<PAGE>

                                   EXHIBIT 13

                         CONAM REALTY INVESTORS 81 L.P.

                               1998 ANNUAL REPORT



<PAGE>

-------------------------------------------------------------------------------
                         CONAM REALTY INVESTORS 81 L.P.
-------------------------------------------------------------------------------

         ConAm Realty Investors 81 L.P. is a California limited partnership
         formed in 1981 to acquire, operate and hold for investment multifamily
         residential properties. At December 31, 1998, the Partnership's
         portfolio consisted of two apartment properties located in Arizona. On
         January 29, 1999, with the consent of the Unitholders, the two
         remaining properties were sold for a price of $22,250,000 (before
         closing costs) and substantially all of the cash, less a contingency
         amount, was subsequently distributed to the Unitholders on February 26,
         1999.

                          CONTENTS
<TABLE>
            <S>      <C>
              1      Message to Investors
              2      Performance Summary
              3      Financial Highlights
              4      Consolidated Financial Statements
              7      Notes to the Consolidated Financial Statements
             13      Independent Auditors' Report
             14      Report of Former Independent Accountants
             15      Net Asset Valuation
</TABLE>



-------------------------------------------------------------------------------
     ADMINISTRATIVE INQUIRIES               PERFORMANCE INQUIRIES/FORM 10-Ks
     ADDRESS CHANGES/TRANSFERS              Brock, Tibbitts and Snell
     MAVRICC Management Systems, Inc.       625 Broadway, Suite 911
     1845 Maxwell, Suite 101                San Diego, California 92101
     Troy, MI  48084-4510
     Attn: Financial Communications
     248-637-7897                           619-232-0365
-------------------------------------------------------------------------------

<PAGE>


CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                              MESSAGE TO INVESTORS
-------------------------------------------------------------------------------

Presented for your review is the 1998 Annual Report for ConAm Realty 
Investors 81 L.P. (the "Partnership"). In this report we have included a 
performance summary which addresses operations at each of the properties (the 
"Properties") and the financial highlights for the year.

We are pleased to announce that the proposed sale of the Partnership's two 
remaining Properties to DOC Investors, L.L.C., a Delaware limited liability 
company, was approved by a majority in interest of the Unitholders as of 
January 15, 1999 and that the sale was completed on January 29, 1999. 
Following the close of the sale of the Properties, a distribution of $172.50 
per Unit, representing the majority of the net proceeds from the sale and 
other cash from operations, was paid to Unitholders on February 26, 1999. 
This distribution included the net proceeds from the sale of the 
Partnership's Properties in January 1999 of $156.17 per Unit, and cash from 
operations of $16.33 per Unit.

CASH DISTRIBUTIONS
The Partnership paid quarterly cash distributions of operating cash flow
totaling $6.00 per Unit for the year ended December 31, 1998. The General
Partner elected not to make a fourth quarter distribution pending the outcome of
the solicitation of the consent of the Unitholders to the sale of the
Partnership's Properties. Including the distribution of sale proceeds and cash
from operations made on February 26, 1999, since inception, the Partnership has
paid distributions totaling $628.05 per original $500 Unit. 

OPERATIONS OVERVIEW
In 1998, operations at the Partnership's Properties continued to be impacted to
varying degrees by strong competition for residents. In the Scottsdale and
Tucson areas where the Properties are located, many renters opted to purchase
homes due to low interest rates. Despite this trend, strong economic growth
nonetheless helped strengthen multifamily housing, and the Properties were able
to sustain average occupancy levels at or above 95% in 1998 while increasing
rental rates at both Properties, in part due to the use of rental concessions.
The Tucson market also improved from its overbuilt situation of two years ago,
contributing to the increased occupancy at Tierra Catalina. Although rental
occupancy and rental rates have improved, rental concessions were required to
maintain occupancy levels.


SUMMARY 
The sale of the Properties on January 29, 1999 and the initial distribution 
of net sales proceeds and cash from operations on February 26, 1999 
represented a major step toward the liquidation of the Partnership that 
is expected to be completed in August 1999. A final distribution of remaining 
Partnership cash, if any, will be made shortly thereafter.

Very truly yours,


/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development Inc.
General Partner of ConAm Property Services, Ltd.
March 30, 1999

                                       1

<PAGE>


CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                               PERFORMANCE SUMMARY
-------------------------------------------------------------------------------

LAS COLINAS I & II  SCOTTSDALE, ARIZONA

Las Colinas I & II is a 300-unit apartment community located in Scottsdale 
eight miles northeast of Phoenix. Las Colinas I & II reported average 
occupancy of 97% in 1998, up from 96% in 1997, and an increase in rental 
rates. The Scottsdale apartment market experienced continued strong 
competition during 1998 and 1997, reflecting high levels of construction and 
notable competition from condominiums and single family houses, as affordable 
prices and low mortgage rates enticed renters to buy. The Scottsdale market 
is experiencing strong job and population growth.

TIERRA CATALINA TUCSON, ARIZONA

Tierra Catalina is a 120-unit apartment community located near the Foothills 
region of Tucson. The property maintained an average occupancy rate of 95% 
during 1998, an increase from 92% for 1997, in part due to the use of rental 
incentives and other concessions in the marketplace to attract residents. The 
increase in occupancy as well as an increase in rental rates led to a 7.5% 
rise in the property's rental income in 1998. Apartment vacancy rates 
generally remain high in this market, but significant population growth in 
Tucson over the last few years is slowly reducing the number of available 
units. Low interest rates and affordable home prices have also increased 
competition for residents by encouraging many renters to purchase homes.

                                       2

<PAGE>


CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                              FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

SELECTED FINANCIAL DATA
For the years ended December 31,            1998           1997             1996             1995             1994  
--------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>              <C>              <C>              <C>
DOLLARS IN THOUSANDS, EXCEPT FOR
PER UNIT DATA

Total Income                             $  3,463        $  3,299         $  3,714           4,416            4,760
Gain on Sale of Properties                     --              --            1,411           1,485               --
Net Income (Loss)                             193              (8)           1,286           1,142             (253)
Net Cash Provided by
     Operating Activities                     998             722              753             974              949
Long-term Obligations at Year End           9,718           9,830            9,943          11,954           15,601
Total Assets at Year End                   12,057          12,495           14,545          16,022           22,497
Net Income (Loss) per
      Limited Partnership Unit*              2.22            (.10)           15.53           (1.38)           (3.19)
Distributions per Limited Partnership
     Unit*                                   6.00            7.40             8.00            8.00             8.00
Special Distributions per Limited
       Partnership Unit*                       --           16.50               --           40.50               --
--------------------------------------------------------------------------------------------------------------------
* 78,290 UNITS OUTSTANDING
</TABLE>

<TABLE>
<CAPTION>

CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT                  1998                   1997
--------------------------------------- ------------------ -------------------
<S>                                     <C>                <C>
Special Distributions*                       $   --                 $16.50
First Quarter                                  2.00                   1.85
Second Quarter                                 2.00                   1.85
Third Quarter                                  2.00                   1.85
Fourth Quarter                                   --                   1.85
                                        ------------------ -------------------
TOTAL                                        $ 6.00                $ 23.90
--------------------------------------- ------------------ -------------------
</TABLE>

Cash distributions were reduced in 1998 due to a suspension of distributions 
in the fourth quarter pending the outcome of the solicitation of the consent 
of the Unitholders to the sale of the Properties.

*  On February 27, 1997, the Partnership paid a special cash distribution
   totaling $16.50 per Unit, reflecting net proceeds received from the sale of
   Ridge Park.


                                       3

<PAGE>


CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS                                   AT DECEMBER 31,            AT DECEMBER 31,
                                                                         1998                       1997
---------------------------------------------------------------------------------------------------------
<S>                                                          <C>                        <C>
ASSETS
Investments in real estate:
     Land                                                    $      3,630,175           $       3,630,175
     Buildings and improvements                                    17,984,707                  17,975,267
                                                             --------------------------------------------
                                                                   21,614,882                  21,605,442
     Less accumulated depreciation                                (11,739,275)                (11,022,393)
                                                             --------------------------------------------
                                                                    9,875,607                  10,583,049
Cash and cash equivalents                                           1,578,924                   1,388,845
Restricted cash                                                       410,262                     430,849
Mortgage fees, net of accumulated amortization
    of $321,697 in 1998 and $270,880 in 1997                           34,020                      84,837
Other assets                                                          158,544                       7,162
---------------------------------------------------------------------------------------------------------
     TOTAL ASSETS                                            $     12,057,357           $      12,494,742
=========================================================================================================

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------------------------------------------------------------------------------
Liabilities:
   Mortgages payable                                         $      9,718,148           $      9,830,261
   Distribution payable                                                    --                    160,929
   Accounts payable and accrued expenses                              307,101                    202,484
   Due to general partner and affiliates                               14,966                     13,797
   Interest payable                                                    68,837                         --
   Security deposits                                                   68,378                     78,834
                                                              -------------------------------------------
     Total Liabilities                                             10,177,430                 10,286,305
                                                              -------------------------------------------
Partners' Capital (Deficit):
   General Partner                                                   (298,566)                  (265,715)
   Limited Partners (78,290 Units outstanding)                      2,178,493                  2,474,152
                                                              -------------------------------------------
     Total Partners' Capital                                        1,879,927                  2,208,437
---------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND PARTNERS' CAPITAL                 $     12,057,357           $     12,494,742
=========================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                       4

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,                                            1998             1997              1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>              <C>            
INCOME
Rental                                                           $     3,402,923   $    3,196,975   $     3,622,403
Interest and other                                                        59,998          102,512            91,282
                                                                ---------------------------------------------------
     Total Income                                                      3,462,921        3,299,487         3,713,685
                                                                ---------------------------------------------------
EXPENSES
Property operating                                                     1,497,797        1,520,450         1,817,928
Depreciation and amortization                                            769,749          769,828           880,445
Interest                                                                 830,863          840,832           992,745
General and administrative                                               169,197          176,587           147,482
Write-off of assets                                                        1,892               --                --
                                                                ---------------------------------------------------
     Total Expenses                                                    3,269,498        3,307,697         3,838,600
                                                                ---------------------------------------------------
Income (Loss) from operations                                            193,423           (8,210)         (124,915)
Gain on sale of property                                                      --               --         1,410,622
-------------------------------------------------------------------------------------------------------------------
     NET INCOME (LOSS)                                           $       193,423   $       (8,210)  $     1,285,707
===================================================================================================================
NET INCOME (LOSS) ALLOCATED:
     To the General Partner                                      $        19,342   $          (82)  $        69,591
     To the Limited Partners                                             174,081           (8,128)        1,216,116
-------------------------------------------------------------------------------------------------------------------
     NET INCOME (LOSS)                                           $       193,423   $       (8,210)  $     1,285,707
===================================================================================================================
PER LIMITED PARTNERSHIP UNIT
(78,290 UNITS OUTSTANDING):
     Income (Loss) from operations                               $          2.22   $         (.10)   $        (1.58)
     Gain on sale of property                                                 --               --             17.11
-------------------------------------------------------------------------------------------------------------------
     NET INCOME (LOSS)                                           $          2.22   $         (.10)   $        15.53
===================================================================================================================

<CAPTION>
-------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
-------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996               GENERAL             LIMITED
                                                                    PARTNER            PARTNERS               TOTAL
-------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>                <C>            
BALANCE (DEFICIT) AT DECEMBER 31, 1995                          $  (188,213)     $    3,763,613     $     3,575,400
Net income                                                           69,591           1,216,116           1,285,707
Distributions ($24.50 per Unit)                                     (82,639)         (1,918,105)         (2,000,744)
-------------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT DECEMBER 31, 1996                          $  (201,261)     $    3,061,624     $     2,860,363
Net loss                                                                (82)             (8,128)             (8,210)
Distributions ($7.40 per Unit)                                      (64,372)           (579,344)           (643,716)
--------------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT DECEMBER 31, 1997                          $  (265,715)     $    2,474,152     $     2,208,437
Net income                                                           19,342             174,081             193,423
Distributions ($6.00 per Unit)                                      (52,193)           (469,740)           (521,933)
-------------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT DECEMBER 31, 1998                          $  (298,566)     $    2,178,493     $     1,879,927
===================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                       5

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,                                  1998               1997                1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                             $   193,423         $    (8,210)        $ 1,285,707
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
   Depreciation and amortization                                  769,749             769,828             880,445
   Gain on sale of properties                                          --                  --          (1,410,622)
   Write-off of assets                                              1,892                  --                  --
   Increase (decrease) in cash arising from changes in
      operating assets and liabilities:
         Fundings to restricted cash                             (405,639)           (396,778)           (450,460)
         Release of restricted cash                               426,226             317,373             493,163
         Other assets                                            (151,382)              7,130              10,654
         Accounts payable and accrued expenses                    104,617              25,070             (48,337)
         Due to general partner and affiliates                      1,169                 752              (2,218)
         Interest payable                                          68,837                  --                  --
         Security deposits                                        (10,456)              6,976              (5,575)
                                                              -----------------------------------------------------
Net cash provided by operating activities                         998,436             722,141             752,757
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate                                          (13,382)                 --                  --
Net proceeds from sale of property                                     --                  --           3,196,264
                                                              -----------------------------------------------------
Net cash provided by (used in) investing activities               (13,382)                 --           3,196,264
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions                                                    (682,862)         (1,961,598)           (695,911)
Mortgage principal payments                                      (112,113)           (112,775)         (2,011,152)
                                                              -----------------------------------------------------
Net cash used in financing activities                            (794,975)         (2,074,373)         (2,707,063)
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents              190,079          (1,352,232)          1,241,958
Cash and cash equivalents, beginning of period                  1,388,845           2,741,077           1,499,119
-------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                      $ 1,578,924         $ 1,388,845         $ 2,741,077
===================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest                      $   762,026         $   840,832         $   992,745
-------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements                       $    (3,942)        $        --         $        --
Write-off of accumulated depreciation                         $     2,050         $        --         $        --
-------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

                                       6
<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

Notes to the Consolidated Financial Statements
DECEMBER 31, 1998, 1997 AND 1996

1. ORGANIZATION

ConAm Realty Investors 81 L.P. (formerly Hutton/ConAm Realty Investors 81) 
(the "Partnership") was organized as a Limited Partnership under the laws of 
the State of California pursuant to a Certificate and Agreement of Limited 
Partnership (as subsequently amended, the "Partnership Agreement") dated 
April 30, 1981, as amended and restated August 31, 1981. The Partnership was 
formed for the purpose of acquiring and operating multi-family residential 
real estate. The general partners of the Partnership were RI-81 Real Estate 
Services Inc. ("RI-81"), an affiliate of Lehman Brothers, Inc., and ConAm 
Property Services, Ltd. ("CPS"), an affiliate of Continental American 
Properties, Ltd. (the "General Partners"). On October 8, 1997, CPS acquired 
RI-81's co-general partner interest in the Partnership, effective July 1, 
1997, pursuant to a purchase agreement between CPS and RI-81 dated August 29, 
1997. As a result, CPS now serves as the sole general partner (the "General 
Partner") of the Partnership. In conjunction with this transaction, the name 
of the Partnership was changed from Hutton/ConAm Realty Investors 81 to ConAm 
Realty Investors 81 L.P. On January 15, 1999, a majority in interest of 
Unitholders agreed to sell the Partnership's remaining properties and 
liquidate the Partnership. The Partnership sold its properties on January 
29,1999 (Note 10) and expects to liquidate during 1999.

2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

FINANCIAL STATEMENTS The consolidated financial statements are prepared on 
the accrual basis of accounting and include the accounts of the Partnership 
and its affiliated ventures when the Partnership has a controlling interest 
in the ventures. The effect of transactions between the Partnership and its 
ventures have been eliminated in consolidation.

INVESTMENTS IN REAL ESTATE Investments in real estate are recorded at cost 
less accumulated depreciation and include the initial purchase price of the 
property, legal fees, acquisition and closing costs.

Revenue is recognized when earned and expenses (including depreciation) are 
recognized when incurred in accordance with generally accepted accounting 
principles. Leases are generally for terms of one year or less.

Depreciation is computed using the straight-line method based upon the 
estimated useful lives of the properties (25 years). Maintenance and repairs 
are charged to operations as incurred. Costs incurred for significant 
betterments and improvements are capitalized and depreciated over their 
estimated useful lives.

For assets sold or otherwise disposed of, the cost and related accumulated 
depreciation are removed from the accounts, and any resulting gain or loss is 
reflected in net income for the period.

IMPAIRMENT OF LONG-LIVED ASSETS The Partnership assesses its real estate 
investments for impairment whenever events or changes in circumstances 
indicate that the carrying amount of the real estate may not be recoverable. 
Recoverability of real estate to be held and used is measured by a comparison 
of the carrying amount of the real estate to future net cash flows 
(undiscounted and without interest) expected to be generated by the real 
estate. If the real estate is considered to be impaired, the impairment to be 
recognized is measured as the amount by which the carrying amount of the real 
estate exceeds the fair value of the real estate. At December 31, 1998, the 
Partnership's properties were assets to be held and used as the Partnership 
did not have the ability to sell the properties without the approval of a 
majority of the Unitholders.

                                       7

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

MORTGAGE FEES Mortgage fees are costs incurred in connection with obtaining 
financing for the Partnership's properties. Such costs are amortized over the 
initial term of the loan on a method which approximates the 
effective-interest method.

INCOME TAXES No provision for income taxes has been made in the financial 
statements as the liability for such taxes is that of the partners rather 
than the Partnership.

CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of highly liquid 
short-term investments with original maturities of three months or less.

CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject 
the Partnership to a concentration of credit risk principally consist of cash 
and cash equivalents and restricted cash in excess of the financial 
institution's federally insured limits. The Partnership invests its cash and 
cash equivalents and restricted cash with high credit quality federally 
insured financial institutions or treasury based money market funds.

RESTRICTED CASH Restricted cash consists of escrow deposits for real estate 
taxes and casualty insurance as required by the first mortgage lender.

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

3. THE PARTNERSHIP AGREEMENT

The Partnership Agreement provides that net cash from operations, as defined, 
is to be distributed quarterly, 90% to the limited partners and 10% to the 
General Partner.

Net loss for any fiscal year is to be allocated 99% to the limited partners 
and 1% to General Partner. Net income for any fiscal year will generally be 
allocated 90% to the limited partners and 10% to the General Partner.

Net proceeds from sales or refinancing are to be distributed 99% to the 
limited partners and 1% to the General Partner until each limited partner has 
received an amount equal to its adjusted capital value (as defined) and an 
annual, non-compounded cumulative 7% return thereon. The balance, if any, is 
to be distributed 85% to the limited partners and 15% to the General Partner. 
Gain from sales resulting from mortgage debt in excess of basis is to be 
allocated to each partner having a negative capital account balance, pro 
rata, to the extent of such negative balance. Thereafter, such gain is to be 
allocated in accordance with the distribution of net proceeds from sale or 
refinancing, with the balance allocated to the limited partners.

Effective July 1, 1997, all general partner allocations were made solely to 
CPS.

4. INVESTMENTS IN REAL ESTATE

The Partnership's two remaining properties at December 31, 1998 were as 
follows:
<TABLE>
<CAPTION>

PROPERTY NAME             UNITS             LOCATION                 DATE ACQUIRED            PURCHASE PRICE
-----------------------------------------------------------------------------------------------------------------
<S>                     <C>        <C>                         <C>                        <C>
Las Colinas I & II         300           Scottsdale, AZ            5/20/81 & 9/23/82            $12,831,783
Tierra Catalina            120             Tucson, AZ                    3/9/84                  7,012,650
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       8
<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

Since inception, the Partnership acquired five residential apartment complexes
either directly or through investments in joint ventures. On July 20, 1995, the
Partnership sold Kingston Village and Cedar Bay Village to an institutional
buyer (the "Buyer"), which was unaffiliated with the Partnership. The selling
price was determined by arm's length negotiations between the Partnership and
the Buyer. Kingston Village and Cedar Bay Village were sold for $5,370,000 and
$1,410,000, respectively. The Partnership received aggregate net proceeds of
$6,555,332 from the sales of which $3,541,400, representing outstanding
principal and interest, was used to fully satisfy the Partnership's mortgage
obligations on Kingston Village and Cedar Bay Village. The sales resulted in a
gain on sale of $1,485,121 which included the recognition of mortgage prepayment
penalties of $120,926 and a $101,146 write-off of the unamortized portion of
mortgage fees. The gain was allocated in accordance with the Partnership
Agreement. On August 17, 1995, the Partnership paid a special distribution of
$3,170,745 or $40.50 per Unit to the limited partners. The special distribution
was comprised of the net proceeds from the sale of Kingston Village and Cedar
Bay Village and Partnership cash reserves.

On November 27, 1996, the Partnership sold Ridge Park to Ridge Park Limited
Partnership, an Oklahoma limited partnership ("Ridge Park L.P."), which is
unaffiliated with the Partnership. The selling price was determined by arm's
length negotiations between the Partnership and Ridge Park L.P. Ridge Park was
sold for $3,385,000. The Partnership received net proceeds of $3,196,264 from
the transaction of which $1,902,666, representing outstanding principal and
interest, was used to fully satisfy the Partnership's mortgage obligation on
Ridge Park. The transaction resulted in a gain on sale of $1,410,622 which
included the recognition of mortgage prepayment penalties of $36,843, and a
$33,154 write-off of the unamortized portion of mortgage fees. The gain was
allocated in accordance with the Partnership Agreement. On February 27, 1997,
the Partnership paid a special distribution of $1,291,785 ($16.50 per unit) to
the limited partners, representing the net proceeds from the sale of Ridge Park.

Cedar Bay Village, Ridge Park, Kingston Village and Tierra Catalina were
originally acquired through joint ventures with unaffiliated developers. To each
venture, the Partnership contributed the apartment projects as its initial
capital contribution. On March 30, 1984, the co-venturer's interest with respect
to Tierra Catalina was acquired for $400,000.

The limited partnership agreements for Ridge Park Associates, Tierra Catalina
and Las Colinas substantially provide that:

a. Available cash from operations is to be distributed 100% to the Partnership
until it has received an annual, non-cumulative preferred return, as defined.
Any remaining balance is to be distributed 99% to the Partnership and 1% to the
General Partner.

b. Net income is to be allocated first, proportionately to partners with
negative capital accounts, as defined, until such capital accounts have been
increased to zero then, to the Partnership up to the amount of any payments made
on account of its preferred return and thereafter, 99% to the Partnership and 1%
to the General Partner. All losses are to be allocated first, to the partners
with positive capital accounts, as defined, until such accounts have been
reduced to zero and then, 99% to the Partnership and 1% to the General Partner.

c. Income from a sale is to be allocated first, to the Partnership until the
Partnership's capital accounts, as defined, are equal to the fair market value
of the Partnerships' assets at the date of the amendments. Then, any remaining
balance is to be allocated 99% to the Partnership and 1% to the General Partner.
Net proceeds from a sale or refinancing are to be distributed first, to the
partners with the positive capital account balance, as defined; thereafter, 99%
to the Partnership and 1% to the General Partner. Upon dissolution or
termination of the Partnerships, the General Partner is to be required to
contribute an amount equal to the lesser of (i) the excess of 1.01% of the
capital account, as defined, of the Partnership as of the date of the
dissolution or termination over any capital contributions made by the General
Partner; or (ii) the deficit balance, if any, in the General Partner's capital
accounts, as defined.

                                       9

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

5. MORTGAGE PAYABLE

On August 27, 1992, the Partnership obtained first mortgage loans on Las 
Colinas I and II, Tierra Catalina, Kingston Village, Cedar Bay Village, and 
Ridge Park properties totaling $15,900,000. The loans, secured by the 
respective properties and an assignment of rents and leases, bear interest at 
an annual rate of 8.5%. Each of the loans is a non-recourse loan with monthly 
payments of principal and interest based on a thirty year amortization 
schedule and a seven year term with the balance of the principal due on 
September 1, 1999. The loans require monthly insurance, real estate tax and 
property replacement and repair reserve escrow fundings.

On July 20, 1995, Kingston Village and Cedar Bay Village were sold. A portion 
of the sales proceeds, in the amount of $3,662,325, representing outstanding 
principal, interest and pre-payment penalties, was used to fully satisfy the 
Partnership's mortgage obligations on the Properties.

On November 27, 1996, Ridge Park was sold. A portion of the sales proceeds, 
in the amount of $1,939,509 representing outstanding principal, interest and 
pre-payment penalties, was used to fully satisfy the Partnership's mortgage 
obligation on the Property.

Mortgages payable for Las Colinas I & II and Tierra Catalina at December 31, 
1998 are $6,182,567 and $3,535,581, respectively. These mortgages contain 
provisions for prepayment penalties if the mortgages are repaid prior to 
their maturity date of September 1, 1999. The loans were repaid in full in 
conjunction with the sale of Las Colinas I & II and Tierra Catalina on 
January 29, 1999 (note 10).

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair 
Value of Financial Instruments," requires that the fair values be disclosed 
for the Partnership's financial instruments. The carrying amount of cash and 
cash equivalents, restricted cash, distribution payable, accounts payable and 
accrued expenses, due to general partner and affiliates, interest payable, 
and security deposits are reasonable estimates of their fair values due to 
the short-term nature of those instruments.

The carrying amount of the mortgage payable is a reasonable estimate of fair 
value based on management's belief that the interest rates and terms of the 
debt are comparable to those commercially available to the Partnership in the 
marketplace for similar instruments.

7. TRANSACTIONS WITH RELATED PARTIES

The following is a summary of fees earned and reimbursable expenses to the 
General Partners and affiliates for the years ended December 31, 1998, 1997 
and 1996, and the unpaid portion at December 31, 1998:
<TABLE>
<CAPTION>
                                                 EARNED AND
                                                  UNPAID AT
                                               DECEMBER 31,                       EARNED
                                                              ------------------ ---------------- ----------------
                                                        1998               1998             1997             1996
------------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>                <C>              <C>
RI-81 Real Estate Services Inc. and
affiliates -
     Out-of-pocket expenses                           $4,509            $ 4,509           $4,615           $3,968
ConAm and affiliates:
     Property operating salaries                          --            234,521          260,841          296,558
     Property management fees                         14,966            171,226          160,005          181,291
------------------------------------------------------------------------------------------------------------------
TOTAL                                                $19,475           $410,256         $425,461         $481,817
------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       10
<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

8. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION

The following is a reconciliation of the net income for financial statement
purposes to net income (loss) for federal income tax purposes for the years
ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                       1998                 1997               1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                <C>                 <C>
Net income (loss) per financial statements                      $   193,423        $      (8,210)      $  1,285,707
Tax basis partnership net income (loss)
     in excess of GAAP basis joint
     venture net income (unaudited)                                 397,234              274,150            (74,666)
Gain on sale of properties
     for tax purposes in excess of gain per
     financial statements (unaudited)                                    --                   --          1,357,592
Other (unaudited)                                                   (20,000)              18,312               (700)
-------------------------------------------------------------------------------------------------------------------
   TAXABLE NET INCOME (UNAUDITED)                               $   570,657        $     284,252       $  2,567,933
===================================================================================================================
</TABLE>
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital (deficit) for federal income tax purposes as of 
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                       1998                 1997               1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                  <C>                <C>
Partners' capital per financial statements                    $   1,879,927        $   2,208,437      $   2,860,363
Accrued distribution from sale of property (unaudited)                   --                   --          1,304,833
Adjustment for cumulative difference between
    tax basis net income and net income
    per financial statements (unaudited)                         (2,325,025)          (2,702,259)        (2,994,721)
-------------------------------------------------------------------------------------------------------------------
PARTNERS' CAPITAL (DEFICIT) PER INCOME TAX RETURN (UNAUDITED) $    (445,097)       $    (493,822)     $   1,170,475
===================================================================================================================
</TABLE>

At December 31, 1998, the tax basis of the Partnership's assets was 
$(208,258) and the tax basis of the Partnership's liabilities was $236,839. 
The Partnership does not consolidate its investment in joint ventures for 
income tax purposes.

9. DISTRIBUTIONS PAID

Cash distributions, per the consolidated statements of partners' capital, are 
recorded on the accrual basis, which recognizes specific record dates for 
payments within each year. The consolidated statements of cash flows 
recognize actual cash distributions paid during the year. The following table 
discloses the annual amounts as presented on the consolidated financial 
statements:
<TABLE>
<CAPTION>
              Distributions                                                              Distributions
                  Payable              Distributions           Distributions                Payable
             Beginning of Year            Declared                 Paid                   December 31,
------------------------------------------------------------------------------------------------------
<S>          <C>                       <C>                     <C>                       <C>          
1998           $   160,929              $   521,933            $     682,862             $       --
1997             1,478,811                  643,716                1,961,598                160,929
1996               173,978                2,000,744                  695,911              1,478,811
------------------------------------------------------------------------------------------------------
</TABLE>

10.  SALE OF PROPERTIES

On January 29, 1999, the Partnership consummated the sale of the Las Colinas 
I & II and Tierra Catalina to DOC Investors, L.L.C., a Delaware limited 
liability company, for a sales price of $22,250,000 (before selling costs and 
prorations). As required by the Partnership's Partnership Agreement, the 
General Partner solicited the consent of a majority in interest of the 
Unitholders to the sale pursuant to a Consent 

                                       11
<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

Solicitation Statement dated December 16, 1998. The requisite consent was 
obtained on January 15, 1999. The Partnership received approximately 
$12,371,000 of cash proceeds from the sale, net of closing costs of 
approximately $1,000 and repayment or assumption of indebtedness of 
approximately $9,878,000.

On February 26, 1999, the Partnership distributed $13,505,025 ($172.50 per 
Unit) to the Unitholders and $142,072 to the General Partner.

                                       12

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                          INDEPENDENT AUDITORS' REPORT
-------------------------------------------------------------------------------


The General Partner
ConAm Realty Investors 81 L.P.:

We have audited the accompanying consolidated balance sheets of ConAm Realty 
Investors 81 L.P. (a California limited partnership) and consolidated 
ventures (the Partnership), as of December 31, 1998 and 1997, and the related 
consolidated statements of operations, partners' capital, and cash flows for 
the years then ended. These consolidated financial statements are the 
responsibility of the Partnership's management. Our responsibility is to 
express an opinion on these consolidated 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.

As further discussed in Note 10 to the consolidated financial statements, the 
Partnership sold substantially all of its assets on January 29, 1999.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of ConAm 
Realty Investors 81 L.P. and consolidated ventures as of December 31, 1998 
and 1997, and the results of their operations and their cash flows for the 
years then ended, in conformity with generally accepted accounting principles.

                                       KPMG LLP

San Diego, California
March 12, 1999

                                       13

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                    REPORT OF FORMER INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------


To the Partners of 
ConAm Realty Investors 81 L.P.:


We have audited the consolidated balance sheet of ConAm Realty Investors 81 
L.P. (formerly Hutton/ConAm Realty Investors 81), a California Limited 
Partnership, and Consolidated Ventures as of December 31, 1996 and the 
related consolidated statements of operations, partners' capital (deficit) 
and cash flows for the year then ended. These consolidated financial 
statements are the responsibility of the Partnership's management. Our 
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of ConAm Realty Investors 81 L.P., a California Limited Partnership, and 
Consolidated Ventures as of December 31, 1996, and the consolidated results 
of their operations and their cash flows for the year then ended in 
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 14, 1997

                                       14

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                  NET ASSET VALUATION
------------------------------------------------------------------------------------------------------------------------

COMPARISON OF ACQUISITION COSTS TO DECEMBER 31, 1998 PROPERTY VALUES AND
DETERMINATION OF NET ASSET VALUE PER UNIT AT DECEMBER 31, 1998 (UNAUDITED)

                                                           ACQUISITION COST      PARTNERSHIP'S SHARE   NET ASSET VALUE
PROPERTY                       DATE OF ACQUISITION       (PURCHASE PRICE PLUS    OF PROPERTY           DETERMINATION
                                                          GENERAL PARTNER'S      VALUE (1)
                                                          ACQUISITION FEES)
------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                       <C>                     <C>                   <C>
Las Colinas I & II              05-20-81 & 09-23-82         $ 13,326,613               $15,850,000
Tierra Catalina                       03-09-84                 7,759,670                 6,400,000
Aggregate Property Value at 12-31-98                                                                   $22,250,000
Less estimated transaction costs in escrow                                                                  (1,000)
                                                                                                     -------------------
Sales proceeds (before repayment of secured debt)                                                       22,249,000
Cash and cash equivalents (including previously restricted cash)                                         1,989,186
Other assets                                                                                               158,544
                                                                                                     -------------------
Total assets                                                                                            24,396,730
                                                                                                     -------------------
Less:
     Secured debt                                                                                        9,718,148
     Other liabilities                                                                                     459,282
     Prepayment penalties                                                                                   97,075
     Contingency amounts (2)                                                                               475,128
                                                                                                     -------------------
Total liabilities                                                                                       10,749,633

                                                                                                     -------------------
Partnership Net Asset Value (3)                                                                         13,647,097
                                                                                                     -------------------
Net Asset Value Allocated:
     Limited Partners                                                                                   13,505,025
     General Partner                                                                                       142,072
                                                                                                     -------------------
                                                                                                        13,647,097
                                                                                                     -------------------

NET ASSET VALUE PER UNIT  (78,290 UNITS OUTSTANDING)                                                        172.50
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Represents the Partnership's share of the fair market value of the
     properties as reflected in the purchase and sale agreements pursuant to
     which the properties were sold on January 29, 1999. The purchase prices
     contained in such agreements were negotiated and agreed to in December
     1998.
(2)  Includes an amount for estimated future costs related to the sale of the 
     properties and liquidation of the Partnership and an amount the General 
     Partner determined to set aside for contingencies.
(3)  The Partnership Net Asset Value assumes a sale at December 31, 1998 of all
     the Partnership's properties at prices equal to the sales prices set forth
     in the purchase and sale agreements described in Note (1) above, payment of
     all Partnership liabilities, and the distribution of the net proceeds of
     such sale and other Partnership cash to the Partners.

Since the Partnership sold all of its real property assets in January 1999, 
is in dissolution, and is in the process of winding up and liquidating, the 
foregoing Partnership Net Asset Value is intended to approximate the 
liquidation value of the Partnership and the Net Asset Value Per Unit is 
intended to approximate the per Unit amount which is expected to be 
distributed to the Limited Partners in connection with the Partnership's 
liquidation. The Net Asset Valuation does not take into account the illiquid 
nature of an investment in the Units or the fact that at December 31, 1998 a 
holder of Units would likely not have been able to sell their Units for the 
Net Asset Value Per Unit set forth above. Fiduciaries of Limited Partners 
which are subject to ERISA or other provisions of law requiring valuation of 
Units should consider all relevant factors, including but not limited to Net 
Asset Value Per Unit, in determining the fair market value of the investment 
in the Partnership for such purposes.

                                       15
<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                            LAS COLINAS           LAS COLINAS
RESIDENTIAL PROPERTY:                            APTS I               APTS II      TIERRA CATALINA                   TOTAL
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                   <C>                 <C>
Location                                 Scottsdale, AZ        Scottsdale, AZ           Tucson, AZ                      na
Construction date                                  1981                  1982            1983-1984                      na
Acquisition date                               05-20-81              09-23-82             03-09-84                      na
Life on which depreciation
     in latest income statements
     is computed                               25 years              25 years             25 years                      na
Encumbrances                              $   6,182,567         $          --        $   3,535,581   $           9,718,148
Initial cost to Partnership:
     Land                                 $   1,582,000         $     514,564        $   1,497,150   $           3,593,714
     Buildings and
     improvements                         $   8,268,721         $   3,268,996        $   6,403,622   $          17,941,339
Costs capitalized
     subsequent to acquisition-
        Land, buildings
        and improvements                  $      29,123         $       8,494        $      46,154   $              83,771
Write-off of buildings
     and improvements                     $          --         $          --        $     (3,942)   $             (3,942)
Gross amount at which carried at close 
of period: (1)
     Land                                 $   1,611,123         $     515,719        $   1,503,333   $           3,630,175
     Buildings and
     improvements                             8,268,721             3,276,335            6,439,651              17,984,707
--------------------------------------------------------------------------------------------------------------------------
                                          $   9,879,844         $   3,792,054        $   7,942,984   $          21,614,882
==========================================================================================================================
Accumulated depreciation                  $   5,729,208         $   2,198,968        $   3,811,099   $          11,739,275
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The aggregate costs for Land, Buildings and Improvements for Federal 
income tax purposes are $17,984,708.

A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>

                                     1998                    1997              1996
-----------------------------------------------------------------------------------------
<S>                                <C>                  <C>                 <C>
INVESTMENTS IN REAL ESTATE:
Beginning of period                $ 21,605,442         $ 21,605,442        $ 25,243,577
Additions                                13,382                   --                  --
Dispositions and disposals               (3,942)                  --          (3,638,135)
-----------------------------------------------------------------------------------------
End of period                      $ 21,614,882         $ 21,605,442        $ 21,605,442
=========================================================================================
ACCUMULATED DEPRECIATION:
Beginning of period                $ 11,022,393         $ 10,303,382        $ 11,370,295
Depreciation expense                    718,932              719,011             818,734
Dispositions and disposals               (2,050)                  --          (1,885,647)
-----------------------------------------------------------------------------------------
End of period                      $ 11,739,275         $ 11,022,393        $ 10,303,382
=========================================================================================
</TABLE>

SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT.

                                       F-1

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                          INDEPENDENT AUDITORS' REPORT
-------------------------------------------------------------------------------


The General Partner
ConAm Realty Investors  81 L.P.:


Under date of March 12, 1999, we reported on the consolidated balance sheets 
of ConAm Realty Investors 81 L.P. (a California limited partnership) and 
consolidated ventures (the Partnership) as of December 31, 1998 and 1997, and 
the related consolidated statements of operations, partners' capital, and 
cash flows for the years then ended, as contained in the 1998 annual report 
to Unitholders. These consolidated financial statements and our report 
thereon are incorporated by reference in the 1998 annual report on Form 10-K. 
In connection with our audits of the aforementioned consolidated financial 
statements, we also have audited the related consolidated financial statement 
schedule III. This consolidated financial statement schedule is the 
responsibility of the Partnership's management. Our responsibility is to 
express an opinion on this consolidated financial statement schedule based on 
our audits.

In our opinion, the consolidated financial statement schedule, when 
considered in relation to the basic consolidated financial statements taken 
as a whole, presents fairly, in all material respects, the information set 
forth therein.

                                       KPMG LLP


San Diego, California
March 12, 1999

                                       F-2

<PAGE>

CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES

-------------------------------------------------------------------------------
                    REPORT OF FORMER INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------


Our report on the consolidated financial statements of ConAm Realty Investors 
81 L.P. (formerly Hutton/ConAm Realty Investors 81), a California Limited 
Partnership, and Consolidated Ventures has been incorporated by reference in 
this Form 10-K from the Annual Report to Unitholders of ConAm Realty 
Investors 81 L.P. for the year ended December 31, 1996. In connection with 
our audit of such financial statements, we have also audited the related 
financial statement schedule listed in the index of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when 
considered in relation to the basic financial statements taken as a whole, 
presents fairly, in all material respects, the information required to be 
included therein.

COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
February 14, 1997


                                       F-3