(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 1996 or

/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________________ to ______________

Commission file number 0-19258

BAYFIELD LOW INCOME HOUSING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

c/o Paul J. Maddock, Megan Asset Management, Inc.
1424 West Century Avenue, Suite 102, Bismarck, ND 58501
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (701) 223-2923

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

Securities registered pursuant to Section 12(g) of the Act: LIMITED PARTNERSHIP INTERESTS
                                                                                       &n sp;                         (Title of class)

               Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / /     No /X/

                Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. /X/

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

                Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.      / / Yes /X/ No

DOCUMENTS INCORPORATED BY REFERENCE

                List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospects filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933: NONE

                This filing is a consolidated filing for the fiscal year ended March 31, 1996. Bayfield Low Income Housing Limited Partnership (the "Partnership") has not heretofore filed an Annual Report on Form 10-K for the fiscal year ended March 31, 1996, nor has it filed Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, September 30, and December 31, 1995, (the "10-Q's"). The 10-Q's al Report on Form 10-K covers the same periods as the 10-Q's.

               A majority of the Projects received financing under Section 515 of the Housing Act of 1949, (as amended "Section 515"), which authorized the Rural Housing Service, the successor agency to the Farmers Home Administration of the Department of Agriculture (collectively referred to here in as "RD") to provide direct below-market-rate mortgage loans for rural rental housing.

               The Partnership was created under the Plan as a master limited partnership into which all of the assets and liabilities of the Debtor Investor Partnerships were "rolled-up" as of July 1, 1990. Pursuant to the Plan, the Partnership has succeeded to the interests of the Debtor Investor Partnerships in the Operating Partnerships, and the Debtor Investor Partnerships were liquidated in 1990.

               The 52 Debtor Investor Partnerships were the following Delaware limited partnerships:

               First American Holdings, Inc., a Delaware corporation ("First American"), was the sole general partner of each of the Debtor Investor Partnerships, and was the initial General Partner of the Partnership under the Plan. The Plan required that an independent manager that was not affiliated with First American take over the responsibility for the administration of the Partnership. A committee formed by

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               Effective December 23, 1991, First American withdrew as general partner, subject to the approval of the Limited Partners, pursuant to a Settlement Agreement (the "Settlement Agreement") with the Partnership and Megan Management. Among other things, the Settlement Agreement provided for certain amendments to the partnership agreement of the Partnership and, at the request of the Investors Committee, f

               As of December 31, 1992, Megan Management's rights and obligations as General Partner and Independent Manager of the Partnership were assigned to, and assumed by, Megan Asset Management, Inc. ("Megan Asset Management" or the "Independent Manager"), a corporation which was under common ownership and control with Megan Management.

               The General Partner has full, exclusive and complete discretion in the management and control of the Partnership, except as limited by the Partnership Agreement, by the Plan or by the Management Agreement. Megan Asset Management, in its capacity as Independent Manager under the Plan, is responsible for the day-to-day management of the Partnership's operations.

               Each of the Debtor Investor Partnerships' offerings of Limited Partnership Interests (as hereinafter defined) had been closed prior to the organization of the Partnership. Accordingly, no additional interests in the Partnership are being made available and only limited transfers of Limited Partnership Interests in the Partnership are being effected in accordance with the Partnership Agreement.

               The Partnership's principal business is to maintain its investments in the form of Limited Partnership Interests in the Operating Partnerships (and, through such investments, in the Projects) and to carry out the provisions of the Plan. See "Business Objectives" under this Item.

               For Projects funded under Section 515 after December 21, 1979, which include substantially all of those in which the Partnership owns an interest, applicable law and regulations require the owner to utilize the housing for eligible low income tenants at restricted lower rents for a period of 20 years following closing of the RD mortgage.

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               The direct below-market-rate mortgage loans for rural rental housing provided by RD under Section 515 are extended to qualified sponsors organized exclusively for the purpose of providing housing in amounts up to 97% of apartment complex costs as determined pursuant to RD regulations and for terms up to 50 years. In addition, RD may provide an owner with mortgage interest subsidies, which effectively

               RD approval is required if an owner wishes to sell a Project. In addition, applicable law and regulations also preclude prepayment of mortgage loans, except in certain very limited circumstances and unless the owner agrees to utilize the project for eligible tenants for a specified period.

               Each of the Projects indirectly owned by the Partnership qualified for the low income housing tax credits (the "Tax Credits"), under Section 42 of the Internal Revenue Code of 1986, as amended (the "Tax Code"), which was enacted by the United States Congress to promote the development of low income rental housing. In order to generate Tax Credits, properties must be rented to tenants whose incomes ar

               For the tax year ended December 31, 1995, the Partnership passed through an aggregate total of approximately $5,020,000 of Tax Credits to the Limited Partners. The annual anticipated Tax Credits, which the Partnership could have received from the Operating Partnerships, excluding those projects lost in prior years due to insolvency or bankruptcy, and passed through to the Limited Partners during the

               As of December 31, 1999, substantially all of the Tax Credits have been realized from the Operating Partnerships and passed through to the Limited Partners. With the realization of substantially all of the Tax Credits by the Limited Partners as of December 31, 1999, the General Partner began exploring various exit strategies, including the sale and refinancing of the Partnership's interests in the Op

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               Although there can be no assurance that the Partnership's purpose or objectives will be achieved, the sole purpose of the Partnership as set forth in the Partnership Agreement was (i) to acquire the Debtor Investor Partnerships' equity interests as a limited partner in each of the Operating Partnerships, which developed and were to own, hold, manage, operate, lease, mortgage, sell and otherw i

               Purpose (i) - the acquisition of the Debtor Investor Partnerships' equity interests as a limited partner in each of the Operating Partnerships, which developed and were to own, hold, manage, operate, lease, mortgage, sell and otherwise deal with the Projects, was completed in July, 1990 (Item 1. Business - Organization, above);

               Purpose (ii) - the liabilities of the Debtor Investor Partnerships were assumed by and have been substantially paid by the Partnership. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Liquidity", below.

               Purpose (iii) - in attempting to fulfill such other undertakings of the Partnership as are set forth in the Plan the Partnership has, among other thing:

               The Partnership does not expect to make material distributions beyond those previously made, as its sources of liquidity are limited and are being used to meet its operating expenses, including attempts to preserve the Projects. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- "Liquidity" and "-- Capital Resources".

               Purpose (iv) - conduct such other activities as may be necessary or appropriate to carry out the foregoing, the Partnership has focused on the following long-term objectives:

               Objective a) - The Partnership's investments are in apartment complexes which provide housing to low income tenants pursuant to government sponsored programs. Therefore, in addition to market-related risks, which any real estate investment is subject to, capital appreciation of a Limited Partnership interest is subject to the restrictions set by government policy. As explained below, this makes it un

               The vast majority of the Projects owned by the Partnership are located in small rural communities. As such, the market rents in many of the Partnership's Project areas are not significantly higher that the RD restricted rents eligible tenants are currently charged. Therefore, the valuation of many of the Partnership's Projects, even if based upon market rents, results in little or no appreciation fro

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instances where market rents might be significantly higher are rare and there are numerous government restrictions in connection with such a course of action. In addition, most of the Partnership's Project mortgages have an absolute restriction which will not allow prepayment until approximately 2009.

               Accordingly, based on current market conditions and government regulations, it does not appear that the value of the Projects owned by the Partnership will increase significantly. The value of the Projects and the market conditions are adversely affected by the restricted use limitations which limit the amount of income rent a tenant may have and the amount of rent a Project can charge a tenant. Unde

               Objective b) - With respect to the Partnership's long-term objective to provide cash distributions to the Limited Partners from the proceeds of the sale or refinancing of the Projects, with the realization of substantially all of the Tax Credits by the Limited Partners as of December 31, 1999, the General Partner began exploring various exit strategies, including the sale and refinancing of the Partn

Employees

               The Partnership has no employees. The day-to-day operations of the Partnership are conducted by the Independent Manager, which employs 2 people on a full-time basis.

(The above list of Operating Partnerships does not include the Partnership's investment in several investor partnerships that own limited partnership interests in Operating Partnerships.)

               The following is additional information on certain Operating Partnerships which had operational or other financial problems either during or which contented during the Fiscal Year ended March 31, 1996:

 Shaker Housing Credit L.P.

               In the 1996 Fiscal Year, Shaker Housing Credit L.P. ("Shaker Housing"), an Operating Partnership, filed for protection under Chapter 11 of the federal bankruptcy laws, following the institution of foreclosure proceedings by its lender, despite advances from the Partnership of $52,000 in excess of the Partnership's capital commitment. This Operating Partnership's Project, Shaker Housing, located in Cleveland, Ohio, had experienced prolonged vacancies, attributable in part to the failure of its management company to maintain the apartments, and structural damage effectively eliminating one apartment. A new management company, Biskind Management, had been put in place by the Operating Partnership, which attempted to increase occupancy in order to enable the Operating Partnership to emerge from bankruptcy under a plan of reorganization; however, the bank holding the first mortgage on the Project obtained an order from the bankruptcy court allowing it to proceed with a foreclosure sale of the property. The Partnership determined that it was no longer economically feasible to incur further costs to attempt to save this Project. The Project was sold to the bank holding the first mortgage at a foreclosure sale. As a result of the foreclosure this Operating Partnership lost its interest in the Project.

               As a result of the loss of this Operating Partnership's Project the Partnership will not receive, or be entitled to, anticipated aggregate Tax Credits of $210,000 from 1996 to 1998. Further, Tax Credits of $163,000 were subject to recapture along with $61,000 in interest, that were passed through to the Limited Partners on their 1996 Schedule K-1. Limited Partners are not expected to be subject to any further tax recapture or interest and penalties with respect to the loss of this Project.

               In the 1995 Fiscal Year, Megan Asset Management , as general partner of the Partnership, and the Partnership commenced an action in the Circuit Court of Alachua County, Florida as the sole limited partner of, and derivatively on behalf of, two Operating Partnerships, Lake City Village, Ltd. and Alachua Villas, Ltd., against John D. Carver ("Carver"), the general partner of these Operating Partnerships, and a management company affiliated with Carver, G & R Management Services, Inc. ("G & R"). The actions arose as a result of the acceleration by RD of the entire balance due on the mortgage against these Operating Partnerships. RD alleged various defaults under such Operating Partnership's loan agreements, promissory notes and mortgages with RD (the "RD Documents"), including failure to pay real estate taxes, failure to maintain account balances sufficient to pay current operating and maintenance expenses, failure to maintain adequate records and file required reports, and failure to correct deficiencies previously noted by RD during its supervisory visits to the housing projects.

               After extensive motion practice and discovery, on January 13, 1995, a settlement agreement was entered into providing for a designated representative of the Partnership (a company under common ownership and control with Megan Asset Management) to take over management of the affected Operating Partnerships and the replacement of Carver as general partner subject to the consent of RD

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(which was obtained in December, 1995). This settlement agreement also provides for an audit of the two Operating Partnerships and Citrus Terrace Village Ltd., an Operating Partnership unaffiliated with Carver, but which G&R managed ("Citrus Terrace"). This audit uncovered possible claims of the two Operating Partnerships and Citrus Terrace against the defendants totaling $83,599, which amount was contested by Carver. Following a hearing on November 13, 1997, the Court ruled that it would enter summary judgment in favor of the Partnership against Carver in the amount of $78,599 together with interest from January 24, 1996. Thereafter Carver appealed the Court's entry of judgment in favor of the Partnership. After the filing of briefs and hearing the arguments the Circuit Court of Appeal, First District, State of Florida dismissed Carver's appeal and the judgment in favor of the Partnership became final. Subsequently, pursuant to the terms of the Settlement Agreement, the Partnership applied for an award of attorneys' fees, which has not been ruled upon by the Court. While the Partnership is making attempts to recover against Carver with respect to the judgment on behalf of the affected Operating Partnerships, there can be no assurance that any such amounts will be recovered by such Operating Partnerships.

               Further, in the 1996 Fiscal Year, in an attempt to recover upon its claims and the sums taken by Carver from the two Operating Partnerships, other than Citrus Terrace, the Partnership commenced a further action in the Circuit Court of Alachua County, Florida against Mercurio & Bridgford, P.A. and John J. Mercurio (together, "Mercurio"), who provided auditing services to each of Lake City Village, Ltd., Alachua Villas, Ltd. and Citrus Terrace, based upon their failure to report the improper payments made by John D. Carver, Jr.

               After a jury trial in the Circuit Court of Alachua County, Florida, in November, 1998, the jury reach a verdict that the defendants had not caused the Partnership's and Operating Partnerships' financial loss. Following the jury's verdict, defendants have sought $55,545 recovery for their costs and attorneys' fees against the Partnership. The Partnership and counsel to the Partnership do not believe the Partnership is obligated for defendants' cost and attorneys' fees and are defending against such claim by defendants. While there can be no assurance that the Partnership's defense of this claim will be successful, an award in favor of defendants on this claim will not materially affect the financial ability of the Partnership to continue its operations.

               In consideration of the Partnership's making loans of $24,655 and $25,310 in excess of its capital commitment to Lake City Village, Ltd. and Alachua Villas, Ltd. respectively, to enable them to pay certain outstanding real estate taxes in arrears, RD has not foreclosed on its mortgages to such Operating Partnerships and has restructured such mortgages to finance the payment of the balance of the past due real estate taxes and to permit such Operating Partnerships to remain in operation. This has permitted the Partnership and its Limited Partners to continue to receive the benefit of the Tax Credits related thereto and to avoid any recapture on Tax Credits taken in prior years. Had RD foreclosed on its loans and the Partnership lost its interest in Lake City Village, Ltd. and Alachua Villas, the Partnership would not have been entitled to aggregate Tax Credits of $392,300 through 1999, or approximately $196 per 0.05% of Limited Partnership Interest. In addition, assuming that 100% of the Tax Credits previously allocated to the Limited Partners relating to these Operating Partnerships were used by them, it is estimated that the Limited Partners would have been subject to a total tax recapture with respect to these Operating Partnerships of $186,709 or approximately $93 per 0.05% of Limited Partnership Interest, plus interest and penalties, if any.

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               In addition to the above loans in excess of its capital commitment, during the fiscal year ending 3/31/98 the Partnership made an additional loan of $20,714 to Lake City Village to cover the cost of maintenance, which had been deferred by Carver, in an attempt to keep the units in this Project habitable and available for rent.

               While the Partnership has obtained a promissory note from each Operating Partnership and a security interest in the Operating General Partners' interests in each Operating Partnership, the repayment of the loans with accrued interest is subject to each Operating Partnership's having sufficient cash flow from operations to cover its ongoing operating expenses and fund the necessary reserves and RD's approval, there can be no assurance that any such amounts will be recovered from such Operating Partnerships.

               The Partnership has also paid professional fees on behalf of each Operating Partnership relating to the litigation against the former general partner and takeover and workout of these Operating Partnerships in the amount of $55,462 on behalf of Alachua Villas and $55,638 on behalf of Lake City Village. Said payments have been reflected as a note payable to the Partnership on the financial statements of each Operating Partnership. Any sums recovered by the Operating Partnerships from the judgment obtained against Carver, the former general partner, will be paid to the Partnership in reduction of these loans, subject to the then financial condition of each Operating Partnership.

               Also in the 1995 Fiscal Year, the Partnership commenced a further action in the Circuit Court of Highlands County, Florida on behalf of Citrus Terrace substantially similar to that described above, against George T. Wheeler ("Wheeler"), individually and as the general partner of Citrus and against Carver, as Trustee of G & R, and G & R , which management company was also managing the Project owned by Citrus Terrace. A substantially similar settlement agreement has been entered into and implemented in connection with and this litigation has also been settled, except for the recovery of the sum of approximately $5,000 in an unauthorized loan taken by Carver from Citrus Terrace. It is not likely going to be economically feasible for the Partnership to attempt to recover this latter sum against Carver with respect to such claim.

               In consideration of an affiliate of Megan Asset Management becoming the substitute general partner of Citrus Terrace, RD did not foreclose on its mortgage to Citrus Terrace, and it has restructured the mortgage to finance the payment of past due real estate taxes to permit this Operating Partnership to remain in operation, notwithstanding the damages suffered by it. This permitted the Partnership and its Limited Partners to continue to receive the benefit of the Tax Credits related thereto and to avoid any recapture on Tax Credits taken in prior years. If RD had foreclosed on its loans and the Partnership lost its interest in such Operating Partnership, the Partnership would not have been entitled to aggregate Tax Credits of $283,136 through 1999, or approximately $142 per 0.05% of Limited Partnership Interest. In addition, assuming that 100% of the Tax Credits previously allocated to the Limited Partners relating to this Operating Partnership were used by them, it is estimated that the Limited Partners would have been subject to a total tax recapture with respect to this Operating Partnership of $115,731, or approximately $58 per 0.05% of Limited Partnership Interest, plus interest and penalties, if any.

               The Partnership has also paid professional fees on behalf of Citrus Terrace relating to the litigation against the former

15

general partner and the takeover and workout of this Operating Partnership in the amount of $57,098. Said payments have been reflected as a note payable to the Partnership on the financial statements of the Operating Partnership. As the repayment of the fees for professional services paid by the Partnership on behalf of Citrus Terrace is subject to its having sufficient cash flow from operations to cover ongoing operating expenses and fund the necessary reserves and RD's approval, there can be no assurance that any such amounts will be recovered by this Operating Partnership.

               The Partnership was made aware that the Internal Revenue Service (the "IRS") audited the 1993 and 1994 income tax returns for one of the Partnership's Operating Partnerships, Flambeau Village, L.P. ("Flambeau Village"), the owner of a 53 unit, mixed income, elderly Project (26 units of low income housing tax credit restricted tenants and 27 units of unrestricted market rate income tenants) located in Ladysmith, Wisconsin.

               Flambeau Village is the Partnership's largest single producer of tax credits with approximately $163,000 in annual tax credits. Accordingly, the Partnership engaged legal and tax counsel and tax credit compliance experts to review the compliance by the Flambeau Village Developer/General Partner with Section 42 of the Internal Revenue Code ("IRC"), meet with the IRS and actively monitor the situation. As a result of a meeting between the professionals engaged by the Partnership and the IRS , the Partnership was informally informed that the IRS had concluded that Flambeau Village had failed to meet the minimum set-aside and rent restriction tests of Section 42 of the IRC and therefore, it had not qualified for and was not entitled Tax Credits for any year. The IRS however did not issued a formal report at the time and its investigation and the Developer/General Partner's negotiations with the IRS continued.

               In view of the above, the Partnership made the decision not to allocate any of the approximately $163,000 of Tax Credits of Flambeau Village for 1996 to its Limited Partners in order to minimize or make a provision for potential recapture, penalties and interest if the IRS ultimately should disallow some or all of the previous allocated Flambeau Village Tax Credits. As no report from the IRS was forthcoming and the Developer/General Partner continued to negotiate with the IRS, the Partnership did allocate the approximately $163,000 of Tax Credits from Flambeau Village for each of 1997 and 1998 to its Limited Partners, although it had not allocated any of the 1996 Tax Credits from Flambeau Village to its Limited Partners.

               Subsequently, in connection with the IRS's criminal investigation of the activities of principals, former officers of or persons related to Flambeau Village's Developer/General Partner, the Partnership learned that one of the Developer/General Partner's principals and former officers pleaded guilty to charges filed by the IRS relating to other activities (not involving the IRS's audit of Flambeau Village's 1993 and 1994 tax returns) and was sentenced to and is serving a two year jail sentence.

               In connection with the actions of the Developer/General Partner with respect to Flambeau Village, the IRS by letter dated September 29, 1999, formally notified Flambeau Village that it had determined that Flambeau Village is not entitled to claim any tax credits for any year that the Project was in existence. Since 1989, the Partnership has received a total of $1,663,311 in Tax Credits in connection with its Limited Partnership interest in Flambeau Village. Of these tax credits, $1,482,898 have been allocated to the Limited Partners of the Partnership.

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               Although there can be no assurance that the IRS will not seek to recapture all of the Tax Credits generated by Flambeau Village, other than for the years 1993 and 1994, the Partnership's counsel believes, after considering the IRS letter which reflects that no adjustments will be proposed by the IRS either at the partnership level or individual partner level for 1993 and 1994, absent a finding of fraud by the IRS with respect to the activities of the Developer/General Partner with respect to Flambeau Village, and the fact that the statute of limitations has run for years prior to 1993, that the IRS will not likely make any adjustment for the Tax Credits allocated by Flambeau Village to the Partnership and by the Partnership to its Limited Partners for the years 1989 through 1994. It is not known what position with respect to adjustments the IRS will take, if any, for the subsequent years, 1995, 1997 and 1998, for which Tax Credits were allocated to and passed through by the Partnership to its Limited Partners. No Tax Credits were passed through by the Partnership for the year 1996 and, in view of the above, the Partnership elected not to pass through Tax Credits allocated by Flambeau Village to it in the amount of $17,727 for the year 1999, which was the last year the Partnership was entitled to tax credits.

               If the IRS takes the subsequent position that adjustments will be proposed at the partnership level, or individual partner level, for the years 1995, 1997 and 1998 (i.e. those years not covered by the IRS's September 29, 1999 letter) or the years prior to 1993 for which Tax Credits were allocated to the Partnership and passed through to its Limited Partners, assuming that 100% of the Tax Credits so allocated to the Limited Partners relating to Flambeau Village were used by the Limited Partners, it is estimated that the Limited Partners would be subject to recapture of Tax Credits with respect to Flambeau Village of an estimated $385,000 or approximately $250 per 0.05% of Limited Partnership Interest, plus interest and penalties, if any.

               As a result of the loss of the 1996 and 1999 Tax Credits not taken by the Partnership in the aggregate amount of $179,142 and the additional costs incurred by the Partnership of $117,815 to have its professionals review the compliance by the Flambeau Village Developer/General Partner with Section 42 of the Internal Revenue Code, meet with the IRS and actively monitor the situation. The Partnership is reviewing the likelihood of successfully pursuing a claim against and attempting to recover compensatory damages for such losses from the Developer/General Partner of Flambeau Village and any affiliate deemed responsible under the terms of Flambeau Village Operating Partnership agreement, the Partnership's Plan and common law. However, in the event a claim is filed there can be no assurance that any amounts will be recovered by the Partnership.

               In connection with its evaluation of the feasibility of pursuing a claim against the Developer/General Partner of Flambeau Village and any affiliate, the Independent Manager had an independent appraisal of the Project performed. The appraisal, dated as of January 4, 2000, showed an appraised value of $1,700,000. As of December 31, 1999, the Project had a mortgage payable of $1,603,455. Accordingly, the Project's appraised value appears to be only $96,545 above the Project's first mortgage loan.

               As the Partnership through its ownership of the limited partnership interests in Flambeau Village already owns a 50% interest in the equity of that Operating Partnership, should that Operating Partnership have a value, after offsetting other assets and other liabilities,

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of the net appraised value over the Project's mortgage or $96,545, the Developer/General Partner's 50% interest in the equity of the Operating Partnership would only be approximately $45,773. Accordingly, the Partnership will not commence an action to attempt to recover the damages the Partnership has suffered as a result of the breaches of the Operating Partnership Agreement by the Developer/General Partner of Flambeau Village, unless the Partnership can first determine the availability of other assets of the Developer/General Partner of Flambeau Village from which a damage award could be satisfied.

               As the repayment of the fees of $117,815 for professional services paid by the Partnership on behalf of Flambeau Village is subject to its having sufficient cash flow from operations to cover ongoing operating expenses and fund the necessary reserves, which this Operating Partnership presently does not have and negotiations with or successful litigation against with the Developer/General Partner of Flambeau Village, there can be no assurance that any such amounts will be recovered by the Partnership.

               The sole operating general partner of three Operating Partnerships, Broadway Terrace of Drew, L.P., Longview Terrace, Ltd. and Pontotoc Ridge, Ltd. located in the state of Mississippi in which the Partnership owns the limited partnership interests, died during the fiscal year ended 3/31/1998. After several months of attempting to sell the deceased Operating General Partner's 5% general partner and 50% equity interests in these three Operating Partnerships, the estate of the deceased Operating General Partner advised the Partnership that it was abandoning its interest in the three Operating Partnerships. Thereupon, Megan Asset Management caused one of its affiliates to be appointed Operating General Partner of the three Operating Partnerships in an attempt to preserve the Partnership's interests therein. Two of the three Operating Partnerships, Broadway Terrace of Drew, L.P. and Pontotoc Ridge, Ltd., had severely underfunded reserves and were delinquent in several years real estate taxes and were subject to possible foreclosure by RD.

               At the time that an affiliate of Megan Asset Management began to manage Broadway Terrace of Drew it had severely under funded reserves and several years of delinquent real estate taxes. Further the Project had an entire building, containing 8 apartments, uninhabitable and unrentable due to severe vandalism, as a result of which RD commenced formal foreclosure proceedings. The Partnership engaged legal counsel on behalf of Broadway Terrace and was successful in stopping the foreclosure proceedings and getting RD to begin working with Megan Asset Management's affiliate to put a workout plan together toward saving the Project owned by this Operating Partnership. A workout plan is in the process of being negotiated and prepared.

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               Although Longview Terrace, Ltd. was not delinquent on its real estate taxes, had the estate of the deceased Operating General Partner simply abandoned its general partnership interest in this Operating Partnership and an affiliate of Megan Asset Management not become the substitute general partner, the Project owned by Longview Terrace would likely have been subject to foreclosure by RD.

               In consideration of an affiliate of Megan Asset Management becoming the Operating General Partner of Longview Terrace, Ltd., RD has not foreclosed on its mortgage and is permitting this Operating Partnership to remain in operation. This permits the Partnership and its Limited Partners to continue to receive the benefit of the Tax Credits related thereto and avoid recapture of previously taken and used Tax Credits.

               In consideration of the Partnership's making a loan of $14,985 in excess of its capital commitment to Pontotoc Ridge , to enable it to pay certain real estate taxes in arrears, RD has not foreclosed on its mortgage to Pontotoc Ridge and is in the process of restructuring its mortgage loan to finance the payment of the balance of the past due real estate taxes and to permit this Operating Partnership to remain in operation. This permits the Partnership and its Limited Partners to continue to receive the benefit of the Tax Credits related thereto and avoid recapture of previously taken and used Tax Credits.

               The Partnership has also paid professional fees on behalf of Broadway Terrace, Longview Terrace and Pontotoc Ridge, relating to the takeover and workout of these Operating Partnerships from the estate of the deceased Operating General Partner and successfully contesting the RD foreclosure proceedings with respect to Broadway Terrace in the amount of $121,674. As the repayment of the fees for professional services paid by the Partnership on behalf of these Operating Partnerships is subject to their having sufficient cash flow from operations to cover ongoing operating expenses and fund the necessary reserves, which these Operating Partnerships do not currently have, and RD's approval, there can be no assurance that any such amounts will be recovered by such Operating Partnerships.

               Pursuant to a syndication agreement dated April 6, 1989 and an Amended and Restated Agreement and Certificate of Limited Partnership of Oak Leaf Partnership, Ltd., dated as of June 13, 1989 and filed June 8, 1990, in the office of the Secretary of State of Mississippi (the "Operating Partnership Agreement"), the Partnership, through its predecessor-in-interest, Clayton Estates Limited Partnership, one of the original 52 Debtor Investor Partnerships, acquired the sole limited partnership interest in Oak Leaf Partnership, Ltd. which was to own Purdy Apartments a 16 unit, scattered site (having buildings at more than one physical location), Project in Jackson, Mississippi. Purdy Apartments were awarded $134,980 of low income housing tax credits by the Mississippi Home Corporation on December 30, 1988. In accordance with the Operating Partnership Agreement and the Plan, the Partnership paid the Operating Partnership capital contributions totaling $62,090.

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               The Partnership, including its predecessor-in-interest, was allocated Tax Credits and losses from 1989 through 1996. During the fiscal year ending March 31, 1996, the Partnership learned that Oak Leaf Partnership, Ltd. was not registered as a limited partnership with the Mississippi Secretary of State; that title to the various scattered sites was in the name of Paul W. Purdy, the general partner of Oak Leaf Partnership, Ltd. and not in the name of this Operating Partnership; a physical inspection revealed one of the lots on which one of the apartment buildings was to be located, did not exist; and that Paul W. Purdy had apparently sold the same ownership interest in Tax Credits and losses which he had sold to the Partnership to another, third-party limited partnership.

               Accordingly, by a Complaint for Damages and Injunctive Relief, filed in or about March, 1997, the Partnership commenced a lawsuit against Paul W. Purdy and Purdy Apartments Limited Partnership, in the Chancery Court of The First Judicial District of Hinds County, Mississippi.

               Subsequently, during the prosecution of the lawsuit, the Partnership confirmed what it had learned as a result of its investigation and further that defendant Paul W. Purdy was in ill-health and had no assets. After evaluating all of the findings and conferring with legal and tax counsel, the Partnership determined that it was not economically feasible to continue to pursue the lawsuit and the Partnership abandoned its recovery efforts and abandoned its interest in the Oak Leaf project.

               As a result of the foregoing, the Partnership lost its interest in this Operating Partnership, and the Partnership did not receive aggregate Tax Credits of $25,646 for 1997 and 1998, or approximately $13 per 0.05% of Limited Partnership Interest which it was entitled to receive. In addition, in view of the foregoing, the Partnership recaptured $40,156 in Tax Credits in 1997, along with $18,098 interest by passing both through to the Limited Partners on their 1997 Schedule K-1..

               The Partnership has also paid professional fees on behalf of Oak Leaf Partnership, Ltd relating to its investigation and the litigation against the former general partner of this Operating Partnership in the amount of $12,890. Said payments have been written-off by the Partnership as uncollectible.

               See discussion of applicable legal proceedings above in "Item 2. Properties" above.

               As discussed in Item 2 . Properties, above, a claim was filed against the Partnership for $55,545 by the defendants in the Mercurio litigation for reimbursement of their costs and attorneys' fees. The Partnership and counsel to the Partnership do not believe the Partnership is obligated for defendants' costs and attorneys' fees and are defending against such claim by defendants. While there can be no assurance that the Partnership's defense of this claim will be successful, an award in favor of defendants on this claim will not materially affect the financial ability of the Partnership to continue its operations.

20

               None.