s/ Plante & Moran, LLP







<PAGE>


The Temple Klye Limited Partnership, LTD.


<TABLE>
<CAPTION>

                                                                                                      Balance Sheet
ASSETS
                                                                                           December 31,
                                                                                      1997                1996

<S>                                                                             <C>                <C>
Cash                                                                            $         3,374    $          5,912
Tenant accounts receivable                                                                  542                 902
Prepaid insurance                                                                         4,442               2,916
Security deposits account - Savings                                                       9,504               9,026
Tax and insurance escrow account - Savings                                               52,340               9,966
Reserve for replacements - Savings                                                       67,941              86,683
Property and equipment:
     Land                                                                                97,319              88,000
     Buildings and land improvement                                                   3,605,668           3,605,668
     Equipment and fixtures                                                              24,848               7,408
                                                                                ---------------    ----------------

              Total cost                                                              3,727,835           3,701,076

     Accumulated depreciation                                                          (568,896)           (474,948)
                                                                                ---------------    ----------------

              Net carrying value                                                      3,158,939           3,226,128
                                                                                ---------------    ----------------

              Total assets                                                      $     3,297,082    $      3,341,533
                                                                                ===============    ================

                        LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Note payable (Note 2)                                                           $     1,406,251    $      1,423,253
Accounts payable and accrued expenses:
     Trade    (Note 3)                                                                   60,311               2,373
     Property taxes                                                                           -              46,370
Security deposits payable                                                                 9,480               9,051
Prepaid rent                                                                                 60                 358
Due to affiliate (Note 3)                                                                 5,165               5,165
                                                                                ---------------    ----------------

              Total liabilities                                                       1,481,267           1,486,570

PARTNERS' EQUITY
     General and limited partners                                                     1,815,815           1,854,963
                                                                                ---------------    ----------------

              Total liabilities and partners' equity                            $     3,297,082    $      3,341,533
                                                                                ===============    ================

</TABLE>

See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
                  THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                                                                                Statement of Operations

                                                                                           December 31,
                                                                                      1997                1996

Revenue
<S>                                                                             <C>                   <C>
     Rentals                                                                    $       372,271       $     330,563
     Interest                                                                             3,525               3,595
     Other                                                                               45,606               2,858
                                                                                ---------------    ----------------
              Total revenue                                                             421,402             337,016

Operating Expenses
     Operation and maintenance                                                          105,785              75,616
     Utilities                                                                           68,497              66,234
     Administrative                                                                      42,560              40,664
     Taxes and insurance                                                                 47,533              49,431
                                                                                ---------------    ----------------

              Total operating expenses                                                  264,375             231,945
                                                                                ---------------    ----------------

Operating Income                                                                        157,027             105,071

Other Project Expenses
     Depreciation                                                                        93,947              91,016
     Interest                                                                           102,228             112,696
                                                                                ---------------    ----------------

              Total other project expenses                                              196,175             203,712
                                                                                ---------------    ----------------

Net Loss                                                                        $       (39,148)   $        (98,641)
                                                                                ===============    ================

</TABLE>

See Notes to Fimnancial Statements
<PAGE>

<TABLE>
<CAPTION>
                  THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                                                                                      Statement of Partners' Equity





                                                       Limited                 General
                                                      Partners                Partners                 Total

<S>               <C>                          <C>                     <C>                     <C>
Balance - January 1, 1996                      $         1,950,211     $             3,393     $          1,953,604

Net loss                                                   (97,655)                   (986)                (98,641)
                                               -------------------     -------------------     -------------------

Balance - December 31 1996                               1,852,556                   2,407                1,854,963

Net loss                                                   (38,757)                   (391)                (39,148)
                                               -------------------     -------------------     -------------------

Balance - December 31, 1997                    $         1,813,799     $             2,016     $          1,815,815
                                               ===================     ===================     ====================
</TABLE>

See Notes to Financial Statements.






<PAGE>
<TABLE>
<CAPTION>
                   THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)

                                                                                            Statement of Cash Flows


                                                                                           December 31,
                                                                                      1997                1996

<S>                                                                             <C>                <C>
Cash flows from Operating Activities                                            $       (39,148)   $        (98,641)
     Net operating loss
     Adjustment to reconcile net operating
     loss to net cash From operating
       activities:
         Depreciation                                                                    93,947              91,016
         (Increase) decrease in assets:
           Tenant accounts receivable                                                       360               4,755
           Prepaid insurance                                                             (1,526)              2,109
           Security deposits account - Savings                                             (478)               (279)
           Tax and insurance escrow account - Savings                                   (42,374)             (2,654)
         Increase (decrease) in liabilities:
           Accounts payable and accrued liabilities                                      11,569              (9,127)
           Security deposits payable                                                        429                 347
           Prepaid rent                                                                    (298)                221
                                                                                ---------------    ----------------

                  Net cash provided by (used in) operating activities                    22,481             (12,253)

Cash Flows for Investing Activities
     Purchase of property and equipment                                                 (26,759)             (5,358)
     Change in reserve for replacement                                                   18,742             (11,520)
                                                                                ---------------    ----------------

              Net cash used in investing activities                                      (8,017)            (16,878)

Cash Flows from Financing Activities
       Principal payments on note payable                                               (17,002)            (30,974)
       Advance received from affiliate                                                        -               5,165
                                                                                ---------------    ----------------

              Net cash used in financing activities                                     (17,002)            (25,709)
                                                                                ---------------    ----------------

Net Decrease in Cash                                                                     (2,538)            (54,840)

Cash - Beginning of Year                                                                  5,912              60,752
                                                                                ---------------    ----------------

Cash - End of Year                                                              $         3,374    $          5,912
                                                                                ===============    ================

Supplemental Information - Cash paid for interest                               $       148,598    $         66,326
                                                                                ===============    ================
</TABLE>
See Notes to Financial Statements.
<PAGE>


                            The Temple Klye Limited Partnership, LTD.


                                     Notes to Financial Statements
                                      December 31, 1997 and 1996





Note 1 - Nature of Business and Significant Accounting Policies

               The  Partnership  was  organized  in  1989  as  a  Texas  limited
               partnership for the purpose of acquiring,  owning,  constructing,
               and operating a designated  historic  structure  that contains an
               apartment  complex of 64 units for low to moderate  income senior
               citizens  and  includes   rental  space  for  office  and  retail
               facilities. The facility is located in Temple, Texas.

               Operations  of the  Partnership  are  limited  to the  rental  of
               apartment   units,   office,   and  retail  space  owned  by  the
               Partnership. Significant accounting policies are as follows:

               Classification  of Assets and Liabilities - The financial affairs
               of  Partnership  do  not  generally  involve  a  business  cycle.
               Accordingly, the classification of assets and liabilities between
               current and long-term is not used.

               Land, Buildings,  and Equipment - Land, buildings,  and equipment
               are  recorded  at cost.  Depreciation  is  calculated  using  the
               straight-line  and accelerated  methods over the estimated useful
               lives of the assets of 7 to 40 years. Maintenance and repairs are
               charged to expense as incurred.

               Allocation  of Profits  and Losses - Losses from  operations  are
               allocated  to the general and limited  partners in the ratio of 1
               and 99 percent, respectively.

               Income  Taxes - No  provision  has  been  made  in the  financial
               statements for income taxes because, as a partnership, all income
               and expenses are allocated to the partners for inclusion on their
               respective income tax returns.

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



Note 2 - Note Payable

               The  Partnership  has a  note  payable  to the  Investor  Limited
               Partner.  The note is due in  monthly  installments  of  $13,800,
               including  interest  at  7.82  percent  through  June  30,  1997.
               Effective July 1, 1997 the note is due in monthly installments of
               $17,600,  including interest at prime plus 1.00 percent,  through
               its maturity  date on June 1, 2005.  At December  31,  1997,  the
               prime interest rate was 8.50 percent.  The note is collateralized
               by all properties of the Partnership.

               Minimum principal  payments on the note payable to maturity as of
December 31, 1997, are as follows:

                           1998                               $          119,293
                           1999                                          127,918
                           2000                                          137,163
                           2001                                          147,080
                           2002                                          157,724
                           2003 and after                                717,073
                                                                    ------------
                                           Total                      $1,406,251



Note 3 - Related Party Transactions

               The Partnership  incurred  management fees of $20,844 and $17,397
               during the years ended  December 31 1997 and 1996,  respectively,
               to a management  company  affiliated  with the  Investor  Limited
               Partner.  The  amount  payable  to  the  management  company  for
               management  fees  totaled $31 and $1,669 at December 31, 1997 and
               1996,  respectively,  and is included in accounts payable - trade
               in the balance sheet.

               Due to affiliate  represent  advances  from the Investor  Limited
               Partner made to the  Partnership in excess of the amount required
               to be deposited into the replacement reserve account. The advance
               is unsecured and  noninterest  bearing and may be returned to the
               Investor  Limited  Partner  upon  approval of the Temple  Housing
               Authority.

<PAGE>









                    The Temple Kyle Limited Partnership, LTD
-
                              (a Texas partnership)
                                Financial Report
                                December 31, 1998

<PAGE>


THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
-
                                    Contents




Independent Auditor's Report                                               1


Financial Statements

    Balance Sheet                                                          2

    Statement of Operations                                                3

    Statement of Partners' Equity                                          4

    Statement of Cash Flows                                                5

    Notes to Financial Statements                                          6-8





<PAGE>



                                  [letterhead]



                          Independent Auditor's Report



To the Partners
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, 1998 and
1997 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 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 The Temple  Kyle  Limited
Partnership,  LTD.  at  December  31,  1998 and  1997,  and the  results  of its
operations,  changes  in  partners'  equity,  and cash  flows for the years then
ended, in conformity with generally accepted accounting principles.



/s/ Plante & Moran, LLP

February 15, 1999



<PAGE>


The Temple Kyle Limited Partnership, Ltd.
<TABLE>
<CAPTION>

                                                                                          Balance Sheet


ASSETS
                                                                                           December 31,
                                                                                      1998                1997

<S>                                                                             <C>                <C>
Cash                                                                            $         8,593    $          3,374
Tenant accounts receivable                                                                  605                 542
Prepaid insurance                                                                         2,884               4,442
Security deposits account - Savings                                                       9,893               9,504
Tax and insurance escrow account - Savings                                               51,950              52,340
Reserve for replacements - Savings                                                       86,041              67,941
Property and equipment:
     Land                                                                                97,319              97,319
     Buildings and land improvement                                                   1,912,154           3,605,668
     Equipment and fixtures                                                              24,848              24,848
                                                                                ---------------    ----------------

              Total cost                                                              2,034,321           3,727,835

     Accumulated depreciation                                                          (664,321)           (568,896)
                                                                                ---------------    ----------------

              Net carrying value                                                      1,370,000           3,158,939
                                                                                ---------------    ----------------

              Total assets                                                      $     1,529,966    $      3,297,082
                                                                                ===============    ================

                        LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Note payable (Note 2)                                                           $     1,389,038    $      1,406,251
Accounts payable and accrued expenses:
     Trade    (Note 3)                                                                   28,647              25,914
     Property taxes                                                                      35,348              34,397
Security deposits payable                                                                 9,768               9,480
Prepaid rent                                                                                240                  60
Due to affiliate (Note 3)                                                                 5,165               5,165
                                                                                ---------------    ----------------

              Total liabilities                                                       1,468,806           1,481,267

PARTNERS' EQUITY
     General and limited partners                                                        61,760           1,815,815
                                                                                ---------------    ----------------

              Total liabilities and partners' equity                            $     1,529,966    $      3,297,082
                                                                                ===============    ================
</TABLE>

See Notes to Financial Statements.



<PAGE>
                  THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
<TABLE>
<CAPTION>

                                                                                            Statement of Operations


                                                                                           December 31,
                                                                                      1998                1997

Revenue
<S>                                                                             <C>                   <C>
     Rentals                                                                    $       399,154       $     372,271
     Interest                                                                             3,366               3,525
     Other                                                                                2,426              45,606
                                                                                ---------------    ----------------
              Total revenue                                                             404,946             421,402

Operating Expenses
     Operation and maintenance                                                          103,844             105,785
     Utilities                                                                           67,632              68,497
     Administrative                                                                      42,974              42,560
     Taxes and insurance                                                                 44,653              47,533
                                                                                ---------------    ----------------

              Total operating expenses                                                  259,103             264,375
                                                                                ---------------    ----------------

Operating Income                                                                        145,843             157,027

Other Project Expenses
     Appraisal                                                                           22,572                   -
     Depreciation                                                                        95,425              93,947
     Interest                                                                            88,387             102,228
                                                                                ---------------    ----------------

              Total other project expenses                                              206,384             196,175

Loss on Impairment of Long-Lived Assets (Note4)                                       1,693,514                   -
                                                                                ---------------    ----------------

Net Operating Loss                                                              $    (1,754,055)   $        (39,148)
                                                                                ===============    ================
See Notes to Financial Statements.
</TABLE>


<PAGE>


 <TABLE>
<CAPTION>
                THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                          (a Texas limited partnership)
                        Statement of Partners' Equity


                                                       Limited                 General
                                                      Partners                Partners                 Total

<S>               <C>                          <C>                     <C>                     <C>
Balance - January 1, 1997                      $         1,852,556     $             2,407     $          1,854,963

Net operating loss                                         (38,757)                   (391)                (39,148)
                                               -------------------     -------------------     -------------------

Balance - December 31 1996                                ,813,799                   2,016                1,815,815

Net operating loss                                      (1,736,514)                (17,541)             (1,754,055)
                                               -------------------     -------------------     -------------------

Balance - December 31, 1997                                 77,285     $           (15,525)    $             61,760
                                               ===================     ===================     ====================



See Notes to Financial Statements.
</TABLE>




<PAGE>

<TABLE>
<CAPTION>
                                   THE TEMPLE KYLE LIMITED PARTNERSHIP, LTD.
                                          (a Texas limited partnership)
                                               Statement of Cash Flows

                                                                                           December 31,
                                                                                      1998                1997

<S>                                                                             <C>                <C>
Cash flows from Operating Activities                                            $    (1,754,055)   $        (39,148)
     Net operating loss
     Adjustment  to  reconcile  net  operating  loss to net cash From  operating
       activities:
         Depreciation                                                                    95,425              93,947
         Loss on impairment of long-lived assets                                      1,693,514                   -
         (Increase) decrease in assets:
           Tenant accounts receivable                                                       (63)                360
           Prepaid insurance                                                              1,558              (1,526)
           Security deposits account - Savings                                             (389)               (478)
           Tax and insurance escrow account - Savings                                       390             (42,374)
         Increase (decrease) in liabilities:
           Accounts payable and accrued liabilities                                       3,684              11,569
           Security deposits payable                                                        288                 429
           Prepaid rent                                                                     180                (298)
                                                                                ---------------    ----------------

                  Net cash provided by (used in) operating activities                    40,532              22,481

Cash Flows for Investing Activities
     Purchase of property and equipment                                                       -             (26,759)
     Change in reserve for replacement                                                  (18,100)             18,742
                                                                                ---------------    ----------------

              Net cash used in investing activities                                     (18,100)             (8,017)

Cash Flows from Financing Activities
       Principal payments on note payable                                               (17,213)            (17,002)
                                                                                ---------------    ----------------

              Net cash used in financing activities                                     (17,213)            (17,002)
                                                                                ---------------    ----------------

Net Decrease in Cash                                                                      5,219              (2,538)

Cash - Beginning of Year                                                                  3,374               5,912
                                                                                ---------------    ----------------

Cash - End of Year                                                              $         8,593    $          3,374
                                                                                ===============    ================

Supplemental Information - Cash paid for interest                               $        88,387    $        148,598

                                                                                ===============    ================
See Notes to Financial Statements.
</TABLE>

<PAGE>


            The Temple Kyle Limited Partnership, Ltd.

                  Notes to Financial Statements
                   December  31, 1998 and 1997




Note 1 - Nature of Business and Significant Accounting Policies

               The  Partnership  was  organized  in  1989  as  a  Texas  limited
               partnership for the purpose of acquiring,  owning,  constructing,
               and operating a designated  historic  structure  that contains an
               apartment  complex of 64 units for low to moderate  income senior
               citizens  and  includes   rental  space  for  office  and  retail
               facilities. The facility is located in Temple, Texas.

               Operations  of the  Partnership  are  limited  to the  rental  of
               apartment   units,   office,   and  retail  space  owned  by  the
               Partnership. Significant accounting policies are as follows:

               Classification  of Assets and Liabilities - The financial affairs
               of the  Partnership  do not generally  involve a business  cycle.
               Accordingly, the classification of assets and liabilities between
               current and long-term is not used.

               Land, Buildings,  and Equipment - Land, buildings,  and equipment
               are  recorded  at cost.  Depreciation  is  calculated  using  the
               straight-line  and accelerated  methods over the estimated useful
               lives of the assets of 7 to 40 years. Maintenance and repairs are
               charged to expense as incurred.

               Allocation  of Profits  and Losses - Losses from  operations  are
               allocated  to the general and limited  partners in the ratio of 1
               and 99 percent, respectively.

               Income  Taxes - No  provision  has  been  made  in the  financial
               statements for income taxes because, as a partnership, all income
               and expenses are allocated to the partners for inclusion on their
               respective income tax returns.

               Restricted  Deposits - The  reserve for  replacement  and tax and
               insurance  escrow  accounts are maintained for the benefit of the
               project and are  restricted  as to use based on  applicable  loan
               documents.

               Year 2000 - The management company has assessed the Partnership's
               exposure to date sensitive  computer  software  programs that may
               not be operative  subsequent to 1999 and has implemented a course
               of action to  minimize  Year 2000 risk and  ensure  that  neither
               significant costs or disruption of normal business operations are
               encountered.  However,  because  there is no  guarantee  that all
               systems  of the  Partnership  and of  outside  vendors  or  other
               entities  affecting  Partnership's  operations  will be Year 2000
               compliant, the Partnership remains susceptible to consequences of
               the Year 2000 issue.



<PAGE>

Note 1 - Nature of Business and Significant Accounting Policies (Continued)

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



Note 2 - Note Payable

               The  Partnership  has a  note  payable  to the  Investor  Limited
               Partner.  The note is due in  monthly  installments  of  $17,600,
               including  interest at prime plus 1.00 percent (an effective rate
               of 8.75 and 9.50 percent in 1998 and 1997, respectively), through
               its maturity  date on June 1, 2005.  At December  31,  1998,  the
               prime interest rate was 7.75 percent.  The note is collateralized
               by all properties of the Partnership.

               Minimum principal  payments on the note payable to maturity as of
December 31, 1998, are as follows:

                           1999                               $    131,693
                           2000                                    141,210
                           2001                                    151,420
                           2002                                    162,363
                           2003                                    174,103
                           2004 and after                          628,249
                                                              ------------
                                         Total                $  1,389,038
                                                              ============






<PAGE>


Note 3 - Related Party Transactions

               The Partnership  incurred  management fees of $19,850 and $20,844
               during the years ended December 31, 1998 and 1997,  respectively,
               to a management  company  affiliated  with the  Investor  Limited
               Partner.  The  amount  payable  to  the  management  company  for
               management fees and reimbursed expenses totaled $1,898 and $31 at
               December  31,  1998 and 1997,  respectively,  and is  included in
               accounts payable trade in the balance sheet. In addition, certain
               expenses  totaling $22,572 were paid on behalf of the Partnership
               by the  Investor  Limited  Partner  and are  included in accounts
               payable - trade in the balance sheet.

               Due to affiliate  represents  advances from the Investor  Limited
               Partner made to Partnership  in excess of the amount  required to
               be deposited into the replacement reserve account. The advance is
               unsecured  and  noninterest  bearing  and may be  returned to the
               Investor Limited Partner upon approval of the General Partner.



Note 4 - Impairment of Long-Lived Assets

               During the year ended  December 31, 1998,  the apartment  complex
               was deemed to be impaired and written down to its fair value. The
               fair  value,   determined  by  an  independent   appraisal,   was
               determined using the fair value of comparable apartment complexes
               in the area and the estimated  discounted  future cash flows. The
               determination  of fair value did not take into  account the value
               of tax credits allocated to the Partnership. The asset impairment
               loss of $1,693,514 is the  difference  between the carrying value
               and the  estimated  fair value of the  apartment  complex and was
               charged to operations during the year ended December 31, 1998.



<PAGE>