INDEPENDENCE TAX CREDIT PLUS L P II - 10-K Annual Report

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

FORM 10-K

(Mark One)

_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended March 31, 1997
OR

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number 33-37724

INDEPENDENCE TAX CREDIT PLUS L.P. II
------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-3646846
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 421-5333

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

None

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

Title of Class
--------------

Limited Partnership Interests and Beneficial Assignment Certificates

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]

DOCUMENTS INCORPORATED BY REFERENCE

None

Index to exhibits may be found on page 80

Page 1 of 91

PART I

Item 1. Business.

General
- -------

Independence Tax Credit Plus L.P. II (the "Partnership") is a
limited partnership which was formed under the laws of the State of Delaware
on February 11, 1992. The general partner of the Partnership is Related
Independence Associates L.P., a Delaware limited partnership (the "General
Partner"). The general partner of the General Partner is Related Independence
Associates Inc., a Delaware corporation.

On January 19, 1993, the Partnership commenced a public offering
(the "Offering") of Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership ("Limited
Partnership Interests"), managed by Related Equities Corporation (the "Dealer
Manager"), pursuant to a prospectus dated January 19, 1993, (the
"Prospectus").

As of March 31, 1997 the Partnership has received $58,928,000 of
Gross Proceeds of the Offering from 3,855 investors ("BACs holders"). The
Offering was terminated on April 7, 1994.

The Partnership's business is primarily to invest in other
partnerships ("Local Partnerships") owning apartment complexes ("Apartment
Complexes" or "Properties") that are eligible for the low-income housing tax
credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of
which may also be eligible for the historic rehabilitation tax credit
("Historic Tax Credit"; and together with Housing Tax Credits, "Tax Credits").
The Partnership's investment in each Local Partnership represents 98.99% of
the partnership interests in the Local Partnership. As of March 31, 1997 the
Partnership acquired interests in fifteen Local Partnerships and does not
anticipate making any additional investments. As of March 31, 1997,
approximately $46,996,000 (not including acquisition fees of approximately
$3,502,000) of net proceeds has been invested in fifteen Local Partnerships of
which approximately $4,267,000 remains to be paid to the Local Partnerships,
as certain benchmarks such as occupancy levels must be attained prior to the
release of such funds. The Partnership does not intend to acquire additional
properties, however, the Partnership may be required to pay for potential
purchase price adjustments based on tax credit adjustor clauses. See Item 2,
Properties, below.

The Partnership has been formed to invest in low income Apartment
Complexes that are eligible for the Housing Tax Credit enacted in the Tax
Reform Act of 1986. Some Apartment Complexes may also be eligible for Historic
Tax Credits . The investment objectives of the Partnership are described
below.

1. Entitle qualified BACs holders to Housing Tax Credits over the
period of the Partnership's entitlement to claim Tax Credits (for each
Property, generally ten years from the date of investment or, if later, the
date the Property is leased to qualified tenants; referred to herein as the
"Credit Period") with respect to each Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the
Properties and provide distributions of Sale or Refinancing Proceeds upon the
disposition of the Properties.

4. Allocate passive losses to individual BACs holders to offset
passive income that they may realize from rental real estate investments and
other passive activities, and allocate passive losses to corporate BACs
holders to offset business income.

One of the Partnership's objectives is to entitle qualified BACs
holders to Housing Tax Credits over the Credit Period . Each of the Local
Partnerships in which the Partnership has acquired an interest has been
allocated by the relevant state credit agencies the authority to recognize Tax
Credits during the Credit Period provided that the Local Partnership satisfies
the rent restriction, minimum set-aside and other requirements for

-2-

recognition of the Tax Credits at all times during such period. Once a Local
Partnership has become eligible to recognize Tax Credits, it may lose such
eligibility and suffer an event of "recapture" if its Property fails to remain
in compliance with the Tax Credit requirements. None of the Local Partnerships
in which the partnership has acquired an interest has suffered an event of
recapture.

There can be no assurance that the Partnership will achieve its
investment objectives as described above.

HUD previously released the American Community Partnerships Act (the
"ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget authority. Two key proposals in
the ACPA that could affect the Local Partnerships are: a discontinuation of
project-based Section 8 subsidy payments, and an attendant reduction in debt
in properties that were supported by the Section 8 payments. The ACPA calls
for a transition during which the project-based Section 8 payments would be
converted to a tenant-based voucher system. Any FHA insured debt would then be
"marked-to-market" that is revalued in light of the reduced income stream.

Several industry sources have commented to HUD and Congress that in
the event the ACPA was fully enacted in its present form, the reduction in
mortgage indebtedness would be considered taxable income to owners such as
limited partners in the Partnership. Legislative relief has been proposed to
exempt "marked-to-market" debt from cancellation of indebtedness income
treatment. At present, there are several bills pending in Congress to address
this tax relief issue. Additionally, in the interim, HUD has agreed to annual
extensions of any expiring project-based Section 8 contracts, but there is no
guarantee that such extensions will be available in the future.

The Partnership is subject to the risks incident to potential losses
arising from the management and ownership of improved real estate. The
Partnership can also be affected by poor economic conditions generally,
however no more than 34% of the properties are located in any single state.
There are also substantial risks associated with owning properties receiving
government assistance, for example the possibility that Congress may not
appropriate funds to enable the U.S. Department of Housing and Urban
Development ("HUD")to make rental assistance payments. HUD also restricts
annual cash distributions to partners based on operating results and a
percentage of the owners equity contribution. The Partnership cannot sell or
substantially liquidate its investments in subsidiary partnerships during the
period that the subsidy agreements are in existence, without HUD's approval.
Furthermore there may not be market demand for apartments at full market rents
when the rental assistance contracts expire.

Competition
- -----------

The real estate business is highly competitive and substantially all
of the properties acquired by the Partnership are expected to have active
competition from similar properties in their respective vicinities. The
Partnership will compete in the acquisition of properties with many other
entities engaged in real estate investment activities, some of which have
greater assets than the Partnership. In addition, the number of entities and
the amount available for investment in properties of a type suitable for
investment by the Partnership may increase, resulting in increased competition
for such investments and possible increases in the prices to be paid. In
addition, various other limited partnerships may, in the future, be formed by
the General Partner and/or its affiliates to engage in businesses which may be
competitive with the Partnership.

Employees
- ---------

The Partnership does not have any direct employees. All services are
performed for the Partnership by the General Partner and their affiliates. The
General Partner receives compensation in connection with such activities as
set forth in Items 11 and 13. In addition, the Partnership reimburses the
General Partner and certain of its affiliates for expenses incurred in
connection with the performance by their employees of services for the
Partnership in accordance with the Partnership's Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement").

-3-

Item 2. Properties.

The Partnership holds a 98.99% limited partnership interest in
fifteen Local Partnerships as of March 31, 1997. Set forth below is a schedule
of the Local Partnerships including certain information concerning their
respective Apartment Complexes (the "Local Partnership Schedule"). Further
information concerning these Local Partnerships and their properties,
including any encumbrances affecting the properties, may be found in Item 14.
Schedule III.

Local Partnership Schedule
--------------------------

Percentage of Units Occupied at May 1,
Name and Location ---------------------------------------------------
(Number of Units) Date Acquired 1997 1996 1995 1994 1993
- ----------------- ------------- ---- ---- ---- ---- ----

Lincoln Renaissance
Reading, PA (52) April 1993 100% 98% 100% 0%(1) 0%*

United Germano-Millgate
Limited Partnership
Chicago, IL (350) October 1993 98% 98% 98% 64%*(1)

Mansion Court Associates
Philadelphia, PA (30) November 1993 93% 100% 100% 47%(1)

Derby Run Associates, L.P.
Hampton, VA (160) February 1994 94% 95% 96% 0%*

Renaissance Plaza '93
Associates , L.P.
Baltimore, MD (95) February 1994 99% 98% 83%(1) 0%*

Tasker Village Associates
Philadelphia, PA (28) May 1994 93% 100% 0%(1) 0%*

Martha Bryant Manor, L.P.
Los Angeles, CA (77) September 1994 92% 0%* 0%*

Colden Oaks
Limited Partnership
Los Angeles, CA (38) September 1994 95% 97% 100%

Brynview Terrace, L.P.
Los Angeles, CA (8) September 1994 100% 0%* 0%*

NLEDC, L.P.
Los Angeles, CA (43) September 1994 93% 93% 0%*

Creative Choice
Homes VI, Ltd.
Miami, FL (102) September 1994 98% 98% 0%*

P&P Homes for the Elderly, L.P.
Los Angeles, CA (107) September 1994 68%(1) 0%* 0%*

-4-

Percentage of Units Occupied at May 1,
Name and Location ---------------------------------------------------
(Number of Units) Date Acquired 1997 1996 1995 1994 1993
- ----------------- ------------- ---- ---- ---- ---- ----

Clear Horizons
Limited Partnership
Shreveport, LA (84) December 1994 93% 95% 100%

Neptune Venture, L.P.
Neptune Township, NJ (99) April 1995 100% 35%(1)

Affordable Green Associates L.P.
New York, NY (41) April 1995 100% 100%

*Properties still in construction phase

(1) Properties are in rent-up phase.

The Partnership invested in Local Partnerships owning existing
Apartment Complexes which receive either Federal or state subsidies. HUD,
through FHA, administers a variety of subsidies for low- and moderate-income
housing. FHA administers similar housing programs for non-urban areas. The
Federal programs generally provide one or a combination of the following forms
of assistance: (i) mortgage loan insurance, (ii) rental subsidies, and (iii)
reduction of mortgage interest payments.

i) HUD provides mortgage insurance for rental housing projects
pursuant to a number of sections of Title II of the National Housing Act
("NHA"), including Section 236, Section 221(d)(4), Section 221(d)(3) and
Section 220. Under all of these programs, HUD will generally provide insurance
equal to 100% of the total replacement cost of the project to non-profit
owners and 90% of the total replacement cost to limited-distribution owners.
Mortgages are provided by institutions approved by HUD, including banks,
savings and loan companies and local housing authorities. Section 221(d)(4) of
NHA provides for federal insurance of private construction and permanent
mortgage loans to finance new construction of rental apartment complexes
containing five or more units. The most significant difference between the
221(d)(4) program and the 221(d)(3) program is the maximum amount of the loan
which may be obtained. Under the 221(d)(3) program, non-profit sponsors may
obtain a permanent mortgage equal to 100% of the total replacement cost; no
equity contribution is required of a non-profit sponsor. In all other respects
the 221(d)(3) program is substantially similar to the 221(d)(4) program.

ii) Many of the tenants in HUD insured projects receive some
form of rental assistance payments, primarily through the Section 8 Housing
Assistance Payments Program (the "Section 8 Program"). Apartment Complexes not
receiving assistance through the Section 8 Program ("Section 8 Payments") will
generally have limitations on the amounts of rent which may be charged. One
requirement imposed by HUD regulations effective for apartment complexes
initially approved for Section 8 payments on or after November 5, 1979 is to
limit the amount of the owner's annual cash distributions from operations to
10% of the owner's equity investment in an apartment complex if the apartment
complex is intended for occupancy by families and to 6% of the owner's equity
investment in an apartment complex intended for occupancy by elderly persons.
The owner's equity investment in the apartment complex is 10% of the project's
replacement cost as determined by HUD.

iii) As well as providing mortgage insurance, the Section 236
program also provides an interest credit subsidy which reduces the cost of
debt service on a project mortgage, thereby enabling the owner to charge the
tenants lower rents for their apartments. Interest credit subsidy payments are
made monthly by HUD directly to the mortgagee of the project. Each payment is
in an amount equal to the difference between (i) the monthly interest payment
required by the terms of the mortgage to pay principal, interest and the
annual mortgage insurance premium and (ii) the monthly payment which would
have been required for principal and interest if the mortgage loan bore
interest at the rate of 1%. These payments are credited against the amounts
otherwise due from the owner of the project, who makes monthly payments of the
balance.

-5-

All leases are generally for periods not exceeding one to two years
and no tenant occupies more than 10% of the rentable square footage.

Rents from commercial tenants (to which average rental per square
foot applies) comprise less than 5% of the rental revenues of the Partnership.
Rents for the residential units are determined annually by HUD and reflect
increases in consumer price indices in various geographic areas.

Management continuously reviews the physical state of the properties
and budgets improvements when required which are generally funded from cash
flow from operations or release of replacement reserve escrows. No
improvements are expected to require additional financing.

Management continuously reviews the insurance coverage of the
properties and believes such coverage is adequate.

See Item 1, Business, above for the general competitive conditions
to which the properties described above are subject.

Real estate taxes are calculated using rates and assessed valuations
determined by the township or city in which the property is located. Such
taxes have approximated 1% of the aggregate cost of the properties as shown in
Schedule III to the financial statements included herein.

In connection with investments in development-stage Apartment
Complexes, the General Partner generally requires that the general partners of
the Local Partnerships ("Local General Partners") provide completion
guarantees and/or undertake to repurchase the Partnership's interest in the
Local Partnership if construction or rehabilitation is not completed
substantially on time or on budget ("Development Deficit Guarantees"). The
Development Deficit Guarantees generally also require the Local General
Partner to provide any funds necessary to cover net operating deficits of the
Local Partnership until such time as the Apartment Complex has achieved
break-even operations. The General Partner generally requires that the Local
General Partners undertake an obligation to fund operating deficits of the
Local Partnership (up to a stated maximum amount) during a limited period of
time (typically three to five years) following the achievement of break-even
operations ("Operating Deficit Guarantees"). Under the terms of the
Development and Operating Deficit Guarantees, amounts funded will be treated
as Operating Loans which will not bear interest and which will be repaid only
out of 50% of available cash flow or out of available net sale or refinancing
proceeds. In some instances, the Local General Partners are required to
undertake an obligation to comply with a Rent-Up Guaranty Agreement, whereby
the Local General Partner agrees to pay liquidating damages if predetermined
occupancy rates are not achieved. These payments are made without right of
repayment. In cases where the General Partner deems it appropriate, the
obligations of a Local General Partner under the Development Deficit,
Operating Deficit and/or Rent-Up Guarantees are secured by letters of credit
and/or cash escrow deposits.

Housing Tax Credits with respect to a given Apartment Complex are
available for a ten-year period that commences when the property is placed
into service. However, the annual Tax Credits available in the year in which
the Apartment Complex is placed in service, must be prorated based upon the
months remaining in the year. The amount of the annual Tax Credit not
available in the first year will be available in the eleventh year. In certain
cases, the Partnership acquired its interest in a Local Partnership after the
Local Partnership had placed its Apartment Complex in service. In these cases,
the Partnership may be allocated Tax Credits only beginning in the month
following the month in which it acquired its interest and Tax Credits
allocated in any prior period are not available to the Partnership.

-6-

Item 3. Legal Proceedings.

This information is incorporated by reference to the discussion of
Clear Horizons in the Results of Operations of Certain Local Partnerships
contained in Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

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

None.

-7-

PART II

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

As of March 31, 1997, the Partnership had issued and outstanding
58,928 Limited Partnership Interests, each representing a $1,000 capital
contribution to the Partnership, or an aggregate capital contribution of
$58,928,000 before volume discounts of $2,000. All of the issued and
outstanding Limited Partnership Interests have been issued to Independence
Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued
58,928 BACs to the purchasers thereof for an aggregate purchase price of
$58,928,000 reduced by volume discounts of $2,000. Each BAC represents all of
the economic and virtually all of the ownership rights attributable to a
Limited Partnership Interest held by the Assignor Limited Partner. BACs may be
converted into Limited Partnership Interests at no cost to the holder (other
than the payment of transfer costs not to exceed $100), but Limited
Partnership Interests so acquired are not thereafter convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on
any established trading market. The Partnership does not intend to include the
BACs for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partner plans to impose limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely
affect the ability of an investor to liquidate his or her investment quickly.
It is expected that such procedures will remain in effect until such time, if
ever, as further revision of the Revenue Act of 1987 may permit the
Partnership to lessen the scope of the restrictions.

As of March 31, 1997 the Partnership has approximately 3,855
registered holders of an aggregate of 58,928 BACs.

All of the Partnership's general partnership interests, representing
an aggregate capital contribution of $1,000, are held by the General Partner.

There are no material legal restrictions in the Partnership
Agreement on the ability of the Partnership to make distributions.

The Partnership has made no distributions to the BACs holders as of
March 31, 1997. The Partnership does not anticipate providing cash
distributions to its BACs holders other than from net refinancing or sales
proceeds.

There has recently been an increasing number of requests for the
list of BACs holders of limited partnerships such as the Partnership. Often
these requests are made by a person who, only a short time before making the
request, acquired merely a small number of BACs in the partnership and seeks
the list for an improper purpose, a purpose that is not in the best interest
of the partnership or is harmful to the partnership. In order to best serve
and protect the interests of the Partnership and all of its investors, the
General Partner of the Partnership has adopted a policy with respect to
requests for the Partnership's list of BACs holders. This policy is intended
to protect investors from unsolicited and coercive offers to acquire BACs
holders' interests and does not limit any other rights the General Partner may
have under the Partnership Agreement or applicable law.

-8-

Item 6. Selected Financial Data.

The information set forth below presents selected financial data of
the Partnership. There were no operations prior to commencement of the
Offering of BACs on January 19, 1993 through the year ended March 31, 1993.
Additional financial information is set forth in the audited financial
statements in Item 8 hereof.

OPERATIONS Year Ended March 31,
- ---------- --------------------------------------------------------
1997 1996 1995 1994
------------ ------------ ------------ -----------

Revenues $ 6,663,351 $ 5,325,045 $ 2,433,861 $ 643,475

Operating expenses 10,687,879 8,277,953 3,634,184 911,326
------------ ------------ ------------ -----------

Loss before minority
interest (4,024,528) (2,952,908) (1,200,323) (267,851)

Minority interest in loss
of subsidiaries 8,916 8,519 7,106 1,404
------------ ------------ ------------ -----------

Net loss $ (4,015,612) $ (2,944,389) $ (1,193,217) $ (266,447)
============ ============ ============ ===========

Net loss per weighted
average BAC $ (67.46) $ (49.47) $ (20.06) $ (7.69)
============ ============ ============ ===========

FINANCIAL POSITION March 31,
- ------------------ ---------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ----------- ----------

Total assets $112,831,500 $116,928,522 $104,107,965 $69,285,916 $5,385,138
============ ============ ============ =========== ==========

Total liabilities $ 68,438,976 $ 68,086,980 $ 52,049,809 $17,077,396 $ 829,838
============ ============ ============ =========== ==========

Minority interest $ 317,189 $ 750,595 $ 1,022,820 $ 859,064 $ 0
============ ============ ============ =========== ==========

Total partners' capital $ 44,075,335 $ 48,090,947 $ 51,035,336 $51,349,456 $4,555,300
============ ============ ============ =========== ==========

During the year ended March 31, 1997, total assets decreased
primarily due to a decrease in cash and cash equivalents resulting from
construction in progress and acquisitions of property and equipment in excess
of net proceeds from mortgage and construction loans and also the repayments
of amounts due to local general partners and affiliates. This decrease in cash
and cash equivalents was partially offset by the increase in construction in
progress and acquisitions of property and equipment net of depreciation.
During the years ended March 31, 1996, 1995 and 1994, total assets and
liabilities increased primarily due to the continued acquisition of Local
Partnerships. Property and equipment increased approximately $37,000,000,
$22,000,000 and $22,000,000 for the years ended March 31, 1996, 1995 and 1994,
respectively. Construction in progress decreased approximately $4,000,000 for
the year ended March 31, 1996 and increased approximately $19,000,000 and
$5,000,000 for the years ended March 31, 1995 and 1994, respectively. Mortgage
notes increased approximately $16,000,000, $9,000,000 and $12,000,000 for the
years ended March 31, 1996, 1995 and 1994, respectively. Construction notes
increased approximately $18,000,000 and $1,000,000 for the years ended March
31, 1995 and 1994, respectively. Due to local general partners and affiliates
increased approximately $6,000,000 and $1,000,000 for the years ended March
31, 1995 and 1994, respectively (Note 8). For the year ended March 31, 1996,
the increase in property and equipment and construction in progress was
partially funded by capital contributions made to the Local Partnerships
resulting in a decrease in cash and cash equivalents. For the year ended March
31, 1993, there was also an increase in assets due

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to capital contributions which were not fully expended. For the year ended
March 31, 1996, minority interest decreased due to distributions received by
the local general partners. Minority interest increased due to capital
contributions from local general partners for the years ended March 31, 1995
and 1994.

Cash Distributions
- ------------------

The Partnership has made no distributions to the BACs holders as of
March 31, 1997.

-10-

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

Liquidity and Capital Resources
- -------------------------------

The Partnership's primary source of funds was the proceeds of its
offering. Other sources of funds include interest earned on such proceeds
which were invested in tax-exempt money market instruments pending acquisition
of Local Partnerships and a working capital reserve. The offering terminated
as of April 7, 1994. The Partnership has received $58,928,000 (including
volume discounts of $2,000) in gross proceeds for BACs pursuant to a public
offering resulting in net proceeds available for investment of approximately
$46,848,000 after volume discounts, payment of sales commissions, acquisition
fees and expenses, organization and offering expenses and establishment of a
working capital reserve.

As of March 31, 1997, the Partnership has invested approximately
$46,996,000 (not including acquisition fees of approximately $3,502,000) of
net proceeds in fifteen Local Partnerships of which approximately $4,267,000
remains to be paid (including approximately $1,232,000 being held in escrow)
as certain benchmarks, such as occupancy level, must be attained prior to the
release of the funds. The Partnership does not intend to acquire additional
properties. During the year ended March 31, 1997, approximately $5,136,000 was
paid (of which approximately $237,000 was released from escrow). An additional
$225,000 was placed into escrow for purchase price payments during the year
ended March 31, 1997. Although the Partnership will not be acquiring
additional properties, the Partnership may be required to fund potential
purchase price adjustments based on tax credit adjustor clauses. There have
been no purchase price adjustments during the year ended March 31, 1997.

For the Fiscal Year ended March 31, 1997, cash and cash equivalents
for the Partnership and its fifteen consolidated Local Partnerships decreased
approximately $9,025,000 primarily due to cash used in operating activities
($1,757,000), an increase in construction in progress ($7,548,000), a net
decrease in due to local general partners and affiliates ($3,035,000),
acquisitions of property and equipment (88,000), an increase in deferred costs
($146,000) and a decrease in capitalization of consolidated subsidiaries
attributable to minority interest ($424,000) which exceeded net proceeds from
mortgage and construction loans ($3,960,000). Included in the adjustments to
reconcile the net loss to cash used in operating activities is depreciation
and amortization of approximately $3,061,000.

An original working capital reserve of approximately $1,473,000
(2.5% of gross equity) has been established from the Partnership's funds
available for investment. At March 31, 1997, approximately $493,000 of this
reserve remains unused. The General Partner believes that these reserves, plus
any cash distributions received from the operations of the Local Partnerships,
will be sufficient to fund the Partnership's ongoing operations for the
foreseeable future. During the years ended March 31, 1997, 1996 and 1995,
respectively, amounts received from operations of the Local Partnerships were
approximately $0, $16,000 and $0. Management anticipates receiving
distributions in the future, although not to a level sufficient to permit
providing cash distributions to BACs holders.

The Partnership had negotiated development deficit guarantees with
the Local Partnerships in which it has invested. The Local General Partners
had agreed to fund development deficits through the breakeven dates of each of
the Local Partnerships, most of which were unlimited or in an unspecified
amount. As of March 31, 1997 and 1996, $59,035 and $59,035 had been funded
under the Development Deficit Guaranty Agreements. Although all development
deficit guarantees have expired as of March 31, 1997, management does not
expect a material impact on liquidity, based on prior years' fundings.

The Partnership has negotiated Operating Deficit Guaranty Agreements
with all Local Partnerships by which the general partners of the Local
Partnerships have agreed to fund operating deficits for a specified period of
time. The terms of the Operating Deficit Guaranty Agreements vary for each
Local Partnership, with maximum dollar amounts to be funded for a specified
period of time, generally three years, commencing on the break-even date. The
gross amount of the Operating Deficit Guarantees aggregates approximately
$5,670,000, none of which have expired as of March 31, 1997. As of March 31,
1997 and 1996, 193,032 and $187,614 has been funded under the Operating
Deficit Guaranty agreements. All current operating deficit guarantees expire
within the next three years. Management does not expect their expiration to
have a material impact on liquidity, based on prior years' fundings.

-11-

In addition, several Local Partnerships have Rent-Up Guaranty
Agreements, in which the Local General Partner agrees to pay liquidating
damages if predetermined occupancy rates are not achieved. The terms of the
Rent-Up Guaranty Agreements vary for each Local Partnership, with maximum
dollar amounts to be funded for a specified period of time. The gross amount
of unexpired Rent-Up Guarantees for the Local Partnerships is approximately
$700,000 as of March 31, 1997. All rent-up deficit guarantees expire within
the next three years. Management does not expect their expiration to have a
material impact on liquidity, based on prior years' fundings.

The Operating Deficit Guaranty Agreements, Rent-Up Guaranty
Agreements, and Development Deficit Guaranty Agreements are negotiated to
protect the Partnership's interest in the Local Partnerships and to provide
incentive to the Local General Partners to generate positive cash flow.

Partnership management fees owed to the General Partner amounting to
approximately $115,000 and $27,000 were accrued and unpaid as of March 31, 1997
and March 31, 1996, respectively.

HUD previously released the American Community Partnerships Act (the
"ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget authority. Two key proposals in
the ACPA that could affect the Local Partnerships are: a discontinuation of
project-based Section 8 subsidy payments, and an attendant reduction in debt
in properties that were supported by the Section 8 payments. The ACPA calls
for a transition during which the project-based Section 8 payments would be
converted to a tenant-based voucher system. Any FHA insured debt would then be
"marked-to-market" that is revalued in light of the reduced income stream.

Several industry sources have commented to HUD and Congress that in
the event the ACPA was fully enacted in its present form, the reduction in
mortgage indebtedness would be considered taxable income to owners such as
limited partners in the Partnership. Legislative relief has been proposed to
exempt "marked-to-market" debt from cancellation of indebtedness income
treatment. At present, there are several bills pending in Congress to address
this tax relief issue. Additionally, in the interim, HUD has agreed to annual
extensions of any expiring project-based Section 8 contracts, but there is no
guarantee that such extensions will be available in the future.

For discussion of contingencies affecting certain Local
Partnerships, see Results of Operations of Certain Local Partnerships, below.
Since the maximum loss the Partnership would be liable for is its net
investment in the respective subsidiary partnerships, the resolution of the
existing contingencies is not anticipated to impact future results of
operations, liquidity or financial condition in a material way. However, the
Partnership's loss of its investment in a Local Partnership will eliminate the
ability to generate future tax credits from such Local Partnership and may
also result in recapture of tax credits if the investment is lost before
expiration of the credit period.

Except as described above, management is not aware of any trends or
events, commitments or uncertainties, which have not otherwise been disclosed
that will or are likely to impact liquidity in a material way. Management
believes the only impact would be for laws that have not yet been adopted. The
portfolio is diversified by the location of the properties around the United
States so that if one area of the country is experiencing downturns in the
economy, the remaining properties in the portfolio may be experiencing
upswings. However the geographic diversification of the portfolio may not
protect against a general downturn in the national economy. The Partnership
has invested the proceeds of its offering in 15 Local Partnerships, all of
which fully have their tax credits in place. The tax credits are attached to
the project for a period of ten years, and are transferable with the property
during the remainder of the ten-year period. If trends in the real estate
market warranted the sale of a property, the remaining tax credits would
transfer to the new owner; thereby adding significant value to the property on
the market, which are not included in the financial statement carrying amount.

-12-

Results of Operations
- ---------------------

In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". Under SFAS No. 121, the Partnership is required to review
long-lived assets and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the book value of an asset
may not be recoverable. An impairment loss should be recognized whenever the
review demonstrates that the book value of a long-lived asset is not
recoverable. Effective April 1, 1996, the Partnership adopted SFAS No. 121,
consistent with the required adoption period.

Property and equipment are carried at the lower of depreciated cost
or estimated amounts recoverable through future operations and ultimate
disposition of the property. Cost includes the purchase price, acquisition
fees and expenses, and any other costs incurred in acquiring the properties. A
provision for loss on impairment of assets is recorded when estimated amounts
recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. Property investments themselves
are reduced to estimated fair value (generally using discounted cash flows)
when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through March 31, 1997, the Partnership has not
recorded any provisions for loss on impairment of assets or reductions to
estimated fair value.

The following is a summary of the results of operations of the
Partnership for the years ended March 31, 1997, 1996 and 1995 (the 1996, 1995
and 1994 Fiscal Years, respectively.)

The net loss for the 1996, 1995 and 1994 Fiscal Years totaled
$4,015,612, $2,944,389 and $1,193,217, respectively.

The Partnership and BACs holders began to recognize Housing Tax
Credits with respect to a Property when the Credit Period for such Property
commenced. Because of the time required for the acquisition, completion and
rent-up of Properties, it is expected that the amount of Tax Credits per BAC
will gradually increase over the first three years of the Partnership. Housing
Tax Credits not recognized in the first three years will be recognized in the
11th through 13th years. The Partnership generated $6,399,740, $3,997,227 and
$624,796 Housing Tax Credits and $37,112, $619,383 and $1,962,743 Historic Tax
Credits during the 1996, 1995 and 1994 tax years, respectively.

1996 vs. 1995
- -------------

The Partnership's results of operations for the 1996 and 1995 Fiscal
Years consisted primarily of (1) approximately $198,000 and $440,000,
respectively, of tax-exempt interest income earned on funds not currently
invested in Local Partnerships and (2) the results of the Partnership's
investment in fifteen consolidated Local Partnerships.

For the year ended March 31, 1997 as compared to 1996, rental income
and all categories of expenses except general and administrative-related
parties increased and the results of operations are not comparable due to the
construction and rent up of properties. In addition, interest income will
continue to decrease in future periods as proceeds are released to the Local
Partnerships. Other income decreased approximately $292,000 for the year ended
March 31, 1997 as compared to 1996, primarily due to a decrease in interest
income as a result of the release of proceeds to the Local Partnerships.
General and administrative-related parties decreased approximately $251,000
for the year ended March 31, 1997 as compared to 1996, primarily due to a
decrease in partnership management fees payable to the General Partner. For
the years ended March 31, 1997 and 1996, five and seven of the Partnership's
fifteen consolidated properties, respectively, completed construction and were
in various stages of rent up. In addition, zero and two of the properties,
respectively, had completed construction in a previous fiscal year, but were
in various stages of rent up for the years ended March 31, 1997 and 1996. Also
for the years ended March 31, 1997 and 1996, ten and one of the properties had
completed construction and were rented up in a previous fiscal year. As of the
end of the years ended March 31, 1997 and 1996, zero and five of the
Partnership's fifteen consolidated properties, respectively, were still under
construction and four and five of the properties, respectively, had
construction loans with commitments for permanent financing.

-13-

1995 vs. 1994
- -------------

The Partnership's results of operations for the 1995 and 1994 Fiscal
Years consisted primarily of (i) $440,205 and $767,716, respectively, of
tax-exempt interest income earned on funds not currently invested in Local
Partnership's and (ii) the results of the Partnership's investment in fifteen
and thirteen Local Partnerships, respectively.

During the year ended March 31, 1996, rental income and all
categories of expenses increased and the results of operations are not
comparable or reflective of future operations due to the continued acquisition
construction and rent up of properties. In addition, interest income will
continue to decrease in future periods since all proceeds of the Offering have
been invested. For the year ended March 31, 1996 and 1995, seven and two of
the Partnership's fifteen and thirteen consolidated properties, respectively,
completed construction and were in various stages of rent up. In addition, two
and one of the properties, respectively, had completed construction in a
previous fiscal year, but were in various stages of rent up for the year ended
March 31, 1996 and 1995. Also for the years ended March 31, 1996 and 1995, one
and zero of the properties had completed construction and were rented up in a
previous fiscal year. As of the end of the years ended March 31, 1996 and
1995, five and ten of the Partnership's fifteen and thirteen consolidated
properties, respectively, were still under construction and five and nine of
the properties, respectively, had construction loans with commitments for
permanent financing.

Results of Operations of Certain Local Partnerships
- ---------------------------------------------------

Clear Horizons Limited Partnership
- ----------------------------------

At December 31, 1996, Clear Horizons Limited Partnership ("Clear
Horizons") current liabilities exceed its current assets by over $88,000.
Although this condition could raise substantial doubt about Clear Horizons
ability to continue as a going concern, such doubt is alleviated as follows:

1. Included in current liabilities at December 31, 1996 is
$93,956 owed to related parties who do not intend to
pursue collection beyond Clear Horizon's ability to pay.

2. The general partner of Clear Horizons has agreed to fund
operating deficits up to $250,000.

Accordingly, management believes that Clear Horizons has the ability
to continue as a going concern for at least one year from December 31, 1996.

Clear Horizons is also named as a defendant in a lawsuit involving
the death of a person shot on the premises of the apartment project. Clear
Horizons' defense is being handled by its liability insurer. Legal counsel
believes that any settlement will be within insurance policy limits,
$3,000,000, and there will be no loss to Clear Horizons. The maximum loss
which the Partnership would be liable for is its net investment in Clear
Horizons. The Partnership's investment in Clear Horizons at March 31, 1997 and
1996 was approximately $963,000 and $1,026,000, respectively, and the minority
interest balance was approximately $0 and $45,000, respectively. Clear
Horizons net loss after minority interest amounted to approximately $63,000,
$27,000 and $6,500 for the 1996, 1995 and 1994 Fiscal Years, respectively.

United Germano-Millgate Limited Partnership
- -------------------------------------------

A former management agent had filed a $70,000 breach of contract
claim against United Germano Millgate ("United Germano") for utility expense
billings the former management company paid on United Germano's behalf prior
to 1991. During 1996, United Germano agreed to pay $47,000 under an
installment arrangement to reimburse these utility advances.

-14-

Martha Bryant Manor, L.P.
- -------------------------

Martha Bryant Manor, L.P. ("Martha Bryant") agreed to an
out-of-court settlement resulting from an alleged breach of contract suit. The
settlement resulted in a loss of $164,860, which is included in general and
administrative expenses in the March 31, 1996 Financial Statements.

Other
- -----

The Partnership's investment as a limited partner in the Local
Partnerships is subject to the risks of potential losses arising from
management and ownership of improved real estate. The Partnership's
investments also could be adversely affected by poor economic conditions
generally, which could increase vacancy levels and rental payment defaults and
by increased operating expenses, any or all of which could threaten the
financing viability of one or more of the Local Partnerships.

There also are substantial risks associated with the operation of
Apartment Complexes receiving government assistance. These include
governmental regulations concerning tenant eligibility, which may make it more
difficult to rent apartments in the complexes; difficulties in obtaining
government approval for rent increases; limitations on the percentage of
income which low and moderate income tenants may pay as rent; the possibility
that Congress may not appropriate funds to enable the Department of Housing
and Urban Development to make the rental assistance payments it has contracted
to make; and that when the rental assistance contracts expire there may not be
market demand for apartments at full market rents in a Local Partnership's
Apartment Complex.

The Local Partnerships are impacted by inflation in several ways.
Inflation allows for increases in rental rates generally to reflect the impact
of higher operating and replacement costs. Inflation also affects the Local
Partnerships adversely by increasing operating costs as, for example, for such
items as fuel, utilities and labor.

There has recently been an increasing number of requests for the
list of BACs holders of limited partnerships such as the Partnership. Often
these requests are made by a person who, only a short time before making the
request, acquired merely a small number of BACs in the partnership and seeks
the list for an improper purpose, a purpose that is not in the best interest
of the partnership or is harmful to the partnership. In order to best serve
and protect the interests of the Partnership and all of its investors, the
General Partner of the Partnership has adopted a policy with respect to
requests for the Partnership's list of BACs holders. This policy is intended
to protect investors from unsolicited and coercive offers to acquire BACs
holders' interests and does not limit any other rights the General Partner may
have under the Partnership Agreement or applicable law.

-15-

Item 8. Financial Statements and Supplementary Data.

Sequential
Page
----------
(a) 1. Consolidated Financial Statements
---------------------------------

Independent Auditors' Report 17

Consolidated Balance Sheets at March 31, 1997 and 1996 61

Consolidated Statements of Operations for the Years Ended
March 31, 1997, 1996 and 1995 62

Consolidated Statements of Changes in Partners' Capital for the
Years Ended March 31, 1997, 1996 and 1995 63

Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995 64

Notes to Consolidated Financial Statements 66

-16-

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

To the Partners of
Independence Tax Credit Plus L.P. II and Subsidiaries
(A Delaware Limited Partnership)

We have audited the consolidated balance sheets of Independence Tax
Credit Plus L.P. II and Subsidiaries (a Delaware Limited Partnership) as of
March 31, 1997 and 1996, the related consolidated statements of operations and
changes in partners' capital and cash flows for the years ended March 31, 1997,
1996, and 1995 (the 1996, 1995 and 1994 Fiscal Years, respectively). The
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for fifteen (Fiscal 1996
and 1995) and thirteen (Fiscal 1994) subsidiary partnerships whose losses
aggregated $3,792,023, $2,533,349 and $1,148,796 for the 1996, 1995 and 1994
Fiscal Years, respectively, and whose assets constituted 94% and 91% of the
Partnership's assets at March 31, 1997 and 1996, respectively, presented in the
accompanying consolidated financial statements. The financial statements of
these subsidiary partnerships were audited by other auditors whose reports
thereon have been furnished to us and our opinion expressed herein, insofar as
it relates to the amounts included for these subsidiary partnerships, is based
solely upon the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the 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, based upon our audits and the reports of other
auditors the accompanying consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Independence
Tax Credit Plus L.P. II and Subsidiaries at March 31, 1997 and 1996, and the
results of their operations and their cash flows for the years ended March 31,
1997, 1996 and 1995 in conformity with generally accepted accounting principles.

Trien, Rosenberg, Rosenberg,
Weinberg, Ciullo & Fazzari L.L.P.

New York, New York
June 27, 1997

[J.H. WlLLlAMS & CO., LLP LETTERHEAD]

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

To the Partners
of Lincoln Renaissance (a Limited Partnership)
Reading, Pennsylvania

We have audited the accompanying balance sheets of Lincoln Renaissance (a
Limited Partnership) as of December 31, 1996 and 1995 and the related statements
of (loss), changes in partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's general
partners and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statements 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 Lincoln Renaissance (a Limited
Partnership) at December 31, 1996 and 1995, and the results of its operations,
changes in partners' equity and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
- -----------------------------

Kingston, Pennsylvania
February 16, 1997

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Lincoln Renaissance (a Limited Partnership)
Reading, Pennsylvania

We have audited the accompanying balance sheets of Lincoln Renaissance (a
Limited Partnership) as of December 31, 1995 and 1994 and the related statements
of income, changes in partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's general
partners and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statements 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 Lincoln Renaissance (a Limited
Partnership) at December 31, 1995 and 1994, and its results of operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ J. H. WILLIAMS & CO., LLP

Kingston, Pennsylvania
February 9, 1996

[Wieland & Company, Inc. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1996,
and the related statements of operations, partners' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1996, and the results of its operations,
changes in partners' equity, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 14, 1997, on our
consideration of the internal control structure of United - Germano - Millgate
Limited Partnership, and reports dated February 14, 1997 on its compliance with
specific requirements applicable to major HUD programs and specific requirements
applicable to Affirmative Fair Housing.

/s/ Wieland & Company, Inc.
- ---------------------------

Geneva, Illinois
February 14, 1997

Employer Identification No.: 36-4025026

Engagement Partner: Paul H. Wieland
315 James Street
Geneva, Illinois 60134

1

[WIELAND & COMPANY, INC. LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1995,
and the related statements of operations, partners' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1995, and the results of its operations,
changes in partners' equity, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated March 15, 1996, on our
consideration of the internal control structure of United - Germano - Millgate
Limited Partnership, and reports dated March 15, 1996 on its compliance with
specific requirements applicable to major HUD programs and specific requirements
applicable to Affirmative Fair Housing.

/s/ WIELAND & COMPANY, INC.

March 15, 1996

Employer Identification No.: 36-4025026

Engagement Partner: Paul H. Wieland
315 James Street
Geneva, Illinois 60134

[MULCAHY FESLER & COMPANY - LOMBARD, ILLINOIS LETTERHEAD]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1994,
and the related statements of operations, partners' equity, and cash flows for
the year ended December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1994, and the results of its operations,
changes in partners' equity and cash flows for the year ended December 31, 1994,
in conformity with generally accepted accounting principles.

/s/ MULCAHY, FESLER & COMPANY

January 20, 1995

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

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

To the Partners of Mansion Court Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Mansion Court Associates (a
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of (loss), changes in partners' equity and cash flow for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on three financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partner and contracted management agent, 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 Mansion Court Associates (a
Limited Partnership) at December 31, 1996 and 1995, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
- -----------------------------

Kingston, Pennsylvania
February 17, 1997

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Mansion Court Associates (a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Mansion Court Associates (a
Limited Partnership) as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partner and contracted management agent, 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 Mansion Court Associates (a
Limited Partnership) at December 31, 1995 and 1994, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

/s/ J. H. WILLIAMS & CO., LLP

Kingston, Pennsylvania
February 12, 1996

[BURRUS PAUL & TURNBULL LETTERHEAD]

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

To the Partners Virginia Housing Development Authority
Derby Run Associates, L.P. 601 S. Belvidere Street
Virginia Beach, Virginia Richmond, Virginia 23220

We have audited the accompanying balance sheet of Derby Run Associates,
L.P., Project No. 93-0625-C, as of December 31, 1996, and the related statement
of profit and loss (HUD Form 92410), partners' deficit and cash flows for the
year then ended. These financial statements are the responsibility of the
project's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly
in all material respects, the financial position of VHDA Project No. 93-0625-C
as of December 31, 1996 and the results of its operations, changes in partner's
deficit and cash flows for the year then ended in conformity with generally
accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (page 10), is presented for purposes of additional analysis and is
not a required part of the basic financial statements for VHDA Project No.
93-0625-C. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.

/s/ Burrus, Paul & Turnbull
-----------------------
CERTIFIED PUBLIC ACCOUNTANTS

Norfolk, Virginia
January 27, 1997

[WALL, EINHORN & CHERNITZER, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners Virginia Housing Development Authority
Derby Run Associates, L.P. 601 South Belvidere Street
Virginia Beach, Virginia Richmond, Virginia 23220

We have audited the accompanying balance sheets of Derby Run Associates,
L.P., VHDA Project Number 93-0625-C, as of December 31, 1995 and 1994, and the
related statements of operations, partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VHDA Project Number
93-0625-C as of December 31, 1995 and 1994, and the results of its operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.

The accompanying supplementary information (shown on pages 10 to 12) is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.

/s/ WALL, EINHORN & CHERNITZER, P.C.

Norfolk, Virginia
February 14, 1996

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 1996, and the related statements of profit
and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 1996, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 23
through 35 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
that portion marked "unaudited," on which we express no opinion, has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

- 6 -

In accordance with Government Auditing Standards and the "Consolidated
Audit Guide for Audits of HUD Programs," we have also issued reports dated
January 30, 1997 on our consideration of Renaissance Plaza 93 Associates, L.P.'s
internal control structure and on its compliance with requirements applicable to
CDA programs, affirmative fair housing and laws and regulations applicable to
the financial statements.

/s/ Reznick Fedder & Silverman
------------------------------

Bethesda, Maryland
January 30, 1997

Audit Principal: Lester A. Kanis

- 7 -

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 1995, and the related statements of profit
and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 1995, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 21
through 28 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
that portion marked "unaudited," on which we express no opinion, has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards we have also issued
reports dated February 9, 1996 on our consideration of Renaissance Plaza 93
Associates, L.P.'s internal control structure and on its compliance with
requirements applicable to CDA programs, affirmative fair housing and laws and
regulations applicable to the financial statements.

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
February 9, 1996

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 1994, and the related statements of changes
in partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 1994, and the changes in partners' capital
and cash flows for the year then ended, in conformity with generally accepted
accounting principles.

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
February 2, 1995

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

To the Partners of
Tasker Village Associates
(a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Tasker Village Associates (a
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of (loss), changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. 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 the
Partnership's general partner and contracted management agent, 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 Tasker Village Associates (a
Limited Partnership) at December 31, 1996 and 1995, and the results of its
operations, changes in partners' equity and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/ J. H. Williams & Co., LLP
- -----------------------------

Kingston, Pennsylvania
February 1S, 1997

[J. H. WILLIAMS & CO., LLP LETTERHEAD]

To the Partners of
Tasker Village Associates
(a Limited Partnership)
Philadelphia, Pennsylvania

We have audited the accompanying balance sheets of Tasker Village Associates (a
Limited Partnership) as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partner and contracted management agent, 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 Tasker Village Associates (a
Limited Partnership) at December 31, 1995 and 1994, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.

/s/ J. H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 14, 1996

[CLIFFORD R. BENN LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
1996 and the related statements of income, changes in partners' capital, and
cash flow for the year then ended. These financial statements are the
responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is
to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Martha Bryant Manor, L.P. at
December 31, 1996 and the results of its operations and its cash flow for the
year then ended. In conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
--------------------

February 13, 1997
Carson, California

[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
1995 and the related statements of income, changes in partners' capital, and
cash flow for the year then ended. These financial statements are the
responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is
to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

I was unable to obtain sufficient evidential matter in connection with the
beginning balance of property investments.

In my opinion, except for the effects of any adjustments and additional
disclosures that might have resulted had I been able to obtain sufficient
evidence in connection with property investments, the financial statements
referred to above present fairly, in all material respects, the financial
position of Martha Bryant Manor, L.P. at December 31, 1995 and the results of
its operations and its cash flow for the year then ended. In conformity with
generally accepted accounting principles.

/s/ CLIFFORD BENN, CPA

January 24, 1996
Carson, California

[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]

To the Partners of
Martha Bryant Manor, L. P.
A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of Martha Bryant Manor, L.P., a
California Limited Partnership, as of December 31, 1994, and the related
statements of operations, changes in partners' capital and cash flows for the
period September 1, 1994 (inception) to December 31, 1994. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Martha Bryant Manor, L.P., a
California Limited Partnership, at December 31, 1994, and the results of its
operations and its cash flows for the period from September 1, 1994 (inception)
to December 31, 1994 in conformity with generally accepted accounting
principles.

/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant

February 28, 1995

[MARVIN D. MASON LETTERHEAD]

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of Colden Oaks, a California
Limited Partnership, as of December 31, 1996, and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles

/s/ Marvin Mason
- ----------------
Marvin Mason
Certified Public Accountant
Encino, California
February 25, 1997

-1-

[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of Colden Oaks, a California
Limited Partnership, as of December 31, 1995, and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant

February 29, 1996

[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of Colden Oaks, a California
Limited Partnership, as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for the period September
1, 1994 (inception) to December 31, 1994. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 1994, and the results of its operations and its
cash flows for the period from September 1, 1994 (inception) to December 31,
1994 in conformity with generally accepted accounting principles.

/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant

February 28, 1995

[CLIFFORD R. BENN LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1996
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 1996 and the results of its operations and its cash flow for the year then
ended. In conformity with generally accepted accounting principles.

/s/ Clifford Benn, C.P.A.
-------------------------

February 13, 1997
Carson, California

[CLIFFORD R. BENN LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1995
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includeS
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 1995 and the results of its operations and its cash flow for the year then
ended. In conformity with generally accepted accounting principles.

/s/ CLIFFORD BENN, CPA
February 2, 1996
Carson, California

[CLIFFORD R. BENN LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1994
and the related statements of income, changes in partners' capital, and cash
flow for the period from inception, September 14, 1994, through December 31,
1994. These financial statements are the responsibility of Brynview Terrace,
L.P.'s management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 1994 and the results of its operations and its cash flow for the period from
inception, September 14, 1994, through December 31, 1994. In conformity with
generally accepted accounting principles.

/s/ CLIFFORD BENN, CPA
February 14, 1995
Carson, California

[ROBERT J. PACHECO, CPA LETTERHEAD]

Independent Auditor's Report

To the Partners of NLEDC, L.P., a California Limited Partnership:

I have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 1996, and the related statements of
income, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NLEDC, L.P., a California Limited
Partnership, at December 31, 1996, and the results of its operations, changes in
partners' capital and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U. S. Department of Housing and
Urban Development, I have also issued a report dated February 25, 1997, on my
consideration of NLEDC, L.P.'s (a California Limited Partnership) internal
control structure, and reports dated February 25, 1997 on its compliance with
specific requirements applicable to Affirmative Fair Housing and specific
requirements applicable to nonmajor HUD program transactions.

/s/ Robert Pacheco
- ------------------
Robert J. Pacheco
Certified Public Accountant
Pasadena, California
February 25, 1997

[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
NLEDC, L.P., A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 1995, and the related statements of
changes in partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NLEDC, L.P., a California Limited
Partnership, at December 31, 1995, and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

/s/ ROBERT PACHECO

Robert J. Pacheco
Certified Public Accountant

February 21, 1996

[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
NLEDC, L.P., A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for the period September
1, 1994 (inception) to December 31, 1994. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NLEDC, L.P., a California Limited
Partnership, at December 31, 1994, and the results of its operations and its
cash flows for the period from September 1, 1994 (inception) to December 31,
1994 in conformity with generally accepted accounting principles.

/s/ ROBERT PACHECO

Robert J. Pacheco
Certified Public Accountant

February 28, 1995

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI,
Ltd. as of December 31, 1996, and the related statements of operations,
partners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Creative Choice Homes VI,
Ltd. as of December 31. 1996, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
------------------------------

Bethesda, Maryland
February 7, 1997

[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI,
Ltd. as of December 31, 1995, and the related statements of operations,
partners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Creative Choice Homes VI,
Ltd. as of December 31, 1995, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
March 22, 1996

[MARK ESCOFFERY, P.A. - PALM BEACH GARDENS, FLORIDA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the General Partner
of Creative Choice Homes VI Ltd.
Owner of Caribbean West Apartments
4243 Northlake Boulevard
Palm Beach Gardens, Florida 33410

I have audited the balance sheet of Creative Choice Homes VI Ltd. (a Limited
Partnership) as of December 31, 1994. This financial statement is the
responsibility of the Company's Management. My responsibility is to express an
opinion on this financial statement based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. I believe that my audit of
the balance sheet provides a reasonable basis for my opinion.

In my opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Creative Choice Homes VI Ltd. as of
December 31, 1994, in conformity with generally accepted accounting principles.

/s/ MARK ESCOFFERY, P.A.

April 14, 1995.

[SUAREZ ACCOUNTANCY CORPORATION LETTERHEAD]

Independent Auditor's Report
----------------------------

To the Partners
P & P Home for the Elderly, L.P.
(A Development Stage Company)
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Development Stage Company) as of December 31, 1996, and the related
statements of income, changes in partners' capital, and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. (A
Development Stage Company) at December 31, 1996, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

/s/ Suarez Accountancy Corporation
----------------------------------

San Pedro, California
April 1, 1997

[SUAREZ ACCOUNTANCY CORPORATION - SAN PEDRO, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
P & P Home for the Elderly, L.P.
(A Development Stage Company)
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Development Stage Company) as of December 31, l995, and the related
statements of income, changes in partners' capital, and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. (A
Development Stage Company) at December 31, 1995, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

/s/ SUAREZ ACCOUNTANCY CORPORATION

January 31, 1996

[RICHARD SUAREZ, JR.- SAN PEDRO, CALIFORNIA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Partners
P & P Home for the Elderly, L.P.
(A Development Stage Company)
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Development Stage Company) as of December 31, 1994, and the related
statements of income, changes in partners' capital, and cash flows for the
period March 1, 1994 (inception) through December 31, 1994. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amou