SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 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
-------------------------                                ----------------------
   December 31, 1997                                            33-13668

                     Holco Mortgage Acceptance Corporation-I
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                      38-2733561
-------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

 P.O. Box 926, South Bend, IN                          46634-0926
-------------------------------                        ----------
(Address of principal executive                        (Zip Code)
           offices)

        Registrant's telephone number, including area code:(219) 287-7861


Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   None

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 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 market value of the voting stock held by  non-affiliates  of
the registrant as of March 20, 1998: $563,750

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of March 20, 1998: 563,750 Shares of Common Stock


                       DOCUMENTS INCORPORATED BY REFERENCE

The contents of the Prospectus of the registrant  ("Prospectus")  dated June 22,
1987,  as filed  pursuant to Rule 424(b)  under the  Securities  Act of 1933 are
incorporated  by reference  into this Form 10-K with respect to the  information
contained in Items 1, 2, 5, 10, 11 and 12, as set forth therein.
<PAGE>



                                     Part I

Item 1. Business.

The business background,  objectives and intentions of Holco Mortgage Acceptance
Corporation-I  (the  "Corporation"),  are set  forth in the  Prospectus  and are
incorporated herein by this reference.  The offering of the Corporation's common
stock (the  "Common  Stock") and three series of bonds (the  "Bonds")  closed on
August 26, 1987, at which time the proceeds of the offering  were used,  and the
Corporation  commenced business  activities,  as contemplated in the Prospectus.
The  Common  Stock  is  also  referred  to  as  "Pass-Through   Equity  Residual
Certificates"  or  "PERCs".  See also  Items  5, 6, 7 and 8 hereof  incorporated
herein by this reference.

The Corporation was formed in 1987 to engage solely in the business of investing
in Multifamily GNMA Certificates.  The Corporation has obtained the proceeds for
such  investments  by  issuing  the  Common  Stock  and  Bonds.   Therefore,   a
presentation concerning industry segments is not applicable. The Corporation has
no employees.


Item 2. Properties.

A list of the  Corporation's  Multifamily GNMA  Certificates is set forth in the
Prospectus and is incorporated herein by this reference.


Item 3. Legal Proceedings.

There are no material  pending legal  proceedings  to which the  Registrant is a
party or to which any of its property is subject.


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

No matter was submitted to a vote of security  holders during the fourth quarter
of the calendar year ended December 31, 1997.


                                     Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Up  until  October  31,  1996,  the  principal  United  States  market  for  the
Corporation's Common Stock was the American Stock Exchange.  In October of 1996,
the American Stock Exchange notified the corporation that it intended to de-list
the stock effective October 31, 1996. This decision was based upon the fact that
the remaining assets of the corporation no longer met AMEX's minimum  standards.
However,  Holco still has  approximately  $8.0 million in mortgage assets in the
fund and these  assets  continue to provide cash flow as  described  below.  The
corporation  is  cognizant of the fact that it is necessary to provide a trading
forum for the stock and are in the process of producing financial projections to
assist  in   establishing  a  market  maker.  As  soon  as  this  is  completed,
stockholders will be notified of their options for trading stock.

The quarterly high and low market information for the Common Stock and dividends
paid by the Corporation are as follows:

                            --------------- MARKET PRICES ----------------------
                            HIGH                  LOW            DIVIDENDS
                            ----                  ---       --------------------

03/01/95                                 2.75                  2            0.02
06/01/95                                 2.44               1.88            0.01
09/01/95                                 2.31               1.88            0.01
12/01/95                                 1.94               0.69            0.01
03/01/96                                 0.88               0.56            0.01
06/01/96                                 0.94               0.62            0.01
09/01/96                                 0.84               0.53            0.01
12/01/96                                 0.94                0.5            0.01
03/01/97                    n/a                   n/a                       0.01
06/01/97                    n/a                   n/a                       0.01
09/01/97                    n/a                   n/a                       0.01
12/01/97                    n/a                   n/a                       0.01

As of March 20,  1998,  there were  approximately  700 record  holders of Common
Stock.  The company pays cash  dividends  from  available  cash after paying all
expenses.
<PAGE>


Item 6. Selected Financial Data.

For years ended December 31, 1997, 1996, 1995, 1994, and 1993:
<TABLE>
                              1997         1996           1995          1994          1993
                          -------------------------------------------------------------------
<S>                       <C>           <C>           <C>           <C>           <C>
Total Revenues ........   $   855,962   $   862,036   $   934,349   $ 1,322,248   $ 1,655,939
Total Expense .........       831,913       839,847       884,530     1,189,373     1,542,072
Net Income ............        24,049        22,189        49,819       132,875       113,867
Net Income allocated
  per share of Common
  Stock ...............           .04           .04           .09          0.24          0.20

GNMA Certificates, at
  cost ................     9,307,188     9,403,269     9,492,787     9,510,433    15,287,563
Total Assets ..........     9,471,611     9,579,277     9,665,218     9,701,799    16,793,408
Collateralized Mortgage
  Obligation Bonds ....     8,723,000     8,816,000     8,900,000     8,977,000    15,552,662
Cash dividends declared
  per share of Common
  Stock ...............          0.04          0.04          0.05          0.96          0.14
</TABLE>

The  above  selected  financial  data  should  be read in  conjunction  with the
financial statements and related notes set forth in Item 8.


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

The  Corporation's  results  of  operations  depend  primarily  on the amount of
interest  paid on the  Multifamily  GNMA  Certificates  securing the Bonds,  the
incidence of prepayments of principal made on the mortgage loans underlying such
Multifamily GNMA  Certificates,  the amount of earnings from the reinvestment of
distributions  on such  Multifamily  GNMA  Certificates  and the  amount  of the
Corporation's expenses,  including, among other things, interest payments on the
Bonds  and  operating  expenses  of the  Corporation.  Substantially  all of the
Corporation's expenses are interest payments due on the Bonds,  management fees,
audit,  legal,  trustee  and other  related  expenses,  state  and local  taxes,
reporting  requirements  and costs of maintaining  the  Corporation's  corporate
qualifications.  It is anticipated that scheduled  distributions of principal of
and interest on the Multifamily GNMA Certificates  pledged as collateral for the
Bonds,  together with  reinvestment  earnings thereon,  will provide  sufficient
funds to make timely payment of all amounts due on the Bonds in accordance  with
their terms and to pay all of the operating expenses of the Corporation.

The  Corporation's  primary  sources  of funds  with  respect  to the  Bonds are
payments of  principal  of and  interest on the  Multifamily  GNMA  Certificates
pledged to secure the Bonds and reinvestment  earnings thereon.  The Corporation
anticipates that it will have sufficient  liquidity and capital resources to pay
all  amounts  due on the  Bonds in  accordance  with  their  terms and all other
expenses  of the  Corporation.  The  Corporation  does not have any  significant
source of funds other than  distributions on the Multifamily  GNMA  Certificates
pledged to secure the Bonds and reinvestment earnings thereon.  Virtually all of
the assets and liabilities of the  Corporation  are monetary in nature.  Because
the Bonds are secured by  Multifamily  GNMA  Certificates  which pay interest at
specified  rates,  and because  payments on the Bonds are at specified  rates of
interest,  inflationary  pressures are not expected to affect the ability of the
Corporation to meet its obligations as they become due.

The  Corporation  expects  that  scheduled  distributions  of  principal  of and
interest  on the  Multifamily  GNMA  Certificates  pledged  to secure the Bonds,
together  with  reinvestment  earnings  thereon,  will at all times  exceed  the
aggregate  of the amount due as payments  of  principal  of and  interest on the
Bonds and operating expenses of the Corporation.

The Corporation's revenue has decreased over the past three years as a result of
the scheduled principal and prepayments of principal on the GNMA certificates.

Because  the amount of  interest  income  that the  Corporation  receives on the
Multifamily  GNMA  Certificates,  together  with the  reinvestment  earnings  on
distributions of principal of and interest on the Multifamily GNMA Certificates,
may,  in some  periods,  be less  than  the  sum of the  Corporation's  interest
expenses on the Bonds and operating expenses for such periods, the Corporation's
ratio of earnings to fixed charges for such periods may be less than one to one.
Any such income  shortfalls will not, however,  be cash flow shortfalls  because
principal and interest payments on the Multi- family GNMA Certificates, together
with reinvestment  earnings thereon,  will be available in sufficient amounts to
meet interest income shortfalls and to make required  principal  payments on the
Bonds. In addition,  the amortization of issuance costs of the Bonds reduces the
Corporation's  ratio of earnings to fixed charges but will not affect the amount
of cash available to meet fixed charges.
<PAGE>


Item 8. Financial Statements and Supplementary Data.

See Index to Financial  Statements and Financial  Statement Schedule on Page F-1
of this Form 10-K.


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

The Corporation is not aware of any such disagreements.


                                    Part III


Item 10. Directors and Executive Officers of the Registrant.

Information  relating to the management of the Corporation and persons  entitled
to exercise management discretion over the Corporation's affairs is set forth in
the Prospectus and is incorporated herein by this reference.


Item 11. Management Compensation.

Information  relating to management  compensation is set forth in the Prospectus
and incorporated  herein by this reference.  See also Item 8 hereof incorporated
herein by this reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

As of March 20, 1998 no person owned of record or was known to own  beneficially
more  than 5% of the  outstanding  Common  Stock of the  Corporation.  Also,  no
director or officer of the Corporation owned any of the outstanding Common Stock
of the Corporation as of March 20, 1998.


Item 13. Certain Relationships and Related Transactions.

The Corporation paid HC Mortgage Company a non-recurring mortgage commitment fee
of  $700,000  and pays an on-going  management  fee to Holco  Capital  Group who
acquired HC Mortgage  Company in December 1997. See Note 5 - "Fees to Affiliate"
on page F-9 of the attached financial statements.


                                     Part IV


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


          a.   The  following  documents are filed as part of this Form 10-K and
               incorporated herein by this reference:


               1.   The financial  statements and financial  statement  schedule
                    listed on the Index to Financial Statements and on page F-1.


               2.   The exhibits listed on the Index to Exhibits on page E-1.


          b.   No reports on Form 8-K were  filed  during the fourth  quarter of
               the calendar year ended December 31, 1997.


                           ITEM 14(a) - EXHIBIT INDEX

3     The  Certificate of  Incorporation  and Bylaws of the Registrant are set
      forth as Exhibits  3.1 and 3.2,  respectively,  to  Amendment  No 1 to the
      Registrant's  Registration  Statement  on Form S-11 dated  April 22,  1987
      (Registration No. 33-13668), and are incorporated herein by reference.

4.1   A  specimen  of  the  certificate  representing  Pass-Through  Equity
      Residual  Certificates  of the  Registrant  is set forth as Exhibit 4.1 to
      Post-Effective Amendment No. 1 to the Registrant's  Registration Statement
      on Form S-11 dated September 10, 1987 (Registration No. 33-13668),  and is
      incorporated herein by reference.
<PAGE>



4.2   Specimens of the Series A, B and C Collateralized  Mortgage Obligation
      Bonds are set forth as Exhibit 4.2 to  Post-Effective  Amendment  No. 1 to
      the Registrant's  Registration  Statement on Form S-11 dated September 10,
      1987 (Registration No. 33-33168), and is incorporated herein by reference.

4.3   The Trust  Indenture  is set forth as  Exhibit  4.3 to  Post-Effective
      Amendment No. 1 to the  Registrant's  Registration  Statement on Form S-11
      dated September 10, 1987 (Registration No. 33-33168),  and is incorporated
      herein by reference.

4.4   A Form of  Guaranty  Agreement  between  the  servicer  and GNMA  with
      respect to Project Loan  Securities  under the GNMA-I Program is set forth
      as  Exhibit  4.4 to  Post-Effective  Amendment  No. 1 to the  Registrant's
      Registration Statement on Form S-11 dated April 22, 1987 (Registration No.
      33-13668), and is incorporated herein by reference.

10    The Form of Multifamily  GNMA  Certificate  evidencing the Registrant's
      beneficial  ownership  interest in each of the  Mortgages  is set forth as
      Exhibit 10.1 to Amendment No. 1 to the Registrant's Registration Statement
      on Form S-11 dated  April 22, 1987  (Registration  No.  33-13668),  and is
      incorporated herein by reference.
<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.


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I


        A DELAWARE CORPORATION


            (Registrant)








By: /s/ John T. Phair
    -----------------------------
    John T. Phair
    Vice President, Treasurer

Date: March 27, 1998
       --------------------------



By:  /s/ Kevin C. Horton
     ----------------------------
     Kevin C. Horton
     Vice President and Secretary


Date:  March 27, 1998
       --------------------------


By:  /s/ Kevin J. Butler
     ----------------------------
     Kevin J. Butler
     Director


Date:  March 27, 1998
       --------------------------



<PAGE>











                     HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

                                FINANCIAL REPORT

                                DECEMBER 31, 1997



<PAGE>












                                 C O N T E N T S

--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITOR
--------------------------------------------------------------------------------

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, 1997 and 1996,  and the related  statements of
income,  stockholders'  equity,  and cash  flows  for  each of the  years in the
three-year  period ended December 31, 1997.  These financial  statements are the
responsibility of the 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,  1997  and  1996,  and  the  results  of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.




/s/ McGladrey & Pullen, LLP




South Bend, Indiana
February 17, 1998


<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

BALANCE SHEETS
December 31, 1997  and  1996
<TABLE>

                                                                                  1997          1996
ASSETS                                                                         ------------------------
<S>                                                                            <C>           <C>
CASH  AND  CASH EQUIVALENTS, including amounts
   held by trustee 1997 $82,085; 1996 $92,144 ..............................   $   82,085    $   92,144

INTEREST RECEIVABLE ........................................................       71,538        72,293

GNMA  CERTIFICATES, at amortized cost ......................................    9,307,188     9,403,269

COLLATERALIZED MORTGAGE OBLIGATION Bond Offering
   COSTS, net of accumulated amortization 1997
   $1,040,722; 1996 $1,039,951 .............................................       10,800        11,571
                                                                               ------------------------
                                                                               $9,471,611    $9,579,277
                                                                               ========================
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Collateralized mortgage obligation bonds ................................   $8,723,000    $8,816,000
   Accounts payable ........................................................       24,053        38,756
   Interest payable ........................................................      136,105       137,565
                                                                               ------------------------
                                                                                8,883,158     8,992,321
                                                                               ------------------------
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) .............................................   (2,280,063)   (2,281,560)
                                                                               ------------------------
                                                                                  588,453       586,956
                                                                               ------------------------
                                                                               $9,471,611    $9,579,277
                                                                               ========================
</TABLE>
 See Notes  to  Financial Statements.
<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

STATEMENTS OF INCOME
Years Ended December 31, 1997, 1996,  and  1995

                                            1997      1996      1995
----------------------------------------------------------------------
Revenues, interest income:
   GNMA certificates ...................  $853,932  $860,346  $932,051
   Funds held by trustee ...............     2,030     1,690     2,298
                                          ----------------------------
                                           855,962   862,036   934,349
                                          ----------------------------
Expenses:
   Interest expense ....................   821,888   830,119   854,802
   Management fees, related party ......     6,168     6,168    26,168
   Other, net ..........................     3,857     3,560     3,560
                                          ----------------------------
                                           831,913   839,847   884,530
                                          ----------------------------

              Net income ...............  $ 24,049  $ 22,189  $ 49,819
                                          ============================

 See Notes  to  Financial Statements.


<PAGE>


HOLCO MORTGAGE ACCEPTANCE
CORPORATION-I

STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997, 1996,  and  1995



                                         Aditional     Retained
                               Common     Paid-In      Earnings
                                Stock     Capital      (Deficit)        Total
--------------------------------------------------------------------------------

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
   Net income ............          - -         - -        24,049        24,049
   Dividends declared ....          - -         - -       (22,552)      (22,552)
                              -------------------------------------------------
Balance, December 31, 1997    $   5,638  $2,862,878   $(2,280,063)  $   588,453
                              =================================================

See Notes  to  Financial Statements.
<PAGE>


HOLCO MORTGAGE ACCEPTANCE CORPORATION-I

STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996, and 1995


                                                    1997     1996        1995
                                                 ------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income ..................................  $ 24,049  $ 22,189    $ 49,819
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Amortization of GNMA certificate discount .    (4,105)   (1,788)    (65,617)
    Amortization of collateralized mortgage
      obligation bond offering costs                  771       588      17,669
    Change in assets and liabilities:
      Decrease (increase) in interest
        receivable ............................       755       645        (371)
      Increase (decrease) in:
        Accounts payable ......................   (14,703)     (267)     20,000
         Interest payable .....................    (1,460)   (1,313)     (1,211)
                                                 ------------------------------
              Net cash provided by
                operating activities ..........     5,307    20,054      20,289
                                                 ------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Principal receipts on GNMA certificates ......  100,186    91,306      83,263
                                                 ------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Redemption of collateralized
    mortgage obligation bonds ..................  (93,000)  (84,000)    (77,000)
  Dividends paid ...............................  (22,552)  (22,550)    (28,189)
                                                 ------------------------------
              Net cash (used in) financing
                  activities ................... (115,552) (106,550)   (105,189)
                                                 -------------------------------
              Increase (decrease) in cash
                and cash equivalents ...........  (10,059)    4,810      (1,637)

Cash and cash equivalents, beginning ...........   92,144    87,334      88,971
                                                 ------------------------------

Cash and cash equivalents, ending .............. $ 82,085  $ 92,144    $ 87,334
                                                 ==============================

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
Certificates  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, 1997 and 1996. 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  approximately
$79,000 as of December 31, 1997 and 1996,  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, 1997 and 1996 are as follows:

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

Principal balances ..........................   $9,347,508       $9,447,694
Unamortized discount ........................       40,320           44,425
                                                ---------------------------
                                                $9,307,188       $9,403,269
                                                                               -
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,
1999 through 2002 as follows: 1998 $109,474;  1999 $119,796; 2000 $131,092; 2001
$143,452; and 2002 $156,981.


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 December 31, 1997 and 1996 is $21,000 and
$36,000   respectively.   The   management   fee,   including   excess   expense
reimbursement, for the years ended December 31, 1997, 1996, and 1995 was $6,168,
$6,168, and $26,168 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:
<TABLE>
                                                                                   Bonds
                                               Original                         Outstanding
                                               Principal   Interest   Stated    December 31,
                                                 Amount      Rate    Maturity*     1997
                                              ----------------------------------------------
<S>                                           <C>          <C>       <C>        <C>
   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      8,723,000
                                              -----------                       -----------
                                              $45,335,000                       $ 8,723,000
                                              ===========                       ===========
<FN>
*  Assuming no prepayments on the GNMA Certificates.
</FN>
</TABLE>

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, 1998 through 2002 as follows: 1998 $101,000;  1999 $112,000;
2000 $122,000; 2001 $135,000; and 2002 $147,000.


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.
<PAGE>


The estimated fair values of the Company's financial  instruments as of December
31, 1997 and 1996 are as follows:

                                    1997                   1996
                           ----------------------  ----------------------
                            Carrying               Carrying
                             Value     Fair Value     Value    Fair Value
                           ----------------------------------------------

Cash and cash equivalents  $   82,085  $   82,085  $   92,144  $   92,144
GNMA Certificates .......   9,307,188   9,967,000   9,403,269   9,914,000

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.


Note 8.  Cash Flows Information

Supplemental  information relative to the statements of cash flows for the years
ended December 31, 1997, 1996, and 1995 is as follows:

                                                 1997        1996       1995
                                               --------------------------------
Supplemental  disclosures  of cash flows
  information:
Cash payments for interest ................    $822,577    $830,844    $838,344
                                               ================================