HCW PENSION REAL ESTATE FUND LTD PARTNERSHIP, 10KSB, 1999-03-31

HCW PENSION REAL ESTATE FUND LTD PARTNERSHIP
10KSB, 1999-03-31
REAL ESTATE

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FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]

For the fiscal year ended December 31, 1998

or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]

For the transition period from.........to.........

Commission file number 0-14578

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
(Name of small business issuer in its charter)

Massachusetts 04-2825863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)

Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:

None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $2,799,000

State the aggregate market value of the voting partnership interests by non-
affiliates computed by reference to the price at which the partnership interests
were sold, or the average bid and asked prices of such partnership interests, as
of December 31, 1998. No market exists for the limited partnership interests of
the Registrant, and, therefore, no aggregate market value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE
None

PART I

ITEM 1. DESCRIPTION OF BUSINESS

HCW Pension Real Estate Fund Limited Partnership (the "Partnership" or
"Registrant") is a publicly-held limited partnership organized on April 30,
1984, under the Uniform Limited Partnership Act of the Commonwealth of
Massachusetts. The General Partner of the Partnership is HCW General Partner
Ltd., (the "General Partner"). The General Partner is a Texas limited
partnership whose sole general partner is IH, Inc. ("Managing General Partner").
The Partnership Agreement provides that the Partnership is to terminate on
October 31, 2024 unless terminated prior to such date.

The Registrant is engaged in the business of operating and holding real
properties for investment. From 1984 through 1986, during its acquisition
phase, the Registrant acquired one existing apartment and one existing
commercial property. The Registrant continues to own and operate these
properties. See "Item 2, Description of Properties."

Commencing on August 17, 1984, the Partnership offered, pursuant to a
Registration Statement filed with the Securities and Exchange Commission (the
"SEC"), 25,000 Units of Limited Partnership interest (the units) at a purchase
price of $1,000 per unit. The sale of Limited Partnership Units closed on
March 14, 1986, with 15,698 units sold at $1,000 each, or gross proceeds of
approximately $15,698,000 to the Partnership. Since its initial offering, the
Registrant has not received, nor are limited partners required to make,
additional capital contributions.

A further description of the Partnership's business is included in Management's
Discussion and Analysis or Plan of Operation included in "Item 6" of this Form
10-KSB.

On April 20, 1994, Hampton Realty Partners, L.P. ("Hampton Partners"), the owner
of all of the limited partner interest in the General Partner, and the
shareholders of Hampton UREF Acquisition Corp. ("Hampton Corp."), the general
partner of the General Partner and Hampton UREF Management, Ltd. ("UREF
Management", an affiliate of Hampton Corp.), entered into a Purchase Agreement
(the "Purchase Agreement") with Insignia Financial Group, Inc. ("Insignia") and
several of its affiliates whereby affiliates of Insignia would purchase all of
the limited partner interest in the General Partner and UREF Management, all of
the outstanding stock of Hampton Corp. and certain assets related to three other
limited partnerships. During the term of the Purchase Agreement, affiliates of
Insignia provided property management and partnership administration services to
the Partnership pursuant to subcontracts between Insignia and UREF Management,
the holder of the contracts to provide property management and portfolio
services to the Partnership.

On August 8, 1994, Hampton Corp. assigned its ownership interests in HCW
General Partner, Ltd., formerly known as Hampton HCW General Partner Ltd., to
IH, Inc., an affiliate of Insignia and Metropolitan Asset Enhancement, L.P. As
a result, IH, Inc. now possesses the sole authority to direct and manage HCW
General Partner, Ltd., which is the sole general partner of the Partnership.
HCW General Partner, Ltd. is the successor general partner to First HCW Pension
Real Estate, Inc., a wholly-owned subsidiary of North American Mortgage
Investors, Inc. and WBK Associates Two Limited Partnership, a Massachusetts
limited partnership, the general partner of which is Southmark Investment Group,
Inc. A special meeting of the Limited Partners of the Partnership was held on
November 19, 1993, pursuant to a call by First HCW Pension Real Estate, Inc. for
the purpose of considering a proposal in which Hampton HCW General Partner, Ltd.
would substitute as the new general partner of the Partnership. On motion made
and carried by the affirmative vote of 10,172 units in favor of the proposal,
the proposal was adopted. Hampton HCW General Partner, Ltd. officially became
the General Partner on December 16, 1993.

Pursuant to the purchase agreement dated August 8, 1994, affiliates of IH, Inc.
acquired certain assets from Hampton Realty Partners, L.P. and its affiliates,
service contract rights to all partnerships affiliated with Hampton Realty, L.P.
and receivables from partnerships other than the Partnership. In addition, an
affiliate of Metropolitan Asset Enhancement, L.P. acquired the limited
partnership interest in HCW General Partner, Ltd. on August 8, 1994. Prior to
February 25, 1998, the Managing General Partner was a wholly-owned subsidiary of
MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP merged into
Insignia Properties Trust ("IPT"), which was merged into Apartment Investment
and Management Company ("AIMCO") effective February 26, 1999. Thus the Managing
General Partner is now a wholly-owned subsidiary of AIMCO.

The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the Managing General
Partner. Property management services were performed at the Partnership's
apartment property by an affiliate of the Managing General Partner for the years
ended December 31, 1998 and 1997. Property management services were performed
at the Partnership's commercial property by an affiliate of the Managing General
Partner for the nine months ended September 30, 1998 and for the year ended
December 31, 1997. Since October 1, 1998, an unaffiliated party has been
providing such property management services for the commercial property.

The business in which the Partnership is engaged is highly competitive. There
are other residential and commercial properties within the market area of the
registrant's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner in such market area, could have a material effect on the rental market
for the apartments and commercial space at the Registrant's properties and the
rents that may be charged for such apartments or space. While the Managing
General Partner and its affiliates are a significant factor in the United States
in the apartment industry, competition for the apartments is local. In
addition, various limited partnerships have been formed by the Managing General
Partner and/or affiliates to engage in business which may be competitive with
the Registrant.

Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside of the control of the Partnership.

There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.

The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.

Transfer of Control

Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership
interest in Insignia Properties Trust ("IPT"), the entity which controls the
Managing General Partner. The Managing General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.

ITEM 2. DESCRIPTION OF PROPERTIES

The following table sets forth the Registrant's investments in properties:

Date of
Property Purchase Type of Ownership Use

Lewis Park Apartments 11/86 Fee ownership Apartment
Carbondale, Illinois 269 units

Highland Professional Tower 10/92 Fee ownership Office Bldg.
Kansas City, Missouri approximately
102,000 sq.ft.

SCHEDULE OF PROPERTIES:

Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
federal tax basis.

Gross

Carrying Accumulated Federal

Property Value Depreciation Rate Method Tax Basis

(in thousands) (in thousands)

Lewis Park Apartments $ 9,638 $4,244 5-40 S/L $ 6,316

Highland Professional

Tower 6,207 1,369 5-25 S/L 5,373

$15,845 $5,613 $11,689

See "Note A" to the financial statements in "Item 7" for a description of the
Partnership's depreciation policy.

SCHEDULE OF RENTAL RATES AND OCCUPANCY:

Average annual rental rates and occupancy for 1998 and 1997 for each property:

Average Annual Average Annual

Rental Rates Occupancy

Property 1998 1997 1998 1997

Lewis Park Apartments $7,706/unit $7,751/unit 85% 84%

Highland Professional Tower 13.30/sq.ft. 13.80/sq.ft. 64% 74%

The Managing General Partner attributes the decrease in occupancy at Highland
Professional Tower to the loss of a major tenant during the fourth quarter of
1997 and to deferred maintenance that needed to be performed at the property.
The Managing General Partner renovated and repaired Highland Professional
Tower's common areas during the year ending December 31, 1997 in an effort to
attract additional tenants. Although all renovations were substantially complete
at the beginning of 1998, the property has not seen any resulting increase in
its tenant base as of December 31, 1998.

As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes and commercial buildings in the area. The
Managing General Partner believes that all of the properties are adequately
insured. The residential property is an apartment complex which leases its
units for terms of one year or less. No residential tenant leases 10% or more
of the available rental space. See "Notes A and F" to the Financial Statements
for information with respect to the terms of the commercial leases and "Schedule
of Lease Expirations" below for additional information about the commercial
leases. All of the properties are in good physical condition, subject to normal
depreciation and deterioration as is typical for assets of this type and age.

SCHEDULE OF LEASE EXPIRATIONS:

The following is a schedule of the lease expirations for Highland Professional
Tower for the years 1999 - 2005:

Number of % of Gross

Expirations Square Feet Annual Rent Annual Rent

(in thousands)

1999 3 2,929 $ 47 8.10%

2000 5 4,163 70 11.98%

2001 3 3,619 56 9.58%

2002 4 3,857 69 11.76%

2003 5 17,724 281 48.25%

2004 1 2,300 34 5.92%

2005 1 1,700 26 4.41%

The principal businesses of the tenants located at Highland Professional Tower
are medical practices.

(Fourteen month to month leases contribute approximately $313,000 to annual
rental income for the Partnership.)

The following schedule presents information on tenants leasing 10% or more of
the leasable square footage for Highlands Professional Tower:

Square Footage Annual Rent Per Lease
Nature of Business Leased Square Foot Expiration
Radiologist 11,581 13.44 1/31/03

SCHEDULE OF REAL ESTATE TAXES AND RATES:

Real estate taxes and rates in 1998 for each property were:

1998 1998

Billing Rate

(in thousands)

Lewis Park Apartments $243 9.26%

Highland Professional Tower 151 9.33%

CAPITAL IMPROVEMENTS

Lewis Park

During 1998, the Partnership completed $370,000 of capital improvements at Lewis
Park, consisting primarily of parking area repairs, swimming pool repairs, roof
replacements and floor covering replacements. These improvements were funded
from operating cash flow. Based on a report received from an independent third
party consultant analyzing necessary exterior improvements and estimates made by
the Managing General Partner on interior improvements, it is estimated that the
property requires approximately $526,000 of capital improvements over the near
term. The Partnership has budgeted, but is not limited to, approximately
$726,000 of capital improvements planned for 1999 which include roof and floor
covering replacements.

Highland Professional Tower

In 1998, the Partnership completed $137,000 of capital improvements at Highland
Professional Tower, consisting primarily of tenant improvements. These
improvements were funded primarily from cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $495,000
of capital improvements over the near term. The Partnership has budgeted, but
is not limited to, approximately $476,000 of capital improvements for 1999
including asbestos control and tenant improvements.

The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.

ITEM 3. LEGAL PROCEEDINGS

On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES LLC. V.
INSIGNIA FINANCIAL GROUP, INC. in the Superior Court of the State of California,
County of Los Angeles. The action involves 44 real estate limited partnerships
(including the Partnership) in which the plaintiffs allegedly own interests and
which Insignia Affiliates allegedly manage or control (the "Subject
Partnerships"). This case was settled on March 3, 1999. The Partnership is
responsible for a portion of the settlement costs. The expense will not have a
material effect on the Partnership's net income.

The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended December 31, 1998, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR PARTNERSHIP'S EQUITY RELATED PARTNER MATTERS

The Partnership, a publicly-held limited partnership, offered and sold 15,698
limited partnership units aggregating $15,698,000. The Partnership currently
has 1,320 holders of record owning an aggregate of 15,698 Units. Affiliates of
the Managing General Partner owned 2,569 units or 16.37% at December 31, 1998.
No public trading market has developed for the Units, and it is not anticipated
that such a market will develop in the future.

A distribution payable of $400,000 ($24.97 per limited partnership unit) was
recorded on December 31, 1998. This distribution was paid on January 20, 1999.
A distribution of $300,000 ($18.73 per limited partnership unit) was recorded on
December 31, 1997 and was paid on January 6, 1998. Both distributions were from
cash from operations. Future distributions will depend on the levels of net cash
generated from operations, debt financing, property sales and the availability
of cash reserves. The Partnership's distribution policy will be reviewed on a
quarterly basis. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations, after required capital expenditures,
to permit any additional distributions to its partners in 1999 or subsequent
periods.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussions
of the Registrant's business and results of operations, including forward-
looking statements pertaining to such matters, does not take into account the
effects of any changes to the Registrant's business and results of operations.
Accordingly, actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.

This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.

Results of Operations

The Registrant's net income for the year ended December 31, 1998 was $52,000 as
compared to $154,000 for the year ended December 31, 1997. (See "Note C" of the
financial statements for a reconciliation of these amounts to the Registrant's
federal taxable income). The decrease in net income was primarily due to a
decrease in total revenue and to a lesser extent an increase in total expenses.
Total revenues decreased primarily due to a decrease in rental income. The
decrease in rental income is attributable to the decrease in occupancy at
Highland Professional Tower and decreases in average annual rental rates at both
of the Partnership's investment properties.

Expenses increased primarily due to an increase in depreciation expense and to
a lesser extent the casualty loss recognized in 1998. The increase in
depreciation expense results from an increase in capital improvements performed
at both of the investment properties during the past two years to improve the
overall appearance and quality of the properties. The casualty loss resulted
from a storm that damaged the roofs at Lewis Park Apartments during 1997. The
damage resulted in a loss arising from the write-off of the basis of the
property, which was replaced during 1998.

Included in general and administrative expenses at both December 31, 1998 and
1997 are management reimbursements to the Managing General Partner allowed under
the Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.

As part of the ongoing business plan of the Registrant, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Registrant from increases in expense. As part of this
plan, the Managing General Partner attempts to protect the Registrant from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At December 31, 1998, the Registrant had cash and cash equivalents of
approximately $1,354,000 as compared to approximately $1,339,000 at December 31,
1997. The increase in cash and cash equivalents is due to $822,000 of cash
provided by operating activities which was partially offset by $507,000 of cash
used in investing activities and $300,000 of cash used in financing activities.
Cash used in investing activities consisted of property improvements and
replacements. Cash used in financing activities consisted of partner
distributions.

The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with federal,
state and local legal and regulatory requirements. The Partnership has
budgeted, but is not limited to, capital improvements of approximately
$1,202,000 for both its properties in 1999. Budgeted capital improvements at
Highland Professional Tower include asbestos control and tenant improvements.
Budgeted capital improvements at Lewis Park include roof and floor covering
replacements. The capital expenditures will be incurred only if cash is
available from operations or from partnership reserves. To the extent that such
budgeted capital improvements are completed, the Registrant's distributable cash
flow, if any, may be adversely affected at least in the short term. The
Registrant's current assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Registrant.

A distribution from operations of $400,000 ($24.97 per limited partnership unit)
was recorded on December 31, 1998 and was paid on January 20, 1999. The limited
partners received $392,000 and the General Partner received $8,000. A
distribution from operations of $300,000 ($18.73 per limited partnership unit)
was recorded on December 31, 1997 and was paid on January 6, 1998. The limited
partners received $294,000 and the General Partner received $6,000. Future
distributions will depend on the levels of net cash generated from operations,
debt financing, property sales and the availability of cash reserves. The
Partnership's distribution policy is reviewed on a quarterly basis. There can be
no assurance, however, that the Partnership will generate sufficient funds from
operations after required capital expenditures to permit additional
distributions to its partners in 1999 or subsequent periods.

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase

Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.

Computer software:

The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.

Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.

The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.

ITEM 7. FINANCIAL STATEMENTS

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

LIST OF FINANCIAL STATEMENTS

Independent Auditors' Reports

Balance Sheet - December 31, 1998

Statements of Operations - Years ended December 31, 1998 and 1997

Statements of Changes in Partners' Capital (Deficit) - Years ended December 31,
1998 and 1997

Statements of Cash Flows - Years ended December 31, 1998 and 1997

Notes to Financial Statements

INDEPENDENT AUDITORS' REPORT

The Partners
HCW Pension Real Estate Fund Limited Partnership (a Massachusetts Limited
Partnership)

We have audited the accompanying balance sheet of HCW Pension Real Estate Fund
Limited Partnership ("the Partnership") as of December 31, 1998, and the related
statements of operations, changes in partners' capital (deficit), and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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 the Partnership as of
December 31, 1998, and the results of its operations and its cash flows for the
year ended in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Greenville, South Carolina
February 23, 1999

INDEPENDENT AUDITORS' REPORT

The Partners
HCW Pension Real Estate Fund Limited Partnership

We have audited the accompanying consolidated statements of operations, changes
in partners' capital (deficit) and cash flows HCW Pension Real Estate Fund
Limited Partnership ("the Partnership") for the year ended December 31, 1997.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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, such financial statements present fairly, in all material
respects the results of operations and cash flows for the year ended December
31,1997 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Greenville, South Carolina
February 17, 1998

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

BALANCE SHEET
(in thousands, except unit data)

December 31, 1998

Assets

Cash and cash equivalents $ 1,354

Receivables and deposits (net of allowance of

$16 for doubtful accounts) 485

Other assets 72

Investment properties:

Land $ 1,121

Buildings and related personal property 14,724

15,845

Less accumulated depreciation (5,613) 10,232

$12,143

Liabilities and Partners' Capital (Deficit)

Liabilities

Accounts payable $ 61

Tenant security deposit liabilities 139

Accrued property taxes 410

Other liabilities 98

Distribution payable 400

Partners' Capital (Deficit)

General partner $ (59)

Limited partners (15,698 units

issued and outstanding) 11,094 11,035

$12,143

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

(in thousands, except unit data)

Years Ended December 31,

1998 1997

Revenues:

Rental income $2,626 $2,685

Other income 173 181

Total revenues 2,799 2,866

Expenses:

Operating 1,313 1,351

General and administrative 267 290

Depreciation 752 661

Property taxes 393 410

Casualty loss 22 --

Total expenses 2,747 2,712

Net income $ 52 $ 154

Net income allocated to general

partner (2%) $ 1 $ 3

Net income allocated to limited

partners (98%) 51 151

$ 52 $ 154

Net income per limited partnership unit $ 3.25 $ 9.62

Distribution per limited partnership unit $24.97 $18.73

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)

Limited

Partnership General Limited

Units Partner Partners Total

Original capital contributions 15,698 $ -- $15,698 $15,698

Partners' (deficit) capital at

December 31, 1996 15,698 $ (49) $11,578 $11,529

Distributions declared to partners -- (6) (294) (300)

Net income for the year ended

December 31, 1997 -- 3 151 154

Partners' (deficit) capital at

December 31, 1997 15,698 (52) 11,435 11,383

Distributions declared to partners -- (8) (392) (400)

Net income for the year ended

December 31, 1998 -- 1 51 52

Partners' (deficit) capital at

December 31, 1998 15,698 $ (59) $11,094 $11,035

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended December 31,

1998 1997

Cash flows from operating activities:

Net income $ 52 $ 154

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation 752 661

Amortization of leasing commissions 2 4

Casualty loss (gain) 22 (1)

Change in accounts:

Receivables and deposits (175) 201

Other assets 4 (20)

Accounts payable 10 (24)

Tenant security deposit liabilities 27 (50)

Accrued property taxes 150 13

Other liabilities (22) 62

Net cash provided by operating activities 822 1,000

Cash flows from investing activities:

Property improvements and replacements (507) (1,104)

Net insurance proceeds -- 51

Net cash used in investing activities (507) (1,053)

Cash flows from financing activities:

Distributions to partners (300) --

Net increase (decrease) in cash and cash equivalents 15 (53)

Cash and cash equivalents at beginning of year 1,339 1,392

Cash and cash equivalents at end of year $ 1,354 $1,339

Supplemental disclosure of non-cash financing activity:

Distribution payable $ 400 $ 300

See Accompanying Notes to Financial Statements

HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization: HCW Pension Real Estate Fund Limited Partnership (the
"Partnership" or "Registrant") is a limited partnership organized pursuant to
the laws of the Commonwealth of Massachusetts on April 30, 1984. On August 17,
1984, a registration statement was declared effective by the Securities and
Exchange Commission. The Partnership commenced operations on June 5, 1985. The
Partnership operates an apartment property and a commercial property located in
the Midwest. The Partnership Agreement provides that the Partnership is to
terminate on October 31, 2024 unless terminated prior to such date.

On August 8, 1994, Hampton Corp. assigned its general partnership interest in
Hampton HCW General Partner, Ltd. to IH, Inc., (the "Managing General Partner")
an affiliate of Apartment Investment and Management Company ("AIMCO") and
Metropolitan Asset Enhancement, L.P. Also effective August 8, 1994, Hampton HCW
General Partner, Ltd. changed its name to HCW General Partner, Ltd. As a
result, IH, Inc. now possesses the sole authority to direct and manage HCW
General Partner, Ltd., which is the sole general partner of the Partnership.

Pursuant to the purchase agreement dated August 8, 1994, affiliates of IH, Inc.
acquired certain assets from Hampton Realty Partners, L.P. and its affiliates,
including the general partnership interest assigned to IH, Inc., service
contract rights to all partnerships affiliated with Hampton Realty, L.P. and
receivables from partnerships other than the Partnership. In addition, an
affiliate of Metropolitan Asset Enhancement, L.P. acquired the limited
partnership interest in HCW General Partner, Ltd. from the termination of an
escrow, which occurred on December 31, 1994. Prior to February 25, 1998 the
Managing General Partner was a wholly-owned subsidiary of MAE GP Corporation
("MAE GP"). Effective February 25, 1998, MAE GP merged into Insignia Properties
Trust ("IPT"), which was merged into AIMCO effective February 26, 1999. Thus
the Managing General Partner is now a wholly-owned subsidiary of AIMCO. See
"Note B - Transfer of Control." The director and officers of the Managing
General Partner also serve as executive officers of AIMCO.

Uses of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Allocation of Cash Distributions: Distributions to the partners are paid from
operations of the Partnership's properties, from sales or refinancing of
properties, or from working capital reserves. Distributions from operations are
distributed 98% to the Limited Partners and 2% to the General Partner.

Distributions of cash from sales and refinancings or from working capital
reserves are made in the following order:

(a) First to the Limited Partners in an amount equal to their adjusted capital
contributions; then,

(b) to the Limited Partners in an amount equal to a 12% cumulative
noncompounded annual return on their average adjusted capital contribution for
Partners who invested on or before March 1, 1985, and 10% to all others; then,

(c) 90% to the Limited Partners and 10% to the General Partner until the
Limited Partners have received, in addition to amounts received pursuant to (a)
and (b), an amount equal to 2% cumulative, noncompounded annual return on their
average adjusted capital contributions; then,

(d) thereafter, 85% to the Limited Partners and 15% to the General Partner.

At December 31, 1998, $400,000 was recorded as an operating distribution payable
and was paid January 20, 1999. The Partnership distributed cash from operations
of approximately $294,000 to the Limited Partners and approximately $6,000 to
the General Partner during the year ended December 31, 1998 from the $300,000
distribution payable recorded on December 31, 1997.

Allocation of Profits, Gains and Losses: The Partnership Agreement provides for
net income or loss arising from Partnership operations other than sales,
financings or refinancings to be allocated 98% to the Limited Partners and 2% to
the General Partner.

Net income arising from a sale, financing or refinancing is to be allocated as
follows: (i) to those partners who have negative balances in their capital
accounts in proportion to and to the extent of such negative balances, (ii) to
the Limited Partners in an amount equal to their adjusted capital contributions,
(iii) to the Limited Partners in an amount equal to a 12% cumulative,
noncompounded annual return on their average adjusted capital contributions for
Limited Partners who invested prior to March 1, 1985, and 10% to all others,
(iv) 90% to the Limited Partners and 10% to the General Partner until the
Limited Partners have received an amount equal to a 2% cumulative, noncompounded
annual return on their average adjusted capital contributions, and (v)
thereafter, 85% to the Limited Partners and 15% to the General Partner.

Net losses from a sale, financing or refinancing are to be allocated as follows:
(i) to any partners having positive capital account balances in proportion to
and to the extent of such positive balances, and (ii) thereafter, 98% to the
Limited Partners and 2% to the General Partner.

Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and Treasury Regulation Sections establish
criteria for allocations of Partnership deductions attributable to nonrecourse
debt. The Partnership's allocations for 1998 and 1997 have been made in
accordance with these provisions.

Escrows for Taxes: These escrows are held by the Partnership and are designated
for the payment of real estate taxes. These funds totaled approximately
$305,000 at December 31, 1998 and are included in receivables and deposits.

Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the properties and related personal property. For Federal
income tax purposes, the accelerated cost recovery method is used (1) for real
property over 15 years for additions prior to March 16, 1984, 18 years for
additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of the
Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years, and (2) personal property additions over 7 years,
and (3) land improvements over 15 years. For book purposes, buildings are
depreciated over useful lives from 27.5 to 40 years and personal property is
depreciated over 5 to 40 years.

Lease Commission: Lease commissions of approximately $20,000 less accumulated
amortization of approximately $19,000 are included in other assets and are being
amortized over the terms of the respective leases using the straight-line
method.

Cash and Cash Equivalents: Includes cash on hand and in banks, money market
funds and certificates of deposits with original maturities less than 90 days.
At certain times, the amount of cash deposited at a bank may exceed the limit on
insured deposits.

Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.

Leases: The Partnership generally leases apartment units for twelve month terms
or less. The Partnership recognizes income as earned on its leases. In
addition, the Managing General Partner's policy is to offer rental concessions
during particularly slow months or in response to heavy competition from other
similar complexes in the area. Concessions are charged against rental income as
incurred. Commercial office property leases vary from one to twelve years. For
leases with scheduled rental increases, rental income is recognized on a
straight-line basis over the life of the applicable leases.

Investment Properties: Investment properties consist of one apartment complex
and one commercial property and are stated at cost. Acquisition fees are
capitalized as a cost of real estate. In accordance with Financial Accounting
Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Partnership records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets. Costs of investment properties that have been
permanently impaired have been written down to appraisal value. No adjustments
for impairment of value were recorded in the years ended December 31, 1998 and
1997.

Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments approximates their fair value due to the short term
maturity of these instruments.

Segment Reporting: In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 131, Disclosure about Segments of an
Enterprise and Related Information ("Statement 131"), which is effective for
years beginning after December 15, 1997. Statement 131 established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. See "Note I" for disclosure
of Segment information.

Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $41,000 and $53,000 for the years ended
December 31, 1998 and 1997, respectively, were charged to expense as incurred.

Reclassification: Certain reclassifications have been made to the 1997
information to conform to the 1998 presentation.

NOTE B - TRANSFER OF CONTROL

NOTE C - INCOME TAXES

The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership.

Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.

The following is a reconciliation of reported net income and Federal taxable
income (in thousands):

1998 1997

Net income as reported $ 52 $ 154

Add (deduct):

Depreciation differences 103 204

Unearned income (4) (6)

Other tax adjustments (9) 14

Federal taxable income $ 142 $ 366

Federal taxable income per limited

Partnership unit $ 8.85 $22.85

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):

Net assets as reported $11,035

Difference in basis of assets and liabilities:

Investment properties at cost 218

Accumulated depreciation 1,217

Syndication 1,708

Other 1

Net assets - tax basis $14,179

NOTE D - TRANSACTIONS WITH AFFILIATED PARTIES

The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to the
Managing General Partner and affiliates during the year ended December 31, 1998
and 1997:

1998 1997

(in thousands)

Property management fees (included in operating expense) $140 $160

Asset management fees (included in general and

administrative expense) 134 136

Reimbursement for services of affiliates (included in

operating, general and administrative expense and

investment properties) (1) 84 144

(1) Included in "reimbursements for services of affiliates" for the years ended
December 31, 1998 and 1997, is approximately $3,000 and $30,000,
respectively, in reimbursements for construction oversight costs.

During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Registrant's
residential properties for providing property management services. The
Registrant paid to such affiliates approximately $93,000 and $93,000 for the
years ended December 31, 1998 and 1997, respectively. For the nine months ended
September 30, 1998 and the year ended December 31, 1997 affiliates of the
General Partner were entitled to receive varying percentages of gross receipts
from all of the Registrant's commercial properties for providing property
management services. The Registrant paid to such affiliates $47,000 and $67,000
for the nine months ended September 30, 1998 and the year ended December 31,
1997. Effective October 1, 1998 (the effective date of the Insignia Merger)
these services for the commercial properties were provided by an unrelated
party.

An affiliate of the General Partner received reimbursement of asset management
fees amounting to approximately $134,000 and approximately $136,000 for the
years ended December 31, 1998 and 1997, respectively.

An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $84,000 and approximately
$144,000 for the years ended December 31, 1998 and 1997, respectively.

For the period January 1, 1997 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the Managing
General Partner with an insurer unaffiliated with the Managing General Partner.
An affiliate of the Managing General Partner acquired, in the acquisition of a
business, certain financial obligations from an insurance agency which was later
acquired by the agent who placed the master policy. The agent assumed the
financial obligations to the affiliate of the Managing General Partner, which
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.

NOTE E - REAL ESTATE AND ACCUMULATED DEPRECIATION

Investment Properties

Initial Cost

To Partnership

(in thousands)

Buildings Net Cost

and Related Capitalized

Personal Subsequent to

Description Land Property Acquisition

Lewis Park Apartments $ 621 $ 7,840 $1,177

Highland Professional Tower 500 4,648 1,059

Totals $1,121 $12,488 $2,236

Gross Amount At Which Carried

at December 31 1998

(in thousands)

Buildings

And Related

Personal Accumulated Date of Date Depreciable

Description Land Property Total Depreciation Construction Acquired Life-Years

Lewis Park $ 621 $ 9,017 $ 9,638 $4,244 1972 11/86 5-40

Highland 500 5,707 6,207 1,369 1973 10/92 5-25

Total $1,121 $14,724 $15,845 $5,613

</TABLE>

Reconciliation of "Real Estate and Accumulated Depreciation":

Years Ended December 31,

1998 1997

(in thousands)

Real Estate

Balance at beginning of year $15,391 $14,377

Property improvements 507 1,104

Disposal of property (53) (90)

Balance at end of year $15,845 $15,391

Accumulated Depreciation

Balance at beginning of year $ 4,892 $ 4,271

Additions charged to expense 752 661

Disposal of property (31) (40)

Balance at end of year $ 5,613 $ 4,892

The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1998 and 1997, is approximately $16,116,000 and approximately
$15,610,000, respectively. The accumulated depreciation taken for Federal
income tax purposes at December 31, 1998 and 1997, is approximately $4,427,000
and approximately $3,778,000, respectively.

NOTE F - REVENUES

The Partnership leases Highland Professional Tower, its only commercial
property, under noncancelable operating lease agreements. Future minimum rental
payments to be received under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1998, are as
follows (in thousands):

1999 $ 555

2000 510

2001 454

2002 411

2003 174

Thereafter 54

$2,158

NOTE G - MAJOR TENANTS

Rents from tenants of Highlands Professional Tower exceeding 10% of rental
income in 1998 or 1997 were as follows:

1998 1997
Amount Percent Amount Percent
(in thousands) (in thousands)

Medical Office $156 16% $156 14%

NOTE H - CASUALTY LOSS

During the year ended December 31, 1998, the Partnership recorded a casualty
loss resulting from a storm that damaged the roofs at Lewis Park Apartments
during 1997. The damage resulted in a loss of approximately $22,000 arising from
the write-off of the basis of the property which was replaced.

NOTE I - SEGMENT REPORTING

Description of the types of products and services from which the reportable
segment derives its revenues:

As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", the Partnership has two reportable segments: residential
properties and commercial properties. The Partnership's residential property
segment consists of one apartment complex in Carbondale, Illinois. The
Partnership rents apartment units to people for terms that are typically twelve
months or less. The commercial property segment consists of a professional
office building located in Kansas City, Missouri. This property leases space to
medical offices at terms ranging from 12 months to six years.

Measurement of segment profit or loss:

The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those described in the
summary of significant accounting policies.

Factors management used to identify the enterprise's reportable segment:

The Partnership's reportable segments consist of investment properties that
offer different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.

Segment information for the years 1998 and 1997 is shown in the tables below.
The "Other" column includes partnership administration related items and income
and expense not allocated to reportable segment.

1998 RESIDENTIAL COMMERCIAL OTHER TOTALS

Rental income $ 1,641 $ 985 $ -- $ 2,626
Other income 117 12 44 173
Depreciation 473 279 -- 752
General and administrative expense -- -- 267 267
Casualty loss on disposal of assets (22) -- -- (22)
Segment profit (loss) 414 (139) (223) 52
Total assets 5,814 5,149 1,180 12,143
Capital expenditures for
investment properties 370 137 -- 507

1997 RESIDENTIAL COMMERCIAL OTHER TOTALS

Rental income $ 1,607 $ 1,078 $ -- $ 2,685
Other income 113 11 57 181
Depreciation 426 235 -- 661
General and administrative expense -- -- 290 290
Gain (loss) on disposal of assets -- -- -- --
Segment profit (loss) 361 26 (233) 154
Total assets 5,802 5,138 1,286 12,226
Capital expenditures for
investment properties 255 849 -- 1,104

NOTE J - LEGAL PROCEEDINGS

The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Effective September 30, 1998, the Registrant dismissed its prior Independent
Auditors, Deloitte & Touche, LLP ("Deloitte") and retained as its new
Independent Auditors, KPMG Peat Marwick, LLP. Deloitte's Independent Auditor's
Report on the Registrant's financial statements for the calendar year ended
December 31, 1997 did not contain an adverse opinion or a disclaimer of opinion,
and was not qualified or modified as to uncertainty, audit scope or accounting
principles. The decision to change Independent Auditors was approved by the
Managing General Partner's Director. During the calendar year ended 1997 and
through September 30, 1998, there were no disagreements between the Registrant
and Deloitte on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of Deloitte, would have caused it to make
references to the subject matter of the disagreements in connection with its
reports.

Effective September 30, 1998, the Registrant engaged KPMG Peat Marwick, LLP as
its Independent Auditors. During the last two calendar years and through
September 30, 1998, the Registrant did not consult KPMG Peat Marwick, LLP
regarding any of the matters or events set forth in Item 304 (a)(2)(i) and (ii)
of Regulation S-B.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Registrant has no officers or directors. The names and ages of, as well as
the position and offices held by the executive officers and directors of IH,
Inc. the Managing General Partner, the general partner of the Partnership's
General Partner HCW General Partner, Ltd. are set forth below. There are no
family relationships between or among any officers or directors:

Name Age Position

Patrick J. Foye 41 Executive Vice President and Director

Timothy R. Garrick 42 Vice President - Accounting and Director

Patrick J. Foye has been Executive Vice President and Director of the Managing
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.

Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President-Accounting and Director of the Managing General Partner since October
1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting
Services of Insignia Financial Group since June of 1997. From 1992 until June
of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from
1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to
1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney.
Mr. Garrick received his B.S. Degree from the University of South Carolina and
is a Certified Public Accountant.

ITEM 10. EXECUTIVE COMPENSATION

Neither the director nor any of the officers of the Managing General Partner
received any remuneration from the Registrant.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Except as noted below, as of December 31, 1998, no person or entity was known by
the Registrant to be the beneficial owner of more than 5% of the Limited
Partnership Units of the Registrant as of December 31, 1998.

Number

Entity of Units Percentage

Cooper River Properties, LLC

(an affiliate of AIMCO) 1,728 11.01%

AIMCO Properties LP

(an affiliate of AIMCO) 764 4.87%

Insignia Properties LP

(an affiliate of AIMCO) 72 .46%

Liquidity Assistance, LLC

(an affiliate of AIMCO) 5 .03%

Cooper River Properties LLC, AIMCO Properties LP, Insignia Properties LP and
Liquidity Assistance, LLC are all indirectly ultimately owned by AIMCO. The
business address of Cooper River Properties, LLC, Insignia Properties LP, and
Liquidity Apartments LLC is 55 Beattie Place, Greenville, SC 29602. The
business address of AIMCO Properties LP is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222.

On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real
estate investment trust, whose Class A Common Shares are listed on the New York
Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a
Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP")
acquired indirect control of the Managing General Partner. AIMCO and its
affiliates currently own 16.37% of the limited partnership interests in the
Partnership. AIMCO is presently considering whether it will engage in an
exchange offer for additional limited partnership interests in the Partnership.
There is a substantial likelihood that, within a short period of time, AIMCO OP
will offer to acquire limited partnership interests in the Partnership for cash
or preferred units or common units of limited partnerships interests in AIMCO
OP. While such an exchange offer is possible, no definite plans exist as to when
or whether to commence such an exchange offer, or as to the terms of any such
exchange offer, and it is possible that none will occur.

A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-KSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(in thousands)

Property management fees (included in operating expense) $140 $160

Asset management fees (included in general and

administrative expense) 134 136

Reimbursement for services of affiliates (included in

operating, general and administrative expense and

investment properties) (1) 84 144

During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Registrant's
residential properties for providing property management services. The
Registrant paid to such affiliates approximately $93,000 and $93,000 for the
years ended December 31, 1998 and 1997 respectively. For the nine months ended
September 30, 1998 and the year ended December 31, 1997 affiliates of the
General Partner were entitled to receive varying percentages of gross receipts
from all of the Registrant's commercial properties for providing property
management services. The Registrant paid to such affiliates $47,000 and $67,000
for the nine months ended September 30, 1998 and the year ended December 31,
1997. Effective October 1, 1998 (the effective date of the Insignia Merger)
these services for the commercial properties were provided by an unrelated
party.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.

(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1998:

Form 8-K filed on September 30, 1998 to disclose a change in auditors
(amended on October 26, 1998 on Form 8-K/A)

Current Report on Form 8-K filed on October 1, 1998 disclosing change in
control of Registrant from Insignia Financial Group, Inc. to AIMCO.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

HCW PENSION REAL ESTATE FUND LIMITED
PARTNERSHIP

By: HCW General Partner, Ltd.,
the General Partner

By: IH, Inc.,
the General Partner

By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President

By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting

Date: March 31, 1999

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.

/s/Patrick J. Foye Date: March 31, 1999
Patrick J. Foye
Executive Vice President and Director

/s/Timothy R. Garrick Date: March 31, 1999
Timothy R. Garrick
Vice President - Accounting and Director

EXHIBIT INDEX

Exhibit

2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT (incorporated by reference to Exhibit 2.1 of
IPT's Current Report on Form 8-K, File No. 1-14179, dated October 1,
1998).

3. & 4. Limited Partnership Agreement (Incorporated by reference to
Registration Statement No. 2-91006 on Form S-11 filed by Registrant).

10.1 Property Management Agreement

19. Asset Purchase Agreement among Southmark Corporation and Robert A.
McNeil dated October 12, 1990, between various affiliates of Southmark
Corporation and Robert A. McNeil. Incorporated by reference to the
Annual Report of McNeil Real Estate Fund IV, Ltd., (Commission file
number 0-7894) on Form 10-K for the period ended December 31, 1991, as
filed with the Securities and Exchange Commission on March 24, 1992.

19.3 Agreed order approving Compromise, Settlement and Mutual Release
Agreement between Southmark Corporation and the Southmark Affiliated
Limited Partnership. Incorporated by reference to the Annual Report
of McNeil Real Estate Fund IV, Ltd., (Commission file number 0-7894)
on Form 10-K for the period ended December 31, 1991, as filed with the
Securities and Exchange Commission on March 24, 1992.

19.1 Asset Purchase Agreement among Southmark Corporation and Robert A.
McNeil dated October 12, 1990, as amended by the First Amendment to
the Asset Purchase Agreement dated February 14, 1991. Incorporated by
reference to the Annual Report of McNeil Real Estate Fund IV, Ltd.,
(Commission file number 0-7894) on Form 10-K for the period ended
December 31, 1991, as filed with the Securities and Exchange
Commission on March 24, 1992.

19.2 Asset Purchase Agreement among Southmark Corporation and Robert A.
McNeil, dated October 12, 1990 as amended by the Second Amendment to
Asset Purchase Agreement dated February 25, 1992. Incorporated by
reference to the Annual Report of McNeil Real Estate Fund IV, Ltd.,
(Commission file number 0-7894) on Form 10-K for the period ended
December 31, 1991, as filed with the Securities and Exchange
Commission on March 24, 1992.

19.3 Asset Purchase Agreement among Southmark Corporation and its
affiliates and SHL Acquisition Corp. III dated March 9, 1993 as
amended by the First Amendment to Asset Purchase Agreement dated
April 22, 1993.

27 Financial Data Schedule.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from HCW Pension
Real Estate Fund Limited Partnership 1998 Year-End 10-KSB and is qualified in
its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000745538
<NAME> HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,354
<SECURITIES> 0
<RECEIVABLES> 485
<ALLOWANCES> 16
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,845
<DEPRECIATION> (5,613)
<TOTAL-ASSETS> 12,143
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,035
<TOTAL-LIABILITY-AND-EQUITY> 12,143
<SALES> 0
<TOTAL-REVENUES> 2,799
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52
<EPS-PRIMARY> 3.25<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>

</TABLE>