HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

                                FINANCIAL REPORT

                                DECEMBER 31, 1996



<PAGE>












                                 C O N T E N T S

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REPORT OF INDEPENDENT AUDITOR                                                
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FINANCIAL STATEMENTS

   Balance sheets                                                             
   Statements of  income                                                     
   Statements of stockholders' equity                                     
   Statements of cash flows                                               
   Notes to financial statements                                             
--------------------------------------------------------------------------------



<PAGE>








                          INDEPENDENT AUDITOR'S REPORT


To  the  Board  of  Directors
HOLCO MORTGAGE ACCEPTANCE CORPORATION-I
South Bend, Indiana


We have audited the  accompanying  balance sheets of Holco  Mortgage  Acceptance
Corporation-I  as of December 31, 1996 and 1995,  and the related  statements of
income,  stockholders'  equity,  and cash  flows  for  each of the  years in the
three-year  period ended December 31, 1996.  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 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 Holco  Mortgage  Acceptance
Corporation-I  as of  December  31,  1996  and  1995,  and  the  results  of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.




/s/ McGLADREY & PULLEN, LLP




South Bend, Indiana
January 10, 1997


<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

BALANCE SHEETS
December 31, 1996  and  1995
<TABLE>


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

 CASH  AND  CASH EQUIVALENTS, including amounts
   held by trustee 1996 $92,144; 1995 $87,334 ..............................   $   92,144    $   87,334

 INTEREST RECEIVABLE .......................................................       72,293        72,938

GNMA  CERTIFICATES, at amortized cost ......................................    9,403,269     9,492,787

 COLLATERALIZED MORTGAGE OBLIGATION Bond Offering
    COSTS, net of accumulated amortization 1996
   $1,039,951; 1995 $1,039,363 .............................................       11,571        12,159
                                                                               ------------------------
                                                                               $9,579,277    $9,665,218
                                                                               ========================
LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES
   Collateralized mortgage obligation bonds ................................   $8,816,000    $8,900,000
   Accounts payable ........................................................       38,756        39,023
   Interest payable ........................................................      137,565       138,878
                                                                               ------------------------
                                                                                8,992,321     9,077,901
                                                                               ------------------------

 STOCKHOLDERS' EQUITY
   Common stock, $.01 par value; authorized
      700,000 shares; issued and outstanding
      563,750 shares .......................................................        5,638         5,638
   Additional paid-in capital ..............................................    2,862,878     2,862,878
   Retained earnings (deficit) .............................................   (2,281,560)   (2,281,199)
                                                                               ------------------------
                                                                                  586,956       587,317
                                                                               ------------------------
                                                                               $9,579,277    $9,665,218
                                                                               ========================
</TABLE>
 See Notes  to  Financial Statements 

<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995,  and  1994


                                       1996        1995       1994
---------------------------------------------------------------------
Revenues, interest income:
   GNMA certificates ............    $860,346    $932,051  $1,297,737
   Funds held by trustee ........       1,690       2,298      24,511
                                     --------------------------------
                                      862,036     934,349   1,322,248
                                     --------------------------------
Expenses:
   Interest expense .............     830,119     854,802   1,161,125
   Management fees, related party       6,168      26,168      24,688
   Other, net ...................       3,560       3,560       3,560
                                     --------------------------------
                                      839,847     884,530   1,189,373
                                     --------------------------------

              Net income ........    $ 22,189    $ 49,819  $  132,875
                                     ================================

              Net income per share   $    .04    $    .09  $      .24
                                     ================================

 See Notes  to  Financial Statements.


<PAGE>


HOLCO MORTGAGE ACCEPTANCE
CORPORATION-I

STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995, and  1994


                                                      Retained
                                Common   Additional   Earnings
                                Stock     Paid-In     (Deficit)        Total
--------------------------------------------------------------------------------

Balance, December 31, 1993    $   5,638 $2,862,878 $  (1,894,503)  $   974,013
   Net income ............           --         --       132,875       132,875
   Dividends declared ....           --         --      (541,201)     (541,201)
                              --------------------------------------------------
Balance, December 31, 1994        5,638  2,862,878    (2,302,829)      565,687
   Net income ............           --         --        49,819        49,819
   Dividends declared ....           --         --       (28,189)      (28,189)
                              --------------------------------------------------
Balance, December 31, 1995        5,638  2,862,878    (2,281,199)      587,317
   Net income ............           --         --        22,189        22,189
   Dividends declared ....           --         --       (22,550)      (22,550)
                               -------------------------------------------------
Balance, December 31, 1996     $  5,638 $2,862,878 $  (2,281,560)  $   586,956
                               =================================================

See Notes  to  Financial Statements.



<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995,  AND  1994
<TABLE>
                                                        1996        1995       1994
-------------------------------------------------------------------------------------
<S>                                                    <C>       <C>       <C>  

Cash Flows From Operating Activities
  Net income                                           $ 22,189  $ 49,819  $  132,875
  Adjustments to reconcile net income to
    net cash provided by (used in)
    operating activities:
    Amortization of GNMA certificate
      discount                                           (1,788)  (65,617)   (153,858)
    Amortization of collateralized mortgage
      obligation bond discount, net                          --        --      18,274
    Amortization of collateralized mortgage
      obligation bond offering costs                        588    17,669      50,663
    Change in assets and liabilities:
      Decrease (increase) in interest receivable            645      (371)     45,716
      Increase (decrease) in:
        Accounts payable                                   (267)   20,000     (15,428)
        Interest payable                                 (1,313)   (1,211)    (92,193)
                                                       ------------------------------
Net cash provided by (used in) operating activities      20,054    20,289     (13,951)
                                                       ------------------------------

Cash Flows From Investing Activities
  Principal receipts on GNMA certificates                91,306    83,263   5,930,988
                                                       ------------------------------

Cash Flows From Financing Activities
  Redemption of collateralized mortgage obligation
    bonds                                               (84,000)  (77,000) (6,593,936)
  Dividends paid                                        (22,550)  (28,189)   (541,201)
                                                       ------------------------------

Net cash (used in) financing activities                (106,550) (105,189) (7,135,137)
                                                       ------------------------------

Increase (decrease) in cash and cash equivalents          4,810    (1,637) (1,218,100)

Cash and cash equivalents, beginning                     87,334    88,971   1,307,071
                                                       ------------------------------
Cash and cash equivalents, ending                      $ 92,144  $ 87,334  $   88,971
                                                       ==============================
</TABLE>

See Notes  to  Financial Statements.


<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

NOTES TO FINANCIAL STATEMENTS


Note 1. Organization, Use of Estimates, and Significant Accounting Policies

Organization:

Holco Mortgage Acceptance Corporation-I, a Delaware corporation, (the "Company")
was  formed  on April 3, 1987 to invest in  Multifamily  GNMA  Certificates,  by
acquiring  fully  modified  pass-through  certificates  representing  beneficial
ownership in multifamily  housing  project  mortgage loans issued by the Federal
Housing Administration ("FHA") under Section 223(f) of the National Housing Act.
These   Certificates  are  guaranteed  by  the  Government   National   Mortgage
Association ("GNMA"),  and are backed by the full faith and credit of the United
States.  The Company  obtained  proceeds for the  acquisition of the GNMA Certi-
ficates by issuing its common  stock and three  series of Bonds.  The  Company's
sole  activities  consist of  providing  monthly  interest  payments to the bond
holders;  repaying the principal of the bonds at either  redemption or maturity;
and providing  distributions to common  stockholders  ("PERC" holders) which are
expected  to  provide  them with  repayment  of their  investment  plus a return
thereon.

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 as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting  period.  The
Company   estimated   prepayments  of  GNMA  Certificates  and  corresponding
redemptions of collateralized mortgage obligation bonds at the time of issuance.
These estimates were used to determine the constant effective yield necessary to
apply  the  interest  method of  amortization  for the  collateralized  mortgage
obligation  bond  offering  costs,   collateralized   mortgage  obligation  bond
discount, and GNMA certificate market discount.

It was  anticipated  that all remaining GNMA  Certificates  would be prepaid and
there would be a corresponding redemption of the then outstanding collateralized
mortgage  obligation bonds during the year ending December 31, 1996.  Management
has now estimated that the future  payments of the remaining  GNMA  Certificates
will be in accordance with their scheduled maturity with  corresponding  monthly
redemptions of the  collateralized  mortgage  obligation bonds sufficient,  at a
minimum,  to assure the bonds which remain  outstanding are fully secured by the
Multifamily  GNMA  Certificates  and the other  collateral  held by the trustee.
Actual  payments could differ from those  estimates and such  differences  could
occur in the near term.

With this  change in  estimate,  management  has  decided to  straight-line  the
remaining unamortized collateralized mortgage obligation bond offering costs and
GNMA   certificate   market  discount  over  the  remaining  term  of  the  GNMA
certificates. The effect of this change is not deemed to have an material effect
on the financial statements taken as a whole.

Significant accounting policies:

Basis of accounting:

The accompanying  financial statements are prepared in accordance with generally
accepted  accounting  principles,  including  the use of the  accrual  method of
accounting.

Cash equivalents:

For purposes of the  statement of cash flows,  the Company  considers  corporate
trust accounts held by the trustee to be cash equivalents.

Collateralized mortgage obligation bond offering costs,  collateralized mortgage
obligation bond discount, and GNMA certificate market discount:

Collateralized  mortgage  obligation  bond offering  costs include  underwriting
commissions and other expenses associated with the offering.  The collateralized
mortgage  obligation bond offering costs and collateralized  mortgage obligation
bond  discount are being  amortized  over the expected life of the related bonds
and are  included  in  interest  expense.  The GNMA certificate  market discount
is being  amortized  over the expected life of the GNMA Certificates and is 
included in interest income.
<PAGE>



Note 2.  Income Tax Status

The Company elected to be treated as a real estate mortgage  investment  conduit
("REMIC")  which has been  authorized  under  the Tax  Reform  Act of 1986.  The
sections of the federal  income tax laws  applicable  to REMICs  provide that in
lieu of corporate  income taxes, the PERC holders  separately  account for their
pro rata  share  of the  Company's  items of  income,  deductions,  losses,  and
credits.


Note 3.  Cash Distributions to PERC Holders

PERC holders receive quarterly cash  distributions  consisting of the cash flows
of the Company, if any, remaining after debt service on the bonds and payment of
operating expenses.


Note 4.  GNMA Certificates

The GNMA  Certificates  consist of three  Multifamily  GNMA  Certificates  as of
December 31, 1996 and 1995. The GNMA  Certificates have been assigned to a trust
for the purpose of securing the  collateralized  mortgage  obligation bonds. The
Certificates  are payable in aggregate  monthly  installments of approxi- mately
$79,000 as of December 31, 1996 and 1995,  including interest at 9% to 9.25% per
annum with stated maturity dates varying between December 2021 and January 2022.
The GNMA  Certificates  are held for payment of  principal  and  interest on the
collateralized mortgage obligation bonds and, accordingly,  are reflected on the
accompanying balance sheets at amortized cost.

The principal  balances and unamortized market discount on the GNMA Certificates
as of December 31, 1996 and 1995 are as follows:

                                                    1996           1995
                                                  ------------------------

Principal balances ....................           $9,447,694    $9,539,000 
Unamortized discount ..................               44,425        46,213
                                                  ------------------------
                                                  $9,403,269    $9,492,787
                                                  ========================

It is anticipated that the aggregate maturities of the GNMA Certificates will be
in accordance  with their  scheduled  maturity for the years ending December 31,
1997 through 2001 as follows: 1997 $100,041;  1998 $109,474; 1999 $119,796; 2000
$131,092; and 2001 $143,452.


Note 5.  Related Party Transactions

Purchase of GNMA Certificates:

The  proceeds  from sale of the Bonds and the PERCs were used by the  Company to
purchase  Multifamily  GNMA  Certificates  from HC Mortgage  Company,  Inc. ("HC
Mortgage"), an affiliate of the Company, and to pay the costs of the offering.

Fees to affiliate:

The  Company  pays  to HC  Mortgage  a  monthly  management  fee  which  will be
subsequently  reduced in proportion to the reduction in cash flow occurring when
any GNMA Certificate is prepaid, disposed of, or fully amortized. The management
fee paid is intended to cover  accounting  fees,  legal fees,  trustee fees, and
independent  directors' fees of the Company.  Affiliates of the Company will not
be required to pay expenses of the Company in the event that expenses exceed the
management fee. However,  the affiliates may elect to pay the excess of expenses
incurred over the  management fee received and treat such excess as an operating
expense loan. The amount of operating expense loans included in accounts payable
in the  accompanying  balance  sheets  at both  December  31,  1996  and 1995 is
$36,000.  The management fee,  including excess expense  reimbursement,  for the
years ended December 31, 1996, 1995, and 1994 was $6,168,  $26,168,  and $24,688
respectively.
<PAGE>



Note 6.  Collateralized Mortgage Obligation Bonds

The  collateralized  mortgage  obligation  bonds  were  issued in the  aggregate
principal amount of $45,335,000 as follows:
                                      
                                                                     Bonds
                              Original                             Outstanding
                              Principal     Interest    Stated     December 31,
                               Amount        Rate     Maturity*       1996
                            ---------------------------------------------------
Class:
  A Bonds                   $18,060,000     9.200      9/1/95     $       --
  B Bonds                    16,000,000     9.000      2/1/22             --
  C Bonds                    11,275,000     9.375      2/1/22      8,816,000
                            -----------                           ----------
                            $45,335,000                           $8,816,000
                            ===========                           ==========

* Assuming no prepayments on the GNMA Certificates.

Interest is payable  monthly on the first  business day of each month.  Interest
payments are made for interest  accrued to the  beginning of the calendar  month
preceding the month of the payment date.

The bonds will bear  interest  at rates  described  above and will be subject to
prepayment  or  redemption.  Interest  will cease  accruing  on each bond at the
beginning of the calendar  month  immediately  preceding the month of the bond's
final payment or redemption.

Principal  and interest  payments  received on the  Company's  Multifamily  GNMA
Certificates  are being  applied to pay principal and interest on the bonds with
sufficient monthly  redemptions,  at a minimum, to assure the bonds which remain
outstanding are fully secured by the Multifamily GNMA Certificates and the other
collateral held by the trustee.

Based upon the scheduled repayments of the GNMA Certificates,  it is anticipated
that the collateralized  mortgage obligation bonds will be redeemed during years
ending December 31, 1997 through 2001 as follows:  1997 $93,000;  1998 $101,000;
1999 $112,000; 2000 $122,000; and 2001 $135,000.

Note 7.  Disclosures about Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and cash equivalents:

The carrying  amount  approximates  fair value because of the short  maturity of
those instruments.

GNMA Certificates:

The fair values of the GNMA  Certificates  are estimated  based on quoted market
prices received by the trustee.

The estimated fair values of the Company's financial  instruments as of December
31, 1996 and 1995 are as follows:

                                      1996                   1995
                            -------------------------------------------------
                            Carrying                   Carrying
                              Value      Fair Value      Value    Fair Value
                            -------------------------------------------------

Cash and cash equivalents   $   92,144   $   92,144   $   87,334  $    87,334
GNMA Certificates .......    9,403,269    9,914,000    9,492,787   10,066,000

Collateralized Mortgage Obligation Bonds:

The fair value of the Company's  collateralized mortgage obligation bonds is not
practicable  to determine  because future cash flows are uncertain and difficult
to predict.
<PAGE>



Note 8.  Cash Flows Information

Supplemental  information relative to the statements of cash flows for the years
ended December 31, 1996, 1995, and 1994 is as follows:
                                                           

                                               1996      1995       1994
                                             ------------------------------

Supplemental disclosures of cash
  flow information .......................   $830,844  $838,344  $1,184,381
                                             ==============================