HALL INSTITUTIONAL MORTGAGE FUND LTD PARTNERSHIP, DEF 14A, 1997-03-18

HALL INSTITUTIONAL MORTGAGE FUND LTD PARTNERSHIP
DEF 14A, 1997-03-18
ASSET-BACKED SECURITIES

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:

/ / Preliminary Proxy Statement / / Confidential, for Use of the

Commission Only (as permitted by
Rule 14a-6(e)(2))

/X/ Definitive Proxy Statement

/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

LIMITED PARTNERSHIP UNITS
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(2) Aggregate number of securities to which transaction applies:
2,552 UNIT(S) (A)
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
1,370 (B)
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(4) Proposed maximum aggregate value of transaction:
3,500,000 (C)
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(5) Total fee paid:
$700.00 (C)
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/X/ Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- - --------------------------------------------------------------------------------
(3) Filing Party:

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(4) Date Filed:

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Notes:
(a) Aggregate number of securities equals the sum of the number of Units held
by all unitholders.
(b) Determined pursuant to Rule 0-11(a)(4).
(c) For purposes of calculating amount of filing fee only. Maximum aggregate
value of transaction equals the aggregate of the cash and the value of the
securities and other property to be distributed to the securityholders. The
amount of the filing fee calculated in accordance with Rule 0-11 equals $700
which is one-50th of one percent of the aggregate value of the transaction.
<PAGE> 2

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
4455 East Camelback Road, Suite A-200
Phoenix, Arizona 85018
(602)840-0060

March 17, 1997

TO: The Limited Partners of Hall Institutional Mortgage Fund Limited
Partnership:

Enclosed is a copy of the consent solicitation statement (the "Solicitation
Statement") relating to the solicitation of written consents of the limited
partners (the "Limited Partners") of Hall Institutional Mortgage Fund Limited
Partnership, an Arizona limited partnership (the "Partnership"), to sell
substantially all of the non-cash assets of the Partnership to an affiliate
thereof (the "Sale Transaction") for a purchase price of $1,600,000 (the
"Purchase Price").

The Sale Transaction will cause a dissolution of the Partnership, and unless a
majority of the Limited Partners vote to continue the Partnership, the Sale
Transaction will be immediately followed by the termination and winding up of
the Partnership's business and the distribution of the cash held by the
Partnership to the creditors and partners of the Partnership in accordance with
the Partnership Agreement (the "Liquidation"). The proposed Sale Transaction
and the Liquidation are collectively referred to as the "Proposal."

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND FORWARD THE ENCLOSED CONSENT CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.

Due to the importance of the actions for which consent is solicited, you should
read the entire Solicitation Statement carefully before returning the consent
card mailed to you with this Solicitation Statement.

Regardless of the number of units of Limited Partnership interest ("Units") you
hold, it is important that your Units be voted. After you have received and
read the Solicitation Statement, we urge you to fill in, date, sign and mail
the consent card promptly. Approval of the Proposal requires the affirmative
written consent of a majority of the Units held by all Limited Partners who are
not affiliates of the Managing General, the Purchaser or Craig Hall.

Please note that capitalized terms in this letter unless otherwise defined
herein shall have the same meaning as set forth in the Solicitation Statement.

In order to help you understand some of the basic information outlined in the
Solicitation Statement, we have prepared the following summary of important
facts discussed in this Solicitation Statement.

Purpose

The purpose of the Solicitation Statement is to provide information to you
regarding the proposed Sale Transaction and Liquidation and to ascertain
whether the Limited Partners are in favor of, or opposed to, the Sale
Transaction. The Sale Transaction involves the sale of the Partnership's
remaining mortgage notes receivable and the Liquidation involves the subsequent
termination of the Partnership by the conversion of all the Partnership's
assets to cash and the distribution of the cash to the Partnership's Limited
Partners. The completion of such a sale and liquidation is contingent upon
approval by the holders of a majority of the Units held by all Limited
Partners, who are not affiliates of the Managing General Partner, the Purchaser
or Craig Hall, vote in favor of the Proposal.

Projected Cash Distribution

Assuming that the Limited Partners vote to approve the Proposal, the
distribution is projected to be approximately $1,370, plus interest thereon, if
any, per Unit. This distribution would be a one-time, all-cash distribution.

<PAGE> 3
The Limited Partners of
Hall Institutional Mortgage Fund Limited Partnership
March 17, 1997
Page 2

Reasons for Sale Transaction and Liquidation

The underlying reasons for the Sale Transaction and Liquidation are summarized
as follows:

First, as discussed in the section entitled "Special Factors" in the
Solicitation Statement, recent modifications to the Partnership's loan
portfolio may have jeopardized the Partnership's prior reliance on certain
exemptions to registration under the Investment Company Act of 1940 (the "1940
Act"). Consequently, if the Partnership does not liquidate, it may have to
register as a reporting company under the 1940 Act. This is currently not
permitted by the Partnership Agreement and would not be practicable given the
limited purpose of the Partnership and even if possible, would require
substantial additional administrative expenses and burdens which the Managing
General Partner is attempting to minimize.

Second, the Managing General Partner has been looking for a method of
accommodating a number of Limited Partners who have, over the past few years,
requested an opportunity to effectively sell their Units.

Third, the Managing General Partner has been looking for a method to alleviate
the administrative cost and burden resulting from the Partnership's status as a
public company and the administrative cost increases that have occurred due to
the termination of certain pension and profit sharing plans which previously
owned Units, necessitating the allocation of fractional interests to such
plans' participants.

Conflict of Interest and Fairness

The Managing General Partner has obtained an independent third-party appraisal
and fairness opinion of the Partnership's notes receivable and the proceeds
from the Sale Transaction, respectively. After reviewing the terms of the
proposed Sale Transaction in relation to the appraised value of the Specific
Loans, the Managing General Partner considers the Sale Transaction to be fair
to the Limited Partners.

The Limited Partners should consider the following factors when considering the
Sale Transaction and the Liquidation:

o Both members of the Board of Directors (the "Board") of the managing
general partner of the Partnership are employed by the Purchaser, and
consequently, faced direct conflicts of interest in negotiating the Sale
Transaction with the Purchaser.

o No independent committee or representative has been appointed or
retained to negotiate the terms of the Sale Transaction on behalf of the
unaffiliated Limited Partners.

o The consideration paid by the Purchaser is based on a valuation of the
Partnership's assets by a third party appraiser hired by the Partnership
and the fairness of the Purchase Price has been passed on by a financial
advisor retained by the Board, however, no financial advisor has been
retained on behalf of the unaffiliated Limited Partners.

o The Partnership is being advised by legal counsel who in the past has
represented the Purchaser, and the unaffiliated Limited Partners will
not be represented by separate legal counsel.

o The managing general partner of the Partnership is controlled by Craig
Hall, the majority stockholder of the Purchaser, and the Purchaser will
benefit from any future appreciation or cash flow of the Partnership's
assets if the Sale Transaction is approved. The Purchaser will also
benefit indirectly from the Sale Transaction because of its relation to
the Affiliated Borrowers (as defined herein) and the ability to forgive
or renegotiate the Specific Loans (as defined herein) without the
approval of unaffiliated Limited Partners. Finally, the Purchaser will
benefit by not having to use certain of its employees to provide
services to the managing general partner of the Partnership without
compensation.

o If the Sale Transaction and the Liquidation are approved, Limited
Partners will receive approximately $1,370, plus interest thereon, if
any, per Unit, but will not participate in any future appreciation of
the assets of the Partnership.

o Limited Partners will not be afforded appraisal rights or dissenters
rights in connection with the Sale Transaction or the Liquidation.
<PAGE> 4
The Limited Partners of
Hall Institutional Mortgage Fund Limited Partnership
March 17, 1997
Page 3

Consequences of Disapproving the Sale Transaction and Liquidation

If the Proposal is not approved, the Partnership will continue to own the
Specific Loans and will continue to receive payments thereon, if any. The
Partnership may then be required to register under the 1940 Act which, among
other things, would deplete assets otherwise available for distribution to the
Limited Partners. See "Special Factors -- The Proposal." As a result, it is
currently the intention of the Managing General Partner to seek an alternative
buyer for the Specific Loans if the Proposal is not approved; however, it is
highly unlikely that the Managing General Partner will be able to arrange for
an alternative sale of the Specific Loans on terms which are as or more
favorable than those offered by the Purchaser, or on terms which are otherwise
acceptable to the Partnership.

It would be unlikely that the Managing General Partner would be able to locate
an alternative purchaser because (i) the obligor on each Specific Loan is a
partnership controlled by the Purchaser, (ii) there is no cash flow currently
from the Specific Loans and (iii) a majority of such properties owned by such
partnerships are managed by affiliates of the Purchaser. The Managing General
Partner believes that the Purchaser would derive more benefit from, and
accordingly pay a more favorable purchase price for, the Specific Loans than
would an unaffiliated third party.

Sale of Units Outside Sale Transaction

There is currently no established secondary market for Units. As such, in the
absence of the Sale Transaction, an investment in the Partnership is highly
illiquid.

Voting Procedures

Enclosed in your package is a consent card. This card permits you to vote for,
against or abstain from voting for the Proposal. Simply check the appropriate
box and send this consent card to the Partnership's administrative agent, The
Herman Group, Inc. ("HERMAN") in the enclosed return envelope.

Time Sensitive Nature of Vote

It is the intent of the Managing General Partner to close the Partnership
effective as of December 31, 1996 if the Proposal is approved in time. In
order to do so, the Partnership must receive the necessary vote on or before
April 5, 1997.

Partnership Tax Returns

If the Proposal is approved, the Managing General Partner anticipates making
the 1996 Partnership Schedule K-1 tax forms the final return for the
Partnership. The timeliness of the tax return will be highly contingent upon
the timeliness of the vote regarding the Sale Transaction and Liquidation.
While no assurances can be given, the Managing General Partner will attempt to
mail Schedule K-1's in sufficient time to meet the April 15, 1997 filing
deadline.

Answers to Questions Regarding the Proposal

Questions associated with the Solicitation Statement, voting, Unit ownership,
or any other questions in connection with the contemplated Proposal, should be
referred to HERMAN at the phone number and address indicated in the
Solicitation Statement. If HERMAN is unable to answer your questions, you may
direct your questions to Hall Financial Group, Inc., 750 N. St. Paul Street,
Suite 200, Attention: Mark Blocher, at (214) 953-1155; fax (214) 953-1160.

PLEASE DO NOT SEND IN YOUR CERTIFICATE FOR UNITS WITH YOUR CONSENT CARD. We
will notify you when to submit your certificates.

Sincerely,

HALL PENSION FUND ASSOCIATES, LTD.
GENERAL PARTNER
<PAGE> 5

SOLICITATION STATEMENT DATED MARCH 17, 1997

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP
4455 East Camelback Road, Suite A-200
Phoenix, Arizona 85018
(602)840-0060

SOLICITATION OF CONSENTS TO SELL CERTAIN LOANS OF THE PARTNERSHIP AND
DISSOLVE, TERMINATE AND WIND UP THE PARTNERSHIP

To the Limited Partners of Hall Institutional Mortgage Funds Limited
Partnership:

Hall Institutional Mortgage Fund Limited Partnership, an Arizona limited
partnership (the "Partnership"), is soliciting consents of the limited partners
("Limited Partners") holding units ("Units") of Limited Partnership interest in
connection with the following proposal (the "Proposal"): the sale of
substantially all of the non-cash assets of the Partnership (the "Sale
Transaction") to Hall Financial Group, Inc., a Delaware corporation (the
"Purchaser") that is 93% owned by Craig Hall, the sole owner of the managing
general partner of the Partnership, for a purchase price of $1,600,000 (the
"Purchase Price") followed by the termination and winding up of the
Partnership's business and the distribution of the cash held by the Partnership
to the creditors and partners of the Partnership (the "Liquidation") in
accordance with the Partnership's Amended and Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement"). If the Proposal
is approved by the requisite consent of the Limited Partners, the Sale
Transaction will close on or around April 7, 1997 and the Liquidation will
occur as soon as practicable thereafter. After repayment of the Partnership's
indebtedness and liabilities incurred for this Sale Transaction and
Liquidation, net proceeds from the Liquidation will aggregate approximately
$3,500,000, and the Partnership anticipates that approximately $1,370, plus
interest thereon, if any, per Unit will be distributed to the Limited Partners.
The Partnership anticipates that Limited Partners may be able to recognize a
taxable loss in 1996 resulting from the Sale Transaction. Limited Partners are
strongly urged to consult their own tax advisor with respect to the tax
consequences of the Sale Transaction and the subsequent Liquidation. See
"Federal Income Tax Consequences."

The Limited Partners should consider the following factors when
considering the Proposal:

o No independent committee or representative has been appointed or
retained to negotiate the terms of the Sale Transaction on behalf of the
unaffiliated Limited Partners.

o The Partnership is being advised by legal counsel who in the past has
represented the Purchaser, and the unaffiliated Limited Partners will
not be represented by separate legal counsel.

o Limited Partners will not be afforded appraisal rights or dissenters
rights in connection with the Sale Transaction or the Liquidation.

- - --------------------------------------------------------------------------------

THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS, NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
<PAGE> 6

Pursuant to the Partnership Agreement, the adoption of the Proposal
requires the consent of the Limited Partners of record holding a majority of
the outstanding Units (a "majority in interest"). Furthermore, the Proposal is
being structured to require the consent of a majority-in-interest of the Units
held by Limited Partners who are not affiliates of the Managing General Partner
(as defined herein), the Purchaser or Craig Hall. As of February 28, 1997,
there were 2,552 Units outstanding and approximately 633 holders of record.

THE BOARD OF DIRECTORS (THE "BOARD") OF HALL APARTMENT ASSOCIATES, INC.,
THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP (FOR A LIST OF DIRECTORS, SEE
"SCHEDULE I--CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS AND THE
DIRECTORS OF THE MANAGING GENERAL PARTNER"), BELIEVES THAT THE PROPOSAL IS FAIR
TO AND IN THE BEST INTEREST OF THE LIMITED PARTNERS. THE PURCHASE PRICE WAS
DETERMINED BY THE PURCHASER BASED ON THE VALUATION REPORT OF AN INDEPENDENT
THIRD PARTY APPRAISER HIRED BY THE BOARD. THE APPRAISER VALUED THE ASSETS TO BE
SOLD TO THE PURCHASER IN THE RANGE OF $1,275,000 TO $1,600,000. THE PURCHASER
AND THE MANAGING GENERAL PARTNER AGREED ON A PRICE OF $1,600,000 BECAUSE THIS
WAS THE HIGHEST AMOUNT IN THE RANGE OF VALUES DETERMINED BY THE APPRAISER. THE
BOARD THEN HIRED AN INDEPENDENT THIRD PARTY FINANCIAL ADVISOR TO EVALUATE THE
FAIRNESS OF THE APPRAISED PURCHASE PRICE TO BE PAID BY THE PURCHASER. THE
BOARD HAS RECEIVED A WRITTEN OPINION FROM ITS FINANCIAL ADVISOR, PRINCIPAL
FINANCIAL SECURITIES, INC., DATED AS OF AUGUST 6, 1996, THAT THE CONSIDERATION
TO BE RECEIVED BY THE PARTNERSHIP IN CONNECTION WITH THE SALE TRANSACTION IS
FAIR TO THE PARTNERSHIP FROM A FINANCIAL POINT OF VIEW AS OF THAT DATE. YOU
SHOULD NOTE THAT THE MANAGING GENERAL PARTNER (AS DEFINED HEREIN) IS CONTROLLED
BY CRAIG HALL, THE MAJORITY STOCKHOLDER OF THE PURCHASER, WHEN DETERMINING YOUR
VOTE. IN VIEW OF THIS AFFILIATION, THE BOARD RECOMMENDS THAT YOU FULLY ANALYZE
THE SALE TRANSACTION AND THE LIQUIDATION CAREFULLY AND THAT YOU CONSULT WITH
YOUR OWN LEGAL, TAX AND INVESTMENT ADVISORS PRIOR TO CASTING YOUR VOTE.

The approximate date on which this Solicitation Statement is being
mailed to Limited Partners is March 17, 1997. Only Limited Partners who are
holders of record of Units at the close of business on February 28, 1997 (the
"Record Date") will be entitled to submit consent cards with respect to the
Proposal. The deadline for the receipt of consent cards is May 1, 1997 at 5:00
p.m., Dallas, Texas time, (the "Expiration Date"). However, if the Proposal is
approved prior to the Expiration Date, the Proposal will be deemed adopted and
effective on the later of (i) April 6, 1997 and (ii) the date when the
Partnership has received executed consent cards consenting to the Proposal from
the Limited Partners holding a majority in interest of the Units outstanding on
the Record Date who are not affiliates of the Managing General Partner, the
Purchaser or Craig Hall (the "Approval Date").

Limited Partners may revoke any previously submitted consent with
respect to the Proposal by delivering written notice of revocation to the
Partnership prior to the earlier of the Approval Date or the Expiration Date.
Any duly executed consent card on which a consent or indication of withholding
of consent is not indicated (except broker non-votes expressly indicating a
lack of discretionary authority to consent) will be deemed a consent to the
Proposal. An abstention from voting on the Proposal will effectively count as
a negative vote with respect to such Proposal.

No persons have been authorized to give any information or to make any
representation other than the representations contained in this Solicitation
Statement in connection with the consents solicited hereby and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Partnership, the Managing General Partner or any other
person.

This Solicitation Statement is dated March 17, 1997.

<PAGE> 7
TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Effect of Approval of the Proposal . . . . . . . . . . . . . . . . 8
Consent of Limited Partners . . . . . . . . . . . . . . . . . . . . 9
Effect on Partnership and Limited Partners if Proposal is not
Approved . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . 10
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . 10
Fiduciary Responsibility of the Managing General Partner . . . . . 10
Fairness of the Proposal . . . . . . . . . . . . . . . . . . . . . 11

MATERIAL TERMS OF THE SALE TRANSACTION . . . . . . . . . . . . . . . . . . 17
The Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . 17
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 18

CERTAIN INFORMATION CONCERNING THE PARTNERSHIP AND THE PURCHASER . . . . . 18
The Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Managing General Partner and Management . . . . . . . . . . . . . . 18
Rights and Powers of Limited Partners . . . . . . . . . . . . . . . 19
Term and Liquidation of the Partnership . . . . . . . . . . . . . . 19
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Regulatory Proceedings . . . . . . . . . . . . . . . . . . . . . . 20
The Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Description of the Partnership's Business . . . . . . . . . . . . . 20
Description of the Partnership's Properties . . . . . . . . . . . . 21
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 21
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . 21
Specific Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 23

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 26

PRO FORMA BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ESTIMATE OF ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . 28

FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . 29
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Sale Transaction and Liquidation of Partnership . . . . . . . . . . 29
Income Tax Consequences to Tax-Exempt Organizations . . . . . . . . 30

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . 30

INTERESTS OF CERTAIN PERSONS IN TRANSACTION . . . . . . . . . . . . . . . . 30

MARKET FOR UNITS AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . 31

VOTING PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SOLICITATION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Certain Information Regarding the Executive Officers
and the Directors of the Managing General Partner . . . . . 35
</TABLE>

<PAGE> 8

<TABLE>
<S> <C>
SCHEDULE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Certain Information Regarding the Executive Officers
and the Directors of the Purchaser . . . . . . . . . . . . . 36

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . F-1

Annex A 1996 Valuation Report . . . . . . . . . . . . . . . . . . . . . . . A-1
Annex B Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Annex C Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . C-1
Annex D Summary of the Projections provided by Partnership to Principal
Financial for Fairness Opinion . . . . . . . . . . . . . . . . . D-1
Annex E Summary of the Appraisals . . . . . . . . . . . . . . . . . . . . . E-1
</TABLE>

<PAGE> 9
SUMMARY

The following is intended to assist Limited Partners in reviewing the
more detailed information contained elsewhere in this Solicitation Statement
and is qualified in its entirety by reference for such detailed information.

THE PURCHASER, THE PARTNERSHIP AND THE MANAGING GENERAL PARTNER

The Purchaser is a Delaware corporation that is 93% owned by its
President and Chief Executive Officer Craig Hall.

The Partnership's general partner is Hall Pension Fund Associates, Ltd.,
a Texas general partnership ("Hall Pension Fund"), the general partner of which
is Hall 1985 Management Associates Limited Partnership, a Texas limited
partnership ("Hall 1985 Management"), the general partner of which is Hall
Apartment Associates, Inc., a Texas corporation ("Hall Apartment Associates").
Craig Hall also owns 100% of the outstanding capital stock of Hall Apartment
Associates, which manages the day to day affairs of the Partnership. Craig
Hall is one of two directors of Hall Apartment Associates and controls over 90%
of each of Hall Pension Fund and Hall 1985 Management. Hall Apartment
Associates, Hall 1985 Management and Hall Pension Fund are collectively
referred to as the "Managing General Partner." See the chart on page 4 for the
relationship between Craig Hall, the Purchaser and the Managing General
Partner.

The Partnership is an Arizona limited partnership that was formed in
1984 solely for the purpose of providing second lien mortgages to certain
affiliates of the Purchaser (the "Affiliated Borrowers"). The Partnership
Agreement prohibits the Partnership from making loans to any entity that is not
an Affiliated Borrower or that is not engaged in a joint venture with an
Affiliated Borrower.

Since the formation of the Partnership, the Partnership has invested in
twelve second lien mortgages to twelve Affiliated Borrowers. Of the remaining
seven Affiliated Borrowers, Craig Hall is the general partner of one and Hall
'85 Associates is the general partner of the other six. The general partner of
Hall '85 Associates is Hall Apartment Associates and 99% of the limited partner
interests of Hall '85 Associates are owned by Hall 1985 Management. Craig Hall
is the sole shareholder of Hall Apartment Associates. Craig Hall is also the
93% owner of the Purchaser. The Purchaser and Craig Hall and their affiliates
also own certain limited partner interests in the Affiliated Borrowers. The
percentage of the outstanding limited partner interests in the Affiliated
Borrowers owned by Craig Hall and his affiliates (other than the Purchaser)
ranges from 1%-73%. The Purchaser's ownership interest in the Affiliated
Borrowers ranges from 0%-54%.

CONFLICTS OF INTEREST

Craig Hall, the President and Chief Executive Officer and sole director
of the Purchaser and one of two directors of the Managing General Partner, owns
93% of the outstanding capital stock of the Purchaser and 100% of the
outstanding capital stock of the Managing General Partner. Additionally, both
directors of the Managing General Partner are employees of the Purchaser.
Consequently, the directors of the Managing General Partner faced a conflict of
interest in negotiating the Sale Transaction with the Purchaser and in
determining the fairness of the Proposal.

No independent committee or representative has been appointed or
retained to negotiate the terms of the Sale Transaction other than an
independent third party appraiser hired by the Purchaser and a financial
advisor hired to advise the Board. Furthermore, the Partnership has hired legal
counsel who in the past represented the Purchaser, and the unaffiliated Limited
Partners will not be represented by separate legal counsel.

Although the Board, the Purchaser and Craig Hall believe that the Sale
Transaction and the Liquidation provide the most expeditious and cost efficient
means of liquidating the Partnership and providing a cash return to the Limited
Partners, in light of the above-referenced conflicts of interest, they are
refraining from making any recommendation as to how the Limited Partners should
vote with regard to the Proposal.

1
<PAGE> 10
THE PROPOSAL

The Partnership is soliciting the consent of the Limited Partners to the
Proposal. If the Sale Transaction is approved, the Partnership will sell
substantially all of its non-cash assets for $1,600,000 to the Purchaser. The
Sale Transaction will cause a dissolution and termination of the Partnership.
Unless a majority of the Limited Partners vote to continue the Partnership, the
dissolution will be followed by distribution of the Partnership's cash to its
creditors and partners in accordance with the Partnership Agreement.

EFFECT ON THE PURCHASER AND ITS AFFILIATES

The Purchaser and Craig Hall will benefit from any future appreciation
or cash flow of the Partnership's assets if the Sale Transaction is approved.
The Purchaser and Craig Hall may also benefit from the Sale Transaction because
of their relation to the Affiliated Borrowers and the resulting ability to
forgive or renegotiate the Specific Loans without the consent of the Limited
Partners. Finally, the Purchaser will benefit because it will no longer use
certain of its employees to provide services to the Managing General Partner
without compensation.

EFFECT ON LIMITED PARTNERS

If the Sale Transaction is approved, the Partnership will dissolve and
terminate and all of its remaining assets will be liquidated. It is
anticipated that as a result of the Liquidation, approximately $1,370, plus
interest thereon, if any, per Unit will be distributed to the Limited Partners.
Depending on when such Limited Partners originally purchased their Units,
Limited Partners may be able to realize a capital loss for tax purposes as a
result of the dissolution of the Partnership. See "Federal Income Tax
Consequences."

There is no established trading market for the Units. Liquidation of
the Partnership will provide Limited Partners an opportunity to receive cash in
liquidation of their investment in the Partnership and make alternative
investments that may offer more liquidity than is currently being provided by
an investment in the Partnership. However, by dissolving the Partnership, the
Limited Partners will be foregoing their proportionate interest in the assets
of the Partnership, as well as any future participation in the appreciation or
cash flow of the underlying properties, if any. There can be no assurance that
the future appreciation or cash flow of the Partnership's assets would generate
returns greater than or less than amounts receivable pursuant to the Sale
Transaction and the Liquidation.

NO DISSENTERS RIGHTS

The Limited Partners will not be entitled to any dissenters' rights or
appraisal rights under either the Partnership Agreement or Arizona law with
respect to the Sale Transaction or the Liquidation. The Limited Partners may
have other remedies under Arizona law. See "Fiduciary Responsibility of the
Managing General Partner."

FAIRNESS OF THE SALE TRANSACTION

The Partnership believes that the Purchase Price is fair from a
financial point of view and that the Sale Transaction is fair from both a
financial and procedural point of view. The Purchaser determined the Purchase
Price based on a valuation report from an independent third party appraiser.
The appraiser valued the assets to be sold to the Purchaser in the range of
$1,275,000 to $1,600,000. The Purchaser and the Managing General Partner agreed
on a price of $1,600,000 because this was the highest amount in the range of
values determined by the appraiser. The Managing General Partner then hired an
independent third party financial advisor to evaluate the fairness of the
Purchase Price. The Board of the Managing General Partner received a written
opinion from its financial advisor, Principal Financial Securities, Inc., dated
as of August 6, 1996, that the consideration to be received by the Partnership
as a result of the Sale Transaction is fair from a financial point of view as
of that date. As indicated below, the Partnership has structured the Proposal
so that the consent of a majority in interest of the Limited Partners who are
not affiliates of the Managing General Partner, the Purchaser or Craig Hall is
required. See "Special Factors--Fairness of the Sale Transaction."

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<PAGE> 11
REQUIRED CONSENT

The Partnership Agreement requires that the Proposal must be approved by
the holders of a majority in interest of the total outstanding Units. In
addition, the Partnership has structured the Proposal so that the consent in
writing of a majority in interest of the Limited Partners who are not
affiliates of the Managing General Partner, the Purchaser or Craig Hall is
required.

CONSIDERATIONS WITH RESPECT TO THE PROPOSAL

Continuing to operate the Partnership as a public partnership requires
ongoing expenditures for overhead costs associated with investor relations and
investor servicing as well as legal and accounting costs associated with
required compliance reporting. The Partnership is subject to federal and state
securities laws and the terms of the Partnership Agreement under which periodic
reports and annual financial statements are required to be generated by the
Partnership.

In addition, recent modifications to the Partnership's loan portfolio
may have inadvertently jeopardized the Partnership's continued reliance on
certain exemptions to registration under the Investment Company Act of 1940.
Consequently, if the Partnership does not dissolve and liquidate, it may have
to register as a reporting company under the Investment Company Act of 1940.
This is currently not permitted by the Partnership Agreement and would not be
practicable given the limited purpose of the Partnership, and the prohibitive
financial and administrative burdens, which the Managing General Partner is
trying to minimize.

TIME SENSITIVE NATURE OF VOTE

It is the intent of the Managing General Partner to close the
Partnership effective as of December 31, 1996 if the Proposal is approved in
time. In order to do so, the Partnership must receive the necessary vote on or
before April 5, 1997.

PARTNERSHIP TAX RETURNS

If the Proposal is approved, the Managing General Partner anticipates
making the 1996 Partnership Schedule K-1 tax forms the final return for the
Partnership. The timeliness of the tax return will be highly contingent upon
the timeliness of the vote regarding the Sale Transaction and Liquidation.
While no assurances can be given, the Managing General Partner will attempt to
mail Schedule K-1's in sufficient time to meet the April 15, 1997 filing
deadline.

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<PAGE> 12
RELATIONSHIP BETWEEN CRAIG HALL, THE MANAGING GENERAL PARTNER AND THE PURCHASER

Craig Hall, the President and Chief Executive Officer and sole director
of the Purchaser, owns 93% of the outstanding capital stock of the Purchaser.
Craig Hall, also, owns 100% of the outstanding capital stock of Hall Apartment
Associates and is one of the two directors who comprise the Board. In addition
to beneficially owning the general partner interests in Hall 1985 Management
and Hall Pension Fund, Craig Hall directly owns over 90% of the limited partner
interests in each of Hall 1985 Management and Hall Pension Fund. However,
Craig Hall beneficially owns less than 3% of the partnership interests in the
Partnership. The following chart shows the management structure of the
Partnership and the affiliation between Craig Hall, the Managing General
Partner and the Purchaser:

------------------
CRAIG HALL
------------------

100% stockholder and
one of two 93% stockholder and sole
directors director

------------------------- -----------------------
HALL APARTMENT HALL FINANCIAL
ASSOCIATES, INC. GROUP, INC.
------------------------- -----------------------

sole general
partner

-------------------------
HALL 1985 MANAGEMENT
ASSOCIATES, LTD.
-------------------------

sole general
partner

-------------------------
HALL PENSION FUND
ASSOCIATES, LTD.
-------------------------

sole general
partner

-------------------------
HALL INSTITUTIONAL
MORTGAGE FUND
LIMITED PARTNERSHIP
-------------------------

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<PAGE> 13
SPECIAL FACTORS

Summarized in this Solicitation Statement are certain provisions of the
Partnership Agreement. Such summaries are qualified in their entirety by
reference to the full text of the Partnership Agreement, which has been
provided previously to the Limited Partners and copies of which may be obtained
without charge upon request to the Partnership at the address set forth under
"Available Information." Certain sections of this Solicitation Statement,
including "Special Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contain various forward looking
statements, which represent the Partnership's expectations or beliefs
concerning future events. The Partnership cautions that these statements are
further qualified by important factors that could cause actual results to
differ materially from those in the forward looking statements, including
without limitation, the improvement or decline of the real estate market,
and/or a change in interest rates. In addition, these statements are further
qualified by important factors which would affect the underlying properties
that consist of apartment units and could cause actual results to differ
materially from those in the forward looking statements, including without
limitation, change in demand for the apartment units owned directly or
indirectly by Affiliated Borrowers (as defined below), the effect of economic
conditions, the effect of severe weather or natural disasters and the effect of
competitive pressures from other apartment complexes.

THE PROPOSAL

Background and Purpose of the Proposal. The decision by the Managing
General Partner to pursue the Sale Transaction and subsequent Liquidation of
the Partnership is the result of several considerations, including, among other
things: (i) the desire to provide Limited Partners with a means of liquidating
their investment in the Units; (ii) the desire to reduce the administrative
cost and burden resulting from the Partnership's status as a public company
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and (iii) more importantly, the desire to avoid additional
administrative cost and burden that would be required to register and maintain
the Partnership as an investment company under the Investment Company Act of
1940 (the "1940 Act"), which might otherwise be required as a result of the
recent restructuring of the Specific Loans (as defined below).

The most pressing impetus for the decision by the Managing General
Partner to undertake the actions for which consent is hereby solicited is the
possible loss of its exemption from registration under the 1940 Act as a result
of the recent restructuring of the Specific Loans beginning in 1995. Until
that time, each of the original loans made by the Partnership ("Specific
Loans") was secured by a subordinated mortgage on the real property owned by an
affiliate of the Purchaser (an "Affiliated Borrower"). The fact that the
Partnership held a security interest, albeit a subordinate one, in the real
property underlying each Specific Loan allowed the Partnership to be excluded
from the definition of "investment company" under the 1940 Act, which excludes
most companies that are primarily engaged in purchasing or otherwise acquiring
mortgages and other liens on and interests in real estate.

The principal reason the Partnership decided to restructure each of the
Specific Loans was the mutual desire of each Affiliated Borrower and the
Partnership to take advantage of a general decline in interest rates by
allowing the Affiliated Borrower to pay off its senior mortgage and enter into
another senior mortgage with a new lender to profit from a reduction in the
interest rate governing the senior mortgage. An important secondary reason for
refinancing the Affiliated Borrowers' senior mortgages was to obtain an
extension of the maturity date of each senior mortgage. It was the
Partnership's position that by restructuring the Specific Loans and refinancing
the related senior secured debt, the Affiliated Borrowers would be in a
stronger position to repay their obligations to the Partnership. However, each
of the new senior lenders required that the Partnership release its subordinate
security interest in the real estate previously securing both the primary loan
and the relevant Specific Loan. In exchange for the partnership's release of
its liens, the promissory note underlying each Specific Loan was amended from a
nonrecourse obligation to a recourse obligation of the Affiliated Borrower.

As of December 31, 1995, the Partnership had Specific Loans outstanding
to the following Affiliated Borrowers: Hall Brambletree Associates
("Brambletree"), Midtree Associates, Ltd. ("Midtree"), Northtree Associates,
Ltd. ("Northtree"), Hall Seven Trails Associates ("Arrowtree"), Lanetree
Associates Limited Partnership ("Lanetree"), Twintree Associates Limited
Partnership ("Twintree") and Coachtree Associates Limited Partnership
("Coachtree" and together with Lanetree and Twintree, the "NHP Transaction
Partnerships"). A more detailed description of each Specific Loan appears
elsewhere herein, see "Certain Information Concerning the Partnership and the
Purchaser--Specific Loans."

The restructuring of the Specific Loans materially enhanced the
Partnership's position as a subordinated creditor. The sale and restructuring
of the properties owned by the NHP Transaction Partnerships benefited the
Partnership, first because Lanetree distributed $569,419 to the Partnership as
part of the NHP Transaction and second because the interest rate on Lanetree,
Twintree, and Coachtree's first mortgage debt service was reduced from
approximately 11% to 9%, the benefit of which would ultimately flow to the
Affiliated Borrower, which in turn would free up proceeds to be paid to the
Partnership. The Midtree refinancing materially enhanced the Partnership's
position by providing a first mortgage at 8.1% with a 7 year term

5
<PAGE> 14
as compared to the original loan, which had matured and had an interest rate of
12%. The Brambletree refinancing materially enhanced the Partnership's
position because the new loan matures in 2006 and bears interest at 8.24%,
while the old loan matured in 1998 and bore interest at 10%. In addition, the
old lender agreed to reduce the debt by $295,624. The Northtree refinancing
materially enhanced the Partnership's position, because the interest rate on
the new loan is 7.58% as compared to the interest rate of the old loan of 11%.
The Arrowtree refinancing materially enhanced the Partnership's position
because Arrowtree paid the Partnership $1,100,000 from the refinancing proceeds
and the interest rate on the first lien mortgage was reduced from 9% to 7.57%.
All of such refinancings enhanced the Partnership's position, because in each
such case, the lien mortgage could have been foreclosed or the interest rate
was higher than current market rates. In one case, the Partnership would have
lost its loan to the Affiliated Borrower absent the refinancing because the
first lienholder would have foreclosed on the property that was subject to the
Partnership's lien and the Partnership had no equity in such property.

Although the Partnership believes that the restructuring has materially
enhanced its position as a subordinated creditor, the release of its security
interest in the real estate relating to the Specific Loans means that the
Partnership may be an investment company for purposes of the 1940 Act. As
there are likely no exemptions to the 1940 Act that would permit the
Partnership to continue to operate with the Specific Loans as currently
structured, the Managing General Partner believes that the Partnership must
either liquidate or register as an investment company under the 1940 Act. The
latter alternative, in the opinion of the Managing General Partner, is
untenable in view of the limited purpose of the Partnership and the significant
administrative cost and burden that registration would entail.

At the time of most of the refinancings, the Managing General Partner
was unaware that the refinancings could jeopardize the 1940 Act exemption of
the Partnership. One refinancing did occur after the Partnership was aware of
the 1940 Act issue, however the Partnership decided to allow such refinancing
because it had no effect on the 1940 Act issue as six of the seven loans had
already been refinanced and their security interests released. Consequently,
the Brambletree refinancing enhanced the Partnership's position as a
subordinated creditor by extending the maturity date and lowering the interest
rate on the senior loan.

In the absence of registration under the 1940 Act, the Partnership
cannot continue to operate with its present structure without exposing itself
to potential liability under the 1940 Act. The 1940 Act prohibits investment
companies that do not qualify for an exemption from registration from
continuing to engage in interstate commerce. Accordingly, the Managing General
Partner believes that the continued operation of the Partnership with its
present asset structure is not a feasible alternative.

Apart from the 1940 Act registration issue, the Managing General Partner
believes that there are important independent considerations supporting the
decision to proceed with the Sale Transaction and Liquidation of the
Partnership. In fact, for several years, the Managing General Partner has
considered taking the Partnership "private" in order to eliminate the costs
associated with having the Units registered under the Exchange Act and to
provide an opportunity to Limited Partners who would like to liquidate at least
part of their Units. In recent years, the number of record holders of Units has
been increasing due to the dissolution of qualified plans and trusts and other
tax exempt entities that previously held Units and the distribution of Units
from such entities to the individual participants in such entities. This
increase has added to the already burdensome administrative cost and effort
involved in maintaining the public status of the Partnership under the Exchange
Act. There has not however been a corresponding increase in the market for
Units, as to which there continues to be no established secondary market. At
the same time, an increasing number of Limited Partners have expressed a desire
to liquidate their Units. The Managing General Partner believes that the Sale
Transaction and subsequent Liquidation will serve at once to ease the
administrative burden of the Partnership resulting from its public status and
provide Limited Partners with the opportunity to liquidate their Units for
cash.

Until 1995, however, neither the Managing General Partner nor any of its
affiliates had sufficient liquidity to accomplish such goals, and no contacts,
negotiations or transactions to dissolve the Partnership or to take the
Partnership private were entered into or occurred. In early 1995, as a result
of the improvement of the real estate industry, the Purchaser had sufficient
liquidity to help the Managing General Partner obtain some of its goals while
allowing the Purchaser to make, in Purchaser's judgment, an attractive
investment in the Partnership or its assets. In order to assess the value of
its assets, the Partnership retained Bryan E. Humphries and Associates (the
"Appraiser") in January 1995 to appraise the properties securing the Specific
Loans. The appraisals made by the Appraiser are described below in "Fairness
of the Sale Transaction."

The original proposal considered by the Board was the possibility of a
tender offer by the Purchaser (the "Tender Offer") without a subsequent
Liquidation. As a result of the steady recovery of the real estate industry,
the Purchaser by then had accumulated sufficient liquidity to undertake the
Tender Offer without reliance upon third party borrowings. In addition to
enabling the Partnership to obtain some of its goals, the Purchaser viewed the
Units as an attractive investment.

In June 1995, the Purchaser settled upon the Tender Offer structure to
give Limited Partners the option of retaining their Units or selling them for
cash. The Purchaser decided to make a tender offer for no more than 49.9% of
the Units to avoid

6
<PAGE> 15
triggering a deemed dissolution of the Partnership for tax purposes. A deemed
dissolution of the Partnership could have resulted in an adjustment of the
Limited Partners' tax bases in their Units which, in turn, could have created
adverse tax consequences for the Limited Partners. The Purchaser engaged the
Appraiser in October 1995 to value the Partnership's assets and assist it in
determining a range of values for the Units. The Appraiser delivered a
valuation report to the Purchaser dated October 12, 1995, (the "1995 Valuation
Report"), a copy of which has been filed as an exhibit to the Partnership's
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") filed with the
Securities and Exchange Commission (the "Commission"). The 1995 Valuation
Report will be made available for inspection and copying at the principal
executive offices of the Managing General Partner by any Limited Partner or his
representative. The 1995 Valuation Report assigned an undiscounted value of
$4,292,500 to the Partnership's assets and a range of values for the
Partnership assets of between $2,378,000 to $2,960,000.

The Managing General Partner ultimately rejected the Tender Offer
alternative because of the need to conclusively resolve the 1940 Act
registration issue. Because the Purchaser could not tender for more than 49.9%
of the Units without adverse tax consequences to the Limited Partners, a Tender
Offer would unlikely result in the Units being held by less than 100 investors,
a level which would afford an exemption to the 1940 Act registration
requirements.

The Managing General Partner became aware of the 1940 Act issue in
February 1996. The Purchaser and the Managing General Partner then agreed that
a sale of the Partnership's assets would provide the most expeditious
resolution to the 1940 Act issue and provide the greatest return to the Limited
Partners.

The Purchaser determined the Purchase Price based on the March 20, 1996,
valuation report from the Appraiser attached hereto as Annex A (the "1996
Valuation Report"). The 1996 Valuation Report valued the assets to be sold to
the Purchaser in a range of $1,275,000 to $1,600,000. The Purchaser and the
Managing General Partner agreed on a price of $1,600,000 because this was the
highest amount in the range of values determined by the Appraiser. The Board
then hired a financial advisor, Principal Financial Securities, Inc., to
evaluate the fairness of the Purchase Price.

Sale Transaction. If the Proposal is approved, the Partnership will
sell the Purchaser the remaining Specific Loans and the Brambletree
Restructuring Advance (as defined below) which comprise substantially all of
the Partnership's non-cash assets, for the Purchase Price. See "Material Terms
of the Sale Transaction." The consummation of the Sale Transaction will cause
the Partnership to dissolve under the Partnership Agreement. The Partnership
Agreement requires that in the event of dissolution of the Partnership, unless
the Limited Partners elect to continue the business of the Partnership, the
Partnership's business will be terminated and the Managing General Partner will
proceed to the winding up of the affairs and the liquidation of the
Partnership.

Provision for Liabilities. Pursuant to the Partnership Agreement, all
distributions in connection with the Sale Transaction are subject to the
payment of Partnership expenses and to the maintenance of reasonable working
capital reserves deemed sufficient for Partnership business by the Managing
General Partner. In connection with the Sale Transaction, provision will be
made for the payment of all debts and liabilities of the Partnership, including
expenses to be incurred in the Sale Transaction and Liquidation, prior to the
distribution of the proceeds from the Sale Transaction. See the Financial
Statements included elsewhere herein for the liabilities of the Partnership as
shown on the balance sheet of the Partnership as of September 30, 1996.

The Managing General Partner will set aside approximately $35,000 of the
net proceeds of the Sale Transaction to meet anticipated liabilities of the
Partnership. The Managing General Partner believes that such amount will be
adequate to pay the liabilities of the Partnership given that the distribution
will immediately follow the Sale Transaction. It is, however, possible that
unforeseen intervening events and circumstances beyond the control of the
Partnership, such as a lawsuit (although the Partnership is unaware of any
pending or currently threatened litigation), may render such provisions
insufficient or inadequate. While the Partnership does not anticipate any
intervening event, there can be no assurance that the Limited Partners will
receive aggregate distributions equal to $3,500,000 as currently anticipated
(see Allocations and Distributions Following Liquidation below), and it is
possible that the occurrence of such intervening events could delay the timing
and decrease the amount of such distributions to the Limited Partners. There
are no limitations on the amount distributions may be affected by such events.
See "-- Allocations and Distribution Following Liquidation" below.

Effect of Sale Transaction on Purchaser. If the Sale Transaction is
approved, the Purchaser will purchase the non-cash assets of the partnership
for $1,600,000 and the Purchaser will benefit from any future appreciation or
cash flow from such assets. Following the Liquidation, the Purchaser, and the
other holders of Units, will have no further interest in the net book value and
net earnings of the Partnership.

Allocations and Distributions Following Dissolution. Upon the
consummation of the Sale Transaction, the Partnership will be dissolved and the
Managing General Partner will cause to be prepared a statement setting forth
the assets and liabilities of the Partnership as of the date of dissolution,
and such statement shall be furnished to all partners. After discharging all
debts

7
<PAGE> 16
and liabilities of the Partnership or making provision therefor, all remaining
cash will be distributed in accordance with the terms of the Partnership
Agreement as summarized below. A table estimating these allocations and
distributions appears elsewhere herein. See "Estimate of Allocations and
Distributions."

The Partnership Agreement provides that following dissolution of the
Partnership, the net profits and net losses, as determined in accordance with
the accounting methods of the Partnership followed for federal income tax
purposes, will be allocated as follows:

(a) net profits will be allocated 99% to the Limited Partners and 1%
to the general partner;

(b) net losses will be allocated among Limited Partners and the
general partner in proportion to the positive balances in their respective
capital accounts; provided, however, that all net losses will be allocated to
the general partner if the allocation of such net losses to the Limited
Partners would result in their having negative capital account balances; and

(c) net profits and net losses allocable to successive holders of
Units during a fiscal year will be divided among such holders based upon the
number of fiscal quarters such holders were deemed to be holders of such Units,
without regard to whether the Partnership's operations during a particular
fiscal quarter produced profits or losses. Notwithstanding the foregoing,
allocations of net profits or net losses attributable to a transaction
generating surplus funds will be allocated to holders of Units as of the first
day of the fiscal quarter in which the Partnership receives such surplus funds.

The Partnership Agreement provides that upon the liquidation and
dissolution of the Partnership, distributions will be made to Limited Partners
and the general partner in an amount equal to their respective capital
accounts. Distributions of operational cash or surplus funds generated during
a fiscal quarter will be made quarterly by the fifteenth day of the month
following such fiscal quarter; provided, however, that the general partner, in
the exercise of reasonable discretion, may determine to retain in the
Partnership all or any part of the funds available for distributions to meet
the working capital needs of the Partnership. All distributions made with
respect to a fiscal quarter will be made to those persons owning Units as of
the close of the first day of such fiscal quarter.

If upon liquidation and dissolution of the Partnership, the capital
account of the general partner reflects a deficit balance, the general partner
will contribute to the Partnership an amount equal to the lesser of (a) any
deficit balance in the general partner's capital account or (b) 1.01% of the
difference between the capital contributions of the Limited Partners (deemed to
be $5,000 per Unit, regardless of any volume purchase discounts provided at the
time of investment in the Partnership) and the capital contribution of the
general partner ($100).

The Partnership Agreement provides that the allocations and
distributions provided for in the Partnership Agreement as set forth above were
expressly consented to by each Limited Partner and the general partner as a
condition to becoming a partner.

The distribution of the proceeds from the Sale Transaction is expected
to occur as soon as practicable after the consummation of the Sale Transaction.
From and after the consummation of the Sale Transaction, the Managing General
Partner intends to invest the net proceeds from the Sale Transaction in short
term obligations, such as money market funds, and obligations of the United
States government with maturities of not in excess of 30 days, the earnings
from which will also be distributed pursuant to the Partnership Agreement upon
the Liquidation.

Assuming that the Limited Partners approve the Proposal and the
consummation of the Sale Transaction occurs in April 1997, it is estimated that
the aggregate net cash proceeds available for distribution will be
approximately $3,500,000 (or approximately $1,370, plus interest thereon, if
any, per Unit). The aggregate proceeds distributable will include simple
interest accrued from the date of the consummation of the Sale Transaction to
the date of the Liquidation. The aggregate proceeds distributable will be net
of accrued and unpaid expenses of the Partnership as of the date such proceeds
are distributed. Based on such aggregate amounts, and after the Partnership's
provision for repayment of the liabilities of the Partnership, it is estimated
that an amount equal to approximately $1,370, plus interest thereon, if any,
per Unit will be distributed to each of the Limited Partners. See "Estimate of
Allocations and Distributions."

The partners will be subject to federal income tax on the income (if
any) resulting from the Sale Transaction. See the Financial Statements
included elsewhere herein and "Federal Income Tax Consequences" below.

EFFECT OF APPROVAL OF THE PROPOSAL

If the Sale Transaction is approved and consummated, the Managing
General Partner will cease to manage the Specific Loans. The Partnership
Agreement provides that upon disposal of the Specific Loans, the Partnership
shall dissolve and, unless

8
<PAGE> 17
the Limited Partners elect to continue the business of the Partnership as
provided in the Partnership Agreement, the Partnership's business will be
terminated. If no such election is made, the Partnership business will be
terminated and the Managing General Partner will proceed to the winding up of
the affairs and the liquidation of the Partnership. The Managing General
Partner will cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such
statement will be furnished to all the Limited Partners. The remaining assets
of the Partnership, which the Managing General Partner determines should be
liquidated, then will be liquidated as promptly as possible. The registration
of the Units under the Exchange Act will be terminated, and the Partnership
will no longer be subject to the reporting requirements thereof and will cease
filing information with the Commission.

Upon completion of the winding up of the Partnership, the Managing
General Partner will file such certificates and documents as may be required to
effectuate and evidence the Liquidation of the Partnership, and the Partnership
Agreement will be formally terminated. It is the intent of the Managing
General Partner to close the Partnership effective as of December 31, 1996 if
the Proposal is approved in time. In order to do so, the Partnership must
receive the necessary vote on or before April 5, 1997.

If the Proposal is approved, the Managing General Partner anticipates
making the 1996 Partnership Schedule K-1 tax forms the final return for the
Partnership. The timeliness of the tax return will be highly contingent upon
the timeliness of the vote regarding the Sale Transaction and Liquidation.
While no assurances can be given, the Managing General Partner will attempt to
mail Schedule K-1's in sufficient time to meet the April 15, 1997 filing
deadline.

CONSENT OF LIMITED PARTNERS

The Partnership Agreement provides that the adoption of the Proposal
requires the consent in writing of Limited Partners who own a majority in
interest of the total outstanding Units. In addition, the Partnership has
structured the Proposal so that the consent in writing of a majority in
interest of Limited Partners who are not affiliates of the Managing General
Partner, the Purchaser or Craig Hall is required. As of the Record Date, there
were 2,552 Units outstanding. The Managing General Partner owns 22 Units, and
Purchaser owns 20 Units. Both such parties intend to consent to the Proposal.
Therefore, Limited Partners who are not affiliates of the Managing General
Partner, the Purchaser or Craig Hall holding at least 1,256 Units must consent
to the Proposal.

If Limited Partners owning more than a majority in interest of the total
outstanding Units consent to the Proposal and Limited Partners who are not
affiliates of the Partnership owning more than a majority in interest of the
total outstanding Units consent to the Proposal, Limited Partners who do not
join in such consent will nevertheless be bound by the decision to sell the
Specific Loans and dissolve, terminate and wind up the Partnership. An
abstention from consenting to the Proposal will effectively count as a negative
vote with respect to such Proposal. Broker non-votes expressly indicating a
lack of discretionary authority to consent also will effectively count as a
negative vote with respect to the Proposal.

EFFECT ON PARTNERSHIP AND LIMITED PARTNERS IF PROPOSAL IS NOT APPROVED

If the Proposal is not approved, the Partnership will continue to own
the Specific Loans and will continue to receive payments thereon, if any. The
Partnership may be required to register under the 1940 Act or to find an
alternative to such registration. Failure to do so could result in significant
liability. See "Special Factors -- The Proposal." As a result, it is
currently the intention of the Managing General Partner to seek an alternative
buyer for the Specific Loans if the Proposal is not approved; however, it is
highly unlikely that the Managing General Partner will be able to arrange for
an alternative sale of the Specific Loans at a favorable price or on terms
which are as or more favorable than those offered by the Purchaser, or on terms
which are otherwise acceptable to the Partnership. Because (i) the obligor on
each Specific Loan is a partnership controlled by an affiliate of the
Purchaser, (ii) there is no cash flow currently from the Specific Loans, and
(iii) a majority of such properties owned by such partnerships are managed by
affiliates of the Purchaser, the Managing General Partner believes that the
Purchaser would derive more benefit from, and accordingly pay a more favorable
purchase price for, the Specific Loans than would an unaffiliated third party.

The Managing General Partner has not previously sought offers from third
party buyers because the Managing General Partner believes such a solicitation
is highly unlikely to bring an offer that would approach the offer from the
Purchaser and would therefore not be cost effective to pursue. Such a
solicitation would not be cost effective because a financial advisor or other
broker would have to be hired to solicit offers and the process would be time
consuming. In addition, the Managing General Partner believes it is highly
unlikely that a third party would be interested in buying the assets of the
Partnership because (i) the Specific Loans are subordinate to the loans made by
each senior lender; (ii) the Specific Loans are generally unsecured; (iii) the
Specific Loans are not paying interest; and (iv) a third party would be less
familiar than the Purchaser with the Affiliated Borrowers and underlying
properties.

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<PAGE> 18

APPRAISAL RIGHTS

The Limited Partners will not be entitled to any dissenters' or
appraisal rights under the Partnership Agreement or Arizona law with respect to
the transactions described in the Solicitation Statement, and will not
voluntarily be granted such rights by the Partnership or Purchaser in as much
as, upon liquidation, the Partnership will distribute all funds available for
distribution. Nevertheless, Limited Partners may have other remedies under
Arizona law. See "Fiduciary Responsibility of the Managing General Partner"
below.

CONFLICTS OF INTEREST

The directors of the Board are subject to conflicts of interests arising
out of their affiliation with the Purchaser. Craig Hall, the President and
Chief Executive Officer and sole director of the Purchaser, owns 93% of the
outstanding capital stock of the Purchaser, and owns 100% of the outstanding
capital stock of the Managing General Partner. Additionally, Craig Hall is one
of two directors of the Board of the Managing General Partner, both of whom are
employed by the Purchaser. Accordingly, Craig Hall and the directors of the
Board faced direct conflicts of interest in negotiating the Sale Transaction
with the Purchaser.

While no independent committee or representative has been appointed or
retained to negotiate the terms of the Sale Transaction on behalf of the
unaffiliated Limited Partners, the Purchaser determined the Purchase Price
based on the 1996 Valuation Report of the Appraiser, who is an independent
third party. The Appraiser valued the assets of the Partnership to be sold to
the Purchaser in the range of $1,275,000 to $1,600,000. The Purchaser and the
Managing General Partner agreed on a price of $1,600,000 because this was the
highest amount in the range of values determined by the Appraiser. The Board of
the Managing General Partner then hired an independent financial advisor to
evaluate the fairness of the appraised Purchase Price to be paid by the
Purchaser. Additionally, the Sale Transaction and the Liquidation must be
approved by a majority vote of the Limited Partners who are not affiliates of
the Managing General Partner, the Purchaser or Craig Hall. The Managing
General Partner, the Purchaser and Craig Hall own less than 3% of the
Partnership in the aggregate.

The Partnership has hired legal counsel who in the past has represented
the Purchaser. So long as no dispute arises between the Partnership and the
Purchaser, the parties will not be represented by separate legal counsel.
Should such a dispute arise, the Purchaser will retain separate legal counsel.
No separate counsel has been hired to represent the unaffiliated Limited
Partners.

FIDUCIARY RESPONSIBILITY OF THE MANAGING GENERAL PARTNER

Under Arizona law, the Managing General Partner is accountable to the
Partnership as a fiduciary and, consequently, must exercise the utmost good
faith and integrity with respect to Partnership affairs. Generally, a general
partner of a limited partnership has the rights and powers and is subject to
the restrictions of a partner in a partnership without limited partners.
Partners in general partnerships in Arizona owe certain fiduciary duties to the
other partners. These duties include the duty of loyalty and the duty of care.
The duty of loyalty includes the following: (i) to account to the partnership
and hold as trustee for it any property, profit or benefit derived by the
general partner in the conduct and winding up of the partnership business or
derived from a use by the general partner of partnership property, including
the appropriation of partnership property; (ii) to refrain from dealing with
the partnership in the conduct or winding up of the partnership business as or
on behalf of a party having an interest adverse to the partnership; and (iii)
to refrain from competing with the partnership in the conduct of the
partnership business before the dissolution of the partnership. A general
partner's duty of care to the partnership and the other partners is limited to
refraining from engaging in grossly negligent or reckless conduct, intentional
conduct or a knowing violation of the law. Further, a general partner must
discharge his duties to the partnership and the other partners and exercise any
rights consistently with the obligation of good faith and fair dealing. A
general partner does not violate a duty or obligation merely because the
general partner's conduct furthers the general partner's own interest.

Additionally, under Arizona law: (i) a limited partner may, subject to
the provisions of applicable procedural rules and statutes, bring an action
against the partnership or another partner for legal or equitable relief to
enforce the limited partner's rights under the partnership agreement and may
bring a derivative action to enforce the rights of the partnership; and (ii)
limited partners who have suffered losses in connection with the purchase or
sale of their interests in a partnership due to the breach of the provisions of
the federal securities laws (and the regulations promulgated thereunder) by a
general partner in connection with such purchase or sale, including
misapplication by a general partner of the proceeds from the sale of interests
in such partnership, may have a right to recover such losses from such general
partner in an action based upon such laws and/or regulations.

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<PAGE> 19
The foregoing summary, describing in general terms the remedies
available to the Limited Partners for breach of fiduciary duty by the Managing
General Partner, is based on statutes, cases and decisions as of the date
hereof. This is a rapidly developing and changing area of the law; therefore,
the Limited Partners who believe that a breach of fiduciary duty by the
Managing General Partner has occurred should consult their own counsel for an
evaluation of the status of the law at such time.

The Partnership Agreement provides that except in the case of negligence
or misconduct, the Managing General Partner and its affiliates or agents will
not be liable to the Partnership or any Limited Partner for any act or for any
failure to act that causes damages to the Partnership, if such course of action
or inaction was undertaken in good faith to promote the best interest of the
Partnership. Furthermore, except in the case of bad faith, negligence,
misconduct or reckless disregard of duty, the Managing General Partner and its
affiliates or agents, under certain circumstances, will be entitled to
indemnification by the Partnership against and released by the Limited Partners
from any liability or loss, as a result of any claim relating to any action or
inaction concerning the activities of the Partnership, provided such action or
inaction was undertaken in good faith to promote the best interests of the
Partnership.

Notwithstanding the foregoing, neither the Managing General Partner or
its affiliates or agents will be indemnified from any liability or loss
incurred in connection with (i) any claim arising under the Securities Act of
1933 unless (a) the party seeking indemnification is successful in defending
such action and (b) such indemnification is specifically approved by a court of
law which has been advised as to the current position of the Commission and the
Commissioner of Corporations of the State of California regarding
indemnification for violations of securities laws; or (ii) any liability
imposed by law, including liability for fraud, bad faith or negligence. As a
result of the above limitations of liability, the Limited Partners have a more
limited right of action than they may have absent the limitations in the
Partnership Agreement.

FAIRNESS OF THE PROPOSAL

Determination of Purchase Price. The Purchaser determined the Purchase
Price based on the 1996 Valuation Report of the Appraiser. The Appraiser valued
the assets of the Partnership to be sold to the Purchaser in the range of
$1,275,000 to $1,600,000. The Purchaser and the Managing General Partner agreed
on a price of $1,600,000 because this was the highest amount in the range of
values determined by the Appraiser. The Managing General Partner then hired an
independent third party financial advisor, Principal Financial Securities,
Inc., to evaluate the fairness of the appraised Purchase Price to be paid by
the Purchaser.

a. Valuation Report. In 1995, the Partnership hired Bryan E.
Humphries and Associates to value the assets of the Partnership in connection
with the Managing General Partner's consideration of certain alternatives to
liquidating the Limited Partners' investments in the Partnership. See the 1996
Valuation Report attached hereto as Annex A. The 1996 Valuation Report
contains a summary of the appraisals that the Appraiser performed on each
property in which an Affiliated Borrower has an interest and a valuation of
each of the Specific Loans, as well as the qualifications of the Appraiser.
These appraisals are filed with the Commission as an exhibit to Schedule 13E-3
and are available for review and copying by Limited Partners during normal
business hours at the executive offices of the Managing General Partner. A
summary of the appraisals is attached hereto as Annex E.

The cash flow projections used in the 1995 appraisals were used in the
valuation of the Specific Loans. Each of the appraisals was based on a
combination of three approaches: the income approach, the market value approach
and the cost approach.

Actual sales comparables were used in the market value approach in each
appraisal. The appraised values were then used in the valuation of the
Specific Loans in the 1996 Valuation Report.

Capitalization rates used in the income approach ranged from 10.5% to
11.5% and the discount rate ranged from 11.5% to 12.5%. In the real estate
industry, capitalization rates are considered appropriate in the range from
10.5% to 11.5%. Capitalization rates used in the appraisals vary depending on
the age of the property, the location, the size and the tenant profile. Newer,
well located properties will have lower capitalization rates and older, poorly
located properties will have higher capitalization rates. The discount rates,
which are an estimation of the amount of return that an investor would seek to
earn on its investment, ranged from 11.5% to 12.5% on each property. The
discount rate gave the Appraiser a range of values based upon the income stream
of the properties.

Income projections from information in the appraisals pertaining to cash
flows from the operations of the properties were used to value the Specific
Loans. The income projections were used in valuing the Specific Loans, because
the properties were not likely to be sold in the near future due to the fact
that such properties had been refinanced with first mortgages containing severe
prepayment penalties, or were included in the NHP Transaction. See "Certain
Information Concerning the Partnership--Specific Loans."

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<PAGE> 20
A range of discounts was then applied to each of the Partnership's
Specific Loans based upon the Appraiser's judgment as to the value of a
Specific Loan. Major factors in determining the discount included the ability
of each Limited Partner to sell its Units in the Partnership where it did not
have control of the property as well as the risk and the liquidity of each of
the Partnership assets.

The valuation of the Specific Loans assumes that all the properties
would be held for five years and allocated the cash flows based upon the terms
of a hypothetical sale or based on operations. A discount rate of 40%-60% was
used on a property-by-property basis. In order for the Partnership to receive
any funds, each of the properties needed to be held for five years based upon
the assumptions of the narrative cash flow. Under the priority payment system
(the order or priority of cash flow payments of the specific property to the
Partnership), little funds would be available to the Partnership unless the
property was held for a period of time and appreciated. Presumption of
assumptions in a five-year cash flow added considerable risk to the present
value of the Partnership Lender Interest (as defined in the 1996 Valuation
Report); consequently, the Partnership interest was discounted on average
40%-60% on a property-by-property basis. The Partnership does not have
expertise in the valuation of limited partnership units; however, the
Partnership does believe that the capitalization rates and discount rates used
by the Appraiser were appropriate.

The Appraiser was selected by the Partnership due to previous appraisals
prepared by the Appraiser for affiliates of the Purchaser and the Appraiser's
knowledge in this type of valuation. Bryan E. Humphries and Associates
specializes in the real estate valuation and services business. The Appraiser
is owned by Bryan E. Humphries, Inc. The Appraiser has over seventeen years of
experience in the appraisal of real properties, including commercial,
multi-family, industrial and special purpose properties, for mortgage bankers,
savings and loan associations, insurance companies, attorneys, private
individuals, public utilities and governmental agencies. The Appraiser's
primary areas of concentration during the last five years include the appraisal
of multi-family and office properties. Additional experience of the Appraiser
includes ownership and management of various multi-family and office
properties. The Appraiser is a licensed broker in Texas and is certified by the
following states: Texas, Louisiana, California, Colorado and Utah, and a member
of the Appraisal Institute, North Texas Commercial Association of Realtors and
Real Estate Financial Executive Association.

The Partnership paid the Appraiser $30,750 for the appraisals and $1,500
for the 1996 Valuation Report. The Purchaser paid $1,000 for the 1995
Valuation Report. The amounts paid for the valuation reports were
substantially less than the amount paid by the Partnership for the appraisals
because the valuation reports were based on the previous appraisals. The 1996
Valuation Report will not be updated for financial and timing reasons. Given
the limited financial resources of the Partnership, the Managing General
Partner desires to preserve the assets of the Partnership so that there will be
more cash available for distribution to the Limited Partners.

b. Fairness Opinion. Principal Financial Securities, Inc.
("Principal Financial") was retained by the Managing General Partner to serve
as financial advisor and to render financial advisory and investment banking
services to the Board with respect to the Sale Transaction. No limitations
were imposed by the Board upon Principal Financial with respect to the
investigations made or the procedures followed by it in rendering its opinion.
On September 17, 1996, Principal Financial delivered its oral opinion to the
Board, that as of the date of its opinion, the Purchase Price to be received by
the Partnership's Limited Partners pursuant to the Sale Transaction is fair
from a financial point of view to the Partnership. Principal Financial also
delivered its written opinion dated August 6, 1996 (the "Fairness Opinion"),
which includes a description of the procedures followed, documents reviewed,
matters considered, the scope of review undertaken and the assumptions made in
arriving at its conclusions. The full text of such written opinion is
incorporated herein by reference and attached to this Solicitation Statement as
Annex B, which Limited Partners are urged to read in its entirety. For purposes
of its opinion, Principal Financial relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was received by Principal Financial from
public sources or provided to Principal Financial by the Managing General
Partner or any of its representatives. Principal Financial also assumed, with
respect to the financial projections supplied to Principal Financial for the
properties relating to the Specific Loans, that all such information was
reasonably derived on bases reflecting the best currently available estimates
and judgments of the Managing General Partner's management as to the future
operating and financial performance of such properties. The cash flow
projections provided by the Partnership to Principal Financial assume a rental
increase of 3% to 4% per year depending upon the property, that vacancy rates
would range from a low of 5% to a high of 8%, and that the expenses would
increase between 3% and 4% depending upon the property. Such assumptions
produced projections of total cash flow to the Affiliated Borrowers after debt
service of $1,401,127 in 1996, $1,627,187 in 1997, $1,911,800 in 1998,
$2,100,195 in 1999 and $2,294,078 in 2000. The projections do not reflect
distributions from the Affiliated Borrowers to the Partnership. Such
projections are attached as Annex D to this Solicitation Statement. Principal
Financial did not make an independent evaluation or appraisal of the assets of
the Partnership or the Affiliated Borrowers. The Fairness Opinion will not be
updated due to time and cost restraints, given the Managing General Partner's
desire to preserve the assets of the Partnership so that there will be more
cash available for distribution.

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<PAGE> 21
LIMITED PARTNERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY.

In arriving at its opinion, Principal Financial considered such
financial and other factors as it deemed appropriate under the circumstances,
including among other things: (i) the Asset Purchase Agreement (as defined
below); (ii) Promissory Notes detailing the terms of the Specific Loans; (iii)
Debtors Second Amended Plan of Reorganization filed by Hall Brambletree
Associates; (iv) historical operating and financial results of the properties
associated with the Specific Loans for the twelve month periods ended December
31, 1993, 1994, 1995 and the period ended June 25, 1996; (v) internal operating
and financial projections of the properties associated with the Specific Loans
including projected statements of operations for the twelve month periods
ending December 31, 1996, 1997, 1998, 1999, and 2000; (vi) the independent
analyses of the market value performed by the Appraiser, as of February 1,
1996, of the Managing General Partner's loans receivable interest provided to
Principal Financial by the management of the Managing General Partner; (vii)
the financial terms, to the extent publicly available, of certain comparable
transactions, which are similar in certain respects to the Sale Transaction,
including the discounts assigned to the valuation of fractional ownership
positions in closely held companies; (viii) the tour of the five properties
located in Albuquerque, New Mexico (Phoenix Square/Midtree Apartments,
Candlewick/Northtree Apartments, The Lake/Lanetree Apartments, Los Altos
Towers/Twintree Apartments, and The Villas/Coachtree Apartments) and the
Brambletree Apartments located in Garland, Texas; (ix) discussions with members
of senior management of the Managing General Partner relating to the operations
and future business prospects of the properties associated with the Specific
Loans, and the rental housing markets in which such properties are located; and
(x) such other information, financial studies and analyses, and financial,
economic and market criteria as Principal Financial deemed relevant. Based
upon these factors, Principal Financial believed the Purchase Price to be fair
from a financial point of view to the Partnership. Principal Financial used a
going concern analysis and liquidation analysis in arriving at its
determination. These two methods were discussed by Principal Financial in its
oral report to the Board of the Managing General Partner (discussed below).

In delivering its oral opinion and making its presentations to the Board
of the Managing General Partner, Principal Financial presented certain
financial and comparative analyses, and such other factors that it deemed
relevant. These analyses included:

(i) Going Concern Analysis. Principal Financial provided a
discussion of the methodology and procedures used to determine
the fairness from a financial point of view of the Purchase
Price. Principal Financial advised that two of its employees
traveled to each of the five properties in Albuquerque, New
Mexico, and one of the properties in Garland, Texas. Principal
Financial advised that it commenced its analysis by using the
cash flow models provided by the Partnership. Principal Financial
then stated that it adjusted the rental increases and expenses to
reflect what it determined was appropriate for the market at that
time. Principal Financial specifically mentioned that it reduced
the rental increases in the Albuquerque market due to the
extensive availability of apartments in the market and the
prediction that rental increases would consequently be minimal in
the near term. Principal Financial then stated that it made net
operating income ("NOI") projections for six years and assumed a
five year holding period for each property. The projected sale
price for each property was determined by dividing an assumed
capitalization rate into the year six NOI generated by the
property. Principal Financial stated that it believed that a B+
property would sell at slightly below a 10% capitalization rate.
(A B+ property for purposes of real property evaluation
constitutes a property which is other than new, but is situated
in an excellent location.) Principal Financial stated that it
did not believe that any of the properties reviewed would be
categorized as a B+, primarily due to their age and locations,
and therefore assumed an 11% capitalization rate for all of the
properties, except the Brambletree Apartments. Principal
Financial assumed a 10% capitalization rate for Brambletree
Apartments because it is newer, has a more stable and higher
occupancy rate, and is in a more desirable location than the
other properties. Principal Financial then stated, that based
upon its cash flow analysis and applying a discount factor, the
value of the Specific Loans would possess a range of value
between $1,100,000 to $1,590,000. This analysis was based on a
going concern valuation of the Specific Loans.

(ii) Liquidation Analysis. Principal Financial then stated that in
order to evaluate whether the $1,100,000 to $1,590,000 range of
value was fair from a financial point of view, it performed a
current liquidation analysis. That analysis required Principal
Financial to analyze a sale of each of the properties and assume
a distribution of the sales proceeds according to each property's
priority schedule of payments. Based upon this analysis,
Principal Financial concluded that, after payment to those
parties with priority ahead of the Partnership, remaining
proceeds available to pay the Partnership's interest in the
properties would be zero making the value of the receivables
zero. Thus, Principal Financial opined that the $1,600,000
Purchase Price was fair from a financial point of view.

The Board further questioned Principal Financial as to whether there
were any limitations regarding Principal Financial's due diligence or
assumptions used in the determination of the value of the Specific Loans, and
Principal Financial stated that there were no such limitations.

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<PAGE> 22
The summary set forth above does not purport to be a complete
description of the Fairness Opinion or Principal Financial's oral presentation
to the Board. The preparation of a fairness opinion is a complex process and
not necessarily susceptible to partial analysis or summary description.
Principal Financial believes that its analyses must be considered as a whole
and that selecting portions of its analyses and of the factors considered by
it, without considering all factors and analyses, could create a misleading
view of the processes underlying its opinion. In its analyses, Principal
Financial made numerous assumptions with respect to general business and
economic conditions and other matters, many of which are beyond the
Partnership's control. Any estimates contained in such analyses, (including
the Fairness Opinion), are not necessarily indicative of actual values, which
may be significantly more or less favorable than as set forth therein. Analyses
based upon forecast of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than
suggested by such analyses. Principal Financial's estimates concerning the
value of the Sale Transaction does not necessarily reflect the prices at which
the Specific Loans could be sold.

The foregoing description of the Fairness Opinion is qualified by
reference to the full text of such report which is attached as Annex B hereto
and is available for inspection and copying by any Limited Partner or a
representative of such person who has been so designated in writing, at the
principal executive offices of the Partnership, and which may also be obtained
in the manner described under "AVAILABLE INFORMATION." Principal Financial has
consented to the use of and inclusion of the Fairness Opinion as an annex to
this Solicitation Statement.

Pursuant to the engagement letter dated June 21, 1996, between the
Managing General Partner, the Purchaser, and Principal Financial, the Managing
General Partner and the Purchaser have agreed: (i) that the Managing General
Partner shall reimburse Principal Financial for its reasonable legal and out of
pocket expenses incurred by Principal Financial in connection with the
engagement as and when they are incurred; (ii) that the Managing General
Partner also agrees to indemnify and hold harmless Principal Financial against
any losses, claims, damages or liabilities to which Principal Financial may
become subject in connection with the services or matters that are the subject
of the engagement, except for losses, claims, damages or liabilities resulting
primarily and directly from Principal Financial's gross negligence or willful
misconduct as determined by a court in a final judgment wherein the court has
jurisdiction over such matters. The Managing General Partner has further
agreed that if the indemnity is unavailable or insufficient to hold Principal
Financial harmless, then the Managing General Partner will contribute such
amounts paid or payable by Principal Financial as a result of such losses,
claims, damages or liabilities in proportion to the benefits received by the
Managing General Partner and its Limited Partners and the Partnership and its
Limited Partners on the one hand, and Principal Financial, on the other hand;
the Managing General Partner has also agreed to indemnify or pay Principal
Financial, in circumstances in which the Managing General Partner or the
Partnership is a party to or subject of any judicial or administrative
proceeding or investigation in connection with the Sale Transaction, and, in
connection therewith, Principal Financial testifies or otherwise presents
evidence or makes submissions as to Principal Financial's performance of its
obligations under the engagement letter; in such circumstances, the Managing
General Partner has agreed to pay Principal Financial $250 per person per hour
for time expended and a minimum of $1,000 per day per person in the event of
court testimony or presentation of evidence, plus out of pocket expenses and
all reasonable fees and expenses of any counsel engaged by Principal Financial
in connection therewith; (iii) the Managing General Partner has agreed to pay
Principal Financial compensation for the delivery of the Fairness Opinion and
other services thereunder, in the amount of $50,000, $25,000 of which was paid
by the Managing General Partner upon the execution of the engagement letter,
and $25,000 of which was paid by the Managing General Partner upon the date
Principal Financial delivered the Fairness Opinion. The Managing General
Partner also agreed to reimburse Principal Financial for all reasonable out of
pocket expenses incurred in connection with providing the Fairness Opinion and
serving as financial advisor to the Board, which reimbursements were not to
exceed $5,000 without prior written permission from the Managing General
Partner.

Principal Financial is a nationally recognized investment banking firm
engaged in the valuation of companies and their securities in connection with
business reorganizations, private placements, negotiated underwritings, mergers
and acquisitions, and valuations for estate, corporate and other purposes. The
Board selected Principal Financial based on such expertise and Principal
Financial's past performance of various investment banking services for the
Purchaser including a fairness opinion which Principal Financial delivered in
February, 1994 to the Purchaser's board of directors on the price of the
Purchaser's stock to be sold, for which services Principal Financial received
fees in the amount of $60,000. The Purchaser and Craig Hall also maintain
investment accounts with Principal Financial, and, therefore, are familiar with
Principal Financial's services.

Discussion of the Board. In evaluating the fairness of the Sale
Transaction and the estimated distribution of the proceeds from the
Liquidation, the Board of the Managing General Partner, on behalf of the
Partnership and on behalf of the Managing General Partner further considered
the following procedural and substantive factors:

a. Procedural Fairness. The Purchaser and the Managing General
Partner are controlled by Craig Hall. Additionally, both members of the Board
of Directors (the "Board") of Hall Apartment Associates, Inc., an entity which
together with Hall 1985 Management and Hall Pension Fund, comprises the
Managing General Partner (for a list of the directors, see "Schedule I--Certain
Information Regarding the Executive Officers and the Directors of the Managing
General Partner"), are

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<PAGE> 23
employees of the Purchaser. The Sale Transaction was unanimously approved by
the Board. Because of the potential conflict of interest, the Board believes
that it should abstain from making any recommendation as to how the Limited
Partners should vote with regard to the Proposal. Nevertheless, the Board on
behalf of the Managing General Partner and the Partnership, believes that the
Proposal procedurally is fair and in the best interest of the Limited Partners.

While an independent third party was not appointed or retained to
negotiate the Sale Transaction on behalf of the unaffiliated Limited Partners,
the Board believes that Sale Transaction and the Liquidation are procedurally
fair to the Limited Partners because the Purchaser determined the Purchase
Price based on the 1996 Valuation Report of the Appraiser. The Appraiser valued
the assets of the Partnership to be sold to the Purchaser in the range of
$1,275,000 to $1,600,000. The Purchaser and the Managing General Partner agreed
on a price of $1,600,000 because this was the highest amount in the range of
values determined by the Appraiser. The Board of the Managing General Partner
then hired Principal Financial to evaluate the fairness of the appraised
Purchase Price to be paid by the Purchaser.

Additionally, the Board believes the Sale Transaction and the
Liquidation are procedurally fair due to (i) the submission of the Proposal to
the vote of the Limited Partners for approval; (ii) the fact that neither the
Managing General Partner, the Purchaser or Craig Hall holds a significant
number Units; and (iii) the requirement that Limited Partners who hold a
majority of the Units and who are not affiliates of the Managing General
Partner, the Purchaser or Craig Hall must approve the Proposal.

b. Substantive Fairness. The Board, on behalf of the Managing
General Partner and on behalf of the Partnership, believes the Sale Transaction
and the Liquidation are also substantively fair. The Managing General Partner
and the Purchaser decided to set the Purchase Price at $1,600,000 because this
was the highest amount in the range of values determined by the Appraiser. The
Board's belief that the Sale Transaction and the estimated distribution of
$1,370, plus interest thereon, if any, from the Liquidation are fair to and in
the best interests of the Limited Partners is based on the following factors:

1. Valuation Report. The Board reviewed and adopted in its entirety
the analysis and valuations of the Appraiser set forth in the 1996 Valuation
Report. The Board believes the Purchase Price is fair based upon the 1996
Valuation Report. The Managing General Partner and the Purchaser determined
that a Purchase Price at the highest value estimated by the Appraiser would be
the appropriate price to be paid by the Purchaser. The Board believes that the
assumptions used by the Appraiser are reasonable and fair. Additionally, the
Board hired an independent financial advisor to confirm that the appraised
Purchase Price to be paid by the Purchaser is fair. Because all of the
Partnership's assets remaining after the Sale Transaction will be cash, and all
such cash will be distributed to the Partnership's partners in accordance with
the Partnership Agreement, the Board believes that the 1996 Valuation Report
supports the fairness of the estimated $1,370, plus interest thereon, if any,
per Unit to be distributed to Limited Partners.

2. Fairness Opinion. The Board reviewed and adopted in its entirety
the procedures followed, the findings and recommendations, and the bases for
and methods of arriving at such findings and recommendations, including, but
not limited to, the going concern analysis and liquidation analysis performed
by Principal Financial as stated in both its oral and written reports. The
Board believes the Purchase Price is fair based upon the Fairness Opinion,
which confirms the 1996 Valuation Report. In determining the fairness of the
Purchase Price, the Board primarily relied upon the going concern analysis and
liquidation analysis performed by Principal Financial. The going concern
analysis values the Specific Loans in the range of $1,100,000 to $1,590,000,
and the liquidation analysis concludes that after a current sale of the
underlying properties, no proceeds would be available to pay the Partnership's
interest in the properties due to payment of those parties with priority ahead
of the Partnership. The Board believes that the Fairness Opinion is reasonable
and fair. Because the Fairness Opinion confirmed the 1996 Valuation Report,
the Board relied heavily on the result of the Fairness Opinion. Consequently,
the Board believes that the $1,600,000 Purchase Price to be paid by the
Purchaser is fair and in the best interests of the Limited Partners. Because
all of the Partnership's assets remaining after the Sale Transaction will be
cash, and all such cash will be distributed to the Partnership's partners in
accordance with the Partnership Agreement, the Board believes that the Fairness
Opinion supports the fairness of the estimated $1,370, plus interest thereon,
if any, per Unit to be distributed to Limited Partners.

3. Book Value. The book value of each Unit is $1,403 as of December
31, 1996. The Board believes that the pro rata net book value, defined as
assets less liabilities, is higher than the estimated distribution because the
amount of $1,403 does not account for the costs of completing the filing and
solicitation of the Proposal and preparing and filing final tax returns. Such
costs are estimated at approximately 39 per Unit. The book value less these
costs is less than the estimated distribution, and as such, the Board believes
the estimated distribution of $1,370, plus interest thereon, if any, is fair.

4. Historical and Current Market Value. The Board believes no
established trading market for the Units exist and that one is not likely to
develop in the future. To the best of the Board's knowledge only five
transactions relating to the sale and purchase of Units between persons
unaffiliated with the Managing General Partner, the Purchaser and Craig Hall
have

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<PAGE> 24
occurred since the formation of the Partnership. In considering the current
and historical market value of the Units, however, the Board considered the
five transactions as follows:

<TABLE>
<CAPTION>
APPROXIMATE UNITS PRICE/UNIT AGGREGATE
----------- ----- ---------- ---------
DATE
----
<S> <C> <C> <C>
04/95 6 $ 35 $ 210
07/96 10 $100 $1,000

01/97 4 $822 $3,288

01/97 5 $750 $3,750
01/97 4 $500 $2,000
</TABLE>

The average sale price of the Units for the five transactions is
approximately $350 per Unit. The Board believes the estimated distribution to
the Limited Partners following a successful completion of the Sale Transaction
is fair in that the current and historical market value of the Units has
recently been substantially less than the estimated $1,370, plus interest
thereon, if any, per Unit to be distributed to the Limited Partners.

The Board also considered the Purchaser's acquisition of 20 Units of the
Partnership from Stuart Drug and Surgical Supply Employee Pension Trust DTD, a
limited partner of the Partnership, for a purchase price of $1,300 per Unit
(the "Stuart Drug Transaction"). The Board believes that the estimated
distribution is fair in relation to the Stuart Drug Transaction because the
$1,300 per Unit purchase price is less than the estimated distribution of
$1,370, plus interest thereon, if any, upon successful completion of the Sale
Transaction. During 1986, the Managing General Partner purchased 22 Units for
the price of $4,484 (the "1986 Sale"). Consideration was not given to the 1986
Sale because it was determined to be irrelevant as it occurred over ten years
ago.

5. Firm Offers. The Board is not aware of any firm offer made by an
unaffiliated party in the last eighteen months for (i) the merger or
consolidation of the Partnership into or with such unaffiliated party, (ii) the
sale or other transfer of all or any substantial part of the assets of the
Partnership, or (iii) the Units of the Partnership which would enable the
unaffiliated party to control the Partnership.

6. Alternative Offers. The Board considered whether it should
solicit an alternative offer. The Board considered (i) that none of the
Specific Loans (as restructured by each Affiliated Borrower's plan of
reorganization) requires any of the Affiliated Borrowers to make current
payments (see "Certain Information Concerning the Partnership and the Purchaser
- - -- the Partnership"), (ii) a third party's lack of control over the Affiliated
Borrowers, (iii) a third party's lack of financial or other interest in the
Affiliated Borrowers and (iv) the Purchaser's familiarity with the properties
of the Affiliated Borrowers and the terms and conditions of such properties.
The Board determined that due to the Purchaser's affiliation with the
Affiliated Borrowers and familiarity with the underlying properties, it would
derive more benefit from the purchase of the properties than would an
unaffiliated third party. The Board concluded that such a solicitation is
highly unlikely to bring an offer that would approach the offer from the
Purchaser and therefore would not be cost effective to pursue.

The Board, on behalf of the Partnership and on behalf of the Managing
General Partner, concluded that the foregoing factors indicated that the
alternative of not proceeding with the negotiation of the Sale Transaction
would not be as financially attractive to the unaffiliated Limited Partners and
would involve substantially greater uncertainty without the commensurate
possibility of gains than would the Sale Transaction and the Liquidation. The
Board did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the preceding factors considered in
reaching its determination. The Board, however, did give equal and greatest
weight to (i) the determination of the Purchase Price based on the highest
discounted value assigned by the Appraiser; (ii) the confirmation of the
fairness of the Purchase Price by Principal Financial; and (iii) the fact that
the Proposal must be approved by a majority of Units held by Limited Partners
not affiliated with the Managing General Partner, the Purchaser or Craig Hall.

The Board carefully reviewed the interests of the Partnership's
affiliates, including the Managing General Partner and Craig Hall, in the Sale
Transaction and all fiduciary duties owed to the unaffiliated Limited Partners
and does not believe that its fairness determination was adversely affected as
a result of any such interests or duties. In light of the fact that neither
the Managing General Partner nor Craig Hall holds a substantial number of the
Units, and beneficially own less than 3% of the Partnership in the aggregate,
the Board believes that all conflicts of interest, both actual and potential,
are avoided and all fiduciary duties fulfilled by (i) the determination of the
Purchase Price based on the highest discounted value assigned by the Appraiser;
(ii) the confirmation of the fairness of the Purchase Price by Principal
Financial; and (iii) the fact that the Sale

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<PAGE> 25
Transaction must be approved by a majority of Units held by Limited Partners
not affiliated with the Managing General Partner, the Purchaser or Craig Hall.

The Board also recognized that no unaffiliated representative, counsel
or financial advisor was retained to act on behalf of the unaffiliated Limited
Partners other than the Appraiser and Principal Financial. No such
representative was retained by the Partnership for the unaffiliated Limited
Partners as the Board determined it was not cost effective. Given the
Partnership's limited financial resources, the Managing General Partner desires
to preserve the Partnership's assets so that there will be more cash available
upon distribution. The Board believes that its fairness determination was not
adversely affected because of (i) the determination of the Purchase Price based
on the highest discounted value assigned by the Appraiser; (ii) the
confirmation of the fairness of the Purchase Price by Principal Financial; and
(iii) the fact that the Sale Transaction must be approved by a majority of
Units held by Limited Partners not affiliated with the Managing General
Partner, the Purchaser or Craig Hall.

Purchaser's Evaluation. The Purchaser believes that the Sale
Transaction and the estimated distribution of the proceeds from the Liquidation
are fair and in the best interests of the Limited Partners. In support of its
belief, the Purchaser adopted the Board's analysis, with respect to both the
procedural and substantive fairness of the Sale Transaction and the
Liquidation, as its own. The Purchaser, however, is refraining from making any
recommendation as to how the Limited Partners should vote with regard to the
Proposal.

Craig Hall's Evaluation. Craig Hall believes that the Sale Transaction
and the estimated distribution of the proceeds from the Liquidation are fair
and in the best interests of the Limited Partners. In support of his belief,
Craig Hall adopted the Board's analysis, with respect to both the procedural
and substantive fairness of the Sale Transaction and Liquidation, as his own.
Craig Hall, however, is abstaining from making any recommendation as to how the
Limited Partners should vote with regard to the Proposal.

MATERIAL TERMS OF THE SALE TRANSACTION

THE ASSET PURCHASE AGREEMENT

The Sale Transaction will be effected pursuant to the asset purchase
agreement between the Partnership and the Purchaser, dated as of October 15,
1996 (the "Asset Purchase Agreement"), and one or more assignment and
assumption agreements. The Asset Purchase Agreement contains the terms
described below and is attached hereto as Annex C.

Consideration. In exchange for the Partnership's non-cash assets,
Purchaser will pay the Purchase Price to the Partnership and shall deliver an
assignment and assumption agreement to the Purchaser which requires the
Purchaser to assume certain of the liabilities and obligations of the
Partnership and all the rights of the Partnership under the Specific Loans.

Representations and Warranties. The Asset Purchase Agreement contains
customary representations and warranties relating to the organization and
standing of the parties thereto, the power and authority of the parties to
effect the Sale Transaction, due authorization and enforceability of the Asset
Purchase Agreement and the parties' obtaining of all requisite consents and
approvals.

Access. The Asset Purchase Agreement provides that Purchaser shall have
full opportunity to make such investigations as it shall desire to make of the
affairs of the Partnership in connection with the Sale Transaction. The
Partnership shall permit Purchaser and its counsel, accountants, auditors, and
other representatives reasonable access to the properties, books and records,
contracts and commitments of the Partnership until such time as Purchaser
reasonably deems necessary to facilitate the transition of ownership.

Consents. Pursuant to the Asset Purchase Agreement, the Partnership and
Purchaser have agreed to use their best efforts to obtain prior to closing of
the Sale Transaction all consents necessary in connection therewith and shall
assist and cooperate with each other in obtaining such consents.

Conditions to Closing. The Asset Purchase Agreement states that the
closing of the Sale Transaction is subject to certain conditions, including (i)
all representations and warranties of the parties shall be true, complete and
accurate in all material respects as of the date when made and as of the
closing date, except for changes expressly permitted by the Asset Purchase
Agreement; (ii) the parties shall have complied in all material respects with
all agreements, obligations and conditions required to be performed or complied
with prior to closing; (iii) there shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction restraining or prohibiting the Sale Transaction; (iv)
all material licenses, permits, consents, approvals and authorizations from
third parties, including the requisite

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<PAGE> 26
consent from the Limited Partners, shall have been obtained; and (v) as a
condition to the obligations of the Partnership, the Fairness Opinion shall
have been delivered to the Managing General Partner.

Termination. The Asset Purchase Agreement may be terminated at any time
prior to the closing of the Sale Transaction by mutual agreement of the
Partnership and Purchaser or if any conditions precedent shall not be satisfied
as of the closing.

ACCOUNTING TREATMENT

The Sale Transaction will be accounted for as a sale of the assets of
the Partnership.

CERTAIN INFORMATION CONCERNING THE PARTNERSHIP AND THE PURCHASER

THE PARTNERSHIP

The Partnership is an Arizona limited partnership that was formed in
1984 for the purpose of providing second lien mortgages to the Affiliated
Borrowers. The purpose of the Partnership as stated in the Partnership
Agreement is to make loans to the Affiliated Borrowers and to engage in
activities incidental to such loans. The principal executive offices of the
Partnership are located at 4455 East Camelback Road, Suite A-200, Phoenix,
Arizona 85018 and the telephone number is (602) 840-0060.

The Partnership's current primary business is the collection of the
Specific Loans previously loaned to Affiliated Borrowers which upon origination
were secured by deeds of trust or mortgages on income-producing real
properties. At the time each Specific Loan from the Partnership to an
Affiliated Borrower was originated, such loan was secured by a second lien on
real property owned by an Affiliated Borrower (except for the Arrowtree
Reorganization Advance and the Brambletree Restructuring Advance), which was
previously approved by the first lien holders. All of the properties
originally securing Specific Loans are apartment complexes.

The loan-to-value ratios of all real properties which secured Specific
Loans at their origination were supported by appraisals prepared at the time of
acquisition by independent appraisers who were members in good standing of the
American Institute of Real Estate Appraisers. Such appraisals are held by the
Affiliated Borrowers and are available for inspection and duplication by the
Limited Partners at the offices of the Managing General Partner.

In the late 1980's and early 1990's there was a national decline in
apartment rental rates and real estate values. This decline caused numerous
partnerships owning apartment properties, including each of the Affiliated
Borrowers, to go into default on both second and first mortgages. Each of the
Affiliated Borrowers to which the Partnership currently has a Specific Loan has
reorganized under Chapter 11 of the Bankruptcy Code. In connection with each
bankruptcy plan of reorganization, the Partnership has restructured each of the
seven remaining loans it holds, one to each of seven Affiliated Borrowers.
None of the Affiliated Borrower's confirmed bankruptcy plans require the
Affiliated Borrower to make current payments on its Specific Loans; instead,
the Partnership is to be repaid from its pro rata share of future available
cash flow, refinance or sales proceeds from each property. There can be no
assurance that any of the Specific Loans will be paid in full.

As of December 31, 1995, $5,489,683 in principal amount of Specific
Loans was outstanding, $4,576,000 of which had been reserved through bad debt
provisions. As of December 31, 1996, an aggregate of $5,018,000 in principal
amount of Specific Loans was outstanding, $5,018,000 of which had been reserved
through bad debt provisions.

MANAGING GENERAL PARTNER AND MANAGEMENT

The Partnership's general partner is Hall Pension Fund Associates, Ltd.,
a Texas general partnership ("Hall Pension Fund"), whose primary business
consists solely of managing and controlling the Partnership as a general
partner. The general partner of the general partner is Hall 1985 Management
Associates Limited Partnership, a Texas limited partnership ("Hall 1985
Management"), and the general partner of Hall 1985 Management is Hall Apartment
Associates, Inc., a Texas corporation ("Hall Apartment Associates"). The
current primary business of Hall 1985 Management is managing and controlling
limited partnerships that own an interest in rental real estate, and the
current primary business of Hall Apartment Associates is managing and
controlling partnerships as a general partner which are general partnerships in
other affiliated partnerships which own an interest in real estate. Hall
Apartment Associates, Hall 1985 Management and Hall Pension Fund are
collectively referred to as the "Managing General Partner." The principal
executive offices of the Managing General Partner are located at 750 N. St.
Paul Street, Suite 200, Dallas, Texas 75201- 3247 and the telephone number is
(214) 953-1155. The Managing General Partner has full and complete charge of
all affairs of the Partnership, and the management and control of the
Partnership's business rests exclusively with the Managing General Partner,
subject to the terms of the Partnership Agreement. The Partnership does not
directly employ any persons on a full-time basis. All persons rendering
services on behalf of the Partnership are affiliates of

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<PAGE> 27

the Managing General Partner whose salaries are paid by the Purchaser. Such
employees are not paid by the Partnership, and the Partnership does not
reimburse the Managing General Partner or its affiliates for these services.

RIGHTS AND POWERS OF LIMITED PARTNERS

The Limited Partners may not take part in the control of the business or
affairs of the Partnership and have no voice in the management or operations of
the Partnership. Their lack of a voice in management and control is necessary
to limit liability in excess of their investment in the Partnership and their
share of undistributed profits from the Partnership. The Limited Partners,
among other things: (i) share all profits, losses and distributions of the
Partnership in accordance with the Partnership Agreement; (ii) have their
liability for the operations of the Partnership limited to the amount of their
capital contributions to the Partnership; (iii) have the right to obtain upon
request certain reports and disclosures to federal and state regulatory and
administrative bodies; (iv) receive financial statements, income tax
information and certain other information pertaining to the operations of the
Partnership; (v) have the right to assign their Units to the extent and as
provided in Article V of the Partnership Agreement; (vi) have the right to
dissolution and winding up of the Partnership by decree of court as provided
for in the Arizona Uniform Limited Partnership Act; (vii) have the right to
vote to amend certain provisions of the Partnership Agreement upon the
affirmative vote of a majority in interest of the Limited Partners; (viii) have
the right to dissolve the Partnership upon an affirmative vote of a majority in
interest of the Limited Partners; (ix) have the right to remove the general
partner upon an affirmative vote of a majority in interest of the Limited
Partners; and (x) have the right to elect additional general partners, elect
substitute general partners and elect to continue the Partnership following an
Event of Withdrawal, as defined in the Limited Partnership Agreement, involving
the sole remaining general partner of the Partnership upon the consent of all
Limited Partners.

Upon the Liquidation, the Limited Partners will no longer have an
interest in the Partnership's assets and business and will be giving up all
their rights under the Partnership Agreement.

TERM AND LIQUIDATION OF THE PARTNERSHIP

The Partnership Agreement provides that the Partnership will continue
until the earlier of (i) December 31, 2014; (ii) the date on which all of the
loans funded by the Partnership are repaid or otherwise disposed of and all
other assets converted to cash; (iii) the date on which the Partnership is
voluntarily dissolved by the vote or written consent of the Limited Partners
owning a majority in interest of the Units; (iv) the date of an Event of
Withdrawal of the general partner; or (v) the date on which any event occurs
that requires dissolution of the Partnership under the Arizona Uniform Limited
Partnership Act. Notwithstanding the above, the Partnership may be dissolved
at an earlier date upon the occurrence of any of the contingencies referenced
in (ii), (iii), (iv) or (v) above.

INDEMNIFICATION

The Partnership Agreement provides that except in the case of negligence
or misconduct, the general partner and its affiliates, or agents acting on
their behalf, will not be liable, responsible or accountable in damages or
otherwise to the Partnership or any of the Limited Partners for any action or
inaction, the effect of which may cause or result in loss or damage to the
Partnership, if such course or inaction was undertaken in good faith to promote
the best interests of the Partnership. The general partner and its affiliates
or agents will be entitled to be indemnified by the Partnership against and to
be released by the Limited Partners from any liability or loss, as a result of
any claim or legal proceeding relating to any action or inaction concerning the
activities of the Partnership, except in the case where the general partner or
its affiliates or agents are guilty of bad faith, negligence, misconduct, or
reckless disregard of duty, provided such action or inaction was undertaken in
good faith to promote the best interests of the Partnership. However, neither
the general partner nor any officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates, the Affiliated Borrowers, or
the Partnership will be indemnified from any liability, loss, or damage
incurred by them in connection with (i) any claim involving allegations that
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities law was violated by any of such parties unless such parties seeking
indemnification are successful in defending such action and such
indemnification is specifically approved by a court of law which has been
advised as to the current position of the Commission and the Commissioner of
Corporations of the State of California regarding indemnification for
violations of securities law; or (ii) any liability imposed by law, including
liability for fraud, bad faith or negligence.

If a claim is made against the Manager General Partner or its agents or
affiliates in connection with such parties' actions on behalf of the
Partnership with respect to the Sale Transaction or the Liquidation, the
Managing General Partner expects that it, as well as its affiliates and agents,
will seek to be indemnified by the Partnership with respect to such claim. As
a result of these indemnification rights, a Limited Partner's remedy with
respect to claims against the Managing General Partner or its affiliates
relating to their respective involvement in the Sale Transaction could be more
limited than the remedy which might have been available absent the existence of
these rights in the Partnership Agreement. A successful claim for

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<PAGE> 28
indemnification would reduce the amount of Partnership cash available for
distributions to the Limited Partners by the amount paid.

REGULATORY PROCEEDINGS

Other than the filing of a Certificate of Cancellation with the
Secretary of State of Arizona and certain filings with the Commission to
deregister the Units, the Partnership is not aware of any approval or other
action by any domestic or foreign governmental or administrative agency that
would be required prior to the consummation of the Sale Transaction or any
license or other regulatory permit which appears to be material to its business
and that might be adversely affected by the proposed Sale Transaction or the
Liquidation. Should any approval or action be required, it is the
Partnership's present intention that such approval or action would be sought.
There is, however, no present intent to delay the tendered Sale Transaction
pending the outcome of any such action or receipt of such approval. There can
be no assurance that any such approval or action, if needed, would be obtained,
or, if obtained, that it would be obtained without substantial conditions, or
that adverse consequences might not result to the Partnership's businesses or
that certain parts of the Partnership's businesses might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action. Following the Liquidation and
deregistration of the Units under Section 12(g) of the Exchange Act, the
Partnership's obligations to file reports pursuant to Section 15(d) of the
Exchange Act will terminate.

THE PURCHASER

The Purchaser is Hall Financial Group, Inc., a Delaware corporation. The
principal executive offices of the Purchaser are located at 750 North St. Paul,
Suite 200, Dallas, Texas 75201. The Purchaser's primary business is the
management as general partner of limited partnerships which own interests in
rental and nonrental real estate and investing in such limited partnerships as
a limited partner. The Purchaser is obtaining the $1,600,000 Purchase Price
from its own working capital.

Craig Hall, the President and Chief Executive Officer and sole director
of the Purchaser, owns 93% of the outstanding capital stock of the Purchaser.
Craig Hall owns 100% of the outstanding capital stock and is one of the two
directors of the Managing General Partner and owns over 90% of the limited
partnership interests in each of the limited partnerships comprising the
Managing General Partner. However, Craig Hall beneficially owns less than 3% of
the Partnership.

The Purchaser was a defendant in a binding arbitration together with
another affiliate of the Purchaser, Hall Securities Corporation, in a case
styled William F. Lowden and Karen M. Lowden, Plaintiffs (collectively, the
"Plaintiffs") v. Blaine P. Swint, Swint Financial Management and Insurance
Marketing Corp. (collectively, "Swint"), Hall Securities Corporation, Fund
Capital, Inc., Hall Financial Group, Inc. and Does One through Ten inclusive in
the Superior Court of the State of California in and for the City and County of
Contra Costa, No. C93-00820 (the "Lawsuit"). The arbitration award (the
"Award") was entered on September 21, 1994 against the Purchaser and Hall
Securities Corporation, a former affiliate of the Purchaser (collectively, the
"Hall Defendants") in the amount of $307,482 for compensatory damages for
breach of fiduciary duty pursuant to the NASD Rules of Fair Practice based upon
the Hall Defendant's determined responsibility for Swint's failure to properly
advise the Plaintiffs regarding investments as limited partners in three of the
Purchaser's properties, Hall Bayoutree Associates, Hall Falltree Associates,
and Hall Northtree Associates. The arbitration panel, consisting of one
arbitrator, found that Swint, acting as broker-dealer for the Hall Defendants,
had encouraged the Plaintiffs to invest beyond their economic capacity in the
Purchaser's properties and that the investments were unsuitable for the
Plaintiffs because they did not meet the economic requirements for investment
in any of the properties. The arbitrator found that Swint made misstatements
and misrepresentations in inducing the Plaintiffs to invest and that the Hall
Defendants were negligent in supervising Swint regarding its advice to the
Plaintiffs. The arbitrator found the Hall Defendants liable for Swint's
actions based upon a theory of respondeat superior, in that Swint was acting as
an agent for the Hall Defendants in Swint's capacity as broker-dealer on behalf
of the Hall Defendants. The arbitrator awarded the Plaintiffs their original
investment as well as pre-judgment interest but declined to award punitive
damages as the Plaintiffs had failed to prove malice. The Purchaser has paid
the damages in full to the Plaintiffs.

DESCRIPTION OF THE PARTNERSHIP'S BUSINESS

The Partnership is an Arizona limited partnership organized in 1984
pursuant to a limited partnership agreement under the Arizona Uniform Limited
Partnership Act.

At completion of the offering of the Units on September 5, 1985, the
Partnership had received and accepted subscriptions for an aggregate of 2,568
Units ($12,835,600). All investors were admitted as limited partners in 1985.

The Partnership will not borrow funds for the purpose of making loans to
the Affiliated Borrowers. However, if the working capital reserves established
for the Partnership are not adequate to provide for the Partnership's liquidity
needs, the Partnership may borrow funds for such purpose.

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<PAGE> 29
The Partnership is prohibited from purchasing real property, directly or
indirectly, except as may be necessary to protect the Partnership against the
foreclosure of a prior lien on property pledged as security for a Specific
Loan.

The purpose of the Partnership is to originate loans to the Affiliated
Borrowers and to engage in activities incidental to such loans. Any change in
the purpose of the Partnership will require an amendment of the Partnership
Agreement which may be done only with the approval of Limited Partners owning a
majority of the outstanding Units held by all Limited Partners. However,
Limited Partners have no voting rights with respect to the implementation of
the Partnership's objectives and policies, such implementation being the sole
responsibility of the Managing General Partner.

Prior to the Partnership making a Specific Loan, an Affiliated Borrower
provided the Partnership with a mortgagee's or owner's title insurance policy
or commitment to evidence priority of the lien securing the Specific Loan and
title to the mortgaged real properties.

Those Specific Loans which were secured by real property had senior
mortgages that did not provide for the amortization of the entire principal
amount of such loans or a substantial portion thereof prior to maturity. The
ability of the Affiliated Borrowers to repay the outstanding principal amount
of these senior loans at maturity was dependent upon the Affiliated Borrowers'
ability to sell the properties or to obtain adequate refinancing, which were
dependent upon economic conditions in general and the value of the underlying
properties in particular.

The Specific Loans to the Affiliated Borrowers were also balloon notes
in that the terms of repayment do not provide for full amortization of the
principal. In addition, terms of the Specific Loans permit a portion of the
interest due to remain unpaid and to accrue until maturity.

The Managing General Partner obtained, at its expense, at the time each
Specific Loan was originated, a letter of opinion issued by an independent and
qualified appraiser to the effect that each Specific Loan was fair and at least
as favorable to the Partnership as a loan to an unaffiliated borrower in
similar circumstances.

There was no restriction upon the amount (as a percentage of total
loans) that the Partnership may advance to Affiliated Borrowers as a group.

Through December 31, 1996, the Partnership had made Specific Loans in
the amount of $10,571,000 to twelve Affiliated Borrowers that used these funds
to purchase or pay off existing indebtedness on twelve apartment complexes. The
Partnership's gross receipts are dependent upon each Affiliated Borrower's
ability to pay interest and principal on its respective Specific Loan. As of
December 31, 1996, $5,018,000 in principal of Specific Loans is outstanding,
$5,018,000 of which has been reserved through bad debt provisions and all of
which have been modified. See "--Specific Loans."

The Partnership does not employ any persons on a full-time basis. All
persons rendering services on behalf of the Partnership are affiliates of the
Managing General Partner whose salaries are paid by the Purchaser. Such
employees were not paid by the Partnership. The value of the services is
insignificant to the Partnership.

DESCRIPTION OF THE PARTNERSHIP'S PROPERTIES

The Partnership does not own or lease any real property.

LEGAL PROCEEDINGS

The Partnership is not a party to any material legal proceedings.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the Partnership's Financial
Statements and notes thereto included elsewhere in this Solicitation Statement.

Capital Resources And Liquidity

The Partnership's primary sources of liquidity are repayments of
principal and interest from the NHP Transaction Partnerships, as defined below,
and repayments of principal and interest from Affiliated Borrowers that have
refinanced their mortgages. Liquidity is also maintained with cash the
Partnership holds as working capital reserves in the amount of not less than 1%
of invested capital, as defined, which was $72,442 and $74,400 at December 31,
1996 and 1995 respectively. None of such cash is maintained in a restricted
account.

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<PAGE> 30
The Partnership's ability to pay distributions to the general and
limited partners was, prior to the NHP Transaction, materially affected by the
non-payment of interest on the loans owed by Affiliated Borrowers. There were
no distributions from operations in 1996 or 1995. During the year ended
December 31, 1994, a distribution of $2,083 (of which $1,367 had been
previously accrued) was paid to the Managing General Partner. No distributions
were made in 1996 or 1995. As of December 31, 1996, most of the Affiliated
Borrowers were not making payments to the Partnership. Accordingly, during the
twelve months ended December 31, 1996, the Partnership deferred $614,203 of
accrued interest income. The Partnership expects to continue to defer a
majority of the accrued interest.

On March 7, 1997, Arthur Andersen, LLP issued its opinion on the 1996
and 1995 financial statements, which in part stated that the accompanying
financial statements were prepared assuming that the Partnership will continue
as a going concern. In February of 1996, the Partnership learned that certain
transactions it had entered into during 1995 may have caused the Partnership to
be in violation of the 1940 Act. As discussed in this Solicitation Statement,
the Partnership is soliciting the consent of the Limited Partners to the
Proposal whereby all of the mortgage notes receivable would be sold for cash to
an affiliate, followed by an immediate liquidation of all Partnership assets
and subsequent dissolution. The financial statements were not prepared on a
liquidation basis of accounting, as it was not determinable if an immediate
liquidation of the Partnership will be required. This uncertainty raises
substantial doubt about the Partnership's ability to continue as a going
concern. All the Affiliated Borrowers have been reorganized under Chapter 11
of the Bankruptcy Code and are not required to make current payments on the
mortgage notes. Instead, the Partnership is to be repaid from its pro rata
shares of a future available cash flow, refinance, or sales proceeds from each
property. All amounts received are applied first toward interest and then
against principal. The estimated operating expenses of the Partnership are
approximately $61,000 per year. There can be no assurance that these expenses
will not increase over time, nor is there any assurance that any of the
Affiliated Borrowers will make any cash payments to the Partnership in a future
period.

Results of Operations

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

For the year ended December 31, 1996, the Partnership recorded a loss of
$431,773 compared to income of $1,767,691 for the year ended December 31, 1995.
The Partnership performs a detailed analysis of the collectibility of its
receivables considering the Affiliated Borrowers' future cash flows from
operations and proceeds from the ultimate sale of the Affiliated Borrowers'
assets as well as the independent appraisals obtained on these assets (to the
extent available). As a result, the Partnership recorded an allowance for
doubtful receivables and allowance for doubtful interest of $442,000 and
$21,898, respectively, in 1996. In addition, the Partnership deferred interest
income on non-performing notes aggregating $614,203, $673,397 and $849,228, in
1996, 1995 and 1994, respectively. Total deferred interest and allowance for
doubtful interest receivables at December 31, 1996 was $4,564,281. The
Partnership collected $1,092,345 in principal on mortgage notes primarily due
to the Arrowtree refinancing. Additional interest deferrals were required to
the extent real estate markets deteriorated further or remained depressed.

Future gross revenues and cash flow were substantially reduced in 1996
as a result of previous loan modifications and defaults by certain Affiliated
Borrowers.

The Partnership restructured the Brambletree Specific Loan in 1996, as
discussed below. See "--Specific Loans." The Partnership advanced Brambletree
approximately $442,000 to refinance its first lien mortgage, and the
Partnership released its second lien mortgage as a consequence of the
refinancing.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

For the years ended December 31, 1995, 1994 and 1993, the Partnership
recorded income of $1,767,691, $1,915,487 and $75,166, respectively. The
Partnership performs a detailed analysis of the collectibility of its
receivables considering the Affiliated Borrowers' future cash flows from
operations and proceeds from the ultimate sale of the Affiliated Borrowers'
assets as well as the independent appraisals obtained on these assets (to the
extent available). As a result, the Partnership reversed a portion of the
allowance for doubtful receivables and allowance for doubtful interest of
$293,683 and $1,359,703, respectively, in 1995. In addition, the Partnership
deferred interest income on non-performing notes aggregating $673,397, $849,228
and $971,098 in 1995, 1994 and 1993, respectively. Total deferred interest and
allowance for doubtful interest receivables at December 31, 1995 was
$3,928,180. Additional interest deferrals were required to the extent real
estate markets deteriorated further or remained depressed.

Future gross revenues and cash flow were substantially reduced as a
result of loan modifications and defaults by certain Affiliated Borrowers.

22
<PAGE> 31
SPECIFIC LOANS

As of December 31, 1996, the Partnership had Specific Loans outstanding
to seven Affiliated Borrowers, all of which have been restructured. The
following is a summary of the current status of each Specific Loan.

BRAMBLETREE. Hall Brambletree Associates ("Brambletree"), an Affiliated
Borrower, owns an apartment property that until August 1996 secured a first
lien mortgage payable to Federal National Mortgage Association. The Appraiser
appraised the property on February 2, 1995 at $6,500,000. The Partnership held
a recourse promissory note in the principal amount of $2,193,000 with $789,495
of accrued interest as of December 31, 1996.

Brambletree informed the Partnership and the Purchaser that the FNMA
mortgage was refinanced on August 9, 1996. The original FNMA mortgage carried
a 10% interest rate. The amount owed to FNMA including principal and interest
was approximately $7,100,000. The first mortgage was scheduled to mature in
November of 1998. On August 9, 1996, the FNMA loan to Brambletree was
refinanced, and Brambletree received a loan in the principal amount of
$6,105,000 from AMRESCO Capital Corporation ("AMRESCO"). The loan bears
interest at 8.24% per annum, matures on September 1, 2006 and is payable in
monthly payments of $45,843.37. FNMA, pursuant to this refinancing, received
principal in the amount of $5,910,086.09 and a deferred interest payment of
$892,620. The incentive recapture fee of $295,624.00 was waived. The
refinancing required an advance from the Partnership in the amount of
approximately $442,000 which is based on the Partnership's pro rata share of
sale and refinance proceeds (the "Brambletree Restructuring Advance"). Such a
loan from the Partnership required the approval of the Limited Partners of the
Partnership, which was not obtained from the Limited Partners. The
Partnership's special loan to Brambletree will accrue interest at 2% over the
prime rate and will be payable out of the first available proceeds from any
future sale, refinance or cash flow of the property in the same ratio as it was
loaned between the Partnership and the Purchaser. This will allow Brambletree
to extend the first mortgage an additional 8 years and lower the amount of
monthly debt service approximately $3,000. The loan is subject to prepayment
penalty based on the expected yield to maturity at the time of prepayment. In
connection with the refinancing, the Partnership released its second lien
mortgage.

MIDTREE. Until its November 1995 refinancing, the apartment property
owned by Midtree Associates, Ltd. ("Midtree") was security for a first lien
mortgage payable to Aetna Life Insurance Company ("Aetna") and a second lien
mortgage payable to the Partnership.

The Midtree property was offered for sale from November 1994 to May
1995. The offering price was $5,800,000, but no offer to purchase the Midtree
property was received during the six months that it was offered for sale.
Because the Aetna loan was originally scheduled to mature on August 1, 1995, on
June 19, 1995, the general partner of Midtree applied for a loan in the amount
of $4,500,000 with Greenpark Financial to refinance the Midtree property. In
conjunction with that application, the property was appraised for $6,300,000 by
Brooks, Lomax & Fletcher, Inc. on August 6, 1995. Greenpark did not issue a
loan commitment, and the loan was never closed. In connection with its
valuation of the Partnership, the Appraiser appraised the Midtree property at
$5,200,000 as of January 27, 1995. As of December 31, 1996, the principal
amount of the Partnership's Specific Loan was $410,000 with $653,498 accrued
interest.

The Aetna loan to Midtree which originally matured August 1, 1995 was
extended to November 1, 1995, at which time it was refinanced, and Midtree
received a first lien mortgage loan in the amount of $4,200,000 from Paine
Webber Real Estate Securities Inc. ("Paine Webber"). The loan bears interest
at 8.1% annually and is payable on a 30-year amortization over a seven-year
term, and is subject to a prepayment penalty based on the expected yield to
maturity at the time of repayment. The interest rate on the first mortgage
lien was reduced from 12% to 8.1% by the refinancing. There were no proceeds
available to the Partnership from the refinancing.

As a condition to making the loan to Midtree, Paine Webber required the
release of the Partnership's second lien. Because the Midtree property could
not be refinanced with a second lien mortgage, the Partnership's second lien
nonrecourse mortgage was converted into a recourse unsecured loan to Midtree
without any other change in its terms. The Partnership was benefited by the
refinance because without the refinancing, the first lien mortgage would have
been foreclosed, and the Partnership would have lost the Midtree receivable.

NORTHTREE. Until its refinancing in January 1996, the property owned by
Northtree Associates Ltd. ("Northtree") was security for a first lien mortgage
payable to Aetna and a second lien mortgage payable to the Partnership.

From November 1994 to May 1995, Northtree offered its property for sale
at $7,200,000, but received no acceptances thereof. To take advantage of
favorable interest rates, on June 19, 1995, the general partner of Northtree
applied for a loan to refinance the Northtree property with Greenpark
Financial. In conjunction with the application, the property was appraised by
Greenpark Financial for $7,710,000 on August 6, 1995. The loan was not closed,
because Greenpark Financial did not issue

23
<PAGE> 32
a commitment. The Appraiser appraised the Northtree property on January 27,
1995 at $6,300,000. As of December 31, 1996, the principal amount of the
Partnership's Specific Loan was $460,000, with $890,192 accrued interest.

On January 19, 1996, the Aetna loan to Northtree was refinanced, and
Northtree received a loan in the principal amount of $5,000,000 from AIG Life
Insurance Company ("AIG"). The loan bears interest at 7.58% per annum, matures
in seven years, and is payable on a 22 year amortization. The loan has a yield
to maturity prepayment penalty based on the expected yield to maturity at the
time of repayment. No proceeds were paid to the Partnership at the time the
loan was funded. Because AIG would not allow a second lien mortgage, the
Partnership released its lien on the Northtree property, and its nonrecourse
second lien mortgage was converted to a recourse unsecured loan without any
other change in its terms. The Partnership benefited from the Northtree
refinance because the interest rate on the first lien mortgage was reduced from
11% to 7.58%.

ARROWTREE. Until its refinancing in January 1996, the Hall Seven Trails
Associates ("Arrowtree") property was security for a first lien mortgage to The
Prudential Insurance Company of America which bore interest at 9% per annum.

The Arrowtree Reorganization Advance, a loan of $181,000 made by the
Partnership to Arrowtree as part of Arrowtree's bankruptcy plan of
reorganization, was paid off in March 1996. As of December 31, 1996, the
Partnership had one loan outstanding to Arrowtree. The Appraiser appraised the
Arrowtree property on February 20, 1995 at $3,300,000. As of December 31,
1996, there was no principal amount outstanding on the Arrowtree Specific Loan
and $547,237 in accrued interest outstanding.

On January 19, 1996, the Prudential loan was refinanced by a first lien
mortgage loan from Paine Webber in the principal amount of $2,750,000 bearing
interest at 7.57%. This loan is for a term of 10 years, with monthly payments
based on an amortization of 25 years. It has a prepayment penalty based on the
expected yield to maturity at the time of a prepayment. In connection with the
refinancing, the Partnership released its lien in exchange for approximately
$1,100,000 from the refinancing proceeds leaving a balance of $547,237 in
accrued interest, which amount does not bear interest, is not secured by the
Arrowtree property and is payable out of future cash flow, refinance or sales
proceeds.

NHP TRANSACTION PARTNERSHIPS. On February 10, 1995, three of the
Affiliated Borrowers entered into a transaction (the "NHP Transaction") with
affiliates of NHP, Inc. and Paine Webber whereby those Affiliated Borrowers'
properties were contributed to three newly formed limited partnerships (the
"New LPs") by the respective Affiliated Borrower in exchange for a limited
partnership interest in its respective New LP and a certain amount of cash. As
a result of this transaction, Lanetree Associates Limited Partnership
("Lanetree"), Twintree Associates Limited Partnership ("Twintree") and
Coachtree Associates Limited Partnership ("Coachtree" and together with
Lanetree and Twintree, the "NHP Transaction Partnerships") each hold a limited
partnership interest in its respective New LP of which affiliates of NHP, Inc.
and Paine Webber are general partners. As part of the transaction, the senior
mortgage of each property involved in the transaction was paid in full, and the
liens on each property securing such mortgage and the liens securing the second
mortgage held by the Partnership were released. In addition, as part of the
NHP Transaction, each NHP Transaction Partnership received cash at closing, and
is entitled to a defined priority equity amount in the New LPs (the "Preferred
Equity") and an annual return on the Preferred Equity of 6% per annum provided
that all of the NHP Transaction Partnerships have been paid in full at the end
of each calendar quarter ("Operation Participation Proceeds"). In the event
all of the NHP Transaction Partnerships have not been paid in full for
Operational Participation Proceeds at the end of each calendar quarter, the
annual return on the Preferred Equity in calculating Operation Participation
Proceeds increases to 9% per annum (hereafter referred to as a "Non-Major
Default"). Upon payment in full of all past due Operation Participation
Proceeds, the annual return on the Preferred Equity returns to 6% per annum. In
addition to Operational Participation Proceeds, each NHP Transaction
Partnership is entitled to a priority return of the Preferred Equity and any
accrued and unpaid Operational Participation Proceeds upon refinancing or sale
of the properties over other equity classes and a 20% participation in net
proceeds available from sale or refinance after payment of the Preferred Equity
and any accrued and unpaid Operational Participation Proceeds ("Sale or
Refinance Participation Proceeds"). Lanetree distributed $569,419 to the
Partnership in March 1995 in partial payment of its loan obligation to the
Partnership from proceeds it received at closing of the NHP Transaction. There
were not sufficient proceeds at such closing (after the payment of priority
repayments) to distribute funds to the Partnership from Coachtree or Twintree.
However, the NHP Transaction Partnerships remain obligated to the Partnership
pursuant to each partnership's bankruptcy plan. Prior to the NHP Transaction,
the Partnership had a secured non-recourse note from each of the NHP
Transaction Partnerships. As a result of the NHP Transaction, the Partnership
now has an unsecured recourse note with respect to each of the partnerships.
The terms of the Preferred Equity held by the NHP Transaction Partnerships
provide that certain amounts as determined by a formula be paid to the NHP
Transaction Partnerships not later than December 10, 2000.

Excluding Sale or Refinance Participation Proceeds and assuming a
Non-Major Default has occurred, the amounts the Partnership would receive on
December 10, 2000, excluding any Operational Participation Proceeds, is
estimated to be:

24
<PAGE> 33
<TABLE>
<S> <C>
Coachtree: $ 500,055
Lanetree: $1,189,524
Twintree: $ 684,098
</TABLE>

As of December 31, 1996, a Non-Major Default had occurred in the NHP
Transaction and was continuing.

The following properties were all part of the NHP Transaction. As such
the Partnership receives payments from the NHP Transaction Partnerships return
on Preferred Equity and a share of any net proceeds from a sale or refinance of
the properties.

LANETREE. On February 10, 1995, Lanetree entered into the NHP
Transaction whereby The Lakes Apartments was contributed to a New LP ("NHP
Lanetree"). As a part of the NHP Transaction, Lanetree received cash at
closing, and a limited partnership interest in NHP Lanetree. Lanetree is
entitled to a priority return over certain other classes of equity in NHP
Lanetree of $3,279,878 (the "Lanetree Preferred Equity"), a 6% (9% during a
Non-Major Default) annual return on the Lanetree Preferred Equity, a 20%
participation in net proceeds available from ongoing operations of NHP Lanetree
after payment of operating expenses and the 6% (9% during a Non-Major Default)
return on the Lanetree Preferred Equity and a 20% participation in net proceeds
available from sale or refinance of The Lakes Apartments by NHP Lanetree after
payment of debts, costs of any transaction and payments of the Lanetree
Preferred Equity. As of December 31, 1996, the principal amount on the
Partnership's Specific Loan was $620,000, with $569,524 accrued interest.

COACHTREE. On February 10, 1995, Coachtree entered into the NHP
Transaction whereby The Villas Apartments was contributed to a New LP ("NHP
Coachtree"). As a part of the NHP Transaction, Coachtree received cash at
closing, and a limited partnership interest in NHP Coachtree. Coachtree is
entitled to a priority return over certain other classes of equity in NHP
Coachtree of $1,118,164 (the "Coachtree Preferred Equity"), a 6% (9% during a
Non-Major Default) annual return on the Coachtree Preferred Equity, a 20%
participation in net proceeds available from ongoing operations of NHP
Coachtree after payment of operating expenses and the 6% (9% during a Non-Major
Default) return on the Coachtree Preferred Equity and a 20% participation in
net proceeds available from sale or refinance of The Villas Apartments by NHP
Coachtree after payment of debts, costs of any transaction and payments of the
Coachtree Preferred Equity. As of December 31, 1996, the principal amount on
the Partnership's Specific Loan was $615,000, with $1,242,890 accrued interest.

TWINTREE. On February 10, 1995, Twintree entered into the NHP
Transaction whereby Los Altos Towers was contributed to a New LP ("NHP
Twintree"). As a part of the NHP Transaction, Twintree received cash at
closing, and a limited partnership interest in NHP Twintree. Twintree is
entitled to a priority return over certain other classes of equity in NHP
Twintree of $1,403,626 (the "Twintree Preferred Equity"), a 6% (9% during a
Non-Major Default) annual return on the Twintree Preferred Equity, a 20%
participation in net proceeds available from ongoing operations of NHP Twintree
after payment of operating expenses and the 6% (9% during a Non-Major Default)
return on the Twintree Preferred Equity and a 20% participation in net proceeds
available from sale or refinance of Los Altos Towers by NHP Twintree after
payment of debts, costs of any transaction and payments of the Twintree
Preferred Equity. As of December 31, 1996, the principal amount on the
Partnership's Specific Loan was $720,000, with $1,471,444 accrued interest.

All the first lien mortgage loans that currently encumber the properties
in which Affiliated Borrowers still have an interest have substantial
prepayment penalties which are in effect for approximately five to ten years.
While the NHP Transaction gives NHP an option to pay the Preferred Equity to
the NHP Partnerships at an earlier date, some of the underlying mortgages
prohibit the sale of the properties and/or have significant potential
prepayment penalties for earlier retirement of the debt. Therefore, NHP could
not exercise its option without coming up with cash to pay off the preferred
equity or sell the property. Accordingly, the properties could only be sold if
the lender approved a purchaser to assume the debt.

25
<PAGE> 34
SELECTED FINANCIAL DATA

Set forth below is a summary of certain consolidated financial
information with respect to the Partnership excerpted or derived from the
information contained in the Partnership's Annual Reports on Form 10-K for the
Years Ended December 31, 1996 and December 31, 1995 (collectively the
"Partnership's 10-Ks"). A copy of the financial statements set forth in the
Partnership's 10-Ks are reproduced elsewhere in this Solicitation Statement.
More comprehensive financial information is in such reports, and the following
summary is qualified in its entirety by reference to such reports and all of
the financial information and notes contained therein.

<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Total Assets $3,634,453 $4,066,226 $2,298,549 $419,287 $ 384,801
Revenue 197,404 177,535 26,524 125,494 37,942
Operating and Other Expenses 165,279 63,230 34,655 50,328 53,876
Bad Debt Expense (Reversal) 463,898 (1,653,386) (1,923,618) -- 702,877
Net Income (Loss) (431,773) 1,767,691 1,915,487 75,166 (718,811)
Net Income (Loss) per Unit (166) 681 738 29 (280)
Distributions per Unit 0 0 0 0 0
Weighted average number of Units outstanding 2568 2,568 2,568 2,568 2,568
Book Value per Unit 1,403 1,569 887 149 120
</TABLE>

No ratio of earnings to fixed charges appears because this ratio is
inapplicable as the Partnership has no fixed charges.

26
<PAGE> 35
PRO FORMA BALANCE SHEET

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP

DECEMBER 31, 1996

<TABLE>
<CAPTION>
Historical Adjustments (a)Pro Forma
---------- ----------- ------------
<S> <C> <C> <C>
ASSETS
- - ------

Cash and equivalents $ 2,034,453 (9) $ 0
1,600,000
(3,634,444) 0
Mortgage notes receivable - affiliates -- -- --
Accrued interest receivable - affiliates 1,600,000 (1,600,000) 0
Deferred charges, net 0
----------- ------------ -----------
$ 3,634,453 (3,634,453) $ 0
=========== ============ ===========

LIABILITIES AND PARTNERS' EQUITY
- - --------------------------------

Accounts payable $ 9 (9) $ 0
Partners' equity:
Limited Partners - 2,568 units outstanding 3,600,848 (3,600,848) 0
General Partner 33,596 (33,596) 0
----------- ------------ -----------
3,634,444 (3,634,444) 0
----------- ------------ -----------
$ 3,634,453 (3,634,453) $ 0
=========== ============ ===========
</TABLE>

NOTES TO PRO FORMA BALANCE SHEET

(a) Represents the sale of the mortgage notes receivable and accrued
interest receivable to the Purchaser for $1,600,000, and the subsequent
distribution of all the cash to pay accounts payable and to the
partners.

NO PRO FORMA STATEMENT OF OPERATIONS IS INCLUDED BECAUSE THERE WILL NOT
BE ANY OPERATIONS AFTER THE DISSOLUTION OF THE PARTNERSHIP.

27
<PAGE> 36
ESTIMATE OF ALLOCATIONS AND DISTRIBUTIONS

Set forth below is a summary of the discharge of the debts and
liabilities of the Partnership or making provision therefore and the assets of
the Partnership based upon approval of the Proposal and the distribution per
unit to the Limited Partners upon completion of the Sale Transaction and
Liquidation.

<TABLE>
<S> <C>
Assets
- - ------

Partnership's cash reserve . . . . . . . . . . . . . . . . . . $ 2,034,453
(as of December 31, 1996)
Sale of Partnership's Assets . . . . . . . . . . . . . . . . . 1,600,000
------------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,634,000

Expenses
- - --------

Legal and Accounting . . . . . . . . . . . . . . . . . . . . . $ 40,000
------------
Printing, Mailing, Depository, Distribution . . . . . . . . . 13,000
Solicitation Expenses . . . . . . . . . . . . . . . . . . . . 5,000
Finalization Set Aside . . . . . . . . . . . . . . . . . . . . 35,000
Reserve For Unknown Expenses . . . . . . . . . . . . . . . . . $ 5,646
------------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,646
------------

Net Available . . . . . . . . . . . . . . . . . . . . . . . . $ 3,535,354
------------
Distribution to Managing General Partner . . . . . . . . . . . $ 35,354
------------

Distribution to Limited Partners . . . . . . . . . . . . . . . $ 3,500,000
------------
Total Distributions . . . . . . . . . . . . . . . . . . . . . $ 3,535,354
------------
Distribution per Unit to Limited Partners . . . . . . . . . . $ 1,370
------------
</TABLE>

28
<PAGE> 37
FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following summary is a general discussion of certain of the federal
income tax consequences of the sale of all of the assets of the Partnership and
the subsequent dissolution, termination and winding up of the Partnership.
This summary is based on the Internal Revenue Code of 1986 (the "Code"),
applicable Treasury regulations thereunder, administrative rulings, practice
and procedures, and judicial authority, all as of the date of this Solicitation
Statement. All of the foregoing are subject to change, and any such change
could affect the continuing accuracy of this summary. This summary does not
discuss all aspects of federal income taxation that may be relevant to a
particular Limited Partner in light of such Limited Partner's specific
circumstances or to certain types of Limited Partners subject to special
treatment under the federal income tax laws (for example, foreign persons,
dealers in securities, banks, insurance companies, and tax-exempt
organizations), nor does it describe any aspects of state, local, foreign or
other tax laws. A sale of the assets of the Partnership and the termination,
winding up and liquidation of the Partnership will be taxable transactions for
federal income tax purposes, and also may be taxable transactions under
applicable state, local, foreign and other tax laws. LIMITED PARTNERS SHOULD
CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
EACH SUCH LIMITED PARTNER OF THE SALE OF THE ASSETS OF THE PARTNERSHIP AND THE
SUBSEQUENT LIQUIDATION, TERMINATION AND WINDING UP OF SUCH PARTNERSHIP.

SALE TRANSACTION AND LIQUIDATION OF PARTNERSHIP

In general, in computing its federal income tax liability for the tax
year in which the assets of the Partnership are sold, each Limited Partner will
be required to take into account its allocable share of any gain or loss from
the sale of the Partnership's properties. The amount of any gain should be
treated as capital gain, except to the extent that gain is attributable to (i)
accrued unpaid interest, including original issue discount, or (ii) market
discount (in certain cases). Any loss from the sale should be treated as
capital loss. A Limited Partner may deduct losses allocated by the Partnership
only to the extent of its adjusted tax basis in its Limited Partnership
interest.

Upon the Liquidation of the Partnership and the distribution of proceeds
from the Sale Transaction, a Limited Partner could, depending on its own tax
situation, recognize additional gain or loss, to the extent that the sum of the
cash received and the reduction in such Limited Partner's share of Partnership
nonrecourse liabilities (if any) is greater than or less than its adjusted tax
basis in its Units. Generally, a Limited Partner's basis in its Units is equal
to the amount of cash contributed by such Limited Partner to the Partnership,
increased by profits allocated to such Units and such Limited Partner's
proportionate share of Partnership liabilities, and decreased by losses
allocated to such Limited Partner's Units and all distributions with respect to
such Units. For this purpose, the Limited Partner's adjusted basis in its
Units is increased by such Limited Partner's share of any gain and reduced by
its share of any loss recognized from the sale of the Partnership assets. Any
additional gain or loss recognized by a Limited Partner on the Liquidation of
the Partnership will generally be treated as capital gain or loss if such
Limited Partner's Unit was held by the Limited Partner as a capital asset.

Any loss reportable by a Limited Partner as a result of the transactions
contemplated herein and any suspended passive activity losses from prior years
that are attributable to the Partnership will generally be deductible in the
year of complete liquidation of a Limited Partner's interest in the Partnership
without regard to the passive activity loss limitations. Any net income or
gains reportable by a Limited Partner as a result of the transactions
contemplated herein should generally be considered "portfolio income" that
cannot be offset against passive activity losses from other sources.

A Limited Partner (other than tax-exempt persons, corporations, and
certain foreign individuals) who tenders its Units may be subject to 31% backup
withholding unless such Limited Partner (i) is a corporation or comes within
certain other exempt categories or (ii) provides a correct taxpayer
identification number ("TIN"), certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A Limited Partner who does not provide the Partnership with
its correct TIN may be subject to penalties imposed by the IRS. In order to
avoid the imposition of 31% backup withholding on

29
<PAGE> 38
distributions in liquidation of a Limited Partner's Units, each Limited Partner
will be required to provide to the Partnership a completed Form W-9 (or, if
appropriate, Form W-8), or other acceptable evidence showing that the Limited
Partner is not subject to backup withholding.

INCOME TAX CONSEQUENCES TO TAX-EXEMPT ORGANIZATIONS

U.S. tax exempt organizations, including qualified pension and profit
sharing trusts and individual retirement accounts, are generally exempt from
U.S. federal income taxation. However, such organizations are subject to
taxation on their "unrelated business taxable income" ("UBTI"), as defined
under Section 512 of the Code. UBTI includes income from most business
operations; however, as a general matter, it does not include gains or losses
from the sale, exchange, or other disposition of property (other than stock in
trade or other property of a kind which would be includible in inventory if on
hand at the end of a tax year or property held primarily for sale to customers
in the ordinary course of business). Further, tax exempt organizations will be
subject to federal income taxation on a portion of any gains derived from
property with respect to which there is acquisition indebtedness. As a general
matter, provided that a Limited Partner which is a tax exempt organization has
not, directly or indirectly, financed the acquisition or carrying of its Units,
any gain attributable to a disposition of its Units should be exempt from
federal income tax. Partners which are tax exempt organizations are strongly
urged to consult their own tax advisors with regard to the foregoing UBTI
aspects of the sale of the Partnership's assets and the subsequent dissolution,
termination and winding up of the Partnership.

EACH LIMITED PARTNER IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE SALE TRANSACTION AND THE SUBSEQUENT
LIQUIDATION ON SUCH LIMITED PARTNER'S PARTICULAR TAX SITUATION.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

There is no individual known by the Managing General Partner to be the
beneficial owner of more than 5% of the Partnership's outstanding Units. The
Managing General Partner beneficially owns 22 Units (.8%) registered in the
name of Hall Pension Fund, and the Purchaser owns 20 Units (.8%). Together,
the Managing General Partner's Units and the Purchaser's Units constitute the
42 Units beneficially owned by Craig Hall. The Managing General Partner and
the Purchaser intend to consent to the Proposal. See "Schedule I--Certain
Information Regarding the Executive Officers and the Directors of the Managing
General Partner."

INTERESTS OF CERTAIN PERSONS IN TRANSACTION

In considering the proposal, Limited Partners should be aware that the
Managing General Partner is owned and controlled by Craig Hall, who owns 93% of
the outstanding capital stock of the Purchaser.

The Partnership Agreement provides that in addition to reimbursements
for expenses of the Partnership, the general partner receives a 1% interest in
the Partnership and the distributions made to the partners. In addition, for
acting as real estate broker in connection with the purchase of certain
properties by Affiliated Borrowers, the general partner and/or its affiliates
may receive real estate brokerage commissions in an amount which does not
exceed the lesser of the standard real estate commission in the area in which
the property is located or 6% of the purchase price thereof. In connection
with the sale of such properties or any portion thereof, the general partner or
its affiliates are entitled to receive commissions payable from the net sale of
the proceeds received, but not in excess of the lesser of 50% of the standard
real estate commission in the area in which the property is located or 3% of
the sales price thereof. The commission payable to the general partner or its
affiliates by the Affiliated Borrowers upon the sale of the property shall be
repaid to the Partnership to the extent that the Limited Partners do not
receive total distributions from the Partnership of an amount equal to 100% of
their capital contributions plus an amount equal to 10% per annum cumulative
return on their capital contributions less any prior distributions made to them
or the prior owners of their Units. All Affiliated Borrowers filed Chapter 11
Bankruptcy proceedings, and included in each of these Affiliated Borrower's
bankruptcy plans is a provision which entitles the Purchaser to a fee not to
exceed 5% of the total sales price of any of the properties owned by the
Affiliated Borrowers in

30
<PAGE> 39
connection with the Purchaser's services in arranging the sale of such
properties. A majority of the limited partners of each of the Affiliated
Borrowers must approve such a sale, including the Purchaser's fee, as a
condition to the closing of such a sale.

Except as set forth in this Solicitation Statement, neither the
Purchaser, nor Craig Hall has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Partnership including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies.

Except as set forth in this Solicitation Statement, there have been no
contracts, negotiations or transactions since January 1, 1991 between the
Purchaser or any of its executive officers and directors or Craig Hall on the
one hand and the Partnership or its affiliates or any of their executive
officers and directors on the other hand, concerning: a merger, consolidation
or acquisition; a tender offer or other acquisition of securities; an election
of directors, other than the annual solicitation of proxies of stockholders; or
a sale or other transfer of a material amount of assets.

On August 27, 1996, Purchaser purchased 20 Units of the Partnership from
Stuart Drug and Surgical Supply Employee Pension Trust DTD, a Limited Partner
of the Partnership, for an aggregate purchase price of $26,000 (the "Stuart
Drug Transaction"). Except as set forth in this Solicitation Statement, none
of the Managing General Partner, the Purchaser or Craig Hall, or, to the best
of the Partnership's knowledge, any of the other executive officers and
directors of the Managing General Partner or the Purchaser has effected any
other transaction in the Units during the past 60 days.

MARKET FOR UNITS AND RELATED MATTERS

There is no established trading market for the Units, and it is not
anticipated that any market will develop in the future. As a result of this
factor as well as others, the market value of a Unit may be substantially less
than the pro rata net book value attributable to a Unit.

To the best of the Managing General Partner's knowledge, there have only
been five sales of Units by Limited Partners to a person not affiliated with
the Managing General Partner, the Purchaser or Craig Hall since the formation
of the Partnership. Three of the sales took place in January 1997: (i) four
Units were sold for $822 per Unit; (ii) five Units were sold for $750 per Unit;
and (iii) four Units were sold for $500 per Unit. In July 1996, ten Units were
sold for $100 per Unit, and in April 1995, six Units were sold for $35 per
Unit.

On August 27, 1996, Purchaser purchased 20 Units of the Partnership from
Stuart Drug and Surgical Supply Employee Pension Trust DTD, a Limited Partner
of the Partnership, for an aggregate purchase price of $26,000 (the "Stuart
Drug Transaction"). Except as set forth in this Solicitation Statement, none
of the Managing General Partner, the Purchaser, Craig Hall, or, to the best of
the Partnership's knowledge, any of the other executive officers and directors
of the Managing General Partner has effected any other transaction in the Units
during the past 60 days.

During 1986, the Managing General Partner purchased 22 Units in the
Partnership for an aggregate purchase price of $98,648. Except for such
transactions, the Purchaser is unaware of any trading of the Units since the
initial offering in which the price was $5,000 per Unit. As of October 15,
1996, there were 633 holders of Units. No distributions have been made to the
Limited Partners during the past two years. A total of $1,925 per Unit in
distributions have been made since the initial offering of the Units.

31
<PAGE> 40
VOTING PROCEDURES

Each Limited Partner shall be entitled to one vote for each Unit owned
of record by such Limited Partner on the Record Date. Approval of the Proposal
requires the affirmative consent of Limited Partners holding a majority in
interest of the Units who are not affiliates of the Managing General Partner,
the Purchaser or Craig Hall (a minimum of 1,256 Units outstanding on the Record
Date held by Limited Partners who are not affiliates of the Managing General
Partner, the Purchaser or Craig Hall). A duly executed consent card on which a
consent or an indication of withholding consent is not indicated will be deemed
a consent to the Proposal, except that broker non-votes (Units held by a broker
or nominee for which a consent card is submitted but with respect to which such
broker or nominee expressly indicates that it does not have discretionary
authority to consent to the Proposal) will be treated as negative votes.
Abstentions also will be treated effectively as negative votes.

The Solicitation Statement is accompanied by a separate consent card.
Consent cards should be completed, signed and returned promptly to the address
specified below in this Solicitation Statement. A self-addressed, prepaid
envelope for return of the consent cards is included with this Solicitation
Statement:

[THE HERMAN GROUP INC. LOGO]

By Mail: By Facsimile: By Hand/Overnight Courier:

THE HERMAN GROUP, INC. (214) 999-9323 THE HERMAN GROUP, INC.
2121 San Jacinto Street or 2121 San Jacinto Street
26th Floor (214) 999-9348 26th Floor
Dallas, TX 75201 Dallas, TX 75201

To Confirm:

(800) 992-6213

For Information Call:

(800) 747-2975
(Toll-Free)

Any Limited Partner delivering a consent card pursuant to the
Solicitation Statement may revoke his, her or its consent with respect to the
Proposal at any time prior to the earlier of the Approval Date or the
Expiration Date by delivering written notice of such revocation to HERMAN, at
the above-indicated address. Such written notice must be received by HERMAN
prior to the earlier of the Approval Date or the Expiration Date.

32
<PAGE> 41
SOLICITATION COSTS

The Partnership will pay for all costs and expenses, including legal
fees, incurred in connection with the preparation, filing and distribution of
this Solicitation Statement and all accompanying or supplementary documents.
The Partnership will reimburse brokers, dealers, commercial banks and trust
companies for customary handling and mailing expenses incurred in connection
with forwarding this Solicitation Statement to the Limited Partners. It is
estimated that the following expenses will be incurred by the Partnership in
connection with this Proposal:

<TABLE>
<CAPTION>
Expenses Amount
-------- ------
<S> <C>
Fairness Opinion Expenses . . . . . . . . . . . $ 55,000
Legal and Accounting . . . . . . . . . . . . . . 110,000
----------
Printing, Mailing, Depository, Distribution . . 13,000
Filing Fees . . . . . . . . . . . . . . . . . . 700
Solicitation Expenses . . . . . . . . . . . . . 5,000
----------

Total . . . . . . . . . . . . . . . . . . . . . $ 183,700
==========
</TABLE>

The solicitation of written consents may be undertaken by the directors,
officers, employees and agents of the Managing General Partner or the
Partnership; such directors, officers, employees and agents of the Managing
General Partner or the Partnership will not be additionally compensated, but
will be reimbursed for reasonable out-of-pocket expenses, if any, in connection
with such solicitation. Further, the Partnership has hired HERMAN to assist in
the solicitation of the written consents, and shall pay HERMAN an estimated fee
of $5,000 for such solicitation assistance and a fee of $13,000 for mailing
services and solicitation and tabulation services fees and direct expenses
incurred by HERMAN. Solicitation may be made by mail, telephone, telegraph,
facsimile transmission or personal interview.

AVAILABLE INFORMATION

The Partnership is subject to the informational requirements of the
Exchange Act and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information filed by the Partnership may be inspected at, and upon
payment of the Commission's customary charges, copies may be obtained from, the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such reports, proxy statements and other
information are also available for inspection and copying at prescribed rates
at the Commission's regional offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission also maintains a site on
the World Wide Web at http://www.sec.gov that contains reports, proxies and
information statements and other information regarding registrants that file
electronically.

33
<PAGE> 42
The Partnership will provide without charge to each person to whom a
copy of this Solicitation Statement is delivered, upon written or oral request
of such person and by first class mail or other equally prompt means, a copy of
any or all of the documents incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests should be directed to:

[THE HERMAN GROUP INC. LOGO]

By Mail: By Facsimile: By Hand/Overnight Courier:

THE HERMAN GROUP, INC. (214) 999-9323 THE HERMAN GROUP, INC.
2121 San Jacinto Street or 2121 San Jacinto Street
26th Floor (214) 999-9348 26th Floor
Dallas, TX 75201 Dallas, TX 75201

To Confirm:

(800) 992-6213

For Information Call:

(800) 747-2975
(Toll-Free)

Any questions regarding the Proposal or any of the statements contained
herein should be directed to HERMAN at the above indicated address. Should
HERMAN be unable to assist, direct questions to Hall Financial Group, Inc., 750
N. St. Paul Street, Suite 200, Dallas, Texas 75201-3247; Attention: Mark
Blocher. Telephone: (214) 953-1155; Fax: (214) 953-1160.

34
<PAGE> 43
SCHEDULE I

CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS
AND THE DIRECTORS OF THE MANAGING GENERAL PARTNER

DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER. The
name, business address, position with the Managing General Partner, present
principal occupation or employment and five-year employment history of each of
the directors and executive officers of the Managing General Partner are set
forth below. Also set forth below are the aggregate number of Units
beneficially owned by each such person and the percentage of ownership of the
Units such beneficial ownership represents. Unless otherwise indicated below,
the business address of each person listed is 750 North St. Paul, Dallas, Texas
75234. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with the Managing General Partner. All
officers serve at the pleasure of the Board. Directors are identified by an
asterisk. As of February 20, 1997, the Managing General Partner beneficially
owns 22 Units.

<TABLE>
<CAPTION>
AGGREGATE
PRESENT PRINCIPAL NUMBER OF
OCCUPATION AND EMPLOYMENT/ UNITS PERCENT
NAME AND MATERIAL POSITIONS HELD BENEFICIALLY OF
BUSINESS ADDRESS DURING THE PAST FIVE YEARS OWNED(A) CLASS CITIZENSHIP
- - ---------------- -------------------------- -------- ----- -----------
<S> <C> <C> <C> <C>
Craig Hall* Director of Managing General 42 1.65% United States
Partner since formation;
President and Chief Executive
Officer of Purchaser since
April 1993; Director and
Chairman of Purchaser
since 1985

Janet Carlson Secretary of Managing General 0 - Great Britain
Partner since September 1995;
Secretary of Purchaser since
September 1995; Assistant
Secretary of Managing General
Partner and Purchaser 1993-95

Donald L. Braun President of 0 - United States
Managing General Partner since
formation; Executive Vice
President of Purchaser since
April 1993; Senior Vice President
of Managing General Partner
and Purchaser 1991-93; Treasurer
of Managing General Partner
and Purchaser since 1988

Mark Depker Executive Vice President of 0 - United States
Managing General Partner since
formation; Executive Vice
President of Purchaser since
April 1993; Vice President of
Managing General Partner and
Purchaser 1992-93

Larry E. Levey* Vice President of Managing General 0 - United States
Partner since formation; Director of
Managing General Partner since
June 21, 1996; Senior Vice President
of Purchaser since April 1993;
Director and President of Edwards
Financial, Inc. from July 1990 to
April 1993
</TABLE>

* Director
(a) As shown in the Partnership's records at February 20, 1997, there were
2,552 Units outstanding.

35
<PAGE> 44
SCHEDULE II

CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS
AND THE DIRECTORS OF THE PURCHASER

DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, position with the Purchaser, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser are set forth below. Also set forth below
are the aggregate number of Units beneficially owned by each such person and
the percentage of ownership of the Units such beneficial ownership represents.
Unless otherwise indicated below, the business address of each person listed is
750 North St. Paul, Dallas, Texas 75234. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
the Purchaser. All officers serve at the pleasure of the board of directors of
the Purchaser. The sole director is identified by an asterisk. The Purchaser
owns 20 Units as of February 20, 1997.

<TABLE>
<CAPTION>
AGGREGATE
PRESENT PRINCIPAL NUMBER OF
OCCUPATION AND EMPLOYMENT/ UNITS PERCENT
NAME AND MATERIAL POSITIONS HELD BENEFICIALLY OF
BUSINESS ADDRESS DURING THE PAST FIVE YEARS OWNED(A) CLASS CITIZENSHIP
- - ---------------- -------------------------- -------- ----- -----------
<S> <C> <C> <C> <C>
Craig Hall* President and Chief Executive 42 1.65% United States
Officer of Purchaser since
April 1993; Director and
Chairman of Purchaser since
1985; Director of Managing
General Partner since
formation

Janet Carlson Secretary of Purchaser since 0 - Great Britain
September 1995; Secretary of
Managing General Partner since
September 1995; Assistant
Secretary of Purchaser and
Managing General Partner 1993-95

Donald L. Braun Executive Vice President of 0 - United States
Purchaser since April 1993;
President of Managing General
Partner since formation; Senior
Vice President of Purchaser and
Managing General Partner 1991-93;
Treasurer of Purchaser and
Managing General Partner since
1988

Mark Depker Executive Vice President of 0 - United States
Purchaser since April 1993;
Executive Vice President of
Managing General Partner since
formation; Vice President of
Purchaser and Managing General
Partner 1992-93

Kathryn Hall Executive Vice President of 0 - United States
Purchaser since September 1995

Larry E. Levey Senior Vice President of since April 0 - United States
Purchaser 1993; Vice President of
Managing General Partner since
formation; Director of Managing
General Partner since June 21, 1996;
Director and President of Edwards
Financial, Inc. from July 1990 to
April 1993
</TABLE>

* Director

36
<PAGE> 45
INDEX TO FINANCIAL STATEMENTS

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP

Financial Statements

December 31, 1996

<TABLE>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . F-3

Financial Statements:
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Operations . . . . . . . . . . . . . . . . . . . . . F-6
Statement of Partners' Equity . . . . . . . . . . . . . . . . . . . F-7
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . F-8
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . F-9
Schedule XII: Mortgage Loans on Real Estate . . . . . . . . . . . F-18
</TABLE>

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP

Financial Statements

December 31, 1995

<TABLE>
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . F-21

Financial Statements:
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . F-23
Statement of Partners' Equity . . . . . . . . . . . . . . . . . . . F-24
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . F-25
Notes to Financial Statements . . . . . . . . . . . . . . . . . . F-26
Schedule XII: Mortgage Loans on Real Estate . . . . . . . . . . . F-36
</TABLE>

F-1
<PAGE> 46
HALL INSTITUTIONAL MORTGAGE FUND

DECEMBER 31, 1996, 1995 AND 1994

F-2

<PAGE> 47

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Hall Institutional Mortgage Fund:

We have audited the accompanying balance sheets of Hall Institutional Mortgage
Fund (an Arizona limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements and the schedule referred to below are the responsibility of the
management of Hall Institutional Mortgage Fund (the "Partnership"). Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hall Institutional Mortgage
Fund as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As further discussed in Note 7 to
the financial statements, in February 1996, the Partnership learned that
certain transactions it had entered into during 1995 had caused the Partnership
to be in violation of the 1940 Investment Company Act (the "1940 Act"). The
Partnership is applying for an exemption under the 1940 Act and is planning to
solicit the approval of the partners concerning alternatives to liquidate the
Partnership. One of the alternatives would require an immediate liquidation of
all Partnership assets and subsequent dissolution. The accompanying financial
statements have not been prepared on the liquidation basis of accounting, as it
is not determinable if an immediate liquidation of the Partnership will be
required. This uncertainty raises substantial doubt about the Partnership's
ability to continue as a

F-3

<PAGE> 48

going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule XII is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our 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.

Dallas, Texas, /s/ARTHUR ANDERSEN LLP
March 7, 1997

F-4

<PAGE> 49

HALL INSTITUTIONAL MORTGAGE FUND

BALANCE SHEETS

DECEMBER 31, 1996 AND 1995 (NOTE 1)

<TABLE>
<CAPTION>
ASSETS 1996 1995
---------- ----------
<S> <C> <C>
Cash and cash equivalents (Note 2) $2,034,453 $1,332,041

Mortgage notes receivable - affiliates, net of an allowance for doubtful
receivables of $5,018,000 and $4,576,000 in 1996 and 1995, respectively (Note
3), and net of loan
origination fees of $2,338 for 1995 respectively (Note 1 and 4) -- 1,092,345

Accrued interest receivable - affiliates, net of deferred interest
and an allowance for doubtful interest receivable
of $4,564,281 and $3,928,180 in 1996 and
1995, respectively (Note 3) 1,600,000 1,639,890

Deferred charges, net -- 1,950
---------- ----------
$3,634,453 $4,066,226
========== ==========

LIABILITIES AND PARTNERS' EQUITY

Accounts payable $ 9 $ 9

Partners' equity:
Limited partners - 2,568 units outstanding
at December 31, 1996 and 1995 3,600,848 4,028,303

General Partner 33,596 37,914
---------- ----------
3,634,444 4,066,217
---------- ----------

$3,634,453 $4,066,226
========== ==========
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-5

<PAGE> 50

HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (NOTE 1)

<TABLE>
<CAPTION>
Revenues: 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Interest and loan origination
fees from affiliates (Notes 3 and 4) $ 197,404 $ 177,535 $ 26,524

Expenses:

Operating 163,329 60,830 32,255

Bad debt (reversal) (Note 3) 463,898 (1,653,386) (1,923,618)

Amortization 1,950 2,400 2,400

----------- ----------- -----------
(629,177) (1,590,156) (1,888,963)
----------- ----------- -----------

Net income (loss) $ (431,773) $ 1,767,691 $ 1,915,487
=========== =========== ===========

Net income (loss) allocable to
limited partners $ (427,455) $ 1,750,014 $ 1,896,322

Net income (loss) allocable to
General Partner (4,318) 17,677 19,155
----------- ----------- -----------

Net income (loss) $ (431,773) $ 1,767,691 $ 1,915,487
=========== =========== ===========

Net income (loss) per limited
partnership unit $ (166) $ 681 $ 738
=========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-6

<PAGE> 51

HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF PARTNERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (NOTES 1 AND 5)

<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance, December 31, 1993 $ 1,798 $ 381,957 $ 383,755

Distributions (716) -- (716)

Net income 19,155 1,896,332 1,915,487

Balance, December 31, 1994 20,237 2,278,289 2,298,526

Net income 17,677 1,750,014 1,767,691

Balance, December 31, 1995 37,914 4,028,303 4,066,217

Net Loss (4,318) (427,455) (431,773)
----------- ----------- -----------

Balance, December 31, 1996 $ 33,596 $ 3,600,848 $ 3,634,444
=========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-7

<PAGE> 52

HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (NOTE 1)

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipt of interest on Specific Loans - affiliates
and short-term investments $ 213,058 $ 1,188,570 $ 8,596
Proceeds from debt settlement -- -- --
Payment of operating costs (163,329) (60,844) (33,735)
----------- ----------- -----------

Net cash provided by (used in) operating activities,
net of distributions 49,729 1,127,726 (25,139)
----------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Loans to Affiliated Borrowers (442,000) -- --
Proceeds of Loans from Affiliated Borrowers 1,094,683 --
Distribution paid -- -- (2,083)
----------- ----------- -----------
Net cash from (used) in financing activities 652,683 -- (2,083)
----------- ----------- -----------

Net increase (decrease) in cash and cash equivalents 702,412 1,127,726 (27,222)

Cash and cash equivalents, beginning of year 1,332,041 204,315 231,537
----------- ----------- -----------
Cash and cash equivalents, end of year $ 2,034,453 $ 1,332,041 $ 204,315
=========== =========== ===========

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ (431,773) $ 1,767,691 $ 1,915,487
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Bad debt (reversal) 463,898 (1,653,386) (1,923,618)
Amortization expense 1,950 2,400 2,400
Amortization of deferred revenue (2,338) 12,396 (17,928)
Decrease in accrued interest receivable 17,992 1,023,431 --
Decrease in accounts payable -- (14) (1,480)
----------- ----------- -----------

Net cash provided by (used in) operating
activities, net of distributions $ 49,729 $ 1,127,726 $ (25,139)
=========== =========== ===========
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-8

<PAGE> 53

HALL INSTITUTIONAL MORTGAGE FUND

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

Hall Institutional Mortgage Fund, an Arizona limited partnership (the
"Partnership"), was formed on October 12, 1984. The general partner of the
Partnership is Hall Pension Fund Associates (the "General Partner") and
the general partner of Hall Pension Fund Associates is Hall 1985
Management Associates Limited Partnership (the "Managing General
Partner"). The Partnership has invested in subordinated mortgages with
affiliated partnerships (the "Affiliated Borrowers") which were primarily
secured by income-producing real estate. The investments were made during
1985, 1986 and 1987 (except for the Arrowtree Loan and the Brambletree
Loan hereinafter defined). The limited partners in the Partnership are
primarily qualified pension, profit sharing and other retirement trusts
and plans, commingled trust funds managed by banks for such trusts,
government pension and retirement trusts, individual retirement accounts,
Keogh plans, certain endowment funds and other institutional investors
intended to be exempt from federal income taxation. The Partnership also
accepted nontax-exempt investors who desired current taxable income from
mortgage investments in real estate.

BASIS OF PRESENTATION -

The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP"). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Certain prior years amounts have been reclassified to
conform with the 1996 presentation.

REVENUE RECOGNITION -

Interest income derived from mortgage notes receivable is deferred to the
extent the underlying mortgage notes receivable are determined, by the
Managing General Partner, to be either partially or completely
uncollectible on the basis described in note 3. If in future periods such
mortgage notes receivable and related interest are deemed to be
collectible, the deferred interest income will be recognized. Deferred
interest is classified in the accompanying balance sheets as a reduction
in accrued interest receivable.

Cash receipts on impaired loans are first applied to recognize previously
deferred interest and then as a reduction of accrued interest and then
finally as a reduction of principal.

For the purpose of the statement of cash flows the Partnership considers
all highly liquid investments with a maturity of three months or less to
be cash equivalents.

F-9

<PAGE> 54

INCOME TAXES -

The Partnership is not subject to federal, state, or local income taxes
and, accordingly, none have been provided in the accompanying financial
statements. Such taxes are the responsibility of the partners and are,
therefore, included in their individual tax returns.

LOAN ORIGINATION FEE -

A 3 percent loan origination fee was earned by the Partnership on each
participating mortgage loan made. This revenue was initially deferred and
is being recognized ratably over the life of the specific related loans.

AMORTIZATION OF ORGANIZATION COSTS -

Organization costs are amortized on a straight-line basis over twelve
years.

ALLOCATION OF PROFIT AND LOSS -

Partnership net profits are allocated 99 percent to the limited partners
and 1 percent to the General Partner. Net losses are allocated to the
limited partners and General Partner in proportion to the positive
balances in their capital accounts. However, all net losses will be
allocated to the General Partner if the allocation to the limited partners
would result in a negative capital account balance for the limited
partners.

DISTRIBUTIONS OF DISTRIBUTABLE CASH FROM OPERATIONS
AND SURPLUS FUNDS -

Distributable cash from operations and surplus funds, as defined, is
allocated 99 percent to the limited partners and 1 percent to the General
Partner. However, the General Partner, exercising reasonable discretion,
may retain in the Partnership all or any part of the funds available for
distributions to meet the working capital needs of the Partnership (see
Note 2).

NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT -

Net income (loss) per limited partnership unit ("Unit") is computed by
dividing net income (loss) allocated to the limited partners by the
weighted average number of Units outstanding. Per Unit information has
been computed based on 2,568 Units outstanding in 1996, 1995 and 1994.

F-10

<PAGE> 55

(2) CASH AND CASH EQUIVALENTS:

Cash and cash equivalents at December 31, 1996 and 1995, consisted of the
following:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash $ 51,718 $ 55,804
Certificates of deposit/Money
Market account 1,982,785 1,276,237
---------- ----------
$2,034,453 $1,332,041
========== ==========
</TABLE>

Under the terms of the partnership agreement, the General Partner is
required to maintain in the Partnership reasonable cash reserves for
working capital and contingencies in an amount of not less than 1% of
invested capital, as defined ($72,442 and $74,400 in 1996 and 1995
respectively). The Partnership maintained the required working capital
reserve at December 31, 1996 and 1995.

(3) MORTGAGE NOTES RECEIVABLE:

The Partnership's loans to Affiliated Borrowers (See Notes 1 and 4 for
relationships) are nonrecourse obligations of the Affiliated Borrowers.
During 1995 and 1996, the Partnership released its second lien position on
the loans to Affiliated Borrowers. All loans, except a certain amount
advanced to Hall Seven Trails Associates and Hall Brambletree Associates,
as more fully discussed hereafter (the "Arrowtree Loan") and (the
"Brambletree Loan"), made by the Partnership to the Affiliated Borrowers
were subject at the time of origination to the rights and restrictions set
out in a specified loan agreement ("Model Loan Agreement") and two
specified forms of notes ("Participating Notes"). Such loans are hereafter
referred to as "Specific Loans". As described hereinafter, all of the
Specific Loans set out in the Model Loan Agreement and the Participating
Notes have been modified subsequent to their origination. As a result of a
detailed analysis the Partnership performs on the estimated values of the
underlying assets relating to and impacting the collectibility of the
Specific Loans, as hereafter described, certain amounts of the Specific
Loans have been reserved through bad debt provisions. The following table
describes the terms and status of outstanding Specific Loans at December
31, 1995 and 1996:

F-11

<PAGE> 56

<TABLE>
<CAPTION>
Outstanding Principal
Loan Amount Accrual
Borrower 1996 1995 Location Rate Status
- - -------- ---- ---- -------- ---- ------
<S> <C> <C> <C> <C> <C>
Arrowtree $ -- $ 913,683 Okemos, MI (A) Modified
Brambletree 2,193,000 1,751,000 Garland, TX 7.00% Modified
Twintree 720,000 720,000 Albuquerque, NM 8.00% Modified
Midtree 410,000 410,000 Albuquerque, NM 8.00% Modified
Lanetree 620,000 620,000 Albuquerque, NM 8.00% Modified
Candlewick 460,000 460,000 Albuquerque, NM 8.00% Modified
Coachtree 615,000 615,000 Albuquerque, NM 8.00% Modified
----------- -----------
$ 5,018,000 $ 5,489,683
=========== ===========
</TABLE>

(A) Arrowtree's Specific Loan accrual rate in 1995 was equal to the
principal payments Arrowtree made on its first lien mortgage.

The following table shows the changes in the Partnership's allowance for loan
losses for the years ended December 31, 1996 and 1995.

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 4,576,000 $ 5,571,770
Allowance recorded on loans 442,000 620,000
Reduction in allowance for loan losses -- (1,094,683)
Write offs against the reserve -- (521,087)
----------- -----------
Balance at end of period $ 5,018,000 $ 4,576,000
=========== ===========
</TABLE>

The following table shows the changes in the Partnership's allowance for
interest receivable losses for the years ended December 31, 1996 and 1995.

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 3,928,180 $ 4,826,539
Allowance recorded on interest receivables 21,898 493,225
Reduction in allowance for interest receivable --
(1,671,928)
Write offs against the reserve -- (376,237)
Deferred interest 614,203 656,581
----------- -----------
Balance at end of period $ 4,564,281 $ 3,928,180
=========== ===========
</TABLE>

The Partnership periodically reviews the amount of reserves which are necessary
on both its mortgages and interest receivables. Previously, the process of
reviewing the amount of reserves was based on the current market value of each
Affiliated Borrower's asset holdings and where the Partnership stands in
relation to the Affiliated Borrower's other creditors. Effective January 1,
1995, the Partnership adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" (SFAS #114). SFAS #114
required the Partnership to evaluate its mortgage notes for impairment based on
a measurement of the present value of expected future cash flows, the loans
observable market price, or the fair value of the

F-12

<PAGE> 57

loans collateral if the loan is collateral dependent. In accordance with SFAS
#114, the Partnership obtained a third-party appraisal of its mortgages and
interest receivables which estimated values of the Partnership's mortgages and
interest receivables ranging from $1,275,000 - $1,600,000, exclusive of amounts
received in connection with the Arrowtree refinancing and inclusive of the
amount advanced in connection with the Brambletree refinancing as described
below. The accompanying financial statements reflect the results of the
receivables appraised values at December 31, 1995, and is based on the upper
end of the valuation range.

The resulting appraised valuations were based on the discounted cash flow
analysis' of the underlying properties (discounted at 12%) assuming a five-year
holding period with a sale occurring at the end of the fifth year. The total
discounted cash flows were further discounted (at 50%-60%) to compensate for
the risk associated with owning a minority non-controlling equity interest
which the Partnership is deemed to possess as a lender to each of the
Affiliated Borrowers.

For the years ended December 31, 1995 and 1994, respectively, the Partnership
reversed bad debt reserves totaling $1,653,386 and $1,923,618. The amounts
reversed during 1995 were primarily based on interest payments received during
the year on previously reserved amounts and the expected principal payments to
be received in connection with the Arrowtree refinancing discussed in Note 8.
The amounts reversed during 1994 were based upon management's process of
reviewing the necessary reserves as discussed above and resulted from the
increased values of the properties that collateralized the mortgage notes at
that time. The Partnership increased the reserve during 1996 by $463,898,
primarily related to the increase in the Hall Brambletree Associates Specific
Loan.

On November 1, 1995, Midtree Associates, Ltd. ("Midtree") refinanced the
Midtree apartments' mortgages. The first lien mortgage in place prior to the
refinancing had an original maturity date of August 1, 1995, but was extended
to allow Midtree time to secure the refinancing proceeds. As part of the
overall refinancing, the property was transferred to Phoenix Square Associates,
Ltd. ("New Midtree"), with Midtree retaining a 99% interest in New Midtree. The
property was refinanced with a new $4.2 million first lien which accrues
interest at 8.1% through maturity on November 1, 2002. Monthly principal and
interest payments are based on a 30-year amortization schedule. As a condition
of the refinancing, the Partnership was required to release its second lien
position and retain an unsecured loan from Midtree for the remaining balance on
Midtree's Specific Loan. The remaining balance on the Midtree Specific Loan has
the same economic and payment terms as prior to the refinancing. The
Partnership believes it was in its best interest to agree to release its second
lien position pursuant to the refinancing. By doing so, Midtree was able to
avoid foreclosure on its underlying property from the original first lien
holder and reduce the interest rate on the first lien from 12%.

In January 1996, Northtree Associates Limited Partnership ("Candlewick"), an
Affiliated Borrower, refinanced the Candlewick apartments' mortgages. The
property was refinanced with a new $5.0 million first lien mortgage which
accrues interest at 7.58% with principal and interest payments due monthly
based on a 22-year amortization schedule through maturity on February 1, 2003.
As a condition of the refinancing agreement, the Partnership was required to
release its second lien position and retain an unsecured recourse promissory
note from Candlewick for the

F-13

<PAGE> 58

remaining balance on Candlewick's Specific Loan. The remaining balance on the
Candlewick Specific Loan has the same economic terms as prior to the
refinancing. The partnership believes it was in its best interest to release
its second lien position to allow the refinancing to be consummated, thereby
decreasing Candlewick's first lien mortgage interest rate and extending the
maturity date.

Hall Seven Trails Associates ("Arrowtree") completed an agreement with
Prudential Insurance Company ("Prudential") in 1994 regarding restructuring its
first lien encumbrance on which Arrowtree had been in default since March 1,
1989. The agreement with Prudential required Arrowtree to raise $345,000 in
cash and funding commitments (the "New Capital") to fund a capital improvement
escrow account, pay the lender's administrative costs, and to bring debt
service current under its new terms. Arrowtree issued a capital call to equity
investors and raised approximately $171,000 of the New Capital. The Partnership
loaned Arrowtree $181,000 ("Arrowtree Reorganization Advance") with such funds
being used by Arrowtree as part of the New Capital. The Arrowtree
Reorganization Advance accrues interest at 10% compounded monthly beginning
January 1, 1994. Interest and principal on the Arrowtree Reorganization Advance
was deferred and reserved, respectively, in 1994. Pursuant to the Partnership's
analysis of the collectibility of receivables from the Affiliated Borrowers, a
portion of this reserve was reversed in 1995. In 1994, the Partnership modified
its Specific Loan from Arrowtree to agree with various modifications called for
as part of the agreement with Prudential and in the Arrowtree plan of
reorganization (the "1994 Arrowtree Modification"). The 1994 Arrrowtree
Modification provided that repayment of the principal portion of Arrowtree's
Specific Loan and the repayment of the Arrowtree Reorganization Advance and its
related accrued interest is subordinate to Prudential receiving their entire
first lien and related accrued interest. The interest portion of Arrowtree's
Specific Loan, in addition to being subordinate to Prudential, is also
subordinate to the repayment of all the New Capital contributed by equity
investors plus a 10% annual preference on such funds. The Partnership believes
it was in its best interest to have consented to the 1994 modification of the
first lien, to have consented to the 1994 Arrowtree Modification, and to make
the Arrowtree Reorganization Advance. As a result of these events, the
Partnership was able to retain its second lien on the property since the first
lien was not assumable by the Partnership and the Partnership did not have the
capability of paying off the first lien. As of December 31, 1995, the Arrowtree
Reorganization Advance was secured by the Partnership's second lien on the
property. In January 1996, Arrowtree refinanced its mortgages. As part of the
overall refinancing, the property was transferred to Arrowtree Properties, Ltd.
("New Arrowtree"), with Arrowtree retaining a 99% interest in New Arrowtree.
The property was refinanced with a new $2.75 million first lien mortgage which
accrues interest at 7.57% with principal and interest payments due monthly. The
refinancing allowed Arrowtree to repay the Partnership in full the $181,000 of
principal and $44,274 of accrued interest on a loan the Partnership made to
Arrowtree pursuant to the 1994 restructuring of Arrowtree's first lien
mortgage. Arrowtree also made a full principal payment of $913,683 on
Arrowtree's Specific Loan. As a condition of the refinancing agreement, the
Partnership was required to release its second lien position and retain an
unsecured recourse promissory note from Arrowtree for the remaining balance on
Arrowtree's Specific Loan. The Partnership is to receive the remaining interest
of $547,237 on the Arrowtree Specific Loan after the return of the New Capital
to the equity investors of Arrowtree.

F-14

<PAGE> 59

A plan of reorganization (the "Plan") for Hall Brambletree Associates
("Brambletree") was confirmed on May 19, 1993. According to the Plan, the
principal and interest of $2,037,324 due to the Partnership on its mortgage
note receivable will bear interest at 7% per annum beginning January 1, 1993.
Property cash flow and sale and refinance proceeds will be allocated first to
the investors who provided additional equity of $250,000 to Brambletree as part
of the Plan (the "Participating Investors"), plus a 12% annual preference, then
50% to the Participating Investors and 50% to Hall Financial Group, Inc.
("HFGI") and the Partnership to be shared pro rata until HFGI and the
Partnership are paid in full, and then 100% to the Participating Investors. In
August 1996, Hall Brambletree refinanced the Brambletree apartments' mortgages.
The property was refinanced with a new $6.105 million first lien mortgage which
accrues interest at 8.245% with principal and interest payments due monthly
based on a 30-year amortization schedule through maturity on September 1, 2006.
As a condition of the refinancing, the Partnership was required to loan
Brambletree an additional $442,000 pro rata with HFGI. This advance will be
repaid pro rata with HFGI out of the first available proceeds before repayment
of amounts due under the Brambletree Specific Loan. Along with the additional
loan, the Partnership was required to release its second lien position and
retain an unsecured recourse promissory note from Brambletree for the remaining
balance on Brambletree's Specific Loan. The remaining balance on the
Brambletree specific Loan has the same economic terms as prior to the
refinancing. The Partnership believes it was in its best interest to release
its second lien position to allow the refinancing to be consummated, thereby
decreasing Brambletree's first lien mortgage interest rate, extending the
maturity date, and take advantage of a discount in the amount of $295,624.

Fawntree Associates, Ltd. ("Fawntree"), an Affiliated Borrower, was sold for
$6,400,000 on June 15, 1995. After the satisfaction of all claims having
priority over the Partnership, Fawntree distributed $582,682 to the Partnership
per the terms on the Fawntree Specific Loan. The Partnership had previously
reserved the entire amount of the Fawntree Specific Loan. As a result of the
sale of the property in 1995 and related payment to the Partnership, the
Partnership reversed the reserve related to the repayment and wrote off the
remaining accrued but unpaid interest of $397,408 and principal balance of
$550,000 against the related reserves.

In February 1995, three of the Affiliated Borrowers, along with 25 other
partnerships (collectively hereafter referred to as the "Hall LPs"), entered
into a transaction with affiliates of NHP, Inc., Paine Webber and HFGI whereby
the properties were transferred to separate limited partnerships (the "New
LPs") by the respective Affiliated Borrower (the "NHP Transaction"). As a
result of the NHP Transaction, Lanetree Associates Limited Partnership,
Twintree Associates Limited Partnership and Coachtree Associates Limited
Partnership ("NHP Transaction Partnerships") each hold a limited partnership
interest in its respective New LP in which affiliates of NHP, Inc. and Paine
Webber are general partners. As part of the NHP Transaction, the senior
mortgage for each property involved in the NHP Transaction was paid in full. In
addition, as part of the NHP Transaction, each Hall LP (including the NHP
Transaction Partnerships) received cash at closing, and is entitled to a
defined priority equity amount in the New LPs (the "Preferred Equity") and an
annual return on the Preferred Equity of 6% per annum (the "Operational
Preference") provided that all of the New LPs have been paid the full amount of
the Operational Preference due at the end of each calender quarter. In the
event all of the New LPs have not been paid the amount of the Operational
Preference due at the end of each calender quarter, the annual return on the
Preferred Equity in calculating Operational Preference increases to 9% per
annum (hereafter

F-15

<PAGE> 60

referred to as a "Non-Major Default"). A Non-Major Default occurred in
April 1996, and is continuing. In addition to Operational Preference, each
NHP Transaction Partnership is entitled to a priority return of the
Preferred Equity and any accrued and unpaid Operational Preference upon
refinancing or sale of the properties over other equity classes and a 20%
participation in net proceeds available from sale or refinancing after
payment of the Preferred Equity and any accrued and unpaid Operational
Preference ("Sale or Refinancing Participation Proceeds"). As a condition
of the NHP Transaction, the Partnership was required to release its second
lien positions and retain unsecured loans from the NHP Transaction
Partnerships for the remaining balances on their respective Specific
Loans. The remaining balances on the NHP Transaction Partnerships'
Specific Loans have the same economic and payment terms as prior to the
NHP Transaction. Lanetree Associates Limited Partnership distributed
$569,419 to the Partnership in March 1995 in partial payment of its loan
obligation to the Partnership from proceeds it received at closing of the
NHP Transaction. There were not sufficient proceeds at closing (after the
payment of priority repayments) to distribute funds to the Partnership
from Coachtree Associates Limited Partnership or Twintree Associates
Limited Partnership. However, the NHP Transaction Partnerships remain
obligated to the Partnership pursuant to each partnership's Bankruptcy
Plan. The terms of the Preferred Equity held by the NHP Transaction
Partnerships provided that defined amounts be paid not later than December
10, 2000. The amounts the Partnership would receive on December 10, 2000,
excluding Sale or Refinancing Participation Proceeds and assuming a
Non-Major Default has occurred, is estimated to be:

<TABLE>
<S> <C>
Coachtree $ 500,055
Lanetree $1,189,524
Twintree $ 684,098
</TABLE>

(4) TRANSACTIONS WITH AFFILIATES:

Loan origination fees of $2,338, $12,396 and $17,928 were recognized in
1996, 1995 and 1994, respectively. Pursuant to the Partnership's analysis
of the collectibility of receivables from the Affiliated Borrowers,
interest income of $97,794 and $128,670 was recognized on the Specific
Loan from Lanetree Associates Limited Partnership in 1996 and 1995
respectively. No interest income was recognized on Specific Loans in 1994.
The interest income is net of deferred interest of $614,203, $656,581, and
$849,228 on non-performing mortgage notes receivable in 1996, 1995 and
1994, respectively.

HFGI performs administrative services for the Partnership. The Partnership
agreement does not allow the partnership to pay HFGI for these services.
No provision has been made in these financial statements to record the
value of these services. It is estimated that these services are worth
less than $5,000 per year and are therefore insignificant to the
operations of the partnership.

(5) DISTRIBUTIONS TO PARTNERS:

During the year ended December 31, 1994, distributions of $2,083 (of which
$1,367 had been previously accrued) were paid to the General Partner. No
distributions were made in 1996 and 1995. Such distributions were made in
accordance with the partnership agreement which requires

F-16

<PAGE> 61

quarterly distributions of Partnership distributable cash flow, as
defined.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires the Partnership to disclose
the estimated fair values of its financial instruments.

The carrying amount of the Partnership's cash and cash equivalents
approximates its fair value due to the short maturity of these
instruments. The Partnership's mortgage note receivables and accrued
interest receivables have been recorded at their estimated fair value
based upon an independent third-party appraisal (see Note 3).

(7) INVESTMENT ACT OF 1940:

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. In February 1996, the
Partnership's attorneys advised the Partnership that the release of the
second lien positions on certain of the loan receivables could cause the
Partnership to be treated as an investment company under the 1940
Investment Company Act (the "1940 Act") by the Securities and Exchange
Commission. The Partnership cannot become an investment company under the
1940 Act because it is in conflict with its partnership agreement and the
purpose of the original offering. In the original offering, it was
anticipated that when the loans were repaid, the funds would be
distributed back to the unit holders rather than being allowed to be
reinvested. Therefore, based upon the Partnership's original partnership
documents, the intent was to have a liquidating fund after all the initial
loans were made. In order to adopt a liquidating plan, a proxy will be
sent to each unit holder for their vote. A majority vote (over 50%) for
the liquidating plan will be required of all unit holders.

The liquidating plan calls for the Partnership to sell all of the loans
receivable to HFGI for $1.6 million. This amount was determined by taking
the highest range of value as determined by an independent third party
appraisal. The proceeds from the sale of the loans receivable plus the
cash on hand will then be distributed to the unit holders based upon their
percentage interest. The Partnership would then be dissolved.

Management expects a proxy statement will be sent out in March 1997 to all
unit holders.

The accompanying financial statements have not been prepared on the
liquidation basis of accounting, as it is not determinable if an immediate
liquidation of the Partnership will be required. This uncertainty raises
substantial doubt about the Partnership's ability to continue as a going
concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

F-17

<PAGE> 62
Schedule XII

HALL INSTITUTIONAL MORTGAGE FUND

Mortgage Loans on Real Estate

December 31, 1996

<TABLE>
<CAPTION>
Description Interest Rate Maturity Date Periodic Payment Terms
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Subordinate Notes on
Apartment Complexes in
New Mexico:

Hall Lanetree Associates 8% compounded December 10, 2000 Interest payments will be made
annually to the Partnership as funds are
available pursuant to the NHP Transaction
described in Note 3.

Hall Midtree Associates 8% compounded November 1, 2002 No interest payments will be made
annually to the Partnership until such time
as accrued but unpaid interest on
the first lien is paid. A balloon payment
of the entire principal balance plus
accrued but unpaid interest is due
at maturity.

Hall Coachtree Associates 8% compounded December 10, 2000 Interest payments will be made to the
annually Partnership as funds are available
pursuant to the NHP Transaction
described in Note 3.

Hall Northtree Associates- 8% compounded January 1, 1999 No interest payments will be made
Candlewick Apartments annually to the Partnership until such time
as accrued but unpaid interest on
the first lien is paid. A balloon payment
of the entire principal balance plus
accrued but unpaid interest is due
at maturity.

Hall Twintree Associates 8% compounded December 10, 2000 Interest payments will be made to the
annually Partnership as funds are available
pursuant to the NHP Transaction
described in Note 3.

<CAPTION>
Principal
Amount
of Loans
Subject to
Face Carrying Delinquent
Amount of Amount of Principal or
Description Prior Liens Mortgages Mortgages Interest
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subordinate Notes on
Apartment Complexes in
New Mexico:

Hall Lanetree Associates (A) $ 620,000 $ 620,000 $ -

Hall Midtree Associates First lien note of $4,200,000 to 410,000 410,000 -
Secore Financial Corporation
bearing interest at 8.1% per
annum until the maturity date of
November 1, 2002

Hall Coachtree Associates (A) 615,000 615,000 -

Hall Northtree Associates- First lien note of $4,300,000 to 460,000 460,000 -
Candlewick Apartments AEtna Life Insurance Company bearing
interest at 12% per annum through
February 1, 1992 and 11% thereafter
until maturity, January 1, 1999.

Hall Twintree Associates (A) 720,000 720,000 -

---------- ---------- ------------
TOTAL NEW MEXICO $2,825,000 $2,825,000 $ -
---------- ---------- ------------

</TABLE>

F-18
<PAGE> 63
Schedule XII

HALL INSTITUTIONAL MORTGAGE FUND

Mortgage Loans on Real Estate

December 31, 1996

Hall Brambletree Associates 7% per annum November 1, 1998 Principal and interest
as of payments are subordinate
January 1, 1993. to the first lien interest and
principal being paid in full
and Participating Investors
contributions plus a 12%
annual preference. (See note 3)

TOTAL TEXAS
GROSS MORTGAGE LOANS ON REAL ESTATE
ALLOWANCE FOR DOUBTFUL RECEIVABLES
NET MORTGAGE LOANS ON REAL ESTATE

Hall Brambletree Associates First lien note of $6,105,000 to $2,193,000 $2,193,000 $ -
AMERSCO bearing an accrual
rate ranging at 8.245% per annum
until the maturity date of
September 1, 2006.

---------- --------- ------------
TOTAL TEXAS 2,193,000 2,193,000 -
---------- --------- ------------
GROSS MORTGAGE LOANS ON REAL ESTATE $5,018,000 5,018,000 $ -
========== ---------- ============
ALLOWANCE FOR DOUBTFUL RECEIVABLES 5,018,000
----------
NET MORTGAGE LOANS ON REAL ESTATE $ 0
==========
</TABLE>

(A) In February 1995, these partnerships entered into a transaction with
affiliates of NHP, Inc. and Paine Webber whereby the properties were
transferred to separate limited partnerships (the "New LP's), by the
respective affiliated borrower in exchange for limited partnership
interests in the New LP's. As part of this transaction, the senior mortgage
for each property was paid in full. In addition, these partnerships are
entitled to certain priority payments as discussed further in Item 7.

F-19

<PAGE> 64
HALL INSTITUTIONAL MORTGAGE FUND

DECEMBER 31, 1995, 1994 AND 1993

F-20
<PAGE> 65
REPORT INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Hall Institutional Mortgage Fund Limited Partnership:

We have audited the accompanying balance sheets of Hall Institutional Mortgage
Fund Limited Partnership (an Arizona limited partnership) as of December 31,
1995 and 1994, and the related statements of operations, partners' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements and the schedule referred to below are the
responsibility of the management of Hall Institutional Mortgage Fund Limited
Partnership (the "Partnership"). Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hall Institutional Mortgage
Fund Limited Partnership as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As further discussed in Note 7
to the financial statements, in February 1996, the Partnership learned that
certain transactions it had entered into during 1995 had caused the Partnership
to be in violation of the 1940 Investment Company Act (the "1940 Act"). The
Partnership is applying for an exemption under the 1940 Act and is planning to
solicit the approval of the partners concerning alternatives to liquidate the
Partnership. One of the alternatives would require an immediate liquidation of
all Partnership assets and subsequent dissolution. The accompanying financial
statements have not been prepared on the liquidation basis of accounting, as it
is not determinable if an immediate liquidation of the Partnership will be
required. This uncertainty raises substantial doubt about the Partnership's
ability to continue as a going concern. The accompanying financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Arthur Andersen LLP

Dallas, Texas,
April 8, 1996

F-21
<PAGE> 66
HALL INSTITUTIONAL MORTGAGE FUND

BALANCE SHEETS

DECEMBER 31, 1995 AND 1994 (NOTE 1)

<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash and cash equivalents (Note 2) $ 1,332,041 $ 204,315

Mortgage notes receivable - affiliates, net of an allowance
for doubtful receivables of $4,576,000 and $5,571,770
in 1995 and 1994, respectively (Note 3), and net of loan
origination fees of $2,338 and $14,734 for 1995 and 1994
respectively (Note 1 and 4) 1,092,345 600,911

Accrued interest receivable - affiliates, net of deferred
interest and an allowance for doubtful interest receivable
of $3,928,180 and $4,826,539 in 1995 and 1994, respectively
(Note 3) 1,639,890 1,488,973

Deferred charges, net 1,950 4,350
------------ ------------
$ 4,066,226 $ 2,298,549
============ ============
LIABILITIES AND PARTNERS' EQUITY

Accounts payable $ 9 $ 23

Partners' equity:
Limited partners - 2,568 units outstanding
at December 31, 1995 and 1994 4,028,303 2,278,289

General Partner 37,914 20,237
4,066,217 2,298,526
------------ ------------
$ 4,066,226 $ 2,298,549
============ ============
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE BALANCE SHEETS.

F-22
<PAGE> 67
HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (NOTE 1)

<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:

Interest and loan origination
fees from affiliates (Notes 3 and 4) $ 177,535 $ 26,524 $ 50,494

Gain on debt settlement (Note 3) - - 75,000
------------ ------------ ------------
177,535 26,524 125,494
------------ ------------ ------------
Expenses:

Operating 60,830 32,255 47,928

Bad debt reversal (Note 3) (1,653,386) (1,923,618) -

Amortization 2,400 2,400 2,400
------------ ------------ ------------
(1,590,156) (1,888,963) 50,328
------------ ------------ ------------
Net income $ 1,767,691 $ 1,915,487 $ 75,166
============ ============ ============
Net income allocable to
limited partners $ 1,750,014 $ 1,896,332 $ 74,414

Net income allocable to
General Partner 17,677 19,155 752
------------ ------------ ------------
Net income $ 1,767,691 $ 1,915,487 $ 75,166
============ ============ ============
Net income per limited
partnership unit $ 681 $ 738 $ 29
============ ============ ============
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-23

<PAGE> 68
HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF PARTNERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (NOTES 1 AND 5)

<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1992 $ 1,046 $ 307,543 $ 308,589

Net income 752 74,414 75,166
------------ ------------ ------------
Balance, December 31, 1993 1,798 381,957 383,755

Distributions (716) - (716)

Net income 19,155 1,896,332 1,915,487
------------ ------------ ------------
Balance, December 31, 1994 20,237 2,278,289 2,298,526

Net income 17,677 1,750,014 1,767,691
------------ ------------ ------------
Balance, December 31, 1995 $ 37,914 $ 4,028,303 $ 4,066,217
============ ============ ============
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-24
<PAGE> 69
HALL INSTITUTIONAL MORTGAGE FUND

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (NOTE 1)

<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Receipt of interest on Specific Loans - affiliates
and short-term investments $ 1,188,570 $ 8,596 $ 8,311
Proceeds from debt settlement - - 75,000
Payment of operating costs (60,844) (33,735) (46,425)
----------- ------------ ------------
Net cash provided by (used in) operating activities,
net of distributions 1,127,726 (25,139) 36,886
----------- ------------ ------------
Cash Flows From Financing Activities
Loans to Affiliated Borrowers - - (181,000)
Distribution paid - (2,083) -
----------- ------------ ------------
Net cash used in financing activities - (2,083) (181,000)
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents 1,127,726 (27,222) (144,114)

Cash and cash equivalents, beginning of year 204,315 231,537 375,651
----------- ------------ ------------
Cash and cash equivalents, end of year $ 1,332,041 $ 204,315 $ 231,537
=========== ============ ============
Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income $ 1,767,691 $ 1,915,487 $ 75,166
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Bad debt reversal (1,653,386) (1,923,618) -
Amortization expense 2,400 2,400 2,400
Amortization of deferred revenue (12,396) (17,928) (42,183)
Decrease in accrued interest receivable 1,023,431 - -
Increase (decrease) in accounts payable (14) (1,480) 1,503
----------- ------------ ------------
Net cash provided by (used in) operating
activities, net of distributions $ 1,127,726 $ (25,319) $ 36,886
=========== ============ ============
</TABLE>

THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.

F-25
<PAGE> 70
HALL INSTITUTIONAL MORTGAGE FUND

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

Hall Institutional Mortgage Fund, an Arizona limited partnership (the
"Partnership"), was formed on October 12, 1984. The general partner of the
Partnership is Hall Pension Fund Associates (the "General Partner") and
the general partner of Hall Pension Fund Associates is Hall 1985
Management Associates Limited Partnership (the "Managing General
Partner"). The Partnership has invested in subordinated mortgages with
affiliated partnerships (the "Affiliated Borrowers") which were primarily
secured by income-producing real estate. The investments were made during
1985, 1986 and 1987 (except for the Arrowtree Loan hereinafter defined).
The limited partners in the Partnership are primarily qualified pension,
profit sharing and other retirement trusts and plans, commingled trust
funds managed by banks for such trusts, government pension and retirement
trusts, individual retirement accounts, Keogh plans, certain endowment
funds and other institutional investors intended to be exempt from federal
income taxation. The Partnership also accepted nontax-exempt investors who
desired current taxable income from mortgage investments in real estate.

BASIS OF PRESENTATION -

REVENUE RECOGNITION -

Cash receipts on impaired loans are first applied to recognize previously
deferred interest and then as a reduction of accrued interest and then
finally as a reduction of principal.

For the purpose of the statement of cash flows the Partnership considers
all highly liquid investments with a maturity of three months or less to
be cash equivalents.

F-26
<PAGE> 71

INCOME TAXES -

LOAN ORIGINATION FEE -

AMORTIZATION OF ORGANIZATION COSTS -

Organization costs are amortized on a straight-line basis over twelve
years.

ALLOCATION OF PROFIT AND LOSS -

DISTRIBUTIONS OF DISTRIBUTABLE CASH FROM OPERATIONS
AND SURPLUS FUNDS -

NET INCOME PER LIMITED PARTNERSHIP UNIT -

Net income per limited partnership unit ("Unit") is computed by dividing
net income allocated to the limited partners by the weighted average
number of Units outstanding. Per Unit information has been computed based
on 2,568 Units outstanding in 1995, 1994 and 1993.

F-27

<PAGE> 72
(2) CASH AND CASH EQUIVALENTS:

Cash and cash equivalents at December 31, 1995 and 1994, consisted of the
following:

<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Cash $ 55,804 $ 44,898
Certificates of deposit/Money
Market account 1,276,237 159,417
----------- ------------
$ 1,332,041 $ 204,315
=========== ============
</TABLE>

Under the terms of the partnership agreement, the General Partner is
required to maintain in the Partnership reasonable cash reserves for
working capital and contingencies in an amount of not less than 1% of
invested capital, as defined ($74,400 and $78,400 in 1995 and 1994
respectively). The Partnership maintained the required working capital
reserve at December 31, 1995 and 1994.

(3) MORTGAGE NOTES RECEIVABLE:

The Partnership's loans to Affiliated Borrowers (see notes 1 and 4 for
relationship) are nonrecourse obligations of the Affiliated Borrowers and
certain of the loans are secured by a subordinate lien on the mortgaged
real property which is pledged as security. The Partnership has released
its second lien position on certain of the loans to Affiliated Borrowers
(see below and Notes 6 and 7). All loans, except a certain amount advanced
to Hall Seven Trails Associates, as more fully discussed hereafter (the
"Arrowtree Loan"), made by the Partnership to the Affiliated Borrowers
were subject at the time of origination to the rights and restrictions set
out in a specified loan agreement ("Model Loan Agreement") and two
specified forms of notes ("Participating Notes"). Such loans are hereafter
referred to as "Specific Loans". As described hereinafter, all of the
Specific Loans set out in the Model Loan Agreement and the Participating
Notes have been modified subsequent to their origination. As a result of a
detailed analysis the Partnership performs on the estimated values of the
underlying assets relating to and impacting the collectibility of the
Specific Loans, as hereafter described, certain amounts of the Specific
Loans have been reserved through bad debt provisions. The following table
describes the terms and status of outstanding Specific Loans at December
31, 1994 and 1995:

F-28

<PAGE> 73
<TABLE>
<CAPTION>
Outstanding Principal
Loan Amount Property
Borrower 1994 1995 Location Accrue Status
-------- ----------- ----------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Arrowtree $ 850,000 $ 913,683 Okemos, MI (A) Modified
Brambletree 1,751,000 1,751,000 Garland, TX 7.00% Modified
Twintree 720,000 720,000 Albuquerque, NM 8.00% Modified
Midtree 410,000 410,000 Albuquerque, NM 8.00% Modified
Fawntree 550,000 - Albuquerque, NM N/A Retired
Lanetree 620,000 620,000 Albuquerque, NM 8.00% Modified
Candlewick 460,000 460,000 Albuquerque, NM 8.00% Modified
Coachtree 615,000 615,000 Albuquerque, NM 8.00% Modified
----------- -----------
$ 5,976,000 $ 5,489,683
=========== ===========
</TABLE>

The following table shows the changes in the Partnership's allowance for
loan losses for the years ending December 31, 1995 and 1994.

<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Balance at beginning of period $ 5,571,770 $ 5,976,000
Allowance recorded on loans 33,268 211,415
Recovery of prior loans - -
Reduction in allowance for loan losses (1,029,038) (615,645)
----------- ------------
Balance at end of period $ 4,576,000 $ 5,571,770
=========== ============
</TABLE>

The following table shows the changes in the Partnership's allowance for
interest receivable losses for the years ending December 31, 1995 and
1994.

<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Balance at beginning of period $ 4,826,539 $ 6,139,271
Allowance recorded on interest receivables 684,119 868,181
Recovery of prior losses - -
Reduction in allowance for interest receivable (1,582,478) (2,180,913)
----------- ------------
Balance at end of period $ 3,928,180 $ 4,826,539
=========== ============
</TABLE>

(A) Arrowtree's Specific Loan accrual rate is equal to the principal
payments Arrowtree makes on its first lien mortgage.

The Partnership periodically reviews the amount of reserves which are
necessary on both its mortgages and interest receivables. Previously, the
process of reviewing the amount of reserves was based on the current
market value of each Affiliated Borrower's asset holdings and where the
Partnership stands in relation to the Affiliated Borrower's other
creditors. Effective January 1, 1995, the Partnership adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS #114). SFAS #114 required the

F-29

<PAGE> 74
Partnership to evaluate its mortgage notes for impairment based on a
measurement of the present value of expected future cash flows, the loans
observable market price, or the fair value of the loans collateral if the
loan is collateral dependent. In accordance with SFAS #114, the
Partnership obtained a third-party appraisal of its mortgages and interest
receivables which estimated values of the Partnership's mortgages and
interest receivables ranging from $1,275,000 - $1,600,000, exclusive of
amounts received in connection with the Arrowtree refinancing (see Note
8). The accompanying financial statements reflect the results of the
receivables appraised values at December 31, 1995, and is based on the
upper end of the valuation range.

The resulting appraised valuations were based on the discounted cash flow
analysis' of the underlying properties (discounted at 12%) assuming a
five-year holding period with a sale occurring at the end of the fifth
year. The total discounted cash flows were further discounted (at 50%-60%)
to compensate for the risk associated with owning a minority
non-controlling equity interest which the Partnership is deemed to possess
as a lender to each of the Affiliated Borrowers.

For the years ended December 31, 1995 and 1994, respectively, the
Partnership reversed bad debt reserves totaling $1,653,386 and $1,923,618.
The amounts reversed during 1995 were primarily based on interest payments
received during the year on previously reserved amounts and the expected
principal payments to be received in connection with the Arrowtree
refinancing discussed in Note 8. The amounts reversed during 1994 were
based upon management's process of reviewing the necessary reserves as
discussed above and resulted from the increased values of the properties
that collateralized the mortgage notes at that time. There was no change
in the reserve during 1993.

On November 1, 1995, Midtree Associates, Ltd. ("Midtree") refinanced the
Midtree apartments' mortgages. The first lien mortgage in place prior to
the refinancing had an original maturity date of August 1, 1995, but was
extended to allow Midtree time to secure the refinancing proceeds. As part
of the overall refinancing, the property was transferred to Phoenix Square
Associates, Ltd. ("New Midtree"), with Midtree retaining a 99% interest in
New Midtree. The property was refinanced with a new $4.2 million first
lien which accrues interest at 8.1% through maturity on November 1, 2002.
Monthly principal and interest payments are based on a 30-year
amortization schedule. As a condition of the refinancing, the Partnership
was required to release its second lien position and retain an unsecured
loan from Midtree for the remaining balance on Midtree's Specific Loan.
The remaining balance on the Midtree Specific Loan has the same economic
and payment terms as prior to the refinancing. The Partnership believes it
was in its best interest to agree to release its second lien position
pursuant to the refinancing. By doing so, Midtree was able to avoid
foreclosure on its underlying property from the original first lien holder
and reduce the interest rate on the first lien from 12%.

F-30

<PAGE> 75
approximately $171,000 of the New Capital. The Partnership loaned
Arrowtree $181,000 ("Arrowtree Reorganization Advance") with such funds
being used by Arrowtree as part of the New Capital. The Arrowtree
Reorganization Advance accrues interest at 10% compounded monthly
beginning January 1, 1994. Interest and principal on the Arrowtree
Reorganization Advance was deferred and reserved, respectively, in 1994.
Pursuant to the Partnership's analysis of the collectibility of
receivables from the Affiliated Borrowers, a portion of this reserve was
reversed in 1995. In 1994, the Partnership modified its Specific Loan from
Arrowtree to agree with various modifications called for as part of the
agreement with Prudential and in the Arrowtree plan of reorganization (the
"1994 Arrowtree Modification"). The 1994 Arrowtree Modification provided
that repayment of the principal portion of Arrowtree's Specific Loan and
the repayment of the Arrowtree Reorganization Advance and its related
accrued interest is subordinate to Prudential receiving their entire first
lien and related accrued interest. The interest portion of Arrowtree's
Specific Loan, in addition to being subordinate to Prudential, is also
subordinate to the repayment of all the New Capital contributed by equity
investors plus a 10% annual preference on such funds. The Partnership
believes it was in its best interest to have consented to the 1994
modification of the first lien, to have consented to the 1994 Arrowtree
Modification, and to make the Arrowtree Reorganization Advance. As a
result of these events, the Partnership was able to retain its second lien
on the property since the first lien was not assumable by the Partnership
and the Partnership did not have the capability of paying off the first
lien. As of December 31, 1995, the Arrowtree Reorganization Advance was
secured by the Partnership's second lien on the property.

The Partnership, Hall Buckingham Associates ("Buckingham"), and
Buckingham's senior mortgage holder signed an agreement on July 15, 1993
wherein the Partnership released Buckingham of its mortgage note
receivable in return for consideration of $75,000. The Partnership
recognized a $75,000 gain on debt settlement in 1993 since the Buckingham
mortgage note had been fully reserved in prior periods.

Fawntree Associates, Ltd. ("Fawntree"), an Affiliated Borrower, was sold
for $6,400,000 on June 15, 1995. After the satisfaction of all claims
having priority over the Partnership, Fawntree distributed $582,682 to the
Partnership per the terms on the Fawntree Specific Loan. The Partnership
had previously reserved the entire amount of the Fawntree Specific Loan.
As a result of the sale of the property in 1995 and related payment to the
Partnership, the Partnership reversed the reserve related to the repayment
and wrote off the remaining accrued but unpaid interest of $397,408 and
principal balance of $550,000 against the related reserves. In February
1995, three of the Affiliated Borrowers entered into a transaction with
affiliates of NHP, Inc., Paine Webber and HFGI whereby the properties were
transferred to separate limited

F-31

<PAGE> 76
partnerships (the "New LPs") by the respective Affiliated Borrower (the
"NHP Transaction"). As a result of the NHP Transaction, Lanetree
Associates Limited Partnership, Twintree Associates Limited Partnership
and Coachtree Associates Limited Partnership ("NHP Transaction
Partnerships") each hold a limited partnership interest in its respective
New LP in which affiliates of NHP, Inc. and Paine Webber are general
partners. As part of the NHP Transaction, the senior mortgage for each
property involved in the NHP Transaction was paid in full. In addition, as
part of the NHP Transaction, each NHP Transaction Partnership received
cash at closing, and is entitled to a defined priority equity amount in
the New LPs (the "Preferred Equity") and an annual return on the Preferred
Equity of 6% per annum provided that all of the New LPs have been paid in
full at the end of each calendar quarter ("Operational Participation
Proceeds"). In the event all of the New LPs have not been paid in full for
Operational Participation Proceeds at the end of each calendar quarter,
the annual return on the Preferred Equity in calculating Operational
Participation Proceeds increases to 9% per annum (hereafter referred to as
a "Non-Major Default"). In addition to Operational Participation Proceeds,
each NHP Transaction Partnership is entitled to a priority return of the
Preferred Equity and any accrued and unpaid Operational Participation
Proceeds upon refinancing or sale of the properties over other equity
classes and a 20% participation in net proceeds available from sale or
refinancing after payment of the Preferred Equity and any accrued and
unpaid Operational Participation Proceeds ("Sale or Refinancing
Participation Proceeds"). Lanetree Associates Limited Partnership
distributed $569,419 to the Partnership in March 1995 in partial payment
of its loan obligation to the Partnership from proceeds it received at
closing of the NHP Transaction. There were not sufficient proceeds at
closing (after the payment of priority repayments) to distribute funds to
the Partnership from Coachtree Associates Limited Partnership or Twintree
Associates Limited Partnership. However, the NHP Transaction Partnerships
remain obligated to the Partnership pursuant to each partnership's
Bankruptcy Plan. The terms of the Preferred Equity held by the NHP
Transaction Partnerships provided that defined amounts be paid not later
than December 10, 2000. NHP, Inc. has the option to pay the Preferred
Equity amounts due the NHP Transaction Partnerships at an earlier date at
a discounted amount. If NHP, Inc. exercises its option within twenty-one
months of the original transaction date, or November 7, 1996, it would
result in the following estimated payments, excluding Sale or Refinancing
Participation Proceeds and assuming a Non-Major Default has not occurred,
to the Partnership from each of the NHP Transaction Partnerships:

<TABLE>
<S> <C>
Coachtree $ 177,960
Lanetree $ 1,167,626
Twintree $ 381,815
</TABLE>

F-32

<PAGE> 77
The amounts the Partnership would receive on December 10, 2000, excluding
any Operational Participation Proceeds, is estimated to be:

Coachtree: $ 334,743
Lanetree: $1,167,626
Twintree: $ 561,409

As of April 8, 1996, a Non-Major Default had occurred in the NHP
Transaction.

(4) TRANSACTIONS WITH AFFILIATES:

Loan origination fees of $12,396, $17,928 and $42,183 were recognized in
1995, 1994 and 1993, respectively. In 1995, pursuant to the Partnership's
analysis of the collectibility of receivables from the Affiliated
Borrowers, interest income of $128,670 was recognized on the Specific Loan
from Lanetree Associates Limited Partnership. No interest income was
recognized on Specific Loans in 1994 or 1993. The interest income is net
of deferred interest of $673,397, $849,228, and $971,098 on non-performing
mortgage notes receivable in 1995, 1994 and 1993, respectively.

The General Partner, the Managing General Partner and the Affiliated
Borrowers are all affiliates of HFGI whose majority shareholder is Mr.
Craig Hall. As is more fully discussed in the Partnership's Annual Report
on Form 10-K., Part II, Item 7, certain of the limited partnerships
affiliated with HFGI have experienced cash flow deficits due primarily to
overbuilding and poor economic conditions in the market areas in which
they operate. Certain of these cash flow deficits have been and are being
funded by HFGI. HFGI may be unwilling or unable to provide additional cash
deficit funding to the Affiliated Borrowers and there can be no assurance
such funding will be available from other sources.

HFGI PERFORMS ADMINISTRATIVE SERVICES FOR THE PARTNERSHIP. THE PARTNERSHIP
AGREEMENT DOES NOT ALLOW THE PARTNERSHIP TO PAY HFGI FOR THESE SERVICES.
NO PROVISION HAS BEEN MADE IN THESE FINANCIAL STATEMENTS TO RECORD THE
VALUE OF THESE SERVICES. IT IS ESTIMATED THAT THESE SERVICES ARE WORTH
LESS THAN $5,000 PER YEAR AND ARE THEREFORE INSIGNIFICANT TO THE
OPERATIONS OF THE PARTNERSHIP.

(5) DISTRIBUTIONS TO PARTNERS:

During the year ended December 31, 1994, distributions of $2,083 (of which
$1,367 has been previously accrued) were paid to the General Partner. No
distributions were made in 1995 or 1993. Such distributions were made in
accordance with the partnership agreement which requires quarterly
distributions of Partnership distributable cash flow, as defined.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107. "Disclosures About
Fair Value of Financial Instruments," requires the Partnership to disclose
the estimated fair values of it financial instruments.

F-33
<PAGE> 78

(7) INVESTMENT ACT OF 1940:

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. In February 1996, the
Partnership's attorneys advised the Partnership that the release of the
second lien positions on certain of the loan receivables could cause the
Partnership to be treated as an investment company under the 1940
Investment Company Act (the "1940 Act") by the Securities and Exchange
Commission. The Partnership cannot become an investment company under the
1940 Act because it is in conflict with its partnership agreement and the
purpose of the original offering. In the original offering, it was
anticipated that when the loans were repaid, the funds would be
distributed back to the unit holders rather than being allowed to be
reinvested. Therefore, based upon the Partnership's original partnership
documents, the intent was to have a liquidating fund after all the initial
loans were made. In order to adopt a liquidating plan,a proxy will be sent
to each unit holder for their vote. A majority vote (over 50%) will be
required of all unit holders.

The liquidating plan would be an immediate liquidation of the Partnership
based on a sale of all the loans receivable to HFGI for $1.6 million. This
amount was determined by taking the highest range of value as determined
by an independent third pary appraisal. The proceeds from the sale of the
loans receivable plus the cash on hand will then be distributed to the
unit holders based upon their percentage interest. The Partnership would
then be dissolved.

F-34
<PAGE> 79
(8) SUBSEQUENT EVENTS:

In January 1996, Northtree Associates Limited Partnership ("Candlewick")
refinanced the Candlewick apartments' mortgages. The property was
refinanced with a new $5.0 million first lien mortgage which accrues
interest at 7.58% with principal and interest payments due monthly based
on a 22-year amortization schedule through maturity on February 1, 2003.
As a condition of the refinancing agreement, the Partnership was required
to release its second lien position and retain an unsecured loan from
Candlewick for the remaining balance on Candlewick's Specific Loan. The
remaining balance on the Candlewick Specific Loan has the same economic
terms as prior to the refinancing. The Partnership believes it was in its
best interest to release its second lien position to allow the refinancing
to be consummated, thereby decreasing Candlewick's first lien mortgage
interest rate and extending the maturity date.

In January 1996, the Arrowtree apartments' mortgages were refinanced. As
part of the overall refinancing, the property was transferred to Arrowtree
Properties, Ltd. ("New Arrowtree"), with Arrowtree retaining a 99%
interest in New Arrowtree. The property was refinanced with a new $2.75
million first lien mortgage which accrues interest at 7.57% with principal
and interest payments due monthly. The refinancing allowed Arrowtree to
repay the Partnership in full the principal and accrued interest on the
Arrowtree Reorganization Advance and to make a partial payment of
approximately $913,000 on Arrowtree's Specific Loan. As a condition of the
refinancing agreement, however, the Partnership was required to release
its second lien position and retain an unsecured loan from Arrowtree for
the remaining balance on Arrowtree's Specific Loan. The remaining balance
on the Arrowtree Specific Loan has the same economic and payment terms as
prior to the refinancing.

F-35

<PAGE> 80

<TABLE>
<CAPTION>
HALL INSTITUTIONAL MORTGAGE FUND Schedule XII

Mortgage Loans on Real Estate Principal

Amount

December 31, 1995 of Loans

Subject to

Face Carrying Delinquent

Amount of Amount of Principal or

Description Interest Rate Maturity Date Periodic Payment Terms Prior Liens Mortgages Mortgages Interest
- - ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
Subordinate

Notes on Apartment

Complexes in

New Mexico:

Hall Lantree 8% compounded December 10, Interest payments will (A) $ 620,000 $ 620,000 $ -
Associates annually 2000 be made to the Partnership
as funds are available
pursuant to the NHP
Transaction described
in Note 3.

Hall Midtree 8% compounded November 1, No interest payments will First lien note 410,000 410,000 -
Associates annually 2002 be made to the Partnership of $4,200,000
until such time as accrued to Secore Financial
but unpaid interest on the Corporation bearing
first lien is paid. A interest at 8.1%
balloon payment of the per annum until the
entire principal balance maturity date of
plus accrued but unpaid November 1, 2002
interest is due at maturity.

Hall Coachtree 8% compounded December 10, Interest payments will be (A) 615,000 615,000 -
Associates annually 2000 made to the Partnership as
funds are available pursuant
to the NHP Transaction de-
scribed in Note 3.

Hall Northtree 8% compounded January 1, No interest payments will First lien note 460,000 460,000 -
Associates- annually 1999 be made to the Partnership of $4,300,000
Candlewick until such time as accrued to AEtna Life
Apartments but unpaid interest on Insurance Company
the first lien is paid. bearing interest
A balloon payment of the at 12% per annum
entire principal balance through February
plus accrued but unpaid 1, 1992 and 11%
interest is due at maturity. thereafter until
maturity, January
1, 1999.

Hall Twintree 8% compounded December 10, Interest payments will be (A) 720,000 720,000 -
Associates annually 2000 made to the Partnership as
funds are available pur-
suant to the NHP Trans-
action described in Note 3.

---------- ---------- ----------
TOTAL NEW MEXICO $2,825,000 $2,825,000 $ -
---------- ---------- ----------

Subordinate Notes

on Apartment

Complexes in Texas:

Hall Brambletree 7% per annum November 1, Principal and interest First line note $1,751,000 $1,751,000 $ -
Associates as of 1998 payments are subordinate of $5,910,086
January 1, 1993 to the first lien to Federal
interest and principal National Mort-
being paid in full gage Association
and Participating bearing an
Investors contributions accrual rate
plus a 12% annual ranging from
annual preference. 9% to 10% and
(See note 3) bearing a pay
rate from 7% to
9%, maturing at
November 1, 1998.

-----------------------------------
TOTAL TEXAS $1,751,000 $1,751,000 $ -
-----------------------------------
</TABLE>

F-36
<PAGE> 81

<TABLE>
<CAPTION>
HALL INSTITUTIONAL MORTGAGE FUND Schedule XII

Mortgage Loans on Real Estate

December 31, 1995

Principal
Amount
of Loans
Subject to
Face Carrying Delinquent
Maturity Amount of Amount of Principal
Description Interest Rate Date Periodic Payment Terms Prior Liens Mortgages Mortgages of Interest
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Subordinate
Notes on
Apartment
Complex in
Michigan:

Hall Seven Is equal to the June 15, The Partnership's mortgage First lien note of $ 850,000 $ 913,683 $ -
Trails payment on the 1997 loan principal balance can $1,527,237 to
Associates first lien. be paid after the first Prudential Insur-
Arrowtree lien and its related ance Company of
accrued interest is paid. America bearing
The Partnership's mortgage interest at 9%
loan accrued interest is per annum until
subordinate to the items the maturity
above and to the return of date of June 15,
Participating Investors 1997. The lien
Reorganization Capital was paid in full
plus interest. subsequent to year
end, see Note 8.

---------------------------------
TOTAL MICHIGAN $ 850,000 $ 913,683 $ -
---------------------------------
GROSS MORTGAGE LOANS ON REAL ESTATE $5,426,000 $5,489,683 $ -
========== =========
ALLOWANCE FOR DOUBTFUL RECEIVABLES $4,576,000
----------
NET MORTGAGE LOANS ON REAL ESTATE $ 913,683
==========
</TABLE>

(A) In February 1995, these partnerships entered into a transaction with
affiliates of NHP, Inc. and Paine Webber whereby the properties were
transferred to separate limited partnerships (the "New Lp's"), by the
respective affiliated borrower in exchange for limited partnership
interests in the New LP's. As part of this transaction, the senior
mortgage for each property was paid in full. In addition, these
partnerships are entitled to certain priority payments as discussed
further in Item 7.

F-37

<PAGE> 82

ANNEX A

March 20, 1996

Hall Financial Group
750 North St. Paul, Suite 200
Dallas, Texas 75201

Attention: Mr. Larry Levey

Reference: Valuation of the Loans Receivable Interest in Hall Institutional
Mortgage Fund

Gentlemen:

Bryan E. Humphries & Associates performed narrative "As Is" market value
appraisals on seven apartment complexes in early 1995. The cash flows contained
within the appraisals will be used to facilitate the estimation of the market
value of Hall Institutional Mortgage Fund (HIMF) loan receivable interest in the
seven properties. The analysis of this letter will estimate the market value of
HIMF's loan receivables as of 2/1/96. The valuations will use cash flow analysis
presented in 1995 appraisals of the seven properties.

The following chart lists the properties, appraisal date and appraised "As Is"
Market Value.

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Hall Financial Group
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Page 2

<TABLE>
<CAPTION>
================================================================================================================================
APPRAISAL "AS IS"
APARTMENT NO. UNITS AGE DATE MARKET VALUE
- - --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1. Arrowtree 114 1972 02/20/95 $3,300,000
4568 Blackstone
Okemos, Michigan
- - --------------------------------------------------------------------------------------------------------------------------------
2. Brambletree 236 1983 02/02/95 $6,500,000
1802 Apollo Road
Garland, Texas
- - --------------------------------------------------------------------------------------------------------------------------------
3. Phoenix Square (Midtree) 122 1976 01/27/95 $5,200,000
7000 Phoenix Avenue, NE
Albuquerque, New Mexico
- - --------------------------------------------------------------------------------------------------------------------------------
4. Candlewick (Northtree) 184 1978 01/27/95 $6,300,000
3011 Jane Place, NE
Albuquerque, New Mexico
- - --------------------------------------------------------------------------------------------------------------------------------
5. The Lakes (Lanetree) 298 1979 01/31/95 $11,800,000
4800 San Mateo Lane, NE
Albuquerque, New Mexico
- - --------------------------------------------------------------------------------------------------------------------------------
6. Los Altos Towers (Twintree) 185 1978 01/30/95 $7,600,000
9125 Copper Avenue, NE
Albuquerque, New Mexico
- - --------------------------------------------------------------------------------------------------------------------------------
7. The Villa (Coachtree) 195 1969 01/27/95 $6,800,000
1111 Cardenas Drive, SE
Albuquerque, New Mexico
================================================================================================================================
</TABLE>

HIMF is basically a lender to all seven properties. As a lender, HIMF has a
minority equity interest and no management control of the property. Partial
interest similar to HIMF are typically discounted to compensate for the risk
associated with a minority position and lack of management control.

Various professional articles have been written on valuing partial interests
which indicate discounts up to 50% and more for various partial interest
situations. Of the articles researched regarding valuation of partial interest,
one article surveyed firms which purchase partnership interest. Please note
chart on the following page.

The valuation within this letter deals with the loan receivable interest of
HIMF, however, the interest more closely parallels a partial partnership
interest than traditional mortgage loan in which the property is security for
the loan and a specific constant payment stream is predetermined. The HIMF loans
have no security and the payments are based upon a priority system. Thus, the
loans are treated much the same as a participation or partial partnership
interest. For this reason, our analysis will focus on analyzing the appropriate
discounted of

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Page 3

partial partnership interests. The type of methodology used in valuing partial
partnership interest in deemed consistent with a valuation of HIMF loans
receivable interest.

<TABLE>
<CAPTION>
===========================================================================================================================
SUMMARY OF TRANSACTION TYPES PURCHASED BY FIVE INDUSTRIAL FIRMS(1)
- - ---------------------------------------------------------------------------------------------------------------------------
TRANSACTION TYPES PURCHASED
- - ---------------------------------------------------------------------------------------------------------------------------
PUBLIC DISCOUNT* PRIVATE DISCOUNT
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liquidity Fund Yes 20%-30% Yes 20%-50%
Emeryville, California
- - ---------------------------------------------------------------------------------------------------------------------------
Partnership Securities Exchange Yes 20%-30% Yes 30%-45%
Oakland, California
- - ---------------------------------------------------------------------------------------------------------------------------
MacKenzie Securities Yes 20%-45% Yes 30%-50%
San Francisco, California
- - ---------------------------------------------------------------------------------------------------------------------------
Equity Resources No Yes 30%-40%
Cambridge, Massachusetts
- - ---------------------------------------------------------------------------------------------------------------------------
Realty Repurchase Yes 17%-26% No
San Francisco, California
- - ---------------------------------------------------------------------------------------------------------------------------
*These ranges are approximate. The exact rate depends on each particular
partnership.
===========================================================================================================================
</TABLE>

The ranges of the chart are primarily dependent upon location quality,
operational cash flow, partnership history and investment type. Items which had
less of a significant impact were future appreciation and property size. Another
significant variable affecting the discount was the partnership age. The older
the partnership indicated typically greater stability and a better operating
history, resulting in a smaller discount.(2)

Another way of determining discounts for fractional interest is by examining
minority interest discounts for REITS and real estate operating companies. This
is accomplished by comparing the appraised value of the assets owned to the
company's market value based on its stock price.(3) For the period 1982 through
1987 the discount for operating companies ranged from +/-20% to 30% while the
discount for REITS ranged from +/-10% to 20%. The discount was greater in poor
real estate market years when the perceived risk in holding real estate was the
greatest. The discount for the REITS was lower than operating companies because
the majority of the cash flow is paid to the shareholders, thus, they control
how this cash is used.(4)

In 1971, the SEC published the Institutional Investor Study Report. This study
compared the price of Rule 144 stock with prices of unrestricted stock
transactions for 338 transactions. The SEC study empirically supports the
concept of discounts for lack of marketability.(6) However, this study did
indicate that large dollar transactions which fell within the top 10% in dollar

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Page 4

revenues and earnings and market value indicated the least discount, +/- 5% to
15%.(7) The Subject is considered to fall within such a transaction.

Another source of determining discounts of fractional interest of partnerships
is to examine the actual sales of these transactions. When considering the price
a buyer would pay for a fractional interest in a limited partnership, it is wise
to be aware that buyers are few and far between. The limited partnership
secondary market exhibits all of the features of a classic buyer's market.
Accordingly, investors typically expect to earn an internal rate of return (IRR)
of 20% on each dollar invested in an average-risk, non trophy real estate
limited partnership.(8)

The two best sources for recent trade data are Secondary Spectrum, a newsletter
that tracks recent trades among approximately 200 of the largest public
partnerships, and Investment Advisor magazine.(9) One sampling from these
publications shows that the real estate partnership IRRs demanded by buyers in
mid-1991 range from 17% for the most stable and conservative partnerships, to
25% for partnerships that generate positive cash flow but are making no cash
distributions.

Brad Davidson in his article on fractional partnership interest, constructs a
chart separating the various items of risk associated with fractional interest.
A percentage based upon his research is also assigned to each, ranging from the
perceived least risky partnership interests to the most risky. The chart which
follows displays this continuum.

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Page 5

<TABLE>
<CAPTION>
========================================================================================================================
FACTORS THAT AFFECT THE
PARTNERSHIP(10) MOST ACTIVE NEUTRAL LEASE ATTRACTIVE
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Relative risk of the 3% 7% 10%
partnership's asset(s)
- - ------------------------------------------------------------------------------------------------------------------------
Historical consistency of 3% 6% 9%
earnings
- - ------------------------------------------------------------------------------------------------------------------------
Condition of the 2% 3% 5%
partnership asset(s)
- - ------------------------------------------------------------------------------------------------------------------------
Partnership market's 2% 3% 4%
growth potential
- - ------------------------------------------------------------------------------------------------------------------------
Portfolio diversification 1% 1% 2%
- - ------------------------------------------------------------------------------------------------------------------------
Strength of the 1% 1% 2%
partnership's management
- - ------------------------------------------------------------------------------------------------------------------------
FACTORS THAT AFFECT THE FRACTIONAL INTEREST
- - ------------------------------------------------------------------------------------------------------------------------
Magnitude of the 2% 4% 7%
fractional interest
- - ------------------------------------------------------------------------------------------------------------------------
Liquidity of the interest 2% 4% 6%
- - ------------------------------------------------------------------------------------------------------------------------
Ability to influence 0% 1% 1%
management
- - ------------------------------------------------------------------------------------------------------------------------
Ease of asset analysis 0% 0% 1%
- - ------------------------------------------------------------------------------------------------------------------------
Aggregate discount 16% 30% 47%
========================================================================================================================
</TABLE>

Historically, the IRS has been involved in valuing many factional interest
partnerships. Obviously, the taxpayer is attempting to reduce tax liability by
showing the greatest discount, thus, the results of any IRS survey might
indicate a greater discounting than typical.

For IRS cases, the customarily accepted range of a fractional interest discount
is approximately 20% to 40%. This range has been sustained in a number of tax
court memoranda.(11)

A recently published article by Mark S. Thompson, PhD. sites studies of the
secondary market that has arisen for interests in investment partnerships as a
basis for estimating partial interest discounts. The 1992 and 1993 studies by
Partnership Profiles, Inc. revealed average discounts of 44% and 46%,
respectively for public partnership interests. These vehicles typically have
unit sizes of $500 to $1,000 and hundreds or thousands of individual investors
in each partnership. The article also states that numerous court rulings and IRS
testimony have supported discounts of 50% and more from prorated asset values in
the valuation of fractional

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Page 6

holdings. The authors conclude that the two main sources of partial interest
price reductions are illiquidity and lack of control.(12)

In April 1995, Bryan E. Humphries and Associates surveyed various local real
estate professionals for their opinions on the discount of a partial interest in
a partnership that owned a Class A apartment community. Those surveyed included:
Capital Consultants Realty Services, Inc. (Roland Freeman), The Worthing
Companies (Stephen Church), Don Cummins (Miller Commercial), Capital Realty
Group, Inc. (Bob Lankford) and G.E. Capital (Margaret Pawel) and Brian O'Boyle
(O'Boyle Properties). The majority of those surveyed represented a principal's
viewpoint.

The majority of the principals surveyed indicated a discount would be required
for the purchase of the fractional interest in a property if control of the
property were not available. Subjective estimates ranged typically from 80% to
90% of total value would be paid for the partial interest with one respondent
indicating the discount could be up to 50%.

Most of the above survey data relates to large investor grade properties or
pools of properties. HIMF has a loan receivable interest in seven separate
properties located in three different markets. Thus, the risk associated with
individual properties is diversified. However, unlike typical ownership
interests, proportionate shares of cash flows are not distributed equally to
each property. The order or priority of cash flow payments of the properties to
HIMF adds considerable risk to the value of the lender interest. This payment
structure varies greatly between properties.

Properties #1, #3 and #4 were refinanced in late 1995 - early 1996 with more
favorable financing. The funds from refinancing were used to satisfy the
original first lien and for Arrowtree any remaining funds went toward HIMF Wrap
Equity (P&I) and HIMF Capital (P&I). Due to a high loan to value ratio, property
#2 Brambletree was not refinanced. However, due to improving apartment market
conditions and favorable financing terms, Brambletree will be assumed to be
refinanced in year two of the cash flow.

For properties #1-#4, the HIMF value will be based upon the same cash flow
parameters used in the narrative appraisals. The valuation is as of 2/1/96
whereas the appraisal cash flows began used for estimating the first year
proforma for each property. The same growth parameters used for the first five
years of the cash flow will be applied to the additional year.

Properties #5 - #7 were involved in a transaction completed in February 1995
with affiliates of National Housing partnership, Paine Webber and Hall Financial
Group, Inc. wherein the old Hall ownership partnership each transferred their
property to a new partnership ("New LP"). Each old Hall Partnership received
cash at closing and retained an interest in the corresponding New LP. The old
Hall partnership (of which HIMF is a portion) is to receive a preferred return
plus 20% of the cash flow after debt service and preferred return. Additionally,
the old partnership has the potential to receive a portion or all of its senior
equity upon sale at some

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Page 7

time in the future. As of the date of the narrative appraisals, all of these
properties contained total debt relatively close to the estimated values.

The following chart shows this relationship:

<TABLE>
<CAPTION>
==========================================================================================================================
APARTMENT ESTIMATED VALUE TOTAL 1, 2, & 3 LIENS
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Coachtree $ 6,800,000 $ 6,439,573
- - --------------------------------------------------------------------------------------------------------------------------
Lanetree $11,800,000 $11,193,025
- - --------------------------------------------------------------------------------------------------------------------------
Twintree $ 7,600,000 $ 8,238,032
==========================================================================================================================
</TABLE>

A prudent investor in an upward trending apartment market such as the Subjects
would consider a holding period for the properties to maximize the old and new
partnership values as the properties' NOI and values increase. Additionally,
based upon the priority payments system of each property, the new partnership
would realize only limited funds at sale if the property were sold based upon a
1995 value. For properties #5 - #7, the same five-year holding period used in
the narrative appraisals' cash flows will be analyzed for the HIMF value. As
with properties #1 - #4, to account for the one year differential in valuation,
the actual 1995 Profit & Loss Statements will be used in estimating the year one
proformas of the cash flows. Similar parameters used in years 2-6 of the
appraisal cash flows will be applied in the HIMF Valuation.

The cash flows of each property is further discussed as follows.

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Page 8

#1 ARROWTREE APARTMENTS
(Please note cash flow analysis following this letter)

1. The discounted cash flow analysis is based upon a five-year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).

2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for years 2 through 6. With little new construction in the
area and continued stable employment, continued upward pressure on
occupancy and rental rates is anticipated. Based on IREM data, since
1978 rents in the Lansing area have increased at a compounded growth
rate of +/- 5% to 6%. For the period 1988 to 1993, IREM indicates rents
have increased at a compounded rate of +/- 2.5% to 5%. For our
analysis, 4% will be used for years 2-6.

3. First-year vacancy collection loss in the discounted cash flow was
projected based upon actual 1995 operating data. Vacancy/collection
loss is projected to be 7% also for Years 2 through 6.

4. A deduction of $30,000 will be made for the PW of the environmental O&M
Program.

5. First-year operating expenses are based upon actual 1995 data for the
Subject. With the exception of management expense, which is calculated
as a percentage of annual effective gross income, each operating
expense category is projected to increase at an annual rate of 4%
during years two through six of the cash flow. IREM data indicates
since 1978 expenses in the Lansing area have increased on a compounded
basis at 4% to 5%. For the period 1988 to 1993, IREM indicated this
compounded growth to be 2% to 4%.

6. The projected sixth-year net income is capitalized at a rate of 11%.
This calculation results in the projected reversion sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price. The reversion rate used in this analysis is based
upon 1) overall capitalization rates (net operating income cash
equivalent sale price) extracted from recent sales of apartment
complexes in the Lansing area, 2) a national real estate investment
survey published by Peter F. Korpacz and Associates, and 3) a debt
coverage ratio analysis based on data provided by an American Council
of Life Insurance survey.

7. The annual cash flows are discounted into present worth over a range of
discount rates (10.0% to 14.0%). A Scott Stahl, Burbach Survey
indicates a discount rate for apartment complexes of 11% - 13% while
the Peter F. Korpacz survey indicates a discount rate of 11.73%.

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Hall Financial Group
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Page 9

Lien Parameters

1. 1st Lien $2,750,000 note to Paine Webber @ 7.57%, 25-year
amortization (PMT $20,447.64 monthly). The note
balloons 1/16/2005.

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sale proceeds
is the principal balance of Lien #1. Any remaining funds from sale go toward
priorities.

Priority Payments

<TABLE>
<S> <C>
Priority #1 Capital Call from Investors of $171,875

Priority #2 HIMF wrap debt deferred of $547,237.

Priority #3 HFGI advances (P&I) of $120,560.

Priority #4 Any remaining cash flow is disbursed to the
investors.

Total HIMF Cash Flow The same discount rate (+/- 12%) deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of
the HIMF payments. Thus, the undiscounted
value of the HIMF Interest is $326,800,
say $325,000.
</TABLE>

Discounting

Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative cash
flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property was held for a period of time and
appreciated. Presumption of assumptions in a five-year cash flow adds
considerable risk to the Present Value of the HIMF Lender Interest. For our cash
flow analysis, the HIMF interest will be discounted 50% to 60% for both
scenarios.

Discounted value range of the HIMF Interest in the Arrowtree Apartments is, Say,
$130,000 - $165,000.

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Page 10

#2 BRAMBLETREE APARTMENTS
(Please note cash flow analysis following this letter)

1. The discounted cash flow analysis is based upon a five-year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).

2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for Years 2 through 6. With no new construction in the area
and continued job growth in the metroplex, continued upward pressure on
occupancy and rental rates is anticipated.

3. First-year vacancy collection loss in the discounted cash flow was
projected based upon actual 1995 operating data. Vacancy/collection
loss is projected to be 7% also for Years 2 through 6.

4. First-year operating expenses are based upon actual 1995 data for the
Subject. A 13-year IREM study in the Dallas area indicates a compounded
expense growth rate of 4.62%. With the exception of management expense,
which is calculated as a percentage of annual effective gross income,
each operating expense category is projected to increase at an annual
rate of 4.0% during Years 2 through 6 of the discounted cash flow. A
management expense of 5.0% of effective gross income will be applied to
the cash flow.

5. The projected sixth-year net income is capitalized at a rate of 10.5%.
This calculation results in the projected reversions sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price. The reversion rate used in this analysis is based
upon 1) overall capitalization rates (net operating income cash
equivalent sale price) extracted from recent sales of apartment
complexes in the Dallas/Fort Worth area, (2) a real estate investment
survey published by Peter F. Korpacz and Associates, and (3) a
quarterly real estate investment survey published by Newmarket Group.

6. The annual cash flows are discounted into present worth over a range of
discount rates (10.0% to 14.0%). The Miller Group Survey data shown
earlier in this section indicates a discount rate for apartment
complexes of 11.2% while the Peter F. Korpacz survey indicates a
discount rate of 11.73%.

Lien Parameters

1. 1st Lien $7,050,180 10% I.O. due 11/1/98

The described loan is based upon an original principle note amount of $5,910,000
with an annual 10% I.O. payment. This is a cash flow loan where the difference
between $7,050,180 and $5,910,000 is deferred interest. As the real estate
market improves and cash flow improves, the amount of deferred interest is
decreased. Currently, the first lien holder (FNMA) would

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Hall Financial Group
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Page 11

discount the first lien $295,624 if the property were refinanced. FNMA has
$134,208 in escrow and the partnership has $175,000 cash available for
refinancing. The partnership believes the property could be refinanced at 75% of
value at an interest rate of 175 basis points above the seven-year treasury note
rate (+/- 7.75%) with a 25-year amortization. For the second year of the cash
flow analysis, the property is assumed to be refinanced based upon a value of
$7,000,000. Any additional funds required for refinancing funded through a
capital call of 66.1% to HIMF and 33.9% to HFGI. Refinancing funds are shown as
follows.

<TABLE>
<S> <C>
FMNA 1st Lien $ 7,050,180
First Year Cash Flow Deferred Interest Deduction -38,278
FMNA Discount -295,624
Escrow -134,208
Cash -175,000
-----------
$ 6,407,118
New Loan Amount -5 250 000
-----------
Fund Required for Refinancing, 66.1% HIMF 33.9% HFGI $ 1,157,118
</TABLE>

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sale proceeds
is the principal balance of the new loan. Any remaining funds from sale go
toward priorities.

Priority Payments

<TABLE>
<S> <C>
Priority #1 Repayment 66.1% to HIMF and 33.9% to HFGI
of $1,157,118 required to refinance the FNMA
lien.

Priority #2 Prorata division of cash flow and reversion of
16.95% to HFGI, 33.05% to HIMF and 50% to
LP/GP.

Total HIMF Cash Flow The same discount rate (+/- 12%) deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of the
HIMF payments. Thus, the undiscounted value
of the HIMF Interest is $222,682, say
$225,000.
</TABLE>

Discounting

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Hall Financial Group
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Page 12

receive any funds requires the property be held for five years based upon the
assumptions of the narrative cash flow. Under the Priority payment system
described, little funds would be available to HIMF unless the property was held
for a period of time and appreciated. Presumption of assumptions in a five-year
cash flow adds considerable risk to the Present Value of the HIMF Lender
Interest. For our cash flow analysis, the HIMF interest will be discounted 50%
to 60%.

Discounted value range of the HIMF Interest in the Brambletree Apartments is,
Say, $90,000 - $110,000.

#3 PHOENIX SQUARE APARTMENTS (MIDTREE)
(Please note cash flow analysis following this letter)

1. The discounted cash flow analysis is based upon a five-year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).

2. Rental adjustments to market at lease expiration with no rental
increase projected for the first year. A 4% rental increase is
projected for Years 2 through 6. Although recent increases have been
high, new construction should slow the increases somewhat.

3. First-year vacancy collection loss in the discounted cash flow was
projected based upon actual 1995 Profit & Loss data. Vacancy collection
loss is projected to be 7% also for Years 2 through 6.

4. First-year operating expenses are based upon the projections located
earlier in this section. With the exception of management expense,
which is calculated as a percentage of annual effective gross income,
each operating expense category is projected to increase at an annual
rate of 4% during years two through six of the cash flow. The 4% growth
is consistent with historical IREM compounded annual expense growth.

5. The projected sixth-year net income is capitalized at a rate of 11.00%.
This calculation results in the projected reversion sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price. The reversion rate used in this analysis is
based upon 1) overall capitalization rates (net operating income cash
equivalent sale price) extracted from recent sales of apartment
complexes in the Albuquerque area, (2) a national real estate
investment survey published by Peter F. Korpacz and Associates, and
(3) real estate investment survey published by Scott Stahl; Burbach
and 4) a debt coverage ratio analysis based on data provided by an
American Council of Life Insurance survey.

6. The annual cash flows are discounted into present worth over a range of
discount rates (10.0% to 14.0%). A Scott Stahl, Burbach Survey
indicates a discount rate for apartment complexes of 11% - 13% while
the Peter F. Korpacz survey indicates a discount rate of 11.73%.

<PAGE> 94

Hall Financial Group
March 20, 1996
Page 13

Lien Parameters

1. 1st Lien $4,200,000 Note to Paine Webber @ 8.1%, 30 year
amortization (PMT $31,111.40/monthly). The note
balloons 11/1/2002.

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sale proceeds
is the principal balance of the new loan. Any remaining funds from sale go
toward priorities.

Priority Payments

<TABLE>
<S> <C>
Priority #1 HFGI post bankruptcy note of $462.

Priority #2 LP Capital & Preferred of $349,792

Priority #3 Prorata payment of cash flows and reversion
to HFGI (16.7%), HIMF (33.3%) and LP/GP (50%).

Total HIMF Cash Flow The same discount rate (+/- 12% deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of the HIMF
payments. Thus, the undiscounted value of the
HIMF Interest is $416,448, say $415,000.
</TABLE>

Discounting

Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the minority interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative cash
flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property held for a period of time and appreciated.
Presumption of assumptions in a five-year cash flow adds considerable risk to
the Present Value of the HIMF Lender Interest. For our cash flow analysis, the
HIMF interest will be discounted 50% to 60%.

Discounted value range of the HIMF Interest in the Phoenix Square Apartments is,
Say, $165,000 - $210,000.

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Page 14

#4 CANDLEWICK APARTMENTS (NORTHTREE)
(Please note cash flow analysis following this letter)

1. The discounted cash flow analysis is based upon a five-year holding
period with reversion occurring at the end of the fifth year (annual
year-end analysis).

3. First-year vacancy collection loss in the discounted cash flow was
projected based upon the actual 1995 Profit & Loss Statement for the
property. Vacancy/collection loss is projected to be 7% also for Years
2 through 6.

4. First-year operating expenses are based upon the actual 1995 Profit &
Loss Statement of the property. With the exception of management
expense, which is calculated as a percentage of annual effective gross
income, each operating expense category is projected to increase at an
annual rate of 4% during years two through six of the cash flow. The 4%
growth is consistent with historical IREM compounded annual expense
growth.

5. Deferred maintenance in the form of roof repairs will be made in our
analysis. For year 1, $75,000 will be deducted, for year 2, $50,000
will be deducted.

6. The projected sixth-year net income is capitalized at a rate of 11.50%.
This calculation results in the projected reversions sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price. The reversion rate used in this analysis is based
upon 1) overall capitalization rates (net operating income cash
equivalent sale price) extracted from recent sales of apartment
complexes in the Albuquerque area, (2) a real estate investment survey
published by Peter F. Korpacz and Associates, and (3) real estate
investment survey published by Scott Stahl, Barbach and 4) a debt
coverage ratio analysis based on data provided by an American Council
of Life Insurance survey.

7. The annual cash flows are discounted into present worth over a range or
discount rates (10.0% to 14.0%). A Scott Stahl, Burbach Survey
indicates a discount rate for apartment complexes of 11% - 13% while
the Peter F. Korpacz survey indicates a discount rate of 11.73%.

Lien Parameters

1. 1st Lien $5,000,000 note to Paine Webber @ 7.58%, 22 year
amortization (payment $39,999 monthly). The note
balloons 11/19/2003.

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Hall Financial Group
March 20, 1996
Page 15

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sale proceeds
is the principal balance of the new loan. Any remaining funds from sale go
toward priorities.

Priority Payments

<TABLE>
<S> <C>
Priority #1 HFGI post petition
Debt of $145,398 plus the cost of a lost
lawsuit of $307,482 total $452,880.

Priority #2 Prorata share of cash flow and reversion,
50% to HIMF and 50% to LP/GP.

Total HIMF Cash Flow The same discount (+/- 12%)
deemed appropriate in our narrative
appraisal is considered appropriate for the
PW of the HIMF payments. Thus, the
undiscounted value of the HIMF Interest is
$841,185, say $840,000.
</TABLE>

Discounting

Discounted value range of the HIMF Interest in the Candlewick Apartments is,
Say, $335,000 - $420,000.

#5 THE LAKES (LANETREE)
(Please Note the cash flow analysis following this letter)

Cash Flow Assumption

1. The discounted cash flow analysis of the first scenario is based upon a
five year holding period with reversion occurring at the end of the
fifth year (annual year-end analysis).

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Hall Financial Group
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Page 16

The parameters of the cash flow are identical to the one used in the
1st quarter 1995 narrative appraisal. First year proforma closely
follows actual 1995 Profit & Loss data.

2. For the cash flow, rental adjustments to market are made at lease
expiration with no rental increase projected for the first year. A 4%
rental increase is projected for Years 2 through 6.

3. First-year vacancy collection loss in the discounted cash flow is based
on actual 1995 Profit & Loss data. Vacancy/collection loss is projected
to be 5% also for years 2 through 6.

4. With the exception of management expense, which is calculated as a
percentage of annual effective gross income, each operating expense
category is projected to increase at an annual rate of 4% during years
two through six of the cash flow.

5. The projected sixth-year net income is capitalized at a rate of 11.50%
his calculation results in the projected reversion sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price.

Lien Parameters

1. 1st Lien $9,051,184 @ 8.37% Interest Only

2. 2nd Lien $925,659 @ 9.66% Interest Only

3. 3rd Lien (PW Mortgage) $1,216,186 @ 9.66% Interest only for years 1 and
2, years 3-6 a $58,004 principal reduction in the middle of the year.

4. Senior Equity - a 6% (Preferred Return) interest only payment from cash
flow. After all liens are paid, including the 6% (Preferred Return),
senior equity is entitled to 20% of the available cash flows. The sum
of the 6% Preferred Return and the 20% payment of available cash flow
are the funds available to Priority Payments. Total Senior Equity is
$3,279,878.

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sales
proceeds is for the principal balance of Liens 1, 2 and 3. Any remaining funds
from sale go toward the balance of the Senior Equity. The balance paid to Senior
Equity becomes a portion of the funds available for priority payments.

<PAGE> 98

Hall Financial Group
March 20, 1996
Page 17

Priority Payments

<TABLE>
<S> <C>
Priority #2 No payments

Priority #3 Prorata payment of HFGI (11%), HIMF (39%)
and LP/GP (50%) of cash flow and reversion over
the holding period up to $2,678,642.

Priority #4 Payment of remaining $34,147 (1st Scenario) and
$781,398 (2nd Scenario), of cash flow to LP/GP.

Total HIMF Cash Flow The same discount rate (+/- 12%)
deemed appropriate in our narrative appraisal is
considered appropriate for the PW of the HIMF
payments. Thus, the undiscounted value of the HIMF
Interest is $688,988, say $690,000.
</TABLE>

Discounting

Based upon the previous discussions of purchases of fractional partnership
interest, a 20% to 30% discount is considered appropriate for an equally
distributed minority ownership interest in which the maturity interest does not
have management control. However, for HIMF to receive any funds requires the
property be held for five years based upon the assumptions of the narrative cash
flow. Under the Priority payment system described, little funds would be
available to HIMF unless the property was held for a period of time and
appreciated. Presumption of assumptions in a five-year cash flow adds
considerable risk to the Present Value of the HIMF Lender Interest. For our cash
flow analysis, the HIMF interest will be discounted 50% to 60%.

Discounted value range of the HIMF Interest in the Lakes (Lanetree), Say,
$275,000 - $345,000.

#6 LOS ALTOS TOWERS (TWINTREE)
(Please note the cash flow analyses following this letter)

Cash Flow Assumption

1. The discounted cash flow analysis of the first scenario is based upon a
five year holding period with reversion occurring at the end of the
fifth year (annual year-end analysis). The parameters of the cash flow
are identical to the one used in the 1st quarter 1995 narrative
appraisal. First year proforma closely follows actual 1995 Profit &
Loss data.

2. For the cash flow, rental adjustments to market are made at lease
expiration with no rental increase projected for the first year. A 4%
rental increase is projected for Years 2 through 6.

<PAGE> 99

Hall Financial Group
March 20, 1996
Page 18

3. First-year vacancy collection loss in the discounted cash flow is based
on actual 1995 Profit & Loss data. Vacancy/collection loss is projected
to be 5% also for years 2 through 6.

5. The projected sixth-year net income is capitalized at a rate of 11.50%.
This calculation results in the projected reversion sale price at the
end of the fifth year. Selling expenses of 3.0% are deducted from the
reversion sale price.

Lien Parameters

1. 1st Lien, $5,852,629 @ 8.37% Interest Only

2. 2nd Lien $600,152 @ 9.66% Interest Only

3. 3rd Lien (PW Mortgage) $785,251 @ 9.66% Interest only for years 1 and
2, years 3-6 a $37,452 principal reduction in the middle of the year.

Lien Payment

Priority Payments

<TABLE>
<S> <C>
Priority #2 Limited partnership capital and preferred
payment of $170,301.

Priority #3 HFGI payment of $378,265 for post position
debt and deferred commission of $185,734.
</TABLE>

<PAGE> 100

Hall Financial Group
March 20, 1996
Page 19

<TABLE>
<S> <C>
Priority #4 Prorata payment of HFGI (10%), HIMF (40%)
and LP/GP (50%) of cash flow and reversion over
the holding period up to $4,694,818.

Total HIMF Cash Flow The same discount rate (+/- 12%) deemed appropriate
in our narrative appraisal is considered appropriate
for the PW of the HIMF payments. Thus, the
undiscounted value of the HIMF Interest is $363,771,
say $365,000.
</TABLE>

Discounting

Discounted value range of the HIMF Interest in the Los Altos Towers (Twintree)
Apartments is say $145,000 - $180,000.

#7 THE VILLAS (COACHTREE)
(Please note cash flow analysis following this letter)

Cash Flow Assumption

1. The discounted cash flow analysis of the first scenario is based upon a
five year holding period with reversion occurring at the end of the
fifth year (annual year-end analysis). The parameters of the cash flow
are identical to the one used in the first quarter 1995 narrative
appraisal. First year proforma closely follows actual 1995 Profit &
Loss data.

2. For the cash flow, rental adjustments to market are made at lease
expiration with no rental increase projected for the first year. A 4 %
rental increase is projected for Years 2 through 6.

3. First-year vacancy collection loss in the discounted cash flow is based
on actual 1995 Profit & Loss data. Vacancy/collection loss is projected
to be 5% also for years 2 through 6.

<PAGE> 101

Hall Financial Group
March 20, 1996
Page 20

Lien Parameters

1. 1st Lien $5,211,560 @ 8.37% Interest Only

2. 2nd Lien $528,948 @ 9.66% Interest Only

3. 3rd Lien (PW Mortgage) $699,065 @ 9.66% Interest only for years 1 and
2, years 3-6 a $33,341 principal reduction in the middle of the year.

Lien Payment

Upon sale at the end of the fifth year. The first payment from the sale proceeds
is the principal balance of Liens 1, 2 and 3. Any remaining funds from sale go
toward the balance of the Senior Equity. The balance paid to Senior Equity
becomes a portion of the funds available for priority payments.

Priority Payments

<TABLE>
<S> <C>
Priority #2 Limited partnership capital and preferred
payment of $38,320.

Priority #3 HFGI payment of $186,934 for post position
debt.

Priority #4 HFGI payment of $249,533 for deferred
commission of 3%.

Priority #5 Payment of $118,481 of post petition deferred
accrued interest to HFGI.
</TABLE>

<PAGE> 102

Hall Financial Group
March 20, 1996
Page 21

<TABLE>
<S> <C>
Priority #6 Prorata payment of HFGI (5%), HIMF (45%) and
LP/GP (50%) of cash flow and reversion over the
holding period up to $3,559,008.

Total HIMF Cash Flow The same discount rate (+/- 12%) deemed
appropriate in our narrative appraisal is
considered appropriate for the PW of the HIMF
payments. Thus, the undiscounted value of the
HIMF Interest is $336,998, say $340,000.
</TABLE>

Discounting

Discounted value range of the HIMF Interest in The Villas (Coachtree) Apartments
is, say $135,000-$170,000.

<PAGE> 103

Hall Financial Group
March 20, 1996
Page 22

SUMMARY

The following chart summarizes the HIMF Mortgage loans receivable value as a
total dollar amount and as a range discounted for the risk associated with the
fractional interests previously described.

<TABLE>
<CAPTION>
==================================================================================================================
UNDISCOUNTED DISCOUNTED HIMF VALUE
NO. NAME HIMF VALUE RANGE
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Arrowtree Apartments $ 325,000 $ 130,000 - $ 165,000
- - ------------------------------------------------------------------------------------------------------------------
2 Brambletree Apartments $ 225,000 $ 90,000 - $ 110,000
- - ------------------------------------------------------------------------------------------------------------------
3 Phoenix Square (Midtree) Apartments $ 415,000 $ 165,000 - $ 210,000
- - ------------------------------------------------------------------------------------------------------------------
4 Candlewick (Northtree Apartments $ 840,000 $ 335,000 - $ 420,000
- - ------------------------------------------------------------------------------------------------------------------
5 The Lakes (Lanetree) Apartments $ 690,000 $ 275,000 - $ 345,000
- - ------------------------------------------------------------------------------------------------------------------
6 Los Altos Towers (Twintree) $ 365,000 $ 145,000 - $ 180,000
Apartments
- - ------------------------------------------------------------------------------------------------------------------
7 The Villas (Coachtree) Apartments $ 340,000 $ 135,000 - $ 170,000
- - ------------------------------------------------------------------------------------------------------------------
TOTAL UNDISCOUNTED VALUE OF HIMF LOANS $3,200,000
RECEIVABLE VALUE
- - ------------------------------------------------------------------------------------------------------------------
TOTAL DISCOUNTED VALUE RANGE OF HIMF INTEREST $1,275,000 - $1,600,000
==================================================================================================================
</TABLE>

<PAGE> 104

Hall Financial Group
March 20, 1996
Page 23

We appreciate the opportunity to be of service and hope you find the enclosed
useful.

Respectfully submitted,

BRYAN E. HUMPHRIES & ASSOCIATES

Bryan E. Humphries, MAI
President

BEH/wpc

Attachments: Footnotes, Cash Flows - All Properties

<PAGE> 105
Arrowtree Apartments -- HIMF Value "As Is" Discounted Cash Flow
Dobie Rd., Okemos, Michigan

<TABLE>
<CAPTION>
ASSUMPTIONS FROM MARKET ANALYSIS EXPENSES PER SF
- - -------------------------------- -------- ------
<S> <C> <C> <C> <C>
Management..................... $ 38,114 $ 0.30
Gross Rental Income ........... $ 813,360 Payroll 86,162 $ 0.68
No Units....................... 114 Taxes 81,346 $ 0.64
Other Income................... $ 22,016 Insurance 16,456 $ 0.13
Stabilized Occupancy........... 93.00% Utilities 56,048 $ 0.44
Total Square Feet.............. 126,294 M/R & Res 137,199 $ 1.09
Expense Growth Rate............ 4.00% Adv. Pro. 24,263 $ 0.19
Resale Cap Rate................ 11.00% Admin. 22,480 $ 0.18
--------- ---------
TOTAL $ 462,068 $ 3.65
</TABLE>

<TABLE>
<CAPTION>
TIME PERIOD YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - ------------------------------- ---------- --------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Rental Income............ $ 813,360 $ 845,894 $ 879,730 $ 914,919 $ 951,516 $ 989,577
% Increase..................... 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Other Income................... $ 22,016 $ 22,897 $ 23,813 $ 24,765 $ 25,756 $ 26,786
% Increase..................... 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income......... $ 835,376 $ 868,791 $ 903,543 $ 939,684 $ 977,272 $1,016,363
Vacancy Rate................... 5.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Vacancy Loss................... $ (41,775) $ (60,815) $ (63,248) $ (65,778) $ (68,409) $ (71,145)
---------- --------- --------- ---------- ----------- --------
Effective Gross Income......... $ 793,601 $ 807,976 $ 840,295 $ 873,906 $ 908,863 $ 945,218
Total Expenses................. $ (462,068) $(480,551) $(499,773) $ (519,764) $ (540,554) $ (562,176)
Per/Sq. Ft..................... $ (3.66) $ (3.81) $ (3.96) $ (4.12) $ (4.28) $ (4.45)
---------- --------- --------- ---------- ----------- ----------
Net Operating Income........... $ 331,533 $ 327,425 $ 340,522 $ 354,142 $ 368,309 $ 383,042
Less: Deferred Maintenance
O&M Program Cost............. $ (30,000)
Less: 1st Lien................. $ (245,371) $(245,371) $(245,371) $ (245,371) $ (245,371)
Reversion-- 11.00%............. $ 3,482,197
Selling Expense @ 3.00% $ (104,466)
Less: 1st Lien Principal....... $(2,524,777)
---------- --------- --------- ---------- -----------
Fund Available for Priorities.. $ 56,162 $ 82,054 $ 95,151 $ 108,771 $ 975,892
---------- --------- --------- ---------- -----------
Less: 1st Priority
Capital Call from Investors.. $ (56,162) $(82,054) $ (33,659)
Less: 2nd Priority
HIMF Deferred Interest....... $(61,493) $(108,771) $ (376,973)
Less: 3rd Priority
HFGI Advances (P&I).......... $ (120,560)
Less: 4th Priority
Cash Flow to Investors....... $ (478,358)
Net Cash Flow.................. $ 0 $ 0 $ 0 $ 0 $ 0
---------- --------- --------- ---------- -----------
Total HIMF Cash Flow........... $ 0 $ 0 $ 61,493 $ 108,771 $ 376,973
========== ========= ========= ========== ===========
Discount Rate.................. 11.00% 11.50% 12.00% 12.50% 13.00% 13.50%
---------- --------- --------- ---------- ----------- ----------
PW of HIMF Cash Flow........... $ 340,329 $ 333,479 $ 326,800 $ 320,287 $ 313,935 $ 307,739
Discounted @ 50%............. $ 170,165 $ 166,740 $ 163,400 $ 160,143 $ 156,967 $ 153,870
Discounted @ 60%............. $ 136,132 $ 133,392 $ 130,720 $ 128,115 $ 125,574 $ 123,096
</TABLE>

1
<PAGE> 106

<TABLE>
<CAPTION>
BRAMBLETREE -- HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
1802 APOLLO RD.
GARLAND, TEXAS
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET RENTABLE AREA 196,440 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 236
STABILIZED OCCUPANCY 93.00% MANAGEMENT $ 71,313 $0.36
EXPENSE GROWTH RAT 4.00% REAL ESTATE TAXES $ 109,135 $0.56
RESALE CAP RATE 10.50% INSURANCE $ 26,173 $0.13
UTILITIES $ 95,347 $0.49
MAINTENANCE/REPAIRS $ 227,195 $1.16
GENERAL/ADMIN $ 59,019 $0.30
PAYROLL $ 130,920 $0.67
--------- -----
TOTAL OPERATING EXPENSES $ 719,102 $3.66
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - ----------------------------------- ----------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Income $ 1,442,914 $ 1,500,631 $ 1,560,656 $ 1,623,082 $ 1,688,005 $ 1,755,526
% Increase 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income 24,198 25,166 26,173 27,219 28,308 29,441
% Increase 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income $ 1,467,112 $ 1,525,796 $ 1,586,828 $ 1,650,301 $ 1,716,314 $ 1,784,966
Less: Vacancy/Collection Loss (118,732) (106,806) (111,078) (115,521) (120,142) (124,948)
----------- ----------- ----------- ----------- ----------- -----------
% of Gross Potential Income 8.09% 7.00% 7.00% 7.00% 7.00% 7.00%
Effective Gross Income $ 1,348,380 $ 1,418,991 $ 1,475,750 $ 1,534,780 $ 1,596,172 $ 1,660,018
Total Operating Expenses $ (719,102) $ (747,866) $ (777,781) $ (808,892) $ (841,248) $ (874,898)
----------- ----------- ----------- ----------- ----------- -----------
Per/Sq. Ft $ (3.66) $ (3.81) $ (3.96) $ (4.12) $ (4.28) $ (4.45)
Net Operating Income $ 629,278 $ 671,125 $ 697,970 $ 725,888 $ 754,924 $ 785,121
Less: 1st Lien FNMA $ (591,000)
Cash Flow PMT-1st Lien $ (38,278)
Less: New First Lien $ (398,203) $ (398,203) $ (398,203) $ (398,203)
Cash Flow $ 0 $ 272,922 $ 299,767 $ 327,685 $ 356,721
Reversion @ 10.50% $ 7,477,342
Less: Selling Expense @ 3.00% $ (224,320)
Less: New Lien Principal $(5,290,514)
===========
$ 1,962,508
Cash Flow with Reversion $ 0 $ 272,922 $ 299,767 $ 327,685 $ 2,319,229
Less: 1st Priority
HIMF/HFGI Refinancing Payback
66.1% HIMF From Cash Flow $ 0 $ (180,401) $ (198,146) $ (216,600) $ (169,708)
33.9% HFGI From Cash Flow $ 0 $ (92,520) $ (101,621) $ (111,085) $ (87,036)
Funds Available for 2nd Priority $ 0 $ 0 $ 0 $ 0 $ 2,062,484
(Cash Flow & Reversion)
Less: 2nd Priority
HFGI Pro Rata (16.95%) $ 0 $ 0 $ 0 $ 0 $ (349,591)
HIMF Pro Rata (33.05%) $ 0 $ 0 $ 0 $ 0 $ (681,651)
----------- ----------- ----------- ----------- -----------
LP/GP Pro Rata (50%) $ 0 $ 0 $ 0 $ 0 $(1,031,242)
HIMF 1st Lien Refinancing Cost $ 764,854
-----------
Total HIMF Cash Flow $ (764,854) $ 180,401 $ 198,146 $ 216,600 $ 851,359
=========== =========== =========== =========== ===========
Discount Rate 11.00% 11.50% 12.00% 12.50% 13.00%
----------- ----------- ----------- ----------- -----------
PW of HIMF Cash Flow $ 250,164 $ 236,234 $ 222,683 $ 209,499 $ 196,672
Discounted @ 50% $ 125,082 $ 118,117 $ 111,341 $ 104,749 $ 98,336
Discounted @ 60% $ 100,065 $ 94,493 $ 89,073 $ 83,800 $ 78,669
</TABLE>

2
<PAGE> 107

<TABLE>
<CAPTION>
PHOENIX SQUARE -- HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
7000 PHOENIX AVE., NE
ALBUQUERQUE, NEW MEXICO
<S> <C> <C> <C> <C>
NET RENTABLE AREA 116,345 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 122
FIRST YEAR OCCUPANCY 95.00% MANAGEMENT $ 39,138 $0.34
EXPENSE GROWTH RATE 4.00% AD/PROMOTION $ 24,850 $0.21
RESALE CAP RATE 11.00% REAL ESTATE TAXES $ 50,268 $0.43
INSURANCE $ 15,572 $0.13
UTILITIES $ 32,697 $0.28
MAINTENANCE/REPAIRS $ 116,463 $1.00
GENERAL/ADMIN. $ 28,313 $0.24
PAYROLL $ 78,709 $0.68
--------- -----
TOTAL OPERATING EXPENSES $ 386,010 $3.32
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - -------------------------------------- ----------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Income.......................... $ 921,670 $ 958,537 $ 996,878 $ 1,036,753 $ 1,078,224 $ 1,121,352
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income.................... 30,947 32,185 33,472 34,811 36,204 37,652
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income................. $ 952,617 $ 990,722 $1,030,351 $ 1,071,565 $ 1,114,427 $ 1,159,004
Less: Vacancy/Collection Loss.......... (69,107) (49,536) (51,518) (53,578) (55,721) (57,950)
% of Gross Potential Income............ 7.25% 5.00% 5.00% 5.00% 5.00% 5.00%
----------- ---------- ---------- --------- --------- ------------
Effective Gross Income................. $ 883,510 $ 941,186 $ 978,833 $ 1,017,986 $ 1,058,706 $ 1,101,054
Less Operating Expenses................ $ (386,010) $ (401,450) $ (417,508) $ (434,209) $ (451,577) $ (469,640)
Per Square Foot........................ $ (3.32) $ (3.45) $ (3.59) $ (3.73) $ (3.88) $ (4.04)
Net Operating Income................... $ 497,500 $ 539,735 $ 561,325 $ 583,778 $ 607,129 $ 631,414
Less: 1st Lien-- ATENA................. $ (373,337) $ (373,337) $ (373,337) $ (373,337) $ (373,337)
Reversion @ 11.00%..................... $ 5,740,126
Less: Selling Expense @ 3.00%.......... $ (172,204)
Less: 1st Lien Balance................. $(3,996,571)
Net Reversion.......................... $ 1,571,351
===========
Cash Flow with Reversion............... $ 124,163 $ 166,398 $ 187,988 $ 210,441 $ 1,805,143
Less: 1st Priority
HFGI Post Petition Loan.............. $ (462)
Less: 2nd Priority
LP Capital & Preferred............... $ (123,701) $ (166,398) $ (59,592)
Less: 3rd Priority
HFGI Prorata (16.7%)................. $ (21,382) $ (35,073) $ (300,856)
HIMF Prorata (33.3%)................. $ (42,765) $ (70,147) $ (601,714)
---------- ----------- -----------
LP/GP Prorata (50%).................. $ (64,148) $ (105,221) $ (902,573)
Net Cash Flow ......................... $ 0 $ 0 $ 0 $ 0 $ 0
Total HIMF Cash Flow................... $ 0 $ 0 $ 42,765 $ 70,147 $ 601,714
=========== ========== ========== =========== ===========
Discount Rate.......................... 11.00% 11.50% 12.00% 12.50% 13.00% 14.00%
----------- ---------- ---------- ----------- ----------- -----------
PW of HIMF Cash Flow................... $ 434,565 $ 425,388 $ 416,448 $ 407,736 $ 399,247 $ 382,909
Discounted @ 50%..................... $ 217,283 $ 212,694 $ 208,224 $ 203,868 $ 199,623 $ 191,455
Discounted @ 60%..................... $ 173,826 $ 170,155 $ 166,579 $ 163,094 $ 159,699 $ 153,164
</TABLE>

3
<PAGE> 108

<TABLE>
<CAPTION>
CANDLEWICK -- HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
3011 JANE PLACE, NE
ALBUQUERQUE, NEW MEXICO
<S> <C> <C> <C>
NET RENTABLE AREA 128,830 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 184
FIRST YEAR OCCUPANCY 95.00% MANAGEMENT $ 48,675 $0.38
EXPENSE GROWTH RATE 4.00% AD/PROMOTION $ 31,823 $0.25
RESALE CAP RATE 11.00% REAL ESTATE TAXES $ 64,783 $0.50
INSURANCE $ 18,809 $0.15
UTILITIES $ 34,937 $0.27
MAINTENANCE/REPAIRS $ 115,940 $0.90
GENERAL/ADMIN. $ 29,048 $0.23
PAYROLL $ 105,551 $0.82
--------- -----
TOTAL OPERATING EXPENSES $ 449,566 $3.49
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - -------------------------------------- ----------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Income.......................... $ 1,126,305 $ 1,171,357 $ 1,218,211 $ 1,266,940 $ 1,317,618 $ 1,370,322
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income.................... 36,860 38,334 39,868 41,462 43,121 44,846
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income................. $ 1,163,165 $ 1,209,692 $ 1,258,079 $ 1,308,402 $ 1,360,739 $ 1,415,168
Less: Vacancy/Collection Loss.......... (44,838) (60,485) (62,904) (65,420) (68,037) (70,758)
% of Gross Potential Income............ 3.85% 5.00% 5.00% 5.00% 5.00% 5.00%
----------- ----------- ----------- ------------ ----------- -----------
Effective Gross Income................. $ 1,118,327 $ 1,149,207 $ 1,195,175 $ 1,242,982 $ 1,292,702 $ 1,344,410
Less Operating Expenses................ $ (449,566) $ (467,549) $ (486,251) $ (505,701) $ (525,929) $ (546,966)
Per Square Foot........................ $ (3.49) $ (3.63) $ (3.77) $ (3.93) $ (4.08) $ (4.25)
Net Operating Income................... $ 668,761 $ 681,658 $ 708,925 $ 737,282 $ 766,773 $ 797,444
Less: Deferred Maintenance............. $ (75,000) $ (50,000)
Less: 1st Lien - Atena................. $ (479,988) $ (479,988) $ (479,988) $ (479,988) $ (479,988)
Reversion @ 11.50%..................... $ 6,934,295
Less: Selling Expense @ 3.00%.......... $ (208,029)
Less: 1st Lien Balance................. $(4,388,366)
Net Reversion.......................... $ 2,337,900
===========
Cash Flow & Reversion.................. $ 113,773 $ 151,670 $ 228,937 $ 257,294 $ 2,624,685
Less: 1st Priority
HFGI Post Petition Loan.............. $ (113,773) $ (151,670) $ (187,436)
Lawsuit (4145398+$307482)
Less: 2nd Priority
HIMF Prorata (50%)................... $ (20,750) $ (128,647) $(1,312,342)
LP/GP Prorata (50%) ................. $ (20,750) $ (128,647) $(1,312,342)
Net Cash Flow ......................... $ 0 $ 0 $ 0 $ 0 $ 0
Total HIMF Cash Flow................... $ 0 $ 0 $ 20,750 $ 128,647 $ 1,312,342
=========== =========== =========== ============ ===========
Discount Rate.......................... 11.00% 11.50% 12.00% 12.50% 13.00% 14.00%
----------- ----------- ----------- ------------ ----------- -----------
Market Value Range...................... $ 878,727 $ 859,708 $ 841,185 $ 823,144 $ 805,569 $ 771,765
Discounted @ 50%..................... $ 439,364 $ 429,854 $ 420,593 $ 411,572 $ 402,785 $ 385,882
Discounted @ 60%..................... $ 351,491 $ 343,883 $ 336,474 $ 329,258 $ 322,228 $ 308,706
</TABLE>

4
<PAGE> 109

<TABLE>
<CAPTION>
THE LAKES (LANETREE) -- HIMF VALUE "AS IS" DISCOUNTED CASH FLOW
4800 SAN MATEO LANE, NE
ALBUQUERQUE, NEW MEXICO
<S> <C> <C> <C> <C>
NET RENTABLE AREA 232,462 OPERATING EXPENSES (YEAR ONE) PER SF
NUMBER OF UNITS 298
FIRST YEAR OCCUPANCY 95.00% MANAGEMENT $ 84,488 $0.36
EXPENSE GROWTH RATE 4.00% AD/PROMOTION $ 47,244 $0.20
RESALE CAP RATE 11.50% REAL ESTATE TAXES $ 80,658 $0.35
INSURANCE $ 44,519 $0.19
UTILITIES $ 81,362 $0.35
MAINTENANCE/REPAIRS $ 218,736 $0.94
GENERAL/ADMIN. $ 30,431 $0.13
PAYROLL $ 118,380 $0.81
--------- -----
TOTAL OPERATING EXPENSES $ 774,818 $3.33
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - -------------------------------------- ----------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Income.......................... $ 2,068,778 $ 2,151,529 $ 2,237,590 $ 2,327,094 $ 2,420,178 $ 2,516,985
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income.................... 127,781 132,892 138,208 143,736 149,486 155,465
% Increase............................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income................. $ 2,196,559 $ 2,284,421 $ 2,375,798 $ 2,470,830 $ 2,569,663 $ 2,672,450
Less: Vacancy/Collection Loss.......... (214,210) (114,221) (118,790) (123,542) (128,483) (133,622)
% of Gross Potential Income............ 9.75% 5.00% 5.00% 5.00% 5.00% 5.00%
----------- ----------- ----------- ----------- ----------- ------------
Effective Gross Income................. $ 1,982,349 $ 2,170,200 $ 2,257,008 $ 2,347,289 $ 2,441,180 $ 2,538,827
Total Operating Expenses............... $ (774,818) $ (805,811) $ (838,043) $ (871,565) $ (906,427) $ (942,685)
Per Square Foot........................ $ (3.33) $ (3.47) $ (3.61) $ (3.75) $ (3.90) $ (4.06)
----------- ----------- ----------- ------------ ----------- ------------
Net Operating Income................... $ 1,207,531 $ 1,364,390 $ 1,418,985 $ 1,475,724 $ 1,534,753 $ 1,596,143
Less: 1st Lien ........................ $ (757,584) $ (757,584) $ (757,584) $ (757,584) $ (757,584)
Less: 2nd Lien......................... $ (89,419) $ (89,419) $ (89,419) $ (89,419) $ (89,419)
Less: 3rd Lien (PW Mtg.)............... $ (117,483) $ (117,483) $ (172,685) $ (167,082) $ (161,480)
Reversion @ 11.50%..................... $13,879,503
Less: Selling Expense @ 3.00%.......... $ (416,385)
Less: 1st Lien Principal .............. $(9,051,184)
Less: 2nd Lien Principal............... $ (925,659)
Less: 3rd Line Principal (PW Mgt)...... $(1,042,170)
-----------
Net Reversion to Senior Equity......... $ 2,444,105
===========
Cash Flow (net of Reversion)........... $ 243,045 $ 399,904 $ 399,277 $ 461,639 $ 526,270
Hall-Lanetree Pre/Cf Payments
6% Preference of $3279878............ $ 243,045 $ 196,793 $ 196,793 $ 196,793 $ 196,793
20% of Cash Flow..................... $ 0 $ 40,622 $ 40,497 $ 52,969 $ 65,895
Reversion-- Senior Equity............ $ 2,444,105
Funds Available to Priorities.......... $ 243,045 $ 237,415 $ 237,290 $ 249,762 $ 2,706,793
(Hall-Lanetree CF & Rev)
Less: 2nd Priority..................... $ 0
Less: 3rd Priority
HFGI Pro Rata (10.8%)................ $ (28,735) $ (26,116) $ (26,102) $ (27,474) $ (200,204)
HIMF Pro Rata (39.2%)................ $ (94,788) $ (92,592) $ (92,543) $ (97,407) $ (709,814)
LP/GP Pro Rata (50%)................. $ (121,523) $ (118,708) $ (118,645) $ (124,881) $ (910,019)
Less: 4th Priority
HFGI Post/Pre Petition Debt.......... $ (193,662)
Cash Flow ............................. $ (0) $ (0) $ (0) $ (0) $ 693,094
Total HIMF Cash Flow................... $ 94,788 $ 92,592 $ 92,543 $ 97,407 $ 709,814
=========== =========== =========== ============ ===========
Discount Rate.......................... 11.00% 11.50% 12.00% 12.50% 13.00% 14.00%
----------- ----------- ----------- ------------ ----------- ------------
PW of HIMF Cash Flow................... $ 713,616 $ 701,151 $ 688,988 $ 677,118 $ 665,533 $ 643,186
Discounted @ 50%..................... $ 356,808 $ 350,575 $ 344,494 $ 338,559 $ 332,767 $ 321,593
Discounted @ 60%..................... $ 285,446 $ 280,460 $ 275,595 $ 270,847 $ 266,213 $ 257,274
</TABLE>

5
<PAGE> 110

<TABLE>
<CAPTION>
Los Altos Tower (Twintree) -- HIMF Value"As Is" Discounted Cash Flow
9125 Copper Ave., NE
Albuquerque, New Mexico
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Rentable Area..................... 170,635 Operating Expenses (Year One) Per SF
Number of Units....................... 185 Management $ 51,708 $0.30
Stabilized Occupancy.................. 95.00% Ad/Promotion $ 20,893 $0.12
Expense Growth Rate................... 4.00% Real Estate Taxes $ 69,395 $0.41
Resale Cap Rate....................... 11.00% Insurance $ 24,619 $0.14
Utilities $ 51,191 $0.30
Maintenance/Repairs $ 148,706 $0.87
General/Admin. $ 32,529 $0.19
Payroll $ 111,920 $0.66
---------- -----
Total Operating Expenses $ 510,961 $2.99
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - ----------------------- ---------- ---------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental Income......................... $1,324,439 $1,377,417 $1,432,513 $1,489,814 $ 1,549,406 $1,611,383
% Increase................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income.................... $ 70,985 $ 73,824 $ 76,777 $ 79,848 $ 83,042 $ 86,634
% Increase................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income................ $1,395,424 $1,451,241 $1,509,291 $1,569,662 $ 1,632,449 $1,697,747
Less: Vacancy/Collection Loss......... (195,277) (72,562) (75,465) (78,483) (81,622) (84,887)
% of Gross Potential
Income................... 13.99% 5.00% 5.00% 5.00% 5.00% 5.00%
Effective Gross Income................ $1,200,147 $1,378,679 $1,433,826 $1,491,179 $ 1,550,826 $1,612,859
Total Operating Expenses.............. $ (510,961) $ (531,399) $ (552,665) $ (574,762) $ (597,752) $ (621,662)
Per/Sq. Ft................. $ (2.99) $ (3.11) $ (3.24) $ (3.37) $ (3.50) $ (3.64)
---------- ---------- ---------- ---------- ----------- ----------
Net Operating Income.................. $ 689,186 $ 847,279 $ 881,171 $ 916,417 $ 953,074 $ 991,197
Less: 1st Lien........................ $ (489,865) $ (489,865) $ (489,865) $ (489,865) $ (489,865) $ (489,865)
Less: 2nd Lien........................ $ (57,975) $ (57,975) $ (57,975) $ (57,975) $ (57,975) $ (57,975)
Less: 3rd Lien (PW Mtg)............... $ (75,855) $ (75,855) $ (111,498) $ (107,880) $ (104,263) $ (113,307)
Reversion-- 11.00%.................... $ 9,010,883
Less Selling Expense @ 3.00%.......... $ (270,326)
Less: 1st Lien Principal.............. $(5,852,629)
Less: 2nd Lien Principal.............. $ (600,152)
Less: 3rd Lien Principal (PW Mtg)..... $ (672,895)
----------
Net Reversion to Senior Equity........ $ 1,614,881
Cash Flow (Net of Reversion........... $ 65,491 $ 223,584 $ 221,833 $ 260,697 $ 300,971
Hall-Twintree Pre/CF Payments
6% Preference @ $1403626.............. $ 65,491 $ 84,218 $ 84,218 $ 84,218 $ 84,218
20% of Cash Flows..................... $ 0 $ 27,873 $ 27,523 $ 35,296 $ 43,351
Reversion 6% to 20% Pre/CF............ $ 1,614,881
Funds Available to Priorities......... $ 65,491 $ 112,091 $ 111,741 $ 119,514 $ 1,742,449
(Hall-Twintree CF & Rev)
Less: 2nd Priority-Cap & Pref......... $ (65,491) $ (104,810)
Less: 3rd Priority-Post Petition Debt
Debt & Def Com 2% $185734.. $ (7,281) $ (111,741) $ (119,514) $ (139,729)
Less: 4th Priority
HFGI Post/Pre Pet.
Debt (10%)................. $ 0 $ 0 $ 0 $ 0 $ (160,272)
HIMF Debt Pro Rata (40%)... $ 0 $ 0 $ 0 $ 0 $ (641,088)
LP/GP Pro Rata (50%)....... $ 0 $ 0 $ 0 $ 0 $ (801,360)
Cash Flow .......................... $ 0 $ 0 $ 0 $ 0 $ 0
Total HIMF Cash Flow.................. $ 0 $ 0 $ 0 $ 0 $ (641,088)
========== ========== ========== ========== ===========
Discount Rate......................... 11.00% 11.50% 12.00% 12.50% 13.00% 14.00%
---------- ---------- ---------- ---------- ----------- ----------
PW of HIMF Cash Flow.................. $ 380,455 $ 372,000 $ 363,771 $ 355,758 $ 347,957 $ 332,961
Discounted @ 50%........... $ 190,227 $ 186,000 $ 181,885 $ 177,879 $ 173,978 $ 166,481
Discounted @ 60%........... $ 152,182 $ 148,800 $ 145,508 $ 142,303 $ 139,183 $ 133,184
</TABLE>

6
<PAGE> 111

<TABLE>
<CAPTION>
The Villas (Coachtree)-- HIMF Value... "As Is" Discounted Cash Flow
1111 Cardenas Dr., SE
Albuquerque, New Mexico
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Rentable Area..................... 161,712 Operating Expenses (Year One) Per SF
Number of Units....................... 195 Management $ 52,904 $0.33
Stabilized Occupancy.................. 95.00% Ad/Promotion $ 18,144 $0.11
Expense Growth Rate................... 4.00% Real Estate Taxes $ 72,951 $0.45
Resale Cap Rate....................... 11.50% Insurance $ 24,152 $0.15
Utilities $ 51,748 $0.32
Maintenance/Repairs $ 164,274 $1.02
General/Admin. $ 21,253 $0.13
Payroll $ 109,516 $0.68
---------- -----
Total Operating Expenses $ 514,942 $3.18
</TABLE>

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
- - ------------------------------------ ---------- ---------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental Income......................... $1,266,608 $1,317,272 $1,369,963 $1,424,762 $ 1,481,752 $1,541,022
% Increase................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Plus: Other Income.................... $ 70,498 $ 73,318 $ 76,251 $ 79,301 $ 82,473 $ 85,772
% Increase................. 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Gross Potential Income................ $1,337,106 $1,390,590 $1,446,214 $1,504,062 $ 1,564,225 $1,626,794
Less: Vacancy/Collection Loss......... (132,571) (69,530) (72,311) (75,203) (78,211) (81,340)
% of Gross Potential
Income................... 9.91% 5.00% 5.00% 5.00% 5.00% 5.00%
---------- ---------- ---------- ---------- ----------- ----------
Effective Gross Income................ $1,204,535 $1,321,061 $1,373,903 $1,428,859 $ 1,486,014 $1,545,454
Total Operating Expenses.............. $ (514,942) $ (535,540) $ (556,961) $ (579,240) $ (602,409) $ (626,506)
Per/Sq. Ft................. $ (3.18) $ (3.31) $ (3.44) $ (3.58) $ (3.73) $ (3.87)
---------- ---------- ---------- ---------- ----------- ----------
Net Operating Income.................. $ 689,593 $ 785,521 $ 816,942 $ 849,620 $ 883,604 $ 918,949
Less: 1st Lien........................ $ (436,208) $ (436,208) $ (436,208) $ (436,208) $ (436,208)
Less: 2nd Lien........................ $ (51,096) $ (51,096) $ (51,096) $ (51,096) $ (51,096)
Less: 3rd Lien (PW Mtg)............... $ (67,530) $ (67,530) $ (99,261) $ (96,039) $ (92,818)
Reversion-- 11.50%.................... $ 7,990,857
Less Selling Expense @ 3.00%.......... $ (239,726)
Less: 1st Lien Principal.............. $(5,211,560)
Less: 2nd Lien Principal.............. $ (528,948)
Less: 3rd Lien Principal (PW Mtg)..... $ (599,042)
-----------
Net Reversion to Senior Equity........ $ 1,411,581
Cash Flow (Net of Reversion........... $ 134,759 $ 230,687 $ 266,377 $ 266,277 $ 303,482

Hall-Coachtree Pre/CF Payments
6% Preference @ $1118164.............. $ 67,090 $ 67,090 $ 67,090 $ 67,090 $ 67,090
20% of Cash Flows..................... $ 13,534 $ 32,719 $ 32,657 $ 39,837 $ 47,278
Reversion - Senior Equity............. $ 1,411,581
Funds Available to Priorities......... $ 80,624 $ 99,809 $ 99,747 $ 106,927 $ 1,525,949
(Hall-Coachtree CF & Rev)
Less: 2nd Priority-LP/GP
Capital & Pref............. $ (38,320)
Less: 3rd Priority-HFG
Post Petition.............. $ (42,304) $ (99,809) $ (44,821)
Less: 4th Priority-HFG
Def Comm @3%............... $ (54,927) $ (106,927) $ (87,679)
Less: 5th Priority-HFG Post
Petition Debt-Def
Accrued Int............... $ (118,481)
Less: 6th Priority-HFG Post
HFGI Pre-P Debt Pro
Rata (5%)................. $ 0 $ 0 $ 0 $ 0 $ (65,989)
HIMF Debt Pro Rata (45%)... $ 0 $ 0 $ 0 $ 0 $ (593,905)
LP/GP Pro Rata (50%)....... $ 0 $ 0 $ 0 $ 0 $ (659,895)
Cash Flow .......................... $ 0 $ 0 $ 0 $ 0 $ 0
Total HIMF Cash Flow.................. $ 0 $ 0 $ 0 $ 0 $ 593,905
========== ========== ========== ========== ===========
Discount Rate......................... 11.00% 11.50% 12.00% 12.50% 13.00% 14.00%
---------- ---------- ---------- ---------- ----------- ----------
PW of HIMF Cash Flow.................. $ 352,454 $ 344,622 $ 336,998 $ 329,575 $ 322,348 $ 308,456
Discounted @ 50%........... $ 176,227 $ 172,311 $ 168,499 $ 164,788 $ 161,174 $ 154,228
Discounted @ 60%........... $ 140,982 $ 137,849 $ 134,799 $ 131,830 $ 128,939 $ 123,382
</TABLE>

7
<PAGE> 112

ANNEX B

the Principal
Financial PRINCIPAL FINANCIAL SECURITIES, INC.
Group Investment Bankers - Member New York Stock Exchange

August 6, 1996

The Board of Directors
Hall Apartment Associates, Inc.
General Partner
Hall Institutional Mortgage Fund, Ltd.
750 N. St. Paul, Suite 200
Dallas, Texas 75201-3247

Dear Sirs:

Principal Financial Securities, Inc. ("PFS") understands that Hall Institutional
Mortgage Fund Limited Partnership, an Arizona limited partnership (the "Fund"),
is contemplating entering into an asset purchase agreement (the "Agreement") to
be dated as of August 6, 1996 between Hall Financial Group, Inc., a Delaware
corporation (the "Purchaser"), or its affiliates, and the Fund in which the
Purchaser will agree to purchase from the Fund, and the Fund agrees to sell to
the Purchaser, seven loans receivable (the "Loans") owned by the Fund and made
to certain of its affiliates (the "Affiliated Borrowers"). Pursuant to the
Agreement, the Fund will sell, convey, assign, transfer and deliver to the
Purchaser the Loans in consideration of a purchase price equal to $1,600,000 in
cash (the "Purchase Price") to be delivered by the Purchaser to the Fund upon
closing (the "Transaction"). On behalf of the Board of Directors of Hall
Apartment Associates, Inc., the general partner of the Fund (the "Company"), you
have requested that PFS act as an independent investment banker for the purpose
of rendering an opinion (the "Opinion") to the Board of Directors of the Company
as to the fairness, from a financial point of view, of the consideration to be
received by the Fund as a result of the aforesaid Transaction.

In arriving at our Opinion, we have:

1. Reviewed the Agreement and certain related agreements in substantially
final form;

2. Reviewed the promissory notes detailing the terms of the Loans, in
which the Fund is to be repaid out of a proportionate share of: (i) the
net receipts from the operation of certain parcels of improved real
property, and the apartment complexes contained thereon (the
"Properties") owned by the Affiliated Borrowers or by National Housing
Partnership ("NHP"), of which certain of the Affiliated Borrowers are
limited partners, including the Lakes Apartments, the Los Altos Towers
Apartments, the Villa North and South Apartments, the Phoenix Square
Apartments, the Candlewick Apartments, all of which are located in
Bernallilo County, New Mexico, and the Arrowtree Apartments located in
Okemos County, Michigan, and (ii) the net proceeds from any refinance
or sale of the Properties that shall be applied to repayment of the
Loans;

The Fountain Place, P.O. Box 508, Dallas, Texas 75221-0508 (214) 880-9000
Formerly Eppler, Guerin & Turner, Inc. Founded 1952.

<PAGE> 113

The Board of Directors
Hall Apartment Associates, Inc.
August 6, 1996
Page 2

3. Reviewed the 'Debtor's Second Amended Plan of Reorganization' (the
"Bankruptcy Plan") filed by an Affiliated Borrower, Hall Brambletree
Associates, a Texas limited partnership, (the "Debtor") in which the
Fund is assigned a proportionate share of the net operating cash flows
and the proceeds, if any, of a sale or refinancing of certain parcels
of improved real property, and the apartment complexes contained
thereon comprising the Brambletree Apartments (one of the Properties)
located in Garland, Texas;

4. Reviewed historical operating and financial results of the Properties
associated with the Loans for the twelve month periods ended December
31, 1993, 1994, and 1995, and the period ended June 25, 1996;

5. Reviewed certain internal operating and financial projections of the
Properties prepared by the Company including statements of operations
for the twelve month periods ending December 31, 1996, 1997, 1998,
1999, and 2000;

6. Reviewed an independent analysis of the market value, as of February 1,
1996, of the Fund's loans receivable interest, performed by Bryan E.
Humphries and Associates on March 20, 1996 and provided to us by the
management of the Company;

7. Reviewed the financial terms, to the extent publicly available, of
certain comparable transactions, which are similar in certain respects
to the Transaction, including the discounts assigned to the valuation
of fractional ownership positions in closely held companies;

8. Toured the five Properties located in Albuquerque, New Mexico (Phoenix
Square/Midtree Apartments, Candlewick/Northtree Apartments, The
Lakes/Lanetree Apartments, Los Altos Towers/Twintree Apartments, and
The Villas/Coachtree Apartments) and the Property located in Garland,
Texas (Brambletree Apartments), at which times we were escorted by a
property manager employed by the Company who reviewed local housing
market conditions, as well as current occupancy levels and future
business prospects for each of the Properties visited;

9. Met certain members of senior management of the Company to discuss the
operations and future business prospects of the Properties, and the
rental housing markets in which the Properties are located;

10. Considered such other information, financial studies and analyses, and
financial, economic and market criteria as we deemed relevant.

In rendering our Opinion, we have relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was received by us from public sources, or provided
to us by the Company or any of its representatives. With respect to the
financial projections supplied to us for the Properties, we have assumed that
all such information has been reasonably derived on bases reflecting the best
currently available estimates and judgments of the Company's management as to
the future operating and financial performance of the Properties. In addition,
we have not made an independent evaluation or appraisal of the assets of the
Fund or the Affiliated Borrowers. We have assumed that the Transaction will be,
in all respects, in compliance with all laws and regulations that are applicable
to the Fund, the Purchaser or the proposed Transaction.

<PAGE> 114

The Board of Directors
Hall Apartment Associates, Inc.
August 6, 1996
Page 3

Our Opinion is based solely upon the information set forth herein as reviewed by
us and circumstances, including economic, market and financial conditions,
existing as of the date hereof. Events occurring after the date hereof could
material affect the assumptions used both in preparing this Opinion and in the
documents and projections reviewed by us. We have not undertaken to reaffirm or
revise this Opinion or otherwise comment upon any events occurring after the
date hereof.

We are not opining, and were not requested by you to opine, as to the fairness
of any aspect of the Transaction other than the consideration to be received by
the Fund as a result of the aforesaid Transaction. Our Opinion does not
constitute a recommendation to any Unitholder of the Fund as to how such
Unitholder should vote on the Transaction.

We have acted as financial advisor to the Board of Directors in connection with
the Transaction and will receive a fee for our services. It is understood that
the Opinion and any advice, written or oral, provided by PFS pursuant to this
letter will be for the information and assistance of the Board of Directors of
the Company in connection with their consideration of the Transaction and are
not to be used, circulated, quoted, or otherwise referred to for any other
purpose, nor is the Opinion or any such advice to be filed with, included in or
referred to in whole or in part in any prospectus, information or proxy
statement, tender offer document, filing, other document, or any communication
with the Fund's Unitholders except in each case with PFS's prior written
consent. We will consent to the use of and inclusion of the Opinion as an
exhibit to the Consent Solicitation Statement, and to the reference to PFS and
its procedures in preparing the Opinion in any above described document and any
other matters required to be disclosed by law, rule or regulation in or in
relation to the such document, provided we are furnished a copy of such
document reasonably in advance of the filing of the same with the SEC which
makes use thereof or reference thereto.

As a part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions, and valuations for estate,
corporate and other purposes.

Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that on the date hereof, the
consideration to be received by the Fund pursuant to the Transaction is fair,
from a financial point of view, to the Fund.

Very truly yours,

/s/Principal Financial Securities, Inc.

PRINCIPAL FINANCIAL SECURITIES, INC.

<PAGE> 115

ANNEX C

ASSET PURCHASE AGREEMENT

between

HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP

as Seller

and

HALL FINANCIAL GROUP, INC.

as Buyer

dated as of October 15, 1996

<PAGE> 116

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
I. TRANSFER OF LOANS................................................................................... 1
Section 1.1 Loans to be Sold.................................................... 1
Section 1.2 Consideration....................................................... 1
Section 1.3 Closing............................................................. 2
Section 1.4 Deliveries by Seller................................................ 2
Section 1.5 Deliveries by Buyer................................................. 2
Section 1.6 Allocation of Purchase Price........................................ 2

II. REPRESENTATIONS AND WARRANTIES OF SELLER AND GENERAL
PARTNER........................................................................................... 2
Section 2.1 Organization and Good Standing...................................... 2
Section 2.2 Authorization....................................................... 3
Section 2.3 Consents and Approvals.............................................. 3

III. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................... 3
Section 3.1 Organization and Good Standing...................................... 3
Section 3.2 Authorization....................................................... 4
Section 3.3 Consents and Approvals.............................................. 4

IV. OTHER OBLIGATIONS OF SELLER AND BUYER............................................................. 4
Section 4.1 Survival of Representations......................................... 4
Section 4.2 Access.............................................................. 4
Section 4.3 Consents............................................................ 4
Section 4.4 Governmental Filings................................................ 5
Section 4.5 Covenant to Satisfy Conditions...................................... 5

V. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER....................................................... 5
Section 5.1 Representations and Warranties...................................... 5
Section 5.2 Performance......................................................... 5
Section 5.3 No Injunction....................................................... 5
Section 5.4 Consents and Approvals.............................................. 5

VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER..................................................... 5
Section 6.1 Representations and Warranties...................................... 6
Section 6.2 Performance......................................................... 6
Section 6.3 No Injunction....................................................... 6
Section 6.4 Consents............................................................ 6
Section 6.5 Fairness Opinion.................................................... 6

VII. TERMINATION OF AGREEMENT......................................................................... 6
Section 7.1 Termination of Agreement............................................ 6
</TABLE>

(i)
<PAGE> 117

<TABLE>
<S> <C>
VIII. MISCELLANEOUS................................................................................... 6
Section 8.1 Expenses, Taxes, Etc................................................ 6
Section 8.2 Further Assurances.................................................. 6
Section 8.3 Parties in Interest................................................. 7
Section 8.4 Entire Agreement, Amendments and Waiver............................. 7
Section 8.5 Headings............................................................ 7
Section 8.6 Notices............................................................. 7
Section 8.7 Governing Law....................................................... 7
Section 8.8 Third Parties....................................................... 8
Section 8.9 Counterparts........................................................ 8
</TABLE>

(ii)

<PAGE> 118

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of August 6,
1996, is by and between Hall Financial Group, Inc., a Delaware corporation
("BUYER"), and Hall Institutional Mortgage Fund Limited Partnership, an Arizona
limited partnership ("SELLER").

INTRODUCTORY STATEMENT

This Agreement sets forth the terms and conditions upon which Buyer
agrees to purchase from Seller, and Seller agrees to sell to Buyer, loans made
by Seller to certain of its affiliates (the "LOANS").

Accordingly, in consideration of the preceding statement and the mutual
agreements, representations, warranties, covenants and conditions in this
Agreement, and for other good, valuable and binding consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

STATEMENT OF AGREEMENT

I. TRANSFER OF LOANS

Section 1.1 Loans to be Sold.

(a) Subject to the terms and conditions of this Agreement, at
the Closing provided for in Section 1.4 hereof (the "CLOSING"), Seller shall
sell, convey, assign, transfer and deliver to Buyer the Loans.

(b) Such sale, conveyance, assignment, transfer and delivery
shall be effected by delivery by Seller to Buyer of (i) the duly executed
instruments of assignment and assumption with respect to the Loans whereby Buyer
will be assigned all rights existing under the Loans and will assume all
liabilities existing under the Loans (the "INSTRUMENTS OF ASSIGNMENT AND
ASSUMPTION"); and (ii) such other good and sufficient instruments of conveyance
and transfer as shall be necessary to vest in Buyer good, valid and marketable
title to the Loans.

Section 1.2 Consideration. In consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery of the Loans, Buyer shall deliver
at the Closing the following:

(a) a cash payment, certified check, official bank check or
wire transfer of federal or other immediately available funds in an
amount equal to $1,600,000 (the "PURCHASE PRICE"); and

<PAGE> 119

Section 1.3 Closing. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1700 Pacific Avenue, Suite 4100, Dallas, Texas, at 9:00 a.m.
Dallas, Texas time, on ____________, 1996 (the "CLOSING DATE"). The Closing Date
may be postponed to such other date as Buyer and Seller may agree.

Section 1.4 Deliveries by Seller. At the Closing, Seller shall deliver
to Buyer (unless delivered previously), the following:

(a) the Instruments of Assignment and Assumption (to be
drafted by Buyer);

(b) all other general instruments of transfer, assignment and
conveyance in form and substance reasonably satisfactory to Buyer to evidence or
perfect the sale, transfer and conveyance of the Loans to Buyer; and

(c) executed counterparts of any consents or waivers required
to be obtained by Seller which are referred to in Section 5.4 hereof.

Section 1.5 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller (unless delivered previously) the following:

(a) the cash payment, certified check, official bank check or
wire transfer of federal or other immediately available funds for the Purchase
Price;

II. REPRESENTATIONS AND WARRANTIES OF SELLER AND GENERAL PARTNER

Seller and Hall Apartment Associates, Inc. (the "MANAGING GENERAL
PARTNER"), a Texas corporation which is the general partner of Hall 1985
Management Associates Limited Partnership, a Texas limited partnership which is
the general partner of Hall Pension Fund Associates, a Texas limited partnership
and the general partner of the Partnership, hereby represent and warrant to
Buyer as follows:

Section 2.1 Organization and Good Standing. Seller is a limited
partnership duly formed, validly existing and in good standing as a limited
partnership under the laws of the State of Arizona. Managing General Partner is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas. Each of Seller and Managing General Partner has the
power and authority to conduct business as it is now being conducted and to own
assets that it now owns.

2
<PAGE> 120

Section 2.2 Authorization.

(a) Each such party has all requisite power and authority to
enter into, execute, deliver and consummate the transactions contemplated by
this Agreement and any instruments and agreements executed and delivered
pursuant to this Agreement (collectively, the "DOCUMENTS").

(b) The Board of Directors of Managing General Partner has
taken all action required by law or otherwise to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including the execution, delivery and consummation of the Documents.
Other than obtaining the requisite consent of its limited partners of Seller in
connection with the transactions contemplated hereby, no other act or proceeding
on the part of Seller or the Managing General Partner is necessary to authorize
this Agreement or any of the Documents or the transactions contemplated hereby
or thereby. This Agreement is, and each of the Documents, when executed and
delivered to Buyer by Managing General Partner, on behalf of Seller, will be, a
valid and binding obligation of Seller enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency, reorganization and other laws and
judicial decisions of general applicability relating to or affecting creditors'
rights and to general principles of equity.

(c) Seller has previously delivered to Buyer true and complete
copies, certified by the Secretary or an Assistant Secretary of Managing General
Partner, of the resolutions duly and validly adopted by the Board of Directors
of Managing General Partner evidencing its authorization of the execution and
delivery of this Agreement and the Documents and the consummation of the
transactions contemplated hereby and thereby (which resolutions have not been
modified, revoked or rescinded in any respect).

Section 2.3 Consents and Approvals. Except as set forth in Schedule
2.3, Seller is not required to obtain, transfer or cause to be transferred any
material consent, approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party in connection with (a)
the execution and delivery by Managing General Partner, on behalf of Seller, of
this Agreement or any of the Documents or (b) the consummation by Seller and
Managing General Partner of the transactions contemplated hereby or thereby,
including but not limited to the sale of the Loans.

III. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

Section 3.1 Organization and Good Standing. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has the power to conduct business as it is now being conducted
and to own assets that it now owns.

3
<PAGE> 121

Section 3.2 Authorization.

(a) Buyer has all requisite corporate power and authority to
enter into, execute, deliver and consummate the transactions contemplated by
this Agreement and the Documents. The Board of Directors of Buyer has taken all
action required by law or otherwise to authorize the execution and delivery of
this Agreement and the Documents and the consummation of the transactions
contemplated hereby and thereby. No other corporate act or proceeding on the
part of Buyer is necessary to authorize this Agreement or any of the Documents
or the transactions contemplated hereby or thereby. This Agreement is a valid
and binding obligations of Buyer enforceable against Buyer in accordance with
its terms, subject to bankruptcy, insolvency, reorganization and other laws and
judicial decision of general applicability relating to or affecting creditors'
rights and to general principles of equity.

(b) Buyer has previously delivered to Seller true and complete
copies, certified by the Secretary or Assistant Secretary of Buyer, of the
resolutions duly and validly adopted by the Board of Directors of Buyer
evidencing its authorization of the execution and delivery of this Agreement,
the Documents and the consummation of the transactions contemplated hereby and
thereby (which resolutions have not been modified, revoked or rescinded in any
respect).

Section 3.3 Consents and Approvals. Except as set forth in Schedule
3.3, Buyer is not required to obtain any material consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with the
execution and delivery by Buyer of this Agreement, the Documents, or the
consummation by Buyer of the transactions contemplated hereby or thereby.

IV. OTHER OBLIGATIONS OF SELLER AND BUYER

Section 4.1 Survival of Representations. All representations,
warranties, covenants and agreements made by any party to this Agreement or
pursuant hereto shall be true, complete and correct as of the date hereof and as
of the Closing Date as though such representations, warranties, covenants and
agreements were made at the Closing Date.

Section 4.2 Access. In order that Buyer may have full opportunity to
make such investigations as it shall desire to make of the affairs of Seller in
connection with the transactions contemplated by this Agreement, Seller shall
permit Buyer and its counsel, accountants, auditors and other representatives
reasonable access during normal business hours to all of the offices,
properties, books and records, contracts and commitments of Seller from the date
hereof until such time as Buyer reasonably deems necessary to facilitate the
transition of ownership.

Section 4.3 Consents. Seller and Buyer shall use their best efforts to
obtain prior to the Closing all consents necessary in connection with the
consummation of the transactions contemplated hereby, including, without
limitation, each of the consents, approvals, licenses, permits and
authorizations listed or referred to in Schedule 2.3 or in Schedule 3.3. Each
party agrees to assist and cooperate with the other in obtaining such consents,
including furnishing financial and other information as may reasonably be
requested by it or a third party.

4
<PAGE> 122

Section 4.4 Governmental Filings. As soon as practicable, Seller and
Buyer shall make any and all filings and submissions to any governmental agency
which are required to be made in connection with the transactions contemplated
hereby. Seller shall furnish to Buyer and Buyer shall furnish to Seller such
information and assistance as the other party or parties may reasonably request
in connection with the preparation of any such filings or submissions.

Section 4.5 Covenant to Satisfy Conditions. Seller, on the one hand,
and Buyer, on the other hand, shall each use their respective best efforts to
insure that the conditions set forth in Articles V and VI hereof, respectively,
are satisfied, insofar as such matters are within their respective control.

V. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

The obligations of Buyer under this Agreement are subject to the
satisfaction at or before the Closing of each of the following conditions, any
one or more of which may be waived by Buyer, in its sole discretion:

Section 5.1 Representations and Warranties. The representations and
warranties of Seller and Managing General Partner contained herein shall be
true, complete and accurate in all material respects as of the date when made
and as of the Closing Date as though such representations and warranties were
made as of such date, except for any changes expressly permitted by the terms of
this Agreement.

Section 5.2 Performance. Seller shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be so performed or complied with by it at or prior to the
Closing.

Section 5.3 No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction restraining or prohibiting
the consummation of the transactions contemplated hereby.

Section 5.4 Consents and Approvals. All material licenses, permits,
consents, approvals and authorizations of all third parties and governmental
bodies and agencies, including the requisite consent of Seller's limited
partners, shall have been obtained which are necessary in connection with the
execution and delivery by Managing General Partner, on behalf of Seller, of this
Agreement, and the consummation by Seller and Managing General Partner of the
transactions contemplated hereby.

VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

The obligations of Seller under this Agreement are subject to the
satisfaction at or before the Closing, of each of the following conditions, any
one or more of which may be waived by Seller in its sole discretion:

5
<PAGE> 123

Section 6.1 Representations and Warranties. The representations and
warranties of Buyer contained herein shall be true, complete and accurate in all
material respects as of the date when made and as of the Closing Date as though
such representations and warranties were made as of such date, except for any
changes expressly permitted by the terms of this Agreement.

Section 6.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it at or prior to the
Closing.

Section 6.3 No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.

Section 6.4 Consents. Seller shall have obtained the requisite consent
of its limited partners for the consummation by Seller and Managing General
Partner of the transactions contemplated hereby.

Section 6.5 Fairness Opinion. Managing General Partner shall have
received a written opinion from Principal Financial Securities, Inc. or any
other reputable investment banking firm that the Purchase Price is fair to
Seller from a financial point of view.

VII. TERMINATION OF AGREEMENT

Section 7.1 Termination of Agreement. This Agreement may be terminated:

(a) at any time prior to the Closing, by mutual agreement of
Seller and Buyer;

(b) on the Closing Date, by either party, if any conditions
precedent to such party's performance shall not have been satisfied on the
Closing Date.

VIII. MISCELLANEOUS

Section 8.1 Expenses, Taxes, Etc. Except as otherwise provided herein,
each of the parties hereto shall pay all fees and expenses incurred by it in
connection with the transactions contemplated by this Agreement.

Section 8.2 Further Assurances.

(a) From time to time (including after the Closing Date), at
Buyer's request and without further consideration, Seller shall execute and
deliver to Buyer such documents and take such other action as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.

(b) From time to time (including after the Closing Date), at
Seller's request and without further consideration, Buyer shall execute and
deliver such documents and take such

6
<PAGE> 124

other action as Seller may reasonably request in order to consummate more
effectively the transactions contemplated hereby.

Section 8.3 Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successors and
permitted assigns of the parties hereto. The rights and obligations of Buyer and
Seller hereunder may not be assigned without the consent of the other, except
that Buyer shall have the right to assign any or all of its rights and
obligations hereunder to any of its affiliates, provided that each such
affiliate assumes Buyer's obligations hereunder.

Section 8.4 Entire Agreement, Amendments and Waiver. This Agreement,
the exhibits, the schedules and other writings referred to herein which form a
part hereof shall constitute the entire understanding of the parties with
respect to its subject matter. This Agreement supersedes all prior negotiations,
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly executed
by the parties. Any condition to a party's obligations hereunder may be waived
in writing by such party to the extent permitted by law.

Section 8.5 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of any provision of this Agreement.

Section 8.6 Notices. Any notices or other communications required or
permitted to be given hereunder shall be in writing and shall be sent to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:

If to Buyer:

780 North St. Paul
Dallas, Texas 75234

If to Seller:

4455 East Camelback Road
Suite A-200
Phoenix, Arizona 85018

Such notices or other communications shall be deemed to have been duly given and
received (i) on the day of sending if sent by personal delivery, cable,
telegram, facsimile transmission or telex, (ii) on the next business day after
the day of sending if sent by Federal Express or other similar express delivery
service or (iii) on the fifth calendar day after the day of sending if sent by
registered or certified mail (return receipt requested).

SECTION 8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.

7
<PAGE> 125

Section 8.8 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person other than
the parties hereto and their successor or permitted assigns, any rights or
remedies under or by reason of this Agreement.

Section 8.9 Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first above written.

SELLER

HALL INSTITUTIONAL MORTGAGE FUND LIMITED
PARTNERSHIP

By: Hall Pension Fund Associates, General Partner

By: Hall 1985 Management Associates Limited
Partnership, General Partner

By: Hall Apartment Associates, Inc.,
Managing General Partner

By: /s/Larry Levey
-----------------------------------
Print Name: Larry Levey
---------------------------
Print Title: Vice President
--------------------------

BUYER

HALL FINANCIAL GROUP, INC.

By: /s/Donald L. Braun
-----------------------------------------------------
Print Name: Donald L. Braun
------------------------------------------
Print Title: Chief Financial Officer
------------------------------------------

8
<PAGE> 126
ANNEX D

HALL INSTITUTIONAL MORTGAGE FUND
SUMMARY OF THE PARTNERSHIP PROJECTIONS

<TABLE>
<CAPTION>
Cash Flow After Debt Service Rental Expense
1996 1997 1998 1999 2000 Increase Vacancy Increase
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARROWTREE 150,363 138,301 150,603 160,959 170,976 3.00% 5.00% 3.00%

BRAMBLETREE 112,696 149,701 170,794 191,309 212,042 3.00% 6.00% 3.00%

COACHTREE 180,130 206,911 320,559 352,957 386,651 4.00% 7.00% 4.00%

NORTHTREE 178,689 242,154 262,767 283,445 304,509 3.00% 3.00% 3.00%

LANETREE 429,074 480,262 524,647 579,657 636,869 4.00% 7.00% 4.00%

TWINTREE 198,821 228,781 285,620 319,052 353,821 4.00% 8.00% 4.00%

MIDTREE 151,354 181,077 196,810 212,816 229,210 3.00% 5.00% 3.00%
</TABLE>

This is a summary of the projections given to Principal Financial Securities,
Inc. by the Partnership.

These are cash flows from the properties to the Affiliated Borrowers and do not
represent the cash flows to the Partnership.

D-1

<PAGE> 127
ANNEX E

HALL INSTITUTIONAL MORTGAGE FUND
SUMMARY OF APPRAISALS

<TABLE>
<CAPTION>
PROPERTY VALUE
------------------------------------------------------
Income Cost Market Final Rental Expense CAP Discount
Approach Approach Approach Value Increase Vacancy Increase Rate Rate
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARROWTREE 3,300,000 3,750,000 2,900,000 to 3,300,000 4.00% 7.00% 4.00% 11.0 11.5%-12.5%
3,300,000
BRAMBLETREE 6,500,000 6,500,000 6,300,000 to 6,500,000 4.00% 7.00% 4.00% 10.5 11.5%-12.5%
6,500,000
COACHTREE 6,800,000 6,900,000 6,000,000 to 6,800,000 4.00% 7.00% 4.00% 11.0 11.5%-12.5%
6,900,000
NORTHTREE 6,300,000 5,600,000 5,800,000 to 6,300,000 4.00% 7.00% 4.00% 11.5 11.5%-12.5%
6,600,000
LANETREE 11,800,000 9,700,000 10,500,000 to 11,800,000 4.00% 5.00% 4.00% 11.5 11.5%-12.5%
11,900,000
TWINTREE 7,600,000 7,500,000 6,600,000 to 7,600,000 4.00% 5.00% 4.00% 11.5 11.5%-12.5%
7,600,000
MIDTREE 5,200,000 5,200,000 4,400,000 to 5,200,000 4.00% 5.00% 4.00% 11.5 11.5%-12.5%
5,200,000
</TABLE>

This summary was prepared from the Bryan E. Humphries and Associates appraisals
dated January 27 to February 20, 1995.

E-1

<PAGE> 128
CONSENT CONSENT
HALL INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP

THIS CONSENT IS SOLICITED ON BEHALF OF HALL INSTITUTIONAL MORTGAGE FUND
LIMITED PARTNERSHIP BY ITS GENERAL PARTNER, HALL PENSION FUND ASSOCIATES, LTD.
THIS SOLICITATION OF CONSENTS EXPIRES ON MAY 1, 1997 UNLESS EXTENDED OR
TERMINATED EARLIER (THE "EXPIRATION DATE").

The Units represented by this Consent, when properly executed, will be
recorded as directed by the Unitholder. IF NO DIRECTION IS GIVEN, UNITS WILL
BE COUNTED AS GIVING CONSENT TO THE PROPOSAL (AS DEFINED BELOW). However, a
Consent returned by a broker or nominee on which such person expressly
indicates lack of discretionary authority to CONSENT to the Proposal will be
treated as being AGAINST the Proposal. Please note that an abstention will be
counted as being AGAINST the Proposal.

The undersigned, acting with regard to all Units held in HALL
INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP (the "Partnership") with
respect to which the undersigned is entitled to give his, her or its consent on
the Record Date, hereby consents, denies consent or abstains from consenting,
all as indicated on the reverse side hereof, to approve the proposal (the
"Proposal") to sell substantially all of the non-cash assets of the Partnership
to Hall Financial Group, Inc. (the "Sale Transaction") followed by the
liquidation and winding up of the Partnership as described in the Solicitation
Statement dated March 17, 1997, receipt of which, together with all amendments
and supplements thereto, if any, is hereby acknowledged. The dissolution and
termination of the Partnership is contingent upon successful completion of the
Sale Transaction. Delivery of this Consent, when properly executed, will
revoke any consent, failure to consent or abstention heretofore given with
respect to such Units.

(PLEASE DATE AND SIGN ON REVERSE SIDE.)

1. TO APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE NON-CASH ASSETS OF THE
PARTNERSHIP TO HALL FINANCIAL GROUP, INC. FOLLOWED BY THE LIQUIDATION
AND WINDING UP OF THE PARTNERSHIP (check one box).

[ ] CONSENT [ ] AGAINST [ ] ABSTAIN

Dated 1997
----------------------------,

------------------------------------------
Signature

------------------------------------------
Signature (if held jointly)

------------------------------------------
Title

Please sign exactly as name appears
hereon. When Units are held by joint
tenants, both should sign. When signing
as an attorney, executor, administrator,
trustee or guardian, please give full
title of such. If a corporation, please
sign in corporate name by President or
other authorized officer. If a
partnership, please sign in partnership
name by authorized person.

PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE OR DELIVER TO: The Herman Group, Inc., 2121 San Jacinto
Street, 26th Floor, Dallas, Texas 75201. Facsimile copies of the Consent,
properly completed and duly executed, will be accepted at (214) 999-9323 or
(214) 999-9348. If you have any questions, please call The Herman Group, Inc.
at (800) 747-2975.

YOU MAY REVOKE THIS CONSENT AT ANY TIME PRIOR TO THE EARLIER OF THE APPROVAL
DATE (AS DEFINED IN THE SOLICITATION STATEMENT) OR THE EXPIRATION DATE.