WNC HOUSING TAX CREDIT FUND V LP SERIES 3
POS AM, 1997-03-25
OPERATORS OF APARTMENT BUILDINGS
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 As filed with the Securities and Exchange Commission on March 25, 1997
                                                      Registration No. 33-91136
    

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                         POST-EFFECTIVE AMENDMENT NO. 6
                                       TO
                                    FORM S-11
                             REGISTRATION STATEMENT
                                      Under
                           THE SECURITIES ACT OF 1933
    

                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
       (Exact names of registrants as specified in governing instruments)

                         3158 Redhill Avenue, Suite 120
                        Costa Mesa, California 92626-3416
                                 (714) 662-5565
                    (Address of principal executive offices)

                              DAVID N. SHAFER, ESQ.
                             WNC & ASSOCIATES, INC.
                         3158 Redhill Avenue, Suite 120
                        Costa Mesa, California 92626-3416
                                 (714) 662-5565
                     (Name and address of agent for service)


                                    Copy to:
                            PAUL G. DANNHAUSER, ESQ.
                             Derenthal & Dannhauser
                          455 Market Street, Suite 1600
                         San Francisco, California 94105
                                 (415) 243-8070

        Approximate date of commencement of proposed sale to the public:
   As soon as practicable after this Registration Statement becomes effective.



wncnat5-24/11.rs

<PAGE>

         Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K

    Registration Item                       Location in Prospectus

 1. Forepart of Registration                Front Cover Page
    Statement and Outside
    Front Cover Page of
    Prospectus

 2. Inside Front and Outside                Cover Pages
    Back Cover Pages of
    Prospectus

 3. Summary Information,                    Summary of the Offering;
    Risk Factors and Ratio                  Risk Factors
    of Earnings to Fixed
    Charges

 4. Determination of Offering               Inapplicable
    Price

 5. Dilution                                Inapplicable

 6. Selling Security Holders                None

 7. Plan of Distribution                    Cover Pages; Terms of the Offering
                                            and Plan of Distribution;
                                            Estimated Use of Proceeds;
                                            Management Compensation; Summary
                                            of the Offering; Supplement (Plan
                                            of Distribution)

 8. Use of Proceeds                         Estimated Use of Proceeds;
                                            Management Compensation;
                                            Investment Objectives and
                                            Policies; Summary of Certain
                                            Provisions of the Partnership
                                            Agreement

 9. Selected Financial Data                 Inapplicable

10. Management's Discussion                 Management's Discussion and
    and Analysis of Financial               Analysis of Financial
    Condition and Results of                Condition; Supplement
    Operations                              (Management's Discussion and
                                            Analysis of Financial
                                            Condition and Results of
                                            Operations)

11. General Information as to               Cover Page; Summary of the
    Registrants                             Offering; Management; Summary of
                                            Certain Provisions of the
                                            Partnership Agreement


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<PAGE>

12. Policy with Respect to                  Investment Objectives and
    Certain Activities                      Policies; Reports

13. Investment Policies of                  Investment Objectives and
    Registrants                             Policies; Supplement (Local
                                            Limited Partnership Investments)

14. Description of Real Estate              Supplement (Local Limited
                                            Partnership Investments)

15. Operating Data                          Supplement (Local Limited
                                            Partnership Investments)

16. Tax Treatment of Registrants            Federal Income Tax Considerations;
    and Their Security Holders              The Low Income Housing Credit

17. Market Price of and                     Inapplicable
    Dividends on the Registrants'
    Common Equity and
    Related Stockholder Matters

18. Description of Registrants'             Terms of the Offering and Plan of
    Securities                              Distribution; Summary of Certain
                                            Provisions of the Partnership
                                            Agreement; Transferability of
                                            Units; Who Should Invest; Risk
                                            Factors

19. Legal Proceedings                       None

20. Security Ownership of                   Management; Financial Statements
    Certain Beneficial Owners
    and Management

21. Directors and Executive                 Management; Supplement
    Officers                                (Management)

22. Executive Compensation                  Management Compensation; Estimated
                                            Use of Proceeds

23. Certain Relationships and               Management; Conflicts of Interest;
    Related Transactions                    Investment Objectives and Policies

24. Selection, Management                   Management; Investment Objectives
    and Custody of Registrants'             and Policies; Management Compensa-
    Investments                             tion; Conflicts of Interest;
 
25. Policies with Respect                   Conflicts of Interest; Investment
    to Certain Transactions                 Objectives and Policies



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<PAGE>

26. Limitations of Liability                Fiduciary Responsibility; Terms of
                                            the Offering and Plan of
                                            Distribution

27. Financial Statements and                Financial Statements; Supplement
    Information                             (Financial Statements)

28. Interests of Named Experts              None
    and Counsel

29. Disclosure of Commission                Fiduciary Responsibility; Terms
    Position on Indemnification             of the Offering and Plan of
    for Securities Act Liabilities          Distribution

wncnat5-24/11.rs


<PAGE>

         The Fund is now  offering  Units in Series 4. Series 3 and Series 4 are
distinct  limited  partnerships and investors in Series 4 will have no rights or
interests  in Series  3.  Prospective  investors  should  note  that  disclosure
respecting  Series  4 is  included  in the  Prospectus,  to which  this  sticker
supplement is appended, and the Supplement(s) which follows the Prospectus.

         The Supplement(s)  which follows the Prospectus  includes the following
items:

     - financial  statements for Series 4 and updated financial  information and
prior performance information for the Sponsor

     -  a  description  of  Local  Limited  Partnership  Interests  acquired  or
identified for acquisition by Series 4

     - other important information which modifies or supplements the information
included in the Prospectus



wncnat5-24/02.ss


<PAGE>



                        WNC HOUSING TAX CREDIT FUND V, L.P.,
                                      SERIES 3
     A Minimum of $1,400,000 in Units of Limited Partnership Interest ("Units")
                                (Issuable in Series)
               $1,000 Per Unit; Minimum Investment - 5 Units ($5,000)

    WNC Housing Tax Credit Fund V, L.P., Series 3 and Series 4 ("Fund") will use
the proceeds from this offering to invest in other limited  partnerships ("Local
Limited  Partnerships") which own apartment complexes built or rehabilitated for
persons with low incomes  ("Apartment  Complexes").  Federal tax law  encourages
investments  in  qualifying  low-income  properties  by providing tax credits to
investors in Apartment  Complexes ("Low Income Housing Credits").  The Fund will
pass through to its investors 99% of the Low Income Housing  Credits to which it
is entitled, and the investors can apply them to reduce their own Federal income
tax  liabilities.  Investors  may also  receive  tax losses that they can use to
offset  certain types of taxable  income which they may have from other sources.
When the Apartment Complexes are sold, the Fund will distribute any net proceeds
which it receives.  Approximately  75% of the Fund's capital will be invested in
Local Limited Partnerships, and approximately 14.5% will be used to pay fees to,
or expenses of, WNC &  Associates,  Inc.  ("Fund  Manager")  and its  affiliated
companies ("Affiliates").

    An  investment  in the  Fund  will  involve  significant  risks  (see  "Risk
Factors"), including the following:

- - The rules relating to Low Income Housing Credits are complicated and the usage
of Low Income Housing Credits can be limited.

- - The only  material  benefit  from the  investment  may be Low  Income  Housing
Credits which may mean that a material portion of each Low Income Housing Credit
may represent a return of the money originally invested in the Fund if there are
insufficient  funds from the sale of the Apartment  Complexes to return investor
capital.  

- - There are limits on the  transferability of the Units, and it is unlikely that
a market for Units will develop.

- - All management decisions will be made solely by the Fund Manager. 

- - The Apartment Complexes will be subject to mortgage  indebtedness.  If a Local
Limited  Partnership  does not make its  mortgage  payments,  the  lender  could
foreclose  on the  Apartment  Complex,  which  would  result  in a  loss  of the
Apartment Complex and a portion of the Low Income Housing Credits, and a portion
of an investor's investment.

- - To the  extent  the Fund does not raise  much  capital,  there will be limited
diversity of Apartment Complexes.

- - The Fund Manager will receive significant  benefits regardless of how well the
Fund performs.

<TABLE>

                                    Price to                      Selling Commissions and
                                    Public (1)                    Dealer-Manager Fee (2)               Proceeds to Fund (3)
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                           <C>                                  <C>                        
Per Unit (4)..............          $        1,000                $          85                        $          915
Total Minimum (5).....                   1,400,000                      119,000                             1,281,000
Total Maximum (5)....                   50,000,000                    4,250,000                            45,750,000

<FN>
(1) The  Units are being  offered,  in two  series  ("Series"),  by WNC  Capital
Corporation ("DealerManager"), which in turn is offering the Units through other
broker-dealers  who  are  members  of the  National  Association  of  Securities
Dealers,  Inc.  ("Soliciting  Dealers").  The Units are being offered on a "best
efforts"  basis,  which  means that no one is  guaranteeing  that any  specified
amount of capital will be raised.
                                                      (Footnotes   continued  on
page 2)

                    The date of this Prospectus is July 26, 1995
    WNC Housing  Tax Credit  Fund V, L.P.,  Series 3 and Series 4 are not mutual
    funds or any other type of  investment  companies  within the meaning of the
    Investment Company Act of 1940 and are not subject to regulation thereunder.


<PAGE>

(Footnotes from cover page)

(2) The  Dealer-Manager  will receive up to 8.5% of the  purchase  price of each
Unit  sold  and may  then  reallow  to  Soliciting  Dealers  as  retail  selling
commissions up to 7.5% of the purchase price of each Unit sold. For  information
concerning   compensation   payable   by  the  Fund  for   sales  of  Units  and
indemnification   arrangements,   see  "Terms  of  the   Offering  and  Plan  of
Distribution." As is also discussed in that section of this Prospectus,  selling
commissions may be reduced for purchases of 100 Units  ($100,000) or more by any
"Purchaser" and  "Designated  Investors" may purchase Units with a reduced or no
selling commission. For the purposes of this table, it has been assumed that the
maximum selling commissions will be paid.

(3) Before deducting  expenses of the offering of Units ("Offering") in addition
to the retail selling  commissions  and  Dealer-Manager  Fee. As discussed below
under "Estimated Use of Proceeds,"  "Management  Compensation" and "Terms of the
Offering and Plan of  Distribution,"  these  additional  expenses,  in an amount
which is estimated to range  between  $70,000 if only  $1,400,000  is raised and
$2,500,000  if  all  of  the  Units  are  sold,  will  include  accountable  and
nonaccountable expense reimbursements.

(4)  Regardless of the Series in which Units are purchased the purchase price is
payable in cash at the time of subscription  except in the case of subscriptions
for 10 Units ($10,000) or more in any one Series,  which may be paid 50% in cash
upon subscription and 50% by a promissory note payable,  together with interest,
in a single  installment  on (i)  March 31,  1996,  if the  investor  subscribes
between the date hereof and  December 31,  1995,  (ii) January 31, 1997,  if the
investor subscribes between January 1, 1996 and June 1, 1996, or (iii) the later
of the date of subscription or June 30, 1997, if the investor  subscribes  after
June 1, 1996.

(5) The Fund has registered with the Securities and Exchange  Commission a total
of 50,000  Units for sale to the  public.  Units will be offered in two  Series;
each Series will consist of 25,000 Units.  The Offering of Series 3 commenced on
the date of this Prospectus; the Offering of Series 4 will commence on a date to
be identified in a supplement hereto.  Unless a minimum of $1,400,000 in cash is
received  by the  Fund  with  respect  to a  Series  within  one  year  from the
commencement  of such  Series,  no Units  in such  Series  will be  sold.  Money
received  from  investors  will be deposited in an escrow  account with National
Bank of Southern California,  and, if the required minimum amount of cash is not
received, will be returned within 30 days, together with interest. See "Terms of
the Offering and Plan of Distribution."
</FN>
</TABLE>

    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

    THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED.  ANY REPRESENTATIONS TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY
OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE  WHICH MAY FLOW FROM AN
INVESTMENT IN THIS PROGRAM IS NOT PERMITTED.

                                          2

<PAGE>



                                 TABLE OF CONTENTS


SUMMARY OF THE OFFERING..................................................... 10
    Risk Factors............................................................ 10
    Who Should Invest; Limitations on Use of Credits and Losses............. 11
    Estimated Use of Proceeds............................................... 12
    Management Compensation................................................. 12
    Conflicts of Interest................................................... 14
    Fiduciary Responsibility................................................ 14
    Investment Objectives and Policies...................................... 15
    Investment Protection Policies.......................................... 16
    The Low Income Housing Tax Credit....................................... 17
    Management.............................................................. 18
    Prior Performance Summary............................................... 19
    Federal Income Tax Considerations....................................... 19
    Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions. 19
    Summary of Certain Provisions of the Partnership Agreement.............. 20
    Transferability of Units................................................ 21
    Terms of the Offering and Plan of Distribution.......................... 21
    Glossary................................................................ 23
    Financial Statements.................................................... 23
 FACTORS.................................................................... 23
   Risks Related to Tax Credits............................................. 23
     Uncertainties as to Availability of Low Income Housing Credits......... 23
     Possible Recapture of Low Income Housing Credits....................... 24
     Limitations on Sales of Apartment Complexes............................ 24
     Limitations on Use of Tax Credits...................................... 24
     Availability and Recapture of Historic Tax Credits..................... 25
   Investment Risks......................................................... 25
     Risks of Government-Subsidized Housing Projects........................ 25
     Keen Competition for Investments....................................... 27
     Risks of Apartment Complexes Without Financing or Operating
         Subsidies.......................................................... 27
     Risks of Low-Income Housing............................................ 28
     Risk of Unspecified Investments........................................ 28
     Risks Associated with Use of Leverage.................................. 28
     Risks of Limited Diversification....................................... 29
     Lack of Fund Control; Reliance on Local General Partners............... 30
     Net Worth of Local General Partners.................................... 30
     Risks of Real Estate Ownership......................................... 30
     Risks of Purchase of Properties Under Construction..................... 30
     Risks of "Two-Tier" Investment Structure............................... 31
                                       3

<PAGE>



     Risks of Investments Prior to the Sale of Units........................ 31
     Risks of Loss of Loans Made to Local Limited Partnerships.............. 31
     Risks of Possible Investment in "Workout" Projects..................... 32
     Risks of Joint Investments............................................. 32
     Possibility of Uninsured Losses........................................ 32
     Possible Loss on Dissolution and Termination........................... 32
    Other Tax Risks......................................................... 32
     No Opinion of Counsel as to Certain Matters............................ 33
     No Ruling as to Tax Status of the Series and Local Limited Partnerships 34
     Limitation on Losses from Passive Activities........................... 34
     Applicability of At Risk Rules......................................... 35
     Tax Liability on Sale of Apartment Complex............................. 35
     Alternative Minimum Tax Liability...................................... 35
     Possibility of Audit................................................... 35
     Possibility of Challenge to Tax Allocations of the Series and the Local
         Limited Partnerships............................................... 36
     Possible Tax Liabilities in Later Years................................ 36
     Possibility of Challenge to Tax Treatment of Certain Expenditures...... 37
     Changes in Tax Law Which Might Affect the Value of Tax Credits......... 37
     Possible Administrative or Judicial Interpretations of the Law......... 37
     State Income Tax Risks................................................. 37
    Fund-Related Risks...................................................... 38
     Lack of Liquidity of Investment........................................ 38
     Lack of Unitholder Control; Reliance on Fund Manager................... 38
     Risks Related to Exercise of Unitholder Voting Rights.................. 38
     Limitations on Fund Manager's Liability................................ 38
     Issuance of Units in Series............................................ 39
     Obligations for Capital Contributions.................................. 39
     Risks of Unitholder Liability.......................................... 40
     Absence of Regulation.................................................. 40
     Possible Delays in Obtaining Financial Data............................ 40
     Lack of Operating History.............................................. 40

WHO SHOULD INVEST;
LIMITATIONS ON USE OF CREDITS AND LOSSES.................................... 41
    All Investors........................................................... 41
    Individual Investors.................................................... 42
    Corporate and Other Entity Investors.................................... 43
    Minimum State Suitability Requirements.................................. 45
     Alabama, Arizona, Arkansas, Indiana, Kentucky, Michigan, Minnesota,
         Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, North
         Carolina, Oklahoma, Oregon, Tennessee, Texas, Vermont, Virginia and
         Wisconsin Requirements............................................. 46

                                       4

<PAGE>



     Alaska, Colorado, Connecticut, Delaware, District of Columbia, Florida,
         Georgia, Hawaii, Idaho, Illinois, Kansas, Louisiana, Maryland,
         Montana, Nevada, New Jersey, North Dakota, Rhode Island, South
         Carolina, Utah, West Virginia and Wyoming.......................... 46
     California and Washington Requirements................................. 46
     Iowa and Massachusetts Requirements.................................... 46
     Maine Requirements..................................................... 46
     Ohio Requirements...................................................... 46
     Pennsylvania Requirements.............................................. 46

ESTIMATED USE OF PROCEEDS................................................... 47
    Deferred Installments................................................... 49
     Business Development Plan.............................................. 50
     Prepayments and Temporary Investments.................................. 52
     Policies as to Pledges of Promissory Notes............................. 52

MANAGEMENT COMPENSATION..................................................... 52

CONFLICTS OF INTEREST....................................................... 59
    Receipt of Fees and Other Compensation by the Fund Manager and its
     Affiliates............................................................. 59
    Other Business Activities of the Fund Manager and its Affiliates........ 60
    Competition with the Fund Manager and its Affiliates with Respect to the
     Purchase or Ownership of Properties.................................... 61
    Other Transactions with Developers, Local General Partners, Lenders and
     Joint Venturers........................................................ 62
    Representation in Tax Audit Proceedings................................. 62
    Distribution of Units................................................... 62
    Joint Investments....................................................... 62
    Resolution of Conflicts of Interest..................................... 63
    Lack of Separate Representation......................................... 63
    Organizational Diagram.................................................. 63

FIDUCIARY RESPONSIBILITY.................................................... 64

INVESTMENT OBJECTIVES AND POLICIES...........................................66
    Principal Investment Objectives..........................................66
    Investment Policies..................................................... 69
     Investment Criteria.................................................... 69
     Eligibility for Low Income Housing Credits............................. 71
     Historic Tax Credits................................................... 71
     Types of Properties.................................................... 71
     Location of Properties................................................. 72
     Number of Investments.................................................. 72

                                       5

<PAGE>



     Timing of Investments.................................................. 73
     Payment for Investments................................................ 74
    The Local General Partners.............................................. 75
     Financial Condition and Experience of Local General Partners........... 75
     Compensation of Local General Partners................................. 76
     Withdrawal of Local General Partners................................... 76
    Terms of the Local Limited Partnership Agreements....................... 76
     Development Obligation................................................. 76
     Operating Guarantees................................................... 77
     Protection Against Reduction or Loss of Tax Credits.................... 77
     Rights of Limited Partner.............................................. 78
     Role of SLP Affiliate.................................................. 79
     Interests in Profits, Losses and Distributions......................... 79
    Joint Investments....................................................... 80
    Use of Leverage......................................................... 80
    Sale or Other Disposition of Investments................................ 81
    Reserves................................................................ 83
    Other Policies.......................................................... 84

THE LOW INCOME HOUSING CREDIT............................................... 85
    Summary................................................................. 85
    Maximum Amount of Credit................................................ 88
    Qualified Properties.................................................... 90
    Credits Subject to State Allocation..................................... 93
    Utilization of the Low Income Housing Credit............................ 96
    Recapture of Low Income Housing Credits................................. 97
    State Low Income Housing Credits........................................100

OTHER GOVERNMENT ASSISTANCE PROGRAMS........................................100
    RECDS Financing and Rural Rental Assistance Programs....................100
    HOME Program............................................................102
    State and Local Bond Programs...........................................103
    HUD Section 8 Rental Assistance Programs................................105

MANAGEMENT..................................................................106
    The Fund Manager........................................................106
     Statement of Purpose...................................................110
     Syndicated Partnerships................................................111
    Change in Management....................................................112
    WNC Capital Corporation.................................................112


                                       6

<PAGE>



PRIOR PERFORMANCE SUMMARY...................................................113
    Public Programs Sponsored...............................................115
    Private Programs Sponsored..............................................118
    Additional Information..................................................122

FEDERAL INCOME TAX CONSIDERATIONS...........................................122
    Introduction............................................................122
    Summary.................................................................123
     Opinion of Counsel.....................................................123
     Classification as a Partnership........................................123
     Tax Treatment of Unitholders...........................................123
     Historic Tax Credits and Recapture.....................................124
     Fund Allocations.......................................................124
     Fund Deductions........................................................124
     Sale of Apartment Complexes............................................124
     Treatment of Debt......................................................125
     Transfers of Units.....................................................125
     Liquidation............................................................125
     Section 754 Election...................................................125
     Other Considerations...................................................125
    Opinion of Counsel......................................................125
    Classification as a Partnership.........................................128
    Investment in Local Limited Partnerships................................130
    Tax Treatment of Unitholders............................................132
    Limitations on Losses and Credits from Passive Activities...............134
     A.  General Limitations................................................134
     B.  Exception for Low Income Housing Credits and Historic Tax Credits..135
         1.       Individuals...............................................135
         2.       Other Investors...........................................138
     C. Exception for Real Property Businesses..............................139
    Historic Tax Credit.....................................................141
    Historic Tax Credit Recapture...........................................142
    General Business Tax Credit Limitations.................................142
    Tax Basis for the Units.................................................143
    Application of At Risk Limitations......................................144
    Fund Allocations........................................................145
    Allocations Prior to Admission..........................................149
    Basis of Local Limited Partnerships in Their Apartment Complexes........149
    Depreciation............................................................150
    Deductibility of Fees...................................................151
     A.           Development Fees and Acquisition Fees.....................151
     B.           Management Fees...........................................152
    Organization and Offering Expenses......................................152
    Start-Up Expenditures...................................................153

                                       7

<PAGE>



    Sales or Exchanges of Local Limited Partnership Property; Depreciation
     Recapture..............................................................153
    Tax Liabilities in Later Years..........................................155
    Treatment of Mortgage Loans.............................................155
    Sales or Exchanges of Units and Local Limited Partnership Interests;
     Transfers by Gift or at Death..........................................156
    Dissolution and Liquidation of a Series or Local Limited Partnership....157
    Elections...............................................................157
    Transferability - Termination of a Series...............................158
    Profit Motive...........................................................158
    Other Important Tax Considerations......................................159
     A.           Tax Rates.................................................159
     B.  Alternative Minimum Tax............................................161
     C.  Deduction of Investment Interest...................................163
    Tax Returns and Tax Information.........................................163
     A.           Audit and Assessment Procedure............................163
     B.           Imposition of Penalties...................................164
         Document and Information Return Penalties..........................164
         Accuracy-Related and Fraud Penalties...............................165
    Tax Shelter Registration................................................165
    Changes in Tax Law......................................................166

STATE AND LOCAL TAX CONSIDERATIONS..........................................167

PROFITS AND LOSSES FOR TAX PURPOSES,
TAX CREDITS AND CASH DISTRIBUTIONS..........................................167
    Cash Available for Distribution.........................................168
    Sale or Refinancing Proceeds............................................168
    Allocations of Profits and Losses for Tax Purposes and Tax Credits......169
    Determination of Distributions and Allocations Among Unitholders........172

SUMMARY OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT.......................................................172
    Default by Unitholder in Payment of the Deferred Capital Contribution...172
    Liability of Unitholders to Third Parties...............................173
    Dissolution and Liquidation.............................................174
    Removal of Fund Manager.................................................174
    Voting Rights...........................................................175
    Meetings................................................................176
    Books and Records.......................................................176

TRANSFERABILITY OF UNITS....................................................177
    Transfer of Units by or to California Residents.........................178


                                       8

<PAGE>



REPORTS.....................................................................179

TERMS OF THE OFFERING AND PLAN OF DISTRIBUTION..............................180
    Issuance of Units in Series.............................................180
    Underwriting Arrangements...............................................180
    Volume Discounts........................................................182
    Purchases by Affiliates and Designated Investors........................183
    How To Subscribe........................................................184
    Escrow Arrangements.....................................................185

SALES MATERIAL..............................................................186

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION......................................................187

LEGAL MATTERS...............................................................188

EXPERTS.....................................................................189

FURTHER INFORMATION.........................................................189

GLOSSARY....................................................................189

Financial Statements.......................................................FS-1
Exhibit A - Prior Performance Tables....................................... A-1
Exhibit B - Partnership Agreement.......................................... B-1
Exhibit C - Subscription Agreement......................................... C-1

                                         9

<PAGE>



                              SUMMARY OF THE OFFERING

THIS  SUMMARY  OUTLINES  THE MAIN POINTS OF THE  OFFERING BUT DOES NOT REPLACE A
FULL AND CAREFUL READING OF THIS PROSPECTUS AND IS QUALIFIED BY THE REMAINDER OF
THE  PROSPECTUS.  ALL PROSPECTIVE  INVESTORS  SHOULD READ THIS PROSPECTUS IN ITS
ENTIRETY.  REFERENCE  IS  MADE  TO THE  "GLOSSARY"  APPEARING  AT THE END OF THE
PROSPECTUS FOR A DEFINITION OF TERMS.

Risk Factors

    An investment in the Fund will involve significant risks. The "Risk Factors"
section of this Prospectus  contains a detailed discussion of the most important
risks, organized into "Risks Related to Tax Credits" (the risks arising from the
laws  applicable  to Tax  Credits  as they apply to each  Series'  investments),
"Investment  Risks" (the risks of the types of  investments in real estate which
each Series will make),  "Other Tax Risks" (the risks relating to tax laws other
than  those  applicable  to Tax  Credits  as they  apply to each  Series and its
investments)  and  "Fund-Related  Risks" (the risks  related to  investment in a
limited   partnership  and  to  the  provisions  of  the  agreement  of  limited
partnership  ("Partnership  Agreement")  of the  Fund).  Please  refer  to those
sections of the Prospectus for a discussion of:

    - Risks Related to Tax Credits:

    * The laws and rules  authorizing and  administering  the Low Income Housing
Credits are  extremely  complicated.  The failure to comply with these rules for
the 15-year period after Low Income Housing Credits are first taken would result
in the loss of future Low Income Housing Credits and the fractional recapture of
all or a portion of Low Income Housing Credits already taken.

    *    Generally, individual investors are limited in their ability to use Tax
Credits.  (See "Who Should Invest; Limitations on Use of Credits and Losses"
below.)

    * The  Local  Limited  Partnerships  may be  unable  to sell  the  Apartment
Complexes;  accordingly, there may be no cash to distribute and the only benefit
from the  investment  may be Tax Credits.  If so, a material  portion of the Tax
Credits may represent a return of the money originally invested in the Fund.

    - Investment Risks:

    *  Except  as set  forth  in a  supplement  to  this  Prospectus,  Apartment
Complexes suitable for investment have not yet been located and each Series will

                                        10

<PAGE>



be competing with other prospective purchasers for such properties.  Unless more
than the minimum proceeds for a Series are raised,  the Series' portfolio may be
subject to limited diversification.

    *  Each  Apartment   Complex  will  be  subject  to   substantial   mortgage
indebtedness.  If a Local Limited  Partnership failed to timely pay its mortgage
it could lose its Apartment Complex in foreclosure;  foreclosure would result in
a loss of future Low Income Housing Credits (if the foreclosure  occurred during
the first 10 years) and the Series' investment in the Apartment Complex,  and in
a  fractional  recapture  of a portion of  previously  taken Tax Credits (if the
foreclosure occurred during the first 15 years).

    * As a limited partner of the Local Limited  Partnerships,  each Series will
have very  limited  rights  with  respect  to  management  of the Local  Limited
Partnerships, and will rely totally on the general partners of the Local Limited
Partnerships for management of the Local Limited Partnerships.

    - Other Tax Risks:

    * The risk that Tax Credits will not be  available  to  investors  because a
Series or a Local Limited  Partnership does not qualify as a partnership for tax
purposes.

    * The Internal Revenue Service ("IRS") may audit a Series or a Local Limited
Partnership  and challenge  the tax  treatment of various tax items;  if the IRS
challenge is  successful,  the amount of Tax Credits  allocated to the investors
could be reduced.

    - Fund-Related Risks:

    * There is no  trading  market  for the  Units and it is  unlikely  that any
market will develop. Accordingly,  investors may not be able to sell their Units
promptly and should consider their Units to be a long-term investment.

    * Risks of reliance on the Fund Manager,  which will exercise all management
rights of each Series without the participation or control of the investors.

Who Should Invest; Limitations on Use of Credits and Losses

    Individuals  should only  invest in the Fund if they expect to have  Federal
income tax  liabilities  against  which the Tax Credits can be applied.  In most
cases,  the amount of Tax Credits that can be used by an  individual  in any one
year is limited  to the tax  liability  due on the  investor's  last  $25,000 of
taxable income.  For example,  an investor in the 36% Federal tax bracket may be
able to use up to a

                                        11

<PAGE>



maximum  annual  amount of  $9,000  in Tax  Credits  ($25,000  x 36% =  $9,000).
Individuals should also recognize the following:

     - Tax Credits cannot be used to reduce the Federal alternative minimum tax.

   -  Generally,  the  ability to use the  passive tax losses that the Fund will
generate is limited to reducing  passive  taxable  income (not wages,  salaries,
dividends and interest).

    An investment in Units cannot be made by an IRA,  Keogh or other  retirement
plan.

    Closely held and personal  service  corporations are subject to other limits
on the use of Tax Credits.  With regard to other  corporations,  generally there
are no special  limitations on the ability to utilize Tax Credits or passive tax
losses,  except that Tax Credits cannot be used to reduce corporate  alternative
minimum tax and the general limitations on business tax credits are applicable.

    The section of the Prospectus  entitled "Who Should  Invest;  Limitations on
Use of Credits and Losses" contains a detailed  explanation of these limitations
for each category of investor, including the rules applicable to investors other
than individuals (including closely-held and widely-held  corporations and other
entities).  Prospective investors are urged to read the portions of that section
applicable to them very carefully,  together with the sections of the Prospectus
entitled "Federal Income Tax  Considerations - Limitations on Losses and Credits
from Passive  Activities," "- General Business Tax Credit  Limitations,"  and "-
Other Important Tax Considerations - Alternative Minimum Tax."

Estimated Use of Proceeds

    Of the  capital  raised  by the Fund,  approximately  75% will  actually  be
invested  in Local  Limited  Partnerships,  3% will be held in  working  capital
Reserves (i.e.,  amounts set aside for contingencies  related to the investments
in Apartment Complexes and to pay administrative  expenses,  to the extent other
funds are not available to do so), and the rest will go to pay fees and expenses
to the Fund Manager,  its Affiliates and others. See "Estimated Use of Proceeds"
for a precise  breakdown of the Fund's  estimate as to the use of the capital it
raises.

Management Compensation

    The Fund Manager will manage the business of each Series,  and the Fund will
pay the Fund  Manager and its  Affiliates  compensation  for various  management
services. The section of this Prospectus entitled "Management Compensation"

                                        12

<PAGE>



details the exact terms of each item of compensation  payable to these companies
by the Fund, of which the following are the most significant:

   - The  Dealer-Manager  will receive a  Dealer-Manager  Fee of up to 1% of the
capital raised by the Fund and selling  commissions of up to 7.5% of the capital
raised.

   - Of the  capital  raised  by the  Fund,  up to 7.5% will be paid to the Fund
Manager as Acquisition Fees. The Dealer-Manager will receive a 1% Nonaccountable
Expense Reimbursement and the Fund Manager and its Affiliates will be reimbursed
for the actual amount of other  "Organizational  and Offering  Expenses"  (i.e.,
expenses in  connection  with the  formation  of each Series and the sale of the
Units) and any "Acquisition  Expenses" (i.e.,  expenses related to the selection
and  acquisition  of Local Limited  Partnership  Interests)  incurred by them on
behalf of the Fund.

   - The Fund  Manager  will be  entitled  to receive  from each Series an Asset
Management  Fee each year equal to the greater of (i) $2,000 for each  Apartment
Complex  invested  in by the Series or (ii)  0.275% of gross  proceeds  from the
Series'  Offering.  In  either  case,  the fee will be  increased  or  decreased
annually based on changes to the Consumer Price Index.  However, the maximum fee
may   not   exceed   0.2%   of   the   "Invested   Assets"   of  the   Fund   in
government-subsidized  Local Limited  Partnerships  (i.e., the sum of the equity
invested  by the Series in such  Local  Limited  Partnerships  plus its pro rata
share of the mortgage debt encumbering their Apartment  Complexes).  The maximum
annual  amount  payable  (before  adjustment  for changes in the Consumer  Price
Index) would be $2,000 per Apartment Complex or $137,500.

   - The Fund Manager will receive from each Series 1% of the Tax Credits and of
any cash  distributions from on-going  operations made by the Series.  After the
investors  in the Series have  received  distributions  of "Sale or  Refinancing
Proceeds" (i.e.,  generally,  the net proceeds that the Series receives from the
liquidation of its investments,  after payment of related expenses) equal to the
purchase  price of their Units and an amount equal to the portion of the "Return
on  Investment"  not  previously  received,  the  Fund  Manager  may  receive  a
Subordinated  Disposition  Fee  equal  to 1% of the  sales  price  of  Apartment
Complexes  and the Fund  Manager  will  receive  10% of any  additional  Sale or
Refinancing  Proceeds.  The Return on  Investment  (any cash portion of which is
payable only after all current and accrued  Series'  fees and  expenses) is paid
from both cash  distributions and Tax Credits and is equal to 14% of "unreturned
capital"  (i.e.,  the  capital  contribution  originally  paid for a Unit,  less
distributions of Sale or Refinancing  Proceeds) each year through 2006 and 6% of
unreturned capital each year thereafter.  The amount of the Return on Investment
for Series 4 may be different

                                        13

<PAGE>



and, if so, will be  identified  in a  supplement  to this  Prospectus  prior to
commencement of the offering of Units in such Series.

    There are a number of other, smaller items of compensation and expense
reimbursement that the Fund Manager and its Affiliates may receive during the
operations of the Fund.  See "Management Compensation."

Conflicts of Interest

    The Fund Manager and its  Affiliates  will have conflicts of interest in the
organization and management of the Fund. The "Conflicts of Interest"  section of
the  Prospectus  contains a discussion of the most important  conflicts.  Please
refer to that section of the Prospectus for a discussion of:

    * The  compensation to be paid to the Fund Manager and its Affiliates is not
the result of arm's-length negotiations, and will be determined by the manner in
which Series'  investments  are purchased,  managed and sold. The result of this
conflict could be that a Series may make investments which are less desirable to
the investors but more desirable to the Fund Manager and its Affiliates, or that
a Series may retain an investment, thereby incurring management fees to the Fund
Manager at a time when a sale of the investment could generate  distributions to
its investors.

    *  Conflicts  may arise in that the Fund  Manager  and its  Affiliates  must
allocate  their time and energies  between the activities of each Series and the
other  activities  of  the  Fund  Manager  and  its  Affiliates.   Although  not
anticipated,  this could  result in the  inability  of the Fund  Manager and its
Affiliates to fully discharge their duties to each Series.

    * The Fund Manager and its Affiliates  have interests that are  inconsistent
with those of the investors in the Fund ("Unitholders") in some respects and are
permitted  to engage in  activities  that may be in  conflict  with those of the
Fund,  without providing the benefits of such activities to the Fund. This could
result in the  purchase by an  Affiliate  of an  investment  which is  otherwise
suitable for purchase by a Series.

Fiduciary Responsibility

    The Fund  Manager  will  act as a  fiduciary  to each  Series.  However,  as
discussed in the section of this Prospectus entitled "Fiduciary Responsibility,"
each Series will be obligated to provide certain indemnities to the Fund Manager
and  certain  Affiliates  thereof,  provided  the  actions  of the  person to be
indemnified did not constitute negligence or misconduct and were the result of a
course of conduct which the Fund Manager,  in good faith,  determined was in the
best interests of the

                                        14

<PAGE>



Series. As a result of these and other provisions in the Partnership  Agreement,
a  Unitholder  may have a more limited  right of action than he would  otherwise
have had in the absence of such provisions.

Investment Objectives and Policies

    The  Fund's  principal  investment  objective  is to  acquire  interests  in
Apartment  Complexes which will entitle  investors to Low Income Housing Credits
over a period of 10 to 12 years. All of the Apartment Complexes will be expected
to qualify for Low Income Housing Credits. In certain instances,  some Apartment
Complexes may qualify for Historic Tax Credits in addition to Low Income Housing
Credits.  See "Federal  Income Tax  Considerations  - Historic Tax Credit" for a
discussion  of  Historic  Tax  Credits.  The Fund  will  also try to  invest  in
Apartment  Complexes that will maintain their value,  so as to permit the return
of the Fund's invested capital at the end of the Fund.

    Each Series  will  invest in Local  Limited  Partnerships  owning  Apartment
Complexes  that have been  built or  rehabilitated  by  developers  that have no
affiliation with the Fund Manager or its Affiliates. Generally, the developer of
the Apartment Complex or an affiliated  company will be the general partner (the
"Local General  Partner") of the Local Limited  Partnership.  A Series will make
its  investment by  contributing  capital to the Local Limited  Partnership  and
becoming  the  majority  (usually  99%)  limited  partner  in the Local  Limited
Partnership.  An Affiliate of the Fund  Manager (the "SLP  Affiliate")  may also
become a limited partner in the Local Limited Partnership. Each Series will seek
to invest in a  geographically-diversified  portfolio of  properties  located in
small cities and suburban  communities  (or in some cases in larger urban areas)
with a  demonstrated  demand for  affordable  rental  housing.  The Fund Manager
anticipates  that certain of the  properties  will be rented to senior  citizens
only,  and the  balance  of the  properties  will be rented to senior  citizens,
families  and  others,  in all  instances  only to those  satisfying  the income
limitations. None of the Apartment Complexes have been selected yet.

    Usually a Local Limited  Partnership  will borrow between 60% and 90% of the
acquisition and  development  cost of the Apartment  Complex.  Most of the Local
Limited Partnership's funds will go to pay construction or rehabilitation costs,
part will be used to establish  working capital reserves and part will go to pay
development  fees (that is,  profits) to the Local General  Partner,  unless the
Local  General  Partner is the Fund Manager or one of its  Affiliates,  in which
event  no  such  development  fees  will be  paid.  Many  of the  Local  Limited
Partnerships will benefit from traditional  government  subsidy programs such as
mortgage  financing or rental  assistance,  but some may not.  Those that do not
will  depend  entirely  on their  rental  income  to  cover  their  expenses  of
operation,  including their mortgage  payments.  If a Local Limited  Partnership
cannot make its mortgage payments, the

                                        15

<PAGE>



lender may  foreclose,  which would cause a "recapture"  of a portion of the Tax
Credits generated by its Apartment Complex.

    It is hard to tell now  exactly  when or  whether  a Series  will be able to
realize any sale proceeds from an Apartment  Complex.  The "recapture" rules for
Low Income Housing Credits prohibit the sale of an Apartment  Complex before the
end of the  fifteenth  year after Low Income  Housing  Credits begin to be taken
(even  though Low Income  Housing  Credits  only last for 10 years).  Government
subsidy  programs also limit sale or  refinancing  opportunities,  and sometimes
buildings  like the Apartment  Complexes are hard to sell. The Fund Manager will
try to  liquidate  each  Series'  investments  after the  fifteenth  year of the
Series' term,  but when that  liquidation  will take place (and for how much) is
impossible to predict.

    See "Investment Objectives and Policies."

Investment Protection Policies

    Each Series will try to protect its and its  Unitholders'  investments  in a
number  of  ways.  See  "Investment  Objectives  and  Policies"  for  a  further
discussion of these policies.

    Staged  Pay-In.  Each Series  will invest its capital in each Local  Limited
Partnership in stages over a period of from one to two years,  with each capital
payment  due  when  certain  conditions  regarding  construction  or  rental  of
apartments to qualified  tenants are satisfied.  In this way the Series will try
to put as little  capital  at risk as  possible  in the  stages of an  Apartment
Complex's life cycle that are most uncertain.

    Development Obligations. In the case of a new construction or rehabilitation
property,  the Local  General  Partners  will agree to  complete  the  Apartment
Complex in a timely manner,  and to provide all funds needed through  completion
of construction or rehabilitation, after applying mortgage loan proceeds and the
Series' capital contribution.

    Tax Credit "Adjuster".  In the event the Tax Credits actually allocated to a
Series  are less  than the  agreed to  amount,  the  Local  Limited  Partnership
Agreement will provide for a reduction in the Series'  capital  contribution  to
the Local Limited  Partnership  (to the extent the entire  contribution  has not
been paid) or a payment by the Local General Partner to the Series.

    Operating Deficit Guarantees.  Each Local Limited Partnership typically will
impose  obligations on the Local General Partners to provide funds to defray any
operating  deficits  for  a  minimum  of  two  years  following   completion  of
construction or rehabilitation.

                                        16

<PAGE>




    Voting Rights.  The Series, as the sole or principal limited partner of each
Local Limited Partnership, will have the right to approve or disapprove the sale
of the Apartment Complexes.

    Repurchase  of Local  Limited  Partnership  Interest.  Generally,  the Local
General  Partners  will be obligated to  repurchase  the Series'  Local  Limited
Partnership  Interest if the Local Limited  Partnership fails to: (i) receive an
allocation of Tax Credits in the year in which the  Apartment  Complex is placed
in service; (ii) cause the Apartment Complex to be placed in service in a timely
manner; (iii) obtain permanent mortgage loan financing;  or (iv) remain eligible
for Tax  Credits  during the  period  when the  Series is  required  to make its
capital contributions.

    Notwithstanding  the preceding there can be no guarantee that these policies
will  protect  the  investment  of a Series  or its  Unitholders.  Most of these
policies are dependent on the financial  strength of the Local General  Partners
and the liquidity of their net worth. See "Risk Factors - Investment Risks - Net
Worth of Local General Partners." If any Local General Partner fails to meet his
obligations,  the  remedy of a Series  might be limited  to  removing  the Local
General Partner as general partner of the Local Limited Partnership.

The Low Income Housing Tax Credit

    When the United  States  Congress  passed  the Tax  Reform  Act of 1986,  it
created  Section 42 of the  Federal  tax code.  Section 42 awards  valuable  Low
Income Housing Credits to investors in low-income housing. Congress mandated the
use of such Tax Credits to attract  private  capital to help build and  preserve
the United States' supply of privately-owned, affordable rental housing.

    Low Income Housing Credits  represent the continuation of the Federal policy
of legislating tax benefits for investors in affordable  housing that spans more
than two  decades.  Under Code  Section  42,  Congress  has given  taxpayers  an
alternative to paying  Federal income taxes:  taxpayers can invest in low-income
housing to receive Tax Credits which will reduce their taxes each year for 10 to
12 years.  These Tax Credits  have become an  integral  element of the  nation's
affordable housing programs.

    The Federal tax code authorizes investors in partnerships such as the Series
to receive  the  benefit  of Low  Income  Housing  Credits  when they  invest in
low-income housing in order to encourage investments of the type the Series will
make. The laws  authorizing Low Income Housing Credits and the rules the IRS has
adopted to administer these Tax Credits are extremely complicated.

    The most important of the rules define the types of Apartment Complexes that
qualify for Low Income Housing Credits, the manner in which the Low Income

                                        17

<PAGE>



Housing Credits are to be allocated among Apartment Complexes whose owners apply
for them,  the kinds of tenants that must live in the Apartment  Complexes,  the
rents that can be  charged to those  tenants  and the costs of  construction  or
rehabilitation  of the Apartment  Complexes that can generate Low Income Housing
Credits.  These rules are described in the section of this  Prospectus  entitled
"The Low Income  Housing  Credit."  Each Series will have to follow all of these
rules for its investors to get the Low Income Housing Credits. Management of the
Fund is  experienced  in  working  with these  rules,  and will do their best to
follow them.  However, no one is guaranteeing that it will be possible to comply
with all of the rules.

    Other  rules  govern the  ability of  taxpayers  to claim Tax  Credits.  For
example,  individuals who have no net passive income can only use Tax Credits to
shelter  up to the  equivalent  of $25,000 of active or  portfolio  income  with
deductions from rental real estate activities in which they actively participate
and  with Tax  Credits.  See  "Summary  of the  Offering  - Who  Should  Invest;
Limitations  on Use of  Credits  and  Losses"  above  and  "Federal  Income  Tax
Considerations"  below.  The rules for the Low Income Housing  Credits include a
concept called "recapture" that applies when the rules are not adhered to during
the entire 15-year period after such tax credits start to be taken.  "Recapture"
means that an investor who previously took Low Income Housing Credits has to pay
additional taxes equal to a portion of the Low Income Housing Credits  generated
by the non-complying Apartment Complex. Therefore the failure of the owner of an
Apartment  Complex to follow the rules  (which may be beyond the  control of the
Fund Manager) could result both in a loss of future Low Income  Housing  Credits
and in a "recapture" of some of the Low Income Housing Credits already taken.

    See "The Low Income Housing Credit."

Management

    The Fund Manager is WNC &  Associates,  Inc. The Fund  Manager's  address is
3158 Redhill Avenue, Suite 120, Costa Mesa,  California 92626 (telephone:  (714)
662-5565).  See "Management" for a description of the people associated with the
Fund Manager who will be responsible  for the management of the business of each
Series.  The  financial  statements  of the Fund  Manager are  contained in this
Prospectus or in a supplement hereto under "Financial Statements."


                                        18

<PAGE>



Prior Performance Summary

    Since its formation,  the Fund Manager and its Affiliates have raised equity
from more than 9,200 investors to acquire  interests in more than 400 properties
consisting  of more than  15,000  apartment  units  located in 32 states and one
territory,  and  representing  more than  $593,200,000 in aggregate  acquisition
costs. The sections of this Prospectus entitled "Prior Performance  Summary" and
"Management"  contain  discussions  of all of the prior real  estate  investment
programs in which the Fund Manager and its Affiliates  have been  involved.  The
Prior  Performance  Tables  included  as  Exhibit A to this  Prospectus  contain
certain  statistical  data regarding the performance of the more recent of these
prior investment programs.

Federal Income Tax Considerations

    The section of this Prospectus  entitled "Federal Income Tax Considerations"
contains a discussion  of numerous  Federal  income tax issues  pertinent to the
Fund. It also contains a description  of the legal opinions as to Federal income
tax matters that the Fund will receive.

Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions

    Under the  Partnership  Agreement,  99% of a  Series'  Tax  Credits  will be
allocated  to its  Unitholders  and 1% to  the  Fund  Manager.  A  Series'  Cash
Available for  Distribution  (which  generally means the difference  between the
Series' cash receipts from the on-going  operations of its  investments  and the
related  expenses),  if any, will be distributable 99% to its Unitholders and 1%
to the Fund Manager.  A Series' Sale or Refinancing  Proceeds  (which  generally
means the net proceeds  that the Series  receives  from the  liquidation  of its
investments,  after the payment of the related  expenses) will be  distributable
entirely  to its  Unitholders  until  they have  received  a return of (i) their
investment in the Series and (ii) their Return on Investment,  to the extent not
already  provided by Tax Credits and any  distributions  of Cash  Available  for
Distribution;  the  balance  will be used to  return  to the  Fund  Manager  its
investment  in the Series and to pay the  Subordinated  Disposition  Fees to the
Fund Manager or its Affiliate,  and then  distributed 90% to the Unitholders and
10% to the Fund Manager.

    Investors should note that the use of the term "Return on Investment" is not
intended to suggest that there is any  guarantee  or assurance  that this return
will be provided to  investors.  It means only that if  proceeds  are  available
after  payment  of all  current  and  accrued  fees and  expenses,  they will be
distributed  to  Unitholders  before  distributions  to the  Fund  Manager.  All
distributions  from  operations or Sale or  Refinancing  Proceeds are contingent
upon the results of a Series' investments and cannot be assured.


                                        19

<PAGE>



    The  section  of  this  Prospectus  entitled  "Profits  and  Losses  for Tax
Purposes, Tax Credits and Cash Distributions"  contains further detail regarding
the  provisions of the  Partnership  Agreement  relating to tax  allocation  and
distribution  policies.  For  a  description  of  the  expected  allocation  and
distribution  policies  of  the  Local  Limited  Partnerships,  see  "Investment
Objectives and Policies - Terms of the Local Limited Partnership Agreements."

Summary of Certain Provisions of the Partnership Agreement

    The  Partnership  Agreement  that will govern the  relationship  between the
Unitholders  and the Fund Manager in a Series is a complex legal  document,  the
full text of which is included as Exhibit B to this Prospectus.  Portions of the
Partnership  Agreement are summarized in the section of this Prospectus entitled
"Summary of Certain  Provisions  of the  Partnership  Agreement."  Certain other
portions of the Partnership Agreement are also summarized under "Transferability
of Units" and "Reports."

    Investors  should  particularly  be  aware  of the  following  terms  of the
Partnership Agreement:

    - The  Partnership  Agreement  gives  investors  owning more than 50% of the
Units in a Series the right to take the  following  actions  with respect to the
Series:

       *          amend the Partnership Agreement

       *          remove the Fund Manager with or without cause and elect its 
                  replacement,

       *          approve or disapprove the sale of all or substantially all of 
                  the assets of the Series other than in connection with a 
                  dissolution of the Series, and

       *          approve the dissolution of the Series.

In order to bring a matter to a vote of investors in a Series,  investors in the
Series  owning at least 10% of the Units  issued by the Series must  request it.
Investors  who  vote  against  any such  actions  will  nonetheless  be bound by
decisions made by the majority-in-interest of their fellow investors.

    - Each Series will be organized and treated as a separate California limited
partnership.

    -  The  Fund  Manager  believes  that  a  "Roll-Up"  of a  Series  would  be
inappropriate  due to adverse tax  consequences  which could  result  therefrom.
Accordingly,  and as  required  by the law of certain  states,  the  Partnership
Agreement  imposes strict  limitations on the ability of a Series to participate
in a

                                        20

<PAGE>



"Roll-Up." A "Roll-Up"  is a  transaction  involving  the  acquisition,  merger,
conversion  or  consolidation  of a Series and the  issuance  of  securities  of
another  entity  (the  "Roll-Up  Entity").   Section  10.3  of  the  Partnership
Agreement,  among other things,  provides that a Series may not participate in a
Roll-Up if the  Unitholders'  voting rights or access to records with respect to
the Roll-Up  Entity would be less than their voting  rights or access to records
with respect to the Series.  Section 10.3 also  provides  that  Unitholders  who
dissent with respect to the Roll-Up  must have the choice of (i)  accepting  the
securities of the Roll-Up Entity,  or (ii) either  remaining as Unitholders,  or
receiving cash in an amount equal to their pro rata share of the appraised value
of the net assets of the Series.

    - No investor  will have any control  over the business of his Series or any
right to act  therefor.  The rights of the  investors  to affect the policies or
conduct of business of their  Series will be limited to the right to vote on the
matters  described  above  in  this  "Summary  of  Certain   Provisions  of  the
Partnership Agreement."

    - The books and records of each Series must be kept at the principal  office
of each Series (3158 Redhill Avenue,  Suite 120, Costa Mesa,  California) and be
available for examination by any investor or his  representative  at any and all
reasonable times. Any investor in a Series or his  representative is entitled to
receive  a copy of the list of  names  and  addresses  of all  investors  in the
Series.

Transferability of Units

    The Units in a Series will be transferable, but only with the consent of the
Fund Manager (and in no event to a foreign person or a tax-exempt  entity).  The
Partnership  Agreement  requires  the Fund  Manager to withhold its consent to a
transfer if the transfer  would  adversely  affect the tax status of the Series.
There will be no market for the Units,  and no one can say  whether an  investor
who wishes to sell his Units will be able to find  someone to  purchase  them or
whether the price will be acceptable to the seller.

Terms of the Offering and Plan of Distribution

    The Fund is  offering  its Units in two  Series on an  all-or-none  minimum,
best-efforts  maximum basis,  which means that no one is  guaranteeing  that any
specified  amount of capital will be raised,  but that no Units in a Series will
be sold  unless at least  $1,400,000  in such  Series is raised from the sale of
Units.  As much as $25,000,000 in Units may be sold by each Series.  Each Series
will consist of a maximum of 25,000  Units.  The Fund Manager will decide in its
discretion when Series 3 will be terminated and Series 4 will begin.  See "Terms
of the Offering and Plan of Distribution."  The Capital  Contributions  from the
different  Series  will be  invested  in  different  Local  Limited  Partnership
Interests and, therefore, Unitholders

                                        21

<PAGE>



in different Series might receive  different yields on their  investments and be
subject to different investment risks.

    When an  investor  subscribes  to buy Units in a Series,  his money  will be
placed in an escrow account until  $1,400,000 in cash from such Series is raised
by the Series (which could take up to one year). During that time, interest will
be earned at savings  account  rates.  The interest will be paid to the investor
when the closing which admits him to the Series as a Unitholder takes place.

    After  $1,400,000  in cash is  raised  in a  Series,  the  Series  will hold
closings and admit  subscribers to such Series as Unitholders  every month or so
until the Fund  Manager  decides to conclude  the  Series.  The last Series will
terminate not later than two years from the date of this Prospectus  (subject to
requalification of the Units after one year in certain states).

    The  minimum  purchase  in a Series  is five  Units  ($5,000),  except  that
employees of the Fund Manager and its  Affiliates,  and/or  investors in limited
partnerships  previously sponsored by the Fund Manager may purchase a minimum of
two Units ($2,000).  After an investor has purchased the required minimum number
of Units in either  Series,  he may make  investments in increments of $1,000 in
the same or subsequent  Series.  Although the purchase  price of $1,000 per Unit
must  generally be paid in full in cash at the time an investor  subscribes  for
his Units,  an investor  who  purchases  10 Units  ($10,000)  or more in any one
Series  may  elect  to  use  an  installment   payment  method   whereunder  his
subscription  need be  accompanied  by a check for only $500 per Unit,  with the
$500 balance of the purchase  price of each Unit payable in accordance  with the
terms of a Promissory Note in a single installment on (i) March 31, 1996, if the
investor  subscribes between the date hereof and December 31, 1995, (ii) January
31, 1997, if the investor  subscribes  between January 1, 1996 and June 1, 1996,
or (iii) the later of the date of subscription or June 30, 1997, if the investor
subscribes  after June 1, 1996.  Each  Promissory  Note will be a full  recourse
obligation of the investor and will bear interest as follows:  (i) for purchases
of less than 500  Units,  at a fixed  rate of 1.5% per annum  above the prime or
reference rate of interest announced by National Bank of Southern  California as
being  charged  by it on  short-term  unsecured  loans to its most  creditworthy
customers (the "Prime Rate"),  such rate to be determined at the commencement of
each Series;  or (ii) for  purchases of 500 Units or more, at a fixed rate of 1%
per annum above the 1-year Treasury Bill rate, such rate to be determined at the
date of purchase.

    See "Terms of the Offering and Plan of Distribution."


                                        22

<PAGE>



Glossary

    See the section of this Prospectus  entitled "Glossary" and Article 1 of the
Partnership  Agreement  for  definitions  of  capitalized  terms  used  in  this
Prospectus.

Financial Statements

    The financial statements of the Fund Manager and the balance sheet of Series
3 are  included  herein  under  "Financial  Statements."  Inasmuch  as  Series 4
currently  has no  assets or  liabilities  and has had no  operations,  the Fund
Manager is of the opinion that the balance  sheet of Series 4 is not material to
investors in Series 3.  Accordingly,  that balance sheet is not included in this
Prospectus.  The balance sheet of Series 4 will be included in the supplement to
this Prospectus which discloses the commencement of the offering of Series 4.

                                   RISK FACTORS

    The purchase of the Units offered  hereby  involves a number of  significant
risk factors.  Some of the factors that prospective  purchasers  should consider
are:

Risks Related to Tax Credits

    THIS SECTION AND THE SECTION ENTITLED "THE LOW INCOME
HOUSING CREDIT" SHOULD BE READ CAREFULLY AND UNDERSTOOD
BY EACH INVESTOR TO DETERMINE WHETHER AN INVESTMENT IN
THE FUND IS SUITABLE FOR HIM.

    Uncertainties as to Availability of Low Income Housing Credits.  Each Series
intends to claim Low Income  Housing  Credits  for the Low Income  Units  (those
residential  units intended for rental to low-income  tenants) in each Apartment
Complex in which it acquires an interest.  The Apartment Complex,  however,  may
not be eligible for such credits,  or the available credits may be substantially
reduced  with  respect  to  the  Apartment  Complex,  if  any  of  a  number  of
requirements  set  forth  in Code  Section  42 is not met.  See "The Low  Income
Housing Credit."

    At the time a Series acquires a Local Limited  Partnership  Interest,  it is
possible that the Apartment  Complex will not yet have received an allocation of
Credit  Authority  (the amount of Low Income  Housing  Credits which a state may
allocate  in a given  year)  from the state in which the  Apartment  Complex  is
located or have rented its residential  units so as to ascertain whether it will
meet the other requirements of Code Section 42, in which case the Series will be
relying only upon guarantees and  representations  of the Local General Partners
and opinions of counsel in these respects.


                                        23

<PAGE>



    Even if an  Apartment  Complex is eligible for Low Income  Housing  Credits,
there are  certain  factual  determinations  to be made in  connection  with the
calculation  of the amount of credits  which are not and will not be the subject
of an opinion of counsel and which could be  challenged by the IRS. See "The Low
Income Housing  Credit." Any such  challenge,  if successful,  could result in a
decrease  in the amount  and/or a delay in the timing of the Low Income  Housing
Credits from those which would otherwise be anticipated. Further, a delay in the
completion of an Apartment  Complex may deprive the  Unitholders  of anticipated
Low Income Housing Credits.

    Possible  Recapture of Low Income  Housing  Credits.  Any Low Income Housing
Credits  allocated  to a Unitholder  with  respect to an  Apartment  Complex are
subject to  recapture  (with  interest)  to the extent that the Low Income Units
therein or any portion thereof cease to satisfy the requirements of Code Section
42 and to otherwise  qualify for Low Income  Housing  Credits at any time during
the 15-year Initial Compliance  Period.  Recapture (with interest) of Low Income
Housing  Credits may also occur if a Local Limited  Partnership  disposes of its
interest  in an  Apartment  Complex  (including  a  disposition  as a result  of
foreclosure of a mortgage loan  encumbering  the Apartment  Complex),  or if the
Series disposes of its interest in a Local Limited Partnership.

    See  "The Low  Income  Housing  Credit -  Recapture  of Low  Income  Housing
Credits." As discussed  therein,  there can be no assurance that events will not
occur  resulting  in the  recapture  of all or a portion of a Series' Low Income
Housing Credits.

    Limitations on Sales of Apartment Complexes. Any Apartment Complex receiving
an allocation of Credit  Authority  must execute an Extended Low Income  Housing
Commitment  with the state  allocating  the Credit  Authority.  The Extended Low
Income  Housing  Commitment  will  require  that the Low Income Units within the
Apartment Complex be rented as low-income housing for the Low Income Use Period.
Accordingly,  on any sale of an  Apartment  Complex  during  the Low  Income Use
Period,  the purchaser  would have to agree to continue to the low-income use of
the Apartment  Complex,  thereby reducing the potential market, and possibly the
sales price, for the property. Furthermore, the sale of an Apartment Complex may
be subject to other  restrictions.  See "Risks of  GovernmentSubsidized  Housing
Projects"  below in this  section  and  "Investment  Objectives  and  Policies."
Accordingly,  there can be no assurance that a Local Limited Partnership will be
able to sell its  Apartment  Complex,  or, if it does so,  that any  significant
amount of Sale or Refinancing  Proceeds will be distributed to the  Unitholders.
As a result,  a material portion of the Low Income Housing Credits may represent
a return of the money originally invested in the Series.

    Limitations on Use of Tax Credits.  The ability of an individual or other 
non-corporate Unitholder to reduce his tax liability attributable to income from

                                        24

<PAGE>



nonpassive sources is subject to certain ordering rules and overall  limitations
on the  amount  of Tax  Credits  which  may be  utilized  in any  year.  Certain
corporate  Unitholders  are  subject to similar and other  limitations.  See the
material under the captions "The Low Income Housing  Credit" and "Federal Income
Tax Considerations - Limitations on Losses and Credits from Passive Activities."
Further,  any portion of a Tax Credit which is allowed to a Unitholder  pursuant
to the  passive  activity  rules is  aggregated  with all of his other  business
credits and is then subject to the general  limitation on all business  credits.
Such  limitation  provides  that credits can be used to offset a taxpayer's  tax
liability  in any  year  only  to the  extent  of  $25,000  plus  75% of his tax
liability in excess of $25,000,  except that business credits may not be used to
offset any  alternative  minimum tax. See "Federal Income Tax  Considerations  -
General   Business  Tax  Credit   Limitations"   and  "-  Other   Important  Tax
Considerations - Alternative Minimum Tax."

    Availability  and  Recapture  of  Historic  Tax  Credits.  In  order  for an
Apartment Complex to be eligible for Historic Tax Credits,  it must meet certain
statutory requirements and be certified by the Department of the Interior. There
can be no assurance that certification will be forthcoming. Even if an Apartment
Complex receives  certification,  the IRS may challenge the inclusion of certain
amounts in the  calculation  of  qualified  expenditures,  thereby  reducing the
amount  of  the  available  Historic  Tax  Credits.   See  "Federal  Income  Tax
Considerations - Historic Tax Credit."

    If Historic  Tax Credits  have been  claimed  with  respect to an  Apartment
Complex,  the sale of the  Apartment  Complex by the Local  Limited  Partnership
during the first five years of operation (or the sale by the Series of the Local
Limited  Partnership  Interest  or the sale by a  Unitholder  of his Units) will
result in recapture of the previously claimed Historic Tax Credits. See "Federal
Income Tax Considerations - Historic Tax Credit Recapture."

Investment Risks

    Risks of  Government-Subsidized  Housing Projects.  The Fund Manager expects
that each Series will invest a substantial  portion of its Net Proceeds in Local
Limited  Partnerships  which own Apartment  Complexes  which, in addition to Tax
Credits,   receive  other  government  financing  or  operating  subsidies.  See
"Investment  Objectives  and Policies - Investment  Policies." The following are
risks associated with various programs that provide some such subsidies:

   -     Difficulties in Obtaining Tenants for the Apartment Complexes.
Governmental regulations with regard to the eligibility of tenants for such
Apartment Complexes may make it more difficult to rent the apartments in the
Apartment Complexes.


                                        25

<PAGE>



   -     Difficulties in Obtaining Rent Increases.  In many cases rents in such
Apartment Complexes can only be increased with the prior approval of the
governmental agency which is providing the subsidies.

   - Limitations  on Cash  Distributions.  Applicable  statutes and  regulations
generally  would limit the amount of cash that may be  distributed  to owners of
such Apartment Complexes to amounts that are less than the amounts that could be
earned by the  owners of  conventional  apartment  properties  that  receive  no
government  subsidies,   and  thus  limit  the  ability  of  the  Local  Limited
Partnerships to make cash distributions.

   - Limitations on Sale or Refinancing of the Apartment Complexes.  Regulations
of applicable  governmental agencies and the terms of the agreements between the
agencies  and the Local  Limited  Partnerships  may limit the ability of a Local
Limited Partnership to sell its Apartment Complex or refinance its mortgage loan
without the prior  approval of the agencies,  which  approval may be withheld in
the discretion of the agency. These approvals,  even if given, may be subject to
various conditions.  In addition, any sale, refinancing or prepayment may result
in the assessment of a prepayment penalty.

   -  Limitations  on  Transfers of  Interests  in Local  Limited  Partnerships.
Regulations  relating to apartment  complexes receiving some types of government
subsidies require that the governmental agency approve the sale of more than 50%
of the  interests  in any  limited  partnership  owning  such a  project,  which
approval  may be withheld in the  discretion  of the  agency.  Accordingly,  the
transfer of a Local Limited  Partnership  Interest by a Series should be subject
to prior governmental approval.

   - Limitations on Removal of Local General Partners.  Regulations  relating to
apartment  complexes  receiving some types of government  subsidies may prohibit
the removal of a Local General Partner except "for cause," such as the violation
of the rules of the government agency. In addition,  government  approval may be
required in connection  with the admission of a successor  local general partner
in such a  limited  partnership  if and when  required  upon the  death or other
disability of a Local General Partner.

   - Limitations on Subsidy Payments. Certain government subsidy payments may be
fixed and subject to annual  appropriations.  Should the rental  revenues of the
apartment  complex,  when  combined  with  the  maximum  committed  subsidy,  be
insufficient  to meet property  obligations,  including debt service,  or should
Congress or the state  legislature,  as the case may be, fail to appropriate the
necessary subsidy,  unless a "workout"  arrangement could be negotiated with the
mortgage lender, the mortgage loan on the property could be foreclosed.


                                        26

<PAGE>



   - Possible Changes in Applicable Regulations.  There can be no assurance that
legislation may not be enacted in the future,  as it has been in the past, which
purports  to  substantially  and  adversely  revise  provisions  of  outstanding
mortgage  loans made or insured by RECDS,  the U.S.  Department  of Housing  and
Urban Development ("HUD") or other government agencies, including mortgage loans
to the Local Limited Partnerships.

    See "Other Government Assistance Programs."

    Keen Competition for  Investments.  Each Series will compete with many other
real estate  investment  partnerships  and other entities engaged in real estate
investment activities,  possibly including the other Series and other Affiliates
of the Fund Manager (see "Conflicts of Interest"), for Apartment Complexes which
are expected to generate for their owners Tax Credits.

    The  availability of such  investments is limited in that there is a maximum
Credit  Authority for each state (see "The Low Income  Housing  Credit - Credits
Subject to State Allocation") and as a result of other factors,  and competition
for desirable  investments of such type may be particularly keen, with resulting
increases in the purchase prices paid for such investments.  In this connection,
it should be noted that a state must  allocate  its Credit  Authority  by giving
preference to applicants  with the lowest  percentage of costs  attributable  to
intermediaries, such as syndicators, and must also give preference to applicants
serving the lowest income  tenants and applicants  obligated to serve  qualified
tenants for the longest  periods.  Further,  an allocating  agency must use good
faith  efforts to allocate  no more Credit  Authority  to an  applicant  than is
necessary for its project's financial feasibility and viability,  and may reduce
the applicable percentage and/or the qualified basis (and thus the amount of the
Low Income  Housing  Credits)  below the amounts for which the  applicant  would
otherwise  be  eligible,  if the agency  believes  that the full amounts are not
necessary  in light of other  sources of  assistance  that are  available to the
applicant.

    In the recent past,  heightened demand for a smaller supply of Local Limited
Partnership  Interests  has  increased  the  purchase  prices  thereof.  Further
increases in the purchase  prices of Local Limited  Partnership  Interests would
reduce the return to  investors  and  hamper the Fund's  ability to satisfy  its
principal investment objective.

    Risks of Apartment  Complexes  Without Financing or Operating  Subsidies.  A
Series may invest a portion of its Net  Proceeds in Local  Limited  Partnerships
which own  Apartment  Complexes  which do not receive  government  financing  or
operating  subsidies.  Those  Apartment  Complexes  will not have the benefit of
below-market-interest-rate  financing  or  operating  subsidies  which often are
important to the feasibility of low-income  housing  projects,  and will have to
rely solely on rents to

                                        27

<PAGE>



pay expenses.  However, in order for an Apartment Complex to be eligible for Low
Income Housing Credits,  the Low Income Units in the Apartment Complex must meet
the  requirements  of Code Section 42, which include a  restriction  on the rent
which  may  be  charged  to  tenants.  See  "The  Low  Income  Housing  Credit."
Accordingly,  if  operating  expenses of a Local  Limited  Partnership  increase
(which is likely to occur,  especially if the Apartment Complex is financed at a
variable  interest  rate),  there can be no  assurance  that the  Local  Limited
Partnership  would be able to increase  rents in an amount  sufficient to offset
such increased  operating expenses without  jeopardizing its eligibility for Low
Income Housing Credits, or otherwise.

    Risks of  Low-Income  Housing.  There are factors  particular  to low-income
housing affecting the need for repairs and  improvements,  and the Local Limited
Partnerships  in which a Series invests may have to expend more funds to protect
and repair the Apartment  Complexes than would be the case if they were operated
as  market-rate  rather  than  low-income  housing.  In  addition,  most  of the
Apartment Complexes will be located in rural areas or small towns or (in certain
instances) in areas of  low-income  where,  even in the absence of  governmental
restrictions on cash distributions, the rents that may be charged to prospective
tenants  are lower  than those that might be  obtained  in more  affluent  urban
areas.  These factors,  and the additional factor that at the time of a sale the
Apartment  Complex  will have a history of having been  operated as a low-income
property,  will affect the time and price at which an  Apartment  Complex can be
sold.

    Risk of Unspecified Investments.  As of the date of this Prospectus,  except
as otherwise set forth in a supplement hereto,  none of the Apartment  Complexes
in which the Series  will invest have been  identified.  Accordingly,  investors
will not have the opportunity to evaluate for themselves the Apartment Complexes
or the terms of the Series'  investments  therein except as such information may
be included in a supplement to this Prospectus.  See "Investment  Objectives and
Policies Investment Policies - Timing of Investments." There can be no assurance
that any Apartment Complexes in which a Series may invest will actually meet the
Fund's investment objectives or that an investor who acquires his Units later in
the Offering period at the same price as one who purchased  earlier may not have
more information  available  concerning  specific  Apartment  Complexes than the
earlier purchaser.

    Risks Associated with Use of Leverage.  Each Local Limited  Partnership will
leverage  a  Series'   investment   therein  by  incurring  mortgage  debt.  See
"Investment  Objectives and Policies - Use of Leverage." Such borrowing may have
either   fixed  or  variable   interest   rates  and  may  be   repayable  in  a
self-amortizing  series of  substantially  equal  installments or in a series of
installments  with a "balloon"  final payment  before or after the expiration of
the Initial Compliance Period or the Extended Use Period. As a result of the use
of leverage, a relatively slight decrease

                                        28

<PAGE>



in the rental  revenues of an Apartment  Complex may  materially  and  adversely
affect  the cash flow from that  property  and the Local  Limited  Partnership's
ability to meet its debt service requirements.  In addition, the use of variable
rate  loans to  finance  Apartment  Complexes  would  create  the risk that debt
service could rise substantially  during periods of high interest rates.  Should
any Local Limited Partnership's revenues be insufficient to service its debt and
pay taxes and other operating costs,  and/or should  government  subsidies which
had been relied upon for the payment  thereof cease to be available  (see "Risks
of Government - Subsidized Housing Projects" above in this section),  such Local
Limited Partnership and the Series would be required to utilize working capital,
seek additional  funds, or suffer a foreclosure of the subject  property.  There
can be no assurance that additional funds will be available to any Local Limited
Partnership  or the  Series,  if  needed,  or,  if  available,  will be on terms
acceptable to the Series.

    As indicated below under "Investment  Objectives and Policies," a portion of
the Net Proceeds may be invested in Local Limited  Partnerships owning Apartment
Complexes  which have in place  "conventional"  financing,  i.e.,  financing not
provided with  government  subsidy.  Recently,  lenders that have  traditionally
provided  conventional  financing for real estate  construction  and acquisition
have reportedly  decreased their exposure to such loans. To the extent that such
a situation exists, there may be fewer conventionally-financed  investments that
are suitable for the Series.  In addition,  it is possible that such a situation
would adversely affect a Local Limited Partnership in which a Series had made an
investment,  for  instance if the Local  Limited  Partnership  found that it was
unable to obtain  permanent  financing to  refinance a  short-term  construction
loan. High interest rates or other factors  related to its Apartment  Complex or
the  national  and  local  economies  may  also  affect  the   availability  and
desirability of financing or refinancing  which may be sought by a Local Limited
Partnership.  Shortages of mortgage funds may adversely  affect the ability of a
Local  Limited  Partnership  to sell its  Apartment  Complex  or require a Local
Limited  Partnership  to incur credit risks in connection  with  purchase  money
mortgages accepted by such partnership from purchasers.

    Risks  of  Limited  Diversification.  The  ability  of a  Series  to  obtain
geographic and other  diversification  of its investments will be dependent upon
the number of Units sold in such Series. To the extent that less than all of the
Units in any Series are sold, and especially if only the minimum number of Units
in  any  Series  is  sold,  the  Series  will  invest  in  fewer  Local  Limited
Partnerships  than would otherwise be the case.  Limited  diversification  means
that any single  Apartment  Complex  experiencing  poor  operating  performance,
impairment of value or recapture of Tax Credits  would have an increased  impact
upon the Series as a whole. The risks of limited diversification will also exist
to the extent  that any Series (i) invests in a few Local  Limited  Partnerships
owning large Apartment  Complexes  rather than a greater number of Local Limited
Partnerships owning smaller Apartment Complexes, or (ii)

                                        29

<PAGE>



invests in Local Limited  Partnerships  which have the same or affiliated  Local
General Partner, or which own Apartment Complexes located in the same area.

    Lack of Fund  Control;  Reliance on Local General  Partners.  The success of
each Series will, to a large extent,  depend on the quality of the management of
the Local Limited Partnerships by the Local General Partners,  who will have the
authority  to make all  management  decisions  relating to the  operation of the
Apartment  Complexes  by the  management  organizations  they may  employ.  As a
limited  partner in a Local  Limited  Partnership,  each  Series  will have very
limited rights with respect to management of the Local Limited  Partnership and,
accordingly,  will not be able to  exercise  any  control  with  respect  to its
business decisions and operations.

    Net Worth of Local  General  Partners.  Each Local  General  Partner will be
required to demonstrate a net worth which is in an amount deemed  appropriate by
the Fund Manager.  However, there is no minimum standard which all Local General
Partners will be required to satisfy.  Further,  the assets of the Local General
Partners  are likely to consist  primarily  of real  estate  holdings  and other
assets the fair market  values of which would be difficult to estimate and which
could  not be  readily  liquidated  to  satisfy  the  financial  guarantees  and
commitments  which  they  are  expected  to make to a  Series.  See  "Investment
Objectives and Policies Investment Policies." Moreover, these assets may also be
subject to the claims of other  creditors,  including  other  partnerships  with
which the Local General  Partners are involved.  Thus,  there is a risk that the
Local  General  Partners  would be unable to perform  their  obligations  to the
Series.  It is not  anticipated  that any  escrow  accounts  or  other  security
arrangements will be established to ensure performance of their obligations.  If
any of the Local General  Partners fail to meet their  obligations,  the cost of
litigation  to  enforce  these  obligations  may be high,  and the remedy of the
Series may be limited to removing the Local General  Partner as general  partner
of the Local Limited Partnership.

    Risks of Real Estate Ownership.  Any investment in real estate is subject to
risks inherent in fluctuating  general and local economic  conditions  which can
adversely  affect the investor's  ability to realize a profit or even to recover
his invested capital.  Among these are the job market, the availability and cost
of mortgage financing, monetary inflation,  government tax, environmental,  land
use and  zoning  policies,  the supply of and  demand  for  similar  properties,
neighborhood conditions, the availability and cost of energy and water and other
such factors over which the investor  will have no control and which can lead to
significant declines in real estate values of the type recently experienced with
respect to certain types of properties in many areas of the United States.

    Risks of Purchase of Properties Under Construction.  Some or all of the
Apartment Complexes may be under construction at the time a Series makes its

                                        30

<PAGE>



investment  therein.  In  general,   investment  in  Apartment  Complexes  under
construction  will involve  more risk than the purchase of completed  properties
because of dependency upon the Local General  Partners to fulfill more extensive
obligations,  including completion of construction.  The Local General Partners'
ability to carry out such obligations may be affected by conditions beyond their
control. Furthermore, the investment decision in respect of an Apartment Complex
upon which  improvements  are to be  constructed  or completed will be made with
reference to  projections  of rental  income and  expenses of the property  upon
completion of construction.  Whether the property will operate at such projected
income and expense  levels cannot be known in most cases until after  completion
and at least a year of actual operation after sustaining occupancy is achieved.

    Risks of  "Two-Tier"  Investment  Structure.  As is the  case for most  real
estate partnerships  designed to provide investors with Tax Credits, each Series
will invest in Apartment Complexes through the Local Limited  Partnerships.  See
"Investment  Objectives and Policies." This  "two-tier"  structure may result in
higher expenses than is the case for "single-tier"  partnerships,  such as those
which are not formed to generate Tax Credits.  These  expenses may include costs
for professional services,  such as attorneys and accountants who provide advice
and consultation to the Local Limited Partnerships.

    Risks of  Investments  Prior to the Sale of Units.  As noted in  "Investment
Objectives  and Policies - Investment  Policies," a Series may make or commit to
investments  in  Apartment  Complexes  at a time  prior to the  commencement  or
completion  of its  Offering,  and may borrow funds from the Fund Manager or its
Affiliates,  or others, for such purposes. Such investments or commitments would
be made in  anticipation  of the receipt of the  proceeds  of the Series.  It is
possible that the Series ultimately will not receive sufficient proceeds to meet
all of its obligations with respect to such investments or commitments.  Failure
to satisfy such obligations may result in the dilution or termination of a Local
Limited Partnership  Interest or a suit by the Local General Partners to require
performance  of such  obligations.  To the extent Tax Credits  had been  claimed
prior  to  the  termination  of  a  Local  Limited  Partnership  Interest,  such
termination  could  result in recapture of all or a portion of such Tax Credits.
See "The Low Income Housing Credit - Recapture of Low Income Housing Credits."

    Risks of Loss of Loans Made to Local  Limited  Partnerships.  In  connection
with a  Series'  determination  to invest in a Local  Limited  Partnership,  the
Series may make a loan to the Local Limited Partnership prior to the acquisition
by the Series of an interest therein. See "Investment  Objectives and Policies -
Investment  Policies."  If the Series is unable or chooses  not to invest in the
Local Limited  Partnership,  the Local Limited  Partnership  might not repay the
loan,  in which event the amount of Net Proceeds  available  for  investment  in
Local Limited Partnership Interests would be reduced.

                                        31

<PAGE>




    Risks of Possible Investment in "Workout" Projects. Any Series may invest in
Apartment Complexes that have experienced cash flow and operational difficulties
and perhaps substantial mortgage delinquencies requiring a "workout" arrangement
with the mortgage lender to avoid  foreclosure.  See "Investment  Objectives and
Policies - Investment  Policies." If the terms of any such workout agreement are
not complied with, the Apartment Complex would face foreclosure unless the terms
of the agreement could be modified or additional funds raised.

    Risks  of  Joint   Investments.   A  Series  may  invest  in  Local  Limited
Partnerships  jointly with the other Series or other limited partnerships if the
conditions  set  forth  under  "Investment   Objectives  and  Policies  -  Joint
Investments"  are met. There is a potential risk that a Series may not acquire a
controlling  interest in a joint  investment  or that,  if an equal  interest is
acquired  by the  Series  and  another  partnership,  there may be an impasse on
decisions.

    Possibility  of  Uninsured  Losses.   There  are  certain  types  of  losses
(generally either of a catastrophic nature, such as earthquakes, floods and wars
or relating to hazardous materials or environmental  matters),  which are either
uninsurable or not economically insurable.  Should such a loss be experienced by
an Apartment Complex in which a Series has invested,  the Series could lose both
its invested  capital and  anticipated  profits in such  property.  Moreover,  a
portion of previously  generated Tax Credits could be recaptured  and future Tax
Credits  lost if the  Apartment  Complex is not  restored by  reconstruction  or
replacement  within a reasonable period of time; and, even if the casualty is an
insured  loss,  it may be  impossible  or  impractical  to  rebuild a  destroyed
property.  See "The Low Income  Housing Credit - Recapture of Low Income Housing
Credits."  Liability  claims could also materially and adversely  affect a Local
Limited  Partnership such that resulting  judgments  exceed available  insurance
proceeds.  The  cost of  liability  and  casualty  insurance  has  substantially
increased  in recent  years and  certain  types of  insurance  have  become more
difficult to obtain or require substantial deductible amounts.

    Possible  Loss on  Dissolution  and  Termination.  Upon the  dissolution  or
termination of a Series,  the proceeds  realized from the liquidation of assets,
the amount, if any, of which would be subject to the foregoing investment risks,
will be distributed to the Unitholders  only after the satisfaction of claims of
the Series' creditors. Accordingly, the ability of an investor to recover all or
any portion of his investment under such circumstances will depend on the amount
of funds so realized and claims to be satisfied therefrom.

Other Tax Risks

    In addition  to those  pertaining  specifically  to Tax  Credits,  there are
numerous  Federal  income  tax  aspects  and  certain  Federal  income tax risks
associated with the

                                        32

<PAGE>



ownership  of  Units  and the  operations  of the  Fund  and the  Local  Limited
Partnerships.  The Fund does not  intend to  request  rulings  on any income tax
matters from the IRS.  Rather,  the Partnership will rely on certain opinions of
Derenthal  &  Dannhauser,  counsel  to the  Fund,  the Fund  Manager  and  their
Affiliates ("Counsel"), and of counsel to the Local Limited Partnerships. Unlike
a ruling from the IRS,  an opinion of counsel has no binding  effect or official
status of any kind, and no assurance can be given that the  conclusions  reached
in any such opinion will not be contested by the IRS or, if contested,  will not
be sustained by a court.  The income tax issues as to which counsel has rendered
or will render opinions, and the issues as to which counsel has not rendered and
will not render opinions,  are discussed in "Federal Income Tax  Considerations"
and "The Low Income Housing Credit."

    These  additional  Federal income tax aspects and risks  associated with the
ownership  of  Units  and the  operations  of the  Fund  and the  Local  Limited
Partnerships include, but are not limited to, the following:

    No Opinion of Counsel as to Certain  Matters.  Prospective  investors should
note that no legal opinion has been obtained,  and it is not anticipated that an
opinion will be obtained,  regarding  determinations,  the  correctness of which
depends in significant part on future factual  circumstances,  regarding matters
peculiar to certain  investors  or regarding  matters in which  opinions are not
customarily  obtained.  The more significant of such  determinations and matters
include:

- -   the allocation of basis among various components of a property, particularly
    as between buildings,  the cost of which is depreciable,  and the underlying
    land, the cost of which is not  depreciable;  a successful  challenge by the
    IRS  to  the  amount  of  basis   allocated  to  buildings   would  decrease
    depreciation attributable to the property;

- -   the characterization of various expenses and payments made to or by a Series
    or a Local  Limited  Partnership  (for  example,  the  extent to which  such
    payments represent  deductible fees or interest);  a successful challenge by
    the IRS to the  characterization  of an expense as deductible  would require
    that such expense be capitalized and recovered, if at all, upon liquidation;

- -   the portion of the cost of any  Apartment  Complex  that  qualifies  for Tax
    Credits  (but see the  discussion  of  so-called  "adjuster"  provisions  in
    "Investment  Objectives and Policies - Investment  Policies");  a successful
    challenge by the IRS would reduce the amount of such credits;

- -   the  application  to  any  specific  Unitholder  of  the  limitation  on the
    availability  of passive  activity  losses  and  credits;  Unitholders  must
    determine for themselves

                                        33

<PAGE>



    the  extent  to  which  their  passive  income  and the  "$25,000  deduction
    equivalent"  are  available  to them to claim Tax Credits and Losses for Tax
    Purposes;

- -   the classification of a Series or any Local Limited  Partnership as a dealer
    in  interests  in  Local  Limited   Partnerships  or  Apartment   Complexes,
    respectively; a dealer generally may not claim depreciation deductions; and

- -   the  application  of the  alternative  minimum  tax to,  or the  calculation
    thereof by, any  Unitholder;  if a Unitholder is subject to the  alternative
    minimum tax, tax benefits from an investment in the Fund could be reduced.

    There can be no  assurance,  therefore,  that some of the  deductions  to be
claimed by a Series,  or the  allocation  of its items of Profits and Losses for
Tax Purposes and Tax Credits,  will not be  challenged  by the IRS and that such
challenge will not be sustained by the courts.  Such  challenge,  if successful,
could have a  detrimental  effect on the  ability  of the Series to realize  its
investment objectives.

    No Ruling as to Tax  Status of the Series  and Local  Limited  Partnerships.
Counsel's  opinion that each Series will be classified as a partnership  and not
as an  association  taxable as a corporation  for Federal income tax purposes is
conditioned  upon initial and continuing  compliance by each Series and the Fund
Manager  with  certain   conditions   described   under   "Federal   Income  Tax
Considerations Classification as a Partnership." Thus, there can be no assurance
that each Series will  continue to qualify as a partnership  for Federal  income
tax  purposes.  The Fund  Manager  intends  to secure an  opinion  of Counsel or
counsel to each Local Limited Partnership in which each Series invests that such
Local Limited Partnership will be classified as a partnership for Federal income
tax  purposes,  which  opinions  are  also  likely  to  be  subject  to  various
conditions.  Material adverse tax consequences to the Unitholders,  particularly
an  inability of a Series to pass  through to its  investors  all or part of the
anticipated Tax Credits,  would result from the  classification of the Series or
any Local Limited Partnership in which it invests as an association taxable as a
corporation.  See  "Federal  Income  Tax  Considerations   Classification  as  a
Partnership."

    Limitation  on Losses from  Passive  Activities.  The Tax Reform Act of 1986
("1986 Act")  imposed  substantial  restrictions  on the ability of investors in
real estate to offset losses or deductions from such investments  against income
from other  sources.  It is  anticipated  that these  "passive  activity"  rules
generally  will  restrict the ability of an  individual  or other  non-corporate
Unitholder  to shelter  his income  from other  sources  with any Losses for Tax
Purposes allocated to him with respect to his Units.

    Prior to investment in Apartment Complexes, a Series will not be entitled to
Tax Credits. In addition, any income from interim investments generally would be

                                        34

<PAGE>



treated as portfolio income that cannot be sheltered with losses from passive
sources.  See "Investment Objectives and Policies" and "Federal Income Tax
Considerations."

    Applicability  of At Risk Rules.  The "at risk" rules of the Code  generally
limit the deduction by a partner of partnership  losses incurred with respect to
real property to the amount of cash the partner has invested in the partnership.
Under  special  rules which apply to an activity  involving  the holding of real
estate,  a taxpayer also will be considered "at risk" with respect to "qualified
nonrecourse  financing,"  and a  significant  portion  of  the  financing  to be
utilized  to purchase  the  Apartment  Complexes  is expected to consist of such
"qualified  nonrecourse  financing." However, there can be no assurance that the
"at risk" rules will not have a material impact on the Unitholders  until all of
the  Local  Limited  Partnerships  are  identified  and  the  financing  for the
Apartment  Complexes  is in place.  See  "Federal  Income Tax  Considerations  -
Application of At Risk Limitations" and "The Low Income Housing Credit."

    Tax Liability on Sale of Apartment Complex.  If a Local Limited  Partnership
sells an Apartment  Complex,  or if a Series sells a Local  Limited  Partnership
Interest,  the  Unitholders  of the Series will be required to  recognize  their
allocable  share of taxable gain therefrom,  measured by the difference  between
the sale proceeds  (including the amount of  indebtedness to which the Apartment
Complex was subject, or the Series' allocable share of such indebtedness, as the
case may be) and the adjusted basis in the Apartment Complex.  In some cases the
amount of tax payable by a  Unitholder  may exceed cash  distributions  from his
Series.  See "Federal  Income Tax  Considerations  - Sales or Exchanges of Local
Limited  Partnership  Property;  Depreciation  Recapture"  and " - Treatment  of
Mortgage Loans."

    Alternative  Minimum  Tax  Liability.  The 1986 Act  reduced the regular tax
rates and  substantially  broadened the application of the  alternative  minimum
tax, and the Omnibus Budget  Reconciliation  Act of 1993 ("1993 Act")  increased
the alternative  minimum tax rate for  individuals to 26% and 28%,  depending on
the level of alternative  minimum  taxable income.  As a result,  it is possible
that a  significant  number  of  potential  investors  will  be  subject  to the
alternative minimum tax.  Accordingly,  each investor should consult his own tax
adviser as to the effect an investment in the Fund will have on his  alternative
minimum tax liability. The Tax Credits expected to be derived from an investment
in the Fund may not be utilized to reduce alternative minimum tax liability. See
"Federal  Income Tax  Considerations  - Other  Important  Tax  Considerations  -
Alternative Minimum Tax."

     Possibility of Audit. The IRS has the ability to audit limited partnerships
at the limited  partnership  level with regard to issues  affecting  the limited
partnership.  Prospective  investors  should  note  that  an  audit  of the  tax
information returns of a

                                        35

<PAGE>



Series also could  result in an audit of the returns of the  Unitholders  of the
Series,  and that such an examination  could result in adjustments both to items
that  are  related  to the  Local  Limited  Partnership  and the  Series  and to
unrelated items.  Unitholders could then be required to file amended tax returns
and pay additional  tax plus interest and penalties.  A contest by the Series of
any material adverse determination by the IRS relating to the tax aspects of the
Series might result in the incurrence of  substantial  legal fees by the Series.
See "Federal Income Tax Considerations - Tax Returns and Tax Information."

    Each Series must  register  under the tax shelter  registration  provisions.
Under  those  provisions,  the IRS will  assign a  registration  number  to each
Series,  which number must be recorded on the tax return of a Unitholder in such
Series.  Failure to include the registration number on a Unitholder's tax return
will  subject  the  Unitholder  to a  penalty  unless  that  failure  is  due to
reasonable cause.  Similarly,  the Local Limited Partnerships may be required to
register as tax shelters.  It is uncertain whether registration as a tax shelter
increases materially the risk of IRS audit. Registration does not imply that the
IRS has reviewed, examined or approved the investment or the claimed benefits of
the  investment.   See  "Federal  Income  Tax   Considerations   -  Tax  Shelter
Registration."

    Possibility  of  Challenge  to Tax  Allocations  of the Series and the Local
Limited  Partnerships.  The IRS might challenge the allocations made by a Series
(i) between its Unitholders and the Fund Manager, (ii) among its Unitholders, or
(iii)  between  the  Series  and a Local  General  Partner,  of  income,  gains,
deductions, losses and Tax Credits as not having substantial economic effect and
not being in accordance with each partner's interest in a Series or in the Local
Limited Partnership,  as the case may be. If any allocations were challenged,  a
greater  share of the  income  or gain or a lesser  share of the  losses  or Tax
Credits  might be allocated  to the  Unitholders,  which would  increase the tax
liability or reduce the tax benefits to them  associated  with an  investment in
the  Series.  See  "Profits  and Losses for Tax  Purposes,  Tax Credits and Cash
Distributions" and "Federal Income Tax Considerations - Fund Allocations."

    Possible Tax  Liabilities in Later Years.  After a period of years following
commencement  of operations by a Local  Limited  Partnership,  the Local Limited
Partnership  may generate  Profits for Tax  Purposes  rather than Losses for Tax
Purposes.  A Unitholder's share of such Profits for Tax Purposes generally would
constitute  passive  income and would be taxable  at  regular  rates  unless the
Unitholder  had  unused  "suspended"  passive  losses  from his  Series or other
investments  or current  passive  losses from other  investments.  See  "Federal
Income Tax  Considerations  -  Limitations  on Losses and Credits  from  Passive
Activities."  In such  circumstances  it would be unlikely  that the  Unitholder
would  receive a cash  distribution  from his  Series  with which to pay any tax
liability resulting from the allocation of Profits for Tax Purposes.

                                        36

<PAGE>




    Possibility of Challenge to Tax Treatment of Certain  Expenditures.  The IRS
may contend that certain  fees and  payments  which a Series or a Local  Limited
Partnership  expects to capitalize or deduct should in fact be deductible over a
longer  period  of  time  or in a  later  year,  are  excessive  and  may not be
capitalized  or deducted in full,  should be  capitalized  and not deducted,  or
should  be  treated  as  nondeductible  and  noncapitalizable  distributions  or
syndication fees and thus not as part of basis for computing Tax Credits. If the
IRS were  successful in any such  contention,  the  anticipated  Tax Credits and
Losses for Tax Purposes would be reduced,  perhaps  substantially.  See "Federal
Income  Tax  Considerations  - Basis  of  Local  Limited  Partnerships  in Their
Apartment   Complexes,"  "  -   Depreciation,"   "Deductibility   of  Fees,"  "-
Organization and Offering Expenses" and "- Start-Up Expenditures."

    Changes in Tax Law Which Might Affect the Value of Tax Credits. Although all
Low Income Housing Credits are allocated to an Apartment Complex at commencement
of the 10-year credit period,  there can be no assurance that future legislation
may not adversely  affect an investment  in the Fund.  For example,  legislation
reducing tax liability of an investor could reduce the value of his Tax Credits,
and  legislation  imposing a so-called "flat tax" could eliminate his ability to
use his Tax  Credits.  In this  regard,  prior to enactment of the 1986 Act, the
principal  tax benefit of an  investment  in a limited  partnership  developing,
owning and/or  operating low income  housing was the losses  generated  thereby,
which generally could be used to reduce an investor's income from all sources on
a  dollar-for-dollar  basis,  and such  investments were made in reliance on the
availability of such tax benefits. Because deduction of such losses was severely
curtailed  by the 1986 Act,  it is  unlikely  that the  "pre-enactment"  limited
partnerships  (including  certain  partnerships  sponsored by WNC &  Associates,
Inc.) will provide their investors with all of the tax benefits  expected at the
commencement of their respective syndications.

    Possible Administrative or Judicial  Interpretations of the Law. Many of the
provisions of the 1986 Act and subsequent tax legislation related to investments
in real estate have not been  interpreted by the IRS in regulations,  rulings or
public  announcements,  or by the courts. These provisions may be interpreted or
clarified by the IRS or the courts so as to have an adverse  effect on the Fund.
The rules dealing with Federal income  taxation are  constantly  under review by
the IRS,  resulting in revisions of its regulations and revised  interpretations
of   established   concepts.   Revisions   in  Federal   tax   regulations   and
interpretations  could  reduce or  eliminate  tax  benefits  associated  with an
investment in the Fund.

    State  Income Tax Risks.  A  Unitholder  may be  required to file income tax
returns  and be  subject to tax in each state or local  taxing  jurisdiction  in
which his Series or any Local  Limited  Partnership  invested  in by such Series
owns an Apartment Complex or has business activities, or in which the Unitholder
is

                                        37

<PAGE>



resident.  Corporate  Unitholders may be required to pay state franchise  taxes.
The tax treatment of  particular  items under state or local income tax laws may
vary   materially   from  the  Federal  income  tax  treatment  of  such  items.
Nonetheless,  many of the risks to which an  investment  in the Fund is  subject
under  Federal  income tax law may also obtain  under state or local  income tax
law. A Series may be  required to withhold  state  taxes from  distributions  to
Unitholders in some instances. The additional cost incurred in having to prepare
various state and local tax returns,  as well as the additional  state and local
taxes which may be payable,  should be  considered by  prospective  investors in
deciding  whether to make an investment in the Fund.  This  Prospectus  makes no
attempt to summarize the state and local tax  consequences to an investor in any
state or locality. Accordingly, prospective investors are urged to consult their
tax advisers in this regard.

Fund-Related Risks

    Lack of Liquidity of Investment.  It is not intended nor anticipated  that a
public  market  will  develop  for the  purchase  and sale of Units  because  of
substantial restrictions on transferability imposed in the Partnership Agreement
and as a result of tax and  securities  laws.  See  "Transferability  of Units."
Accordingly, Unitholders may not be able to liquidate their investments promptly
or at a  reasonable  price  prior to the end of their  Series'  term,  and Units
should be considered as a long-term investment.

    Lack  of  Unitholder  Control;  Reliance  on  Fund  Manager.  All  decisions
concerning  the  management  of a Series,  including  selection of the Apartment
Complexes in which the Series will invest and whether or when to  terminate  its
Offering,  will be made by the Fund Manager.  Unitholders have no right or power
to take part in the  management  of the Series.  Accordingly,  no person  should
purchase  Units unless he is willing to entrust all aspects of the management of
the Series to the Fund Manager.

    Risks  Related to Exercise of  Unitholder  Voting  Rights.  The  Partnership
Agreement  grants the Unitholders  owning more than 50% of the Units in a Series
the right to remove the Fund Manager of the Series and elect a  replacement,  to
amend the Series' Partnership Agreement and to terminate the Series. Such voting
rights will make it possible for a  majority-in-interest  of the  Unitholders to
cause any such changes to their Series,  even if  Unitholders  owning 49% of the
Units oppose such action.  See "Summary of Certain Provisions of the Partnership
Agreement Voting Rights."

    Limitations  on Fund Manager's  Liability.  Under  California  law, the Fund
Manager is  accountable  to the  Unitholders  of each Series as a fiduciary and,
consequently,  is required to  exercise  good faith and loyalty in handling  the
affairs of each Series.  However,  the Partnership  Agreement  provides that the
Fund

                                        38

<PAGE>



Manager and its Affiliates will not be liable to a Series or its Unitholders for
its acts and omissions  performed or omitted in good faith and in a manner which
the Fund Manager reasonably believes to be within the scope of its authority and
in the best  interest of the Series,  provided  such conduct did not  constitute
negligence or misconduct.  Therefore,  Unitholders may have a more limited right
of action  against the Fund Manager and its Affiliates  than would  otherwise be
the case absent such  provisions in the  Partnership  Agreement.  See "Fiduciary
Responsibility."

    Issuance of Units in Series.  The Partnership  Agreement  provides that each
Series will be a separate  partnership under California law investing in its own
Local Limited Partnership  Interests.  Therefore,  Unitholders in one Series may
receive  different  yields on their  investments and may be subject to different
risks with respect to their  Series' Local Limited  Partnership  Interests  than
Unitholders in the other Series.  The Fund Manager will decide in its discretion
when Series 3 will be terminated and Series 4 will begin.

    Obligations for Capital  Contributions.  Each investor who subscribes for 10
or more Units may elect to pay one-half of the purchase  price of his Units upon
subscription  and the balance  pursuant to a Promissory Note. See "Estimated Use
of Proceeds - Deferred  Installments."  In the event that a  Unitholder  who has
elected  to  utilize  such  installment  payment  arrangement  defaults  on  his
obligation to pay the deferred installment and interest thereon when due, or any
other Event of Default,  as defined in the Promissory Note,  occurs he will face
serious  consequences,  which may include  acceleration of his Promissory  Note,
loss of right to Tax Credits and  recapture of  previously  utilized Tax Credits
and foreclosure and sale of his Units. Late payments will also be subject to the
payment of late charges.  See "Summary of Certain  Provisions of the Partnership
Agreement." In addition to such Unitholder's liability for the balance due under
the Promissory  Note, he may also be liable to his Series or other holder of his
Promissory  Note,  as  applicable,  for any expenses  incurred in enforcing  the
Series' or other holder's rights.

    If any  Unitholder  should  fail to make  any  payment  required  under  his
Promissory  Note when due and if his Units cannot be promptly resold pursuant to
the  provisions  of  the  Partnership  Agreement,  the  Series  may  be  without
sufficient  funds to meet its  obligations  with  respect  to its Local  Limited
Partnership  Interests.  This could result in the dilution or  termination  of a
Local   Limited    Partnership    Interest   with    resulting    recapture   of
previously-claimed   Tax  Credits  and  loss  of  expected  future  Tax  Credits
pertaining to such Local Limited  Partnership  Interests or legal actions by the
Local General  Partners to require  performance  of such  obligations  and/or to
recover their damages and costs,  thereby adversely affecting the Series and the
non-defaulting Unitholders.


                                        39

<PAGE>



    Risks of Unitholder  Liability.  If a Unitholder is deemed to be taking part
in the  control  of the  business  of his  Series,  he would  lose  his  limited
liability,  which would mean that the debts and other  obligations of the Series
could be satisfied  out of his personal  assets to the extent that assets of the
Series were  inadequate to discharge its  obligations.  The  California  Revised
Limited  Partnership  Act under which each Series is organized  differs from the
Uniform  Limited  Partnership  Act as in  effect  in  many  states  in  that  it
specifically  permits  Unitholders to exercise the voting rights provided in the
Partnership  Agreement  without being deemed to be taking part in the control of
the business of their Series. With respect to operations of the Series in states
other than California,  however, there is uncertainty as to whether the exercise
of these rights (and possibly their mere existence) could be deemed to be taking
part in the  control  of the  Series'  business  and,  as a  result,  cause  the
Unitholders' loss of limited liability.

    In addition,  even if the Unitholders retain their limited liability,  it is
possible  that a Series  itself  could be deemed to be taking part in control of
the  business of one or more Local  Limited  Partnerships  because of the voting
rights which it will have under the Local Limited Partnership Agreements, and as
a result,  obligations of such Local Limited  Partnership could be satisfied out
of the  assets of the  Series to the extent  that  assets of such Local  Limited
Partnership were inadequate to discharge its obligations.

    Absence of Regulation.  Neither Series is a real estate investment trust nor
an investment company, and the management and investment practices of the Series
will not be supervised or regulated by any Federal or state authority.

    Possible Delays in Obtaining  Financial Data.  There cannot be any assurance
that the Local General  Partners will comply with  provisions in the  respective
Local Limited Partnership Agreements requiring the Local Limited Partnerships to
retain  independent  public  accountants  and to report  tax data and  financial
information  in a timely  manner.  Should the Local General  Partners fail to so
comply a Series might be unable to provide in a timely manner to its Unitholders
its Federal income tax  information,  financial  statements and other reports as
described herein (see "Reports").

    Lack of Operating History.  The Fund has no operating history.  No assurance
can be given that the Fund's operations will be successful or that the Fund will
meet its stated investment objectives.


                                        40

<PAGE>



                                WHO SHOULD INVEST;
                     LIMITATIONS ON USE OF CREDITS AND LOSSES

All Investors

    Each investor in the Fund must be of sufficient  financial  means to apprise
himself of, and assume the risks  inherent in, the purchase of Units,  including
the illiquidity of the investment,  and must evaluate whether such investment is
suitable for him based upon his investment  objectives,  financial situation and
needs. An investor  should only invest in the Fund if he (i) reasonably  expects
to have Federal tax liabilities which can be offset by Tax Credits, and (ii) has
adequate  financial  means to bear the lack of liquidity and the economic  risks
associated with long-term investments in real estate.

    The Code imposes an  alternative  minimum tax on all taxpayers to the extent
the alternative  minimum tax exceeds their  regularly-computed  tax. Tax Credits
cannot be used to reduce alternative minimum tax liability.  Further,  even in a
situation  where a taxpayer  does not have  alternative  minimum  tax  liability
(because his  regularly-computed  tax exceeds his alternative  minimum tax), Tax
Credits  cannot be used to reduce his tax  liability  to an amount less than his
alternative  minimum tax liability.  See "Federal  Income Tax  Considerations  -
Other  Important Tax  Considerations  - Alternative  Minimum Tax."  Accordingly,
investors  are urged to consult  their tax  advisers  to  determine  whether the
alternative  minimum tax may limit their  ability to benefit from the use of Tax
Credits.

    An investment in Units is not suitable for  tax-exempt  entities,  including
pension or profit-sharing plans, Keogh plans and Individual Retirement Accounts.
Accordingly, SUCH ENTITIES WILL NOT BE PERMITTED TO INVEST IN THE FUND.

    A  transferee  of  Units  will be  required  to meet  the  same  suitability
standards  as had been  imposed upon the  transferror  Unitholder,  or such more
restrictive  standards,  if any, as may arise under  applicable state securities
laws.

    In the agreement to be executed by each  Soliciting  Dealer,  the Soliciting
Dealer will agree to make reasonable inquiry of prospective investors concerning
the  suitability of such an investment for such persons and to maintain  records
of such suitability  determinations.  Each Soliciting Dealer is required to make
every  reasonable  effort to assure that an  investment in Units is suitable and
appropriate  for a  potential  investor,  based on  information  provided by the
potential investor as to his financial situation and investment objectives.

    In order to purchase  Units,  an investor  must,  at a minimum,  satisfy the
suitability  standards  applicable to residents of the jurisdiction in which the
investor

                                        41

<PAGE>



is resident.  See "Who Should  Invest;  Limitations on Use of Credits and Losses
Minimum State Suitability Requirements" below. In the case of sales to fiduciary
accounts, the minimum suitability standards must be met by the beneficiary,  the
fiduciary  account,  or by the  donor or  grantor  who  directly  or  indirectly
supplies  the funds to purchase  the Units if the donor or grantor is one of the
fiduciaries.

Individual Investors

    The principal  benefits to be derived from an investment in the Fund are Low
Income Housing Credits and, possibly,  Historic Tax Credits. The extent to which
a prospective  investor can utilize these tax benefits will determine whether or
not he is a suitable investor.

    With respect to natural persons,  Federal tax law imposes limitations on the
utilization of "passive activity" credits and "general  business" credits,  each
of which  category  generally  includes  Tax  Credits.  The Fund is  expected to
generate Tax Credits over a period of 10 to 12 years. Accordingly, as more fully
discussed  elsewhere in this  Prospectus,  an investment in the Fund will not be
suitable for a  prospective  investor  unless he expects  that,  for the next 12
years,  he will be able to utilize  the Tax Credits  under the passive  activity
rules and the general business  credits rules,  and the alternative  minimum tax
rules referred to above.

    The passive activity rules do not impose an adjusted gross income limitation
on  taxpayers  seeking to utilize  Low Income  Housing  Credits,  provided  such
credits  are  derived  from  properties  (such as those in which  the Fund  will
invest)  that are  placed in  service  after  December  31,  1989.  Nonetheless,
prospective investors who do not otherwise materially participate in rental real
estate activities should note that Low Income Housing Credits generally may only
be  used  to  offset  income  tax  liability  on  a  maximum  of  $25,000  of  a
non-corporate  taxpayer's  active or  portfolio  income for each  taxable  year.
Additionally,  there are  further  limits on the  ability of natural  persons to
utilize  Historic  Tax  Credits.  Specifically,  a natural  person  may  utilize
Historic  Tax Credits in the manner  described  above but only to the extent his
adjusted gross income does not exceed $200,000;  the ability of a natural person
to utilize  Historic Tax Credits is phased out if his adjusted  gross is between
$200,000 and $250,000,  and is eliminated if his adjusted  gross income  exceeds
$250,000.  Further, a prospective  investor who is a natural person and who does
not otherwise  materially  participate in rental real estate  activities  should
note that Losses for Tax Purposes will be allowable only to the extent that such
an investor has  sufficient  passive  income to offset such Losses.  For further
information   regarding  the  principal  limitations  that  will  apply  to  the
utilization  for Federal  income tax  purposes of the Tax Credits and Losses for
Tax Purposes  anticipated to be generated by an investment in the Units, see the
entire  discussion  under "Federal  Income Tax  Considerations  - Limitations on
Losses and Credits from Passive  Activities" and "- General  Business Tax Credit
Limitations."

                                        42

<PAGE>




Corporate and Other Entity Investors

    An  estate  or a  trust  other  than a  grantor  trust  should  consider  an
investment  only if it  expects  to have  during  the next 12  years  sufficient
unsheltered  passive  income to  utilize  the Tax  Credits  and  Losses  for Tax
Purposes  anticipated  from its  investment in the Units. A grantor trust should
consider  an  investment  only if  each of its  grantors  meets  the  investment
criteria applicable to it.

    Prospective  corporate  investors  should note that  special  rules apply to
determine  whether  a  corporation  will  be able to  utilize  the tax  benefits
anticipated from an investment in the Units. Accordingly, investment in the Fund
is  suitable  for a  corporation  if,  at a  minimum,  it  meets  the  following
requirements:  (a) in the case of a corporation other than a corporation subject
to Subchapter S of the Code (a "C Corporation") that is neither closely-held nor
a personal service corporation, such corporation expects to have during the next
12 years  sufficient  taxable income from all sources to utilize the Tax Credits
and Losses for Tax Purposes anticipated from its investment in the Units; (b) in
the case of a C Corporation that is closely-held,  but is not a personal service
corporation,  such  corporation  expects  to  have  during  the  next  12  years
sufficient  unsheltered  passive income and/or to have sufficient  other taxable
income,  determined without regard to portfolio income and any passive income or
loss,  to utilize the Tax Credits and Losses for Tax Purposes  anticipated  from
its  investment in the Units;  and (c) in the case of a C Corporation  that is a
personal service  corporation,  such corporation expects to have during the next
12 years  sufficient  unsheltered  passive income to utilize the Tax Credits and
Losses for Tax Purposes  anticipated  from its investment in the Units. For this
purpose,  the term "personal  service  corporation"  includes  corporations  the
principal  activity  of which is the  performance  of  services in the fields of
health,  law,   engineering,   architecture,   accounting,   actuarial  science,
performing arts or consulting.  A closely-held corporation is a corporation that
at any time during the last half of its  relevant  taxable year is more than 50%
owned,  by value,  directly or  indirectly  by five or fewer  shareholders.  See
"Federal  Income Tax  Considerations  -  Limitations  on Losses and Credits from
Passive Activities."

    A  corporation  that  is  subject  to  Subchapter  S  of  the  Code  (an  "S
Corporation")  should  consider an investment  only if each of its  shareholders
holding  a  material   interest   therein  meets  the  criteria   applicable  to
non-corporate  investors.  A partnership  should  consider an investment only if
each of its partners  holding a material  interest  therein meets the investment
criteria applicable to it.

    In  determining  the  suitability  of an  investment  in the Fund, an entity
investor  should also consider the effect of such an investment on its financial
reports.

    Generally,  it is  anticipated  that an investment in Units will increase an
entity  investor's  net income after taxes for financial  reporting  purposes in
each year other

                                        43

<PAGE>



than the first year during the period over which Tax Credits will be  generated.
Increases  in net income  also result in  increases  in  retained  earnings  and
shareholders'  equity.  Thereafter,  the  effect  on net  income  for  financial
reporting purposes will depend upon the method of accounting used.

    The actual  effect on an entity  investor's  net income will depend upon the
results  of  Series'  operations  and the  method of  accounting  adopted by the
investor respecting its investment in the Series. During the past 18 months, the
Emerging Issues Task Force ("EITF") of the Financial  Accounting Standards Board
has been  examining  the methods of  accounting  used by entities  investing  in
low-income  housing through  limited  partnerships.  In general,  as of the date
hereof, the EITF has determined that the permissible methods used to account for
such  investments  include the modified  cost  method,  the equity  method,  the
effective yield method and the full consolidation method.

    Under the modified cost method, an entity investor initially capitalizes the
cost of its investment in the limited  partnership,  and subsequently  amortizes
the difference  between the carrying cost and the aggregate  estimated  residual
value of the limited partnership's property portfolio over the Tax Credit period
of such portfolio.  The estimated  residual value of a property is its estimated
residual  value at the end of the last period in which Tax Credits are allocated
to the investor and will not reflect anticipated inflation.

    Under the equity method, an entity investor  initially  capitalizes the cost
of its investment in the limited partnership,  and subsequently reduces (but not
below zero) or increases the carrying value by the investor's allocable share of
losses or income, respectively, from the limited partnership.

    Under the effective yield method, an entity investor  initially  capitalizes
the  cost  of  its  investment  in the  limited  partnership,  and  subsequently
amortizes  the cost to provide a constant  effective  yield over the period that
the Tax  Credits are  allocated  to the  investor.  The  effective  yield is the
internal rate of return on the  investment,  based on the cost of the investment
and the Tax Credits  allocated to the investor.  Any expected  residual value of
the investment is to be excluded from the effective yield calculation.

    Under the full  consolidation  method,  the  low-income  housing  properties
themselves,  and the results of operations therefrom (rather than the investment
in the limited  partnership)  are  included in the entity  investor's  financial
statements.

    Regardless of the method selected,  the EITF has not changed the requirement
that an investment be reviewed periodically to determine impairment of value.


                                        44

<PAGE>



    With the exception of the effective  yield method,  the method of accounting
to be used by an entity investor in a low-income  housing  program  generally is
not elective but rather is determined by the level of the entity's investment in
the  limited  partnership  and/or the  ability of the  investor  to control  the
limited  partnership.  The effective  yield method may be elected if (a) the tax
credits allocable to the investor are guaranteed by a creditworthy  entity,  (b)
the  investor's  yield based  solely on the cash flows from the  guaranteed  tax
credits is positive, and (c) the investor is a limited partner for legal and tax
purposes and the investor's liability is limited to its capital investment.

    If the  investor is unable to or does not elect to use the  effective  yield
method,  the  appropriate  method will be (i) the modified  cost method,  if the
investor's  interest  in the  limited  partnership  is so  minor  as to give the
investor  virtually  no  influence  over  partnership  operating  and  financial
policies;  (ii) the equity  method,  if the  investor  owns less than 50% of the
limited partnership and has no significant control over partnership policies; or
(iii) the full  consolidation  method,  if the investor  owns 50% or more of the
limited  partnership  unless  the  investor  has  no  significant  control  over
partnership  policies,  in which event the equity method is to be used. To date,
the EITF has provided no  "bright-line"  ownership  test for use in  determining
when an  investor's  interest is so minor as to give the investor  "virtually no
influence over partnership  operating and financial  policies." The staff of the
Securities  and  Exchange  Commission,   however,  understands  that  accounting
practice  generally has viewed investments of more than 3% to 5% to be more than
minor.

    It is  anticipated  that  entity  investors  in a Series will use either the
modified cost method or the equity method. As indicated above,  under the equity
method (but not under the modified cost method) an investor will actually report
its share of Series' losses or income. In this regard,  for financial  reporting
purposes each Series is expected to use the equity method,  which will result in
recognition  by the  Series of its share of  losses or income  from the  limited
partnerships in which it invests.

Minimum State Suitability Requirements

    The Units may be offered and sold only in those  jurisdictions in which they
have been  registered or qualified for sale or are exempt from the  registration
or qualification requirement.

    Set forth below are the minimum  suitability  standards for residents of the
District of Columbia and of each state in which the Fund has applied to have the
Units  registered  or  qualified  for  sale.  For these  purposes,  net worth is
exclusive of home, furnishings and automobiles.


                                        45

<PAGE>



    Alabama,  Arizona,  Arkansas,   Indiana,  Kentucky,   Michigan,   Minnesota,
Mississippi,  Missouri,  Nebraska,  New Hampshire,  New Mexico,  North Carolina,
Oklahoma,   Oregon,   Tennessee,   Texas,   Vermont,   Virginia  and   Wisconsin
Requirements.  Each investor in Alabama, Arizona,  Arkansas,  Indiana, Kentucky,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico,
North  Carolina,  Oklahoma,  Oregon,  Tennessee,  Texas,  Vermont,  Virginia  or
Wisconsin  must have (i) an annual  gross  income of at least  $45,000 and a net
worth of at least $45,000 or (ii) a net worth of at least $150,000.

    Alaska,  Colorado,  Connecticut,  Delaware,  District of Columbia,  Florida,
Georgia, Hawaii, Idaho, Illinois, Kansas, Louisiana,  Maryland, Montana, Nevada,
New Jersey, North Dakota, Rhode Island, South Carolina,  Utah, West Virginia and
Wyoming. Each investor in Alaska, Colorado,  Connecticut,  Delaware, District of
Columbia,   Florida,  Georgia,  Hawaii,  Idaho,  Illinois,   Kansas,  Louisiana,
Maryland,  Montana,  Nevada,  New Jersey,  North  Dakota,  Rhode  Island,  South
Carolina, Utah, West Virginia or Wyoming must have (i) an annual gross income of
at least  $35,000 and a net worth of at least  $35,000 or (ii) a net worth of at
least $75,000.

    California  and  Washington  Requirements.  Each  investor in  California or
Washington  must have (i) an annual gross  income of at least  $50,000 and a net
worth of at least $65,000 or (ii) a net worth of at least $200,000.

    Iowa and Massachusetts Requirements.  Each investor in Iowa or Massachusetts
who purchases his Units  entirely with cash must have (i) an annual gross income
of at least  $45,000 and a net worth of at least  $45,000 or (ii) a net worth of
at least  $150,000.  Each  investor in Iowa or  Massachusetts  who purchases his
Units with a  Promissory  Note must have (i) an annual  gross income of at least
$60,000  and a net  worth of at least  $60,000  or (ii) a net  worth of at least
$225,000.

    Maine  Requirements.  Each  investor in Maine must have (i) an annual  gross
income of at least  $50,000  and a net worth of at least  $50,000  or (ii) a net
worth of at least  $200,000.  No  investor  in Maine may  purchase  Units with a
Promissory  Note;  each investor in Maine must purchase his Units on an all-cash
basis.

    Ohio  Requirements.  Each  investor  in Ohio must  have (i) an annual  gross
income of at least  $45,000  and a net worth of at least  $45,000  or (ii) a net
worth of at least $150,000.  No investor in Ohio may invest more than 10% of his
net worth in a Series.

     Pennsylvania  Requirements.  Each investor in Pennsylvania must have (i) an
annual gross income of at least  $45,000 and a net worth of at least  $45,000 or
(ii) a net worth of at least $150,000.  No investor in  Pennsylvania  may invest
more than 10% of his net worth in a Series.  Because the minimum  closing amount
for each

                                        46

<PAGE>



Series  is  less  than   $2,500,000,   the  amount   suggested  by  Pennsylvania
regulations,  prospective investors who are Pennsylvania residents are cautioned
to  carefully  evaluate  the  ability  of the  Fund  to  accomplish  its  stated
objectives   and  to  inquire  as  to  the  current   dollar  volume  of  Series
subscriptions.

                             ESTIMATED USE OF PROCEEDS

    The following table sets forth  information  concerning the estimated use of
proceeds from the sale of the Units. As indicated therein,  approximately 75% of
the total proceeds will be invested in Local Limited  Partnerships.  The amounts
in the table  represent  the Fund  Manager's  present  estimates  and the actual
amounts may be different.

<TABLE>


                                             Percentage                    Percentage
                                    Minimum    of Gross        Maximum     of Gross
                                   Proceeds  Proceeds(1)       Proceeds    Proceeds(1)

<S>                              <C>            <C>         <C>             <C>                 
Gross Offering Proceeds (2)      $1,400,000     100.00%     $50,000,000     100.00%

Less Public Offering Expenses:

<S>                                 <C>           <C>         <C>             <C>  
Selling Commissions (3)             105,000       7.50%       3,750,000       7.50%
Dealer-Manager Fee (4)               14,000       1.00%         500,000       1.00%
Other Organizational and
  Offering Expenses (4)(5)           70,000       5.00%       2,500,000       5.00%
                                  -----------    -------     -------------   -------

Public Offering Expenses (6)        189,000      13.50%       6,750,000      13.50%

Amount Available for Investment  $1,211,000      86.50%     $43,250,000      86.50%
                                 ==========      ======     ===========      ======

Acquisition Expenses (7)             14,000       1.00%         500,000       1.00%

Acquisition Fees (6)(7)             105,000       7.50%       3,750,000       7.50%

Working Capital Reserves (8)         42,000       3.00%       1,500,000       3.00%
                                 ------------   -------    --------------     -----

Proceeds Invested (9)(10)        $1,050,000      75.00%      37,500,000      75.00%
                                  ==========     ======     ===========      ======


<FN>
(1)      It is expected that all Capital  Contributions as received,  whether at
         the time of subscription or as a result of payments of installments due
         under  the  Promissory  Notes,  will be  applied  substantially  in the
         percentages indicated herein.

(2)      Excludes one Unit  purchased by the Initial  Unitholder.  Also excludes
         interest on the unpaid principal  balance of each Promissory Note which
         shall be payable along with  principal.  See "Terms of the Offering and
         Plan of  Distribution."  The amount of interest actually to be received
         by

                                        47

<PAGE>



         a Series pursuant to Promissory  Notes cannot be estimated,  as it will
         depend on the dates of receipt of the respective  subscriptions and the
         amounts and dates of payment of the Promissory Notes. Any such interest
         will  constitute  Cash Flow, and as such may be used, in the discretion
         of the Fund Manager,  to defray  administrative  costs,  or to increase
         reserves or the amount available for distribution to the Unitholders as
         Cash Available for Distribution.

(3)      For information concerning additional underwriting compensation payable
         by the Fund,  see "Terms of the Offering and Plan of  Distribution."  
         As is also discussed in that section of this Prospectus, selling 
         commissions may be reduced for purchases of $100,000 or more by any  
         "Purchaser"  and Designated  Investors may purchase  Units with a 
         reduced  sales  commission.  For the purposes of this table, it has 
         been assumed that the maximum selling commissions will be paid.

(4)      See "Management Compensation" and "Terms of the Offering and Plan of
         Distribution."

(5)      It is possible  that a greater  amount of  Organizational  and Offering
         Expenses  will be paid  from  the  proceeds  of one  Series  than  from
         another.  To the extent  Units are sold in two Series,  one Series will
         reimburse the other to the extent  necessary so that the pro rata share
         of  Organizational  and Offering  Expenses  borne by each Series is the
         same.

(6)      The portion of Public Offering  Expenses and  Acquisition  Fees payable
         from payments to be received on the  Promissory  Notes may only be paid
         as the payments are actually received on the Promissory Notes.

(7)      See "Management Compensation."

(8)      See "Investment Objectives and Policies - Reserves."

(9)      Proceeds Invested represents amounts payable for the acquisition of 
         Local Limited Partnership Interests.  Portions of Proceeds Invested 
         may be used to repay the Fund Manager or its Affiliates amounts 
         advanced by them (including interest and carrying costs) to enable a 
         Series to make initial investments in Local Limited Partnership 
         Interests prior to the sale of Units.  See "Investment Objectives and 
         Policies - Investment Policies."  The Local General Partner of each 
         Local Limited Partnership and/or his Affiliates may retain as 
         compensation, after deduction of amounts provided by the Local General 
         Partner or the Local Limited Partnership for the development of the 
         Apartment Complex, a portion of the Proceeds Invested, which will be 
         negotiated in each case and is anticipated to be

                                        48

<PAGE>



         equal to approximately  10% to 30% (although in some cases it may be as
         much as 40%) of the  cost of the  Apartment  Complex.  See  "Investment
         Objectives  and Policies -  Investment  Policies."  For each  Apartment
         Complex being constructed or rehabilitated, these costs will consist of
         the  cost  of  the  land  (and   building   shell  in  the  case  of  a
         rehabilitation),  construction costs,  construction interest and taxes,
         financing fees and developmental and organizational expenses.

(10)     The Partnership Agreement requires that each Series commit, at a
         minimum, a percentage of Capital Contributions to Investment in Local
         Limited Partnership Interests (defined in the Partnership Agreement to
         include Reserves of up to 5% of Gross Proceeds as well as amounts used
         to acquire interests in Apartment Complexes) which is equal to the 
         greater of (i) 80% of the Capital Contributions reduced by 0.1625% for
         each 1% of the Series' allocable share of the mortgage financing 
         encumbering the Apartment Complexes or (ii) 70% of the Capital 
         Contributions.  For example, at a leverage rate of 60%, the minimum 
         Investment in Local Limited Partnership Interests would be 70.25% of 
         Capital Contributions ($983,500 of the minimum Gross Offering Proceeds 
         of $1,400,000), decreasing to a minimum of 70% of Capital Contributions
         ($980,000) at a leverage rate of 62.15% and above.
</FN>
</TABLE>

Deferred Installments

    Units  are being  offered  at a price of  $1,000  per  Unit,  with a minimum
investment of five Units ($5,000), except that employees of the Fund Manager and
its Affiliates, and/or investors in limited partnerships previously sponsored by
the Fund Manager may  purchase a minimum of two Units  ($2,000).  Investors  who
subscribe  for fewer than 10 Units  ($10,000)  must pay the full  amount of such
purchase price in cash upon subscription.  However,  investors who subscribe for
10 Units or more in any one  Series  may elect to pay only 50% of such  purchase
price in cash upon  subscription  and the  remaining  50% by the  delivery  of a
promissory note (the "Promissory  Note") payable,  together with interest,  in a
single installment on (i) March 31, 1996, if the investor subscribes between the
date hereof and  December  31,  1995,  (ii)  January 31,  1997,  if the investor
subscribes  between  January 1, 1996 and June 1, 1996, or (iii) the later of the
date of subscription or June 30, 1997, if the investor  subscribes after June 1,
1996.

    Promissory  Notes  will be (i)  prepayable  at any time in full  (but not in
partial prepayments), without penalty or premium, (ii) secured by the respective
Unitholder's interest in the Series, and (iii) a full recourse obligation of the
respective  Unitholder.  If a Unitholder  should fail to make the full amount of
the required  payments on a Promissory  Note, the Series would have the right to
recover by legal  proceedings the amount of the Promissory Note remaining unpaid
from

                                        49

<PAGE>



such  Unitholder.  In addition,  the Series would have the right to foreclose on
the Units of such Unitholder under its security interest or to cause a resale of
one or  more  of such  Unitholder's  Units  or to  offset  Series  distributions
allocable to such Units under the provisions of Section 3.4.1 of the Partnership
Agreement. See "Summary of Certain Provisions of the Partnership Agreement." The
obligation  of each  Unitholder  to pay his  Promissory  Note to the  Series  is
unconditional and involves certain risks. See "Risk Factors - Fund-Related Risks
- - Obligations for Capital Contributions."

    The Fund Manager and its Affiliates have substantial experience with respect
to the collection and application of deferred  investor  payments in their prior
limited partnerships. See "Management" and "Prior Performance Summary." Based on
this experience,  the Fund Manager  believes that deferred payment  arrangements
can offer  significant  benefits to investors in direct  participation  programs
such as the Fund,  notwithstanding  the risks  referred  to  above.  A  deferred
payment arrangement permits a more effective utilization of offering proceeds by
a partnership by minimizing  the time during which  unneeded  investor funds are
held by the  partnership.  Rather than holding investor funds idle, or investing
them in low-yielding  short-term government securities,  it is more efficient to
match payments from investors with the  partnership's  actual needs for capital.
This  allows  investors  to retain the use of their  funds  until  needed by the
Series. Also based on this experience,  however,  the Fund Manager has concluded
that the administrative  costs involved in processing and collecting  promissory
notes make it  advisable  that such  installment  payment  arrangements  only be
available  to  purchasers  of  a  significant  amount  of  limited   partnership
interests,  and has determined  that amount should be 10 Units ($10,000) or more
in the case of the Fund.

    Business  Development Plan. The Fund has adopted a business development plan
for the utilization of initial and deferred  investor  payments which takes into
account the historical patterns of deferred  installment  payments in connection
with  investments  in Local  Limited  Partnerships,  such as those in which each
Series will invest,  formed primarily to develop or  substantially  rehabilitate
Apartment  Complexes  which benefit from Government  Assistance.  No Series will
have a  policy  of  deferring  commitments  for  investments  until  receipt  of
principal  payments on the Promissory  Notes;  rather,  each Series will seek to
make its investment  commitments  at the earliest  possible  date.  However,  as
discussed  below  under   "Investment   Objectives  and  Policies  -  Investment
Policies,"  each Series will  normally  make its capital  contributions  to each
Local Limited Partnership in stages over a period of one to two years, with each
contribution due when certain  conditions  regarding  construction or leasing of
the Apartment Complex have been fulfilled.

    For example (and solely for illustrative  purposes),  a Series' contribution
could be made over a one- to two-year  period subject to satisfaction of some or
all of the

                                        50

<PAGE>



following  requirements:  (1)  reservation  of Low Income  Housing  Credits  and
receipt of Form 8609 (Low-Income  Housing Credit Allocation  Certification) with
respect  thereto;  (2) admission of the Series as a limited partner to the Local
Limited  Partnership;  (3) substantial  completion of the Apartment Complex; (4)
receipt of a commitment for or closing of the construction  loan; (5) receipt of
a commitment for or closing of the permanent  loan;  and/or (6) occupancy of the
Low Income Units by qualified tenants.

    Each Series  intends  generally  to structure  the timing of these  deferred
capital  contributions so that not more than one-half of the total amount of its
capital  contribution to any Local Limited Partnership is due (after taking into
account any  applicable  grace  period for the  benefit of the Series)  prior to
March 1996 and that not more than  three-quarters  of such  contribution  is due
prior to January  1997.  However,  there cannot be any  assurance  that payments
required  under the  Promissory  Notes will be made when due, in which event the
Fund  Manager may attempt to  renegotiate  the  obligations  of the Series or to
obtain additional  financing from institutional or other lenders.  The inability
of a Series to perform its  obligations  to a Local  Limited  Partnership  could
result in the dilution or  termination of a Local Limited  Partnership  Interest
with resultant recapture of  previouslyclaimed  Tax Credits and loss of expected
future Tax Credits  pertaining to its Apartment  Complex or legal actions by the
Local General  Partners to require  performance  of such  obligations  and/or to
recover  their damages and costs.  The Fund Manager will seek to mitigate  these
risks by  attempting  to negotiate  certain  protective  provisions in the Local
Limited  Partnership  purchase  agreements or  commitments.  Such provisions may
include extensions of the due dates for payment,  releases from such commitments
if  proceeds  are not  available,  or dilution  of a Local  Limited  Partnership
Interest to permit a reduced investment in an Apartment Complex.  However, there
is no assurance  that any of these  mitigation  measures  could be  successfully
implemented.

    In the  event  that a  Unitholder  defaults  on his  obligation  to pay  the
deferred  installments and interest when due, or any other Event of Default,  as
defined  in the  Promissory  Note,  occurs  he will face  serious  consequences,
including  acceleration of his Promissory Note, loss of right to Tax Credits and
foreclosure and sale of his Units. Late installments will also be subject to the
payment of late charges.  See "Summary of Certain  Provisions of the Partnership
Agreement." In addition to a Unitholder's  liability under his Promissory  Note,
the  Unitholder  may  also be  liable  to his  Series  or  other  holder  of the
Promissory  Note, as applicable,  for any expenses  incurred in enforcing  their
respective rights.

    The Partnership Agreement requires that the portion of Front-End Fees (e.g.,
selling commissions,  Organizational and Offering Expenses and Acquisition Fees)
payable from payments to be received on the Promissory Notes may only be paid as
the payments are actually received on the Promissory Notes.

                                        51

<PAGE>




    Prepayments and Temporary  Investments.  The Fund Manager  anticipates  that
some  investors  will not subscribe for a sufficient  number of Units to qualify
for the use of the installment payment arrangement described above and that some
investors  who do  qualify  will  desire  to pay for  their  Units in full  upon
subscription  or to later  prepay  their  Promissory  Notes  to avoid or  reduce
interest costs or otherwise in connection with their own financial planning. The
Fund Manager  cannot predict the percentage of Fund equity which may be so paid.
The business  development plan of the Fund  contemplates that any such payments,
whether at the  inception of the program or  thereafter,  will be applied in the
following order of priority: (i) to fund related amounts of Front-End Fees which
have been  deferred as described in the  preceding  paragraph,  and (ii) to make
Temporary  Investments  and  applied  as soon as  practicable  to Local  Limited
Partnership investments and other deferred costs.

    Policies  as to Pledges  of  Promissory  Notes.  The  Partnership  Agreement
precludes  each Series from  selling  Promissory  Notes prior to  maturity,  but
permits a Series to pledge and grant security  interests in Promissory  Notes as
security for any Series obligation.  Such security interests in Promissory Notes
may be  granted  by a Series  to  secure  its  obligations  to pay the  deferred
portions of its capital contribution to the Local Limited Partnerships.

                              MANAGEMENT COMPENSATION

    The following table summarizes the types,  estimated  amounts and recipients
of  compensation  to be paid  to the  Fund  Manager  and  its  Affiliates.  Such
compensation   was  not  determined  by  arm's-length   negotiations.   Further,
investment and management  decisions which such persons make for the Series will
affect the amount of the compensation actually to be received.  For example, one
of the  limits  on the  Asset  Management  Fee  payable  by a Series to the Fund
Manager is based on the number of  Apartment  Complexes  invested in which could
cause a conflict  of interest  because it could  encourage  the Fund  Manager to
maximize  the  number  of  Apartment  Complexes  acquired.   See  "Conflicts  of
Interest." Other than as set forth herein,  no compensation is to be paid to the
Fund Manager or its  Affiliates,  and such  compensation  cannot be increased by
reclassifying  into different  categories  fees or  reimbursements  which are in
excess of the limitations set forth herein.


Type of Compensation                      Estimated Maximum Amount
and Recipient                             of Compensation                     


                         Organizational and Offering Stage

Selling  commissions  payable to          Up to 7.5% of the Capital 
Dealer-Manager                            Contributions in the discretion of 
                                          the Dealer-Manager ($105,000 

                                       52

<PAGE>

                                          if 1,400 Units are sold; $3,750,000 
                                          if all of the Units are sold). (1)

Dealer-Manager Fee payable to             Up to 1% of the Capital Contributions
Dealer-manager                            $14,000 if 1,400 Units are sold;
                                          $500,000 if all of the Units are sold)
                                          (1)

Nonaccountable  Expense                   1% of the Capital ($14,000 if 1,400
Contributions                             are sold; $500,000 if all of the
Reimbursement payable to Dealer-          Units are sold). (1)
Manager  

 

Accountable  reimbursement of certain     The Fund Manager and its Affiliates 
Organizational and Offering Expenses      will be  reimbursed  by each    
paid by the Fund Manager or its           Series from the Gross  Proceeds   
Affiliates                                for the actual amount of 
                                          Organizational and Offering  Expenses 
                                          advanced by them on behalf of such 
                                          Series and for salaries and direct 
                                          expenses of certain of their employees
                                          in connection with the organization 
                                          and registration of such Series. 
                                          Such expenses may include printing,  
                                          legal, accounting, Escrow Agent and 
                                          depository  fees, due diligence
                                          expenses and other accountable 
                                          Organizational and Offering Expenses.
                                          Notwithstanding, the Fund Manager the 
                                          agreed  that  it will  pay all  other
                                          Organizational and Offering Expenses  
                                          (with the exception of the 7.5% retail
                                          selling commissions, the Dealer-
                                          Manager Fee and the Nonaccountable 
                                          Expense Reimbursement) to the extent 
                                          such other expenses exceed an 
                                          aggregate  amount equal  to 4% of the
                                          Capital Contributions.  However,  if  
                                          and to the extent Acquisition Expenses
                                          are less than the maximum permitted  
                                          amount, as set forth below in this 
                                          table, the difference between the 
                                          actual Acquisition  Expenses and
                                          the  maximum  permitted  amount of


                                       53
<PAGE>

  
                                          Acquisition Expenses will reduce the 
                                          Fund Manager's obligation to pay such 
                                          Organizational and Offering Expenses,
                                          but in any event the Fund Manager has
                                          agreed to pay the amount of such  
                                          expenses in excess of 5% of the 
                                          Capital  Contributions.  In addition,
                                          the Fund Manager has agreed to pay all
                                          Organizational and Offering Expenses  
                                          (including  the 7.5% retail selling 
                                          commissions, the Dealer-Manager Fee 
                                          and  the  Nonaccountable Expense  
                                          Reimbursement) in excess of 14.5% of 
                                          the Capital  Contributions.  Each
                                          such guaranty is without recourse to 
                                          or  reimbursement by the Fund.  
                                          ($56,000 if 1,400  Units are sold and 
                                          the  maximum  Acquisition  Expenses  
                                          are  reimbursed; $70,000 if 1,400 
                                          Units are sold and no Acquisition 
                                          Expenses  are  reimbursed; $2,000,000 
                                          if all of the Units are sold and the 
                                          maximum Acquisition Expenses are
                                          reimbursed;  $2,500,000 if all of the 
                                          Units are sold and no Acquisition 
                                          Expenses are reimbursed).

                               Acquisition Stage (2)

Acquisition  Fee payable to the           Up to 7.5% of the Capital 
Fund Manager or its Affiliates            Contributions (up to $105,000) if
                                          1,400 Units are sold; up to $3,750,000
                                          if all of the Units are sold). (3)




                                        54

<PAGE>



Reimbursement of Acquisition             The Fund Manager and its Affiliates
Expenses paid by the Fund                will be reimbursed by each Series from
Manager or its Affiliates                the Gross Proceeds for the actual
                                         amount of any of the Acquisition 
                                         Expenses (i.e., legal, accounting and 
                                         other expenses pertaining to the  
                                         negotiation and  acquisition  of Local
                                         Limited Partnership Interests) advanced
                                         by them. These reimbursements plus all 
                                         other Acquisition Expenses will not 
                                         exceed 1% of Capital Contributions 
                                         ($14,000 if 1,400 Units are sold; 
                                         $500,000 if all of the Units are sold).

                                  Operating Stage

Asset  Management  Fees payable to       An annual fee in an initial amount
the Fund Manager or its  Affiliates      equal to the greater of (i) $2,000
                                         for each  Apartment Complex,  or (ii)  
                                         0.275% of Gross  Proceeds.  In either  
                                         case, the fee will be decreased or 
                                         increased annually based on changes to 
                                         the Consumer Price Index.  However, in 
                                         no event will the maximum amount 
                                         exceed 0.2% of Invested  Assets in
                                         government-subsidized Local Limited 
                                         Partnerships which are subsidized 
                                         under one or more Federal, state or 
                                         local government programs. (Initially, 
                                         a maximum of the greater of $2,000 per 
                                         Apartment Complex or $3,850 if 1,400 
                                         Units are sold; a maximum of the 
                                         greater of $2,000 per Apartment Complex
                                         or $137,500 if all the Units are sold).

Property  management  or  leasing        Although not anticipated, the Fund 
fees  payable  to  the  Fund  Manager    Manager or its Affiliates may act as 
or its Affiliates                        the management and leasing agents for
                                         some of the Local Limited Partnerships.
                                         Actual  amounts which may be received 
                                         by the Fund Manager or its Affiliates 
                                         for such services are not determinable

                                       55
<PAGE>

 
                                         at this time, but in any event would be
                                         at Competitive rates for comparable  
                                         services, not to exceed 5% of gross 
                                         property revenues.

Reimbursement  of Fund expenses          The Fund Manager and its Affiliates
paid by the Fund Manager or its          will be reimbursed for the actual
Affiliates                               amount of any of the Operating Cash
                                         Expenses  advanced  by  them.  Actual  
                                         amounts are not determinable at this 
                                         time, but in no event will reimburse-
                                         ments be permitted for (i) services for
                                         which the Fund Manager is entitled to  
                                         compensation by way of a separate fee, 
                                         (ii) rent, depreciation or other such  
                                         administrative items, or (iii) salaries
                                         fringe benefits or travel expenses of a
                                         controlling person of the Fund Manager.
                                         Actual amounts are not determinable at 
                                         this time.

Fund Manager's share of Cash             1% of Cash Available for Distribution.
Available for Distribution               Actual amounts will depend upon results
                                         of operations of the Series and are not
                                         determinable at this time.

SLP Affiliate's  share of allocations    Up to 0.1% of all allocations by Local
and operating cash distributions of      Limited Partnerships of profits,
Local Limited Partnerships               losses and Tax Credits and up to 1% of
                                         distributions from operating cash flow.
                                         Actual amounts will depend upon the 
                                         terms of the Local Limited Partnership 
                                         Agreement and the results of the Local 
                                         Limited  Partnership's operations and 
                                         are not determinable at this time. (4)

Local General Partner's share of         In the event the SLP Affiliate or
allocations and operating cash           another Affiliate of the Fund Manager
distributions of any Local Limited       becomes the Local General Partner of a
Partnership in the event that an         Local General Partner of a Local 
Affiliate of the Fund Manager            Limited Partnership, such Affiliate may
(which may be the SLP Affiliate)         receive allocations by the Local
becomes the Local General Partner        Limited Partnership of profits, losses
of such Local Limited  Partnership       and Tax Credits and distributions from

                                       56

<PAGE>


                                         operating cash  flow.  Actual  amounts 
                                         will depend upon the terms of the Local
                                         Limited Partnership Agreement and  the 
                                         results of the Local Limited 
                                         Partnership's operations and are not 
                                         determinable at this time. (4)

                               Liquidation Stage (5)

Fund Manager's Subordinated              Subject to the prior return of Capital
Disposition Fee                          Contributions to its Unitholders and
                                         Fund Manager, and payment of the Return
                                         on Investment, which includes Tax 
                                         Credits, to the Unitholders, a Series  
                                         may pay the Fund  Manager from the 
                                         proceeds  of Apartment  Complexes sold 
                                         by  Local  Limited   Partnerships,   a 
                                         Subordinated Disposition Fee equal to 
                                         1% of the sales price of the Apartment 
                                         Complexes.  Actual amounts will depend 
                                         upon results of the sale and are not  
                                         determinable at this time. (6)

Fund Manager's share of Sale or          After its Unitholders have received
Refinancing  Proceeds                    Sale or Refinancing Proceeds equal to
                                         the amounts of their  Capital
                                         Contributions and their Return on 
                                         Investment, which includes Tax Credits,
                                         and the Fund  Manager has  received (i)
                                         Sale or Refinancing Proceeds equal to 
                                         the amount of its Capital 
                                         Contributions, and (ii) any 
                                         Subordinated Disposition Fee, a Series 
                                         will distribute any additional Sale or 
                                         Refinancing  Proceeds 90% to its
                                         Unitholders and 10% to the Fund 
                                         Manager.  Actual  amounts will depend 
                                         upon the amount of Sale or Refinancing 
                                         Proceeds received from Local Limited 
                                         Partnerships and are not determinable 
                                         at this time.


                                        57

<PAGE>



Local General Partner's share of         In the event that the SLP Affliate or
distributions  from a Sale or            another Affiliate of the Fund Manager
Refinancing transaction  by any          becomes the Local General Partner of
Local Limited  Partnership in the        a Local Limited Partnership, such
event that an Affiliate of the Fund      Affiliate may receive distributions
Manager  (which may be the SLP           from the Sale or Refinancing of the 
Affiliate)  becomes the Local            Local Limited Partnership's Apartment
General Partner of such Local            Complex.  Actual amounts will depend
Limited Partnership                      upon the terms of the Local Limited
                                         Partnership Agreement and the results
                                         of Local Limited Partnership operations
                                         and are not determinable at this time.
                                         (4)                                   


                               Interest in Fund (7)

Fund Manager's allocations of            Generally, 1% of Profits and Losses
Profits and Losses for Tax               for Tax Purposes and of Tax Credits,
Purposes and Tax Credits                 except that in the case of Profits for
                                         Tax Purposes arising from a Sale or
                                         Refinancing, the percentage may be 
                                         increased to as much as 10%, calculated
                                         in accordance with the Partnership 
                                         Agreement. Actual amounts allocable to 
                                         the Fund Manager will  depend  upon  
                                         results of operations of the Series and
                                         the Local Limited Partnerships and are 
                                         not determinable at this time.

(1)      All or a portion of these amounts may be reallowed to participating
         Soliciting Dealers.

(2)      In addition, the Fund Manager or its Affiliates may receive interest on
         short-term loans to a Series to facilitate investments in Apartment
         Complexes prior to the sale by the Series of that number of Units 
         sufficient to fund such purchases, or for other Series' purposes, 
         subject to the restrictions set forth in Section 5.3.1(ii) of the 
         Partnership Agreement, which provides that the maximum amount of 
         interest charged on such loans shall in no event exceed by more than 2%
         per annum the Prime Rate.

(3)      Acquisition  Fees to the Fund Manager and its Affiliates are subject to
         reduction  in the case of Unit  purchases  by  Discount  Investors,  as
         discussed  under  "Terms  of the  Offering  and Plan of  Distribution."
         Acquisition Fees

                                        58

<PAGE>



         may also be reduced from time to time as deemed appropriate by the Fund
         Manager in its sole discretion.

(4)      Notwithstanding, the interest of the Fund Manager and each of its
         Affiliates in cash to be distributed by the Partnership or by any Local
         Limited Partnership from Cash Available for Distribution, from Sale or
         Refinancing Proceeds, or from similar sources in the case of a Local
         Limited Partnership, will not exceed, in the case of Cash Available for
         Distribution, 10% of total Cash Available for Distribution and, in the 
         case of Sale or Refinancing Proceeds, after payment to the Limited 
         Partners of an amount equal to 100% of their Capital Contributions and 
         their Return on Investment, 15% of remaining Sale or Refinancing 
         Proceeds.

(5)      Liquidation Stage includes liquidations of investments in Apartment
         Complexes.

(6)      In compliance with the "blue sky" laws of certain states in which the 
         Units will be offered, a Subordinated Disposition Fee will be paid by a
         Series with respect to the sale of an Apartment Complex only if the 
         Fund Manager or an Affiliate provides a substantial amount of services 
         in the sales effort.  The Partnership Agreement does not specify the 
         extent of the services which will be required to satisfy this 
         requirement, and the Fund Manager will cause such a fee to be paid when
         it believes that it is appropriate to do so.

(7)      See "Profits and Losses for Tax Purposes, Tax Credits and Cash
         Distributions."

                               CONFLICTS OF INTEREST

    The interests of the Fund Manager and its  Affiliates  may conflict with the
interests of the Unitholders in various ways. These conflicts include:

Receipt of Fees and Other Compensation by the Fund Manager and its
Affiliates

    The Fund  Manager  has  absolute  discretion  with  respect to  transactions
involving  the  purchase,  sale and  management  of the Series'  investments  in
Apartment Complexes which will result in the realization by the Fund Manager and
its  Affiliates  of  fees,   compensation  and  other  income.  See  "Investment
Objectives  and  Policies,"  "Management  Compensation"  and "Summary of Certain
Provisions of the Partnership  Agreement." Such  compensation  arrangements were
not negotiated at arm's length and may create conflicts between the interests of
the Fund Manager and its Affiliates and those of the Series and the Unitholders.

                                        59

<PAGE>




    For  example,  the  Asset  Management  Fee  would be  increased  if a Series
invested in a greater number of smaller  Apartment  Complexes than if the Series
invested in a fewer number of larger Apartment  Complexes.  The Asset Management
Fee would also be increased if the Series  invested a greater  percentage of its
Net  Proceeds  in  government-subsidized   rather  than  conventionally-financed
Apartment  Complexes.   And  by  negotiating  with  Local  General  Partners  of
partnerships  in which the  Series  might  invest  for the Fund  Manager  or its
Affiliates to provide  property  management  or leasing  services to those Local
Limited  Partnerships,  the Fund Manager may cause it or its  Affiliates to earn
property management or leasing fees from the Local Limited  Partnerships,  as is
permitted under the Partnership  Agreement.  The result of these conflicts could
be that a Series  may make  investments  which are less  desirable,  or on terms
which are less  favorable,  to the Series than might  otherwise be the case.  In
addition, in connection with the sale of an Apartment Complex by a Local Limited
Partnership  the consent of the SLP Affiliate  and/or a Series may be necessary.
The  Fund  Manager  and  the  SLP   Affiliate  may  face  a  conflict  in  these
circumstances  inasmuch  as their  share  of Sale or  Refinancing  Proceeds  and
Subordinated  Disposition Fees from the transaction may be more or less than the
Fund  Manager's  expected  share of Asset  Management  Fees which  would be paid
absent the sale of the Apartment Complex.

Other Business Activities of the Fund Manager and its Affiliates

    The Fund Manager and its  Affiliates  have formed and are serving as general
partners of other public and private real estate  limited  partnerships  and are
providing  administrative and consulting  services for other real estate limited
partnerships of which they were not the original managing general partners.  See
"Management" and "Prior Performance Summary." In addition,  the Fund Manager and
its  Affiliates  may in the future  become  general  partners of other public or
private  real  estate  limited  partnerships  and may become  involved  in other
business activities unrelated to the business of the Fund.

    Under the Partnership  Agreement,  the Fund Manager is required to devote to
the  affairs  of each  Series  only such  time as is  necessary  for the  proper
performance  of its duties under the  Partnership  Agreement.  The duties of the
Fund Manager will be performed by its officers, directors and employees. None of
such persons are expected to devote their full time to the  performance  of such
duties.  Therefore,  conflicts  may arise in the  allocation  of the time of the
officers,  directors and  employees of the Fund Manager among the  activities of
each Series and the other  activities  of the Fund  Manager.  However,  the Fund
Manager believes that it has sufficient  personnel to fully discharge its duties
to the  Series and to all other  entities  to which  they are  responsible.  See
"Management."


                                        60

<PAGE>



Competition with the Fund Manager and its Affiliates with Respect to the
Purchase or Ownership of Properties

    As noted  above,  the  Fund  Manager  and its  Affiliates  are also  general
partners of a substantial  number of other real estate limited  partnerships and
in the future may form and manage  additional real estate limited  partnerships.
The other existing  partnerships  have, and it is expected that any partnerships
to be  organized  in the  future  will  have,  the  same or  similar  investment
objectives as the Fund.

    The Fund Manager  might be presented  with an investment  opportunity  which
might be availed of by a Series and one or more other  entities  (including  the
other Series) which the Fund Manager or one of its Affiliates  manages, in which
event the Series may be unable to consummate the investment.  The decision as to
the  particular  entity which will make the  investment  will be based upon such
factors as the effect of the  acquisition  on  diversification  of each entity's
portfolio,  the estimated income tax effects of the purchase on each entity, the
amount of funds of each entity  available for  investment and the length of time
such funds have been  available for  investment.  If a particular  investment is
determined to be suitable for more than one entity,  priority  generally will be
given to the entity  having  uninvested  funds for the  longest  period of time;
except  that (i) an entity  which was formed to invest  primarily  in  apartment
complexes  eligible for California or other state low income housing  credits as
well as the Federal Low Income  Housing  Credit will be given priority over each
Series  and other  entities  which are not  seeking  to  provide  such state tax
credits  with  respect to any  investment  which is eligible  for such state tax
credits  and (ii) each  Series and any other  entity  which was formed to invest
primarily  in  apartment  complexes  eligible  only for the  Federal  Low Income
Housing Credit will be given  priority with respect to any  investment  which is
not  eligible  for state tax  credits  over any  entities  which are  seeking to
provide such state tax credits as well as the Federal Low Income Housing Credit.

    The Local General Partners and their Affiliates and the Fund Manager and its
Affiliates  may  presently own or may acquire  interests in  properties  near or
adjacent to the Apartment Complexes in which a Series may invest. It is possible
that the  value of  properties  in which  such  persons  have  interests  may be
enhanced by their  proximity  to the Series'  Apartment  Complexes  or that such
properties  may be in  competition  with the  Series'  Apartment  Complexes  for
prospective  tenants  or  purchasers.  As a result,  the  interests  of the Fund
Manager, the Local General Partners and their respective Affiliates may conflict
with  those of a Series  with  respect  to the  acquisition  of a Local  Limited
Partnership Interest.


                                        61

<PAGE>



Other Transactions with Developers, Local General Partners, Lenders and
Joint Venturers

    The Fund Manager  anticipates  that certain  persons  controlling  or having
business dealings with the Local Limited Partnerships in which a Series invests,
such as general partners,  developers and lenders, will be persons with whom the
Fund  Manager  and  its  Affiliates  have  entered  into  previous  real  estate
transactions  and may enter into  additional  real  estate  transactions  in the
future.   The  Fund  Manager  and  its   Affiliates   may  receive   substantial
compensation,   profits  or  other  benefits  in  connection   with  such  other
transactions,  and, as a result, conflicts may arise between their interests and
the  interests  of the Fund.  In this  regard,  the Fund  Manager  generally  is
entitled  to  remove  a  Local  General  Partner  without  the  consent  of  the
Unitholders.  If the Fund  Manager has other  business  dealings  with the Local
General   Partner,   the  Fund  Manager  might  be  reluctant  to  do  so  under
circumstances which otherwise would warrant removal.

Representation in Tax Audit Proceedings

    The Fund  Manager  has been  designated  the "Tax  Matters  Partner" of each
Series and is authorized and directed by the Partnership  Agreement to represent
each Series and its  Unitholders at the expense of the Series in connection with
all  examinations  of the  Series'  affairs by tax  authorities,  including  any
resulting  administrative or judicial proceedings.  Such proceedings may involve
or affect the other Series and other  partnerships for which the Fund Manager or
an Affiliate acts as general partner. In such situations, the positions taken by
the Fund Manager with  respect to the Series may have  differing  effects on the
Series and the other Series and other partnerships.

Distribution of Units

    No independent managing underwriter has been engaged for the distribution of
the Units.  Furthermore,  WNC Capital  Corporation  (the  "Dealer-Manager"),  an
Affiliate  of the Fund  Manager,  may sell  Units and will  perform  wholesaling
services for the Fund,  and may not be expected to perform due  diligence in the
same manner as an independent broker-dealer.

Joint Investments

    A Series may invest in Local  Limited  Partnerships  jointly  with the other
Series or with other limited partnerships  (including other limited partnerships
sponsored by the Fund Manager or its  Affiliates)  if the  conditions  set forth
under "Investment Objectives and Policies - Joint Investments" are met. There is
always a risk that joint venture  partners will reach an impasse  respecting the
activities of the joint venture. For example, because of the differing financial
positions of the co-

                                        62

<PAGE>



venturers,  it may be in the best  interest  of a Series to sell a  jointly-held
Local Limited Partnership  Interest at a time when it is in the best interest of
its  co-venturer  to retain such  investment.  In such event,  the Series may be
unable to timely sell the Local Limited Partnership Interest.

Resolution of Conflicts of Interest

    Other than the process  described  above  relating to the  acquisition of an
interest in a Local Limited  Partnership  when funds are  available  both from a
Series and another  entity  (including  the other Series)  sponsored by the Fund
Manager or its  Affiliates,  the Fund has not developed  any formal  process for
resolving  conflicts  of  interest.  However,  the Fund  Manager is subject to a
fiduciary  duty to exercise  good faith and integrity in handling the affairs of
each  Series,  which duty will  govern  its  actions  in all such  matters  (see
"Fiduciary  Responsibility"),  and is subject to  restrictions  contained in the
Partnership  Agreement concerning the manner in which investments may be made in
Apartment  Complexes  and the manner in which the Series will be  operated  (see
"Investment Objectives and Policies").

    While the foregoing  conflicts could result in materially adverse effects on
the Unitholders,  the Fund Manager, in its discretion,  will attempt to mitigate
such potential  adversity by the exercise of its business judgment in an attempt
to fulfill its  fiduciary  obligations.  There can be no assurance  that such an
attempt will prevent adverse consequences  resulting from the numerous conflicts
of interest.

Lack of Separate Representation

    The Fund, the Fund Manager and its  Affiliates,  and the Unitholders are not
represented  by separate  counsel.  See "Legal  Matters." All of the  attorneys,
accountants  and other  experts  performing  services  for the Fund also perform
services for the Fund Manager and its  Affiliates.  Following the termination of
the  Offering,  if any  controversy  arises in which the  interests  of a Series
appear to be in conflict with those of the other Series,  or the Fund Manager or
its  Affiliates,  or in which the interests of a Series appear to be in conflict
with those of a Local Limited  Partnership,  other counsel would be retained for
one or more of the parties.

Organizational Diagram

    The following diagram illustrates the relationships among the Fund, the Fund
Manager, certain other Affiliates and certain other parties:


                                        63

<PAGE>


  
               Owner of                         WNC & Associates, Inc.
                   |                                       |
                   |                                       |
         WNC Capital Corporation                      Fund Manager
                                                   (General Partner)
                                                          of
                                                           |
                                                           |
                                                WNC Housing Tax Credit
                                                      Fund V, L.P.,
                                                   Series 3 and Series 4
                                                           |
                                                           |  
                                                    Limited Partners
                                                          of
                                                           |
                                                           |
                                                    Local Limited
                                                     Partnerships


     In   addition   to  the  foregoing relationships, the Fund Manager and its
Affiliates   have   sponsored and  are serving  as  general  partners  of other
real estate  limited  partnerships.  See "Management" and "Prior   Performance
Summary."

                             FIDUCIARY RESPONSIBILITY

    The Fund Manager is  accountable  to the Fund as a  fiduciary.  The Fund has
been  advised by  Counsel  that the laws of the State of  California  govern the
fiduciary  obligations  of the Fund Manager to each Series and its  Unitholders.
Under such laws,  a general  partner owes his partners the utmost good faith and
loyalty. The Partnership  Agreement does not modify these fiduciary  obligations
provided under  California  law.  Rather,  the Partnership  Agreement  expressly
provides  that  the  Fund  Manager  (i)  has  fiduciary  responsibility  for the
safekeeping  and use of all funds and assets of each  Series,  whether or not in
its  immediate  possession or control,  and may not employ or permit  another to
employ such funds or assets in any manner  except for the  exclusive  benefit of
the Series;  (ii) may not contract away its fiduciary duty under common law; and
(iii) may engage in other business activities independent of the Series provided
that the right to engage in such  activities  does not relieve it of its general
fiduciary obligation to the Series.

    Under  California law and subject to certain  conditions,  a limited partner
may institute legal action on behalf of a partnership (a partnership  derivative
action) to recover damages from third parties or to recover damages for a breach
by a general

                                        64

<PAGE>



partner of its fiduciary  duty. In addition,  a limited  partner may institute a
legal  action on behalf of  himself  and all other  similarly  situated  limited
partners (a class action) to recover  damages for a breach by a general  partner
of its fiduciary  duties,  subject to California rules of general  applicability
with respect to class actions.  In any such action,  the Fund Manager may assert
defenses  based  on the  exculpation  provisions  in the  Partnership  Agreement
described in the following  paragraph.  If the Fund Manager demonstrates that it
satisfied such  exculpation  standards,  it would be deemed not to have breached
its fiduciary  obligation.  This area of the law is changing and  developing and
investors who have  questions  concerning  the duties of the Fund Manager to the
Series should consult with their counsel.

    The  Partnership  Agreement  exculpates the Fund Manager and each Designated
Affiliate,  as defined  in  Section  5.8.5 of the  Partnership  Agreement,  from
liability for acts or omissions that any of them performs in good faith and in a
manner the Fund Manager reasonably  believes to be within the scope of authority
granted  to it or its  Designated  Affiliate  and in the  best  interest  of the
Series, provided such conduct did not constitute negligence or misconduct of the
Fund Manager or Designated Affiliate. The Partnership Agreement also indemnifies
the Fund Manager and each Designated Affiliate against liabilities for losses to
a Series  resulting from errors in judgment or other acts or omissions,  whether
or not  disclosed,  provided  such  conduct  did not  constitute  negligence  or
misconduct of the Fund Manager or Designated  Affiliate and were the result of a
course of conduct which the Fund Manager,  in good faith,  determined was in the
best interests of the Series. See Section 5.8 of the Partnership Agreement. As a
result of the  exculpation  and  indemnification  provisions in the  Partnership
Agreement,  a Unitholder  may have a more limited  right of action than he would
otherwise  have had in the  absence of such  provisions.  In the  opinion of the
Securities and Exchange  Commission,  indemnification  for  liabilities  arising
under  the  Securities  Act of 1933  is  against  public  policy  and  therefore
unenforceable.



                                        65

<PAGE>



                        INVESTMENT OBJECTIVES AND POLICIES

Principal Investment Objectives

    The Fund's principal  investment objective is to provide tax benefits in the
form of:

         (a)      A predictable  stream of Tax Credits which Unitholders may use
                  to offset their  Federal  income tax  liabilities,  subject to
                  certain specific limitations.

         (b)      Losses for Tax Purposes which (i) individuals,  S Corporations
                  and personal  service C Corporations may use to offset passive
                  income,  (ii)  closely-held C  Corporations  may use to offset
                  income  other  than  portfolio  income  and  (iii) all other C
                  Corporations may use to offset any type of income.

    In addition  the Fund will seek,  to the extent  feasible,  to preserve  and
protect the Fund's  invested  capital and to return such  capital  through  cash
distributions  resulting  from Sale or  Refinancing  transactions.  See "Sale or
Other Disposition of Investments" below.

    It is not an investment objective of the Fund to provide significant amounts
of cash  distributions  from  operations,  and  any  such  distributions  can be
anticipated only where a particular  Apartment  Complex is subject to relatively
lower mortgage financing or includes units which are not intended to be eligible
for Tax Credits.

     THERE  CAN  BE NO  ASSURANCE  THAT  THESE  INVESTMENT  OBJECTIVES  WILL  BE
ACHIEVED.  IN ADDITION,  THE DEGREE OF ACHIEVEMENT OF THE FUND'S  OBJECTIVES MAY
VARY BETWEEN THE SERIES.

    At such times during the negotiations for a specific  investment as the Fund
Manager  believes a reasonable  probability  exists that the investment  will be
acquired by a Series,  this  Prospectus  will be  supplemented  to disclose  the
negotiations  and  pending  investment.  Any  such  supplement  will  set  forth
available data with respect to the  investment,  including the proposed terms of
purchase,   a  description  of  the  Apartment  Complex  and  other  information
considered appropriate for an understanding of the transaction.

TO BE USED ONLY IN ARIZONA, MAINE, MASSACHUSETTS, MINNESOTA, MISSOURI, NEBRASKA,
     PENNSYLVANIA, TENNESSEE OR TEXAS


                                        66b

<PAGE>



                        INVESTMENT OBJECTIVES AND POLICIES

Principal Investment Objectives

    The Fund's principal  investment objective is to provide tax benefits in the
form of:

         (a)      A predictable  stream of Tax Credits which Unitholders may use
                  to offset their  Federal  income tax  liabilities,  subject to
                  certain  specific  limitations.  The Fund intends to invest in
                  Local  Limited  Partnerships  with a  view  to  realizing  Tax
                  Credits of from $1,350 to $1,500 per Unit.

         (b)      Losses for Tax Purposes which (i) individuals,  S Corporations
                  and personal  service C Corporations may use to offset passive
                  income,  (ii)  closely-held C  Corporations  may use to offset
                  income  other  than  portfolio  income  and  (iii) all other C
                  Corporations may use to offset any type of income.

    In addition  the Fund will seek,  to the extent  feasible,  to preserve  and
protect the Fund's  invested  capital and to return such  capital  through  cash
distributions  resulting  from Sale or  Refinancing  transactions.  See "Sale or
Other Disposition of Investments" below.

    It is not an investment objective of the Fund to provide significant amounts
of cash  distributions  from  operations,  and  any  such  distributions  can be
anticipated only where a particular  Apartment  Complex is subject to relatively
lower mortgage financing or includes units which are not intended to be eligible
for Tax Credits.

     THERE  CAN  BE NO  ASSURANCE  THAT  THESE  INVESTMENT  OBJECTIVES  WILL  BE
ACHIEVED.  IN ADDITION,  THE DEGREE OF ACHIEVEMENT OF THE FUND'S  OBJECTIVES MAY
VARY BETWEEN THE SERIES.

    At such times during the negotiations for a specific  investment as the Fund
Manager  believes a reasonable  probability  exists that the investment  will be
acquired by a Series,  this  Prospectus  will be  supplemented  to disclose  the
negotiations  and  pending  investment.  Any  such  supplement  will  set  forth
available data with respect to the  investment,  including the proposed terms of
purchase,   a  description  of  the  Apartment  Complex  and  other  information
considered appropriate for an understanding of the transaction.

NOT TO BE USED IN ARIZONA, MAINE, MASSACHUSETTS, MINNESOTA, MISSOURI, NEBRASKA,
     PENNSYLVANIA, TENNESSEE OR TEXAS

                                        66a

<PAGE>



    The  consummation  of  any  acquisition  that  is  not  covered  by  binding
agreements  will be  subject  to  further  negotiation  with the  developer  and
execution  of a final  agreement.  Such final  agreement  may differ in material
respects from prior  understandings or agreements  between the developer and the
Series.  The acquisition or retention of each investment will also be subject to
various terms and conditions of closing,  including the receipt of  satisfactory
closing  documentation,  and to the receipt of  sufficient  Net  Proceeds of the
Series which is to make the investment.  Accordingly,  there can be no assurance
that  any  potential  Apartment  Complex  investment  initially  disclosed  in a
supplement to this Prospectus will ultimately be acquired, nor that the terms of
any acquisition  will not differ  substantially  from those which were initially
disclosed.

    Low Income Housing Credits will be available for an Apartment Complex over a
10-year period  commencing  with the date that the Property is placed in service
and otherwise meets the  requirements for the credit.  Although  Unitholders are
expected to be allocated Low Income Housing  Credits  beginning in the year they
are  admitted  to a Series,  it is also  expected  that the amount of Low Income
Housing  Credits  available to  Unitholders  will be higher in subsequent  years
because of the time that is necessary for the Fund Manager to identify the Local
Limited  Partnerships  in which a Series will invest and for such Local  Limited
Partnerships to complete  construction of their respective  Apartment Complexes.
However,  any  reduction in Low Income  Housing  Credits in the first and second
years of a Series is expected to result in additional Low Income Housing Credits
in the tenth and eleventh years of a Series.

    The Fund  Manager  believes  that  each  Series  will be able to  acquire  a
sufficient  number of Local Limited  Partnership  Interests at a purchase  price
which will enable the Series to provide  the amounts of Tax Credits  anticipated
at  commencement of the Series  Offering.  This belief is based upon the general
knowledge that the management personnel of the Fund Manager have with respect to
the current and past purchase  prices for  properties  that are eligible for Tax
Credits.  In  negotiating  the  purchase  price to be paid by a  Series  for its
interest in a Local  Limited  Partnership,  the Fund Manager will  determine the
portion of the Net Proceeds that can be paid for such interest which will enable
the  Unitholders  to receive the  anticipated  amount of Tax  Credits.  The Fund
Manager  will take  into  consideration  the  possibility  that a Local  Limited
Partnership  will not provide all of the Tax Credits that are expected,  and the
purchase price paid by the Series for that interest will be reduced to take into
account the  possibility  that the full  amount of the Tax  Credits  will not be
delivered.  Prospective  investors should note that, to the extent a Series does
not make  Distributions  of Sale or Refinancing  Proceeds and Cash Available for
Distribution  in respect of a Unit  equal to the  $1,000  purchase  price of the
Unit, the Tax Credits generated by the Series would in effect represent a return
of (and not a return on) the investor's investment in the Series.


                                        67

<PAGE>



    Among other things, the Fund Manager's estimate of the amount of Tax Credits
that  will be  provided  by each  Series  is  based  upon  the  assumption  that
investment  demand  for  Apartment  Complexes  receiving  Tax  Credits  does not
increase the price for Local Limited Partnership Interests.  In the recent past,
heightened  demand  for,  and a reduced  supply of,  Local  Limited  Partnership
Interests has increased the purchase  price  thereof.  Further  increases  could
impair the ability of the Fund to provide investors with the anticipated  amount
of Tax  Credits.  See "Risk  Factors  Investment  Risks - Keen  Competition  for
Investments."

     The Fund  Manager's  estimate of the amount of the Tax Credits that will be
provided by each Series is based upon additional  assumptions,  including,  that
(a) no tax laws or  regulations  (and  court  interpretations  thereof)  will be
enacted or adopted in the future which would adversely  affect the tax positions
of the Series; (b) the Apartment  Complexes will qualify for the anticipated Tax
Credits at the appropriate  times;  (c) 100% of the cost of the Low Income Units
in each Apartment  Complex will qualify for the low-income  housing credit base;
(d) the Low Income  Units in each  Apartment  Complex will be rented to eligible
tenants;  (e) the "qualified  basis" of each  Apartment  Complex for purposes of
calculating  the Tax  Credits  will not  decrease  during  the  15-year  Initial
Compliance  Period and each Local Limited  Partnership will continually meet the
rental  and  occupancy  tests  for the  Low  Income  Units  during  the  Initial
Compliance  Period;  (f) payments to Local General  Partners or their Affiliates
for their  services to the Local Limited  Partnerships  in  connection  with the
development  of the Low Income Units will be included in the eligible tax credit
base;  and (g) in the case of an existing  Apartment  Complex,  the  acquisition
thereof will  constitute a "purchase"  for purposes of Code Section 42. See "The
Low Income Housing Credit."

    Events subsequent to the acquisition of Local Limited Partnership  Interests
could materially  affect a Series' ability to provide all of the anticipated Tax
Credits.  For example,  Tax Credits will be less than  anticipated if there is a
change  in the  present  value  calculation  (which is  based,  pursuant  to IRS
regulations,  on current  interest  rates) at the time the Apartment  Complex is
placed in  service  or if the  expenditures  by the Local  General  Partners  to
develop the Low Income Units, or other factors,  cause the "qualified  basis" to
be less than  anticipated.  The  amount of Tax  Credits  achieved  could also be
materially and adversely affected by the failure of any other of the assumptions
mentioned in the  preceding  paragraphs.  See "Risk Factors Risks Related to Tax
Credits." However,  as discussed below in this section under "Terms of the Local
Limited Partnership  Agreements," the Local Limited Partnership  Agreements will
include   various   "adjuster"   provisions   intended  to  reduce  the  adverse
consequences to a Series if such subsequent events occur by reducing the Series'
required capital contribution to the affected Local Limited Partnership.


                                        68

<PAGE>



    The  foregoing  investment  objectives  are  set  forth  in the  Partnership
Agreement and can only be changed by an amendment to the Partnership  Agreement.
An amendment to a Series' investment objectives may be made with the approval of
Unitholders owning more than 50% of the Units in the Series unless the amendment
would  adversely  affect the limited  liability of a Unitholder of the Series or
the rights,  powers,  duties or  compensation  of the Fund Manager or any of its
Affiliates,  in any of which  events it will also  require  the  consent of such
persons.  See "Risk Factors - Fund-Related  Risks - Risks Related to Exercise of
Unitholder  Voting  Rights."  Further,  in the event that recent  changes in the
Federal income tax laws are not interpreted in the way in which the Fund Manager
has interpreted  such provisions or in the event other changes occur which would
materially and adversely affect the ability of a Series to attain its investment
objectives by pursuing the investment policies described below, the Fund Manager
may be required  to make  certain  modifications  to such  investment  policies,
subject to the  restrictions  set forth in the Partnership  Agreement,  so as to
afford the Series a better opportunity to achieve its investment objectives.

Investment Policies

    Investment Criteria.  In selecting Apartment Complexes the Fund Manager will
evaluate,  among other factors: the amount of Tax Credits which are anticipated;
the  amount of cash flow from  operations,  if any,  which is  anticipated;  the
location of the Apartment Complex;  general rental market conditions in the area
of the Apartment  Complex  (including  vacancy rates and  information  as to the
numbers of people who meet the income standards required to be met by tenants in
the area so that the  Apartment  Complex  would be able to  qualify  for the Low
Income Housing Credits); the expenses, rental rates and costs of construction of
the Apartment Complex and comparable apartment  complexes;  the data supplied to
the  agency  providing  government  financing  subsidies  or other  lender;  the
potential  of the Low Income Units for  conversion  to market rate units or into
condominiums when any applicable governmental agency's restrictions on a sale or
any use other than housing for low- and moderate-income tenants have lapsed; the
financial  strength of the Local General Partners;  the prior performance of the
Local General  Partners;  the experience  and prior  performance of the property
manager for the Apartment Complex; the types of guarantees which can be obtained
from  Local  General  Partners  or other  sellers or  developers;  and the prior
experience and reputation of the builder and architect of the Apartment Complex.
In the event that the potential investment is in an older Apartment Complex, the
Fund Manager will investigate the physical condition of such Property, including
obtaining an engineering report if it determines that it is in the best interest
of the Series to do so, and will review the current  rent roll of the  Apartment
Complex.

    The criteria for selecting a particular  investment of a Series will include
the following:

                                        69

<PAGE>




    (1) The Apartment  Complex must be completed,  under  development  or in the
process of being rehabilitated.

    (2) The  Apartment  Complex  must not have been  placed in service  prior to
January 1, 1990 so that the limitations on utilization of the Low Income Housing
Credits  determined  with  regard to a  taxpayer's  adjusted  gross  income (see
"Federal  Income Tax  Considerations  -  Limitations  on Losses and Credits from
Passive
Activities") will not apply to Unitholders.

    (3) In the case of a new construction or rehabilitation  Apartment  Complex,
no substantial part of the Series'  investment shall be made prior to receipt of
a  commitment  for the  construction  loan and no more  than 75% of the  Series'
investment shall be made prior to receipt of a commitment for the permanent loan
for the Apartment Complex.

    (4) The Local Limited  Partnership  must  represent that at least 40% of the
residential  units comprising the Apartment Complex will be Low Income Units and
agree to provide  the Series with the amount of Tax  Credits  anticipated  to be
received as a result of the ownership of the Apartment Complex.

    (5) In no case shall the Series invest in any Local Limited  Partnership  of
which, at the date of initial  investment,  the Fund Manager or any Affiliate of
the Fund Manager is a Local  General  Partner or an Affiliate of a Local General
Partner,  or otherwise has an interest  therein,  except as provided in Sections
5.2.2(vii), 5.3.2(i) and/or Section 5.3.1(viii) of the Partnership Agreement. In
certain  circumstances  where direct  acquisition of an Apartment Complex by the
Series would be permissible under applicable governmental regulations,  the Fund
Manager may form a Local Limited  Partnership  to acquire the Apartment  Complex
rather than having the Series acquire it directly.  Formation of a Local Limited
Partnership in such a case will be for administrative  convenience of the Series
and will be subject to  Sections  5.2.2(vii)  and  5.3.2(i)  of the  Partnership
Agreement,  and the Series will acquire all of the limited partnership interests
of such partnership.

    Prior to the time at which a Series  becomes the limited  partner of a Local
Limited  Partnership,  the Fund  Manager  will seek to  ascertain  the status of
certain  matters with respect to such Local Limited  Partnership.  These matters
are expected to include (i)  assurance  that the Local Limited  Partnership  has
title  to  its  Apartment  Complex,   (ii)  assurance  that  the  Local  Limited
Partnership is duly formed as a limited  partnership under the laws of its state
of origin and (iii)  receipt of an  opinion  of  counsel  for the Local  Limited
Partnership  as to the  limited  liability  of the  Series as a limited  partner
thereof.  Such counsel's opinion will also include, or permit the Fund's counsel
to deliver to the Series,  an opinion that the Local  Limited  Partnership  is a
partnership for Federal income tax purposes,  that the allocation  provisions of
the Local Limited Partnership Agreement will not be significantly

                                        70

<PAGE>



modified  by the IRS  and,  based  on the  assumption  that  the  Local  Limited
Partnership will operate as represented by the Local General Partners,  that the
Apartment  Complex will qualify for the anticipated  Tax Credits.  A Series will
not  invest  in a Local  Limited  Partnership  unless it first  obtains  such an
opinion.

    A Series will not acquire any Local Limited Partnership  Interest unless the
Series has received, with respect to the Apartment Complex of such Local Limited
Partnership,  either  (i) an  appraisal  prepared  by a  competent,  independent
appraiser or (ii) RECDS Forms 1924-13  (estimate and certificate of actual cost)
and 1930-7  (statement  of budget,  income and  expense) or HUD project cost and
budget  analysis on Form 2264, or a comparable form of any successor of RECDS or
HUD or of a state or other  governmental  agency,  including any  applicable Tax
Credit allocation  agency,  setting forth estimates with respect to construction
and mortgage  financing costs and initial rental income and operating  expenses,
which in either case will be maintained in the Series' records for at least five
years, and shall be available for inspection and duplication by any Unitholder.

    Each Series intends to invest only in Local Limited  Partnerships which will
arrange for  comprehensive  insurance  coverage for their  Apartment  Complexes,
including  liability,   fire  and  extended  coverage,  of  the  type  which  is
customarily  obtained for similar  properties.  See,  however,  "Risk  Factors -
Investment Risks Possibility of Uninsured Losses."

    Eligibility for Low Income Housing Credits. Each Series will invest in Local
Limited  Partnerships  which  own and  operate  Apartment  Complexes  which  are
expected to be eligible for the Low Income  Housing  Credits.  At a minimum,  at
least (i) 40% of the residential units in each Apartment  Complex,  and (ii) 70%
of the total number of residential units in all of the Apartment  Complexes,  in
which a Series invests shall be expected to be Low Income Units.

    Historic Tax Credits.  Certain of the Local Limited  Partnerships in which a
Series  invests may own  Apartment  Complexes  which  qualify for  Historic  Tax
Credits  as well  as Low  Income  Housing  Credits.  Historic  Tax  Credits  are
available  for  certain   rehabilitation   expenditures  incurred  in  improving
certified historic structures.  If an expenditure is a qualified  rehabilitation
expenditure,  the  Historic  Tax  Credit  is  generally  equal  to 20%  of  such
expenditure.  Unlike Low Income Housing Credits, the full amount of the Historic
Tax Credit is claimed in the year in which the rehabilitated structure is placed
in service.  The Historic Tax Credit is more fully  discussed in "Federal Income
Tax Considerations - Historic Tax Credit" and "- Historic Tax Credit Recapture."

     Types of  Properties.  Each  Series  might  invest  in two  basic  types of
Apartment   Complexes.   The  first  type  consists  of   newly-constructed   or
substantially   rehabilitated   Apartment  Complexes  which  generally  will  be
comprised of a number

                                        71

<PAGE>



of buildings containing a total of from 20 to 75 one- and two-bedroom  apartment
units.  These  projects  will be  financed  either  by the  Rural  Economic  And
Community  Development Services of the U.S. Department of Agriculture  ("RECDS")
(formerly, the Farmers Home Administration of the U.S. Department of Agriculture
("FmHA")),  under the Home Investment  Partnership program ("HOME"), or with the
proceeds  of  tax-exempt  bonds  or of  state  and  local  bonds  which  are not
tax-exempt, or with other below-market-interest-rate  indebtedness, and may also
receive  rental  assistance.  The second type consists of  newly-constructed  or
substantially   rehabilitated  Apartment  Complexes  without  Federal  or  state
government  subsidies,  but which otherwise  qualify for Tax Credits,  including
single-room occupancy complexes.

    The Fund Manager may  consider  acquiring  interests in Apartment  Complexes
that  have  experienced  cash  flow and  operational  difficulties  and  perhaps
substantial mortgage  delinquencies  requiring a "workout"  arrangement with the
mortgage lender to avoid foreclosure. No Series will acquire any such investment
until after a satisfactory  workout arrangement is in place and the Fund Manager
has determined that the risk associated with the investment is not significantly
greater  than the risk  associated  with an  investment  in a  newly-constructed
Apartment Complex. Notwithstanding,  in no event will more than 10% of a Series'
Investment in Local Limited  Partnership  Interests be invested in Local Limited
Partnerships  owning  Apartment  Complexes  which have been subject to "workout"
arrangements.

    Location of Properties. The Apartment Complexes may be located in any of the
United  States,  territories,  or islands  which are  possessions  of the United
States.  Apartment  Complexes  financed  or assisted by RECDS will be located in
towns of under  50,000  population.  HUD-assisted  Apartment  Complexes  will be
located in cities with medium to large  populations.  Other Apartment  Complexes
may be located  in urban,  suburban  or rural  areas.  It is the Fund  Manager's
intention to seek as much  diversity as reasonably  possible in the locations of
the  Apartment   Complexes;   however,   a  Series'   ability  to  provide  such
diversification  will  be  substantially  influenced  by the  amount  of the Net
Proceeds of its Offering and the purchase  prices of Local  Limited  Partnership
Interests.  See "Number of  Investments"  below and "Risk  Factors -  Investment
Risks  -  Risks  of  Limited   Diversification"  and  "-  Keen  Competition  for
Investments."  The Fund does not intend to invest in any  distressed  low-income
areas with a high risk of property  deterioration and neighborhood  instability,
but may invest in renewal  areas where the Fund Manager  believes  there to be a
strong probability of economic success.

    Number of Investments.  The number of different Apartment Complexes in which
a Series will be able to invest  will  depend on the amount of the Net  Proceeds
from the sale of Units  and the  purchase  prices of Local  Limited  Partnership
Interests.  If only the minimum $1,400,000 of Capital Contributions for a Series
is  received,  it is  expected  that the  Series  would  invest in three to five
Apartment

                                        72

<PAGE>



Complexes.  If the maximum Capital  Contributions for a Series is received,  the
number  of  Apartment  Complexes  in which  the  Series  would  invest  would be
substantially greater. In each instance the actual number of Apartment Complexes
will vary  depending  on the purchase  price of  interests in the Local  Limited
Partnerships. The Fund does not have a policy, and there is no limitation, as to
the amount or  percentage  of a Series'  assets which may be invested in any one
Local  Limited  Partnership  or  group of Local  Limited  Partnerships  or Local
Limited Partnerships with which any person or group of persons is affiliated.

    Timing of Investments.  Subject to the limitations  below, a Series may make
or commit to  investments in Apartment  Complexes at any time,  including a time
prior to the  commencement  or completion  of its Offering.  See "Risk Factors -
Investment  Risks - Risks of  Investments  Prior to the Sale of Units." The Fund
Manager  will  attempt  to  mitigate  the  risks  accompanying   investments  or
commitments  made  in  anticipation  of the  receipt  of  Offering  proceeds  by
appropriately  limiting such  investments  and  commitments and by attempting to
negotiate   certain   protective   provisions  in  the  related   agreements  or
commitments.  Such  provisions  may  include  extensions  of the due  dates  for
payment,  releases  from such  commitments  if proceeds  are not  available,  or
dilution of a Local Limited Partnership  Interest to permit a reduced investment
in an Apartment Complex.

    Any of the  Capital  Contributions  of the  Offering  of a Series  which the
Series has not invested or committed to investment in Apartment Complexes within
the later of (i) 24 months from the date of commencement of the Series' Offering
or (ii) 12 months  after  termination  of the  Offering,  except for amounts set
aside for Reserves,  will be returned by the Series to its  Unitholders  without
reduction  for  Front-End  Fees;  and  Capital   Contributions  so  returned  to
Unitholders  will  constitute  a return  of  capital  and will  not  reduce  the
aggregate  interest in the Series allocated to the  Unitholders.  Any funds with
respect to the investment of which a Series has executed a written  agreement in
principle,  commitment  letter,  letter  of  intent  or  understanding,   option
agreement or other similar understanding or contract or which the Series has set
aside as a reserve  for  contingent  payments as of the later of (i) the date 24
months after the date of the  commencement  of the Series'  Offering or (ii) the
date  twelve  months  after  the  termination  of the  Offering,  will be deemed
committed to  investment on that date and will not  subsequently  be returned to
the  Unitholders  even if the investment of such funds is not consummated or the
contingent payments are not made.

    Until  required  by a Series for use in  connection  with its  business  and
operations as described in this Prospectus, all funds received out of the escrow
account  described under "Terms of the Offering and Plan of  Distribution" or in
payment of the  Promissory  Notes  will be held by the  Series in United  States
government  securities,  securities  issued or fully guaranteed by United States
government agencies,  certificates of deposit and time or demand deposits in, or
repurchase

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agreements  constituting  obligations of, commercial banks with deposits insured
by the Federal Deposit Insurance Corporation or other short-term,  highly-liquid
investments  ("Temporary  Investments").  The rate of  return  on such  types of
investments has fluctuated widely in recent years and may be significantly  more
or less than that obtainable from  investments in Apartment  Complexes.  The Net
Proceeds  will not be segregated or held separate from other funds of the Series
pending  investment,  and no  interest  will be  payable to the  Unitholders  if
uninvested funds are returned to them upon the expiration of the 24-month period
described above.

    Payment  for   Investments.   A  Series  will   normally  make  its  capital
contributions to a Local Limited Partnership in stages over a period of from one
to two years,  with each  contribution  due when  certain  conditions  regarding
construction  or operation of the  Apartment  Complex have been  fulfilled.  For
example (and solely for illustrative  purposes),  the Series' contribution could
be made over a one- to two-year period subject to satisfaction of some or all of
the following  requirements:  (1)  reservation of Low Income Housing Credits and
receipt of Form 8609 (Low Income Credit Allocation Certification); (2) admission
of the Series as a limited partner in the Local Limited Partnership; (3) receipt
of a  commitment  for or  closing  of the  construction  loan for its  Apartment
Complex;  (4) substantial  completion of the Apartment Complex; (5) receipt of a
commitment  for or closing of the  permanent  loan;  or (6) occupancy of the Low
Income Units by qualified  tenants.  In connection  with the  acquisition  of an
interest in a Local Limited Partnership owning a completed project, a Series may
make its capital  contribution in stages,  as described above, or in full at the
time of its acquisition of such interest.  Payments made by a Series or released
from escrow to a Local  Limited  Partnership  will  generally be made subject to
receipt of  representations  and warranties of the Local General Partners to the
effect that there is no material default by the Local Limited  Partnership under
any  mortgage  loan or under any other  material  agreements  in  respect of the
Apartment Complex. See "Terms of the Local Limited Partnership Agreements" below
in this section.

    Once an investment has been selected,  the Fund Manager's  asset  management
personnel  will monitor the Apartment  Complex  monthly to determine  compliance
with  construction and rent-up  schedules.  After stabilized  occupancy has been
achieved,  quarterly  reviews and annual  on-site  visits will be  conducted  to
monitor building maintenance,  occupancy and other operations and maintenance of
reserves.

    In  determining  whether or not to acquire an  interest  in a Local  Limited
Partnership,  a Series may make a loan to the Local Limited Partnership prior to
acquiring  the  interest.  Any such loan must be on a  short-term  basis (not to
exceed one year) and must,  unless  earlier  repaid,  be repaid from the Series'
initial capital contribution to the Local Limited Partnership. The amount of any
such loan may

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<PAGE>



not exceed 50% of the total capital contribution to be made to the Local Limited
Partnership.

    In the event a Local Limited  Partnership  as to which no investment is made
fails to repay a loan to a Series,  the amount of the Net  Proceeds  of a Series
available for investment in other Local Limited  Partnerships  would be reduced.
See "Risk  Factors  -  Investment  Risks - Risks of Loss of Loans  Made to Local
Limited Partnerships."

The Local General Partners

    Under the terms of the respective Local Limited Partnership Agreements,  the
Local  General  Partners  will  operate and  control  the  business of the Local
Limited  Partnerships,  and the role of a Series  will be  limited  to that of a
limited partner.  Hence, the experience and the financial condition of the Local
General Partners will be crucial to the success of any investment by a Series in
a Local Limited Partnership.

    Financial  Condition and Experience of Local General Partners.  Prior to any
investment in a Local Limited Partnership, the Fund Manager will obtain from the
Local  General  Partners  financial  statements  (which  may be  unaudited)  and
information  and  representations  with respect to the prior  experience  of the
Local General Partners in connection with real estate development. Except in the
case of non-profit  organizations,  the Local General Partners and any Affiliate
guaranteeing  the  obligations  of any Local General  Partner  generally will be
required to demonstrate to the  reasonable  satisfaction  of the Fund Manager an
aggregate  net worth in an amount  which is not less than  $500,000 and which is
sufficiently  liquid or  otherwise  readily  available to be able to protect the
Local  Limited  Partnership  in view of the  size  and  scope  of its  Apartment
Complex,  the obligations of the Local General  Partners and their Affiliates to
the Local  Limited  Partnership,  any security or other  assurances  or measures
taken to perform such obligations and the material contingent liabilities of the
Local General Partners. A Series may invest in a Local Limited Partnership whose
Local  General  Partner  does not  satisfy  the  foregoing  standard if the Fund
Manager  determines  that  there are  adequate  alternative  forms of  assurance
protecting the Local Limited Partnership.  Notwithstanding the preceding,  there
cannot be any  assurance  that full  disclosure  in this  regard will be made by
Local General  Partners,  or that their  financial  condition will not adversely
change  during  the  course  of a  Series'  investment  in  such  Local  Limited
Partnership.

    Real estate development  organizations  which specialize in construction and
ownership of apartment complexes of the type in which the Fund expects to invest
are  typically   closely-held   entities  which  depend,  for  their  successful
management and operation,  on one or a very limited number of principal  owners.
In  a  typical  Apartment  Complex  the  principal  owners  of  the  development
organization will,

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directly  or through  various  entities  controlled  by them,  provide  rent-up,
property management and other services involved in the development and ownership
of such Apartment  Complex,  and possibly will also,  through a separate entity,
construct the Apartment  Complex.  While the principal owners of the development
organization will usually be the Local General Partners,  in cases acceptable to
the Fund Manager an Affiliate of the principal  owners will be the Local General
Partner,  and all or some  portion of its  obligations  under the Local  Limited
Partnership  Agreement may be  guaranteed  by the principal  owners or by one or
more of their  Affiliates.  For  purposes  of this  Prospectus,  the term "Local
General  Partners" may include the various  individuals and entities  comprising
the development organization which has organized and is operating the respective
Local Limited Partnership.

    Compensation  of Local General  Partners.  The Local  General  Partners will
receive  fees  from  the  Local  Limited  Partnership  in  consideration  of the
construction  and  development  of the  Apartment  Complex,  management  of such
partnership and the Apartment Complex,  their agreement to fund certain deficits
discussed  below,  the initial rent-up of the Apartment  Complex,  and for other
services rendered to such partnership, which may include a sales preparation fee
and/or real estate  commission for services rendered with respect to sale of the
Apartment Complex. For a discussion of certain of these fees, see "Estimated Use
of Proceeds."

    Withdrawal of Local General Partners.  Each Series intends to invest only in
Local Limited  Partnerships in which an experienced  real estate  developer will
agree  to  supervise  management  of the  Apartment  Complex  or to serve as the
managing  general  partner for a period of time  acceptable to the Fund Manager.
Under the terms of each Local Limited Partnership  Agreement,  the Local General
Partner  will not be permitted to withdraw  from the Local  Limited  Partnership
without the consent of the Series,  unless a designated  successor acceptable to
the Series is  admitted  in its place,  or unless a  successor  meeting  certain
specified  criteria  established in the Local Limited  Partnership  Agreement is
admitted in its place.

Terms of the Local Limited Partnership Agreements

    It is  anticipated  that in each  instance  the  Local  Limited  Partnership
Agreement  will be  negotiated by the Fund Manager in such a manner as to impose
on the Local General Partners significant  responsibilities  with respect to the
Apartment  Complex.  The  precise  terms  of  such  responsibilities,   and  the
limitations thereon,  will be subject to negotiation.  However it is anticipated
that the terms of each Local  Limited  Partnership  Agreement  may  include  the
provisions described below.

    Development Obligation.  In the case of a new construction or rehabilitation
property,  the Local  General  Partners  will agree to provide all funds  needed
through the completion of the  construction or  rehabilitation  of the Apartment
Complex and the closing of its  long-term  mortgage  financing,  after  applying
mortgage loan

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<PAGE>



proceeds and the Series' capital  contribution (net of fees payable to the Local
General  Partners  and their  Affiliates).  Funds so provided  may or may not be
reimbursable  by the Local Limited  Partnership.  In the event of the failure of
the Local  General  Partners to perform  those  obligations,  the Local  General
Partners  or their  Affiliates  will be in default  pursuant to the terms of the
Local Limited Partnership  Agreement,  and may be removed from the Local Limited
Partnership by the Series.

    Operating Guarantees. The Local Limited Partnership Agreement will typically
impose  obligations on the Local General  Partners to provide funds to the Local
Limited  Partnership to defray any operating deficits for a minimum of two years
following the completion of the construction or  rehabilitation of the Apartment
Complex or to create a reserve to provide a source of payment of such  deficits.
The Local General  Partners may or may not be entitled to  reimbursement of such
funds by the Local Limited  Partnership;  provided that, if the funds are not to
be reimbursed,  the Local General Partners will normally be specially  allocated
for income tax purposes the  deductible  expense which is paid with the funds so
advanced.  A Series  may  invest in Local  Limited  Partnerships  for which such
operating  guarantees are not required if the Fund Manager determines that there
are adequate alternative forms of assurance protecting the Series' investment in
the Local Limited Partnership.

    Protection  Against Reduction or Loss of Tax Credits.  To reduce the adverse
consequences which a Series would experience in the event that the amount of the
Tax  Credits  actually  allocated  to the Series  should be less than the amount
represented  when  the  investment  was  made,  the  Local  Limited  Partnership
Agreement will include so-called  "adjuster"  provisions designed to provide the
Series with a substantially similar aggregate return on investment as would have
been  received  had  the  Tax  Credits  been  as  originally  anticipated.  Such
provisions  may adjust any one or more of the  following:  the required  capital
contribution  by the  Series,  the  Local  General  Partners'  share of the cash
available for  distribution of such Local Limited  Partnership,  the development
fee, the property  management fee or partnership  administration  fee payable to
the Local General Partners or their Affiliates,  or the Series' share of Sale or
Refinancing proceeds of such Local Limited  Partnership.  While the intention is
to require the adjuster provisions described in this paragraph,  such provisions
may not be  included in each Local  Limited  Partnership  Agreement  if the Fund
Manager  considers  one or more of such  provisions  to be  unnecessary  for the
protection of the Series or if the Fund Manager  determines that it is otherwise
in the  interest  of the  Series to modify or  eliminate  such  provisions.  For
example,  such adjuster  provisions  may be modified or eliminated in connection
with the acquisition of an interest in a Local Limited  Partnership which owns a
completed Apartment Complex.


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<PAGE>



    Each Local General Partner will covenant to take no action which would cause
a termination or  discontinuance of the qualification of an Apartment Complex as
a "qualified  low-income  housing  project" under Code Section 42(g)(1) or which
would cause the  recapture  of any Tax Credit under the Code without the consent
of the  Series.  In  addition,  the Local  General  Partner  of a Local  Limited
Partnership which owns a Property which is not receiving government financing or
operating  subsidies  will be  obligated to pay to the Series an amount equal to
any Low Income  Housing Credit which is recaptured as a result of any Low Income
Unit  ceasing to qualify  for Low Income  Housing  Credits  (see "The Low Income
Housing  Credit")  or to  furnish  such  other  safeguards  as the Fund  Manager
determines are appropriate to protect the Series and the Unitholders against the
consequences of recapture.

    Prospective  investors  should note that,  to the extent the Fund Manager is
successful in negotiating guarantees, undertakings and assurances from the Local
General  Partners of the nature  described in this Prospectus or otherwise,  the
prices paid by a Series for its Local  Limited  Partnership  investments  may be
marginally higher than would otherwise be the case.

    Rights  of  Limited  Partner.  As  a  limited  partner  of a  Local  Limited
Partnership,  a Series  will  have no right to  manage  the  operations  of such
partnership.  However, each Local Limited Partnership Agreement will provide the
Series with certain voting rights, including the right, in each case without the
concurrence of the Local General Partners,  to replace the Local General Partner
on the basis of the  performance  and discharge of the Local  General  Partner's
obligations,  to approve or  disapprove a sale or  refinancing  of the Apartment
Complex owned by such Local Limited  Partnership,  to approve or disapprove  the
dissolution  of the Local  Limited  Partnership  and to  approve  or  disapprove
amendments to the Local Limited Partnership  Agreement  materially and adversely
affecting the Series' investment in the Local Limited Partnership.  Nonetheless,
in the case of Apartment Complexes which are government assisted, the ability of
the Series to take such  actions  may be subject  to the prior  approval  of the
government  agency providing such assistance (see "Other  Government  Assistance
Programs"   below   and   "Risk   Factors    Investment   Risks   -   Risks   of
Government-Subsidized   Housing  Projects").   Similarly,   each  Local  Limited
Partnership  Agreement  will  provide  the Series  with  certain  other  rights,
including  rights  relating  to the calling of  meetings,  reports to holders of
limited  partnership  interests and access to records  comparable to those which
the Partnership  Agreement provides to the Unitholders.  See "Summary of Certain
Provisions  of the  Partnership  Agreement."  No assurance can be given that the
exercise of such rights (and possibly their mere  existence)  will not cause the
Series to be deemed a general  partner of such Local  Limited  Partnership.  See
"Risk  Factors -  Fund-Related  Risks - Risks of Unitholder  Liability."  Except
where the Fund Manager or its Affiliates  serve as a Local General  Partner of a
Local Limited Partnership,  each of the foregoing voting and other rights of the
Series as a limited partner in the Local Limited  Partnership  will be exercised
by the Fund Manager on

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<PAGE>



     behalf  of  the  Series,  and  Unitholders  will  not  have  any  right  to
participate therein. See "Conflicts of Interest."

    Role of SLP Affiliate.  It is  anticipated  that the SLP Affiliate will be a
special limited partner of certain Local Limited  Partnerships and will have one
or more of the  following:  the right to  assume  the  duties  and  receive  the
benefits of the Local  General  Partner  upon the removal or  withdrawal  of the
Local General  Partner;  the right to approve the selection of, and/or  dismiss,
any manager of the  Apartment  Complex;  the right to approve the  selection of,
and/or dismiss, the accountants for the Local Limited Partnership;  the right to
direct  the  decisions  of  the  "tax  matters  partner"  of the  Local  Limited
Partnership, including the right to bring and defend administrative and judicial
actions and make tax elections; the right to compel the Local General Partner to
locate  a  buyer  for  the  Apartment  Complex  or  the  Series'  Local  Limited
Partnership   Interest;   and  the  right  to  approve  or  disapprove   certain
transactions  outside of the ordinary course of business proposed to be taken by
the Local Limited Partnership.  It should be noted that in the case of Apartment
Complexes  which are  government  assisted,  the ability of the SLP Affiliate to
take such actions may be subject to the prior approval of the government  agency
providing such assistance (see "Other Government  Assistance Programs" below and
"Risk  Factors  -  Investment  Risks - Risks  of  Government-Subsidized  Housing
Projects").

    Interests in Profits,  Losses and  Distributions.  Each Series will normally
acquire at least a 90% interest in the  profits,  losses and Tax Credits of each
Local Limited  Partnership,  with the balance  remaining  with the Local General
Partners and the SLP Affiliate.  However, in certain cases, at the discretion of
the Fund Manager,  a Series may acquire a lesser interest (but normally at least
a 50%  interest)  in the  profits,  losses and Tax  Credits  of a Local  Limited
Partnership.  See "Joint  Investments" below in this section.  The Local General
Partners will  generally  receive as  management  fees and/or  participations  a
portion  of  the  cash  flow  from  operations  of  an  Apartment   Complex  and
reimbursements  payable from cash flow. The Local Limited Partnership  Agreement
will normally provide that  distributions of proceeds from a Sale or Refinancing
of the  Apartment  Complex  will be paid in the range of from 95% to 100% to the
Series  until it has  received a full return of that portion of the Net Proceeds
invested in the Local Limited Partnership (which may be reduced by any cash flow
distributions  previously received) as well as providing the Series with a share
of any remaining Sale or Refinancing proceeds, which share may range from 10% to
90%. The sharing arrangements for cash distributions from operations and Sale or
Refinancing proceeds will depend upon the competition for interests in Apartment
Complexes  which are  suitable  for  investment  and will also  depend  upon the
particular circumstances of each Apartment Complex,  including the proportion of
residential  units in the  Apartment  Complex  eligible  for Low Income  Housing
Credits,  the amount invested by the Series in the Apartment Complex relative to
the other sources of financing for the Apartment Complex, the

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<PAGE>



percentage  interest in the profits and losses of the Local Limited  Partnership
which is acquired by the Series relative to the interests held by other parties,
and the amounts of cash flow and appreciation anticipated or realized.

Joint Investments

    Local  Limited  Partnerships  may be invested in jointly by a Series and the
other Series or other limited partnership (including another limited partnership
sponsored by the Fund Manager or any of its Affiliates),  provided that: (1) the
two partnerships have similar investment objectives,  (2) there are no duplicate
property  management or other fees, (3) the compensation to the sponsors of each
partnership is substantially  similar, (4) each partnership will have a right of
first refusal if the other partnership  wishes to sell its interest in the Local
Limited  Partnership  (although  there is a risk that a partnership may not have
sufficient  resources to accomplish such  purchase),  (5) the investment of each
partnership is on  substantially  the same terms and conditions,  and (6) if the
other limited  partnership  is (a)  controlled  by the Fund  Manager,  the other
limited  partnership  must be publicly  registered  under the  Securities Act of
1933, or (b) is not  controlled  by the Fund Manager,  the Series must acquire a
controlling  interest in the joint venture. See "Risk Factors - Investment Risks
- - Risks of Joint  Investments"  and  "Conflicts  of  Interest." A Series  cannot
engage  in  activities  through  a joint  venture  that it could  not  otherwise
undertake.

Use of Leverage

    Except as may be  necessary  to make initial  investments  in Local  Limited
Partnerships prior to the sale of Units, the Fund does not anticipate  borrowing
funds,  although the Fund Manager has full authority to cause a Series to borrow
money as deemed  necessary  or  appropriate  to the  achievement  of the Series'
investment objectives.

    The Fund Manager or its  Affiliates may advance funds from time to time to a
Series in order that the Series may make initial  investments  (including  loans
and deposits) in Local Limited Partnerships prior to the sale of its Units. Such
advances,  together with interest  thereon,  will be repaid from the proceeds of
the Offering.  See  "Estimated Use of Proceeds." All borrowings by a Series from
the Fund Manager or an Affiliate  must (i) be on a  short-term  basis;  (ii) not
bear any  interest,  charges  or fees in excess of the  amounts  which  would be
charged by  unrelated  lending  institutions  on  comparable  loans for the same
purpose in the same locality  (and in no event may such interest  exceed by more
than 2% per annum the Prime  Rate;  and (iii) not be subject  to any  prepayment
charge or penalty.

    The ability of a Series to generate  Tax Credits in the amounts  anticipated
will depend in part on the use of leverage by the Local Limited Partnerships.

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<PAGE>



Accordingly,  the Fund Manager expects that the Local Limited  Partnerships will
use  debt to  finance,  on a  combined  basis,  approximately  60% to 90% of the
acquisition and development costs of their Apartment  Complexes.  Such financing
may include loans made,  guaranteed or subsidized by agencies of Federal,  state
or  local  governments,  including  state or local  government  bond  financing,
balloon  payment  mortgages,   loans  providing  for  variable  interest  rates,
renegotiable interest rates or deferral of principal payments, wrap-around loans
and loans from non-profit  organizations one of the tax-exempt purposes of which
includes the financing of low-income housing.  See "Other Government  Assistance
Programs" below and "Risk Factors - Investment Risks - Risks Associated With Use
of Leverage." No Series will impose any limitation on the indebtedness which may
be incurred by any Local Limited Partnership and, consistent with the investment
objectives of the Fund,  the Fund Manager has discretion to select Local Limited
Partnerships which have structured the financing of their Apartment Complexes in
any way and from any source that the Local General  Partners believe is feasible
for the properties,  and that the Fund Manager believes is both (i) feasible for
the particular  property and (ii) beneficial for the investors.  Notwithstanding
the  preceding,  following  the  termination  of the Offering of Units a Series'
share   of  such   indebtedness   may   not   exceed   (i)   with   respect   to
conventionally-financed  Apartment  Complexes,  the sum of 85% of the  aggregate
purchase price of all Apartment  Complexes which have not been  refinanced,  and
85% of the  aggregate  fair market value of all Apartment  Complexes  which have
been refinanced and (ii) with respect to subsidized Apartment Complexes, the sum
of 100% of the aggregate  purchase price of all Apartment  Complexes  which have
not  been  refinanced,  and  100% of the  aggregate  fair  market  value  of all
Apartment Complexes which have been refinanced.

    To reduce the  interest  rate risk  inherent  in  investments  in  Apartment
Complexes  which are  encumbered by variable rate financing or financing that is
payable  prior  to the  expiration  of the  anticipated  holding  period  of the
investment,  the Fund Manager will endeavor to take or require the Local Limited
Partnerships to take one or more of the following steps:  (i) establish  maximum
interest rates for variable rate financing,  (ii) obtain accrual features, (iii)
purchase interest rate swaps or similar financial  arrangements,  (iv) establish
debt  service  escrows  from  mortgage  proceeds,  surplus  operating  revenues,
holdbacks  of capital  contributions  or letters  of  credit,  (v) obtain  Local
General Partner guarantees, (vi) establish extension options and (vii) establish
mandatory refinancing requirements.

Sale or Other Disposition of Investments

    In  general,  sale or  refinancing  of an  Apartment  Complex  or a  Series'
interest in a Local Limited Partnership will be subject to various  restrictions
which will require that investments be held for substantial periods. The present
expectation of the Fund Manager is that a Series will hold its  investments  for
at least 15 years after the Series  acquires them in order to avoid recapture of
Tax Credits (see "The Low

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<PAGE>



Income  Housing  Credit"),  and will  thereafter,  subject  to the  restrictions
discussed below, attempt to sell or refinance the investments with the objective
of returning to the  Unitholders  of the Series,  at a minimum,  their  invested
capital.  However,  when it determines  that it is in the best  interests of the
Series to do so under all of the then applicable circumstances, the Fund Manager
may cause the Series to sell or refinance any investments at an earlier or later
time.

    The Low Income Units in an  Apartment  Complex  generally  must be rented as
low-income  housing for the Low Income Use Period (i.e., a period of at least 30
years and,  possibly,  of up to 55 years), so that any sale of such an Apartment
Complex during that period must be to a purchaser who agrees to maintain the Low
Income Units as  low-income  housing for the  duration of such period.  However,
except where more  stringent  requirements  are imposed under state law, the Low
Income Use Period can be terminated as to an Apartment Complex after the 15-year
Initial  Compliance  Period  if the  housing  agency  of the  state in which the
Apartment  Complex is located is unable to find a purchaser at a price that will
return the owner's adjusted equity investment in the Apartment Complex, although
existing  tenant leases cannot be terminated by the owner during the three years
thereafter.  See "The Low  Income  Housing  Credit -  Credits  Subject  to State
Allocation."

    Any  Apartment  Complexes  receiving   government   financing  or  operating
subsidies will generally be subject to substantial  additional  restrictions  on
sale or refinancing.  For example, currently applicable RECDS regulations do not
permit the sale of a property  which is financed by such agency  except with the
specific  approval of RECDS,  and mortgage loans which are funded after December
14,  1989  cannot be prepaid at any time  during  their terms of up to 50 years.
Similarly,  current HUD  regulations  require  that HUD must approve the sale of
more than 50% of the interests in any limited  partnership which owns a property
which is receiving some form of HUD subsidies.

    However,  consistent  with the  foregoing  and other  applicable  regulatory
restrictions,  the Fund Manager  believes  that the Local  Limited  Partnerships
should  be able  to sell or  refinance  the  Apartment  Complexes  after a 15 to
20-year   holding   period  under  one  or  a   combination   of  the  following
circumstances:

         (1) After the expiration of the Initial  Compliance Period with respect
    to its Apartment Complex, a Local Limited Partnership could seek to sell the
    Apartment Complex to:

                  (a) another limited  partnership  similar to the Local Limited
         Partnership  which  would  agree to  continue to operate the Low Income
         Units as housing  for  low-income  tenants  for the  balance of the Low
         Income Use Period and otherwise in compliance with restrictions imposed
         under

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         the  regulations  applicable  to Low  Income  Housing  Credits  and the
         requirements  of  existing  mortgage  indebtedness.  Such a sale  would
         likely be feasible  only if at that time the Code  includes  provisions
         extending significant tax benefits to purchasers of existing low-income
         housing; or

                  (b) certain other types of  purchasers  who,  irrespective  of
         then-existing  Code  provisions,  may have  incentives  to acquire  and
         operate the Low Income Units as housing for low-income tenants, such as
         the  tenants  of the  Low  Income  Units  (or a  cooperative  or  other
         organization  formed on their  behalf) or a state agency or  non-profit
         organization.

         (2) With respect to Apartment  Complexes which are subject to the RECDS
    prepayment   prohibition   discussed   above,   RECDS  will,  under  certain
    circumstances,  guarantee  an equity loan to the Local  Limited  Partnership
    owner 20 years after the original loan was made. The equity loan would be in
    an  amount  of up to 30% of the  amount  of the  original  loan and would be
    funded from monthly  payments to a special RECDS  national  pool. See "Other
    Government Assistance Programs - RECDS Financing and Rural Rental Assistance
    Programs."

    In connection with any disposition of an Apartment Complex (or Local Limited
Partnership  Interest),  the Local Limited Partnership (or the Series) will have
the right to engage in seller  financing of the  disposition  of such  Apartment
Complex (or Local Limited  Partnership  Interest) by accepting a promissory note
in partial payment of the sales price.  However, it is anticipated that a Series
as a limited  partner of the Local  Limited  Partnership  will have the right to
approve  or  disapprove  any such  proposed  sale.  A Series  will  thus be in a
position  to weigh the  higher  sales  price  that such  seller  financing  will
generally  provide  against the credit risk that the obligor on such  promissory
note would default in its payment obligations, and the fact that distribution by
a Series of Sale or Refinancing  Proceeds,  if any, would be further  delayed to
the extent of the principal amount of such promissory note.

Reserves

    Each  Series   initially   will  set  aside  at  least  3%  of  the  Capital
Contributions as a Reserve for contingencies.  The Fund Manager will increase or
decrease such Reserve from time to time as it deems appropriate. The Reserve may
be used to cure any problems arising from the Apartment Complexes, although most
Apartment  Complexes  will have their own  reserve  requirements.  Reserves of a
Series may also be utilized to pay expenses of the Series,  including the annual
Asset  Management  Fee,  to the  extent  other  funds of the  Series  are not so
available.


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<PAGE>



Other Policies

    No Series will lend funds (other than in the form of  Temporary  Investments
as described above) to any person or entity,  including the Fund Manager and its
Affiliates,  except that it may make loans to, or post  letters of credit for, a
Local Limited Partnership in which the Series anticipates acquiring an interest,
subject to certain limitations specified in the Partnership Agreement.

    No Series will underwrite  securities of other issuers,  offer securities in
exchange for property, repurchase or otherwise reacquire any Units or, except in
connection with the investments of funds in Local Limited  Partnerships,  invest
in securities of other issuers, other than in Temporary Investments as described
above.

    No Series will (i) utilize Cash Available for  Distribution to acquire Local
Limited  Partnership  Interests;  or (ii) reinvest Sale or Refinancing  Proceeds
unless a sufficient portion thereof is distributed to the Series' Unitholders to
enable each such Unitholder  (assuming that he is in a combined  Federal,  state
and local  marginal  income tax  bracket of 30%) to pay the  Federal,  state and
local income tax liability  arising from the Sale or Refinancing which generated
such  proceeds,  and in any  event  Sale or  Refinancing  Proceeds  will  not be
reinvested  following  the second  anniversary  of the first day of the calendar
quarter  in which  the  Investment  Date  occurs,  except  to the  extent of any
Reserves retained therefrom.

    A Series may, in the  absolute  discretion  of the Fund Manager and once the
Series'  offering has concluded,  repurchase Units upon the written request of a
Unitholder.  No Series has any  obligation to repurchase  any Units at any time,
and there is no assurance  that any Units will in fact ever be  repurchased by a
Series.  No  Units  will be  repurchased  from the  Fund  Manager  or any of its
Affiliates.

    None of the Series is a real estate investment trust and, therefore, none is
subject to the  restrictions  imposed on such entities by the Code.  Each Series
will use its best efforts to conduct its  operations so as not to be required to
register as an investment company under the 1940 Act.

    No Series will engage in any  transaction  which would result in the receipt
by the Fund  Manager or an  Affiliate  of the Fund  Manager  of any  undisclosed
"rebate" or "give-up" or in any reciprocal business arrangement which results in
the circumvention of the restrictions contained in the Partnership Agreement.


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<PAGE>



                           THE LOW INCOME HOUSING CREDIT

Summary

    Section 42 of the Internal Revenue Code of 1986 ("Code"),  as amended by the
Technical and Miscellaneous Revenue Act of 1988 ("1988 Act"), the Omnibus Budget
Reconciliation  Act of 1989 ("1989 Act"), the Omnibus Budget  Reconciliation Act
of 1990 ("1990  Act") and the  Omnibus  Budget  Reconciliation  Act of 1993 (the
"1993  Act"),  provides  tax  credits  (the "Low  Income  Housing  Credits")  to
investors  in certain  low-income  housing.  Following  is a summary of the more
salient  provisions  of Code  Section 42 and its  interrelation  with other Code
provisions.  Each of these  provisions  is  discussed  in greater  detail in the
subsections below and under "Federal Income Tax Considerations."

    Low Income  Housing  Credits are indirect  Federal  subsidies of  low-income
housing  and  are  being  used  by  individuals,   small  businesses  and  large
corporations.  Low Income Housing Credits offset tax liability dollar-for-dollar
regardless of a taxpayer's tax bracket  because they are tax credits and not tax
deductions;  thus,  tax credits are more  valuable  than tax  deductions  or tax
deferrals.  Taxes are one of the largest expenses faced by taxpayers  throughout
their  lifetimes,  and  therefore  represent  one of the  greatest  barriers  to
retaining earned income. According to a report issued by the Tax Foundation,  in
1994 the  average  American  worked two hours and 45 minutes of each  eight-hour
workday to pay all taxes.  Federal  taxes  exhausted  one hour and 48 minutes of
earnings, and state and local taxes exhausted 57 minutes of earnings. The report
states that American  workers  utilized a greater  portion of the workday to pay
taxes than to pay for food and  tobacco,  clothing,  and housing  and  household
operations.  An investment in Low Income  Housing  Credits  reduces  Federal tax
liability and thereby can increase after-tax spendable income.

    It is  important  to note that Low Income  Housing  Credits  are tax credits
rather than the more  familiar tax  deductions.  For example,  a married  couple
filing  jointly  with  taxable  income of  $125,000  in 1995 would be subject to
Federal income tax liability  before Tax Credits in the amount of  approximately
$31,000,  or approximately  25% of taxable income.  (The tax liability for later
years  could  be  different  due to  changes  in the tax  rates  resulting  from
inflation  adjustments  or amendments to the tax laws.  See "Federal  Income Tax
Considerations - Other Important Tax  Considerations - Tax Rates" and "- Changes
in Tax Law.")


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<PAGE>




















If the couple had $7,750 in Low Income Housing Credits (the maximum  permissible
amount pursuant to the $25,000 deduction equivalent, as discussed under "Federal
Income Tax  Considerations  -  Limitations  on Losses and Credits  from  Passive
Activities  -  Exception  for  Low  Income  Housing  Credits  and  Historic  Tax
Credits"),  their Federal tax liability of $31,000 would be reduced by $7,750 to
$23,250.














These pie charts are intended to  graphically  display  that Tax Credits  reduce
income taxes  dollar-for-dollar,  and are not intended to be, nor should they be
interpreted as,  predictions of Tax Credits to be allocated to an investor.  The
absolute  and/or  relative  percentage  reduction in Federal  income taxes to be
realized  by any  investor  will  depend on his actual tax  liabilities  and his
actual Tax Credits.



                                        86

<PAGE>



    Low Income Housing  Credits account for the  construction  of  approximately
120,000  housing  units  annually.  Nonetheless,  the  availability  of  quality
low-income  housing  has  declined.  According  to the Joint  Center of  Housing
Studies of Harvard  University,  "[t]he  national goal of decent and  affordable
housing for all Americans remains out of reach because of two broad trends:  the
persistence  of poverty and the loss of low-cost  rental  units from the housing
inventory."  According to another study (A Place To Call Home,  Center On Budget
and Policy  Priorities,  based on information  from the American  Housing Survey
through 1993),  the shortage of affordable  rental housing is not a new problem,
but one that dates back to the early 1970's.  Since 1970, the number of low rent
or affordable  units has continued to fall in relation to the number of those in
need of these  units.  This  persistent  decline  has  created a shortage of 4.7
million affordable rental units nationwide.  Among the problems the nation faces
is the loss of low-cost  rental units that  provide  shelter for  families,  the
elderly and other citizens of modest means.





















    Low Income  Housing  Credits are designed to subsidize  either 70% or 30% of
the costs of the  low-income  units in an apartment  complex.  Accordingly,  the
amount of Low Income Housing Credits is based on the cost of a property,  rather
than the operations of the property,  and thus are pre-determined in amount. The
subsidies are realized by claiming  Federal Tax Credits every year for 10 years,
with the  entire  amount of the  subsidies  allocated  at the  beginning  of the
10-year  period,  resulting in a steady and  predictable  stream of Tax Credits.
Unlike other  investments,  once determined,  the amount of Tax Credits does not
fluctuate.


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<PAGE>



    In exchange for the right to claim Low Income Housing Credits,  the owner of
the  apartment  complex must agree to rent the  low-income  units to  low-income
individuals at reduced  rental rates for a period of at least 15 years.  Failure
to do so will result in ineligibility  for any portion of the Low Income Housing
Credits not yet claimed and, possibly,  the recapture of such credits previously
claimed.

    Code  Section 42  authorizes a fixed  amount of Low Income  Housing  Credits
which any state may allocate in any year. Generally,  an apartment complex owner
must receive an allocation of Low Income  Housing  Credits from an agency of the
state in which the apartment complex is located.

    Most taxpayers are not able to claim Low Income Housing Credits in unlimited
amounts.  Rather, such ability is limited by the provisions of the Code known as
the "passive  activity" rules,  the "at risk" rules,  the overall  limitation on
"general business" credits, and the alternative minimum tax rules.

    Prospective investors should note that the Low Income Housing Credit program
is extremely  technical in nature.  Few  Treasury  Regulations  have been issued
interpreting  Code Section 42, and there can be no assurance that the provisions
of that Section will be interpreted in a manner  consistent with the description
set forth below. Furthermore,  the discussion that follows is general in nature.
Because the Fund has not yet identified any of the Local Limited Partnerships in
which  it  will  invest,  it is  impossible  to  predict  how  certain  specific
provisions of the Low Income  Housing Credit program will apply to the Apartment
Complexes.

Maximum Amount of Credit

    Under Code  Section 42, for a 10-year  period an owner,  which may include a
limited  partner  in a  limited  partnership  owner,  of an  apartment  building
receives tax credits equal to the  "applicable  percentage" (as explained in the
next  paragraph)  times that portion of the basis of the building  qualified for
the credit (the "qualified  basis").  For a discussion of qualified  basis,  see
"Qualified Properties" below. Such Low Income Housing Credits may be used by the
owner,  subject  to  various  limitations,  to reduce  his  Federal  income  tax
liabilities over a 10-year period.

    The "applicable  percentage" is a percentage  prescribed by the Secretary of
the Treasury for the earlier of (i) the month in which the building is placed in
service,  or (ii) at the election of the owner, the month in which the owner and
the housing  credit  agency  enter into an  agreement as to the amount of Credit
Authority to be allocated to the  building.  The  applicable  percentage  varies
essentially  according  to two major  factors:  (i)  whether a property is newly
constructed or substantially  rehabilitated or is an existing  property and (ii)
whether or not a property is  Federally  subsidized.  There are two basic credit
categories:


                                        88

<PAGE>



    1. Non-Federally  subsidized new construction or substantial  rehabilitation
properties  receive a maximum  credit which will yield a present value of 70% of
the qualified basis of the property. This is the applicable percentage expressed
in present value terms for  recognition  of credits over 10 years.  Accordingly,
the applicable  percentage is determined  primarily by long-term interest rates,
and does not fluctuate with stock or bond prices.  Congress  determined that for
1987 a 9% credit would have a present value of 70%;  thus 9% was the  applicable
credit  percentage  for  1987.  For years  subsequent  to 1987,  each  month the
Treasury  Department  redetermines the appropriate  yearly  percentage that will
yield a 70%  present  value over 10 years  utilizing  a  prescribed  discounting
methodology.  For  properties  placed  in  service  in  June  1995,  the  yearly
percentage  is  8.66%.  "Substantial   rehabilitation"  is  defined  as  capital
expenditures   (other  than  acquisition  costs)  incurred  in  connection  with
rehabilitation  of a building  aggregated  over a  24-month  period in an amount
equal to at least the greater of 10% of adjusted  basis or $3,000 per Low Income
Unit.

    2. Federally  subsidized  new  construction  or  substantial  rehabilitation
properties  receive a maximum  credit which will yield a present value of 30% of
the qualified  basis of the  property.  Congress  determined  that for 1987 a 4%
credit  would have a present  value of 30%;  thus 4% was the  applicable  credit
percentage for 1987. For years subsequent to 1987, the Treasury Department makes
monthly  redeterminations  in a manner  corresponding  to that  described in the
preceding  paragraph for the 70% present value credit.  For properties placed in
service in June 1995, the yearly percentage for this 30% present value credit is
3.71%. For purposes of the Low Income Housing Credit program,  Federal subsidies
include only tax-exempt financing and  below-market-interest-rate  Federal loans
the  proceeds  of which are used  directly  or  indirectly  with  respect to the
property.  See the material below under the caption "Other Government Assistance
Programs" for a discussion as to whether certain  programs which may be utilized
for the Apartment  Complexes are considered  "Federally  subsidized"  within the
meaning  of the  1986  Act,  which  used  this  term in a  manner  which  is not
co-extensive with its customary definition. An owner has the option of excluding
Federally  subsidized  loans from qualified basis and then using the 70% present
value credit against the remaining qualified basis.

    The  acquisition  costs of existing  buildings  will only be eligible  for a
credit if the buildings are subject to  substantial  rehabilitation  (as defined
above).  (If the  acquisition is from a government  agency,  the  rehabilitation
expenditures  must  average at least  $3,000 per  low-income  residential  unit,
without  regard  to  the  10%  of  adjusted  basis  rule.)  If  the  substantial
rehabilitation  test is satisfied the acquisition costs are eligible for the 30%
present value credit.  However,  acquisition costs are not available for the 30%
present  value credit if the property was last  transferred,  or if it underwent
certain  rehabilitation work, during the prior 10 years,  although the Secretary
of the Treasury may waive this rule with respect to any

                                        89

<PAGE>



Federally-assisted  building in order to avert certain  mortgage  assignments or
claims against Federal  mortgage  insurance  funds, or to preserve as low-income
housing  properties  which are  acquired  from  failed  thrift  institutions  or
properties as to which certain mortgages may be prepaid.

    The qualified  basis of a low-income  housing  property is determined at the
end of the first taxable year of the credit period.  However, an owner may elect
to make more of a property  eligible for Low Income  Housing  Credits  after the
ten-year credit period has already begun.  The so-called  "addition to qualified
basis" provides a credit equal to two-thirds of the applicable  percentage noted
above, and such credits are claimed over the remainder of the Initial Compliance
Period.  Additional  credits must be allocated from the state's Credit Authority
described below under "Credits Subject to State Allocation," but are not subject
to  recapture.  See  "Recapture  of Low Income  Housing  Credits"  below in this
section.

Qualified Properties

    Pursuant to Code Section  42(g),  Low Income  Housing  Credits are available
only  with  respect  to  "qualified  low-income  housing  projects."  "Qualified
low-income housing projects" are generally  residential rental projects in which
(a) 20% or more of the  aggregate  residential  rental  units  are  occupied  by
individuals  with incomes of 50% or less of area median income,  as adjusted for
family size (the  "20-50  set-aside  test") or (b) 40% or more of the  aggregate
residential rental units are occupied by individuals with incomes of 60% or less
of area median income, as adjusted for family size (the "40-60 set-aside test").
This requirement, referred to as the minimum set-aside, must be met in order for
any portion of an apartment  development  to be eligible for Low Income  Housing
Credits. Additional residential rental units in an apartment development, beyond
the minimum set-aside,  also will qualify for Low Income Housing Credits if such
residential  rental  units meet the income  standards  selected  for the minimum
number of residential rental units.

    Additionally,  in order to qualify for Low Income Housing Credits, the gross
rent charged to tenants who meet the applicable  income limitation cannot exceed
30% of the applicable set-aside income (i.e., 50% or 60% of area median income),
assuming that, in the case of a unit which does not have a separate bedroom, the
unit is occupied by one  individual,  and, in all other cases,  that the unit is
occupied  by one and  one-half  individuals  per  separate  bedroom  (the  "rent
restriction  test").  Gross  rent  for  this  purpose  includes  the cost of any
utilities,  other than  telephone,  and any mandatory costs for services such as
meals and social services.  Federal,  state and local rental assistance payments
are not  included in gross rent and thus an owner may  receive a rental  subsidy
payment under the RECDS Rental  Assistance  Program or similar programs of other
agencies in addition to the amount paid by the tenant.


                                        90

<PAGE>



    Units which are both  rent-restricted  and occupied by individuals  who meet
the applicable  income  limitation are referred to herein as "Low Income Units."
Low Income Units must be suitable for  occupancy,  and used, on a  non-transient
basis.

    Pursuant to Code Section 42(g)(3) an apartment development must, in general,
meet the minimum set-aside requirements as well as the rent restriction test not
later  than the close of the first  year of the  10-year  credit  period for the
development. The owner may elect which of the minimum set-aside tests (i.e., the
20-50  set-aside test or the 40-60 set-aside test) it proposes to meet but, once
made,  the  election is  irrevocable.  In order to avoid credit  recapture,  the
apartment development must remain in compliance with the rules governing the Low
Income  Housing  Credit  program  for the  15-year  Initial  Compliance  Period.
However,  a  separate  15-year  compliance  period  commences  in the year  that
substantial  rehabilitation  is  completed.  Thus,  with  respect  to a building
undergoing substantial  rehabilitation,  the effective compliance period will be
extended by the time  period  between  acquisition  and the  completion  of such
substantial rehabilitation.

    The "qualified basis" of an apartment  development with respect to which Low
Income  Housing  Credits are computed is generally  the portion of the "eligible
basis" in a building  attributable  to the Low Income Units.  This proportion is
the lesser of (1) the proportion of occupied low-income units to all residential
rental units (whether or not occupied),  or (2) the proportion of floor space in
the occupied low-income units to the total floor space of all residential rental
units (whether or not occupied) in the building.

    In general,  the  "eligible  basis" of a building is its adjusted  basis for
Federal  income tax  purposes,  determined  as of the close of the first taxable
year  of  the  Initial  Compliance  Period.  For a  newly-constructed  building,
eligible basis will be the cost of construction,  including all direct costs and
various related "soft" costs, such as construction period interest,  developer's
and   architects'   fees,   other   compensation,   insurance  and  general  and
administrative      expenses     related     to     construction.      For     a
substantially-rehabilitated  building  eligible  basis  would  be  comprised  of
rehabilitation costs aggregated over a 24-month period, provided that such costs
are in an  amount  equal to at least the  greater  of 10% of  adjusted  basis or
$3,000 per Low Income Unit.  Acquisition  costs may only be included in eligible
basis to the extent they satisfy the  principles for inclusion  discussed  above
under  "Maximum  Amount of  Credit."  Land costs may not be included in eligible
basis. Because only the adjusted basis of a building may be included in eligible
basis,  one must take into account the adjustments to basis described in Section
1016 of the Code,  except for  depreciation.  For example,  a reduction in basis
equal to any  Historic Tax Credit  allowed  with respect to a property  would be
taken into account.  As indicated in "Federal Income Tax  Considerations - Basis
of  Local  Limited   Partnerships  in  Their   Apartment   Complexes"  and  "  -
Depreciation,"  no  opinion  of  Counsel  or  of  counsel  to  a  Local  Limited
Partnership will be rendered with respect

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<PAGE>



to the calculation of an Apartment  Complex's adjusted basis. It should be noted
that the  eligible  basis for any  building is reduced by an amount equal to the
portion  of the  adjusted  basis  of  the  building  which  is  attributable  to
residential  rental  units in the  building  which are not Low Income  Units and
which are above the  average  quality  standard  of the Low Income  Units in the
building.  However,  at the  election of the  taxpayer,  the cost of a unit that
would  otherwise be so excluded from eligible  basis may be included in eligible
basis if (1) the  excess  cost of such  unit  over the  average  cost of the Low
Income Units does not exceed 15% of the average cost of the Low Income Units and
(2) the excess cost is excluded from eligible basis.

    For all  types  of  buildings,  the  eligible  basis  includes  not only the
adjusted  basis of the  residential  rental  units  (subject to the  limitations
discussed  above) but also the adjusted basis of facilities and certain personal
property (such as major  appliances) for use by the tenants and other facilities
reasonably  required for use in the common areas of the  building.  The costs of
amenities  in non-Low  Income  Units may only be included if the  amenities  are
comparable  to the  costs  of  amenities  in the Low  Income  Units.  Also,  the
allocable   costs  of  tenant   facilities  such  as  swimming  pools  or  other
recreational  facilities and parking areas may be included provided there is not
a  separate  fee for  use of  these  facilities  and  they  are  available  on a
comparable basis to all tenants.

    Residential  rental property may qualify for Low Income Housing Credits even
though a portion  of the  building  in which  residential  units are  located is
available  for  commercial  use.  However,  no  portion  of  the  cost  of  such
nonresidential  property may be included in the eligible basis.  The legislative
history of the 1986 Act suggests that it was the  Congressional  intention  that
the  costs of such  mixed-use  facilities  would  be  allocated  according  to a
reasonable  method that properly reflects  proportionate  benefits to be derived
directly or indirectly by the nonresidential rental property and the residential
units. The portion of the cost of each Apartment  Complex owned by Local Limited
Partnerships  allocable to  commercial  space will be  determined  on a pro rata
basis  using a ratio of the area of  commercial  space to the total area of such
Apartment Complex.

    Eligible basis may not include in any taxable year the amount of any Federal
grant,  whether or not such grant is includable in gross income. A Federal grant
for such purpose (as opposed to a Federal loan or rental  subsidy)  includes any
grant to the extent it is Federally funded.

    The eligible basis of a building  located in an area  designated by HUD as a
"qualified  census tract" or as "difficult to develop" will be deemed to be 130%
of the eligible basis determined  under the principles  outlined above. For this
purpose,  a "qualified  census  tract" means a census  tract  designated  by the
Secretary of HUD (or, if census tract information is unavailable, an enumeration
district)  in which 50% or more of the  households  have an income which is less
than 60% of the area

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median gross income. An area is treated as "difficult to develop" if it has high
construction,  land and utility costs  relative to area median gross income.  No
more  than  20% of the  population  of a  metropolitan  statistical  area may be
designated as within a qualified census tract or as difficult to develop, and no
more  than 20% of  nonmetropolitan  areas  may be  designated  as  difficult  to
develop.

Credits Subject to State Allocation

    All buildings,  except those financed  through  proceeds of tax-exempt bonds
subject to the tax-exempt  bond ceiling  included in the Code, must be allocated
Credit  Authority by the state or local credit  agency for the  jurisdiction  in
which the buildings are located.  The aggregate annual Credit Authority is $1.25
per  resident of the  jurisdiction.  In the event that a state fails to allocate
its  entire  Credit  Authority  in a given  year,  the Code  permits a  one-year
carryforward  of the unused  amount;  to the  extent  the  unused  amount is not
utilized during the carryforward  period, it will be reallocated to other states
through a national pool.

    Once Credit  Authority  is  allocated  by the credit  agency to a particular
housing  development,  the  development  does not  have to  reapply  for  Credit
Authority in later years nor does the aggregate  amount of the Credit  Authority
allocated  to a housing  development  reduce  the  amount  of  Credit  Authority
available to other buildings in later years, if any. Accordingly, it is the case
that all Low Income  Housing  Credits to be claimed by investors  over a 10-year
period are  allocated  at the outset of the  10-year  period.  However,  in some
circumstances  it may be  necessary  to seek  additional  allocations  of Credit
Authority, if available, with respect to increases in qualified basis.

    Generally, a building must be placed in service during the calendar year for
which the Credit  Authority  is  allocated  by the housing  credit  agency.  The
exceptions to this general rule are as follows:  (i)  allocations  pursuant to a
binding  commitment made by a housing credit agency (not later than the close of
the  calendar  year in which the  building  is placed in  service) to allocate a
specified  dollar  amount of Credit  Authority  to the  building  beginning in a
specified later year; (ii) allocations  attributable to an increase in qualified
basis  made not later  than the  close of the  calendar  year in which  ends the
taxable year to which the  allocation  will first apply;  and (iii)  allocations
respecting a building which is placed in service not later than the close of the
second  calendar year  following  the calendar  year in which the  allocation is
made,  provided that the taxpayer's basis in the building as of the close of the
calendar year in which the allocation is made is more than 10% of the taxpayer's
reasonably  expected  basis in such  building  as of the  close  of such  second
calendar year. An additional exception to the general rule exists in the case of
a development  which  includes (or will  include) more than one building.  Under
this exception, the state agency has authority to allocate Credit Authority on a
development rather than on a  building-by-building  basis, and the allocation to
the

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development  generally will be valid if (a) it is made to the development at any
time  during  the period  beginning  with the first  calendar  year for which an
allocation may be made for the first  building  placed in service as part of the
development  and ending with the  calendar  year the last  building is placed in
service as part of such  development,  and (b) the  portion  of such  allocation
which is  allocated to any building in the  development  is specified  not later
than the close of the calendar  year in which the building is placed in service.
An allocation of Credit  Authority to a development only applies to buildings in
the  development  which are placed in service  during or after the calendar year
for which the allocation is made.

    Low Income  Housing  Credits are not  permitted  for any building  unless an
Extended  Low Income  Housing  Commitment  is executed  between the owner of the
building and the state which  allocates  the Credit  Authority.  In general,  an
Extended Low Income  Housing  Commitment  requires that the building  qualify as
low-income  housing  for a Low Income  Use Period  equal to the longer of (a) 30
years,  beginning with the commencement of the Initial Compliance Period, or (b)
the period specified by the state in the Extended Low Income Housing Commitment.
The  Extended  Low Income  Housing  Commitment  does not prevent the sale of the
building to a new owner; rather, it only requires that the new owner continue to
rent the building as low-income housing. Further, after a period of 14 years the
owner may make a written  request to the state to find a person to  acquire  the
Low Income Units within the  building.  The state will have one year to locate a
buyer at a price no less than (i) with  respect to the  portion of the  building
which does not constitute Low Income Units,  the fair market value thereof,  and
(ii) with respect to the Low Income Units, the applicable fraction (specified in
the Extended Low Income Housing Commitment and determined by the extent to which
units within the building  constitute Low Income Units) of the excess of (1) the
sum of (A) the  outstanding  indebtedness  secured by the  building  and (B) the
adjusted  investor  equity in the building (i.e.,  the aggregate  amount of cash
invested in the  building  increased by a cost of living  adjustment),  over (2)
cash distributions (or available  distributions) from the building.  If no buyer
is  located  the  building  may  be  converted  to  market-rate   use  with  the
qualification  that existing  low-income tenants may not be evicted within three
years.  The  "one-year  notice"  provision  will not  apply to the  extent  more
stringent  requirements  are  imposed  under the  commitment  or state law.  The
Extended Low Income Housing  Commitment must be binding on all successors of the
owner,  grant all individuals  meeting the income  limitation  applicable to the
building  the  right to  enforce  its terms in state  court,  be  recorded  as a
restrictive  covenant,  prohibit  the eviction or other  termination  of tenancy
(other than for good  cause) of an  existing  tenant of a Low Income Unit before
the close of the three-year period following the Low Income Use Period, prohibit
any increase in the gross rent for a Low Income Unit not otherwise  permitted by
Code  Section  42,  prohibit  the  refusal  to lease to a holder  of a Section 8
voucher or certificate  of eligibility  (see  "Government  Assistance  Programs"
below)  because of the status of the  prospective  tenant as such a holder,  and
prohibit the disposition to

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any  person of any  portion of the  building  to which the  Extended  Low Income
Housing  Commitment applies unless all of the building to which the Extended Low
Income Housing Commitment applies is disposed of to such person.

    Also with respect to allocations made after 1989, Code Section 42(m) imposes
requirements on the state agencies which allocate Credit Authority.  In general,
an allocating  agency must develop and follow a qualified  allocation plan which
includes  pre-established criteria for ranking the various developments applying
for Credit Authority.  The selection criteria must include development  location
factors (e.g.,  broad geographic  distribution,  designated target areas such as
inner  cities,  Community  Development  Block  Grant  neighborhoods,  distressed
communities,  pockets of poverty and rural areas), housing needs characteristics
(e.g.,  low  vacancy  rate,  income mix of tenants  within the  development  and
meeting  state,  regional or local  housing needs and  priorities),  development
characteristics (e.g., whether the development increases the stock of low-income
housing,  whether  substantial  rehabilitation  expenditures  are  needed by the
development,  energy  conservation,  quality  of units  and type of  financing),
sponsor  characteristics (e.g., nonprofit sponsorship and minority participation
in development and  management),  tenant  populations with special housing needs
(e.g.,  elderly,  handicapped,   disabled,  homeless,  large  families  and  the
displaced) and public housing waiting lists.

    Once the agency has selected its  developments,  it must allocate the Credit
Authority by giving preference to developments serving the lowest income tenants
and developments obligated to serve tenants for the longest periods. Further, an
allocating  agency  must use good  faith  efforts  to  allocate  no more  Credit
Authority to a development  than is necessary for its financial  feasibility and
viability as low-income  housing  through the 10-year credit  period.  In making
this  determination  the agency must consider the sources and uses of funds, the
available Federal,  state and local subsidies committed to the development,  the
total financing  planned for the development,  the proceeds or receipts expected
to be  generated  by  reason  of tax  benefits,  the  percentage  of the  Credit
Authority to be used for project costs other than the cost of intermediaries and
the   reasonableness   of  the   developmental  and  operational  costs  of  the
development.  In  this  regard  the  allocating  state  agency  may  reduce  the
applicable  percentage and/or the qualified basis from the amounts for which the
development  would  otherwise be eligible if the agency  believes  that the full
amounts  are not  necessary  in light of other  sources of  assistance  that are
available to the development.  The allocation plan must also include a procedure
whereby the agency will  monitor the  development  for  non-compliance  with the
provisions of the Code respecting Low Income Housing Credits and will notify the
IRS of any noncompliance of which the agency becomes aware.

    At least 10% of a state's  annual  Credit  Authority  must be  allocated  to
buildings  as to  which a  qualified  nonprofit  organization  has an  ownership
interest and materially participates in the development and operation thereof.

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    The Series will only purchase  interests in Apartment  Complexes  which have
been allocated Credit Authority by the appropriate  credit agency or as to which
there  appears a  reasonable  probability  that such  Credit  Authority  will be
allocated. However, there can be no assurance that delay in the completion of an
Apartment  Complex will not deprive the  Unitholders of  anticipated  Low Income
Housing Credits.

Utilization of the Low Income Housing Credit

    Low Income Housing Credits are claimed by taxpayers  owning an interest in a
"qualified  low-income  project"  over a 10-year  period.  In the first year the
credit is claimed the allowable  credit  amount is  determined  using an average
convention  to reflect  the number of months Low Income  Units were  occupied by
low-income  individuals during the year. For example,  if half of the Low Income
Units  included  in  qualified  basis were  first  occupied  in October  and the
remaining half were first  occupied in December,  a calendar year taxpayer would
adjust  the amount of Low Income  Housing  Credits  claimed in the first year to
reflect  that these units were  occupied on average  only 2 months or 1/6 of the
year.  To the extent that there is such a reduction of the credit  amount in the
first year, an additional credit in the amount of such reduction is available in
the 11th taxable year.

    In order to fully utilize Low Income Housing  Credits,  a taxpayer who is an
individual, an S Corporation or a "closely-held  corporation" (i.e, one in which
five or fewer shareholders directly or indirectly owned, by value, more than 50%
of the stock at any time during the last half of its relevant fiscal year), must
be  "at  risk"  with  respect  to his  investment  in  the  low-income  housing.
Generally, the qualified basis of any low-income housing property is reduced for
"at risk" purposes by the amount of any non-qualified nonrecourse financing with
respect to such property.

    However,  "qualified commercial  financing" is not considered  non-qualified
nonrecourse  financing  and  therefore a taxpayer  will be  considered to be "at
risk" for purposes of Low Income Housing Credits with respect to such financing.
For purposes of Low Income Housing Credits,  qualified  commercial  financing is
defined as  financing  with  respect to any  property  if (a) such  property  is
acquired by the taxpayer from a person who is not a related person, and (b) such
financing  is borrowed  from a qualified  person or  represents  a loan from any
Federal,  state or local government  instrumentality.  A "qualified  person" for
such purposes is a person who is actively and regularly  engaged in the business
of lending money and who is not (a) a person from whom the taxpayer acquired the
property,  or (b) a person  who  receives a fee with  respect to the  taxpayer's
investment in the property. An exception is provided for financing borrowed from
a  nonprofit  organization  which  is not  affiliated  with or  controlled  by a
for-profit  organization and whose exempt purpose includes fostering  low-income
housing,   i.e.,  a  "qualified  nonprofit   organization."  Such  financing  is
considered "qualified commercial financing" even

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if it is seller  financing  or if the  lender is not  regularly  engaged  in the
business of lending  money,  provided  such  financing is (a)  generally  not in
excess of 60% of the eligible basis of the qualified  low-income  building,  (b)
secured by the  building,  and (c) fully repaid on or before the earliest of (1)
the date the  financing  matures,  (2) the  ninetieth day after the close of the
Initial  Compliance  Period  with  respect to the  building,  except  that,  for
property  financed by qualified  nonprofit  organizations,  such date is 90 days
after the earlier of the date upon which the  building  ceases to be a qualified
low-income building or the date which is 15 years after the close of the Initial
Compliance  Period,  but  only if such  financing  does  not  constitute  seller
financing, or (3) the date of the refinancing or sale of the building.

    It is not  anticipated  that  the  amount  of  Low  Income  Housing  Credits
allowable  to a Series  will be limited  under the "at risk"  rules  because the
Series intends to invest in Local Limited  Partnerships  that obtain  "qualified
commercial financing," as described above, which will be included in the Series'
(and the Partners')  amount "at risk." However,  Counsel has rendered no opinion
on this issue or on the  qualification  of any Apartment  Complex for Low Income
Housing  Credits  because these issues  depend upon the specific  nature of each
Apartment Complex and its financing.

    Taxpayers  cannot  use Low Income  Housing  Credits  in  unlimited  amounts.
Generally,  individuals  who have no net passive income can only use Tax Credits
(i.e., Low Income Housing Credits and Historic Tax Credits) to shelter up to the
equivalent of $25,000 of active or portfolio  income with deductions from rental
real estate activities in which they actively  participate and with Tax Credits.
Further,  the allowance of these  deductions and Tax Credits is subject to other
limitations.  Corporations,  other  than  S  Corporations  or  personal  service
corporations,  can generally use Tax Credits against taxes on all income and can
use losses to reduce taxable income. However, closely-held corporations can only
use Tax Credits against active income. Tax Credits are not a preference item for
purposes  of the  Federal  alternative  minimum tax but cannot be used to offset
that tax.

    For a more complete  discussion of these  limitations on the  utilization of
Tax Credits,  see "Federal Income Tax Considerations - Limitations on Losses and
Credits from Passive  Activities," "- General  Business Tax Credit  Limitations"
and " - Other Important Tax Considerations - Alternative Minimum Tax."

Recapture of Low Income Housing Credits

    Following the close of the first  taxable year for which Low Income  Housing
Credits are  claimed and for each  taxable  year  thereafter  during the Initial
Compliance  Period, the owner must certify to the Secretary of the Treasury that
the development has continuously  complied  throughout the year with the minimum
set-aside  requirements  and report the dollar amount of the qualified  basis of
the

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development and the maximum applicable  percentage and qualified basis permitted
to be taken into account by the housing credit agency.

    The  owners of a  "qualified  low-income  housing  project"  will lose their
entitlement  to Low Income  Housing  Credits and will be  required to  recapture
(with interest) a portion of any credit  previously taken if, in any year during
the Initial  Compliance  Period,  any of the following  events  occur,  although
certain rules, described below, provide some flexibility:

         (1)   the  project  fails  to  meet  the  minimum   set-aside  or  rent
     restriction requirements of Code Section 42(g);

         (2)   there is a change of ownership (with exceptions noted below);

         (3)   there is a decrease in the qualified basis of the project (even
    though the minimum set-aside requirements continue to be met); or

         (4)   there is a failure  to fully  repay the  principal  and  interest
     attributable   to   financing   borrowed   from  a   "qualified   nonprofit
     organization"  within the required time period (see "Utilization of the Low
     Income Housing Credit" above in this section).

    Recapture  event (1)  results  in a  recapture  of a portion  of Low  Income
Housing  Credits  previously  claimed with respect to the qualified basis of the
entire  development.  Recapture event (2) results in a recapture of a portion of
Low Income Housing Credits previously claimed with respect to the portion of the
development  that has  changed  ownership.  Recapture  event (3)  results in the
recapture of a portion of Low Income  Housing  Credits  previously  claimed with
respect to the residential  units which no longer qualify as Low Income Units or
to the other decreases in the qualified basis of the development.  In each case,
the amount of Low Income Housing Credits  recaptured is the accelerated  portion
thereof (as discussed below) for all prior years. Recapture event (4) results in
a recapture of the amount of Low Income Housing Credits  previously claimed that
are attributable to the financing.

    Upon the  occurrence  of  recapture  events (1),  (2) or (3),  the amount of
recapture is the accelerated portion of Low Income Housing Credits  (hereinafter
described)  on the project for all prior years.  In addition,  interest  will be
charged  on the  recapture  amount  calculated  from the due date for filing the
return for the year any  recapture  amount was  claimed at the rate  established
under Code Section 6621. The  accelerated  portion of Low Income Housing Credits
in any year is the amount of the credit  determined for the year less the amount
which would have been  determined for the year if all Low Income Housing Credits
had been allowable

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ratably over the Initial Compliance Period.  Low Income Housing Credits are
recaptured in the year of noncompliance as follows:

         Year of Event Giving
          Rise to Recapture                      Portion Recaptured

                    1-11                               5/15
                    12                                 4/15
                    13                                 3/15
                    14                                 2/15
                    15                                 1/15
            After Year 15                               0

    The Code  provides  certain  rules  for  avoiding  recapture  penalties.  No
recapture applies if the failure to satisfy the minimum set-aside requirement is
de minimis error and the failure is waived by the Secretary of the Treasury.  No
recapture  occurs  if  noncompliance  with  the  set-aside  requirement  or  the
reduction of qualified basis is corrected within a "reasonable period," although
the term "reasonable" is not defined in the Code. A tenant's income,  which must
be recertified  annually during the Initial  Compliance Period unless the entire
building is occupied by low-income tenants and  recertification is waived by the
Secretary  of the  Treasury,  may rise by as much as 140% over the  then-current
qualifying  income  for that  unit and the unit may  still be  considered  a Low
Income Unit if it continues to be  rent-restricted.  Even if the tenant's income
increases by more than that 140% amount,  no recapture results unless any vacant
unit  of  comparable  or  smaller  size  in  the  development  is  rented  to  a
non-qualifying tenant.

    Generally,  any change of  ownership  of a  development  during the  Initial
Compliance Period is an event of recapture.  Although a partner in a partnership
generally  will be treated as the  taxpayer  for  purposes of  recapture  of Low
Income Housing  Credits,  any  partnership  that has 35 or more partners will be
treated as the taxpayer with respect to Low Income Housing  Credits,  unless the
partnership  otherwise  elects.  Because  a  Series  will  invest  in  Apartment
Complexes  only through  Local Limited  Partnerships,  which will not have 35 or
more direct partners, this exception will not permit a Local Limited Partnership
to be treated as the  taxpayer  upon  transfer  of a Local  Limited  Partnership
Interest or Apartment Complex,  respectively.  However, because such Series will
have more than 35  partners,  it  appears  as if this  exception  will  permit a
Unitholder  to transfer his Units without  recapture,  unless 50% or more of the
Units are transferred in a single 12- month period.

    A Local Limited  Partnership may avoid recapture upon change of ownership by
posting a bond with the Secretary of the Treasury in an amount  satisfactory  to
the  Secretary and provided it can  reasonably be expected that the  development
will

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continue to be operated as a "qualified low-income project" for the
remainder of the Initial Compliance Period.

    There is no recapture of Low Income Housing  Credits if there is a reduction
in  qualified  basis by reason of a  casualty  loss to the  extent  such loss is
restored by reconstruction or replacement  within a reasonable period of time as
established by the Secretary of the Treasury.

State Low Income Housing Credits

    In addition to Federal Low Income Housing Credits, a few states have enacted
provisions for similar credits which can be used to offset  liability for income
taxes  otherwise  payable to the  respective  state  with  respect to low income
housing which is constructed, substantially rehabilitated or otherwise placed in
service within the state.  However,  the Fund does not expect that a significant
number,  if any, of the  Apartment  Complexes  in which any Series  invests will
qualify for a state credit.

                       OTHER GOVERNMENT ASSISTANCE PROGRAMS

     THE DISCUSSION WHICH FOLLOWS DESCRIBES VARIOUS FEDERAL AND STATE GOVERNMENT
FINANCING AND OPERATING  SUBSIDY PROGRAMS TO WHICH APARTMENT  COMPLEXES IN WHICH
THE FUND  INVESTS  MAY BE  SUBJECT.  THE  DISCUSSION  IS NOT  INTENDED TO BE ALL
INCLUSIVE.  THERE CAN BE NO ASSURANCE  THAT THE TERMS OF SUCH  PROGRAMS,  OR THE
REGULATIONS  GOVERNING THEM, WILL REMAIN THE SAME. The Fund is unable to predict
which of the government  subsidy  programs  described below will be utilized for
the Apartment  Complexes,  or the percentage of Apartment  Complexes  which will
receive government financing or operating subsidies.

    As  discussed   above,  Low  Income  Housing  Credits  can  be  utilized  in
conjunction  with projects that receive  financing or operating  subsidies  from
Federal,  state or local  governments  as well as those that do not receive such
subsidies,  and the Fund  expects  that the Series  may  invest  some of the Net
Proceeds in such "conventional" Apartment Complexes.

RECDS Financing and Rural Rental Assistance Programs

    Section 515 of the Housing Act of 1949 authorizes RECDS (formerly,  FmHA) to
provide  direct  below-market-interest-rate  mortgage  loans  for  rural  rental
housing. Such loans are extended to qualified sponsors organized exclusively for
the purpose of providing  housing in amounts of up to 95% of  apartment  complex
costs as  determined  pursuant  to RECDS  regulations  and for terms of up to 50
years. In addition, RECDS may provide an owner with mortgage interest subsidies,
which

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effectively  lower  the  interest  rate of the loan to 1% per  annum  after  the
completion of the apartment  complex,  the benefits of which the owner must pass
on to  eligible  tenants  in the  form of lower  rents.  Section  515  apartment
complexes may be eligible for Low Income Housing Credits.  However, because such
apartment complexes are the beneficiaries of Federal  below-market-interest-rate
loans,  they would be considered to be Federally  subsidized for purposes of Low
Income Housing  Credits and thus eligible only for the 30% present value credit.
See "The Low Income Housing Credit."

    Each  apartment  complex  receiving a permanent  mortgage loan from RECDS is
subject to various RECDS  regulations with respect to its operation.  Failure of
an owner to operate its apartment  complex in conformity with RECDS  regulations
could result in termination of RECDS assistance.

    RECDS regulations limit cash distributions to owners of apartment  complexes
which it  finances  with  mortgage  loans or  interest  subsidies  to a  maximum
cumulative  return  of 8% per  annum on their  equity  investments.  RECDS  also
requires  that monthly  payments to a reserve  account be made until the maximum
amount of 10% of the total  construction  cost of the apartment complex has been
set aside. Rent increases required to meet increased operating expenses for such
an Apartment  Complex must be approved by RECDS.  The  management  agent and the
terms of the management  agreement for each such Apartment  Complex must also be
approved by RECDS.

    RECDS approval is required before an owner may sell or otherwise transfer or
encumber title to its apartment complex. Furthermore, RECDS approval is required
before a  partnership  owner may admit or remove a general  partner  thereof  or
permit a general  partner  thereof to reduce  its  percentage  interest  in that
partnership.

    In addition,  for projects funded after December 14, 1989,  prepayment of an
RECDS  mortgage  loan is  prohibited  during its 50-year  term.  However,  if it
determines that there is a reasonable likelihood that the Apartment Complex will
continue to be decent,  safe and sanitary  housing for the remaining term of the
original loan and that neither an undue  hardship on tenants or an  unreasonable
cost to the  government  would result  therefrom,  RECDS can guarantee an equity
loan to the owner 20 years  after the  original  loan was made.  The equity loan
would be in an amount equal to the difference between the outstanding  principal
balance of debt secured by the property  and 90% of the  appraised  value of the
property, but not to exceed 30% of the amount of the original loan, and would be
funded from monthly payments to a special RECDS national pool.

    In its application for interest credit subsidies, the owner of the apartment
complex must submit to RECDS  budgets for "market  rentals"  (rents  required to
operate on a limited  profit basis with mortgage  payments based on the interest
rate

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provided in the RECDS  mortgage  loan) and budgets  for "basic  rentals"  (rents
required  to  operate on a limited  profit  basis  assuming  a mortgage  bearing
interest at 1% per annum). The owner will have the option of charging basic rent
or rent equal to 30% of each  tenant's  monthly  adjusted  income less a utility
allowance.  In neither  case would the tenant be charged  more than the  "market
rent" or less than the "basic  rent."  Utilities  are not included in either the
basic rent or market rent. The owner will receive interest subsidies so that the
additional  amount  which  it must pay for  debt  service  is the same as if the
interest  rate on its RECDS  mortgage  loan were 1% per annum  (rather  than the
actual interest rate on the RECDS mortgage  loan),  plus the amount of "overage"
for the month (if any).  Overage is the amount by which 30% of  one-twelfth of a
tenant's adjusted gross annual income exceeds the "basic rent" for his unit.

    RECDS  also  provides  rent  subsidies  ("Rental  Assistance  Payments")  to
low-income  tenants in  apartment  complexes  receiving  direct loans from RECDS
pursuant to the Section 515 Rural Rental Housing Program.

    Tenants with adjusted  annual  incomes at a level  established  from time to
time by RECDS are eligible for assistance under the rental  assistance  program.
Each  eligible  tenant  is  required  to pay  rent at the  lesser  of 30% of his
adjusted  gross  income  or the  "basic  rent"  established  for the  applicable
apartment  complex.  Funds provided by RECDS are applied to cover any difference
between  rents  required to be paid by eligible  tenants and basic  rents.  When
tenants pay utility bills directly a utility  allowance is established by RECDS.
The amount of the  allowance is  subtracted  from the rental  subsidy  otherwise
payable to the  apartment  complex  owner.  If the monthly rent plus the utility
allowance  exceeds  30% of the  tenant's  income,  the tenant  will  receive the
difference  directly from the apartment  complex owner out of the rental subsidy
funds paid by RECDS.

    In order to obtain Rental  Assistance  Payments for a  newly-constructed  or
substantially-rehabilitated  apartment  complex,  the  owner  executes  a rental
assistance  agreement  with  RECDS for a term of up to 20 years.  However,  some
contracts  may have only a five-year  term.  Upon  expiration of the term of the
agreement,  a new  agreement  may be executed  for a period of up to five years.
Additional units in the apartment  complex may subsequently be eligible if funds
are available.

HOME Program

    The Home Investment  Partnership program ("HOME") was authorized under Title
II of the Cranston-Gonzalez National Affordable Housing Act, enacted into law in
1990. HOME is a formula-based Federal housing program intended to support a wide
variety of state and local affordable housing programs.


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    HOME funds,  which are allocated by HUD on a formula basis to  participating
state and  local  governments,  can be used by such  governments  to expand  the
supply of affordable  housing and increase the number of  households  who can be
served  by  assisted  housing  programs.  Funds  can be  used  for  acquisition,
construction,   moderate  or  substantial   rehabilitation   activities  or  for
tenant-based rental assistance programs.

    State and local  jurisdictions  are  statutorily  required to meet  matching
requirements in order to qualify for HOME funding. This requires a 30% match for
new construction and a 25% match for rehabilitation.

    Participating jurisdictions are allowed to use funds for equity investments,
interest-bearing or non-interest-bearing  loans, advances, interest subsidies or
other forms of assistance  that HUD finds to be  consistent  with the purpose of
law.  If a  jurisdiction  were to make a loan to an  apartment  complex  with an
interest rate below the applicable  borrowing rate, the apartment  complex would
be eligible only for the 30% present value Low Income  Housing  Credits  because
the apartment complex would be considered to be Federally subsidized.

    Interim regulations  published by HUD provide that the amount of funds which
a  participating  jurisdiction  may invest on a per-unit  basis in an  apartment
complex may not exceed the  per-unit  limits  established  by HUD under  Section
221(d)(3) of the National Housing Act.

    Specific  apartment  complexes  which are  assisted  with HOME funds must be
occupied by low-income  families  (those whose incomes do not exceed 80% of area
median  income)  with the further  condition  that at least 20% of the  dwelling
units are occupied by very low-income families, i.e., those whose incomes do not
exceed 50% of the area median  income,  adjusted for family  size,  who pay rent
equal to no more than 30% of their adjusted income or rent which does not exceed
the amount  permitted  under the Low Income  Housing Credit  program.  Remaining
units  must be rented  at  amounts  which do not  exceed  the  lesser of (1) the
existing fair market rent under the HUD Section 8 program or (2) an amount equal
to 30% of the adjusted income of a family whose income is 65% of the area median
income,  adjusted for family size. It should be noted that the rents allowed for
such  remaining  units may exceed the amounts  permitted for units under the Low
Income Housing Credit program.

State and Local Bond Programs

    A number of states and some local  governmental  entities  have  established
housing finance agencies  ("HFAs") to assist in the development and financing of
low-  and  moderate-income  housing.  HFAs are  empowered  to  issue  their  own
obligations  (short-term  notes and long-term  revenue bonds) which,  due to the
status

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of the HFAs as governmental  entities,  are under certain conditions exempt from
Federal  income  taxation  and thus are sold in the  tax-exempt  municipal  bond
market at interest costs to the HFAs below  conventional money market rates. The
HFAs then use the  proceeds of the sale of their notes  and/or  bonds to make or
purchase mortgage loans for low- and moderate-income apartment complexes.

    When an HFA provides direct  construction  and permanent  mortgage loans for
multi-family  housing without HUD mortgage  insurance,  the HFA itself generally
determines   the  economic   feasibility,   market  need  and  demand  for,  and
architectural  construction  characteristics  of, the apartment complex. In such
cases, the HFA generally also monitors the progress of construction,  marketing,
rent-up of dwelling units and the management of the completed apartment complex.

    Although  HFAs'  criteria  and  requirements  for   non-HUD-insured   direct
construction  and  permanent  mortgage  loans  vary,  generally  such  loans are
available  in  an  amount  of up to  90%  of an  HFA's  estimate  of  the  total
development  cost of the  apartment  complex,  for terms of up to 40 years,  for
newly  constructed or substantially  rehabilitated  multi-family  rental housing
intended for occupancy by  individuals  and families,  elderly  individuals  and
handicapped  individuals of low and moderate incomes,  where the owner accepts a
limitation on the amount of operating  income from the  apartment  complex which
may be  distributed  to it annually.  The HFAs' direct loan programs  frequently
include  requirements as to operating  assurances,  escrow,  working capital and
other deposits.  While certain of these operating  assurances may be funded from
mortgage loan proceeds, most are to be provided by the developer/owner either in
cash,  in the form of letters of credit or through the pledge of certain  equity
syndication proceeds.

    Generally,  in cases where the mortgage loans of HFAs are also  HUD-insured,
the underwriting and regulatory  standards and procedures of HUD pursuant to the
applicable HUD mortgage  insurance  program are employed without any substantial
additional requirements.

    State enabling laws establishing HFA direct mortgage loan programs generally
do not require the apartment complex to receive additional subsidy assistance if
it otherwise can meet the housing needs of low- and moderate-income  individuals
and families. However, the preponderance of HFA-financed multi-family housing is
also  assisted  (as  to at  least  a  portion  of the  dwelling  units  in  each
development) pursuant to the HUD Section 8 program.

    In order to maintain the tax-exempt  nature of  obligations  issued by HFAs,
20% of the units in an apartment  complex must be rented to households at 50% of
the area  median  income (or 40% at 60% of area median  income) as adjusted  for
family size, and tenants may not pay more than 30% of their adjusted incomes for
rent. These tenant  qualification  requirements must be satisfied annually based
on income

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earned each year by tenants over the term of the qualified project period.  This
period  extends  until the latest of (a) 15 years from the date 50% of the units
are occupied;  (b) redemption of the bonds;  or (c) termination of any Section 8
Program rental assistance. Typically, a mortgage loan financed with the proceeds
of tax-exempt bonds may not be prepaid during this period and,  thereafter,  may
be prepaid only upon payment of amounts necessary to redeem the bonds, including
the  payment of  premiums  for early  redemption.  HFAs'  direct  mortgage  loan
programs also generally impose limitations on the sale, refinancing or change in
use of the apartment complex.  They may also require that a restrictive covenant
be placed on record  prohibiting  the use of the apartment  complex for anything
other than rental housing.  Further, they may require approval of the sale of an
interest in a partnership  owner.  These requirements may make it more difficult
for a Series  to sell its  interest  in a Local  Limited  Partnership  owning an
Apartment Complex financed with the proceeds of tax-exempt bonds or to refinance
the mortgage loan on such an Apartment Complex.

    Apartment  Complexes  financed  by  tax-exempt  bonds  issued by HFAs may be
eligible  for Low Income  Housing  Credits.  In such cases,  Low Income  Housing
Credits  are  not  allocated  from  Credit  Authority;  rather,  the  amount  of
tax-exempt  bond authority  available to a state or local agency is subject to a
strict state bond  ceiling.  Apartment  Complexes  financed  through  tax-exempt
financing are  considered to be Federally  subsidized for purposes of Low Income
Housing  Credits,  and thus eligible only for the 30% present value credit.  See
"The Low Income Housing Credit."

HUD Section 8 Rental Assistance Programs

    HUD administers the Existing Housing Program under Section 8 of the National
Housing Act, under which tenants whose incomes do not exceed  certain  specified
percentages  of area median incomes are given housing  vouchers  through a local
housing  authority.  These vouchers can be used to pay a significant  portion of
the rents for  housing  available  in the private  market,  but only in projects
approved by HUD on the basis of housing quality and suitability standards.

    The definition of "Federally  subsidized" for purposes of Low Income Housing
Credits  excludes  all of  the  Section  8  programs  except  for  the  Moderate
Rehabilitation  Section 8 program (other than funds  disbursed under the Stewart
B. McKinney  Homeless  Assistance  Act of 1988),  so that units  receiving  such
assistance may be eligible for the 70% present value credit.


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                                    MANAGEMENT

The Fund Manager

    The  Fund  Manager  is WNC &  Associates,  Inc.  The  Fund  Manager  has the
shareholder's  equity  reflected in its audited  balance  sheet (see  "Financial
Statements").  The Fund  Manager  will be  responsible  for all  aspects  of the
operations of the Series.  The Fund Manager will provide  executive  supervisory
and certain administrative  services for the operations of the Series.  Property
management will be provided at the expense of each Local Limited  Partnership by
agents,  which may  include  Affiliates  of the Fund  Manager.  See  "Management
Compensation." The services provided by the Fund Manager will include exercising
all of the rights of the Series under the Local Limited Partnership  Agreements.
Unitholders will have no right to participate in the management of their Series.

    The Fund Manager and its Affiliates  are serving as the general  partners of
the limited  partnerships  described below under "Prior Performance Summary" and
may serve as general partners for other real estate limited  partnerships in the
future.  It is anticipated  that the officers of the Fund Manager will initially
devote approximately 5% to 50% of their time to the Fund; however, the amount of
time  devoted to the Fund by all of these  individuals  is  expected to decrease
significantly  after  the  investment  of the  Net  Proceeds  in  Local  Limited
Partnership Interests. See "Conflicts of Interest."

    The Fund Manager is a California  corporation  which was  organized in 1971.
Its officers are:

         Wilfred N. Cooper, Sr.             Chief Executive Officer
         John B. Lester, Jr.                President, Chief Operating
                                            Officer and Secretary
         David N. Shafer, Esq.              Senior Vice President and
                                            General Counsel
         Wilfred N. Cooper, Jr.             Senior Vice President- Marketing
         Theodore M. Paul, CPA              Vice President - Finance
                                             and Chief Financial Officer
         Sy Garban                          Vice President - National
                                              Sales
         Thomas J. Riha                     Vice President - Asset Management
         Janice S. Wong                     Vice President - Marketing
         Michele M. Taylor                  Investor Services Director
         Donald S. Belanger                 Acquisitions Director
         Carl Farrington                    Acquisitions - Origination


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     The  directors of WNC &  Associates,  Inc. are Wilfred N. Cooper,  Sr., who
serves  as  Chairman  of the  Board,  John B.  Lester,  Jr.  and Kay L.  Cooper.
Substantially  all of the shares of WNC & Associates,  Inc. are owned by Wilfred
N. Cooper,  Sr., through the Cooper  Revocable  Trust, and John B. Lester,  Jr.,
through the Lester Family Trust.

    Wilfred N. Cooper,  Sr., age 64, has been the  principal  shareholder  and a
Director of WNC & Associates,  Inc. since its  organization  in 1971, of Shelter
Resource  Corporation since its organization in 1981 and of WNC Resources,  Inc.
from its organization in 1988 through its acquisition by WNC & Associates,  Inc.
in 1991,  serving  as  President  of  those  companies  until  1992 and as Chief
Executive Officer since 1992, and has been a Director of WNC Capital Corporation
since its organization. He is also a general partner with WNC & Associates, Inc.
in WNC Financial Group,  L.P. and WNC Tax Credit Partners,  L.P. During 1970 and
1971  he  was  a  principal  of  Creative  Equity  Development  Corporation,   a
predecessor of WNC & Associates,  Inc., and of Creative  Equity  Corporation,  a
real estate investment firm. For 12 years prior to that, Mr. Cooper was employed
by Rockwell  International  Corporation,  last serving as its manager of housing
and urban  developments.  Previously,  he had  responsibility  for new  business
development including factory-built housing evaluation and project management in
urban  planning  and  development.  Mr.  Cooper is a  Director  of the  National
Association  of Home  Builders  (NAHB) and a Trustee of the NAHB's Rural Housing
Council,  a  Director  of the  National  Housing  Conference,  a  member  of the
Affordable Housing Tax Credit Coalition,  a past President of the Rural Builders
Council of California (RBCC) and a past President of Southern California Chapter
II of the Real  Estate  Syndication  and  Securities  Institute  (RESSI)  of the
National Association of Realtors (NAR). Mr. Cooper graduated from Pomona College
in 1956 with a Bachelor of Arts degree.

    John B.  Lester,  Jr.,  age 61,  has  been a  shareholder,  a  Director  and
Secretary of WNC & Associates,  Inc.  since 1986,  Executive Vice President from
1986 to 1992, and President and Chief Operating Officer since 1992, and has been
a  Director  of  WNC  Capital  Corporation  since  its  organization.  He  was a
shareholder,   Executive  Vice  President,  Secretary  and  a  Director  of  WNC
Resources,  Inc. from 1988 through its acquisition by WNC & Associates,  Inc. in
1991.  From 1973 to 1986 he was the Chairman of the Board and Vice  President or
President of E & L Associates,  Inc., a provider of engineering and construction
services to the oil refinery and petrochemical industries which he co-founded in
1973.  Mr.  Lester  is a  former  Director  of the Los  Angeles  Chapter  of the
Associated  General  Contractors of California.  His  responsibilities  at WNC &
Associates,  Inc. include  property  acquisitions  and company  operations.  Mr.
Lester  graduated  from the  University  of Southern  California  in 1956 with a
Bachelor of Science degree in Mechanical Engineering.


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    David  N.  Shafer,  age  43,  has  been a  Senior  Vice  President  of WNC &
Associates,  Inc. since 1992 and General Counsel since 1990, and served as Asset
Management  Director  from  1990  to  1992.  Previously  he was  employed  as an
associate attorney by the law firms of Morinello, Barone, Holden & Nardulli from
1987 until 1990, Frye,  Brandt & Lyster from 1986 to 1987 and Simon and Sheridan
from 1984 to 1986. Mr. Shafer is a past President of Southern California Chapter
II of RESSI, a Director and President of RBCC, a past Director of the Council of
Rural Housing and Development  and a member of the State Bar of California.  Mr.
Shafer graduated from the University of California at Santa Barbara in 1978 with
a Bachelor of Arts  degree,  from the New  England  School of Law in 1983 with a
Juris  Doctor  degree (cum laude) and from the  University  of San Diego in 1986
with a Master of Law degree in Taxation.

    Wilfred N. Cooper, Jr., age 32, has been employed by WNC & Associates,  Inc.
since 1988, has been Senior Vice President - Marketing since 1994, and served as
Vice President - Marketing from 1992 to 1994. Mr. Cooper  oversees all marketing
and  sales  activities  at  WNC,  and has  been  President  of and a  registered
principal with WNC Capital  Corporation since its organization.  Previously,  he
was employed as a government  affairs assistant by Honda North America from 1987
to 1988,  and as a legal  assistant  with  respect  to Federal  legislative  and
regulatory  matters by the law firm of  Schwartz,  Woods and Miller from 1986 to
1987. Mr. Cooper graduated from The American  University in 1985 with a Bachelor
of Arts degree.

    Theodore  M.  Paul,  age 39,  has been Vice  President  -  Finance  of WNC &
Associates,  Inc. since 1992 and Chief Financial Officer since 1990. Previously,
he was a Vice President and the Chief Financial Officer of National  Partnership
Investments  Corp.,  a sponsor and general  partner of  syndicated  partnerships
investing in affordable  rental  housing  qualified  for tax credits,  from 1986
until  1990,  and was  employed  as an  associate  by the  accounting  firms  of
Laventhol & Horwath,  during 1985, and Mann & Pollack Accountants,  from 1979 to
1984.  Mr.  Paul is a member  of the  California  Society  of  Certified  Public
Accountants  and the American  Institute of Certified  Public  Accountants.  His
responsibilities  at WNC &  Associates,  Inc.  include  supervision  of investor
partnership  accounting  and tax reporting  matters and monitoring the financial
condition of the Local Limited  Partnerships in which the Fund will invest.  Mr.
Paul  graduated  from the  University  of  Illinois  in 1978 with a Bachelor  of
Science degree and is a Certified Public Accountant in the State of California.

    Sy Garban,  age 49, has 18 years'  experience in the real estate  securities
and syndication  industry.  He has been  associated with WNC & Associates,  Inc.
since  1989,  serving  as  National  Sales  Director  through  1992  and as Vice
President National Sales since 1992.  Previously,  he was employed by MRW, Inc.,
Newport  Beach,  California  from  1980  to  1989,  a real  estate  acquisition,
development  and management  firm.  Mr. Garban is a member of the  International
Association of

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Financial  Planners and has been Vice  President  of and a registered  principal
with WNC Capital Corporation since its organization.  He graduated from Michigan
State  University  in  1967  with a  Bachelor  of  Science  degree  in  Business
Administration.

    Thomas J. Riha, age 40, has been Vice President - Asset  Management of WNC &
Associates, Inc. since 1994. He has more than 17 years' experience in commercial
and multi-family real estate investment and management. Previously, Mr. Riha was
employed by Trust  Realty  Advisor,  a real estate  acquisition  and  management
company,  from 1988 to 1994,  last  serving as Vice  President  Operations.  His
responsibilities at WNC & Associates, Inc. include monitoring the operations and
financial  performance of, and regulatory  compliance by,  properties in the WNC
portfolio. Mr. Riha graduated from the California State University, Fullerton in
1977 with a Bachelor of Arts degree (cum laude) in Business  Administration with
a concentration in Accounting and is a Certified Public  Accountant in the State
of  California  and a member  of the  American  Institute  of  Certified  Public
Accountants.

    Janice  S.  Wong,  age 36,  has been Vice  President  -  Marketing  of WNC &
Associates, Inc. since 1994. Previously, from 1987 to 1994 Ms. Wong was employed
by ATEL Securities Corporation,  a California-based  dealer-manager of equipment
leasing limited partnership  offerings,  where she last served as Executive Vice
President  -  Marketing,  and from  1986 to 1987  she was  employed  by  Wedbush
Securities,  Inc., a regional brokerage firm in Los Angeles,  California,  where
she served as coordinator for the marketing of limited  partnerships  and mutual
funds. She has been a registered  principal with WNC Capital  Corporation  since
1994,  and is  responsible  for the  marketing of WNC's retail  investments  and
overseeing  broker-dealer  relations.  Ms. Wong graduated from the University of
Southern  California in 1980 with a Bachelor of Science degree (magna cum laude)
in Business  Administration  with dual  emphasis  in  corporate  and  investment
finance.

    Michele M. Taylor, age 40, has been employed by WNC & Associates, Inc. since
1986,  serving as a paralegal and office manager,  and currently is the Investor
Services  Director.  Previously she was  self-employed  between 1982 and 1985 in
non-financial  services  activities  and from 1978 to 1981 she was employed as a
paralegal by a law firm which  specialized  in real estate  limited  partnership
transactions.  Ms. Taylor  graduated from the University of California at Irvine
in 1976 with a Bachelor of Arts degree.

    Donald  S.  Belanger,  age  33,  has  been  Acquisitions  Director  of WNC &
Associates,  Inc.  since 1994.  He has eight  years'  experience  in real estate
analysis, finance, construction and development.  Previously, from 1988 to 1991,
Mr.  Belanger  was a principal  in Marchand  Development  Company,  Inc., a real
estate  development and  construction  firm  specializing in  single-family  and
multi-family

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properties,  and from  1985 to 1988 he was  employed  as an  analyst  and  group
manager at Economic  Development  Corporation,  a regional  business  consulting
firm. Mr. Belanger  graduated from the University of California,  Los Angeles in
1985 with a Bachelor of Arts degree and from London  School of Economics in 1992
with a Diploma in  Economics  and in 1993 with a Masters  of  Science  Degree in
Finance.

    Carl  Farrington,  age 52, has been associated  with WNC & Associates,  Inc.
since 1993,  serving as  Acquisitions  Director  until 1994 and  Acquisitions  -
Originator  since 1994.  Mr.  Farrington  has more than 11 years'  experience in
finance  and real estate  acquisitions.  Previously,  he served as  Acquisitions
Director for The Arcand Company from 1991 to 1993, and as Treasurer and Director
of Finance and  Administrator  for Polytron  Corporation  from 1988 to 1991. Mr.
Farrington graduated from Yale University with a Bachelor of Arts degree in 1966
and from Dartmouth College with a Masters of Business Administration in 1970.

     Kay  L.  Cooper,  age  58,  has  been  an  officer  and  Director  of WNC &
Associates,  Inc.  since 1971 and of WNC  Resources,  Inc. from 1988 through its
acquisition  by WNC & Associates,  Inc. in 1991.  Mrs.  Cooper has also been the
sole  proprietor  of Agate 108, a  manufacturer  and retailer of home  accessory
products,  since 1975. She is the wife of Wilfred N. Cooper,  Sr., the mother of
Wilfred  N.  Cooper,  Jr.  and the  sister of John B.  Lester,  Jr.  Ms.  Cooper
graduated from the University of Southern  California in 1958 with a Bachelor of
Science degree.

    Statement of Purpose.  Organized in 1971, WNC & Associates,  Inc. since then
has specialized in providing quality investment opportunities exclusively in the
field of affordable housing. WNC & Associates, Inc. has a time-honored tradition
of prudent  investing and is one of the nation's  oldest  sponsors of Tax Credit
investments.  Its officers believe that WNC & Associates,  Inc. has developed an
insight  into  the  affordable  housing  business  based  upon  the  fundamental
principles  of  diversification  and market  need that few other  companies  can
match.  Using a  disciplined  selection  process  it  evaluates  all  investment
properties  for value and  location,  placing  particular  emphasis on long-term
economic stability and rental demand.

    Prior to 1982 WNC & Associates,  Inc. was in the business of structuring and
sponsoring  private  placements  of equity  securities  in limited  partnerships
organized to develop and operate  residential  rental  properties  which benefit
from Government  Assistance,  and thereafter  monitoring the investments made by
such  partnerships  and  providing  certain   administrative   services  to  the
investors.  A  discussion  of  these  partnerships  is  set  forth  below  under
"Syndicated Partnerships."


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     In addition to the  Syndicated  Partnerships,  through May 31, 1995,  WNC &
Associates, Inc. and/or its Affiliates had sponsored 11 public and 45 non-public
real  estate  programs  as  managing  general  partner.  See "Prior  Performance
Summary."

    Syndicated Partnerships.  WNC & Associates,  Inc. structured for independent
real estate developers 57 private placements of partnerships  formed to own real
estate projects  ("Syndicated  Partnerships").  In such transactions,  investors
paid an aggregate of approximately  $15,825,000 in equity capital  contributions
to limited partnerships with respect to projects having an aggregate acquisition
cost estimated at approximately $82,000,000. Estimates of acquisition costs of a
project  herein are made by adding  the  related  limited  partner  and  general
partner capital  commitments to the principal amount of its mortgage  financing.
These  investment  programs  invested in 57 apartment  properties,  all of which
benefit from Government Assistance, in the following jurisdictions:

    Arizona                (2)              Ohio                       (6)
    California             (29)             Texas                      (4)
    Colorado               (1)              Utah                       (1)
    Florida                (6)              Virginia                   (1)
    Kansas                 (1)              Washington                 (1)
    Kentucky               (1)              West Virginia              (3)
    New Mexico             (1)

    As of May 31, 1995,  nine of the  Syndicated  Partnerships  had either sold,
resyndicated (to Affiliates) or refinanced their properties,  returning to their
investors  between  100% and 200% of  their  invested  capital  in  addition  to
providing tax deductions averaging in excess of 200% of their invested capital.

    In connection with the Syndicated Partnerships,  WNC & Associates,  Inc., in
addition  to  providing  structuring  and  consulting  services  to  developers,
directly  or through  professional  consultants,  arranged  for  preparation  of
partnership   agreements  and  other  requisite  documents  for  such  projects,
including  legal opinions as to Federal income tax and  organizational  matters,
and  arranged  for the  placement  of such  securities,  typically  pursuant  to
Regulation  D under  the  Securities  Act of  1933.  It  relied  on  independent
broker-dealers to place such securities.

    WNC & Associates,  Inc., as an investor  service  agent,  typically has also
provided certain on-going partnership  administrative services to the Syndicated
Partnerships.  In this role, it has gathered and evaluated information,  handled
all  communications  between  the  partnerships  and  investors,  including  the
forwarding of financial  statements and tax reporting  forms,  and served as the
initial channel for investor  inquiries.  In cases where projects have failed to
perform as expected,  WNC &  Associates,  Inc. has  intensified  its  monitoring
operations,  visited the  projects,  attempted to organize the  interests of the
investors, to provide general

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advice to the partners and to help seek a resolution of pending  problems,  and,
with  respect  to four of the  Syndicated  Partnerships,  each of which  owned a
single  property,  become  the  successor  managing  general  partner  after the
original  managing general partners had  misappropriated  partnership  accounts.
With  respect  to three of those  Syndicated  Partnerships  (which  had the same
original managing general partner), WNC & Associates,  Inc. became the successor
managing general partner in 1986; thereafter,  the three Syndicated Partnerships
sold their  respective  properties  to three other  partnerships  which were not
Affiliates of WNC & Associates,  Inc. After the general partner thereof obtained
Tax Credits for such  properties,  a partnership  sponsored by WNC & Associates,
Inc.  (see  "Prior  Performance  Summary")  purchased  the  limited  partnership
interests  therein.  With  respect to the other  Syndicated  Partnership,  WNC &
Associates,  Inc. became successor managing general partner in 1989. Thereafter,
using  the  proceeds  from  an  RECDS  loan,  the  property  was   substantially
rehabilitated  and  continues  to  be  owned  and  operated  by  the  Syndicated
Partnership.

Change in Management

    The management and control of the Fund Manager may be changed at any time in
accordance with its organizational documents, without the consent or approval of
the  Unitholders.  In  addition,  the  Partnership  Agreement  provides  for the
admission of one or more  additional or successor Fund Managers to any Series in
certain circumstances.

    First,  with the  consent  of any other  Fund  Managers  of the Series and a
majority-in-interest  of the Unitholders,  the Fund Manager may designate one or
more persons to be  successor  or  additional  Fund  Managers to the Series.  In
addition, the Fund Manager may, without the consent of any other Fund Manager or
the  Unitholders,  (i)  substitute in its stead as Fund Manager any entity which
has, by merger,  consolidation or otherwise,  acquired  substantially all of its
assets,  stock or other evidence of equity  interest and continued its business,
or (ii) cause to be admitted to the Series an  additional  Fund  Manager or Fund
Managers if it deems such  admission  to be  necessary  or desirable so that the
Series will be  classified  as a  partnership  for Federal  income tax purposes.
Finally,  a  majority-in-interest  of the Unitholders may at any time remove the
Fund Manager of their Series and elect a successor Fund Manager. The Partnership
Agreement  provides  that if at any time a Series  does not have a Fund  Manager
which is an Affiliate  of WNC &  Associates,  Inc.,  the Series shall change its
name in such a manner as not to include the initials "WNC."

WNC Capital Corporation

    WNC Capital Corporation,  a California  corporation which is wholly-owned by
WNC & Associates, Inc., was organized in February 1994 principally to facilitate

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the  distribution of securities of  partnerships  sponsored by the Fund Manager.
WNC Capital  Corporation  is a member firm with the NASD, and is registered as a
broker-dealer  with the  Securities  and  Exchange  Commission,  the  California
Department of Corporations and regulatory  agencies of certain other states. The
officers of WNC Capital Corporation are Wilfred N. Cooper, Jr., President and Sy
Garban, Vice President.

                             PRIOR PERFORMANCE SUMMARY

    WNC &  Associates,  Inc.  and Wilfred N. Cooper,  Sr.,  directly and through
their  Affiliates have had significant  prior  experience in the syndication and
management of real estate programs. Since its formation the Fund Manager and its
Affiliates  have  raised  equity  from  more than  9,200  investors  to  acquire
interests in more than 400  properties  located in 32 states and one  territory,
and  representing  more than  $593,200,000 in aggregate  acquisition  costs. The
information   which  follows  and  the  section  of  this  Prospectus   entitled
"Management"  contain  discussions  as of May 31,  1995 of all of the prior real
estate  investment  programs in which the Fund Manager and its  Affiliates  have
been involved.



























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    In addition to the  Syndicated  Partnerships  for which the Fund Manager has
performed  syndication and related services for third parties as discussed above
under  "Management," as of May 31, 1995 the Fund Manager and its Affiliates have
sponsored a total of 11 public and 45 non-public real estate programs (excluding
the Fund). As of May 31, 1995,  these 56 partnerships had raised an aggregate of
approximately $180,000,000 from approximately 8,800 investors. These 56 programs
invested in a total of 351 apartment properties at an aggregate acquisition cost
of approximately $522,658,000 in the following jurisdictions:

    Alabama                (14)             Mississippi                (7)
    Arizona                (7)              Missouri                   (6)
    Arkansas               (9)              New Mexico                 (9)
    California             (84)             North Carolina             (22)
    Florida                (4)              Ohio                       (4)
    Georgia                (3)              Oklahoma                   (7)
    Idaho                  (1)              Oregon                     (4)
    Illinois               (8)              South Carolina             (14)
    Indiana                (4)              South Dakota               (1)
    Iowa                   (7)              Tennessee                  (25)
    Kansas                 (1)              Texas                      (68)
    Kentucky               (2)              U.S. Virgin Islands        (1)
    Louisiana              (13)             Virginia                   (5)
    Maryland               (2)              West Virginia              (1)
    Michigan               (1)              Wisconsin                  (17)

    Of these 56  partnerships,  11 public and 38 private  real  estate  programs
commenced their offerings  during the 10 1/2-year  period  beginning  January 1,
1985 (the  "Prior  Programs").  See "Public  Programs  Sponsored"  and  "Private
Programs  Sponsored"  below.  The Prior  Programs  were  organized  to invest in
apartment complexes (by acquiring limited partnership interests in other limited
partnerships which owned the apartment  complexes)  benefitting from one or more
forms of Government  Assistance,  generally  consisting of low interest mortgage
financing pursuant to Section 515 of the Housing Act of 1949, Low Income Housing
Credits  and/or  rental  assistance  payments  under the Section 8 Program.  See
"Other Government  Assistance Programs." Two of the public programs and eight of
the  private  programs  did not have as  their  principal  investment  objective
providing Low Income  Housing  Credits to their  investors.  Such Prior Programs
were offered prior to the effective date of the 1986 Act (which both established
the Low  Income  Housing  Credit  program  and  restricted  other  types  of tax
benefits)  and were  principally  intended to provide their  investors  with tax
losses which could be used to reduce taxable income from other sources.  As will
be the case  with  respect  to the  Apartment  Complexes  in which the Fund will
invest,  management and operational control of the properties in which the Prior
Programs have invested is exercised by the general partners of the local limited
partnerships.

                                        114

<PAGE>




Public Programs Sponsored

    The 11 public Prior  Programs are Shelter  Resource  Fund  ("SRF"),  Shelter
Resource  Fund II ("SRFII"),  WNC Housing Tax Credit Fund,  L.P.  ("HTCF"),  WNC
California Housing Tax Credits,  L.P. ("CHTC"),  WNC Housing Tax Credit Fund II,
L.P.  ("HTCFII"),  WNC California Housing Tax Credits II, L.P.  ("CHTCII"),  WNC
Housing  Tax Credit  Fund III,  L.P.  ("HTCFIII"),  WNC  California  Housing Tax
Credits III, L.P.  ("CHTCIII"),  WNC Housing Tax Credit Fund IV, L.P.,  Series 1
("HTCFIV  Series 1"),  WNC Housing Tax Credit Fund IV,  L.P.,  Series 2 ("HTCFIV
Series 2") and WNC  California  Housing Tax Credits IV, L.P.,  Series 4 ("CHTCIV
Series 4").  With the  exception of HTCFIV Series 2 and CHTCIV Series 4, each of
the public Prior Programs had completed its offering as of May 31, 1995.

    In an offering which began in August 1985, SRF II received subscriptions for
in excess of $1,600,000 of its limited partnership  interests.  However,  all of
the   subscription   proceeds  were  held  in  an  escrow  account  pending  the
satisfaction of certain conditions which had not occurred prior to the enactment
of the 1986 Act,  which Act would have  impeded  the ability of SRFII to achieve
its  investment  objectives.  Accordingly,  that  offering was  terminated,  all
subscription   proceeds  and  interest  earned  thereon  were  returned  to  the
respective subscribers, and SRFII was dissolved.

    Through  May 31,  1995,  the other 10 public  Prior  Programs  had raised an
aggregate  of  approximately  $107,543,000  in  capital  contributions  from  an
aggregate  of  approximately  7,000  investors  and  invested  in a total of 181
apartment properties located in the following jurisdictions:

    Alabama                (12)             Mississippi                (6)
    Arizona                (3)              New Mexico                 (3)
    Arkansas               (5)              North Carolina             (13)
    California             (44)             Ohio                       (4)
    Florida                (1)              Oklahoma                   (1)
    Georgia                (1)              Oregon                     (2)
    Idaho                  (1)              South Carolina             (1)
    Illinois               (8)              South Dakota               (1)
    Indiana                (4)              Tennessee                  (5)
    Iowa                   (7)              Texas                      (35)
    Kentucky               (1)              Virginia                   (4)
    Louisiana              (6)              West Virginia              (1)
    Maryland               (1)              Wisconsin                  (11)

    The aggregate  mortgage debt  encumbering  the properties was  approximately
$210,230,000   and  the  aggregate   acquisition  cost  of  the  properties  was
approximately

                                        115

<PAGE>



$283,000,000.  At the times of the Prior Programs' investments therein 57 of the
properties were existing  apartment  complexes and 124 were under development or
construction by the local partnerships which own them. All of the properties are
current in their mortgage  obligations  and are otherwise  being  constructed or
operating  approximately  as  anticipated  at the  time  the  local  partnership
investments were made by the respective public programs.

    HTCF, CHTC, HTCFII, CHTCII, HTCFIII, CHTCIII, HTCFIV Series 1, HTCFIV Series
2, and CHTCIV Series 4, like the Partnership, have as their principal investment
objective  providing  Federal  Low Income  Housing  Credits to their  investors,
although  only CHTC,  CHTCII,  CHTCIII and CHTC IV Series 4 have the  additional
objective of providing  California Low Income Housing  Credits.  Through May 31,
1995,  these  nine  Prior  Programs  had raised an  aggregate  of  approximately
$103,543,000  (approximately  96% of the  total  for  all  of the  public  Prior
Programs) in capital  contributions  from an aggregate  of  approximately  6,500
investors,  and had  invested  in a total of 173  apartment  properties  with an
aggregate mortgage debt of approximately $198,752,000  (approximately 95% of the
total) and aggregate  property  acquisition costs of approximately  $268,994,000
(approximately 95% of the total).  These properties are located in the following
jurisdictions:

    Alabama                (12)             Mississippi                (6)
    Arizona                (3)              New Mexico                 (3)
    Arkansas               (5)              North Carolina             (13)
    California             (42)             Ohio                       (4)
    Florida                (1)              Oklahoma                   (1)
    Georgia                (1)              Oregon                     (2)
    Idaho                  (1)              South Carolina             (1)
    Illinois               (7)              South Dakota               (1)
    Indiana                (4)              Tennessee                  (5)
    Iowa                   (7)              Texas                      (34)
    Kentucky               (1)              Virginia                   (4)
    Louisiana              (3)              Wisconsin                  (11)
    Maryland               (1)

Certain information with regard to HTCF, CHTC, HTCFII, CHTCII, HTCFIII, CHTCIII,
HTCFIV  Series 1,  HTCFIV  Series 2 and CHTC Series 4 is set forth in the tables
which follow:

                                        116

<PAGE>

<TABLE>


                             Federal Credit Programs

Offering       Partnership Invested           Credits Received Per $10,000 Investment              Credit Years
Commencement   Name        Assets(1)  Total(2)     1994     1993     1992     1991     1990  1989  Remaining(1)
- ------------   ----        ---------  --------     ----     ----     ----     ----     ----  ----  ------------
<S>            <C>      <C>            <C>       <C>      <C>      <C>
1989           HTCF     $17,755,000    $7,350    $1,410   $1,410   $1,410   $1,400   $1,640   $80         6
1990           HTCFII    28,963,000     6,110     1,460    1,380    1,210    1,300      760    --         8
1992           HTCFIII   58,472,000     1,910     1,190      680       40       --       --    --        11
1993           HTCFIV
              Series 1    2,950,000       320       320       --       --       --       --    --        11
1994           HTCFIV
                Series 2 17,700,000       210       210       --       --       --       --    --        12


                     Federal and California Credit Programs

                                                                                                       Federal
Offering       Partnership Invested              Credits Received Per $10,000 Investment              Credit Years
Commencement   Name        Assets(1)  Total(2)     1994     1993     1992     1991     1990     1989  Remaining(1)
- ------------   ----        ---------  --------     ----     ----     ----     ----     ----     ----  ------------
<S>            <C>      <C>           <C>        <C>      <C>      <C>
1989           CHTC     $22,340,000   $11,690    $1,180   $1,720   $2,360   $2,590   $2,280   $1,560         7
1991           CHTCII    41,300,000     6,180     1,940    1,780    1,810      650       --       --        10
1993           CHTCIII   36,625,000       860       800       60       --       --       --       --        11
1994           CHTCIV
                 Series 4 5,308,000        --        --       --       --       --       --       --        11

<FN>

     (1) As of December 31, 1994. (2) During the Initial  Compliance  Period,  a
portion of the Tax Credits  could be subject to  recapture.  See "The Low Income
Housing Credit."

</FN>
</TABLE>


                                      117

<PAGE>



Private Programs Sponsored

    As of May 31, 1995, the 38 private Prior  Programs  involved an aggregate of
approximately  $68,278,000 in commitments for capital  contributions  payable in
installments from an aggregate of approximately  1,640 investors.  These private
Prior Programs  invested in a total of 157 apartment  properties  located in the
following jurisdictions:

    Alabama                (2)              Missouri                   (5)
    Arizona                (3)              New Mexico                 (5)
    Arkansas               (4)              North Carolina             (9)
    California             (38)             Oklahoma                   (5)
    Florida                (3)              Oregon                     (2)
    Georgia                (1)              South Carolina             (13)
    Kentucky               (1)              Tennessee                  (20)
    Louisiana              (7)              Texas                      (29)
    Maryland               (1)              Virginia                   (1)
    Michigan               (1)              Wisconsin                  (6)
    Mississippi            (1)

    The aggregate  mortgage debt  encumbering  the properties was  approximately
$177,079,000   and  the  aggregate   acquisition  cost  of  the  properties  was
approximately $223,963,000.  All of the properties are current on their mortgage
obligations and are otherwise  being  constructed or operated  approximately  as
anticipated at the times of their respective private placements.

    Thirty-one  of  these  Prior  Programs  have as their  principal  investment
objective  providing Federal Low Income Housing Credits to their investors,  and
12 of the 31 programs have the additional  objective of providing California Low
Income  Housing  Credits.  These 31 programs have an aggregate of  approximately
$60,891,000  (approximately  89% of the  total  for  all  of the  private  Prior
Programs) in commitments  for capital  contributions  from  approximately  1,400
investors.  These  Prior  Programs  have  invested  in a total of 133  apartment
properties  with  an  aggregate  mortgage  debt  of  approximately  $152,469,000
(approximately  86% of the total) and aggregate  property  acquisition  costs of
approximately  $194,513,000  (approximately 88% of the total).  These properties
are located in the following jurisdictions:


                                        118

<PAGE>



    Alabama                (2)              Missouri                   (3)
    Arizona                (3)              New Mexico                 (5)
    Arkansas               (4)              North Carolina             (7)
    California             (30)             Oklahoma                   (3)
    Florida                (3)              Oregon                     (2)
    Georgia                (1)              South Carolina             (7)
    Kentucky               (1)              Tennessee                  (18)
    Louisiana              (7)              Texas                      (28)
    Maryland               (1)              Virginia                   (1)
    Mississippi            (1)              Wisconsin                  (6)


Certain  information with regard to these 31 programs is set forth in the tables
which follow:


                                        119

<PAGE>

<TABLE>


                                                       Federal Credit Programs
                                                                                                                        Credit
Offering Com-   Partnership    Invested              Credits Received Per $10,000 Investment(2)                         Years
mencement         Name          Assets(1)   Total(3)   1994    1993    1992    1991    1990(4)   1989     1988     1987 Remaining(1)
- ------------       ----         ---------    -------   ----    ----    ----    ----    -------   ----     ----     ---- ------
<S>           <C>               <C>         <C>       <C>      <C>     <C>     <C>      <C>      <C>      <C>      <C>      <C>
1987          Pepper Tree (5)  $ 6,105,000  $10,690   $1,450   $1,470  $1,470  $1,470   $2,370   $1,530   $  900   $ 30     5
1987          East Bay           3,861,000   11,230    1,360    1,360   1,360   1,360    1,670    1,700    1,400  1,020     3
1987          Sequoia Manor      5,989,000   10,700    1,370    1,370   1,350   1,380    2,220    1,460    1,340    210     4
1987          Bayou              5,296,000   10,310    1,290    1,290   1,290   1,290    2,110    1,400    1,330    310     3
1987          Laurel Hill        5,496,000   10,130    1,320    1,320   1,320   1,300    2,090    1,320    1,230    230     4
1988          Ridgetop           6,354,000    9,530    1,390    1,390   1,390   1,390    2,250    1,500      220     --     4
1989          Alta Mesa          4,840,000    7,770    1,320    1,320   1,320   1,320    1,950      540       --     --     6
1990          WNC-90             4,735,000    5,850    1,400    1,400   1,400   1,400      250      --        --     --     6
1991          Shelter Resource
                   XIX           4,340,000    5,040    1,440    1,440   1,440     720       --      --        --     --     7
1991          WNC Tax Credits 
                   XX            7,454,000    5,320    1,460    1,460   1,460     940       --      --        --     --     7
1991          WNC Tax Credits 
                   XXI           8,203,000    3,800    1,360    1,360   1,030      50       --      --        --     --     8
1992          WNC Tax Credits 
                   XXII          8,873,000    3,910    1,410    1,410   1,090       --      --      --        --     --     8
1992          WNC Tax Credits 
                   XXIII         9,279,000    3,640    1,400    1,370     870       --      --      --        --     --     8
1992          WNC Tax Credits 
                   XXV           7,939,000    2,300    1,280      870     150       --      --      --        --     --    10
1993          WNC Tax Credits 
                   XXVI          7,557,000    2,150    1,310      840      --       --      --      --        --     --     9
1993          WNC Tax Credits 
                   XXVIII        5,446,000      750      640      110      --       --      --      --        --     --    10
1993          WNC Tax Credits 
                   XXIX          6,925,000      820      790       30      --       --      --      --        --     --    10
1994          WNC Tax Credits 
                   XXX           7,662,000      120      120       --      --       --      --      --        --     --    11
1994          WNC Institutional 14,584,000      500      500       --      --       --      --      --        --     --    12



</TABLE>

                                                                120

<PAGE>
<TABLE>



                                               Federal and California Credit Programs

                                                                                                                        Federal
Offering       Partnership   Invested           Credits Received Per $10,000 Investment(2)                            Credit Years
Commencement   Name          Assets(1)   Total(3)   1994     1993     1992     1991   1990(4)   1989     1988   1987  Remaining(1)
- ------------   ----         ---------    --------   ----     ----     ----     ----   -------   ----     -----  ----  -----------
<S>           <C>            <C>         <C>        <C>      <C>      <C>

1987          Beech Villa    $4,067,000  $15,030    $1,350   $1,350   $1,350   $1,350 $2,670    $3,210   $3,210  $540        3
1988          Elmwood Villa   3,850,000   15,050       990      990    1,330    2,610  4,010     3,460    1,660    --        5
1988          Poplar Villa    5,752,000   14,710       970      970      970    2,280  3,420     3,410    2,690    --        3
1988          Olive Tree      4,468,000   14,550       970      970      970    1,620  3,990     3,310    2,720    --        4
1988          Pine Rock       3,920,000   13,650       940      880    1,220    3,280  3,810     3,240      280    --        5
1988          Mesa Verde      4,622,000   12,980     1,030    1,030    1,870    1,690  3,610     2,760      990    --        5
1988          Sunfield        6,408,000   11,630     1,340    1,340    1,340    1,650  3,090     2,080      790    --        5
1988          Foxglove        6,136,000    9,160     1,360    1,550    2,020    2,020  1,920       290       --    --        6
1989          Elliot Place    4,194,000   11,760     1,200    1,200    1,670    2,460  3,200     2,030       --    --        6
1990          Wheatridge      4,302,000    8,640     1,120    1,480    2,240    2,230  1,570        --       --    --        6
1992          WNC Tax Credits 
                     XXIV     8,054,000    5,590     2,180    2,180    1,230        --    --       --        --    --        7
1993          WNC Tax Credits 
                     XXVII    7,981,000    2,760     1,740    1,020       --        --    --       --        --    --      9

<FN>
(1) As of  December  31,  1994.  
(2)  Represents  the return received  by investors utilizing  deferred  payment  
purchase  plans.  In many instances the respective  returns  to cash  investors  
were  higher  than those  listed  above inasmuch as the use of deferred payment  
purchase notes entailed the payment of interest. 
(3) During the Initial Compliance Period, a portion of the Tax Credits
could be subject to recapture.  See "The Low Income Housing Credit." 
(4) In 1990 certain  partnerships  were  permitted to, and did, elect to utilize 
150% of the Federal Low Income Housing Credit otherwise  allowable for 1990. 
(5) Pepper Tree originally offered Federal Tax Credits only. After the investors
were admitted to the Prior Program,  the Local General Partners obtained 
California Low Income Housing Credits as well, which are not reflected in this 
chart.
</FN>
</TABLE>


                                                                121

<PAGE>



Additional Information

    Additional  information  with regard to certain of the Prior Programs is set
forth in Tables I, II and III, which comprise Exhibit A to this Prospectus,  and
in Table VI which appears in Part II of the Registration Statement of which this
Prospectus  is a part and  describes in greater  detail the  properties in which
these  programs have  invested.  Tables IV and V have been omitted since none of
the prior programs sponsored by the Fund Manager or its Affiliates have sold any
of their properties or completed operations.

    There will be made available to any prospective  investor,  upon request and
without  charge,  copies of Table VI and of the most recent  report on Form 10-K
filed by any of the public programs with the Securities and Exchange Commission,
and upon request, for a reasonable fee, the exhibits to such Form 10-K will also
be provided.

    In one prior  private  program  sponsored in 1981,  WNC &  Associates,  Inc.
became successor  managing  general partner in 1989 after the original  managing
general partner had misappropriated partnership accounts.  Thereafter, using the
proceeds from an RECDS loan, the property was  substantially  rehabilitated  and
continues to be owned and operated by the prior program.

                         FEDERAL INCOME TAX CONSIDERATIONS

Introduction

    The following discussion  summarizes the material Federal income tax aspects
of the purchase,  ownership and  disposition of Units and the opinion of Counsel
with regard to such aspects,  other than Low Income Housing  Credits,  which are
discussed  under "The Low Income  Housing  Credit." This  discussion,  Counsel's
opinion and the discussion of Low Income Housing  Credits are based on the Code,
Treasury Regulations thereunder,  published administrative rulings, and judicial
decisions  in effect on the date of this  Prospectus.  The 1986 Act and the 1987
Act  substantially  altered the Federal  income tax system,  particularly  as it
relates to the tax  consequences of investments by limited  partnerships in real
estate,  and the 1988 Act, the 1989 Act, the 1990 Act and the 1993 Act have made
numerous other changes in the Code. Consequently, significant uncertainty exists
regarding various aspects of the taxation of limited partnerships.  Furthermore,
applicable  regulations  and  interpretations  in this  area  have  not yet been
written or are under  continuing  review by the IRS. No  assurance  can be given
that future  legislative or  administrative  changes or court decisions will not
significantly  modify the statements and opinions  expressed in this Prospectus.
Any such  changes may or may not be  retroactive  with  respect to  transactions
completed prior to the effective dates of such changes.

                                        122

<PAGE>




Summary

    The  following  is a summary  of, and is  qualified  by, the more  extensive
discussion  of the  Federal  income  tax  consequences  set forth  below in this
section.

    Opinion of Counsel.  In  connection  with its  preparation  of the following
discussion  Counsel  has  rendered  its  opinion as to  certain of the  material
Federal  income tax issues.  With  regard to certain  other  matters  Counsel is
unable  to  render an  opinion.  See  "Opinions  of  Counsel."  The Fund has not
received  and will not apply for a ruling  from the IRS with  respect  to any of
these matters.

    Classification  as a Partnership.  As indicated  throughout this Prospectus,
the  primary  tax  benefit  to  investors  will be Low Income  Housing  Credits.
However,  Low Income Housing  Credits will only be available to Unitholders in a
Series if,  among other things (see "The Low Income  Housing  Credit" as well as
the discussion  which  follows),  the Series is classified as a partnership  for
Federal  income tax  purposes.  As  indicated  below (see  "Classification  as a
Partnership"),  Counsel  has  rendered  its  opinion  that each  Series  will be
classified as a partnership in this regard.

    Tax  Treatment  of  Unitholders.  As set forth below (see "Tax  Treatment of
Unitholders"),  the Series themselves will not be subject to Federal income tax.
Rather,  each  Unitholder  will report on his own income tax return his share of
his Series' Profits and Losses for Tax Purposes and Tax Credits,  which includes
his  share  of  the  Series'   share  of  such  items  from  the  Local  Limited
Partnerships. See "Investment in Local Limited Partnerships."

    Because a Unitholder's share of cash distributions will not ordinarily equal
his share of Taxable  Income for Tax  Purposes,  a  Unitholder  may have taxable
income for a year in an amount which exceeds his distributions for the year. See
"Tax Treatment of Unitholders" and "Tax Liabilities in Later Years."

    A  Unitholder's  ability to utilize his Tax Credits and to deduct Losses for
Tax Purposes is limited. For example, because the Fund's credits and losses will
for most  investors be classified  as "passive," a Unitholder  might need income
from other sources to fully utilize his Tax Credits,  and in most instances will
need  income  from other  sources to deduct  his  Losses for Tax  Purposes.  See
"Limitations  on Losses  and  Credits  from  Passive  Activities"  and  "General
Business  Tax Credit  Limitations."  In addition,  a  Unitholder  may not deduct
Losses for Tax Purposes in excess of his basis in his Units.  See "Tax Basis for
the Units." A Unitholder may not deduct Losses for Tax Purposes in excess of his
amount  "at  risk"  in his  Series'  activities  (see  "Application  of At  Risk
Limitation"),  nor may he utilize  Low Income  Housing  Credits in excess of the
amount he has "at risk" with respect to  expenditures  qualifying for Low Income
Housing Credits. See "The Low Income

                                        123

<PAGE>



Housing  Credit - Utilization  of the Low Income Housing  Credit."  Further,  no
deductions  will be available to a Unitholder  if his  investment  in his Series
and/or the  Series'  activities  are "not  engaged in for  profit."  See "Profit
Motive."

    Historic  Tax Credits  and  Recapture.  In  addition  to Low Income  Housing
Credits,  tax  credits  generally  are  available  for  certain   rehabilitation
expenditures  incurred in improving  certified  historic  structures and certain
other  buildings  originally  placed in service  before 1936 (the  "Historic Tax
Credit").  If  an  expenditure   respecting  such  a  building  is  a  qualified
expenditure,  20% of the  expenditure  will give rise to an Historic Tax Credit.
See "Federal Income Tax Considerations - Historic Tax Credit."

     Historic  Tax  Credits  are  subject  to  recapture  in the  event of early
disposition of the building.  See "Federal Income Tax  Considerations - Historic
Tax Credit Recapture."

    Fund  Allocations.   The  Code  and  Treasury  Regulations  include  certain
highlytechnical  provisions  respecting  allocations  which  are  included  in a
partnership agreement.  The Partnership Agreement has been drafted in an attempt
to comply with such  provisions.  For a discussion of them, and the terms of the
Partnership Agreement in this regard, see "Fund Allocations."

     The Code also prohibits the  allocation to a partner of  partnership  items
incurred  prior to the admission of the partner as a partner.  See  "Allocations
Prior to Admission."

     Fund  Deductions.  In  general,  the  Code  requires  that the Fund use the
accrual method of accounting.  However,  the Code provides special rules for the
treatment of such items as depreciation,  Acquisition Fees,  management fees and
organization  expenses.  See  "Basis  of  Local  Limited  Partnerships  in Their
Apartment Complexes," "Depreciation," "Deductibility of Fees," "Organization and
Offering Expenses" and "Start-Up Expenditures."

    Sale of  Apartment  Complexes.  Gain or  loss  on the  sale of an  Apartment
Complex will equal the amount of consideration received (including the amount of
any  liability  to which the  Apartment  Complex was  subject),  minus the Local
Limited  Partnership's basis in the Apartment Complex.  This rule applies to all
dispositions of an Apartment Complex,  including a foreclosure,  so that the tax
liability on a disposition may exceed the cash received therefor.  The character
of gain or loss as ordinary or capital, and as passive or portfolio, will depend
upon, among other things, the manner in which the Local Limited Partnership held
the  Property.  See "Sales or Exchanges of Local Limited  Partnership  Property;
Depreciation Recapture."


                                        124

<PAGE>



     Treatment of Debt. If a promissory note issued or received by a Series or a
Local Limited Partnership  includes original issue discount,  the original issue
discount must be claimed as an expense or recognized as income annually over the
term of the loan regardless of the amount of interest actually paid or received.
See "Treatment of Mortgage Loans."

    Transfers  of Units.  On a sale of his Units,  a Unitholder  will  recognize
taxable  gain in an amount  equal to the excess,  if any,  of the  consideration
received  for the  Units  (including  his  share  of  Series  or  Local  Limited
Partnership  nonrecourse  liabilities),  over his  basis in the  Units.  The tax
consequences  of a transfer of Units as a gift or upon the death of a Unitholder
will depend upon, among other things, the Unitholder's particular circumstances.
See  "Sales  or  Exchanges  of Units and Local  Limited  Partnership  Interests;
Transfers by Gift or at Death."

     Liquidation.  Upon  liquidation of his Series,  a Unitholder will recognize
taxable gain if the cash received by him (including his share of Series or Local
Limited Partnership nonrecourse liabilities) exceeds his basis in his Units. See
"Dissolution  and  Liquidation  of a Series or Local  Limited  Partnership"  and
"Transferability - Termination of a Series."

     Section 754  Election.  No Series is  expected  to file an  election  under
Section 754 of the Code.  The absence of an election may have an adverse  effect
on the marketability and sales price of Units. See "Elections."

     Other   Considerations.   The  following  discussion  also  includes  other
subsections  which  discuss  less  significant  tax  consequences.   See  "Other
Important Tax  Considerations,"  "Tax Returns and Tax Information," "Tax Shelter
Registration" and "Changes in Tax Law."

    These and other  material  Federal  income tax issues are  discussed  below.
However,  the following  discussion does not purport to deal with Federal income
tax consequences applicable to all categories of investors, some of which may be
subject to special  rules,  and is not  intended  as a  substitute  for  careful
planning.  Prospective  investors  are urged to consult  their own tax advisers,
attorneys or accountants with specific reference to their own tax situations and
the effect thereon of an investment in the Fund.

Opinion of Counsel

    Counsel is of the opinion  that to the extent that the  summaries of Federal
income tax consequences to the Unitholders set forth in this "Federal Income Tax
Considerations"  section and under the headings "Risk Factors - Risks Related to
Tax  Credits"  and " - Other Tax  Risks"  and "The Low  Income  Housing  Credit"
involve  matters of law, such  statements are accurate in all material  respects
under the Code,

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Treasury Regulations and existing interpretations thereof and address fairly the
principal  aspects of each  material  Federal  income tax issue  relating  to an
investment in the Fund. Based on the assumptions and  representations  described
herein,  Counsel is of the opinion that for Federal income tax purposes (i) each
Series will be classified as a partnership and not as an association  taxable as
a corporation;  (ii) upon  admission to a Series,  an investor will be a limited
partner of the Series; (iii) each Unitholder will be permitted to include in his
tax basis of his Units his share of the bona fide nonrecourse liabilities of his
Series, including his Series' share of bona fide nonrecourse liabilities of each
Local Limited  Partnership;  (iv) the  allocations of Profits and Losses for Tax
Purposes and Tax Credits  provided for in the Partnership  Agreement will not be
significantly  modified; (v) Profits and Losses for Tax Purposes and Tax Credits
(other than the portion thereof  classified as portfolio income) will be treated
as  derived  from a  passive  activity;  and (vi) no Series  will be  considered
"publicly traded" within the meaning of Section 469(k) or 7704 of the Code.

    Notwithstanding  the  foregoing,  no Series has yet acquired any  particular
investment,  and the tax benefits  available  to  Unitholders  necessarily  will
depend in large  part upon the  characteristics  of the  particular  investments
acquired. Due to the factual nature of the issues involved, Counsel is unable to
render an opinion at this time regarding the specific application of the Federal
income tax laws to such  investments.  Prior to investing  in any Local  Limited
Partnership,  the Fund Manager  anticipates that a Series will obtain an opinion
of counsel,  which may be based on assumptions and on  representations  from the
Fund  Manager  and the  general  partners  of such  Local  Limited  Partnership,
substantially  to the effect that for Federal  income tax purposes (i) the Local
Limited  Partnership  will  be  classified  as  a  partnership  and  not  as  an
association taxable as a corporation; (ii) the Local Limited Partnership will be
the owner of the relevant  Apartment Complex;  (iii) upon admission,  the Series
will be a limited partner of the Local Limited Partnership; (iv) the allocations
of profit or loss and Tax Credits under the Local Limited Partnership  Agreement
will not be  significantly  modified by the IRS; (v) for purposes of determining
its tax basis and  amount "at risk"  (under  Code  Sections  42 and 465) for the
Local Limited Partnership, the Series will be permitted to take into account its
properly  allocable  share  of  such  Local  Limited  Partnership's  nonrecourse
liabilities;  (vi) the relevant  Apartment Complex will qualify for Tax Credits;
and (vii) the Local Limited Partnership will not be considered "publicly traded"
within  the  meaning  of  Section  469(k) or 7704 of the Code.  In  addition  to
reaching  the   foregoing   conclusions,   such  opinion  will   conclude   that
substantially  more  than  half of the  material  Federal  income  tax  benefits
anticipated  from such  investment  more likely than not will be realized by the
Series.  No investment in any Local  Limited  Partnership  will be made prior to
receipt of an opinion of counsel  substantially on the terms referred to in this
paragraph. See "Investment in Local Limited Partnerships."


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    Prospective  investors  should note that no legal opinion has been obtained,
and  it  is  not  anticipated  that  an  opinion  will  be  obtained,  regarding
determinations,  the correctness of which depends in significant  part on future
factual  circumstances,  regarding  matters  peculiar  to certain  investors  or
regarding  matters  in  which  opinions  are  not  customarily  obtained.   Such
determinations and matters may include:

- -   the allocation of basis among various components of a property, particularly
    as between buildings,  the cost of which is depreciable,  and the underlying
    land, the cost of which is not  depreciable;  a successful  challenge by the
    IRS  to  the  amount  of  basis   allocated  to  buildings   would  decrease
    depreciation attributable to the property;

- -   the  estimated  useful  lives  for   depreciation   purposes  of  properties
    ineligible for depreciation under the cost recovery  provisions of the Code;
    a  successful  challenge  by the IRS to the useful life  selected by a Local
    Limited  Partnership  would  extend  the  period  over which the cost of the
    property was recovered through depreciation deductions;

- -   the characterization of various expenses and payments made to or by a Series
    or a Local  Limited  Partnership  (for  example,  the  extent to which  such
    payments represent  deductible fees or interest);  a successful challenge by
    the IRS to the  characterization  of an expense as deductible  would require
    that such expense be capitalized and recovered, if at all, upon liquidation;

- -   the portion of the cost of any  Apartment  Complex  that  qualifies  for Tax
    Credits  (but see the  discussion  of  so-called  "adjuster"  provisions  in
    "Investment  Objectives and Policies - Investment  Policies");  a successful
    challenge by the IRS would reduce the amount of such credits;

- -   the  application  to  any  specific  Unitholder  of  the  limitation  on the
    availability  of passive  activity  losses  and  credits;  Unitholders  must
    determine for  themselves  the extent to which their passive  income and the
    "$25,000  deduction  equivalent"  are available to them to claim Tax Credits
    and Losses for Tax Purposes;

- -   the  classification  of any  Series or any Local  Limited  Partnership  as a
    dealer in interests in Local Limited  Partnerships  or Apartment  Complexes,
    respectively; a dealer generally may not claim depreciation deductions; and

- -   the  application  of the  alternative  minimum  tax to,  or the  calculation
    thereof by, any  Unitholder;  if a Unitholder is subject to the  alternative
    minimum tax, tax benefits from an investment in a Series could be reduced.


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<PAGE>



    There can be no  assurance,  therefore,  that some of the  deductions  to be
claimed by a Series,  or the  allocation  of items of Profits and Losses for Tax
Purposes  and Tax Credits  among its Fund Manager and  Unitholders,  will not be
challenged  by the IRS and that  such  challenge  will not be  sustained  by the
courts.  Such challenge,  if successful,  could have a detrimental effect on the
ability of a Series to realize its investment objectives. See also "Risk Factors
- - Other Tax Risks."

Classification as a Partnership

    The Fund does not plan to apply for a ruling  from the IRS as to the  status
of any Series as a partnership.  Counsel is of the opinion that each Series will
be classified as a partnership and will not be treated as an association taxable
as a  corporation  for Federal  income tax  purposes.  Unlike a tax  ruling,  an
opinion of counsel is not binding on the IRS, and no assurance can be given that
the IRS will not  successfully  challenge the tax status of any Series.  In that
event,  the Series  would be  treated  for tax  purposes  as a  corporation,  as
described below.

    The IRS has  published  procedural  guidelines  prescribing  the issuance of
favorable tax status rulings to limited  partnerships  meeting certain tests. It
is uncertain  whether the Series will meet all of the tests  enumerated  in such
Revenue Procedure. However, the Revenue Procedure by its terms provides that the
guidelines are only for purposes of  determining  whether letter rulings will be
issued,  are not intended as substantive  rules regarding the  determination  of
partnership  status  and are not to be  applied  as  criteria  for the  audit of
taxpayers' returns.

    Counsel's  opinion as to  partnership  status for each Series assumes and is
conditioned on the continuing  existence of the following  facts: (i) the Series
was organized and will operate  throughout its existence in compliance  with the
applicable state law concerning limited  partnerships and in accordance with the
terms and provisions of the Partnership  Agreement,  all as presently in effect;
(ii) the Fund Manager (or its general partner) will maintain substantial assets;
and (iii) the Fund Manager will maintain  throughout the existence of the Series
an interest equal to at least 1% of each material item of Series  income,  gain,
loss,  deduction or credit.  The Fund Manager  anticipates  that such conditions
will be met.

    There can be no assurance  that the Fund Manager will remain as Fund Manager
of each  Series  for the entire  term of the  Series or that it (or its  general
partner) will continue to have  substantial  assets.  In the event that the Fund
Manager (or its general partner) ceases to have substantial assets, there can be
no  assurance  that any Series will  otherwise  continue to be  classified  as a
partnership for Federal income tax purposes.

    The treatment of the Series as partnerships  for Federal income tax purposes
is based upon the present provisions of the Code,  regulations  thereunder,  and
existing

                                        128

<PAGE>



judicial and administrative interpretations thereof, all of which are subject to
change.  In one  decision,  the United States Tax Court  suggested  that the IRS
reconsider  its  regulations  governing the  requirements  for  partnership  tax
status. If the IRS were to amend its regulations, it is possible that the Series
would not qualify as partnerships under the amended regulations.

    Additionally,  under Section 7704 of the Code, a publicly traded partnership
will be treated as a corporation  for Federal  income tax  purposes,  unless the
partnership meets certain gross income  requirements,  described below. For this
purpose,  a publicly  traded  partnership  is one the interests in which are (a)
traded  on an  established  securities  market,  or (b)  readily  tradable  on a
secondary market (or the substantial equivalent thereof). As indicated under the
heading  "Transferability  of Units," it is not anticipated that a public market
for the Units will develop.  The report of the Conference  Committee on the 1987
Act (the  "Conference  Report")  indicates  that where  interests are quoted and
traded on an irregular basis and such interests cannot be disposed of within the
time that they could be disposed of in an over-the-counter market, the interests
are not to be treated as readily  tradable on the  substantial  equivalent  of a
secondary market.

    The  Partnership  Agreement  provides  that a transfer of a Unit will not be
recognized  by  a  Series  unless  (i)  the  transferror   represents  that  the
transaction  will not  occur  through  a market  maker in the  Units,  through a
broker-dealer   that  provides  a  readily  available,   regular,   and  ongoing
opportunity to  Unitholders  to sell or exchange  their Units,  through a public
means of obtaining or providing  information  on offers to buy, sell or exchange
Units or through a broker-dealer or matching agent whose procedures for transfer
of the Units have not been approved by the Fund Manager as not being incident to
trading on an established securities market or a secondary market, or (ii) if in
the opinion of Counsel,  such  transfer  would cause the Series to be considered
publicly  traded if such  result  would have  adverse  tax  consequences  to any
Partner.  Furthermore, the Partnership Agreement provides that any transfer of a
Unit not made for  investment but for resale will be void if the transferee is a
person who makes a market in securities.  Finally, the Fund Manager is empowered
to amend the Partnership  Agreement to the extent  necessary to prevent a Series
from being  taxed as an  association  taxable as a  corporation.  Based on these
provisions  of the  Partnership  Agreement  and on  representations  that  these
provisions will be enforced according to their terms,  Counsel is of the opinion
that the Series will not be "publicly traded" within the meaning of Section 7704
of the Code.

    Even if a Series is treated as publicly  traded  under  Section  7704 of the
Code, it will not be  classified  as a corporation  if 90% or more of its income
for the taxable year is qualifying income.  For this purpose,  qualifying income
includes  interest,  dividends,  real  property  rents and gain from the sale or
other disposition of real property. The Fund Manager has represented that 90% or
more of the gross

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<PAGE>



income of each Series will consist of such  interest,  dividends,  real property
rents  and  gains  from  the  sale  or  other   disposition  of  real  property.
Accordingly,  based on this  representation,  Counsel is of the opinion that the
Series will not be treated as associations  taxable as corporations  for Federal
income tax purposes under Section 7704 of the Code even if the Series were to be
considered publicly traded. However, see "Limitations on Losses and Credits from
Passive  Activities"  for a discussion  of additional  restrictions  that may be
imposed if the  Series  were  considered  publicly  traded.  In the event that a
Series were to become a publicly traded  partnership,  the Fund Manager would be
responsible for monitoring the composition of the income of the Series and would
be empowered to take such action as may be necessary to avoid  classification of
the Series as an association taxable as a corporation.  Section 7704 of the Code
generally would apply to a Series in its first taxable year in which it became a
publicly traded partnership.

    If, for any reason, a Series were treated for Federal income tax purposes as
a corporation in any taxable year, income, gain, loss,  deductions,  Tax Credits
and tax  preferences of the Series would be reflected only on its own tax return
rather than being passed through to the Partners.  In that event, the Low Income
Housing  Credits,  as well as any losses,  deductions or Historic Tax Credits of
the Local Limited  Partnerships or the Series,  would not be available to reduce
the tax liability of any Unitholder.  In addition,  the Series would be required
to pay  Federal  income  tax (at the  corporate  tax rates  described  in "Other
Important Tax Considerations Tax Rates") on its net income,  thereby potentially
reducing the amount of cash available to be distributed to the Unitholders,  and
all or a  portion  of any  distributions  to  Unitholders  could be  treated  as
dividends,  taxable to them as ordinary  income to the extent of the current and
accumulated  earnings  and  profits of the  Series.  Distributions  in excess of
earnings  and  profits  would be treated as a return of capital to the extent of
the  recipient's  basis (which would not include the  Unitholder's  share of any
nonrecourse  liabilities of the Series), while the remainder would be treated as
capital gain (assuming the Unitholder's  Units qualified as capital assets).  In
addition,  such a change in the Series' status for tax purposes could be treated
by the IRS as a taxable event,  in which case the  Unitholders  could have a tax
liability under  circumstances  where they would not receive a cash distribution
from the Series.

Investment in Local Limited Partnerships

    The Series will not invest directly in the Apartment Complexes.  Rather, the
Series  will  invest in Local  Limited  Partnerships  each of which  will own an
Apartment  Complex.  The  availability  to  prospective  Unitholders  of the tax
benefits that are  anticipated  to be derived from an investment in the Units is
dependent,  in the  first  instance,  on the  following  general  principles  of
partnership taxation:


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<PAGE>



    1.  Each  of  the  Local  Limited  Partnerships  must  be  classified  as  a
partnership for Federal income tax purposes,  and not as an association  taxable
as a corporation.

    2. The allocation of the items of income,  gain,  loss,  deduction,  and Tax
Credit to the Series by each Local  Limited  Partnership  must have  substantial
economic effect or otherwise be in accordance with the Series'  interest in such
Local Limited Partnership.

    3. The  Series'  tax basis in each of the Local  Limited  Partnerships  must
exceed the amounts of losses and  deductions  allocated  to the Series from such
Local Limited Partnership.

    4. The Series'  amount "at risk" in each of the Local  Limited  Partnerships
must  exceed the amount of losses and  deductions  allocated  to the Series from
such Local Limited Partnership.

    5. The Series' amount "at risk" with respect to  expenditures  of each Local
Limited  Partnership that qualify for Low Income Housing Credits must exceed the
amount of such expenditures allocated to the Series.

    The  application of these general  principles of Federal income  taxation to
any  investment  by a Series in a Local Limited  Partnership  will depend on the
specific facts associated with that investment,  including the provisions of the
partnership  agreement of such Local Limited  Partnership  and the nature of the
debts  incurred by such Local Limited  Partnership  to finance its investment in
its Apartment Complex.

    As  indicated  above in "Opinion of Counsel,"  prior to acquiring  any Local
Limited Partnership  Interest, a Series will obtain an opinion of counsel to the
Local Limited  Partnership or the Series  respecting  certain Federal income tax
matters. The discussion set forth below and opinions of Counsel described herein
regarding  the Federal  income tax  consequences  of an  investment in the Units
assume that the Series will obtain  such  opinions  regarding  each of the Local
Limited  Partnerships  in which it invests,  and rely on the accuracy of each of
such opinions.  Prospective investors should be aware that the Fund Manager does
not intend to seek a ruling from the IRS regarding  any of the tax  consequences
of an  investment  by a Series in any  Local  Limited  Partnership,  and that an
opinion of counsel is not binding on the IRS and has no  official  status of any
kind.

    The IRS has rendered several  published rulings regarding the Federal income
tax  consequences  of an  investment by a  partnership  in another  partnership.
Although such rulings have not addressed every Federal income tax consequence of
such an investment, they have addressed the material consequences expected to be
relevant to an  investment  in the Units.  Based on such rulings and the general
principles of

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<PAGE>



partnership taxation,  except as specifically noted below, the discussion of the
Federal  income  tax  consequences  of an  investment  in the  Units is  equally
applicable  to an  investment  by a Series as a limited  partner  in each  Local
Limited Partnership.

Tax Treatment of Unitholders

    A Series  itself will not be subject to Federal  income tax  (subject to the
matters discussed under "Classification as a Partnership" above), although it is
possible  that a Series  will be subject to income tax in one or more  states or
local tax jurisdictions.  Instead, each Unitholder will be required to report on
his own income tax return his share of the  Series'  Profits  and Losses for Tax
Purposes and Tax Credits.

    The share of each  Unitholder  in Profits and Losses for Tax Purposes and in
Tax Credits is based on the application to the Local Limited Partnerships of the
general principles of Federal income taxation of partnerships that are discussed
above under the heading "Investment in Local Limited Partnerships."  Thereafter,
in determining the Federal income tax liability of a Unitholder as a consequence
of his investment in the Units, the following principles will apply in the order
summarized below:

     1.   The allocation  provisions  contained in Article 4 of the  Partnership
          Agreement  will  determine  each  Unitholder's  share of the  items of
          Profits and Losses for Tax Purposes and Tax Credits to the extent that
          such allocations have substantial  economic effect or are otherwise in
          accordance with the Unitholder's interest in his Series.

     2.   The  Unitholder's  tax basis in his Units  must  exceed  the amount of
          losses and deductions allocated to such Unitholder.

     3.   The Unitholder's  amount "at risk" in his Units must exceed the amount
          of losses and deductions allocated to the Unitholder.

     4.   The Unitholder's amount "at risk" with respect to expenditures of each
          Local Limited  Partnership that qualify for Low Income Housing Credits
          must  exceed  the  amount  of  such  expenditures   allocated  to  the
          Unitholder.

    To the extent that the  allocation of any Profits or Losses for Tax Purposes
or Tax Credits is disallowed to a Unitholder as a result of the  application  of
any of the principles set forth above,  such Unitholder will not be permitted to
take such  allocation  into  account  in  determining  his  Federal  income  tax
liability unless and until that principle,  and each of the principles,  if any,
stated thereafter,  has been satisfied. Each of these principles is described in
greater detail below.


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<PAGE>



    In addition to and after satisfying the foregoing principles, the ability of
a  Unitholder  to take  advantage  of any Losses for Tax Purposes or Tax Credits
allocated  to him with  respect to his Units may be limited by the passive  loss
and passive credit  limitations  described  below in  "Limitations on Losses and
Credits from Passive  Activities," by the overall limitation on business credits
described  below  under  "General  Business  Tax  Credit  Limitations,"  by  the
limitations  on  miscellaneous  itemized  deductions  described  below in "Other
Important Tax  Considerations  - Tax Rates," and by the alternative  minimum tax
described below under "Other Important Tax Considerations - Alternative  Minimum
Tax."

    The amount of a Unitholder's  share of Profits for Tax Purposes for any year
will not  ordinarily  be identical to the amount of his share of Cash  Available
for  Distribution for the year.  Accordingly,  in a particular year a Unitholder
may be allocated  Profits for Tax Purposes  without  receiving a distribution of
Cash  Available  for  Distribution.   See  "Tax  Liabilities  in  Later  Years."
Conversely,  a  Unitholder  may receive a  distribution  of Cash  Available  for
Distribution  in a year when a Loss for Tax Purposes is  reportable  by him. See
"Fund Allocations" below.

    Cash  received  by a  Unitholder  from his Series  generally  will not cause
recognition  of income by the Unitholder but will reduce his basis in his Units.
A distribution  of Cash Available for  Distribution  in excess of a Unitholder's
adjusted  basis  in his  Units  prior to the  distribution  will  result  in the
recognition  of taxable  income to the extent of the  excess.  Any such  taxable
income generally will be treated as capital gain. The gain realized in a non-pro
rata  distribution  may be taxed to Unitholders as ordinary income to the extent
attributable to the Unitholders' share of "unrealized receivables" and inventory
that has  substantially  appreciated in value.  See "Sales or Exchanges of Units
and Local Limited Partnership Interests; Transfers by Gift or at Death" below.

    The most  significant  Federal  income tax benefits of an  investment in the
Units are  expected to be derived from Low Income  Housing  Credits  (and,  to a
substantially lesser extent, Losses for Tax Purposes and, possibly, Historic Tax
Credits)  allocated to each  Unitholder.  However,  as indicated above, the Code
imposes substantial  restrictions on the ability of all individuals,  trusts and
estates and certain corporate  taxpayers to take advantage of losses and credits
generated from so-called "passive  activities." Although the rules applicable to
tax credits,  including Low Income Housing Credits and Historic Tax Credits, and
to losses from passive activities are to be applied after the application of the
limitations on deductibility of losses to the amount of a Unitholder's basis and
amount "at risk" in his Units (see "Tax Basis for the Units" and "Application of
At Risk Limitations"  below), the rules applicable to passive losses and credits
will be described first due to their  importance in evaluating the  advisability
of an investment in the Fund. The rules regarding the availability of Low Income
Housing Credits are discussed in

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<PAGE>



"The Low Income  Housing  Credit,"  which  should be reviewed  carefully by each
prospective investor and his advisers.

Limitations on Losses and Credits from Passive Activities

A.       General Limitations

    In the case of individuals,  trusts,  estates and certain  corporations  (as
discussed  below),  Code  Section  469  imposes  limits on the  ability  of such
taxpayers  to use losses and credits  from  so-called  "passive  activities"  to
offset  taxable income and tax liability  arising from  non-passive  sources.  A
passive  activity  includes  (a) one which  involves  the  conduct of a trade or
business  in which the  taxpayer  does not  materially  participate,  or (b) any
rental activity, regardless of the level of participation.  With certain limited
exceptions, a limited partner will not be treated as materially participating in
a limited  partnership's  activities.  Accordingly,  absent  satisfaction of the
conditions to such limited exceptions,  and with the exception of the portion of
a  Series'  income  that is  portfolio  income  and any  gain or loss  from  the
disposition of Series' property that Treasury Regulations under Code Section 469
classify  as not  arising  from a  passive  activity,  based on the  anticipated
activities  of each  Series  and  Local  Limited  Partnerships  in which it will
invest,  Counsel is of the opinion  that Profits and Losses for Tax Purposes and
Tax Credits of each Series will be treated as derived from a passive activity.

    Generally,  a taxpayer's  deductions and credits from passive activities may
be used to reduce his tax  liability in a given  taxable year to the extent such
liability  arises from passive  activities.  In determining the amount of income
from passive  activities in any taxable year, a taxpayer must exclude "portfolio
income,"  that is, (a) any gross income from the  activity  that is derived from
interest,  dividends,  annuities or royalties,  unless such income is derived in
the ordinary  course of a trade or business;  (b) expenses (other than interest)
directly  and  clearly  allocable  to such  income;  and (c)  interest  expenses
properly  allocable  to such income.  For this  purpose,  portfolio  income also
includes  any gain or loss  from  the  disposition  of  property  that  produces
portfolio income or that is held for investment.  Any income,  gain or loss that
is  attributable  to an  investment  of working  capital also will be treated as
portfolio income. Prospective investors should note that any portfolio income of
the Fund must be reported as taxable  income,  without  reduction for any of the
expenses of the Fund (other than those  described  in clauses (b) and (c) of the
second sentence of this paragraph), and that each Unitholder will be required to
pay  Federal  income  tax on his  share  of such  portfolio  income,  even if no
corresponding  distribution  is made to the Partners and  regardless of the fact
that overall operations result in Losses for Tax Purposes.

    To the extent that a taxpayer's aggregate losses from all passive activities
exceed his aggregate  income from all such  activities  in a taxable  year,  the
taxpayer has a

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<PAGE>



"passive  activity loss" for such year.  Similarly,  a "passive activity credit"
arises in any year to the extent that the  taxpayer's  tax credits (with certain
limited   exceptions)  arising  from  all  passive  activities  exceed  his  tax
liabilities  allocable to all passive  activities.  Such a loss or credit may be
carried forward to successive  taxable years until fully utilized against income
from passive activities in such years;  however, such losses and credits may not
be carried back to prior years.

    With respect to gain on the disposition of property used in an activity, the
Treasury Regulations generally provide that such gain will be treated as passive
if the activity in which the property was used in the year of disposition  was a
passive activity.  However,  if the property was used in both active and passive
activities during the 12 preceding months, the gain must be allocated among such
activities.  Furthermore,  where  the  interest  in  property  is  substantially
appreciated (that is, its fair market value exceeds 120% of its adjusted basis),
the gain will be  treated  as not  passive  unless  the  property  was used in a
passive activity for the 24-month period preceding the disposition or for 20% of
the taxpayer's holding period.

    In the  event a  taxpayer  disposes  of his  entire  interest  in a  passive
activity to an unrelated party in a transaction in which all of the gain or loss
realized on such disposition is recognized, any loss (but not a credit) from the
activity  that was  disallowed  by the passive  activity  rules will cease to be
treated as a passive  activity loss and any loss on such disposition will not be
treated as  arising  from a passive  activity.  Such  losses  will be allowed as
deductions  against income in the following  order:  (i) gain recognized on such
disposition;  (ii) net  income or gain for the  taxable  year  from all  passive
activities;  and (iii) any other income or gain.  Suspended  Tax Credits are not
made  available  as a result of a  disposition  of a  taxpayer's  interest in an
activity.  Rather,  to the extent not  subject to  recapture,  such  credits are
carried forward to subsequent tax years.  Special rules apply to dispositions by
gift or by death and to certain installment sales.

    Counsel  has  rendered  no  opinion   regarding  the  manner  in  which  the
limitations on losses and credits from passive  activities and/or the exceptions
thereto discussed below will apply to any particular  Unitholder,  because these
limitations are applied at the Unitholder  rather than the Series level and will
depend on the particular  circumstances of each  Unitholder.  Each Unitholder is
strongly  advised to consult  his own tax adviser  regarding  the effect on such
Unitholder of the limitations on the allowance of passive losses and credits.

B.       Exception for Low Income Housing Credits and Historic Tax Credits

    1.  Individuals.  An exception to the general rules  discussed above permits
certain taxpayers to shelter up to $25,000 of nonpassive income with losses from
certain  rental real estate  activities in which they actively  participate  and
with Low Income Housing Credits and Historic Tax Credits regardless of the level
of

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participation.  Generally,  a limited  partner  will not be treated as  actively
participating  in a rental real estate  activity  conducted by a partnership  of
which he is a member.

    The exception is commonly referred to as the "$25,000 deduction  equivalent"
and is available to  individuals  and, in limited  circumstances  (as  discussed
below),  estates.  Special rules apply to married individuals as follows: (i) in
the case of married  individuals  filing  jointly,  the full  $25,000  deduction
equivalent  is  available,  (ii)  in the  case  of  married  individuals  filing
separately  who have lived  apart for the entire  taxable  year,  the  deduction
equivalent for each  individual is reduced to $12,500,  and (iii) in the case of
married  individuals  filing  separately who have not lived apart for the entire
taxable year, no deduction equivalent is available.

    For  all  rental  real  estate   losses  in  which  the  taxpayer   actively
participates  and  Historic  Tax  Credits,  and for Low Income  Housing  Credits
attributable to property placed in service prior to January 1, 1990, the $25,000
maximum deduction  equivalent  ($12,500 for certain married  individuals  filing
separate  returns)  is reduced  in the event the  adjusted  gross  income of the
taxpayer (including the taxpayer's spouse where a joint return is filed) exceeds
certain  limits.  In the case of losses from rental  real estate  activities  in
which the taxpayer actively  participates,  the maximum deduction  equivalent is
reduced by one-half of the amount by which the taxpayers'  adjusted gross income
exceeds $100,000 ($50,000 in the case of a married  individual filing a separate
return).  In the case of Tax  Credits  described  in the first  sentence of this
paragraph, the maximum deduction equivalent is reduced by one-half of the amount
by which the taxpayer's  adjusted gross income exceeds $200,000 ($100,000 in the
case of a married  individual filing a separate  return).  Adjusted gross income
for this purpose is determined  without  regard to  contributions  to Individual
Retirement  Accounts,  taxable  social  security  benefits and passive  activity
losses,  but is otherwise  determined in accordance with Section 62 of the Code.
It is not anticipated that any Series will invest in Local Limited  Partnerships
owning  Apartment  Complexes  which were  placed in service  prior to January 1,
1990;  accordingly,  the  adjusted  gross income  limitations  described in this
paragraph  should  not apply to  Unitholders,  except to the  extent  that Local
Limited Partnerships generate Historic Tax Credits.

    There are  several  important  ordering  rules  that must be  understood  to
determine whether and to what extent the $25,000 deduction  equivalent  (subject
to the phase-out rules discussed above) will be available to a Unitholder who is
an individual. First, losses from a passive activity, including losses generated
from rental real estate activities in which the taxpayer actively  participates,
must be offset by any income  from a passive  activity.  The  $25,000  deduction
equivalent  is then used  against  (i) the  remaining  passive  activity  losses
generated from the rental real estate  activities in which the taxpayer actively
participates,  which,  as noted  above,  will not  include  any  Losses  for Tax
Purposes generated by the Units; (ii) the passive activity

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credits  generated  from  rental real estate  activities  in which the  taxpayer
actively  participates,  other than Historic Tax Credits and Low Income  Housing
Credits;  (iii) the Historic Tax Credits (subject to the phase-out  rules);  and
(iv) the Low Income Housing Credits.  In this regard the Fund has not sought and
will not seek to determine the extent to which  potential  investors have losses
(including  losses  from  rental  real  estate  activities  in  which  potential
investors  actively  participate) or credits from passive  activities.  Further,
there is no limitation on the number of Units which may be purchased by a single
investor. Accordingly,  potential individual investors should consult with their
own tax  advisers as to whether  they may fully  utilize any Low Income  Housing
Credits or Historic Tax Credits  which may be generated by an  investment in the
Fund under the ordering rules set forth above.

    Assuming  that a  prospective  individual  investor  does not have a passive
activity loss generated from rental real estate  activities in which he actively
participates  (or that such losses are not allowable  because his adjusted gross
income exceeds $150,000),  and that he does not have passive activity income for
the  taxable  year (that is,  the  excess of income  over  losses  from  passive
activities), such investor could use up to $7,000 of Tax Credits a year based on
a 28% marginal tax rate,  $7,750 a year based on a 31% marginal tax rate, $9,000
a year  based on a 36%  marginal  tax rate,  and  $9,900 a year based on a 39.6%
marginal tax rate. See "Other Important Tax Considerations - Tax Rates." In each
instance,  because Federal income tax is imposed at marginal rates,  the maximum
amount of credits  could be used only if the  investor  has at least  $25,000 in
income subject to the marginal rate.

                            Maximum Annual Tax Credits
  
    Federal                                               Maximum Annual
    Tax Bracket            Income                         Federal Credit

    15%           x        $25,000          =              $3,750
    28%           x        $25,000          =              $7,000
    31%           x        $25,000          =              $7,750
    36%           x        $25,000          =              $9,000
    39.6%         x        $25,000          =              $9,900

    Most  taxpayers  pay a  substantial  portion  of their  Federal  annual  tax
liability by way of regular  employer  withholding from their salaries and/or by
way of estimated Federal tax payments due on the April 15, June 15, September 15
and January 15 preceding the filing date of the taxpayers' annual Federal income
tax returns. To the extent that an individual taxpayer has Tax Credits which are
otherwise  allowable for a year,  the taxpayer may use the Tax Credits to reduce
his regular  withholding  amounts or to reduce his estimated  tax payments.  For
example,  a married couple filing jointly with taxable income of $75,000 in 1995
would be subject to Federal

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tax liability  before Tax Credits in the amount of approximately  $16,000.  (The
tax liability for later years could be different due to changes in the tax rates
resulting from  inflation  adjustments or amendments to the tax laws. See "Other
Important  Tax  Considerations  - Tax  Rates.")  If the couple had $7,000 in Tax
Credits  for 1995  (the  maximum  permissible  amount  pursuant  to the  $25,000
deduction  equivalent),  and the  couple  would  otherwise  make  estimated  tax
payments of their Federal tax liability in the amount of $4,000 each, the couple
could reduce each estimated tax payment by $1,750,  for a net payment of $2,250.
If a taxpayer  does not adjust his  withholding  or  estimated  tax payments for
allowable  Tax Credits,  his annual tax refund or annual tax  liability  will be
increased  or  reduced,  respectively.  Accordingly,  Tax Credits can be used to
reduce tax liability  from all sources,  including  taxable  income arising from
wages, self-employment income, retirement account withdrawals, and capital gains
from the sale of stock and other investments.

    If an investor is able to utilize  Tax  Credits  under the passive  activity
rules discussed above, and under the other Federal income tax rules discussed in
this section, Tax Credits would be claimed on the investor's individual IRS Form
1040 as follows: First, the investor enters all taxable income and subtracts all
available  deductions and exemptions to compute taxable income.  The tax imposed
on such  taxable  income is entered  on line 38 of the Form 1040,  and the total
amount of the  investor's  tax  liability is entered on line 40. The  investor's
utilizable  Tax  Credits  are  entered  on  line  44 and  are  subtracted,  on a
dollar-for-dollar basis, from the taxes which appear on line 40.

    The  1987  Act  added  Section  469(k)  to the Code  pursuant  to which  the
limitations  on losses  and  credits  from  passive  activities  will be applied
separately to, and the $25,000  deduction  equivalent will not be available for,
investments in publicly traded  partnerships,  except with respect to Low Income
Housing  Credits  and  Historic  Tax  Credits.  As  discussed  under the heading
"Classification  as a  Partnership,"  Counsel is of the opinion  that the Series
will not be  treated as  publicly  traded.  If any Series  were to be treated as
publicly traded, individual investors in the Series could not use Losses for Tax
Purposes to offset passive income from other sources,  but could use Tax Credits
generated by the Series to offset tax  liability  from all other  sources to the
extent of the $25,000 deduction equivalent. Losses for Tax Purposes could not be
used to offset income from another  publicly traded  partnership  whether or not
the Series were considered publicly traded.

    2. Other  Investors.  As noted above,  the limitations on the utilization of
passive  losses and credits  apply to all  individuals  and,  subject to certain
additional  limitations,  to all  trusts and  estates.  In the case of a grantor
trust,  the  provisions  apply  at the  grantor  rather  than the  trust  level.
Generally,  neither a nongrantor  trust nor an estate can take  advantage of the
$25,000 deduction equivalent. A limited exception is provided to allow an estate
to take advantage of the $25,000 deduction

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equivalent in any taxable year ending less than two years after the death of the
decedent.

    Certain corporations are also subject to limitations on their use of passive
losses  and  credits.  The  corporations  subject  to  these  rules  are (a) all
"regular"  or "C"  corporations  that at any time  during  the last  half of the
taxable year were more than 50% owned, by value, directly or indirectly, by five
or fewer individuals ("closely-held corporations"), and (b) all personal service
corporations.  For this purpose,  the term  "personal  service  corporation"  is
defined to mean a corporation the principal  purpose of which is the performance
of personal services in the fields of health,  law,  engineering,  architecture,
accounting,  actuarial  science,  performing  arts,  or  consulting,  when  such
services are substantially performed by any employee who owns, on any day during
the year,  any of the  outstanding  shares of such  corporation.  Stock  held by
related parties is taken into account pursuant to special attribution rules.

    Closely-held  corporations,  but  not  personal  service  corporations,  are
allowed to utilize their  passive  activity  losses and their  passive  activity
credits to offset their tax liabilities  arising from certain net active income,
i.e, taxable income from other sources, other than portfolio income. However, if
a Series were to be treated as publicly traded under Section 469(k) of the Code,
Losses for Tax Purposes  could not be used to offset income from other  sources.
Furthermore,  if a closely-held  corporate  investor were to have an interest in
another  partnership that was publicly  traded,  Losses for Tax Purposes and Tax
Credits  from the  Series  could not be used to offset the net income or the tax
liability  attributable  to  the  net  income,   respectively,   of  such  other
partnership, whether or not the Series were considered publicly traded.

    Generally, personal service corporations will only be allowed to use passive
losses and  credits,  including  Losses for Tax  Purposes  and Tax  Credits,  to
shelter  passive income,  subject to the provisions of Section 469(k),  and will
not be allowed to take  advantage of the $25,000  deduction  equivalent  that is
available to individuals.

    With respect to S Corporations and partnerships,  the passive activity rules
are applied to the shareholders and partners, respectively.

C. Exception for Real Property Businesses

    The 1993 Act added a  provision  to Code  Section  469 which  provides  that
rental real estate  activities of "qualifying  taxpayers" are not subject to the
rule that treats all rental activities as passive. To qualify for this treatment
for a taxable  year, a taxpayer must  perform,  during that year,  more than 750
hours of  personal  services  and more than  one-half  of the  taxpayer's  total
personal services during the year

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must be performed in real  property  trades or  businesses in which the taxpayer
materially participates (as defined below).

    Pursuant  to  Treasury   Regulations   issued  under  Code  Section  469,  a
"qualifying  taxpayer"  may  make an  election  to treat  all of the  taxpayer's
interests in rental real estate as a single rental real estate  activity.  Under
certain circumstances, this election might enable a limited partner to establish
material  participation with respect to his interest in the limited  partnership
where he otherwise could not do so.

    If a qualifying taxpayer so elects, and the taxpayer's share of gross rental
income from all of the taxpayer's limited  partnership  interests in rental real
estate for a taxable year is less than 10% of the taxpayer's gross rental income
from all of the  taxpayer's  interests  in rental real estate for the year,  the
taxpayer will be deemed to materially  participate  in his combined  rental real
estate  activity  if one or more of the  following  tests is  satisfied:  (i) he
participates  in the activity for more than 500 hours during the year;  (ii) his
participation in the activity for the year constitutes  substantially all of the
participation  in the  activity  of all  individuals  for  such  year;  (iii) he
participates  in the activity  for more than 100 hours during the year,  and his
participation in the activity for the year is not less than the participation in
the  activity  of any other  individual  for such year;  (iv) the  activity is a
significant  participation activity (i.e., a trade or business activity in which
he does not  materially  participate  (other than by reason of this clause (iv))
and in which he  participates  for more than 100 hours  during the year) and his
participation  in all  significant  participation  activities  during  the  year
exceeds 500 hours; (v) he materially participated in the activity (other than by
reason  of  this  clause  (v)  for any  five  years  during  the 10  years  that
immediately  precede the year; (vi) the activity is a personal  service activity
(i.e.,  the performance of services in the fields of health,  law,  engineering,
architecture,  accounting,  actuarial science, performing arts or consulting, or
any other trade or business in which capital is not a material  income-producing
factor; and (vii) based on all the facts and circumstances  (taking into account
certain additional special rules), he participates in the activity on a regular,
continuous, and substantial basis during the year.

    If the  taxpayer  fails to satisfy the 10% gross  rental  income  test,  the
combined  rental real estate  activity will be treated as a limited  partnership
interest  for purposes of  determining  material  participation.  In such event,
under  Treasury   Regulations   the  taxpayer  could  only  establish   material
participation by satisfying clauses (i), (v) or (vi) above.

    As a review of this  discussion  indicates  the  exception for real property
businesses  is  extremely  technical  and  limited  in  nature.   Further,  this
discussion  does not address all the rules entailed in satisfying the exception.
Accordingly,  prospective  investors are urged to consult their own tax advisers
to determine the availability of this exception.

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Historic Tax Credit

    In addition to the Federal Low Income Housing Credit, a tax credit generally
is  available  for certain  rehabilitation  expenditures  incurred in  improving
certified historic  structures and certain other buildings  originally placed in
service  before  1936  (the  "Historic  Tax  Credit").  If an  expenditure  is a
qualified  rehabilitation  expenditure on a certified historic  structure,  Code
Section 47 provides  that the  taxpayer is entitled to a credit  equal to 20% of
the   expenditure   against  his  income  tax  liability  for  that  year.  Such
qualification  depends  upon the approval by the  Department  of Interior of the
plans and completed  rehabilitation  work. The historic structure generally must
be left in place,  must be rehabilitated in a manner consistent with history and
the  rehabilitation  expenditures  must  exceed  the  greater  of  $5,000 or the
adjusted basis of the building during a 24-month period.  In the case of certain
nonresidential  buildings  placed in service prior to 1936 (other than certified
historic  structures)  a 10% credit is allowed.  The tax basis of  rehabilitated
real property is reduced by 100% of the allowed Historic Tax Credit.  Therefore,
the gain upon disposition of an interest in such a property is increased by 100%
of the allowed Historic Tax Credit. See "Depreciation."

    Moreover,  in order to utilize  the  Historic  Tax  Credit a  taxpayer  must
satisfy  the same "at risk"  requirements  with regard to any  investment  which
generates  a  Historic  Tax  Credit as is  required  under  the "at risk"  rules
applicable to Federal Low Income  Housing  Credits.  See "The Low Income Housing
Credit." In addition,  to be considered  "at risk" with respect to an investment
which  generates  Historic Tax Credits,  it is also necessary that the amount of
all nonrecourse  financing (which is defined very broadly for this purpose) with
respect to such  property  not exceed  80% of the credit  base of the  qualified
rehabilitation expenditures.

    A  Series  may  invest  in  a  Local   Limited   Partnership   that   incurs
rehabilitation  expenditures  that will  qualify for such  Historic  Tax Credit,
which would then be available to the  Unitholders to reduce their Federal income
taxes, but the ability of a Unitholder to utilize such credits may be restricted
by the passive  activity  limitation  rules,  the limitation on general business
credits,  and the alternative  minimum tax rules. See "Limitations on Losses and
Credits from Passive Activities,"  "General Business Tax Credit Limitations" and
"Other  Important Tax  Considerations  -  Alternative  Minimum Tax." Counsel has
rendered no opinion regarding the qualification of any Apartment Complex for the
Historic Tax Credit or the application of related "at risk"  limitations to such
Apartment  Complex,  because such issues  depend on the nature of the  Apartment
Complexes and their financing, none of which are known at this time.


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Historic Tax Credit Recapture

    Any Historic Tax Credit taken for qualified  rehabilitation  expenditures is
subject to recapture in the event of early disposition of the property.  If such
property is disposed of by the Partnership or a Local Limited Partnership within
five years after the property is placed in service, a Partner's tax for the year
of  disposition  will be increased by the total credit taken for  rehabilitation
expenditures,  multiplied by a "recapture percentage" determined on the basis of
the holding period of the property. The amount of recapture decreases by 20% for
each full year that elapses after the property is placed in service. Thus, there
is 100%  recapture  if the  property is disposed of less than one year after the
property is first placed in service;  there is 80% recapture after one year, 60%
after two years,  40% after three  years,  20% after four years and no recapture
after five years.

    Moreover,  recapture  will also result if a Unitholder  sells or disposes of
his entire interest in the Partnership  within five years from the date property
for which the Historic Tax Credit is claimed is placed in service. Additionally,
if a Unitholder's  interest in the profits of the Partnership is reduced to less
than 66 2/3% of what it was when the  property for which the Historic Tax Credit
is  claimed  was  placed  in  service,  the  reduction  will  be  treated  as  a
proportional  disposition  of the  property by the  Unitholder.  Therefore,  for
example,  if a  Unitholder  disposed of 50% of his  partnership  interest in the
first year in which an Historic Tax Credit was claimed, then 50% of the Historic
Tax Credit claimed by the Unitholder will be recaptured.

General Business Tax Credit Limitations

    The  ability  of  taxpayers  to use Tax  Credits  is  subject  to an  annual
limitation on the allowance of aggregate general business tax credits (i.e., the
Low Income Housing  Credit,  the Historic Tax Credit,  any other  investment tax
credit, the targeted jobs credit, the alcohol fuels credit, the research credit,
the enhanced oil recovery  credit,  the disabled  access  credit,  the renewable
electricity  production  credit,  the empowerment  zone employment  credit,  the
Indian employment  credit and the employer social security credit).  Such annual
limitation is generally equal to the first $25,000 of tax liability ($12,500 for
married persons filing  separately)  plus 75% of tax liability in excess of that
amount,  except  that (i)  business  tax  credits  may not be used to offset any
applicable  alternative minimum tax, and (ii) even if no alternative minimum tax
is imposed in a particular  year (because  "regular"  tax liability  exceeds the
amount which would have been imposed under the  alternative  minimum tax rules),
business tax credits may not be used to reduce  regular tax liability  below the
amount  which would be imposed  under the  alternative  minimum  tax rules.  Tax
credits limited by this rule are first carried back three years and then forward
15 years.  It should be noted  that,  for  purposes  of  determining  which of a
taxpayer's  general  business tax credits will be treated as exceeding the limit
in any

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year, Low Income Housing Credits will be treated as being used only after all of
the other general business tax credits.

    Any Tax Credit  that is  allowable  in any year under the  passive  activity
rules  described  above,  but is  disallowed  in such  year as a  result  of the
application  of the  general  business  credit  limitations  described  in  this
section,  ceases to be  subject  to the  limitations  on  credits  from  passive
activities for purposes of any carryback or carryforward of such Tax Credit.

Tax Basis for the Units

    A  Unitholder's  tax  basis  for his  Units  generally  will be equal to his
Capital  Contribution plus his share of his Series'  nonrecourse  liabilities to
the extent that they do not exceed the fair market  value of the assets  subject
thereto. From time to time such tax basis will be (a) increased by the amount of
Profits for Tax Purposes  allocated  to him, and (b)  decreased by the amount of
Losses for Tax Purposes allocated to him and by the amount of Cash Available for
Distribution and Sale or Refinancing Proceeds distributed to him.

    In the opinion of Counsel,  a Series'  nonrecourse  liabilities will include
its share of the nonrecourse  liabilities of each Local Limited Partnership,  to
the extent  that such  liabilities  do not exceed the fair  market  value of the
property subject thereto.  Further,  in the opinion of Counsel,  each Unitholder
will be  permitted  to  include  in his tax  basis of his Units his share of the
nonrecourse  liabilities  of his Series,  including  the  Series'  share of such
liabilities of each Local Limited  Partnership,  as so  determined.  Pursuant to
Treasury  Regulations  promulgated  under  Section 752 of the Code,  a partner's
share of  nonrecourse  liabilities  of a  partnership  (those  liabilities  with
respect to which no partner or related  person bears the economic  risk of loss)
is determined as follows: first, an amount of liabilities is allocated among the
partners to reflect their respective shares of partnership minimum gain; second,
any tax gain that would be  allocated to the partners  under the  principles  of
Section  704(c) if the  partnership's  property were sold for an amount equal to
the  nonrecourse  debt  securing  the  property is matched by an  allocation  of
partnership  nonrecourse  debt;  and,  third,  to the  extent  that  nonrecourse
liabilities exceed these items, such liabilities are allocated among partners in
accordance with their profits interests in the partnership.

    Each Unitholder may deduct, on his own Federal income tax return,  his share
of the Losses for Tax  Purposes,  if any, to the extent that he has tax basis in
his Units.  Any losses in excess of a Unitholder's tax basis may be carried over
indefinitely  and may be  deducted  in  future  years  to the  extent  that  the
Unitholder's   basis  has  increased   above  zero.  It  is   anticipated   that
substantially  all of the  liabilities  of the Local Limited  Partnerships  will
constitute  nonrecourse  liabilities  for  this  purpose;  consequently,  it  is
anticipated that each Unitholder will have sufficient

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basis in his Units to claim his allocable share of Losses for Tax Purposes. See,
however,  "Tax Treatment of Unitholders,"  "Application of At Risk Limitations,"
and  "Limitations  on Losses and  Credits  from  Passive  Activities"  for other
limitations on the amount of losses that may be claimed by a Unitholder.

    A decrease in a Partner's  proportionate  share of  nonrecourse  liabilities
(as,  for  example,  when a mortgage  is paid off in whole or in part by a Local
Limited  Partnership,  or when an  Apartment  Complex  subject to a mortgage  is
transferred by a Local Limited Partnership,  or when nonrecourse debt of a Local
Limited  Partnership  is  refinanced  with  recourse  debt) is  treated  for tax
purposes  as  though  it  were a cash  distribution.  Such a  constructive  cash
distribution reduces a Unitholder's tax basis in his Units (but not below zero),
and any  remaining  portion  of his share of the  reduction  in  liabilities  is
taxable to him as though it were gain on the sale or exchange of his Units.  See
"Sales or Exchanges of Units and Local Limited Partnership Interests;  Transfers
by Gift or at Death" below.

Application of At Risk Limitations

    Section 465 of the Code  provides  that the amount of any losses  (otherwise
allowable for the year in question) that may be deducted by an individual,  an S
corporation,  or a closely-held  corporation  other than a leasing  company,  in
connection  with an  activity  that is part of a trade  or  business  or that is
engaged in for the production of income, cannot exceed the aggregate amount with
respect to which such taxpayer is "at risk" in such activity at the close of the
tax year. In the case of a partnership,  the  limitations  apply to each partner
who is an individual, S corporation or closely-held corporation.

    A partner  generally  will be considered "at risk" to the extent of the cash
and adjusted basis of the other property contributed to the partnership, as well
as any borrowed  amounts  contributed to the  partnership  with respect to which
such partner has personal liability for payment from his own assets.

    In addition,  special  rules apply to an activity  involving  the holding of
real estate.  A taxpayer  engaged in such activity will be considered  "at risk"
with respect to any "qualified  nonrecourse  financing"  that is secured by real
property used in the activity. In general,  "qualified nonrecourse financing" is
non-convertible,  nonrecourse  debt which is borrowed  from a  government  or an
instrumentality  thereof  (or is  guaranteed  by a  government)  or  any  person
actively and regularly engaged in the business of lending money,  other than (a)
the person from whom the taxpayer acquired the property,  (b) a person receiving
a fee with respect to the taxpayer's investment in the property, or (c) a person
related to either of such  persons.  However,  if a lender  that is  otherwise a
qualified person is related to the taxpayer, the loan will qualify as "qualified
nonrecourse  financing"  only if the  loan  is  commercially  reasonable  and on
substantially the same terms as loans involving

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unrelated  persons. A partner's share of "qualified  nonrecourse  financing" for
purpose of the "at risk"  rules will be the same as his share of such  financing
for the purpose of determining his tax basis in his partnership  interests.  See
"Tax Basis for the Units" above.

    If at the end of a  taxable  year a  taxpayer's  amount  "at  risk" has been
reduced  below zero,  the  deficit  amount "at risk" is  recaptured  and must be
included  in gross  income in that  year.  The amount  recaptured  is treated in
future years as if it were a deduction suspended by the "at risk" provisions. To
the extent that the  taxpayer's  amount "at risk" is  increased  above zero in a
subsequent year, an additional deduction may be allowable at such time.

    Based on the  anticipated  investments  of the Fund described in "Investment
Objectives  and  Policies"  above,  the "at risk" rules  under Code  Section 465
should not limit the amount of deductions available for a Unitholder,  because a
substantial  portion  of the  financing  secured  by each  Apartment  Complex is
expected to consist of qualified nonrecourse financing that is includable in the
Unitholder's amount "at risk." It is expected that an opinion of counsel will be
rendered  on this  issue  prior  to a  Series'  investment  in a  Local  Limited
Partnership. See "Opinion of Counsel" above.

Fund Allocations

    The Partnership Agreement provides for allocations of Profits and Losses for
Tax  Purposes  and Tax Credits as  described  under  "Profits and Losses for Tax
Purposes,  Tax  Credits  and  Cash  Distributions."  Generally,  each  partner's
distributive share of income,  gain, loss,  deduction or credit of a partnership
is determined in accordance with the partnership agreement. However, Section 704
of the  Code  provides  that an  allocation  to a  partner  under a  partnership
agreement of income,  gain, loss, deduction or credit (or item thereof) will not
be respected  unless such allocation has  "substantial  economic  effect." If an
allocation does not have substantial economic effect, the partner's distributive
share of income, gain, loss, deduction or credit (or item thereof) is determined
in accordance  with the partner's  interest in the  partnership  (determined  by
taking into account all facts and circumstances).

    Treasury  Regulations  have been  issued  governing  the  interpretation  of
Section 704 of the Code. The  Regulations in general  provide that an allocation
does not have "economic  effect" unless (i) a capital  account is maintained for
each partner in accordance with Federal income tax accounting  principles;  (ii)
allocations  of income,  gain,  loss and deduction are reflected by  appropriate
increases,  or decreases,  to the partners' capital accounts;  (iii) liquidation
proceeds  throughout  the  term  of  the  partnership  are  to be  allocated  in
accordance  with the partners'  capital account  balances;  and (iv) any partner
with a deficit in his capital account following

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the distribution of liquidation  proceeds is required to restore ("makeup") such
deficit amount to the partnership, which amount is to be distributed to partners
in accordance with their positive capital account balances or paid to creditors.
The   Regulations   provide  another  test  as  an  alternative  to  the  fourth
requirement,  under which an allocation  will have economic effect to the extent
it does not create a deficit or increase an  existing  deficit in any  partner's
capital account balance and the partnership  agreement has provisions allocating
income  and gain to  partners  who do have  deficit  capital  account  balances.
Counsel has advised the Fund that the Partnership  Agreement contains provisions
which, if followed throughout the existence of the Series,  substantially comply
with  requirements  (i),  (ii) and (iii) above and the  alternative  test to the
fourth requirement.

    An allocation  which has economic effect  nevertheless may be disregarded by
the IRS if the effect of the allocation is not "substantial." The IRS may assert
that the effect of certain allocations provided in the Partnership  Agreement is
not  substantial.  If at any time the allocations of a Series among its Partners
do not  have  economic  effect  or are  not  substantial,  they  will be made in
accordance  with the  interests of the Partners in the Series.  The  Regulations
indicate that the determination of a partner's interest in a partnership is made
by taking into  account  all facts and  circumstances  relating to the  economic
arrangement of the partners.  The Regulations further provide that where capital
accounts  are  maintained  in  accordance  with  the  rules  set  forth  in  the
Regulations  and  liquidating  distributions  are to be made in accordance  with
positive capital account  balances,  the partners'  interests in the partnership
each  year  generally  will be  determined  by  comparing  the  manner  in which
distributions and contributions  would be made if all partnership  property were
sold at book value and the partnership were liquidated  immediately prior to the
taxable year with the manner in which  distributions and contributions  would be
made if the sale of partnership  property at book value and liquidation occurred
at the end of the taxable year. Allocations made under this rule generally would
be similar to those provided in the Partnership Agreement,  although there is no
assurance the IRS would not be successful in  reallocating  a Series'  income or
losses in a different  manner with the result that the shares of Profits for Tax
Purposes of any or all Unitholders  might be increased or their shares of Losses
for Tax Purposes or Tax Credits decreased.

    The  Regulations  state that an  allocation  of an item of loss or deduction
(such as depreciation) attributable to nonrecourse debt secured by a partnership
property cannot have substantial economic effect. However, such an allocation is
deemed to be made in accordance with the partners'  interests in the partnership
if requirements  (i), (ii) and (iii) of the economic effect test set forth above
are satisfied,  allocations of nonrecourse deductions are made among partners in
a manner which is reasonably  consistent with allocations which have substantial
economic  effect of some other  significant  partnership  item  attributable  to
assets  securing the  nonrecourse  debt, the  partnership  agreement  contains a
"minimum gain

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chargeback"  provision (i.e., a provision requiring chargeback of income or gain
to partners who have been allocated nonrecourse  deductions and who have deficit
capital account balances) and all other material allocations and capital account
adjustments   under  the   partnership   agreement  are  recognized   under  the
Regulations. The Partnership Agreement contains provisions which are intended to
comply with the  requirements  of these  Regulations.  If the  nonrecourse  debt
allocation  provision of the  Regulations  is not  satisfied,  the allocation of
income, gain, loss and deduction attributable to nonrecourse  indebtedness is to
be made in accordance with the overall economic interests of the partners in the
partnership.

    The Regulations provide that because allocations of tax credit and recapture
do not give rise to adjustments  to partners'  capital  accounts  (except to the
extent of basis  adjustments  attributable to Section 38 property),  they cannot
have economic effect.  Accordingly,  tax credits and recapture must be allocated
in accordance with the partners' interests in the partnership as of the time the
tax  credit or  recapture  arises.  In the case of tax  credits  other  than the
investment  tax credit (such as Low Income  Housing  Credits),  the  Regulations
provide that  allocations  will be deemed to be in accordance with the partners'
interests in the  partnership  if made in the ratio in which the partners  share
the  expenditures  giving rise to the  credits.  In the case of  investment  tax
credits  (such  as  Historic  Tax  Credits),  credits  should  be  allocated  in
accordance  with the ratio in which  partners  share the general  profits of the
partnership for the year in which the property is placed in service, or, in some
cases, for the date on which the property is placed in service.  The Partnership
Agreement contains provisions which are intended to comply with these provisions
of the Regulations.

    It is possible that the  Regulations  under Section 704(b) of the Code which
are described in the preceding paragraphs may be modified. Under the Partnership
Agreement,  the Fund Manager is authorized to amend the Partnership Agreement to
the  minimum  extent   necessary  to  preserve  the  plan  of  allocations   and
distributions  provided in the  Partnership  Agreement if the Fund is advised by
its counsel or accountants that such  modifications are necessary because of the
adoption of new regulations under Section 704 of the Code or other  developments
in the law.

    Notwithstanding  the possibility of challenge by the IRS,  provided that the
Partnership  Agreement  is  followed  throughout  the entire term of a Series in
allocating and making  distributions,  maintaining capital accounts,  allocating
Profits and Losses for Tax Purposes  (and items  thereof)  and Tax Credits,  and
determining  the rights and  obligations of the  Unitholders and Fund Manager of
the Series upon  dissolution  and  liquidation of the Series,  Counsel is of the
opinion that the Unitholders would not be allocated  significantly  more Profits
for Tax  Purposes  or  less  Losses  for Tax  Purposes  or Tax  Credits  than is
allocated to them under the Partnership  Agreement if the allocations were fully
litigated in court.  However,  there can be no  assurance  that the IRS will not
challenge the allocations in the

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Partnership  Agreement on the ground that they lack substantial  economic effect
or do not reflect a  Unitholder's  interest  in his Series.  If such a challenge
were  successful,  all income and losses and Tax Credits of the Series  would be
reallocated  to its  Unitholders  and Fund  Manager  in  accordance  with  their
respective interests in the Series.

    The  Series  will  enter into Local  Limited  Partnerships  the  partnership
agreements  of which will be subject to future  negotiations.  Prior to entering
into  each of such  partnership  agreements,  the Fund  Manager  will  obtain an
opinion of tax counsel  regarding  the  Federal  income tax  consequences  of an
investment by a Series in the respective  Local Limited  Partnership,  including
specifically  an opinion  that the  allocation  provisions  of such  partnership
agreement  will not be  substantially  modified  by the  IRS.  See  "Opinion  of
Counsel"  above.   Counsel's  opinion  stated  above  regarding  the  allocation
provisions  of the  Partnership  Agreement  assumes the Fund Manager will obtain
(and the accuracy of) such an opinion of tax counsel  regarding  the  allocation
provisions of each Local Limited Partnership.

    It is possible  that the IRS will seek to  recharacterize  the  relationship
between a Local Limited Partnership and other parties.  Such  recharacterization
could  adversely  affect the tax treatment of a Local Limited  Partnership  (and
consequently  of the  Unitholders).  For example,  the IRS might  contend that a
lender to a Local Limited Partnership is actually a partner,  either because the
lender  is  entitled  to  interest  measured  in whole or in part by the  income
generated  by certain  property  or because  the lender had made a  subordinated
nonrecourse loan whose repayment  arguably is subject to an equity-type risk. In
that  event,  some or all of the  payments  to the lender  would be  partnership
distributions.  The  Local  Limited  Partnership  would be  denied  an  interest
deduction  for such  payments,  and the lender might be allocated a share of the
deductions of the Local Limited Partnership attributable to the property.

    Allocations  of taxable  income and losses  also may be affected by possible
IRS recharacterizations and disallowances of Series or Local Limited Partnership
deductions. For example, a Local Limited Partnership might pay a general partner
or an  Affiliate  of a general  partner  fees for  services  performed  or to be
performed. The IRS might contend that such fees are not deductible expenses, but
are  actually  partnership  distributions,  and that  the  general  partner  was
entitled  to a larger  percentage  of the Local  Limited  Partnership's  taxable
income or loss.

    Whether  the IRS would be  successful  in any  attempted  recharacterization
would depend upon all the facts and circumstances of the transaction, including,
in the case of fees,  the nature of the services for which the fees actually are
being paid. Because such facts and circumstances are unknown at present, Counsel
has rendered no opinion with respect thereto.


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Allocations Prior to Admission

    Items of partnership income,  gain, loss,  deduction or credit are allocable
to a partner only if realized,  paid or incurred by the  partnership  during the
portion of the year in which the partner is a member of the  partnership.  Items
realized,  paid or incurred during periods prior to the partner's  admission may
not be allocated  retroactively to the partner. In determining whether any items
have been  realized,  paid or incurred prior to a  Unitholder's  admission,  the
Partnership Agreement provides that the items of income, gain, loss deduction or
credit accrued during each month are allocated among persons who are Partners of
the Series at the end of that month.

    The Tax Reform  Act of 1984  authorizes  the  Treasury  Department  to issue
regulations  concerning  the  allocation of income,  gain,  loss,  deduction and
credit  to  partners   whose   interests  in  a  partnership   vary  during  the
partnership's  tax year.  The General  Explanation of the Tax Reform Act of 1986
indicates that Congress  intended that these regulations apply to the allocation
of Tax  Credits  where a partner is admitted to a  partnership  or his  interest
therein changes during a taxable year. The General Explanation of the Tax Reform
Act of 1984 indicates that until such Treasury  Regulations are issued and for a
reasonable period thereafter any reasonable  convention will be permissible.  As
of the date of this  Prospectus,  Treasury  Regulations have not been issued and
consequently,  Counsel is of the opinion that the method of  allocation  used by
the Fund is proper. However, Treasury Regulations, when issued, may require that
some other method of allocation be used.

Basis of Local Limited Partnerships in Their Apartment Complexes

    A Local Limited  Partnership's  basis in its Apartment Complex determines in
part its (and  thus the  Unitholders')  depreciation  and  interest  deductions.
Section  1012 of the Code  provides  that  the  basis of  property  acquired  by
purchase is its cost.  This cost includes cash paid to acquire such property and
certain purchase  transaction costs such as real estate commissions,  attorneys'
fees and  appraisal  costs.  The basis of property is increased to the extent of
the cost of capital improvements thereon.  Moreover,  where property is acquired
or improved with proceeds of the owner's note, the owner's basis in the property
includes the  principal  amount of the note  regardless  of whether the owner is
personally  liable for payment  thereof.  The foregoing rule has been applied in
cases where little or no downpayment has been made,  where payments of principal
are not made  currently  and  where  the note  itself is  payable  partially  or
entirely from the proceeds realized from the property acquired.

    The principal amount of a nonrecourse note may not, however,  be included in
the basis of acquired  property  unless it is  recognized  for tax purposes as a
bona fide

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liability.  The rule adopted by the courts  which is most often  asserted by the
IRS in  attacking  the bona fide nature of a  nonrecourse  liability is that the
principal amount of a nonrecourse  liability may not be included in the basis of
acquired or improved  property  unless the fair market value of such property is
at least  equal to the face  amount  of the  nonrecourse  note.  (See  Wilman v.
Commissioner,  78 T.C. 943 (1982);  Narver v. Commissioner,  75 T.C. 53 (1980).)
Additionally, in Hager v. Commissioner, 76 T.C. 759 (1981), the Tax Court stated
that in a transaction  involving a large amount of nonrecourse  debt incurred in
the  purchase  of a  property  at an  inflated  price,  the  entire  sale may be
disregarded.  Thus, the IRS will closely  scrutinize any  transaction  involving
nonrecourse liability to determine whether the principal amount of the liability
approximates the value of the property purchased.

    It is anticipated that nonrecourse  liabilities will exist only at the Local
Limited Partnership level. Accordingly, if any such liabilities are successfully
challenged by the IRS, a  Unitholder's  share of Tax Credits,  depreciation  and
interest  deduction  and the basis in his Units (to the extent  attributable  to
such Local Limited Partnership  liability) would be reduced. It is expected that
an  opinion  of  counsel  will be  rendered  in this  regard  prior to a Series'
investment in a Local Limited Partnership. See "Opinion of Counsel" above.

Depreciation

    In  determining  profits  and losses for tax  purposes  and under  generally
accepted accounting  principles,  a partnership's income for any year is reduced
by deductions representing  depreciation of the partnership's assets. The larger
the depreciation deductions,  the lower the income or higher the loss reportable
on the partnership's tax information return will be. Consequently,  Partners may
receive Cash Available for  Distribution in years in which they are not required
to report any Profits for Tax Purposes attributable to their Units.

    Code Section 168 provides rules for determining the manner in which tangible
assets are to be  depreciated.  Subject to certain  transitional  rules that may
apply to one or more Apartment Complexes,  residential rental property placed in
service on or after January 1, 1987 may be depreciated  over a 27.5-year  period
or a 40-year  period  using  the  straight-line  method.  Personal  property  is
depreciated over recovery periods of three,  five,  seven,  ten, 15 or 20 years,
depending on the nature of the asset, using an accelerated method.

    Residential rental property  depreciated  pursuant to the rules described in
the  preceding   paragraph  is  not  subject  to  depreciation   recapture  upon
disposition except to the extent of any adjustment to the basis of such property
required  by Section  50 of the Code in the case of  expenditures  eligible  for
Historic Tax Credits.  Prior  depreciation for all personal property will result
in recapture when the property is disposed of at a gain. Any such recapture will
be taxed as ordinary income to the

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Unitholders.   The  excess  of  accelerated   depreciation  over   straight-line
depreciation for all types of property  generally is an item of "tax preference"
that may result in additional  Federal income tax to a Unitholder,  as discussed
below under "Other Important Tax Considerations - Alternative Minimum Tax."

    The purchase  price of the  Apartment  Complexes  must be allocated  between
depreciable  assets (such as improvements on real estate and personal  property)
and nondepreciable  items (such as land). Such allocations are questions of fact
which will not be subject to Counsel's review or opinion,  and IRS reallocations
of purchase  price may result in Losses for Tax Purposes  and Tax Credits  being
decreased or Profits for Tax Purposes  being  increased.  A Series may invest in
Local Limited  Partnerships which have Apartment  Complexes under  construction.
Both  the  direct  costs  and any  indirect  costs  properly  allocable  to such
property,  including  interest and taxes incurred during  construction,  must be
capitalized and may be deducted only through cost recovery deductions.

    The  manner in which a Series  acquires  its  interests  in a Local  Limited
Partnership or in which a Local Limited Partnership  acquires its interest in an
Apartment Complex may affect the determination of the Series' properly allocable
share of the tax basis of the Local Limited Partnership's assets, including such
Local  Limited  Partnership's  expenditures  that  qualify for Tax  Credits.  In
instances in which a Series  purchases  more than 50% in interest of the profits
and capital of a Local Limited Partnership,  such Local Limited Partnership will
be treated as having  terminated  and  distributed  all of its assets to a newly
formed  partnership  of which the Series is a partner.  Generally,  the  Series'
share of the tax basis of each asset of the Local Limited Partnership would then
be based on the amount paid for the Local Limited  Partnership  Interest and the
ratio  of the  tax  basis  of such  asset  in the  hands  of the  Local  Limited
Partnership to the tax basis of all such assets.  This allocation may be further
affected by the presence of a Section 754 election  with respect to the relevant
Local  Limited  Partnership.  See  "Elections."  A different  allocation  of the
Series'  tax basis  among the  assets of the Local  Limited  Partnership  may be
obtained  if a new Local  Limited  Partnership  is formed to acquire an existing
Apartment  Complex.  The Fund  Manager  intends to consult  its tax  counsel and
accountants  and  to  take  these  varying  tax  consequences  into  account  in
negotiating the acquisition of Local Limited Partnership Interests.  Counsel has
not  rendered an opinion  respecting  this issue due to its  inherently  factual
nature.

Deductibility of Fees

A.       Development Fees and Acquisition Fees

    The Fund Manager  anticipates  that each Local Limited  Partnership will pay
its Local General Partners a fee for services in connection with the development
of its Apartment Complex.  Further, each Series will pay Acquisition Fees to the
Fund

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Manager  for  services  in  connection  with the  acquisition  of Local  Limited
Partnership  Interests.  The Local  Limited  Partnerships  will  capitalize  the
development  fees as part of the basis of their respective  Apartment  Complexes
and recover  the cost  thereof  through  depreciation  deductions  to the extent
applicable to depreciable property. Each Series will capitalize Acquisition Fees
related to the acquisition of its Local Limited Partnership Interests as part of
the respective  basis of such interests.  Such Acquisition Fees may be allocated
to  depreciable  property  and deducted  over the useful life of such  property,
treated as  start-up  expenses  that may be  amortized  over a 60-month  period,
amortized  over  the  life of the  Local  Limited  Partnership,  or  treated  as
nondeductible until the termination of the Local Limited Partnership,  depending
on the facts and circumstances  surrounding the investment in each Local Limited
Partnership,  including the manner in which such  investment is structured.  The
balance of the  Acquisition  Fees will be  amortized  by the Series as  start-up
costs or deducted as  ordinary  and  necessary  business  expenses.  Counsel has
rendered no opinion  regarding the proper  treatment of any development  fees or
Acquisition Fees due to the inherently factual nature of the issues involved.

B.       Management Fees

    Each Local Limited Partnership intends to claim a deduction for certain fees
paid to its  general  partners  or their  Affiliates,  including  fees  paid for
property management services, and each Series intends to deduct Asset Management
Fees paid to the Fund  Manager.  The Fund Manager  believes  that such  property
management  fees and Asset  Management  Fees should be  deductible by each Local
Limited  Partnership  and  each  Series,  as the case may be,  as  ordinary  and
necessary  business  expenses.  It is  impossible  to  predict  the  outcome  of
litigation  if the IRS were to challenge  the treatment of all or any portion of
these fees. Many of the issues involved in any such litigation would be factual,
not legal,  issues.  Resolution  of the issue  would  depend  upon,  among other
things, the credibility of witnesses,  the availability of expert witnesses, and
the strength of their testimony as to the value of the services to be performed.
The disallowance of the  deductibility of these fees could result in an increase
in the Profits for Tax Purposes of the Unitholders  with no associated  increase
in Cash Available for Distribution  with which to pay any resulting  increase in
tax liability, or a decrease in Losses for Tax Purposes.

Organization and Offering Expenses

    Each Series will incur  expenses in  connection  with its  organization  and
Offering.  See "Estimated Use of Proceeds." The Code requires that such expenses
be  capitalized.  However,  each  Series is  permitted  and  intends to elect to
amortize  over  60  months  as  much  of  these   expenditures   as  qualify  as
"organizational  expenses" as defined in Section 709(b)(2) of the Code. Offering
and syndication expenses will be capitalized permanently,  and no deduction will
be obtained by a Series with

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respect to such  expenses.  The IRS may  challenge the amount of expenses that a
Series treats as  "organizational  expenses,"  and/or attempt to  recharacterize
other payments,  including,  without limitation, a portion of the fees described
in the preceding  section,  as nondeductible  Offering or syndication  expenses.
Counsel has rendered no opinion on this issue because of its inherently  factual
nature.

Start-Up Expenditures

    Section 195 of the Code provides that certain "start-up  expenditures"  may,
at the election of the taxpayer,  be amortized ratably over a period of not less
than 60 months beginning with the month in which the business begins.  "Start-up
expenditures"  include costs incurred (other than amounts properly  allocable to
the  acquisition  cost of Local Limited  Partnership  Interests and  amortizable
organization expenses as discussed above) prior to entering into an active trade
or business, which would have been deductible if incurred in connection with the
expansion of an existing  trade or business in the same field as that entered by
the taxpayer.  The determination of whether an item is a start-up expenditure is
based on the facts and circumstances in each case.

    A Local Limited Partnership may deduct certain expenses incurred by it prior
to the date that it completes the  construction  of any  Properties or generates
rental  income,  and a Series will deduct its allocable  share of such expenses.
The IRS may  disallow  any  such  deductions  as not  having  been  incurred  in
connection  with an  existing  trade or business of any one or more of the Local
Limited Partnerships.  If the IRS were successful, the disallowed expenses would
be available as deductions,  if at all, only through  amortization,  either over
the applicable start-up expenditure period (to the extent that a proper election
is in place and these expenses qualify as start-up expenditures) or over another
applicable  period. Due to the inherently factual nature of the issues involved,
Counsel is unable to render an opinion regarding the manner in which Section 195
may apply to any Series or any Local Limited Partnership.

Sales or Exchanges of Local Limited Partnership Property; Depreciation
Recapture

    Each Local Limited  Partnership's  gain on sale of an Apartment Complex will
be measured by the difference between the sale proceeds (including the amount of
any indebtedness to which the property is subject) and the adjusted basis of the
Apartment  Complex.  Consequently,  the amount of tax payable by a Unitholder on
his share of his Series'  allocable  share of such gain may in some cases exceed
his share of the cash proceeds  therefrom.  In the event of a foreclosure  of an
Apartment  Complex,  a  Series  may  realize  gain  equal to the  excess  of the
indebtedness  secured by the mortgage or trust deed over the  adjusted  basis of
the Apartment Complex,

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and the  Unitholders  may realize taxable income without the receipt of any cash
distributions as a result of the foreclosure.

    Circumstances  involving a  disposition  of an Apartment  Complex that might
result in the Unitholders receiving  insufficient cash with which to pay any tax
liability  generated  by the  disposition  could  include:  (i) the  sale of the
Apartment  Complex at a time when all or part of the net  proceeds  thereof  may
have to be retained by the Local  Limited  Partnership  or the Series to support
its  remaining  operations,  and  (ii)  the sale of the  Apartment  Complex  for
proceeds  which  include  illiquid  assets,  such  as  promissory  notes  of the
purchaser.  See "Treatment of Mortgage Loans."  Unitholders should note that the
partnership  agreements  of the  Local  Limited  Partnerships  have not yet been
negotiated  and  that in  certain  instances  such  agreements  may  permit  the
retention  by a Local  Limited  Partnership  of all or a portion  of its sale or
refinancing proceeds.

    The Apartment  Complexes  will most likely be considered to be "Section 1231
assets" (i.e., real property and depreciable  assets used in a trade or business
and held for more than one year and not for sale to  customers  in the  ordinary
course of business).  In such event, a Unitholder's  allocable  share of gain or
loss from the sale of an  Apartment  Complex  would be  combined  with any other
Section  1231 gains or losses  incurred  by him in that year and his net Section
1231 gains or losses would constitute  capital gains or ordinary losses,  as the
case may be.  Notwithstanding  the above,  to the extent net Section 1231 losses
are  treated as  ordinary  losses in any taxable  year,  net Section  1231 gains
recognized during the five succeeding  taxable years will be treated as ordinary
income.

    If an  Apartment  Complex is deemed to be held for sale to  customers in the
ordinary  course of business  ("dealer  property"),  all gain on the disposition
thereof will constitute ordinary income. Because the determination as to whether
any  Apartment  Complex  is dealer  property  depends on future  facts,  Counsel
expresses no opinion as to that issue. Further, gain realized by a Local Limited
Partnership on a disposition of an Apartment  Complex will be ordinary income to
the extent of depreciation recapture. See "Depreciation" above. In addition, the
sale of an Apartment Complex may give rise to the recapture of Tax Credits.  See
"Historic  Tax  Credit  Recapture"  above and "The Low Income  Housing  Credit -
Recapture of Low Income Housing Credits."

    For a discussion  of the income tax  consequences  attendant to a sale of an
Apartment  Complex on the installment  basis,  see "Treatment of Mortgage Loans"
below.


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Tax Liabilities in Later Years

    After a period of years  following  commencement  of  operations  by a Local
Limited Partnership,  the Local Limited Partnership may generate Profits for Tax
Purposes  rather than Losses for Tax Purposes.  In earlier  years,  depreciation
deductions are expected to result in Losses for Tax Purposes.  However, in later
years,  as the  portion of debt  service  payments  attributable  to  deductible
interest  decreases and the portion  attributable  to  non-deductible  principal
amortization  increases,  net operating income of the Local Limited  Partnership
might exceed depreciation. A Unitholder's share of such Profits for Tax Purposes
would constitute passive income and would be taxable at regular rates unless the
Unitholder  had  unused  "suspended"  passive  losses  from his  Series or other
investments, or current passive losses from other investments.  See "Limitations
on Losses and Credits from Passive  Activities"  above. In such circumstances it
would be unlikely that the Unitholder would receive a cash distribution from his
Series with which to pay any tax  liability  resulting  from the  allocation  of
Profits for Tax Purposes,  and the tax liability  would require a  nondeductible
out-of-pocket payment of tax by such Unitholder.

Treatment of Mortgage Loans

    A Local Limited  Partnership  may take back purchase money mortgages as part
of the  consideration  received  upon  sale of an  Apartment  Complex.  The Fund
Manager  anticipates  that any such sale would qualify as an "installment  sale"
for Federal  income tax  purposes and that taxable  income  therefrom  generally
would be recognized over the period during which payments are received.

    However, the 1986 Act and the 1987 Act substantially  modified the timing of
the recognition of gain arising from installment sales under Code Section 453. A
taxpayer who disposes of property other than dealer  property on the installment
basis may be  required  to pay  interest  on the  portion  of his tax  liability
deferred by use of the  installment  method.  This rule  applies to  installment
obligations  arising from such  dispositions if the aggregate face amount of all
such obligations arising in any one year and outstanding at the end of that year
exceeds  $5,000,000.  Interest is payable each year at the rate specified by the
Code for underpayments of tax (the short-term Federal rate plus three percentage
points) in effect for the month in which the tax year ends. In  determining  the
application of this rule, all taxpayers  under common control within the meaning
of Section 52 of the Code are to be treated as a single  taxpayer.  It is likely
that a Series and each Local Limited  Partnership in which it owns more than 50%
of the profits or capital interests will be treated as under common control.

     Any depreciation or other ordinary income  recapture is denied  installment
sale treatment and must be recognized in the year of the sale. Further, the Code

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provides for recognition of gain on installment  obligations that are pledged to
secure  indebtedness of the taxpayer.  The proceeds of the secured  indebtedness
are treated as payment on the pledged installment obligation.

    A sale or exchange of dealer property is not eligible for  installment  sale
treatment.  Accordingly, if a Local Limited Partnership disposes of an Apartment
Complex on an installment  basis and the Apartment Complex is determined to have
been sold to customers in the ordinary course of business, all gain on such sale
would be recognized in the year of sale. In such a case, tax would be payable as
a result of such sale even though no proceeds of the sale had yet been received.

    The Fund Manager  intends to take into account the  application of these new
rules  regarding the timing of recognition  of income in determining  whether to
approve  the  sale of an  Apartment  Complex  in  return  for a  purchase  money
mortgage.

    Any notes held by a Local Limited  Partnership as a result of an installment
sale  generally  will be secured by mortgages  or deeds of trust.  If the stated
redemption  price at maturity of such notes  exceeds the issue price (the amount
originally  loaned),  the difference  will be treated as original issue discount
("OID"). In the case of purchase money financing,  the issue price is determined
by  discounting  future  payments of  principal  and  interest to present  value
utilizing  specified rates that are intended to reflect market conditions at the
time of the sale. The stated redemption price at maturity  generally consists of
the face amount of the notes,  plus deferred  interest and other amounts payable
at maturity. A Local Limited Partnership will be required to accrue, as interest
income in  addition  to that  stated in the  notes,  a portion  of any OID.  The
accrued  portion is  calculated  in  accordance  with the  formula  designed  to
approximate the true economic yield on the notes.

Sales or Exchanges of Units and Local Limited Partnership Interests; Transfers
by Gift or at Death

    A  Unitholder  may not be able to sell his Units  because  the Fund  Manager
intends to prohibit the  development  of a public  trading  market in the Units.
However,   it  may  be  possible   to  arrange  a  sale  in  some   cases.   See
"Transferability of Units." Any gain realized on a sale of Units by a Unitholder
who is not a "dealer" in the Units or other similar securities generally will be
a capital  gain,  except to the  extent  the gain is  allocable  to  "unrealized
receivables"   (which  is  defined  in  Section  751  of  the  Code  to  include
unrecognized  depreciation  recapture) or inventory items of his Series, if any,
that have appreciated substantially in value. In determining the amount received
upon the sale or exchange of a Unit,  a  Unitholder  must  include,  among other
things, his allocable share of the Series' allocable share of each Local Limited
Partnership's nonrecourse indebtedness.  In addition, as a result of the sale of
Units a Unitholder may be subject to the recapture of Tax Credits. See "Historic
Tax Credit Recapture" above and "The

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Low Income Housing Credit - Recapture of Low Income  Housing  Credits."  Similar
rules will apply in the case of a sale or exchange  by a Series of its  interest
in a Local Limited Partnership. Therefore, it is possible that the gain realized
upon the sale of a Unit or Local  Limited  Partnership  Interest  may exceed the
cash  proceeds of such sale,  and in some cases the income  taxes  payable  with
respect to such sale may exceed such cash proceeds.  See, however,  "Limitations
on Losses and Credits from Passive  Activities" above regarding the allowance of
previously  suspended  passive activity losses and passive activity credits upon
the disposition of a taxpayer's entire interest in a passive activity.

    A gift of a Unit may  result  in  Federal  or state  income  tax (as well as
Federal or state gift tax)  liabilities to the donor. The IRS will take the view
that a  Unitholder  who makes a gift of a Unit is  relieved  of his share of his
Series'   allocable   share  of  a  Local  Limited   Partnership's   nonrecourse
indebtedness and,  therefore,  will realize a taxable gain (taxable as described
above with respect to the sale of a Unit) on the gift to the extent his share of
such liabilities exceeds the tax basis for his Units. In addition, the tax basis
of any donated Unit will be increased in the hands of the donee by any suspended
passive  activity  losses of the donor and such losses will not be  allowable as
deductions  to either the donor or the  donee.  See  "Limitations  on Losses and
Credits from Passive Activities" above.

    If a  Unitholder  dies,  the fair market value of his Units at death (or, if
elected,  at the  alternative  valuation date) will be subject to Federal estate
taxation.  The cost or other basis of a Unit inherited from a decedent generally
is "stepped up" or "stepped  down" to its fair market  value for Federal  estate
tax  purposes.  An estate is allowed  to use the  $25,000  deduction  equivalent
attributable to rental real estate in which the decedent  actively  participated
before  his death and to use Low Income  Housing  Credits  only for its  taxable
years  ending less than two years after the date of death of the  decedent.  See
"Limitations on Losses and Credits from Passive Activities" above.

Dissolution and Liquidation of a Series or Local Limited Partnership

    Generally,  upon liquidation or termination of his Series, a Unitholder will
recognize  income only to the extent that the sum of the cash distributed to him
and his proportionate  share of the Series' allocable share of any then existing
nonrecourse  liabilities of the Local Limited  Partnerships exceeds his adjusted
basis in his Units at the time of distribution.  Similar rules will apply in the
event of the dissolution or liquidation of a Local Limited Partnership.

Elections

    The Code permits a partnership  to elect to adjust the basis of  partnership
property on the transfer of an interest in the  partnership  by sale or exchange
or on

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the death of a partner and on the distribution of property by the partnership to
a partner (a "Section 754 election").  The general effect of such an election by
a Series would be that  transferees  of Units would be treated,  for purposes of
depreciation  and taxable gain, as though they had acquired a direct interest in
the Series'  assets,  including the Series'  interest in the assets held by each
Local Limited Partnership. As a result of the complexities of the tax accounting
required,  the Fund  Manager  does not  presently  intend to make a Section  754
election,  although it is empowered to do so by the Partnership  Agreement.  The
absence of any such  election  may, in some  circumstances,  reduce the value of
Units to a potential purchaser.

    In certain instances, a Section 754 election may have been made by a Series,
or the Fund  Manager  may  require  that one be made,  with  respect  to a Local
Limited  Partnership,  effective  for the year in which the Series  acquires  an
interest  therein.  Such  election  may affect the amount of the tax basis of an
Apartment  Complex,  including  the amount of  expenditures  qualifying  for Tax
Credits, properly allocable to the Series. See "Depreciation."

Transferability - Termination of a Series

    The Code provides  that if 50% or more of the capital and profits  interests
in a partnership  are sold or exchanged  within a single 12-month  period,  such
partnership generally will terminate for Federal income tax purposes.  Under the
Partnership  Agreement,  50% or more of the Units  may not be sold or  exchanged
within a single 12-month period.  However, if a termination should occur, it may
cause   recapture  and  might  require  that  the  Series  use  the  methods  of
depreciation  and recovery  periods  applicable to property placed in service in
the year in which  termination  occurs.  For a  discussion  of the  effect  of a
termination of a Local Limited Partnership at the time that a Series acquires an
interest therein, see "Depreciation."

Profit Motive

    Under  Section  183 of the Code,  certain  expenses  (other than real estate
taxes and interest) from  activities not engaged in for profit are disallowed as
deductions from other income.  Notwithstanding  the fact that low-income housing
typically does not generate a profit from  operations,  the Treasury  Department
has issued  Regulations  stating  that Code  Section  183 will not be applied to
apartment  complexes  which qualify for the Federal Low Income Housing Credit so
long as the investment in such properties is bona fide and not an economic sham.
Accordingly,  Counsel is of the  opinion  that it is more  likely  than not that
Section  183  would not be  applied  to  disallow  deductions  arising  from the
ownership of the Apartment Complexes.


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Other Important Tax Considerations

    In  addition  to the  provisions  of the  Code  specifically  applicable  or
directly  relevant to investments in limited  partnerships  or in real property,
investors should be aware of other important Code provisions that are applicable
to  investments  in  general,   or  that  may,  depending  upon  the  facts  and
circumstances,  be applicable to certain taxpayers.  While a detailed discussion
of such  general  tax aspects is beyond the scope of this  section,  prospective
investors  should be aware of the following  matters,  among others,  and should
consult  their own tax  advisers  for more  details  if further  information  is
desired.

A.       Tax Rates

    The Code includes five marginal tax rates for  individuals,  as set forth in
the following tables:

Filing                                                                Marginal
Status            Income                                               Tax

Married           up to $39,000                                        15%
Filing            between $39,000 and $94,250                          28%
Jointly           between $94,250 and $143,600                         31%
                  between $143,600 and $256,500                        36%
                  over $256,500                                        39.6%

Head              up to $31,250                                        15%
of                between $31,250 and $80,750                          28%
household         between $80,750 and $130,800                         31%
                  between $130,800 and $256,500                        36%
                  over $256,500                                        39.6%

Single            up to $23,350                                        15%
                  between $23,350 and $56,550                          28%
                  between $56,550 and $117,950                         31%
                  between $117,950 and $256,500                        36%
                  over $256,500                                        39.6%

Married           up to $19,500                                        15%
Filing            between $19,500 and $47,125                          28%
Separate          between $47,125 and $71,800                          31%
                  between $71,800 and $128,250                         36%
                  over $128,250                                        39.6%


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The  dollar  amounts  set forth  above  apply to 1995 and will be  adjusted  for
inflation in each year thereafter.

     Notwithstanding  the  preceding,  the maximum tax rate on capital  gains is
28%.  Capital  losses are  deductible to the extent of capital gains plus $3,000
($1,500  in the case of a  married  individual  filing  a  separate  return)  of
ordinary income. The remainder is carried forward.

    The personal  exemption  amount,  established at $2,000 for 1989, is indexed
for inflation after 1989 ($2,500 for 1995). The personal exemption is phased out
by 2% (4% for a married  person  filing a separate  return)  for each  $2,500 by
which a taxpayer's adjusted gross income exceeds certain threshold amounts.

    It also should be noted that under Code Section 67, noncorporate Unitholders
may claim most miscellaneous  itemized  deductions  (including  expenses paid or
incurred (a) for the  production or collection  of income,  (b) for  management,
conservation,  or maintenance of property held for the production of income, (c)
in connection with the determination,  collection or refund of a tax, or (d) for
the trade or business  of being an  employee)  only to the extent such  expenses
exceed 2% of  adjusted  gross  income.  This rule is to apply  with  respect  to
indirect deductions through pass-through entities (such as the Series, the Local
Limited Partnerships and any corporation electing to be taxed under Subchapter S
of the  Code (an "S  corporation"))  of  amounts  that  are not  allowable  as a
deduction if paid or incurred directly by an individual.

    Further,  Code  Section  68  imposes a limit on the  individual's  aggregate
itemized  deductions,  other than deductions for medical  expenses under Section
213,  investment  interest  under Section 163 and  casualty,  theft and wagering
losses under Section 165. For an individual  whose adjusted gross income exceeds
the  "applicable  amount,"  the  amount  of the  itemized  deductions  otherwise
allowable  for the  taxable  year will be reduced by the lesser of (i) 3% of the
excess of the adjusted gross income over the "applicable amount," or (ii) 80% of
the itemized  deductions  otherwise  allowable for the taxable  year.  For these
purposes,  the  "applicable  amount"  means  $100,000  ($50,000 in the case of a
married person filing a separate return).  The applicable amount is adjusted for
inflation in tax years  beginning  after  December 31, 1991 ($114,700 for 1995).
Code  Section  68 is to be  applied  after the  application  of any  other  Code
limitation on the allowance of itemized deductions.

    With respect to corporations,  other than personal service corporations, the
Code imposes the following tax rates:


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    (i) 15% of so much of the taxable income as does not exceed $50,000;

    (ii) 25% of so much of the taxable income as exceeds $50,000 but does not
exceed $75,000;

    (iii) 34% of so much of the taxable income as exceeds $75,000 but does not
exceed $10,000,000; and

    (iv) 35% of so much of the taxable income as exceeds $10,000,000.

    In the  case  of a  corporation  which  has  taxable  income  in  excess  of
$15,000,000,  the amount of the tax determined under the foregoing provisions is
increased by an additional  amount equal to the lesser of (i) 3% of such excess,
or (ii) $100,000.

    With respect to personal service corporations, the 1993 Act imposes a single
rate of tax equal to 35%.

B.  Alternative Minimum Tax

    In addition to the regular  income tax, there is imposed under Code Sections
55- 59 an alternative minimum tax for noncorporate and corporate taxpayers.  The
1986 Act significantly  broadened the alternative minimum tax base. That base is
equal to a taxpayer's taxable income, subject to certain adjustments,  increased
by items of tax preference and reduced by an exemption, all as described below.

    For purposes of the alternative minimum tax, depreciation deductions on real
property are computed  under the  straight-line  method over a 40-year  recovery
period, and depreciation  deductions on personal property are computed using the
150% declining  balance method over the property's  class life. A less favorable
alternative  tax net operating loss deduction is used in lieu of the regular tax
net operating loss deduction.

    For corporations,  the Code requires an addition to taxable income of 75% of
the  amount by which  adjusted  current  earnings  exceeds  alternative  minimum
taxable income.

    In addition to the adjustments described above,  alternative minimum taxable
income is increased by the amount of "items of tax  preference." Tax preferences
include certain excess depletion  deductions,  excess intangible drilling costs,
certain  tax-exempt  interest,  and the difference between the fair market value
and the  exercise  price of stock  acquired by exercise  of an  incentive  stock
option. No deduction is allowed for losses from a tax shelter farm activity.


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    Tax Credits cannot be used to offset  alternative  minimum tax. Rather,  Tax
Credits  may only be utilized to the extent they do not exceed the excess of the
taxpayer's  net income tax (i.e.,  the sum of the regular tax  liability and the
alternative minimum tax liability) over the greater of (i) his tentative minimum
tax  liability,  or (ii) 25% of his regular tax  liability in excess of $25,000.
Any "excess" Tax Credits are first  carried back three years and then forward 15
years.

    The itemized deductions  allowable in computing  alternative minimum taxable
income include the following:  charitable  contributions,  medical deductions in
excess of 10% of adjusted  gross income,  casualty  losses,  interest on certain
personal housing,  and other interest to the extent of net investment income. No
standard deduction is allowed, but an exemption amount is available as discussed
below.

    It should be noted that when a taxpayer  pays  alternative  minimum tax, the
amount of such tax allocable to certain adjustments and timing preferences (such
as depreciation) is allowed as a credit against the regular tax liability of the
taxpayer in subsequent years.  Timing  adjustments and preferences are those for
which the  timing,  rather than the  amount,  of a  deduction  gives rise to its
treatment as an adjustment or tax preference. The credit allowed may not be used
in any subsequent year to reduce a taxpayer's alternative minimum tax liability.

    The  alternative  minimum tax for individuals is equal to (A) 26% of so much
of the taxable  excess as does not exceed  $175,000,  plus (B) 28% of so much of
the taxable excess as exceeds $175,000. For this purpose, "taxable excess" means
the amount by which  alternative  minimum  taxable  income exceeds the exemption
amount.  The  exemption  amount is $45,000 for a married  couple  filing a joint
return or a surviving spouse,  $33,750 for a single individual and $22,500 for a
married individual filing a separate return or for an estate or trust.  However,
the  exemption is reduced (but not below zero) by 25% of the amount by which the
alternative  minimum  taxable income  exceeds  $150,000 in the case of a married
couple filing a joint return,  $112,500 in the case of a single  individual  and
$75,000 in the case of a married  individual  filing a separate return or for an
estate or trust. The Code eliminates any incentive for married taxpayers to file
separate returns by increasing the amount of alternative  minimum taxable income
by the lesser of (i) 25% of the excess of  alternative  minimum  taxable  income
over $165,000, or (ii) $22,500.

    The corporate  alternative  minimum tax is the amount,  if any, by which (A)
20% of the excess of (1) the  corporation's  alternative  minimum taxable income
over (2) the exemption amount, exceeds (B) the corporation's regular tax for the
year.  The corporate  exemption  amount is $40,000.  However,  this exemption is
reduced by 25% of the amount by which alternative minimum taxable income exceeds
$150,000.   The  corporate   alternative   minimum  tax  does  not  apply  to  S
corporations;

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     rather, the alternative  minimum tax for taxpayers who are not corporations
applies to the shareholders of an S corporation.

    Because the impact of the  alternative  minimum tax is  dependent  upon each
Unitholder's  particular  tax  situation,  each  prospective  Unitholder  should
consult his own tax adviser as to the effect of an investment in a Series on the
calculation of his alternative minimum tax liability.

C.  Deduction of Investment Interest

    The 1986 Act  imposed  substantial  limitations  upon the  deductibility  of
interest on funds  borrowed  by an  investor to purchase or to carry  investment
assets. Code Section 163(d) provides that a deduction for "investment  interest"
may be  taken by an  individual  only to the  extent  of such  individual's  net
investment  income for the taxable year.  Investment  interest  generally is any
interest  that is paid or accrued  on  indebtedness  incurred  or  continued  to
purchase or carry investment  property.  Investment  interest  includes interest
expense  allocable  to portfolio  income and  investment  and  interest  expense
allocable to an activity in which the taxpayer does not materially  participate,
if such  activity is not treated as a passive  activity  under the passive  loss
rules.  Investment  interest  does not include any  interest  that is taken into
account in determining a taxpayer's  income or loss from a passive activity or a
rental activity in which a taxpayer actively participates.

    Net  investment  income  consists  of the excess of  investment  income over
investment  expenses.  Investment income generally  includes gross income (other
than gain on  disposition)  from property held for  investment,  gain (excluding
gain treated as capital gain)  attributable  to property held for investment and
amounts  treated as portfolio  income  under the passive loss rules.  Investment
income does not include income taken into account in computing gain or loss from
a passive  activity.  Investment  expenses are deductible  expenses  (other than
interest)   directly   connected  with  the  production  of  investment  income.
Generally,  in calculating investment expenses, only those expenses in excess of
2%  of  adjusted   gross  income  are   included.   See  "Other   Important  Tax
Considerations - Tax Rates."

Tax Returns and Tax Information

A.       Audit and Assessment Procedure

    The IRS could audit the tax information returns filed by a Series or a Local
Limited Partnership.  Any such audit could result in the audit of a Unitholder's
tax return.  An audit of a  Unitholder's  return could result in  adjustments to
items related to the Series as well as items not related to the Series.


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    Unitholders  should be aware that the Tax  Equity and Fiscal  Responsibility
Act of  1982  enhanced  the  ability  of the  IRS to  assess  partners  for  tax
deficiencies  attributable  to adjustments of partnership tax items. As a result
of the 1982 Act, a partnership  is treated as a separate  entity for purposes of
audit, settlement and judicial review. Thus, the IRS may audit and make a single
determination  of the propriety of a partnership's  treatment of partnership tax
items at the  partnership  level.  In  general,  a  partnership's  "tax  matters
partner"  (the Fund  Manager in the case of each  Series)  is  charged  with the
responsibility  of representing the partnership and its partners in the event of
such an audit of the  partnership's  tax returns.  All partners are nevertheless
entitled  to  participate  in any such audit and each  partner  may enter into a
settlement agreement on his own behalf with the IRS.

    Further,  it should be noted  that by reason of the 1982 Act  partners  must
report  partnership  items  consistently  with  the  position  reported  by  the
partnership   on  its  tax   returns  or  file  a  statement   identifying   the
inconsistency. If an inconsistency statement is not filed, the IRS may treat the
inconsistency  as a computational  error on the return and assess any deficiency
resulting  from  such  inconsistency,  and may  additionally  assess  negligence
penalties for failure to comply with the statute.

    If the IRS proposes any adjustments to the tax returns filed by a Series,  a
Local Limited  Partnership  or a Unitholder,  substantial  legal and  accounting
expenses and deficiency interest and penalties may be incurred by any of them. A
Series will not bear any expense that may be incurred by one of its  Unitholders
in  connection  with his  participation  in an audit of the  Series'  or a Local
Limited  Partnership's  tax  returns,  the  audit  of his  tax  returns,  or the
determination  or  redetermination  of his tax liability  even though  resulting
solely from  adjustments  to the Series' or a Local  Limited  Partnership's  tax
returns.

B.       Imposition of Penalties

    The 1989 Act included  provisions  which streamline and revamp the civil tax
penalty  provisions of the Code.  Changes were made in the following broad topic
areas:  document and information  return penalties;  accuracy-related  and fraud
penalties; preparer, promoter and protestor penalties; and penalties for failure
to file or pay. The latter two penalties  are of no  particular  relevance to an
investment in the Fund and are not discussed herein.

    Document  and  Information  Return  Penalties.  Three  separate and distinct
categories of penalties apply to information  returns and payee  statements,  as
follows:  a penalty  for  failing  to file an  information  return or to include
correct  information  therein  (e.g.,  Form  8308,  which  must  be  filed  by a
partnership upon a transfer of its partnership interests); a penalty for failing
to file a payee statement or to include correct information on a payee statement
(e.g., Schedule K-1); and a penalty for failure to comply with other information
reporting requirements (e.g.,

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the requirement  that a transferor must give notice to a partnership  concerning
the exchange of an interest in the partnership).

    The   penalties  in  this   category   differ  in  amount.   Under   certain
circumstances,  some of the  penalties  may be  reduced  or  avoided  by  filing
corrected  returns  within  specific  time  limits,  or  if  the  omissions  and
inaccuracies  are  inconsequential.  On the other  hand,  the  penalties  may be
increased if the failure to comply is due to intentional disregard.

    Accuracy-Related and Fraud Penalties.  All penalties related to the accuracy
of tax returns are consolidated  into one penalty equal to 20% of the portion of
an  underpayment  resulting  from one or more of the  following:  negligence  or
disregard of the rules and regulations; any substantial understatement of income
tax; any substantial valuation overstatement;  any substantial  overstatement of
pension   liabilities;   and  any  substantial  estate  or  gift  tax  valuation
understatement.

    A  substantial  understatement  of income  tax  exists if the  amount of the
understatement  exceeds the greater of (i) 10% of the tax  required to be shown,
or (ii) $5,000 ($10,000 in the case of a corporation other than an S Corporation
or a personal holding company).

    A substantial valuation  overstatement exists if the value or adjusted basis
of any property is 200% or more of the amount determined to be the correct value
or adjusted  basis,  or if the price for services or property in connection with
transactions  between certain affiliated entities is 200% or more of the current
price. In the case of a gross  overstatement  (i.e., where the value or adjusted
basis or price is 400% or more of the correct amount),  the penalty is increased
to 40%. In no event will a penalty be imposed  unless the  underpayment  exceeds
$5,000  ($10,000 in the case of a corporation  other than an S Corporation  or a
personal holding company).

    Any portion of an  understatement  which is attributable to fraud is subject
to a penalty at the rate of 75% of the understatement.  The 20% accuracy-related
penalty will not apply to any portion of an understatement as to which the fraud
penalty is imposed.

Tax Shelter Registration

    Under the Tax Reform Act of 1984,  tax shelter  organizers  are  required to
register their tax shelters with the IRS.  Furthermore,  tax shelter  organizers
are required to maintain lists of investors in the tax shelter, which lists must
be turned over to the IRS upon request. Both of these requirements have enhanced
the ability of the IRS to audit tax shelters.


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     Each Series has applied to the IRS for a tax shelter  registration  number.
The registration number and the taxpayer identification number to be assigned to
a Series will be provided to the  Unitholders  of the Series upon  availability.
EACH UNITHOLDER  MUST REPORT THIS  REGISTRATION  NUMBER TO THE INTERNAL  REVENUE
SERVICE  IF HE CLAIMS  ANY  DEDUCTION,  LOSS,  CREDIT,  OR OTHER TAX  BENEFIT OR
REPORTS ANY INCOME BY REASON OF HIS INVESTMENT IN A SERIES.

    Each Unitholder must report the registration number (as well as the name and
taxpayer identification number of his Series) on Form 8271.

    FORM 8271 MUST BE ATTACHED TO THE RETURN ON WHICH A
UNITHOLDER CLAIMS THE DEDUCTION, LOSS, CREDIT, OR OTHER TAX
BENEFIT OR REPORTS ANY INCOME.

    ISSUANCE OF A  REGISTRATION  NUMBER DOES NOT  INDICATE  THAT THE  INVESTMENT
DESCRIBED  HEREIN OR THAT THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED,  EXAMINED
OR APPROVED BY THE INTERNAL REVENUE SERVICE.

    It should also be noted that a Local Limited  Partnership may be required to
register as a tax shelter.  If such is the case, each Unitholder may be required
to report the registration  number of such Local Limited  Partnership to the IRS
on Form 8271. If a Unitholder fails to include a required registration number on
his individual  tax returns he is subject to a maximum  penalty of $250 for each
such failure.

    Further,  Unitholders  are required to notify  transferees of their Units of
the Series' tax shelter registration number. If a Unitholder fails to notify his
transferee of the  registration  number,  he is subject to a maximum  penalty of
$100 for each such failure.

Changes in Tax Law

    Many of the  amendments  to the  Code  enacted  since  1980  have  not  been
interpreted by corresponding  amendments to the Treasury Regulations.  Also, few
judicial decisions or administrative rulings with regard thereto exist as of the
date of this Prospectus.  Accordingly,  certain of the Code provisions described
above may be further amended,  modified or clarified by Congress, the IRS or the
courts so as to have an adverse effect on the Fund.

    The  passage of  legislation  does not  preclude  the  enactment  of further
amendments to the Code in later years (including amendments having a retroactive
effect) which could adversely affect an investment in the Fund.

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<PAGE>



                        STATE AND LOCAL TAX CONSIDERATIONS

    In addition to the Federal income tax aspects  described above,  prospective
investors  should  consider  potential  state and local tax  consequences  of an
investment in the Fund. A  Unitholder's  distributive  share of Series tax items
generally will be required to be included in determining  his reportable  income
for state or local tax purposes in the  jurisdiction  in which he is a resident.
Moreover,  California and other states in which a Series may do business  impose
taxes on nonresident  Unitholders,  determined with reference to their allocable
shares of Series income and gain derived from such states; and losses associated
with an investment in a Series from operations in one state may not be available
to offset income from the Series or other sources taxable in a different  state.
Personal  exemptions,  computed in various ways,  are allowed by some states and
may  reduce  the  amount  of tax owed to a  particular  state.  A Series  may be
required  to withhold  state taxes from  distributions  to  Unitholders  in some
instances.

    To the extent that a Unitholder who is not a resident of a state pays tax to
that state by virtue of Series  operations within that state, he may be entitled
to a deduction or credit against tax owed to his state of residence with respect
to the same  income,  and should  consult  his tax  adviser in that  regard.  In
addition,  payment of such state taxes  presently  constitutes  a deduction  for
Federal income tax purposes, assuming that the taxpayer itemizes deductions.

    Tax benefits that are  available for Federal  income tax purposes may not be
available for state income tax purposes.  For example,  certain  states have not
adopted the Federal cost recovery depreciation rules and the Federal installment
sale rules.  Thus, it is possible that investors in some states will be required
to recognize more or less income or loss from operations,  or gain from the sale
of Series investments, for state tax purposes than for Federal tax purposes.

    Finally,  it should be noted that Unitholders may be subject to state estate
or inheritance  taxes in the states in which the Series  conducts  business,  as
well as in their own states of residence.  Corporate  Unitholders  may be liable
for minimum state  franchise  taxes in such states.  Each  prospective  investor
should therefore consult his own personal tax adviser  concerning his individual
tax situation  with respect to the state and local tax aspects of investing in a
Series.


                       PROFITS AND LOSSES FOR TAX PURPOSES,
                        TAX CREDITS AND CASH DISTRIBUTIONS

    Set forth below in this section of the  Prospectus  is a  discussion  of the
allocation and distribution provisions of the Partnership Agreement.


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Cash Available for Distribution

    Subject to certain adjustments, Cash Available for Distribution will consist
of  the  Series'  net  cash  flow  from  cash  distributions  by  Local  Limited
Partnerships  after payment of all Operating Cash Expenses and amounts  required
for Reserves.

    Because of the high  leverage  expected to be utilized by most or all of the
Local Limited  Partnerships,  cash flow  participations  and fees expected to be
paid to the Local  General  Partners and  restrictions  which will be imposed by
Federal and state agencies on Apartment Complexes receiving government financing
or operating subsidies, it is not anticipated that there will be any significant
amounts of  distributions  of Cash Available for  Distribution.  The Partnership
Agreement provides that all Cash Available for Distribution of a Series shall be
paid or distributed 99% to its Unitholders and 1% to the Fund Manager within 120
days following the close of the fiscal year during which such Cash Available for
Distribution was generated.

Sale or Refinancing Proceeds

    Sale Proceeds will consist of net cash receipts  arising from sales or other
dispositions of, and condemnations,  damage awards and insurance recoveries with
respect to, Apartment Complexes of the Local Limited  Partnerships.  Refinancing
Proceeds will consist of net cash receipts arising from any mortgage  financing,
refinancing or borrowing secured by the Apartment Complexes. Sale or Refinancing
Proceeds will not include any amounts  necessary for the payment of Series debts
and the funding of Reserves.

    Sale or  Refinancing  Proceeds  received by a Series after the expiration of
two years from the beginning of the quarter in which the Investment  Date occurs
will be distributed by the Series in the following order of priority:

     (1)  First,  to  its   Unitholders,   an  amount  equal  to  their  Capital
Contributions;

    (2) Second,  to its Unitholders  until they have received an amount equal to
their Return on Investment,  to the extent not previously  received  through Tax
Credits and Cash Available for Distribution,  in addition to the return of their
Capital Contributions;

    (3)  Third, to the Fund Manager, an amount equal to the Fund Manager's
Capital Contributions; and

    (4) Fourth (after payment of any accrued but unpaid Subordinated Disposition
Fees), the balance 90% to its Unitholders and 10% to the Fund Manager.


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    Sale or Refinancing  Proceeds distributed in connection with the liquidation
of the Series  will be  distributed  in  accordance  with  Capital  Accounts  as
maintained  for  Federal  income  tax  purposes.  It is  anticipated  that these
distributions  would  have the same  effect in all  material  respects  as those
described in clauses (1) through (4) above.

    If a Local Limited Partnership sells an Apartment Complex on terms involving
its receipt of a purchase money mortgage or other installment  obligation of the
purchaser,  distribution of the proceeds of the  installment  obligation will be
based upon a distribution percentage determined by calculating the percentage of
the then  present  value of any  sales  proceeds  that  the  respective  classes
composed of the Fund  Manager and the  Unitholders  would  receive had the Local
Limited  Partnership  received the deferred  installments  in cash at closing in
lieu of the  installment  obligation.  The present  value of any sales  proceeds
(including interest,  if any, on the installment  obligation) will be based on a
discount rate equal to the current yield, on the date of the  installment  sale,
of a United States  Treasury  obligation  selected by the Fund Manager  having a
stated  maturity  comparable  to  the  ultimate  stated  maturity  date  of  the
installment  obligation.  The  Unitholders  as a class  thereafter  will receive
principal and interest  payments on such  installment  obligations  according to
their percentage share of such installment proceeds.

Allocations of Profits and Losses for Tax Purposes and Tax Credits

    Low Income Housing Credits of a Series generally will be allocated among its
Unitholders and Fund Manager in the same manner that deductions  attributable to
the  expenditures  giving rise to such  credits  will be  allocated  among them.
Historic  Tax  Credits  of a  Series  generally  will  be  allocated  among  its
Unitholders  and Fund  Manager  in the manner in which  Profits  are or would be
allocated  for the fiscal  year in which the  property  qualifying  for such tax
credits is placed in service.  In accordance with these rules, it is anticipated
that Low Income  Housing  Credits and  Historic  Tax Credits of a Series will be
allocated 99% to its Unitholders and 1% to the Fund Manager.

    Profits for Tax  Purposes  (including  Profits)  and Losses for Tax Purposes
(including  Losses) are not the same as cash  distributions.  Profits and Losses
for Tax Purposes of a Partner are determined on a tax  accounting  basis for use
in the preparation of the individual income tax returns of each Partner. Because
of the effect of certain  deductions  allowable for Federal income tax purposes,
the  amount of income  taxable to each  Partner  may be greater or less than the
amount  of  cash  distributable  to  him  from  his  Series.  Accordingly,   the
Partnership  Agreement provides separately for allocations of Profits and Losses
for Tax Purposes on the one hand and Cash Available for Distribution and Sale or
Refinancing Proceeds on the other.


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<PAGE>



    Losses of a Series generally will be allocated:  first, to the extent of the
positive Capital Account balances of its Partners,  in such manner and amount as
is necessary to cause such balances,  as so adjusted,  to be in the ratio of 99%
to its  Unitholders  and 1% to the Fund  Manager;  second,  to the extent of the
excess of Partnership  Minimum Gain over the aggregate  negative Capital Account
balances of the Partners with such balances, to the Fund Manager and Unitholders
in such  manner and  amount as is  necessary  to cause  their  negative  Capital
Account balances,  as so adjusted,  to be in the ratio of 99% to its Unitholders
and 1% to the Fund Manager;  and third,  to the Fund Manager.  For this purpose,
the Fund  Manager  shall be  deemed  to have  contributed  1.01% of the  Capital
Contributions of the Unitholders to the Series.

    Partnership  Minimum Gain generally is the aggregate of the excess,  if any,
of the principal amount of each Local Limited  Partnership's  nonrecourse  debts
over its adjusted basis in the property  securing such debt, i.e., the amount of
income each Local Limited  Partnership  would  realize if all of its  properties
were sold for the amount of the  outstanding  nonrecourse  debts secured by such
properties.

    Profits of a Series  generally will be allocated:  first,  in the event that
its Unitholders have an aggregate  positive Capital Account balance and the Fund
Manager has a negative  Capital  Account  balance or vice versa, to the class of
Partners with and to the extent of such negative balance;  second, to the extent
of the aggregate  negative  Capital  Account  balances of the  Partners,  to its
Unitholders  and the Fund  Manager in such manner and amount as is  necessary to
cause the negative  Capital Account balances of such Partners to be in the ratio
of  99% to  its  Unitholders  and 1% to the  Fund  Manager;  and  third,  to its
Unitholders to the extent that their positive  Capital Account balances are less
than their Adjusted Capital Contributions.

    Notwithstanding  the  above,  to the  extent  that  there  are  any  Profits
remaining  after the  allocation  of Profits under clause third of the preceding
paragraph or to the extent that the  positive  Capital  Account  balances of the
Unitholders  before the  allocation of any Losses to them exceed their  Adjusted
Capital  Contributions,  such  Profits or Losses  shall be  allocated  among the
Unitholders  and the Fund  Manager in such manner and amount as is  necessary to
cause the positive  Capital Account balances of the Partners to be equal to such
Partners'  respective  Deemed  Liquidation  Distributions.  A  Partner's  Deemed
Liquidation  Distribution  generally is the amount that would be  distributed to
him if his Series were  dissolved and liquidated and (i) the Series' assets were
sold for their Federal  adjusted tax basis;  (ii) the Series'  liabilities  were
paid; and (iii) the Series'  remaining cash were  distributed in accordance with
the provisions  applicable to Sale or Refinancing Proceeds arising other than in
liquidation of the Series.


                                        170

<PAGE>



    To the extent such relationships between the Capital Account balances of the
Fund Manager and the Unitholders  cannot be maintained through the allocation of
Profits or Losses for a given  year,  the  Partnership  Agreement  provides  for
allocations  of  gross  income  or gain for  such  year  (or in some  instances,
subsequent years) to cause such  relationships to be maintained as of the end of
each fiscal  year.  Further,  the  Partnership  Agreement  provides  that if the
allocation of Profits and Losses for Tax Purposes by a Series fails to cause the
Capital  Accounts  of its  Partners  to be  equal to  their  Deemed  Liquidation
Distributions,  or, where there would be no Deemed Liquidation  Distributions to
the Partners, to cause the negative Capital Account balances of the Partners (to
the  extent  that the  aggregate  amount  of such  balances  is not in excess of
Partnership Minimum Gain) to be in the ratio of 99% to the Unitholders and 1% to
the Fund  Manager,  the Fund  Manager  is  authorized  to amend  the  allocation
provisions  applicable  to Profits and Losses for Tax  Purposes on the advice of
the Series'  accountants  or legal counsel to the extent  necessary to cure such
defect,  provided  that  the  provisions  related  to the  distribution  of Cash
Available for Distribution  and Sale or Refinancing  Proceeds may not be amended
to cure such defect.

    The Partnership  Agreement provides that each Partner's Capital Account will
initially equal his Capital Contribution,  with certain adjustments.  Throughout
the existence of his Series each Partner's  Capital  Account will be (i) reduced
by the  amount of  Losses  for Tax  Purposes  allocated  and the  amount of Cash
Available for Distribution and Sale or Refinancing  Proceeds distributed to him,
and (ii) increased by the amount of Profits for Tax Purposes allocated to him.

    If a  Local  Limited  Partnership  sells  its  Apartment  Complex  under  an
installment  sale  arrangement,  the  allocation  of Profits  and Losses for Tax
Purposes  arising from such  transaction  generally will have the same effect as
the foregoing,  but may vary depending on the percentage interest determined for
the  Unitholders as a class in such  installment  proceeds,  as discussed  under
"Sale or Refinancing Proceeds" above.

    The  Partnership  Agreement  provides  that the Fund  Manager will always be
allocated  at least 1% of each  material  item of  Series  income,  gain,  loss,
deduction and credit for each taxable year of the Series, subject to allocations
mandated by Section 704(b) or (c) of the Code.

    The  Partnership  Agreement also includes  provisions  which are intended to
comply with Code Sections 704(b), 704(c) and 752 and the Regulations promulgated
thereunder and other official  interpretations thereof. (See "Federal Income Tax
Considerations"  above.)  For  example,  the  Partnership  Agreement  includes a
chargeback for  Partnership  Minimum Gain, a chargeback for Partner  Nonrecourse
Debt Minimum Gain, a qualified income offset provision,  a provision  allocating
Nonrecourse  Deductions,  a  provision  allocating  deductions  attributable  to
Partner

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<PAGE>



Nonrecourse  Debt to the  Partner  bearing  the  Economic  Risk of Loss  for the
Partner  Nonrecourse  Debt, an adjustment to Capital  Accounts in the event that
the tax basis of a Series' property is adjusted pursuant to Code Sections 734(b)
or 743(b),  a provision  respecting  allocations  attributable  to Code  Section
704(c) property and a limitation on allocations  creating or increasing Adjusted
Capital Account Deficits.  Prospective  investors are urged to read Article 4 of
the  Partnership  Agreement  in  its  entirety  for a  full  description  of the
provisions summarized above.

Determination of Distributions and Allocations Among Unitholders

    Payments of Cash Available for Distribution and Sale or Refinancing Proceeds
and  allocations  of Profits and Losses for Tax  Purposes  and Tax Credits for a
Series will be made among its  Unitholders  in proportion to the number of Units
owned by each of them.  Distributions and allocations during the Offering period
will be as described  under  "Federal  Income Tax  Considerations  - Allocations
Prior to Admission."  Distributions  and allocations  with respect to holders of
transferred Units will be as described under "Transferability of Units."

                       SUMMARY OF CERTAIN PROVISIONS OF THE
                               PARTNERSHIP AGREEMENT

    The Partnership  Agreement  (attached  hereto as Exhibit B) is the governing
instrument  establishing  the rights and  obligations  of the  Partners  in each
Series.  Each  prospective   investor  should  therefore  read  the  Partnership
Agreement in full. Many of the principal provisions of the Partnership Agreement
have been  summarized  elsewhere  in this  Prospectus  under  various  headings.
Certain other provisions of the Partnership  Agreement are summarized below, but
for complete information reference should be made to the Partnership Agreement.

Default by Unitholder in Payment of the Deferred Capital Contribution

    Under the  Promissory  Notes to be given to a Series by those  investors who
are eligible,  and elect,  to do so in partial payment for their Units, an Event
of Default  will  include:  (i) the  failure to make any  payment  due under the
Promissory  Note within 30 days after the due date ("Payment  Default"),  (ii) a
material  misrepresentation  by an investor in  connection  with the purchase of
Units,  (iii) the filing of a  proceeding  by or against an  investor  under the
Federal  bankruptcy  laws,  (iv) an assignment by an investor for the benefit of
creditors and (v) the  appointment  of a receiver or trustee for all or any part
of the investor's assets.

    If an Event of Default  occurs,  the Series may  declare  the entire  unpaid
balance of the  Promissory  Note due and  payable and the  Promissory  Note will
continue to bear  interest  until paid. A late charge of 5% will also be imposed
on any late  payment.  In  addition,  any  distributions  of cash to  which  the
Unitholder would be

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<PAGE>



entitled may be offset against amounts due under the Promissory  Note.  Pursuant
to the terms of a security agreement in favor of the Series contained in Section
3.4.1 of the  Partnership  Agreement,  upon any such  default the Series will be
entitled to the remedies available under the applicable Uniform Commercial Code,
including  foreclosure and sale of the Units and proceeding directly against the
Unitholder.  The Series may sell the Units (or fractional  interests thereof) of
the defaulting  Unitholder to the  nondefaulting  Unitholders or to non-Partners
for the highest price which the Series can obtain in a  commercially  reasonable
sale.  The Fund  Manager  and its  Affiliates  may (but  are not  obligated  to)
purchase  any such Units,  but only if such Units have first been offered to the
nondefaulting Unitholders. There can be no assurance that the sales will provide
sufficient  funds to make the full  payment  to the  Series  and the  defaulting
Unitholder;  and any monies received through such sale shall first be applied to
the payments due to the Series.

    In addition to the  above-described  right to sell a  Unitholder's  Units in
default, the Series is not restricted in the exercise of its rights to institute
legal  proceedings  against a  defaulting  Unitholder  to compel  payment of the
unpaid balance of the Promissory Note as well as all costs (including attorneys'
fees)  incurred  by the  Series in  enforcing  its  rights  under  the  security
agreement contained in the Partnership  Agreement.  A defaulting Unitholder will
remain  liable  for  any  deficiency  remaining  after  any  properly  conducted
foreclosure sale. If a defaulting Unitholder's Units are sold by or on behalf of
the Series in a foreclosure  sale, the defaulting  Unitholder  will be deemed to
have  consented,   by  having  executed  the  Partnership   Agreement,   to  the
substitution of the purchaser of the Units as a Unitholder.  See "Risk Factors -
Fund-Related  Risks - Obligations for Capital  Contributions." In the event of a
Payment Default,  until 30 days after the Payment Default and notice thereof and
intent to foreclose has been given to the defaulting Unitholder, such Unitholder
will  have the right to cure the  Payment  Default  with  interest  due  thereon
without suffering any reduction in interest in the Series and the Series may not
commence  proceedings  to  enforce  its  security  interest  in  the  defaulting
Unitholder's Units.

    The Promissory  Notes may be pledged as collateral to secure Series debt. If
a Unitholder  defaults  under his  Promissory  Note, a subsequent  holder of the
Promissory Note will have the rights of the Series as described above.

Liability of Unitholders to Third Parties

    The Fund Manager will be liable for all general obligations of the Series to
the extent not paid by the Series.  Under  California  law, a Unitholder  is not
personally  liable for the debts,  liabilities  and obligations of his Series in
excess  of his  Capital  Contribution,  except  for the  payments  due under his
Promissory Note, if any, and

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<PAGE>



except to the extent and under the  circumstances  discussed in "Risk  Factors -
FundRelated Risks - Risks of Unitholder Liability."

Dissolution and Liquidation

    Each Series is  intended to be  self-liquidating  and will be  dissolved  no
later than  December 31, 2050,  or earlier upon the prior  occurrence of certain
events,  including:  (1)  the  disposition  of  all  Local  Limited  Partnership
Interests  and other assets of the Series;  (2) the election by the Fund Manager
(with the  consent of its  Unitholders  owning more than 50% of the Units in the
Series)  or by  Unitholders  owning  more than 50% of the Units in the Series to
dissolve  the Series;  or (3) unless the  business of the Series is continued by
the Series or a reconstituted  partnership  under Section 8.1 of the Partnership
Agreement,   the  bankruptcy  or  dissolution   (or  death  or  adjudication  of
incompetence in the case of an individual) of a sole remaining Fund Manager. The
Fund Manager has agreed not to retire or withdraw voluntarily from the Series.

    Upon  dissolution of a Series unless its business is continued in accordance
with the Partnership  Agreement,  the Series will be liquidated and the proceeds
of liquidation will be applied first to the payment of obligations of the Series
to  creditors  and the  expenses  of  liquidation,  and to the setting up of any
reserves for  contingencies  which the Fund  Manager  considers  necessary.  Any
remaining  proceeds  of  liquidation  and any other funds or  properties  of the
Series will then be  distributed  in the manner  described  under  "Profits  and
Losses  for  Tax  Purposes,  Tax  Credits  and  Cash  Distributions  -  Sale  or
Refinancing  Proceeds." After such  distributions  and allocations of Profits or
Losses for Tax  Purposes  have been made,  the Fund Manager will be obligated to
make a capital  contribution  to the Series in an amount  equal to the lesser of
(i) the negative amount,  if any, of its Capital  Account;  or (ii) 1.01% of the
excess of the Capital  Contributions  made by the Unitholders of the Series over
the Capital Contributions of the Fund Manager. Any amounts so contributed by the
Fund Manager will be distributed first to Series creditors entitled thereto, and
any balance will be deemed a general asset of the Series.  For a description  of
the Federal income tax consequences of such  distributions,  see "Federal Income
Tax Considerations."

Removal of Fund Manager

    The Partnership  Agreement  provides that the Fund Manager may be removed as
such with  respect  to any  Series,  and a new Fund  Manager  elected,  upon the
written consent or affirmative  vote of Unitholders  owning more than 50% of the
Units in the Series.  If the Fund  Manager is removed,  the fair market value of
the  interest of the removed Fund  Manager in the Series will be  determined  by
agreement of the former Fund Manager and the Series or, if they cannot agree, by
arbitration,  and will be paid to the Fund  Manager by delivery of a  promissory
note of the Series for

                                        174

<PAGE>



such fair market  value  payable in no less than five equal  consecutive  annual
installments  commencing  on the  first  anniversary  of the date of such  note.
Payments  required under such  promissory note could result in the Series having
to  sell  one or more of its  interests  in  Local  Limited  Partnerships.  Such
promissory  note shall bear simple  interest at a rate per annum which is at all
times equal to the Prime Rate,  payable on the last day of each calendar quarter
while  such  note is  outstanding;  provided,  however,  that  if  such  note is
delivered  following  an Event of  Withdrawal  of the  Fund  Manager  which is a
Voluntary Withdrawal on its part then (i) such note shall neither be secured nor
bear interest and (ii) the  principal  payable to the  withdrawing  Fund Manager
shall be  limited in amount  and date of  payment  to  distributions  which such
withdrawing Fund Manager would have received under the Partnership Agreement had
it not withdrawn.

    Within  120 days after the  determination  of the fair  market  value of the
former  Fund  Manager's  Interest,  the  Series  may,  with the  consent  of any
remaining  Fund  Managers  and  the  consent  of a  majority-in-interest  of its
Unitholders, sell such Interest to one or more persons, who may be Affiliates of
any remaining Fund Manager or Fund Managers, and admit such person or persons to
the Series as substitute  Fund Managers;  provided,  however,  that the purchase
price to be paid to the Series for the Interest of the former Fund Manager shall
not be less than its fair market value as determined by the procedures described
above. Such substitute Fund Manager or Fund Managers may pay said purchase price
in installments in the manner set forth above.

Voting Rights

    Unitholders  owning  more  than 50% of the  Units in a Series  may amend the
Partnership  Agreement of the Series at any time, except that an amendment which
would  adversely  affect the limited  liability of a  Unitholder  or the rights,
powers,  duties or  compensation  of the Fund Manager or any of its  Affiliates,
will also require the consent of such Partner.  The  Partnership  Agreement of a
Series  may also be  amended  by the Fund  Manager  without  the  consent of the
Unitholders  to admit  Unitholders  in  connection  with the sale or transfer of
Units as described in this  Prospectus and for certain other  amendments for the
benefit of (or not adverse to) the interests of the  Unitholders as specified in
Section 12.1.2 of the Partnership Agreement.

    The removal of the Fund Manager and the admission to a Series of a successor
or  additional  Fund Manager also  requires the approval of  Unitholders  of the
Series owning more than 50% of the Units in the Series in certain circumstances.
See "Removal of Fund Manager" above in this section and "Management."

    In addition,  the Fund Manager may not,  without the consent of  Unitholders
owning more than 50% of the Units in the Series,  (a) sell all or  substantially
all the

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assets of the Series at one time,  except in connection with the liquidation and
winding up of the Series business upon its dissolution; or (b) elect to dissolve
the Series.

    Notwithstanding  the general ability of Unitholders  owning more than 50% of
the Units in a Series to amend the Partnership Agreement of the Series,  Section
10.3 of the Partnership Agreement imposes strict limitations on the ability of a
Series to propose or participate in a Roll-Up.  Unitholders owning more than 50%
of the Units in a Series  could vote to revise or eliminate  these  limitations.
Nonetheless,  in addition to these  limitations,  the California Revised Limited
Partnership  Act, which governs each Series,  gives limited partners who dissent
to a Roll-Up the right,  subject to certain procedural  limitations,  to require
that their limited  partnership  repurchase  their interests at a price equal to
their fair market value.

Meetings

    There  will be no  annual or other  periodic  meetings  of the  Unitholders.
However,  meetings of the  Unitholders of a Series for any purpose may be called
by the Fund  Manager  and are  required  to be called by the Fund  Manager  upon
written  request of  Unitholders in a Series owning in the aggregate 10% or more
of the Units in the Series.  In  addition,  the Fund  Manager  may, and the Fund
Manager shall upon request of Unitholders owning in the aggregate 10% or more of
the Units in a Series,  submit any matter (upon which they are entitled to vote)
to the Unitholders in the Series for a vote without a meeting.

Books and Records

    Each  Series  will  maintain  its books and  records  at the  Fund's  office
(currently 3158 Redhill Avenue,  Costa Mesa,  California  92626).  The books and
records are open to inspection,  reproduction and examination by the Unitholders
of the Series at all reasonable times.  Further,  upon request, the Fund Manager
will promptly  deliver to a Unitholder of a Series a copy of the following books
and  records of his  Series:  the  Certificate  of Limited  Partnership  and all
amendments thereto; the Partnership Agreement, and all amendments thereto; and a
current  list of the full name and last  known  address  of each  Partner in the
Series. If such a list is requested,  the Fund Manager is required to provide it
within  10 days of the  receipt  of the  request,  such list to be  arranged  in
alphabetical  order,  on white  paper  and in a  readily  readable  form.  Under
California  law, if the Fund Manager fails to provide the list of Partners and a
court finds that the failure to do so was without  justification,  the court may
award,  in addition to any actual  damages  suffered,  an amount  sufficient  to
reimburse  the  Unitholder  bringing  the court action for  reasonable  expenses
incurred in connection therewith.



                                        176

<PAGE>



                             TRANSFERABILITY OF UNITS

    There are restrictions on the transfer of Units as set forth in Article 7 of
the Partnership  Agreement and as described  below. To transfer Units, a written
instrument  of  assignment  must be  signed  by  both  the  transferror  and the
transferee  and  returned  to the Fund  Manager  together  with  payment  of all
reasonable legal fees and filing costs in connection with the transfer,  but not
to exceed $100. The Fund Manager may also request  additional  documentation  to
evidence the authority of the parties to the  assignment  and  compliance of the
assignment with the terms of the Partnership Agreement,  as well as the consent,
if required,  of the  Commissioner of Corporations of the State of California or
of any other state official who asserts  jurisdiction over such assignment.  For
these reasons, no Series will issue any transferable  certificates  representing
the Units,  and an assignment shall not take effect for any purpose until it has
been registered on the books of the Series.  A pledge or other  encumbrance of a
Unit shall  similarly not be effective  unless so registered.  On the death of a
Unitholder,  his executor or administrator  will have all rights of a Unitholder
for the purpose of settling his estate, including the same power as the decedent
had to assign his interest to another party.

    It is not intended or anticipated  that a public market will develop for the
purchase and sale of Units. Thus, Unitholders may not be able to liquidate their
investment  promptly  or at a  reasonable  price  prior to the  dissolution  and
liquidation  of their  Series,  and the Units  should  only be  considered  as a
long-term investment. See "Risk Factors - Fund-Related Risks - Lack of Liquidity
of Investment."

    If a Unitholder is able to negotiate a sale,  exchange or other  transfer of
his Units,  the  effectiveness  thereof  may be denied or  deferred  by the Fund
Manager  if  necessary,  in the  opinion of  counsel,  to avoid:  the  premature
termination of the Series for tax purposes;  the  disqualification of the Series
for Low Income Housing Credits under Code Section 42(j)(5)(B); classification of
the Series as a  publicly-traded  partnership or as an association  taxable as a
corporation  for Federal  income tax purposes;  or recapture of Tax Credits.  In
addition, no transfers may be made to tax-exempt or foreign entities, or through
a securities  market or a secondary  market.  The Fund Manager will give written
notice to all  Unitholders  in the event that  transfers of Units are  generally
suspended.  Section 7 of the Partnership  Agreement gives the Fund Manager broad
powers to enforce or modify these provisions.  The Fund Manager will review from
time to time the  restrictions  on  transfer  of  Units  and  will  modify  such
restrictions  to make them less  restrictive  if the Fund shall have received an
opinion of counsel that such  modification  may be made without material adverse
tax consequences to the Partners.

    A transfer  (except for a transfer by gift,  inheritance,  bequest or family
dissolution,  or a transfer  to an  Affiliate  of the  transferror)  will not be
recognized

                                        177

<PAGE>



     if,  immediately  thereafter,  any  transferror or transferee  would hold a
fraction of a Unit.

    Except as otherwise provided in Section 7.3.3 of the Partnership  Agreement,
transfers  will  generally be recognized  and entered on the records of a Series
only as of the first day of the fiscal  quarter  following the fiscal quarter in
which the Series  receives  appropriate  documentation  relating to the transfer
together with the payment described above.  Cash Available for Distribution,  if
any, will be allocated to the persons  recognized as Unitholders on the last day
of each  fiscal  quarter.  Profits  and Losses  for Tax  Purposes  from  current
operations  and Tax  Credits  for a  fiscal  year  during  which a  transfer  is
recognized will be allocated  between a transferror and a transferee  based upon
the number of  quarterly  periods  that each was  recognized  as the holder of a
Unit,  without regard to whether Series operations  during particular  quarterly
periods of such year produced profits or losses or cash  distributions.  Sale or
Refinancing Proceeds,  if any, will be distributed,  and all related Profits and
Losses  for Tax  Purposes  will  be  allocated,  to the  persons  recognized  as
Unitholders  as of the date on which the Sale or Refinancing  occurred,  and for
this  purpose  transfers  will be  recognized  as of the date  specified  by the
transferror and the transferee in the instrument of assignment or, if no date is
specified,  the first day of the fiscal quarter  following the fiscal quarter in
which the Series  receives the  instrument of assignment.  However,  any Sale or
Refinancing  Proceeds  received as a result of an  installment or other deferred
sale will be  distributed,  and any Profits and Losses for Tax Purposes  will be
allocated,  to the persons  recognized  as  Unitholders  on the day such Sale or
Refinancing  Proceeds are  received by the Series.  Adverse  Federal  income tax
consequences  may result from any transfer of Units, and Unitholders are advised
to consult their tax advisers  prior to any such transfer.  See "Federal  Income
Tax Considerations."

    Transferees may become Substitute Unitholders, entitled to all the rights of
a Unitholder, by obtaining the consent of the Fund Manager and by complying with
the provisions of Section 13.3 of the  Partnership  Agreement.  The rights of an
assignee of a Unit who does not become a Substitute  Unitholder  will be limited
to the right to receive  his share of Profits and Losses for Tax  Purposes,  Tax
Credits, Cash Available for Distribution and Sale or Refinancing  Proceeds,  and
will not include other rights,  such as the voting rights  described in "Summary
of Certain Provisions of the Partnership Agreement."

Transfer of Units by or to California Residents

    Any sale or transfer of Units in  California  or  involving  any  California
resident  (but not a transfer  which does not occur in  California  and does not
involve any  California  resident)  requires  the prior  written  consent of the
Commissioner of  Corporations of the State of California,  except as provided in
the Commissioner's

                                        178

<PAGE>



Rules.  Accordingly, any certificates representing Units will bear the following
legend:

    "IT IS UNLAWFUL TO  CONSUMMATE A SALE OR TRANSFER OR THIS  SECURITY,  OR ANY
    INTEREST  THEREIN,  OR TO RECEIVE ANY  CONSIDERATION  THEREFOR,  WITHOUT THE
    PRIOR WRITTEN  CONSENT OF THE  COMMISSIONER  OF CORPORATIONS OF THE STATE OF
    CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

                                      REPORTS

    Within 120 days after the end of each year,  each Series will  distribute to
its  Unitholders:  (i) financial  statements of the Series for such year,  which
will include a balance sheet and statements of operations,  partners' equity and
cash flows prepared on an accrual basis in accordance  with  generally  accepted
accounting  principles  and  accompanied  by an auditor's  report  containing an
opinion of an independent  accountant;  (ii) a report of any distributions  made
during the year; and (iii) a report of the Series' significant activities during
such year. In addition, each Series will distribute to its Unitholders unaudited
quarterly  financial  statements  for each of the first  three  quarters of each
year, together with a report of the Series' activities during such quarter. Such
quarterly  financial  statements will consist of a balance sheet and a statement
of  operations.  Within 75 days after the end of each  year,  each  Series  will
distribute  to its  Unitholders  such tax  information  as is necessary  for the
preparation of their Federal and state income tax returns.

    Until the Net Proceeds of its Offering are fully invested or returned to its
Unitholders,  each  Series  will  also  furnish  to its  Unitholders,  at  least
quarterly, a report concerning the investments of the Series.

    Within 60 days  after the end of each of the first  three  quarters  of each
year,  each Series  will  distribute  to its  Unitholders  a detailed  statement
describing any fees and other compensation paid by the Series or a Local Limited
Partnership  during  such  quarter to the Fund  Manager and its  Affiliates.  In
addition, each Series will send to its Unitholders within 120 days after the end
of each year a detailed  statement of any  transactions  between the Series or a
Local Limited  Partnership  and the Fund Manager and its  Affiliates  and of the
fees,  commissions,  compensation and other benefits paid or accrued to the Fund
Manager and its Affiliates for the year.

    Reporting  requirements similar to those set forth above for each Series are
expected to be included in each Local Limited Partnership Agreement so that each
Series will be able to prepare the reports  set forth  above.  The Fund  Manager
shall, to the extent it deems it appropriate, transmit to the Unitholders of the
Series copies

                                        179

<PAGE>



of all reports  received by the Series in its  capacity as a limited  partner of
each Local Limited Partnership.

                  TERMS OF THE OFFERING AND PLAN OF DISTRIBUTION

    The Fund is offering 50,000 Units for sale to the public in two Series. Each
Series will consist of 25,000  Units.  The Fund  Manager  will  determine in its
discretion when Series 3 will be terminated and Series 4 will begin. No Units in
a Series  will be sold  unless  at least  $1,400,000  of  Capital  Contributions
(defined to exclude  contributions  which are in the form of Promissory  Notes -
see "How to Subscribe"  below) from such Series are received and accepted  prior
to termination of the Series Offering.  See "Escrow  Arrangements"  below. In no
event will any Offering be  conducted  more than two years from the date of this
Prospectus.  All Units  will be sold at a price of $1,000  per Unit  (except  as
discussed  below under "Volume  Discounts"  and  "Purchases  by  Affiliates  and
Designated  Investors"),  payable in cash upon subscription (except as discussed
below under "How to Subscribe").

Issuance of Units in Series

    As indicated above, the Fund is offering Units in two Series. Each Series is
organized  as a separate  California  limited  partnership.  Except as set forth
below,  each Series will account for, and issue information with respect to, its
Units  separately.  Organizational  and Offering  Expenses may be higher for one
Series than for the other Series;  if so, one Series will reimburse the other in
such a manner  so that the pro  rata  portion  of  Organizational  and  Offering
Expenses  borne by each  Series is the same.  With  respect  to  Operating  Cash
Expenses,  (i) those expenses allocable to a Local Limited Partnership  Interest
will be borne by the Series which owns such Local Limited Partnership  Interest,
and (ii) those  expenses not allocable to a Local Limited  Partnership  Interest
will be  apportioned  among and borne by the  respective  Series  based upon the
advice of the Accountants.

    Any certificate  representing Units will be marked to identify the Series to
which the certificate relates.

Underwriting Arrangements

    Units are being offered on an all-or-nothing minimum,  best-efforts maximum,
basis through WNC Capital Corporation (the  "Dealer-Manager")  and through other
members  ("Soliciting  Dealers")  of  the  National  Association  of  Securities
Dealers,  Inc. ("NASD") selected by the Dealer-Manager.  The Dealer-Manager will
manage the  selling  group and provide  certain  wholesaling  services,  and may
participate in the Offering. The Dealer-Manager is a wholly-owned  subsidiary of
the Fund

                                        180

<PAGE>



Manager formed to participate in offerings sponsored by the Fund Manager.  See
"Conflicts of Interest" and "Management."

    The Dealer-Manager  will receive as compensation  retail selling commissions
in an amount of up to 7.5% of the Capital Contributions. The Dealer-Manager will
also  receive  a  Dealer-Manager  Fee in an  amount  of up to 1% of the  Capital
Contributions,  and a Nonaccountable Expense Reimbursement in an amount equal to
1%  of  the  Capital  Contributions.   From  the  accountable  reimbursement  of
Organizational  and  Offering  Expenses to be paid by the Fund (see  "Management
Compensation"),  the  Dealer-Manager may receive an amount not to exceed 0.5% of
the Capital  Contributions  for additional  underwriting  compensation,  plus an
amount not to exceed 0.5% of the Capital  Contributions  for  accountable,  bona
fide due diligence activities. The Dealer-Manager may reallow any portion of its
underwriting   compensation  to  Soliciting   Dealers  (i)   proportionately  in
accordance  with the number of Units sold by them in payment for  retailing  and
wholesaling  activities,  (ii) in  reimbursement  of selling  and due  diligence
activities,  and (iii) subject to the  requirements  set forth  hereinafter,  in
payment  of cash or  noncash  sales  incentive  programs.  Subject  to the prior
approval of the NASD and compliance with the NASD's Rules of Fair Practice,  the
Fund  or the  DealerManager  may  establish  cash  or  noncash  sales  incentive
programs,  provided that the aggregate value of any noncash  incentive awards to
individual  registered  representatives  during any year does not  exceed  $100.
Sales  incentives  with a value in excess of $100,  if any, will consist of cash
and will be paid directly to Soliciting Dealers, which will have sole discretion
as to how such  incentives  will be distributed to their  individual  registered
representatives. In no event will the aggregate of all underwriting compensation
paid to the  Dealer-Manager and the Soliciting Dealers exceed 10% of the Capital
Contributions,  plus a maximum of 0.5% of  Capital  Contributions  for  expenses
incurred for accountable, bona fide due diligence purposes.

    Underwriting  compensation  of any form  payable  with  respect to  proceeds
represented  by the  Promissory  Notes will be payable only when,  as and if the
Promissory Notes are paid in cash.

    The Fund has  agreed to  indemnify  the  Dealer-Manager  and the  Soliciting
Dealers against certain liabilities resulting from untrue statements of material
facts  (or the  omission  to  state  material  facts)  in this  Prospectus,  the
Registration  Statement or supplemental  sales literature  authorized for use by
the Fund, including liabilities under the Securities Act of 1933. In the opinion
of the  Securities  and Exchange  Commission,  indemnification  for  liabilities
arising out of the Securities Act of 1933 is against public policy and therefore
unenforceable.


                                        181

<PAGE>



Volume Discounts

    As  indicated  above in this  section and under  "Management  Compensation,"
generally  the  Fund  will pay up to 7.5% of  Capital  Contributions  as  retail
selling  commissions to the  Dealer-Manager;  the Fund also will pay up to 1% of
Capital  Contributions  as the  Dealer-Manager  Fee and up to  7.5%  of  Capital
Contributions as Acquisition Fees to the Fund Manager.  However, with respect to
retail selling commissions,  in connection with subscriptions for 100 or more of
the Units in one or more Series,  such selling commissions will be determined in
accordance with the following schedule:

Amount of Units Subscribed        Maximum Retail Selling
to by Any "Purchaser"             Commissions Per Unit        Price Per Unit

Up to 99                          7.5% ($75)                  $1,000
100 to 199                        5.5% ($55)                  $  980
200 to 299                        4.5% ($45)                  $  970
300 to 399                        3.5% ($35)                  $  960
400 to 499                        2.5% ($25)                  $  950
500 and over                      2.0% ($20)                  $  945

    Investors should note that reductions in retail selling commissions apply in
a graduated  manner.  For example,  in connection  with a purchase of 299 Units,
retail selling  commissions  of $75 per Unit will be payable in connection  with
the first 99 Units,  retail selling  commissions of $55 per Unit will be payable
in connection with the next 100 Units, and retail selling commissions of $45 per
Unit will be payable in connection with the remaining 100 Units.

    With  respect  to   Acquisition   Fees  payable  to  the  Fund  Manager  and
DealerManager  Fees  payable to the  Dealer-Manager,  the Fund  Manager  and the
DealerManager  have reserved the right to agree upon lower  Acquisition Fees and
DealerManager  Fees regarding  subscriptions of 250 or more Units in one or more
Series, but all such discounts will be the same for investors making investments
of substantially the same size.

    Subscriptions  to one or more  Series  may be  combined  for the  purpose of
determining the amounts  reimbursable in the case of  subscriptions  made by any
"Purchaser" as that term is defined below.  Any request to combine more than one
subscription  must be made in writing on a form  which  will be  available  upon
request from the Series or the Soliciting Dealers,  and must set forth the basis
for such request. If all of the information  required in the form,  including an
indication that  subscriptions are to be combined,  is not provided,  the Series
will not be  responsible  for failing to  properly  combine  subscriptions.  Any
request to combine  subscriptions  will be subject to verification by the Series
that all such subscriptions were made by a single "Purchaser" as defined below.


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<PAGE>



    In the event that a "Purchaser"  subscribes for additional  Units subsequent
to his initial purchase of Units, no reimbursement  will be made with respect to
selling  commissions or Acquisition  Fees which have been paid or are payable in
connection with the prior  subscription(s).  However, in determining the selling
commissions or Acquisition  Fees  reimbursable in connection with the additional
purchase, all subscriptions made by such "Purchaser" will be aggregated.

    For the foregoing purposes,  the term "Purchaser" shall be deemed to include
(i) an individual, or an individual,  his or her spouse and their children under
the age of 21, who purchase the Units for his or her or their own account,  (ii)
a corporation, partnership, association, joint-stock company, trust, fund or any
organized  group of persons,  whether  incorporated  or not  (provided  that the
entities  described in this clause (ii) must have been in existence for at least
six months before purchasing the Units), (iii) investors whose funds are managed
by a single  professional  investment  adviser  registered  under the Investment
Advisers Act of 1940, and (iv) investors for whom a designated  bank,  insurance
company,  trust  company  or other  designated  entity  exercises  discretionary
investment  responsibility.  Any such reduction in selling  commissions  will be
prorated among the separate subscribers considered part of a "Purchaser."

Purchases by Affiliates and Designated Investors

    Prior to this  Offering  John B.  Lester,  Jr., a  shareholder,  officer and
director  of the Fund  Manager,  purchased  one Unit in  Series 3, at a price of
$1,000.  Similarly,  Mr.  Lester or another  Affiliate  of the Fund Manager will
purchase  one Unit at a price of $1,000 in Series 4,  prior to  commencement  of
that Series'  Offering.  The Fund Manager and its  Affiliates  do not  presently
intend  to  purchase  additional  Units;  however,  the  Fund  Manager  and  its
Affiliates  may  purchase  an  unlimited  number of Units for any reason  deemed
appropriate  by the Fund  Manager and its  Affiliates,  provided  that any Units
acquired by such Persons will not be applied to the  requirement  that a minimum
of $1,400,000 in subscription  funds be received for a Series.  The Fund Manager
and its Affiliates will hold all Units which they acquire for investment and not
for  distribution.  Any purchase of Units by the Fund Manager and its Affiliates
will be for the same  price and  subject  to the same  terms as all other  Units
issued by the Series,  will be fully  disclosed to all  purchasers  of Units and
will provide the purchaser  thereof with the same rights as other  purchasers of
Units,  except that neither the Fund Manager nor any of its  Affiliates may vote
any  Unit in an  election  held  pursuant  to  Section  10.2 of the  Partnership
Agreement or in any vote otherwise  required by the Partnership  Agreement which
entails  a  conflict  of  interest  on the  part  of  the  Fund  Manager  or its
Affiliates.

    In addition to the schedule of reduced  rates set forth above under  "Volume
Discounts,"  the  Soliciting  Dealers  and their  employees,  except any of such
persons who may be  Affiliates  of the Fund  Manager  (collectively  referred to
herein as

                                        183

<PAGE>



"Designated  Investors"),  may, in the discretion of the Fund Manager,  purchase
Units on the same terms and  conditions  as other  purchasers,  except that they
will  not pay the  7.5%  retail  selling  commission.  In  addition,  Designated
Investors will include clients of an investment adviser who have been advised by
such adviser on an ongoing basis regarding investments other than investments in
the Fund,  and who are not being  charged  by such  adviser  or its  Affiliates,
through the payment of commissions or otherwise, for the advice rendered by such
adviser  in  connection  with the  purchase  of Units,  if such  adviser  (i) is
registered  under the  Investment  Advisers'  Act of 1940,  as amended,  (ii) is
registered as a  broker-dealer  under the  Securities  Exchange Act of 1934, and
(iii) has executed a Soliciting  Dealer  Agreement with the  Dealer-Manager.  In
connection  with any  purchases  by  Designated  Investors,  the proceeds to the
Series, net of retail selling  commissions and any reductions  thereof,  will be
the same.

    Any  investor  who pays a  reduced  retail  selling  commission  or  reduced
Acquisition Fees or Dealer-Manager Fees (through the application of the schedule
set forth above for certain volume purchasers or as a Designated  Investor) will
receive an interest in Cash  Available  for  Distribution,  Sale or  Refinancing
Proceeds,  Profits or Losses for Tax Purposes and Tax Credits  computed  without
regard to the discount (i.e., such investor will receive the same share per Unit
owned of such items as an investor who purchased without a discount).

    Investors  who qualify as  Designated  Investors  are urged to consider  the
provisions  of the Tax Reform Act of 1984  relating to the tax status of certain
fringe benefits, including employee discounts.

How To Subscribe

    In order to purchase  Units,  the  subscriber  must complete and execute the
Investor  Form  accompanying  this  Prospectus  and  deliver  it to his  account
executive.  A specimen of the Investor  Form is attached as part of Exhibit C to
the Prospectus.  Execution  copies of the Investor Form may be obtained from any
Soliciting  Dealer.  Certain Soliciting Dealers may use alternative forms of the
Investor Form, which may be obtained from such Soliciting Dealers.

    The minimum investment is five Units ($5,000),  except that employees of the
Fund  Manager  and its  Affiliates  and/or  investors  in  limited  partnerships
previously  sponsored  by the Fund  Manager may  purchase a minimum of two Units
($2,000).  After an investor has purchased the required  minimum number of Units
in any Series,  he may make  investments  in increments of $1,000 in the same or
any subsequent series. Subscriptions for fewer than 10 Units must be accompanied
by a check for $1,000 per Unit payable to "National Bank of Southern  California
WNC/HTCFV."  However,  investors who subscribe for 10 Units ($10,000) or more in
any one Series may elect to utilize an installment payment method whereunder

                                        184

<PAGE>



their  subscriptions need be accompanied by a check for only $500 per Unit, with
the  balance  of the  $1,000  purchase  price for such Unit  (i.e.,  $500) to be
payable in accordance  with the terms of the  Promissory  Note which is included
with the Investor  Form in a single  installment  on (i) March 31, 1996,  if the
investor  subscribes between the date hereof and December 31, 1995, (ii) January
31, 1997, if the investor  subscribes  between January 1, 1996 and June 1, 1996,
or (iii) the later of the date of subscription or June 30, 1997, if the investor
subscribes  after June 1, 1996.  Each  Promissory  Note will be a full  recourse
obligation of the investor and will bear interest as follows:  (i) for purchases
of less than 500 Units,  at a fixed rate of 1.5% per annum above the Prime Rate,
such rate to be determined at the  commencement of each Series (10.25% per annum
for Series 3); or (ii) for purchases of 500 Units or more, at a fixed rate of 1%
per annum above the 1-year Treasury Bill rate, such rate to be determined on the
date of purchase.  See "Risk  Factors -  Fund-Related  Risks -  Obligations  for
Capital Contributions."

    Completed  Investor Forms and checks should be sent to the Escrow Agent,  at
the following address:

         National Bank of Southern California
         4100 Newport Place, Suite 100
         Newport Beach, CA  92660
         Attention: WNC Escrow Manager

    Each  investor  whose  subscription  is  accepted  will  receive a letter of
welcome from the Fund Manager and a  certificate  of interest with the amount of
the  investment  and the  number  of Units  purchased.  No sale  will be  deemed
complete  until at least five  business  days after the  investor has received a
Prospectus.

Escrow Arrangements

    All  subscribers'  funds and  Promissory  Notes received by a Series will be
placed in an escrow  account  established  by the Series with  National  Bank of
Southern California, Newport Beach, California, at the Series' expense. Pursuant
to the Escrow  Agreement  between each Series and the Escrow  Agent,  the Escrow
Agent shall deposit escrowed funds in accordance with instructions from the Fund
Manager  in  short-term  U.S.  government   securities,   securities  issued  or
guaranteed  by the U.S.  government,  certificates  of deposit or time or demand
deposits in commercial banks.

    Upon receipt by a Series of a minimum of $1,400,000 of Capital Contributions
(defined to exclude  contributions  which are in the form of Promissory  Notes),
the  subscribers  for such Units will be  admitted  to the Series and the Escrow
Agent will  release to the Series all funds and  Promissory  Notes which it then
holds.  Funds and Promissory Notes received from subsequent  subscribers to such
Series will continue

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to be placed in escrow,  and the Series will admit  additional  Unitholders on a
monthly (or more frequent) basis until the  termination of the Series  Offering.
Only subscribers  whose  subscriptions  have been received and accepted at least
five days prior to an Investor Closing (other than the initial Investor Closing)
will be admitted as Unitholders  at such closing,  unless the Fund Manager shall
elect otherwise.  Promptly after the release to a Series of a subscriber's funds
and  Promissory  Note, if any, the Escrow Agent will pay to such  subscriber any
interest  earned  on the cash  portion  of his  subscription  proceeds  while in
escrow.

    Funds and the Promissory Note, if any, of an investor whose  subscription is
rejected  will be returned to him promptly  after  rejection,  together with any
interest actually earned on the cash portion of his subscription  proceeds while
in escrow.

    A subscription is not subject to termination by the subscriber.  If a Series
does not receive a minimum of  $1,400,000  of Capital  Contributions  within one
year from the  commencement of the Series  Offering,  the Series will cancel all
existing subscriptions to such Series and all funds and Promissory Notes paid on
account of each such  subscription  to such Series will be released  from escrow
and returned promptly to the subscriber together with all interest earned on the
cash portion of his subscription proceeds while in escrow.

    Pending the receipt of the initial $1,400,000 of Capital Contributions for a
Series,  and in the sole  discretion of the Fund Manager,  the Series may borrow
funds  from an  institutional  lender  or from  the Fund  Manager  or any of its
Affiliates to pay all or a portion of the selling commissions and reimbursements
to which  Soliciting  Dealers  would  become  entitled  after the receipt of the
initial $1,400,000 of Capital  Contributions,  provided that any such Soliciting
Dealer must agree to return all selling commissions and reimbursements  received
by it in the  event the  initial  $1,400,000  of  Capital  Contributions  is not
received by the Series. The Series would repay the borrowed funds only after the
receipt of such initial $1,400,000 of Capital Contributions.

                                  SALES MATERIAL

    The Fund may make use of certain  material in addition to this Prospectus in
connection  with the Offering of the Units.  Such  material may consist of sales
brochures which will be distributed to prospective  investors together with this
Prospectus,  "tombstone"  advertisements,  invitations to seminars,  prospecting
letters, videotapes and slide presentations.

    The Fund  has not  authorized  the use of sales  material  other  than  that
described above. The Offering of Units is made only by means of this Prospectus.
Although the information  contained in the Fund's sales material is believed not
to conflict  with any of the  information  contained  in this  Prospectus,  such
material does not

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purport to be complete and should not be considered as part of this  Prospectus,
as being incorporated in this Prospectus by reference or as forming the basis of
the Offering of the Units.

                       MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OF FINANCIAL CONDITION

    As  reflected  in its  financial  statements,  the Fund  currently  has only
nominal funds, as it is newly-formed,  has not yet commenced  operations and the
capital  anticipated to be raised  through its public  Offering of Units has not
yet become available.

    The Fund  plans to raise  equity  capital  from  investors  by means of this
public  Offering,  and then to  apply  such  funds,  including  the  installment
payments  on the  Promissory  Notes  as  received,  to the  purchase  price  and
acquisition fees and costs of Local Limited Partnership Interests,  Reserves and
expenses of this Offering.

     It is not expected that any of the Local Limited  Partnerships in which the
Fund will  invest  will  generate  cash from  operations  sufficient  to provide
distributions to the Unitholders in any significant  amount,  except possibly in
the  circumstances   discussed  under  "Investment  Objectives  and  Policies  -
Principal Investment Objectives." Such cash from operations, if any, would first
be used to meet  operating  expenses of the Fund,  including  the payment of the
Asset Management Fee. See "Management Compensation."

    The Fund's investments will not be readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating  losses for the  Apartment  Complexes,  the Local  Limited
Partnerships  and the Fund.  These problems may result from a number of factors,
many of which cannot be controlled. See "Risk Factors - Investment Risks - Risks
of Real Estate  Ownership."  Nevertheless,  the Fund  Manager  anticipates  that
capital  raised from the sale of the Units will be sufficient to fund the Fund's
future investment commitments and proposed operations.

    The Fund will establish  working capital  Reserves of at least 3% of Capital
Contributions,  an amount  which is  anticipated  to be  sufficient  to  satisfy
general  working  capital and  administrative  expense  requirements of the Fund
including  payment of the Asset Management Fee as well as expenses  attendant to
the preparation of tax returns and reports to the Unitholders and other investor
servicing  obligations  of the Fund.  Liquidity  would,  however,  be  adversely
affected by  unanticipated  or greater than  anticipated  operating  costs.  The
Fund's  liquidity could also be affected by defaults or delays in payment of the
Promissory Notes, from

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<PAGE>



which a portion of the working capital Reserves is expected to be funded. To the
extent  that  working  capital  Reserves  are  insufficient  to satisfy the cash
requirements  of the Fund,  it is  anticipated  that  additional  funds would be
sought through bank loans or other  institutional  financing.  The Fund may also
apply any cash  distributions  received from the Local Limited  Partnerships for
such purposes or to replenish or increase working capital Reserves.

    Under the Partnership Agreement the Fund does not have the ability to assess
the  Unitholders  for additional  Capital  Contributions  to provide  capital if
needed by the Fund or Local Limited Partnerships.  Accordingly, if circumstances
arise that cause the Local Limited  Partnerships  to require capital in addition
to that  contributed  by the Fund and any equity of the Local General  Partners,
the only  sources  from which such  capital  needs will be able to be  satisfied
(other  than the  limited  Reserves  available  at the Fund  level)  will be (i)
third-party  debt  financing  (which may not be available  if, as expected,  the
Apartment  Complexes  owned  by  the  Local  Limited  Partnerships  are  already
substantially  leveraged),  (ii) additional equity  contributions or advances of
the Local General  Partners,  (iii) other equity sources (which could  adversely
affect the Fund's interest in Tax Credits,  cash flow and/or proceeds of sale or
refinancing of the Apartment Complexes and result in adverse tax consequences to
the  Unitholders),  or (iv) the sale or disposition  of the Apartment  Complexes
(which could have the same adverse  effects as discussed in (iii) above).  There
can be no  assurance  that  funds  from any of such  sources  would  be  readily
available in sufficient  amounts to fund the capital  requirements  of the Local
Limited  Partnerships  in question.  If such funds are not available,  the Local
Limited Partnerships would risk foreclosure on their Apartment Complexes if they
were unable to renegotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes to the extent the capital requirements of the
Local Limited  Partnerships  relate to such debt. See "Risk Factors - Investment
Risks - Risks  Associated With Use of Leverage" and  "Investment  Objectives and
Policies - Use of Leverage."

    The Fund's capital needs and resources are expected to undergo major changes
during its first several  years of  operations as a result of the  completion of
its Offering of Units and its acquisition of investments. Thereafter, the Fund's
capital  needs and  resources  are  expected  to be  relatively  stable over the
holding periods of the investments, except to the extent of proceeds received in
payment  of  Promissory   Notes  and  disbursed  to  fund  the  Fund's  deferred
obligations.  See,  however,  "Risk  Factors - Investment  Risks - Risks of Real
Estate Ownership."

                                   LEGAL MATTERS

    The  legality of the Units  offered  hereby and certain  Federal  income tax
matters  will be  passed  upon  for the  Fund by  Derenthal  &  Dannhauser,  San
Francisco, California, counsel for each Series and the Fund Manager.

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                                      EXPERTS

    The balance sheet of WNC Housing Tax Credit Fund V, L.P., Series 3 as of May
31, 1995 and the balance sheet of WNC &  Associates,  Inc. as of August 31, 1994
which are included in this  Prospectus  and in the  Registration  Statement have
been audited by Corbin & Wertz, independent certified public accountants, as set
forth  in  their  reports  thereon   appearing   elsewhere  herein  and  in  the
Registration Statement and are included in reliance upon such reports given upon
the authority of said firm as experts in accounting and auditing.

    The matters of law  discussed in the section  entitled  "Federal  Income Tax
Considerations" and under the captions "Risks Related to Tax Credits" and "Other
Tax Risks" in the section  entitled "Risk  Factors" and in the section  entitled
"The Low Income  Housing  Credit" as they  relate to Federal  income tax matters
have been reviewed by Derenthal & Dannhauser and are included herein in reliance
upon the authority of such firm as experts.

                                FURTHER INFORMATION

    This  Prospectus  does not  contain  all the  information  set  forth in the
Registration  Statement  and the exhibits  relating  thereto  which the Fund has
filed with the  Securities and Exchange  Commission  under the Securities Act of
1933,  and to  which  reference  is  hereby  made.  Copies  of the  Registration
Statement and exhibits  relating  thereto are on file at the principal office of
the  Securities  and  Exchange  Commission  at  450  Fifth  Street,   Northwest,
Washington,  D.C. 20549, and may be obtained, upon payment of the fee prescribed
by the  Commission,  or may be examined  without  charge,  at the offices of the
Commission.

                                     GLOSSARY

    The  meanings of the  defined  terms used in this  Prospectus  are set forth
below.

    "Accountants" means Corbin & Wertz, Irvine,  California,  or such other firm
of  independent  public  accountants as from time to time shall be engaged for a
Series by the Fund Manager.

    "Acquisition Expenses" means expenses,  including, but not limited to, legal
fees and expenses,  travel and  communications  expenses,  costs of  appraisals,
non-refundable  option  payments on property not acquired,  accounting  fees and
expenses,  title insurance and  miscellaneous  expenses related to selection and
acquisition by a Series of Local Limited Partnership Interests and the selection
and  acquisition  of  Apartment  Complexes  by the Local  Limited  Partnerships,
whether or not acquired.


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<PAGE>



    "Acquisition  Fees" means the total of all fees and commissions  paid by any
party in  connection  with the  selection  or  purchase by a Series of any Local
Limited Partnership Interest,  and the purchase,  development or construction of
an Apartment  Complex by a Local Limited  Partnership,  whether  designated as a
real  estate   commission,   acquisition  fee,  finders'  fee,   selection  fee,
Development Fee, Construction Fee,  nonrecurring  management fee, consulting fee
or any fee of a  similar  nature  however  designated,  with  the  exception  of
Development Fees and  Construction  Fees paid to Persons not affiliated with the
Sponsor  in  connection  with the  actual  development  and  construction  of an
Apartment  Complex.  As used herein, a "Development  Fee" shall be a fee for the
packaging of an Apartment  Complex,  including  negotiating and approving plans,
and undertaking to assist in obtaining zoning and necessary variances, necessary
financing and Tax Credits for the Apartment  Complex,  either  initially or at a
later date, and a "Construction  Fee" shall be a fee or other  remuneration  for
acting  as  general   contractor  and/or   construction   manager  to  construct
improvements,  supervise  and  coordinate  projects or provide  major repairs or
rehabilitation for an Apartment Complex.

    "Act" means the California Revised Limited Partnership Act (Corp. Code
Section 15611, et seq.), as now in effect and as the same may be amended from
time to time hereafter.

    "Additional  Unitholders" means those Persons who purchase Units pursuant to
this Prospectus.

    "Adjusted  Capital Account Deficit" means, with respect to each Partner in a
Series, the deficit balance in his Capital Account as of the end of the relevant
fiscal period of the Series, after giving effect to the following adjustments:

         (a)  Increasing  such  Capital  Account by any  amounts  such Person is
    obligated to restore under the standards set by Section 1.704-1(b)(2)(ii)(c)
    of  the  Regulations  (or is  deemed  obligated  to  restore  under  Section
    1.704-2(g)(1) and (i)(5) of the Regulations); and

         (b) Decreasing  such Capital  Account by the items described in Section
    1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6)
    of the Regulations.

    "Adjusted  Capital   Contribution"   means,  for  each  fiscal  period,  the
Unitholders'  Capital  Contribution  reduced by all distributions of noninvested
funds and distributions of Sale or Refinancing  Proceeds made to the Unitholders
through the end of such period.

     "Affiliate"  or "Affiliated  Person"  means,  when used with reference to a
specified  Person:  (i) any Person who,  directly or indirectly,  controls or is
controlled by or

                                        190

<PAGE>



is under common  control with the  specified  Person;  (ii) any Person who is an
officer  of,  partner in, or trustee  of, or serves in a similar  capacity  with
respect to, the specified Person or of which the specified Person is an officer,
partner or trustee,  or with respect to which the  specified  Person serves in a
similar  capacity;  (iii)  any  Person  who,  directly  or  indirectly,  is  the
beneficial owner of, or controls,  10% or more of any class of equity securities
of, or otherwise has a 10% or more beneficial interest in, the specified Person;
or (iv) any Person of which the specified Person is, directly or indirectly, the
owner of, or in control of, 10% or more of any class of equity securities, or in
which the specified Person has a 10% or more beneficial interest.

    "Agreement" means a Series' Agreement of Limited Partnership,  as originally
executed and as amended or restated from time to time.

    "Apartment  Complex" or "Property" means a multi-family  residential  rental
complex  owned  or  under  development  or  rehabilitation  by a  Local  Limited
Partnership.

    "Asset  Management  Fee" means the annual fee payable to the Fund Manager or
an  Affiliate  of  the  Fund  Manager  for  services  in  connection   with  the
administration of the affairs of the Series.

    "C Corporation" has the meaning given it under "Who Should Invest;
Limitations on Use of Credits and Losses."

    "CHTC" means WNC California Housing Tax Credits, L.P.

    "CHTCII" means WNC California Housing Tax Credits II, L.P.

    "CHTCIII" means WNC California Housing Tax Credits III, L.P.

    "CHTCIV Series 4" means WNC California  Housing Tax Credits IV, L.P., Series
4.

    "CTCAC" means the California Tax Credit Allocation Committee.

    "Capital  Account"  means,  with  respect to any  Partner  in a Series,  the
Capital  Account  maintained for such Partner in such Series in accordance  with
the following  provisions:  (i) to each Partner's Capital Account there shall be
credited such Partner's  Capital  Contribution  and such Partner's  distributive
share of Profits for Tax Purposes  and (ii) to each  Partner's  Capital  Account
there  shall be  debited  the  amount of cash and the net fair  market  value of
property   distributed  to  such  Partner  pursuant  to  any  provision  of  the
Partnership  Agreement and such Partner's  distributive  share of Losses for Tax
Purposes. In the event any interest in a Series

                                        191

<PAGE>



is transferred in accordance  with the terms of the Partnership  Agreement,  the
transferee shall succeed to the Capital Account of the transferror to the extent
it  relates  to the  transferred  interest.  Subject  to  Section  4.4.1  of the
Partnership  Agreement,  Capital Accounts shall be maintained in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv).

    "Capital  Contribution"  means the total  amount  of cash  contributed  to a
Series determined  without inclusion of any interest or late charges paid on the
Promissory  Notes  and  without  reduction  for  any  discounts  for  Designated
Investors  and Discount  Investors  (prior to the  deduction of any  Syndication
Expenses) by all the  Partners or any class of Partners or any one  Partner,  as
the case may be (or the predecessor holders of the Interests of such Partners or
Partner),  reduced,  in  the  case  of the  Unitholders  by  the  amount  of any
noninvested funds returned to them.

    "Cash Available for Distribution"  means,  with respect to any period,  Cash
Flow less any amounts set aside from Cash Flow for the  restoration  or creation
of Reserves.

    "Cash Flow" means,  with respect to any period,  (i) all cash funds provided
to a Series from Local Limited Partnership operations (exclusive of any proceeds
derived  from the sale,  disposition,  financing  or  refinancing  of  Apartment
Complexes,  or other Sale or Refinancing  transactions) plus (ii) all cash funds
from Series operations  (including any interest from Promissory Notes),  without
deduction for depreciation, but after deducting cash funds used to pay all other
expenses, Debt Service and capital expenditures.

    "Code"  means  the  Internal  Revenue  Code  of  1986,  as  amended,  or any
corresponding provision or provisions of succeeding law.

    "Competitive,"  when applied to a fee, commission or other payment for goods
supplied or services  rendered,  means a payment equal to the amount customarily
charged by Persons not  Affiliated  with the payee for such goods or services in
the geographic area in which such goods are supplied or services rendered.

    "Consent"  means either (i) the approval  given by vote at a meeting  called
and held in accordance with the provisions of the Partnership Agreement, or (ii)
a prior  written  approval  required or  permitted  to be given  pursuant to the
Partnership Agreement.

    "Counsel" means Derenthal & Dannhauser.

    "Credit  Authority"  means,  for any state, the amount of Low Income Housing
Credits  which may be allocated  by such state in a given year  pursuant to Code
Section 42(h).

                                        192

<PAGE>




    "Dealer-Manager" means WNC Capital Corporation.

    "Dealer-Manager  Fee" means the fee  payable to the  Dealer-Manager  for its
services  as  Dealer-Manager  pursuant  to  Section  5.6.2  of  the  Partnership
Agreement.

    "Debt Service" means all payments required to be made in connection with any
loan  to the  Series  or any  loan  secured  by a lien  on any of the  Apartment
Complexes.

    "Deemed Liquidation  Distribution" means, with respect to the Unitholders of
a Series,  as a class, and the Fund Manager the amount that would be distributed
to them as of the end of each  fiscal  year of the  Series  if the  Series  were
dissolved  and  liquidated  and  (i)  the  assets  of  the  Series  (other  than
installment  obligations  where  Section  4.7.1  of  the  Partnership  Agreement
applies) were sold for cash equal to their Federal  adjusted tax basis (or their
book value,  where  Section  4.4.2 of the Series  Agreement  applies);  (ii) the
liabilities  of the Series were paid; and (iii) the remaining cash of the Series
were  distributed to such class of Partners in accordance  with Section 4.2.1 of
the Partnership Agreement (and not Section 4.2.2 of the Partnership  Agreement).
For the purposes of this  definition,  (a) the Capital  Accounts of the Partners
shall not be adjusted  for their  shares of any  Partnership  Minimum  Gain that
would be  recognized as a result of a deemed sale of Properties or Local Limited
Partnership Interests;  and (b) installment  obligations shall be treated in the
manner provided in Section 4.7 of the Partnership Agreement.

     "Designated  Investor"  shall have the meaning  specified in the Prospectus
under "Terms of the Offering and Plan of Distribution."

    "Discount Investor" means any Additional Unitholder (other than a Designated
Investor) who has paid or agreed to pay less than $1,000 per Unit subscribed for
by  him on  account  of  reduced  selling  commissions  and/or  reduced  Sponsor
Acquisition Fees attributable to his Units, as specified in the Prospectus under
"Terms of the Offering and Plan of Distribution."

    "Economic  Risk of Loss"  means the  extent to which a  Partner  or  Related
Person bears the  economic  risk of loss for a Series  liability  as  determined
under Treasury Regulation Section 1.752-2.

    "Escrow  Agent" means National Bank of Southern  California,  Newport Beach,
California,  or any other  escrow agent chosen by the Fund Manager to hold funds
from investors pending their admission to a Series.

     "Event of Withdrawal"  with respect to a Series means the occurrence of any
of the following  events as to the Fund  Manager:  (i) its  withdrawal  from the
Series pursuant to Section 15662 of the Act; (ii) its removal in accordance with
the Series

                                        193

<PAGE>



Agreement;  (iii) it (a) makes an assignment  for the benefit of creditors,  (b)
files a  voluntary  petition  in  bankruptcy,  (c) is  adjudged  a  bankrupt  or
insolvent,  or has entered  against it an order for relief in any  bankruptcy or
insolvency  proceeding,  (d) files a petition  or answer  seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute,  law or regulation,  (e) files an answer or
other  pleading  admitting or failing to contest the material  allegations  of a
petition  filed  against  it in any  proceeding  of this  nature,  or (f) seeks,
consents  to  or  acquiesces  in  the  appointment  of a  trustee,  receiver  or
liquidator of itself or of all or any substantial  part of its properties;  (iv)
the lapse of 120 days  after  the  commencement  of any  proceeding  against  it
seeking reorganization,  arrangement,  composition,  readjustment,  liquidation,
dissolution  or similar relief under any statute,  law or regulation,  if during
such period the proceeding has not been dismissed, or the lapse of 90 days after
the appointment,  without its consent or acquiescence, of a trustee, receiver or
liquidator of itself or of all or any  substantial  part of its  properties,  if
during such  period the  appointment  is not vacated or stayed,  or if within 90
days after the expiration of any such stay, the appointment is not vacated;  (v)
in the case of a Fund Manager who is a natural person, (a) his death, or (b) the
entry by a court of  competent  jurisdiction  adjudicating  him  incompetent  to
manage his person or his  property;  (vi) in the case of a Fund  Manager  who is
acting  as a general  partner  by  virtue  of being a  trustee  of a trust,  the
termination  of the trust (but not merely the  substitution  of a new  trustee);
(vii)  in the  case of a Fund  Manager  which  is a  separate  partnership,  the
dissolution and commencement of winding up of the separate  partnership;  (viii)
in  the  case  of a  Fund  Manager  which  is a  corporation,  the  filing  of a
certificate  of  dissolution,  or its  equivalent,  for the  corporation  or the
revocation  of its charter;  or (ix) in the case of a Fund  Manager  which is an
estate, the distribution by the fiduciary of the estate's entire interest in the
Series.  Notwithstanding  the  foregoing,  an Event of  Withdrawal  shall not be
deemed to have  occurred as to a Fund Manager  under the  preceding  clause (iv)
until 120 days  shall  have  elapsed  after  Notification  has been given to the
Unitholders  in the Series of the event  which,  with or without  lapse of time,
would constitute an event contemplated by such clause.

    "Extended Low Income Housing  Commitment"  means, for any Apartment Complex,
the  agreement  between the Local  Limited  Partnership  and the housing  credit
agency of the state in which the Apartment  Complex is located  which  specifies
the Low Income Use Period for such Apartment Complex.

    "Extended Use Period" means, for any Apartment Complex, the period beginning
at the  conclusion of the Initial  Compliance  Period and ending on the later of
the date specified in the Extended Low Income Housing Commitment with respect to
such  Apartment  Complex  or the date  which is 15  years  after  the end of the
Initial Compliance Period.


                                        194

<PAGE>



    "FmHA" means the Farmers Home Administration of the United States
Department of Agriculture.

    "Front-End  Fees" means fees and expenses paid by any party for any services
rendered during the organizational and acquisition phases of a Series, including
Organizational and Offering Expenses,  Acquisition Fees,  Acquisition  Expenses,
interest on deferred  fees and  expenses  and any other  similar  fees,  however
designated.  Front-End  Fees which are to be paid  pursuant  to the  Partnership
Agreement from  installment  payments on the Promissory  Notes shall be paid pro
rata as the installment payments are received by the Series.

    "Fund" means,  collectively,  WNC Housing Tax Credit Fund V, L.P., Series 3,
and WNC Housing Tax Credit Fund V, L.P., Series 4.

    "Fund Manager"  means WNC & Associates,  Inc., or any Person or Persons who,
at the time of reference thereto,  has been admitted as a successor to such Fund
Manager or as an additional  Fund Manager,  in each such Person's  capacity as a
general  partner.  Restrictions  placed on the  rights  and  powers of the "Fund
Manager" throughout the Partnership  Agreement also serve to restrict the rights
and powers of the Affiliates of the Fund Manager.

    "Government Assistance" means any form of Federal, state or local government
assistance provided to Properties or their tenants or owners, including mortgage
insurance,  rental  assistance  payments,   permanent  mortgage  financing,  low
interest mortgage loans, interest reduction payments and the Tax Credits.

    "Gross  Proceeds"  means  the gross  proceeds  of the  Offering,  determined
without  inclusion of any interest or late charges paid on the Promissory  Notes
and without  reduction for any discounts for  Designated  Investors and Discount
Investors.

    "HOME" means the Home Investment Partnership program established under Title
11 of the Cranston-Gonzalez National Affordable Housing Act.

    "HTCF" means WNC Housing Tax Credit Fund, L.P.

    "HTCFII" means WNC Housing Tax Credit Fund II, L.P.

    "HTCFIII" means WNC Housing Tax Credit Fund III, L.P.

    "HTCFIV Series 1" means WNC Housing Tax Credit Fund IV, L.P., Series 1.

    "HTCFIV Series 2" means WNC Housing Tax Credit Fund IV, L.P., Series 2.


                                        195

<PAGE>



    "HUD" means the United States Department of Housing and Urban Development or
any successor thereto.

    "Historic Tax Credit" means the tax credit allowable  pursuant to Section 47
of the Code for  rehabilitation  expenditures  incurred  with respect to certain
qualified buildings.

    "IRS" means the Internal Revenue Service.

    "Independent  Expert"  means a  Person  with no  material  current  or prior
business  or  personal  relationship  with  the  Sponsor  who  is  engaged  to a
substantial  extent in the business of rendering opinions regarding the value of
assets of the type held by the  Series,  and who is  qualified  to perform  such
work.

    "Initial  Compliance  Period" means,  for any Apartment  Complex,  a 15-year
period  beginning  with the year in which a Low Income  Housing  Credit is first
taken with respect to such Apartment Complex.

    "Initial Unitholder" means John B. Lester, Jr.

    "Interest" means the entire  ownership  interest of a Partner in a Series at
any particular time, including the right of such Partner to any and all benefits
to which a Partner of such Series may be entitled as provided in the Partnership
Agreement,  together with the obligations of such Partner to comply with all the
terms and provisions of the Partnership  Agreement.  Reference to a majority, or
specified  percentage,  in interest of the Unitholders  means  Unitholders whose
combined Capital Contribution represents over 50%, or such specified percentage,
respectively, of the Capital Contribution of all Unitholders in such Series.

    "Invested  Assets"  means the sum of a Series'  Investment  in Local Limited
Partnership  Interests  and the  Series'  allocable  share of the  amount of the
mortgage loans on, and other debts related to, the Apartment  Complexes owned by
such Local Limited Partnerships.

    "Investment Date" means,  with respect to any Series,  the date of the final
admission into the Series of Additional  Unitholders  who purchased Units during
such Series.

    "Investment  in Local  Limited  Partnership  Interests"  means the amount of
Capital  Contributions  used by a Series to acquire  Local  Limited  Partnership
Interests  (except  that,  if a portion  of the  Series'  investment  in a Local
Limited  Partnership  is used to fund  working  capital  reserves  of the  Local
Limited  Partnership,  there shall be excluded from this  calculation any amount
which is used to fund working capital reserves which is in excess of 5% of Gross
Proceeds) plus Reserves of the

                                        196

<PAGE>



Series,  except  that  Reserves in excess of 5% of Gross  Proceeds  shall not be
included, but excluding Front-End Fees.

    "Investor Closing" means a closing at which purchasers of Units are admitted
to a Series as Additional Unitholders pursuant to Section 3.3 of the Partnership
Agreement.

    "Limited Partner" means any Unitholder.

    "Local General Partners"  (whether or not capitalized) means the Persons who
are from time to time general  partners of Local  Limited  Partnerships,  except
that  where  reference  is made to Local  General  Partners  in  respect  of any
guaranties  or  undertakings  provided  to  a  Series  in  connection  with  its
investment  in a Local  Limited  Partnership,  such term  shall  mean such Local
General Partners at the date of such investment or such other Persons (including
Affiliates of such Local General  Partners) as actually  provide such guaranties
and undertakings.

    "Local Limited  Partnership"  means a limited  partnership  which owns or is
developing or rehabilitating one or more rental housing projects to be qualified
under Section 42(g) of the Code.

    "Local Limited Partnership Agreement" means, with respect to a Local Limited
Partnership,  its agreement of limited partnership as originally executed and as
amended from time to time.

    "Local Limited Partnership  Interest" means the limited partnership interest
of a Series in a Local Limited Partnership.

    "Low Income Housing Credit" means the tax credit  allowable under Section 42
of the Code for a qualified low income housing project.

    "Low Income Units" means, for any Apartment  Complex,  the residential units
in the  Apartment  Complex  intended  for  occupancy  by tenants who satisfy the
set-aside test of Code Section 42(g)(1)  applicable to the Apartment Complex and
the rent restriction test of Code Section 42(g)(2).

    "Low Income Use Period" means the Initial Compliance Period and any
Extended Use Period.

    "Mortgage" (whether  capitalized or not) means any mortgage,  deed of trust,
or  similar  security  instrument  and,  where  the sense of the  Prospectus  so
requires, the indebtedness secured thereby.


                                        197

<PAGE>



    "NASAA  Guidelines"  means the  Statement  of Policy  Regarding  Real Estate
Programs adopted by the North American  Securities  Administrators  Association,
Inc., as in effect on the date of the Partnership Agreement.

    "NASD" means the National Association of Securities Dealers, Inc.

    "1986 Act" means the Tax Reform Act of 1986.

    "1987 Act" means the Revenue Act of 1987.

    "1988 Act" means the Technical and Miscellaneous Revenue Act of 1988.

    "1989 Act" means the Omnibus Budget Reconciliation Act of 1989.

    "1990 Act" means the Omnibus Budget Reconciliation Act of 1990.

    "1993 Act" means the Omnibus Budget Reconciliation Act of 1993.

    "Net Proceeds" means the Gross Proceeds less Organizational and Offering
Expenses.

    "Nonaccountable  Expense  Reimbursement" means the payment to be made to the
Dealer-Manager or an Affiliate of the  Dealer-Manager  pursuant to Section 5.6.3
of the Partnership Agreement.

    "Nonrecourse Deductions" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(1).

    "Nonrecourse  Liability"  means a Series  liability with respect to which no
Partner of the Series or Related Person bears the Economic Risk of Loss.

    "Note Capital  Contribution"  means that portion of a  Unitholder's  Capital
Contribution, if any, paid in accordance with his Promissory Note.

    "Notification"  means a writing,  containing the information required by the
Partnership Agreement to be communicated to any Person,  personally delivered to
such Person or sent by registered,  certified or regular mail,  postage prepaid,
to such Person at the last known  address of such  Person.  The date of personal
delivery or the date of mailing thereof, as the case may be, shall be deemed the
date of giving the Notification.

    "Offering"  means,  with  respect to a Series,  the offering and sale of its
Units pursuant to the Prospectus.


                                        198

<PAGE>



    "Offering  Commencement  Date" means,  with respect to the initial Series of
Units,  the  effective  date  of  the  registration  statement  filed  with  the
Securities and Exchange  Commission with respect to the Units, and, with respect
to  subsequent  Series of Units,  such  later  date as may be  specified  by the
Prospectus.

    "Operating  Cash Expenses"  means,  with respect to any fiscal  period,  the
amount of cash  disbursed by a Series in that period in the  ordinary  course of
business  for the  payment  of its  operating  expenses,  such as  expenses  for
management,    utilities,   repair   and   maintenance,    insurance,   investor
communications,  legal, accounting, statistical and bookkeeping services, use of
computing or accounting equipment,  travel and telephone expenses,  salaries and
direct expenses of Series  employees while engaged in Series  business,  and any
other  operational  and  administrative   expenses  necessary  for  the  prudent
operation of the Series.  Without  limiting  the  generality  of the  foregoing,
Operating  Cash Expenses  shall include the actual cost of goods,  materials and
administrative  services used for or by the Series, whether incurred by the Fund
Manager,  an  Affiliate  of the  Fund  Manager  or a  non-Affiliated  Person  in
performing the foregoing  functions.  As used in the preceding sentence,  actual
cost of goods and materials  means the actual cost of goods and  materials  used
for or by the Series and obtained  from  entities not  Affiliated  with the Fund
Manager,  and actual cost of administrative  services means the pro rata cost of
personnel  (as  if  such  persons  were  employees  of  the  Series)  associated
therewith, but in no event to exceed the Competitive amount.

    "Organizational  and  Offering  Expenses"  means all  expenses  incurred  in
connection with the formation of a Series, the registration and qualification of
its Units under Federal and state  securities  laws and the Offering,  including
selling  commissions,   the  Dealer-Manager  Fee,  the  Nonaccountable   Expense
Reimbursement
and all advertising expenses.

    "Partner" means any Fund Manager or Unitholder.

    "Partner Nonrecourse Debt" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(4).

    "Partner  Nonrecourse  Debt  Minimum  Gain" means the amount  determined  in
accordance with the principles of Treasury Regulation Section 1.704-2(i)(3).

    "Partnership  Agreement" means,  with respect to a Series,  its Agreement of
Limited Partnership as originally executed and as amended from time to time.

    "Partnership  Minimum Gain" means the amount  determined in accordance  with
the principles of Treasury Regulation Section 1.704-2(d).


                                        199

<PAGE>



    "Partnership Register" means the schedule listing the names and addresses of
all  Unitholders  of a Series  together  with the  amounts  of their  respective
Capital Contributions which shall be maintained by the Fund Manager.

    "Person"  means any  individual,  partnership,  corporation,  trust or
other legal entity.

    "Prime Rate" means the prime or reference rate of interest from time to time
announced  by National  Bank of Southern  California  as being  charged by it on
short-term unsecured loans to its most creditworthy customers.

    "Prior Programs" has the meaning given to it under "Prior Performance
Summary."

    "Profits" and "Losses" means, with respect to a Series, for each fiscal year
or other relevant period,  an amount equal to the Series' taxable income or loss
for such year or period determined in accordance with Section 703(a) of the Code
(for this purpose all items of income,  gain,  loss or deduction  required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following  adjustments:  (i) any income of the
Series  that is exempt  from  Federal  income tax and not  otherwise  taken into
account in  computing  Profits or Losses  pursuant to this  definition  shall be
added to such  taxable  income  or loss;  (ii) any  expenditures  of the  Series
described  in Section  705(a)(2)(B)  of the Code or treated as such  pursuant to
Treasury Regulation Section  1.704-1(b)(2)(iv)(i),  and not otherwise taken into
account in computing  Profits or Losses  pursuant to this  definition,  shall be
subtracted  from such taxable income or loss;  (iii) any adjustment  pursuant to
Section 743(b) of the Code shall be allocated solely to the Partner to whom such
adjustment  relates and shall not be taken into account in computing  Profits or
Losses;  (iv) any gain or loss which  would have been  realized by the Series on
the sale of assets distributed in kind to Partners, determined with reference to
the fair market value and the  adjusted  tax basis of such  property for Federal
income tax purposes immediately prior to such distribution, shall be added to or
subtracted  from such  taxable  income or loss;  (v)  notwithstanding  any other
provision of this definition, any items that are specially allocated pursuant to
Section 4.4.3 of the  Partnership  Agreement  shall not be taken into account in
computing Profits or Losses; and (vi) if required,  the adjustments specified in
Section 4.4.2 of the Partnership Agreement shall be taken into account.

    "Profits and Losses for Tax Purposes"  means all items of Profits and Losses
as well as any items that are  specifically  excluded from Profits and Losses by
clause (v) of the definition thereof.


                                        200

<PAGE>



    "Promissory  Note" means the full recourse  promissory  note  evidencing the
deferred  installments,  if any, of the Capital Contribution required to be made
for a Unit.

    "Prospectus"  means the prospectus  contained in the registration  statement
filed with the Securities and Exchange  Commission with respect to the Units, in
the final form in which said  prospectus  is filed with said  Commission  and as
thereafter  supplemented  pursuant to Rule 424 under the Securities Act of 1933,
as amended.

    "Purchase  Price"  means  the  price  paid  upon the  purchase  or sale of a
particular Local Limited Partnership  Interest or Apartment Complex, as the case
may be,  including the amount of Acquisition Fees and all liens and mortgages on
the Apartment Complex, but excluding points and prepaid interest.

    "RECDS" means the Rural Economic and Community  Development  Services of the
United States Department of Agriculture or any successor thereto.

    "Registration  Date" means the date on which an assignment of Units has been
recorded on the Partnership Register.

    "Related Person" means a Person having a relationship with a Partner that is
described in Treasury Regulation Section 1.752-4(b).

    "Reserves"  means amounts set aside by a Series for working capital or other
obligations  of the Series and  contingencies  related to the ownership of Local
Limited Partnership Interests.

    "Return  on  Investment"  means,  with  respect  to any  Series,  an annual,
cumulative, but not compounded,  "return" to the Unitholders of such Series as a
class  on  their  Adjusted  Capital  Contributions   commencing  for  each  such
Unitholder on the last day of the calendar quarter during which the Unitholder's
Capital  Contribution  is received by the Series,  calculated  at the  following
annual rates:  (i) 14% through  December 31, 2006 and (ii) 6% for the balance of
the Series' term.

    "Roll-Up" means a transaction involving the acquisition,  merger, conversion
or consolidation, either directly or indirectly, of a Series and the issuance of
securities of a Roll-Up Entity. Such term does not include:

     (i) any  transaction if the securities of the Series have been for at least
twelve months traded on a national  securities  exchange or through the National
Association of Securities  Dealers,  Inc.  Automated  Quotation  National Market
System; or

     (ii)  a  transaction  involving  the  conversion  to  corporate,  trust  or
association  form of only the Series,  if, as a consequence of the  transaction,
there will be no

                                        201

<PAGE>



     significant  adverse change in any of the following:  (a) the  Unitholders'
voting  rights;  (b) the  term of  existence  of the  Series;  (c) the  terms of
compensation of the Sponsor; or (d) the Series' investment objectives.

    "Roll-Up  Entity"  means the  partnership,  real  estate  investment  trust,
corporation,  trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up transaction.

     "S  Corporation"  has the  meaning  given  it  under  "Who  Should  Invest;
Limitations on Use of Credits and Losses."

    "SLP Affiliate"  means an Affiliate of the Fund Manager in its capacity as a
special limited partner of Local Limited Partnerships.

    "SRF" means Shelter Resource Fund.

    "Sale  or  Refinancing"  means  any  Series  or  Local  Limited  Partnership
transaction  not in the  ordinary  course of its  business,  including,  without
limitation, sales, exchanges or other dispositions of Apartment Complexes, Local
Limited  Partnership  Interests and real or personal  property of the Series, or
any  borrowings  or  refinancings.  Sale or  Refinancing  shall not  include any
receipt of capital  contributions  by a Series or a Local  Limited  Partnership;
provided,  however, that the receipt by a Series of a return of all or a portion
of its capital  contribution  to a Local Limited  Partnership,  however  funded,
shall be treated as a Sale or Refinancing.

    "Sale or Refinancing  Proceeds"  means all cash receipts of a Series arising
from a Sale or Refinancing less the following:

    (i) the  amount  paid or to be paid in  connection  with or as an expense of
such Sale or Refinancing,  and, with regard to damage recoveries or insurance or
condemnation proceeds,  the amount paid or to be paid for repairs,  replacements
or renewals  resulting  from damage to or partial  condemnation  of the affected
property;

     (ii) the amount applied to the payment of the debts and  obligations of the
Series; and

    (iii) any Reserves funded with such proceeds.

    "Series"  means WNC Housing  Tax Credit  Fund V, L.P.,  Series 3, and/or WNC
Housing Tax Credit Fund V, L.P., Series 4.

    "Soliciting  Dealers"  means the  broker-dealers  through whom the Units are
being offered and sold.

                                        202

<PAGE>




    "Sponsor" means WNC & Associates, Inc.

    "Subordinated Disposition Fee" means the fee payable by a Series to the Fund
Manager in connection  with  dispositions  of Properties  owned by Local Limited
Partnerships.

    "Substitute  Unitholder"  means an  assignee  of a Unit in a  Series  who is
admitted to the Series as a limited partner.

    "Syndicated Partnerships" has the meaning given it under "Management - WNC
& Associates, Inc."

    "Syndication  Expenses"  means all  expenditures  classified as  syndication
expenses  pursuant  to  Treasury  Regulation  Section  1.709-2(b).   Syndication
Expenses shall be taken into account by a Series under the Partnership Agreement
at the time  they  would be taken  into  account  under  the  Series'  method of
accounting if they were deductible expenses.

    "Tax Credits" means any credit  permitted under the Code against the Federal
income tax liability of any Partner as a result of activities or expenditures of
his Series or any Local Limited Partnership,  including, without limitation, the
Low Income Housing Credit and the Historic Tax Credit.

    "Temporary   Investments"   means  United  States   Government   securities,
securities  issued or fully  guaranteed  by United States  Government  agencies,
certificates of deposit and time or demand deposits in, or repurchase agreements
constituting  obligations  of,  commercial  banks with  deposits  insured by the
Federal  Deposit  Insurance  Corporation  and other  short-term,  highly  liquid
investments.

    "Treasury  Regulation  or  Regulations"  means the  Income  Tax  Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

    "Unit"  means  the  Interest  of a  Unitholder  attributable  to  a  Capital
Contribution  of  $1,000  (determined   without  regard  to  any  discounts  for
Designated Investors and Discount Investors).

    "Unitholder" means any Person who is a limited partner of a Series,  whether
an Initial Unitholder,  an Additional  Unitholder or a Substitute  Unitholder at
the time of reference thereto, in such Person's capacity as a limited partner of
the Series.

    "Voluntary  Withdrawal" by the Fund Manager means, with respect to a Series,
any  withdrawal  initiated  by the Fund  Manager  and  excludes  any  withdrawal
accomplished  as the result of a settlement,  whether or not  incorporated  in a
decree

                                        203

<PAGE>



of a court or administrative  agency, between a withdrawing Fund Manager and one
or  more  of  any  remaining  Fund  Managers,  a  majority-in-interest   of  the
Unitholders  or any  regulatory  agency  whether a Federal or state  agency or a
self-regulatory agency, having jurisdiction over the affairs of the Series.


                                        204

<PAGE>


                           INDEX TO FINANCIAL STATEMENTS

                                                                        Page

WNC Housing Tax Credit Fund V, L.P., Series 3

  Independent Auditors' Report.............................................FS-1
  Balance Sheet, May 31, 1995..............................................FS-2
  Notes to Balance Sheet...................................................FS-3

WNC & Associates, Inc.
  Independent Auditors' Report.............................................FS-6
  Balance Sheets, May 31, 1995 (Unaudited)
    and August 31, 1994....................................................FS-7
  Notes to Balance Sheet...................................................FS-8


                                       FS-i

<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Partners
WNC Housing Tax Credit Fund V, L.P., Series 3


We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund V,
L.P.,  Series  3  (a  California  limited   partnership)  (the  Partnership)  (a
development-stage  enterprise)  as of May 31,  1995.  The  balance  sheet is the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the balance sheet based on our audit.

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

In our opinion,  the  accompanying  balance  sheet  referred to above,  presents
fairly,  in all material  respects,  the  financial  position of WNC Housing Tax
Credit  Fund  V,  L.P.,   Series  3  (a  California   limited   partnership)  (a
development-stage  enterprise)  as of May 31, 1995 in conformity  with generally
accepted accounting principles.


                                                   /s/ Corbin & Wertz


Irvine, California
June 7, 1995


                                      FS-1
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                                  BALANCE SHEET

                                  May 31, 1995




                                     ASSETS

Cash                                                     $             1,000
                                                                      --------
                                                         $             1,000
                                                                      =========

                        LIABILITIES AND PARTNERS' CAPITAL

Commitments and contingencies (Note 2)

Partners' capital (Note 1):
  General partner                                        $               200
  Original limited partner                                               800
                                                                     ----------
     Total partners' equity                                            1,000
                                                         $             1,000
                                                                     ==========



                     See accompanying notes to balance sheet
                                      FS-2

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                             NOTES TO BALANCE SHEET

                                  May 31, 1995



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

WNC  Housing  Tax Credit  Fund V, L.P.,  Series 3 (the  Partnership)  was formed
pursuant  to the laws of  California  on March  28,  1995 and has not  commenced
operations.  The  Partnership  was formed to invest  primarily in other  limited
partnerships which will own and operate multi-family housing complexes that will
qualify for low income housing credits.

The general partner is WNC & Associates,  Inc.  Wilfred N. Cooper,  Sr., through
the  Cooper  Revocable  Trust,  owns  67%  of  the  outstanding  stock  of WNC &
Associates, Inc. John B. Lester, Jr. will be the original limited partner of the
Partnership  and owns,  through the Lester Family Trust,  29% of the outstanding
stock of WNC & Associates, Inc.

Allocations Under the Terms of the Partnership Agreement

The General Partner has a 1% interest in operating  profits and losses,  taxable
income and loss and in cash available for distribution from the Partnership. The
limited  partners  will  be  allocated  the  remaining  99% of  these  items  in
proportion to their respective investments.

After the limited  partners  have received  proceeds from a sale or  refinancing
equal to their capital  contributions and their return on investment (as defined
in  the   Partnership   Agreement)  and  the  General  Partner  has  received  a
subordinated disposition fee (as described in Note 2 below), any additional sale
or  refinancing  proceeds will be  distributed  90% to the limited  partners (in
proportion to their respective investments) and 10% to the General Partner.







Continued

                                      FS-3

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                       NOTES TO BALANCE SHEET - CONTINUED

                                  May 31, 1995



NOTE 2 - COMMITMENTS AND CONTINGENCIES

The Partnership is offering up to 25,000 limited partnership units at $1,000 per
unit. The accompanying balance sheet does not include certain Partnership legal,
accounting, and other organization and offering costs paid and to be paid by the
General  Partner  and/or  affiliates  of the  General  Partner.  If the  minimum
offering  amount of $1,400,000 is raised,  the  Partnership  will be required to
reimburse the General  Partner  and/or its  affiliates  for such fees out of the
proceeds of the offering,  up to certain  maximum levels set forth below. In the
event  the  Partnership  is unable to raise the  minimum  offering  amount,  the
General Partner will absorb all organization and offering costs.

Further, if the minimum offering amount of $1,400,000 is raised, the Partnership
will be obligated to the General Partner or affiliates for certain  acquisition,
management and other fees as set forth below.

         Acquisition  fees up to 7.5% of the  gross  proceeds  from  the sale of
         Partnership units.

         Reimbursement  for  organizational,  offering,  selling and acquisition
         expenses advanced by the General Partner or affiliates on behalf of the
         Partnership.  These  reimbursements  plus all other  organizational and
         offering expenses  inclusive of sales commissions will not exceed 14.5%
         of the gross proceeds.

         An annual  management  fee equal to the  greater of (i) $2,000 for each
         apartment  complex or (ii) .275% of the gross proceeds,  in either case
         increased or decreased  based on annual  changes in the Consumer  Price
         Index.  However,  the  maximum  fee may not exceed .2% of the  invested
         assets (defined as the  Partnership's  capital  contributions  plus its
         allocable  percentage  of  the  permanent  financing)  of  the  limited
         partnerships.



                                      FS-4

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 3
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)


                       NOTES TO BALANCE SHEET - CONTINUED

                                  May 31, 1995



NOTE 2 - COMMITMENTS AND CONTINGENCIES, continued

         A  subordinated  disposition  fee in an amount equal to 1% of the sales
         price of real estate sold.  Payment of this fee is  subordinated to the
         limited  partners  receiving   distributions  equal  to  their  capital
         contributions  and  their  return  on  investment  (as  defined  in the
         Partnership's  Agreement of Limited Partnership) and is payable only if
         services are rendered in the sales effort.

NOTE 3 - INCOME TAXES

The  Partnership  will not incur a provision  for income  taxes since all income
taxes and losses  will be  allocated  to the  Partners  for  inclusion  in their
respective returns.





                                      FS-5

<PAGE>



                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
WNC & Associates, Inc.


         We have audited the  consolidated  balance  sheet of WNC &  Associates,
Inc.  and  subsidiary  (the  Company) as of August 31, 1994.  This  consolidated
balance  sheet  is  the   responsibility  of  the  Company's   management.   Our
responsibility is to express an opinion on this consolidated balance sheet based
on our audit.

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

         In our  opinion,  the  consolidated  balance  sheet  referred  to above
presents  fairly,  in all material  respects,  the  financial  position of WNC &
Associates,  Inc.  and  subsidiary  as of August  31,  1994 in  conformity  with
generally accepted accounting principles.



                                                          /s/  Corbin & Wertz


Irvine, California
October 30, 1994

                                      FS-6

<PAGE>



                             WNC & ASSOCIATES, INC.
                           CONSOLIDATED BALANCE SHEETS
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



 ASSETS                                     May 31, 1995       August 31, 1994
                                            (Unaudited)             (Audited)

 Cash                                         $460,102              $189,788
 Fees receivable (Notes 1, 2 and 12)         1,092,601               834,326
 Loans to property developers 
    (Notes 3 and 12)                         1,153,621             3,603,994
 Offering costs advanced 
    (Notes 1 and 12)                           452,139               400,097
 Advances to partnerships                      218,413               128,563
 Property and equipment 
  (Notes 1 and 4)                              261,781               129,797
 Other assets (Notes 5 and 10)                 324,010               269,136
                                              -------                -------

                                            $3,962,667            $5,555,701

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
Notes payable to bank (Note 6)                      $0              $525,000
Notes payable to stockholders (Note 7)               0               960,000
Accounts payable and accrued expenses          293,935               119,668
Deferred income taxes (Notes 1 and 8)          359,872               359,872
Income taxes payable                                 0               331,690
Accumulated losses of partnerships in excess of
investments (Note 1)                           461,264               419,408
Capitalized lease obligations (Note 11)        130,310                53,925
                                              ----------         -----------
                                             1,245,381             2,769,563

Commitments and contingencies (Notes 9 and 11)

Stockholders' equity (Note 13):
  Preferred stock, no par value, 
  1,000,000 shares authorized, 
  none issued
  Common stock, no par value, 
  1,000,000 shares authorized, 
  104,750 issued and outstanding in
    1995 and 1994                              277,987               277,987
Notes receivable from stockholders 
  for common stock issued                     (100,310)             (100,310)
Retained earnings                            2,539,609             2,608,461
                                             ---------             ---------
Total stockholders' equity                   2,717,286             2,786,138

                                            $3,962,667            $5,555,701
 
             See accompanying notes to consolidated balance sheets
                                      FS-7
<PAGE>


                             WNC & ASSOCIATES, INC.
                      NOTES TO CONSOLIDATED BALANCE SHEETS
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

WNC & Associates, Inc. (a California corporation) (Company), acts as a corporate
general  partner and sponsor of both  public and private  placement  real estate
partnerships  (Partnerships),  which invest in apartment complexes, the majority
of which are government assisted apartment complexes.

The Company is the general partner of approximately  fifty limited  partnerships
which own government  assisted housing  apartment  complexes (either directly or
indirectly   through  other   partnership   interests).   The  majority  of  the
Partnerships'  apartment  complexes are subsidized through various United States
governmental  low-income housing programs. The Company's interest in the profits
and losses of each Partnership,  as general partner, varies between one-half and
five percent.

The financial information presented as of May 31, 1995 is prepared in conformity
with generally accepted accounting principles and such principles are applied on
a basis  consistent with those reflected in the Annual Report for the year ended
August 31, 1994. The financial  information  presented herein as of May 31, 1995
has been prepared by management  without audit by independent  certified  public
accountants who do not express an opinion  thereon.  The balance sheet presented
as of May 31,  1995  has  been  derived  from,  but  does  not  include  all the
disclosures  contained in the audited  balance sheet as of August 31, 1994.  The
information furnished as of May 31, 1995 includes all adjustments, which are, in
the  opinion of  management,  necessary  for a fair  presentation  of  financial
position as of the interim date.

Consolidation

The accompanying consolidated financial statements include the accounts of WNC &
Associates and its wholly owned subsidiary, WNC Capital Corporation. WNC Capital
Corporation  was  incorporated  on February 23, 1994 and is registered  with the
Securities and Exchange Commission as a broker/dealer in securities. WNC Capital
Corporation  does not  carry  customers'  accounts  or hold  securities  for the
accounts  of  its  customers.   All   significant   intercompany   accounts  and
transactions have been eliminated in consolidation.

Revenue Recognition and Fees Receivable

Fees  receivable  consist of syndication  fees due from various  partnerships in
which the Company acts as general  partner.  Syndication  fees are recognized at
the time the  Partnerships'  initial  capital  offerings  are  completed and the
Company's contractual obligations have been fulfilled. Syndication fees that are
scheduled to be  collected  more than one year from the  Company's  year end are
discounted  to reflect  their  present  value.  The  accretion  of  discounts is
included in interest and other income.

Management  fees are  derived  from  services  provided  by the  Company  to the
Partnerships  and are  recognized as earned and to the extent that such fees are
deemed to be collectible.

Commissions  revenue earned and related expenses  associated with the operations
of WNC Capital Corporation are recorded when the related services are performed.

                                      FS-8
<PAGE>



                             WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



    Offering Costs Advanced

Offering  costs  advanced  represent  funds  that the  Company  advances  to the
Partnerships  for certain  costs and expenses to produce the offering  materials
and to qualify the  partnership  interests  for sale under the various  state or
federal  securities  laws.  Such  advances  are repaid to the Company out of the
Partnerships' initial capital proceeds.

Property and Equipment

Property and equipment and improvements which extend the economic life of assets
are recorded at cost and are depreciated using the straight-line method over the
estimated  useful  life  of  the  related  asset.   Leasehold  improvements  and
capitalized  leases are  amortized  over the shorter of the life of the lease or
estimated useful life of the related asset.

Organization Costs

Organization costs consist  principally of legal and regulatory fees incurred to
incorporate  WNC  Capital  Corporation  and obtain the  necessary  approvals  to
commence  operations.  These  costs are  amortized  over a five year period on a
straight-line  basis  and are  included  in  other  assets  in the  accompanying
consolidated financial statements. Amortization for the period February 23, 1994
(see above) to August 31, 1994 was $1,482.

Investments in Partnerships

The Company records its investment in the Partnerships  using the equity method,
which  recognizes  the  Company's  proportionate  share of  income or loss as an
increase or decrease in the investment in the  partnership.  Losses in excess of
the Company's  investment are recorded as accumulated  losses of Partnerships in
excess of investments.

Income Taxes

The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 109 (SFAS 109), "Accounting For Income Taxes." Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are recognized
for  the  future  tax  consequences  attributable  to  differences  between  the
financial  statement  carrying  amounts of existing  assets and  liabilities and
their respective  bases.  Deferred tax assets and liabilities are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary differences are expected to be recovered or settled.  Under SFAS
109, the effect on deferred tax assets and  liabilities of a change in tax rates
is recognized as income in the period that includes the enactment date.

NOTE 2 - FEES RECEIVABLE

     Syndication  fees  (see  Note  1) are  received  by the  Company  from  the
Partnerships  as the limited  partners make their capital  contributions  to the
Partnerships. Such capital contributions are generally scheduled to be collected
during


                                      FS-9
<PAGE>


                             WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



NOTE 2 - FEES RECEIVABLE, CONTINUED

March of each year.  Aggregate  annual future minimum  collections as of May 31,
1995 (unaudited) and August 31, 1994 (audited) are as follows:




                                                 May 31, 1995  August 31, 1995
                                                  (Unaudited)    (Audited)
                                                  -----------    ---------
1995                                              $284,836       $ 86,230
1996                                               299,177        286,028
1997                                               455,000        440,000
1998                                               210,000        210,000
                                                   -------        -------
Total                                            1,249,013     1,022,258
Less: Discounts recorded on fees receivable
at an effective rate of 9%                        (156,412)     (187,932)

Present value of future minimum fees
receivable                                      $1,092,601      $834,326


NOTE 3 - LOANS TO PROPERTY DEVELOPERS

Loans to property  developers  are  comprised  of amounts  loaned to the general
partners of limited  partnerships in which the Partnerships have or will have an
equity interest. All such loans receivable are secured by the respective general
partners  interest in the  limited  partnerships.  Loans to property  developers
consist of the following:



                                                 May 31, 1995   August 31, 1994
                                                 (Unaudited)       (Audited)
Notes receivable due on various dates
  through August 1995, non-interest
  bearing.                                         $981,721        $3,463,994
Notes receivable due on various dates
  after August 1995, non-interest
  bearing.                                          171,900                 0
Notes receivable due in March 1995,
  with interest at the Company's
  borrowing rate (9.75% per annum at
  August 31, 1994)                                        0           140,000
                                                       ----           -------
                                                 $1,153,621        $3,603,994



                                       FS-10
<PAGE>

                       WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                  May 31, 1995  August 31, 1994
                                                   (Unaudited)     (Audited)

Furniture, fixtures and computer software            $232,812      $184,897
Automobiles                                            23,388        23,388
Leasehold improvements                                 36,321        26,981
Equipment subject to capital leases (see Note 11)     157,046        72,640
                                                      -------        ------
                                                      449,567       307,906
Less accumulated depreciation and amortization       (187,786)     (178,109)
                                                     ---------     ---------
                                                     $261,781      $129,797


NOTE 5 - OTHER ASSETS

Other assets consist of the following:
                                                  May 31, 1995  August 31, 1994
                                                   (Unaudited)    (Audited)

Real estate joint venture costs                      $182,668      $148,260
Due from stockholders (Note 10)                        81,206        81,206
Deposits, advances and other                           47,562        26,355
Organization costs                                     12,574        13,315
                                                       ------        ------
                                                     $324,010      $269,136


NOTE 6 - NOTES PAYABLE

The Company has a  line-of-credit  from a bank. This  line-of-credit  allows the
Company  to borrow up to  $1,000,000  at the  bank's  index  rate plus 1% (10.5%
(unaudited)  and 9.75%  (audited) per annum at May 31, 1995 and August 31, 1994,
respectively).  This line-of-credit is secured by certain property and equipment
and the  personal  guarantee  of the  majority  stockholder  of the  Company and
expired  November 24, 1994.  The amount  outstanding  was $525,000  (audited) at
August 31, 1994. (See Note 14)


NOTE 7 - NOTES PAYABLE TO STOCKHOLDERS

During 1994, the Company borrowed an aggregate of $960,000 from two stockholders
of the Company. The notes are due in two payments: $200,000 payable June 4, 1995
(unaudited-  but  repaid in  December  1994) and  $760,000  on August  22,  1995
(unaudited - but repaid in May 1995),  and bear interest at prime plus 2% (11.5%
(unaudited) and 10.75%  (audited) per annum at May 31, 1995 and August 31, 1994,
respectively).  Interest  expense  to  stockholders  was  approximately  $64,400
(unaudited) and $12,000 (audited) for the nine months ended May 31, 1995 and for
the twelve months ended August 31, 1994, respectively.

                                     FS-11

<PAGE>


                     WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)


NOTE 8 - PROVISION FOR INCOME TAXES

The  provision  for income taxes for the year ended August 31, 1994  consists of
the following:

Current
  Federal                                    $320,844
  State                                       110,689
                                              431,533

Deferred:
  Federal                                    (222,565)
  State                                      ( 67,320)
                                             (289,885)

Total                                        $141,648


The  deferred  tax  liability  of  $359,872  as of August  31,  1994  represents
primarily the tax effect of the temporary  difference  between  syndication fees
recognized on the accrual basis for financial statement purposes and on the cash
basis for tax return purposes.

Income tax  expense  differed  from the amounts  computed  by applying  the U.S.
Federal  income tax rate of 34% to pretax  income for the years ended August 31,
1994, as a result of the following:


Computed "expected" tax expense               $183,902
State taxes, net of Federal income
 tax benefit                                    30,477
Federal tax credits                            (92,841)
Other                                           20,110
                                             ----------
                                             $ 141,648


At August 31, 1993, the Company had  low-income  housing tax credits for Federal
tax purposes of approximately  $42,000 which were utilized during the year ended
August 31, 1994.


NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company is a guarantor of certain bank loans made to the  Partnerships.  The
aggregate  amounts  outstanding  on these  notes was  $391,000  (unaudited)  and
$611,500 (audited) as of May 31, 1995 and August 31, 1994,  respectively.  These
loans will be repaid by the  Partnerships  as the  limited  partners  make their
capital contributions to the respective Partnerships.

                                     FS-12

<PAGE>


                             WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)


NOTE 10 - RELATED PARTY TRANSACTIONS

The Company entered into an equity participation agreement with a key officer of
the Company and his spouse. This agreement provided for an investment of $80,000
by the Company to acquire a 50%  interest in certain  property,  which was later
converted  into  rental  property,  owned  by the key  officer  and his  spouse.
Pursuant  to terms of this  agreement,  all income and losses  arising  from the
operations of the rental property, including the allocation of income and losses
upon a sale or refinance  shall be  allocated  50% to the Company and 50% to the
key officer and his spouse.

In April, 1993, Wilfred N. Cooper, the Company's majority  stockholder  borrowed
$55,000.  This note  bears  interest  at 7.5% per annum and is due,  along  with
accrued interest,  in March 1995. The note,  together with accrued interest,  is
included in other assets in the  accompanying  financial  statements.  (See Note
14.)

During 1994, an officer and stockholder of the Company  borrowed  $25,000.  This
note  bears  interest  at 8% per annum and is due  March 31,  1995.  The note is
included in other assets in the accompanying financial statements.
(See Note 14.)


NOTE 11 - LEASES

The Company  leases office space,  automobiles  and  furniture  under  operating
leases and certain equipment under capital leases. The leases are non-cancelable
and require  future  minimum lease  payments as of August 31, 1994  (audited) as
follows:

                                             Capitalized    Operating
                                               Leases         Leases
Fiscal year:
  1995                                         $18,770       $80,265
  1996                                          18,770        88,679
  1997                                          18,770        78,075
  1998                                           9,385        73,730
  1999                                               0        10,977
                                             ---------        ------
Total minimum lease payments                    65,695      $331,726
Less amounts representing interest at rates
  ranging from 9.5% to 14.5% per annum         (11,770)
Present value of future minimum capitalized
  lease obligations                            $53,925


On October 3, 1994, the Company entered into a new capital  equipment lease that
replaced  existing  equipment  under a  capital  lease.  The new  capital  lease
requires monthly payments of $1,611 for principal and interest at 9.5% per annum
through October 1999. (See Note 14.)


                                     FS-13

<PAGE>

                             WNC & ASSOCIATES, INC.

                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
             May 31, 1995 (Unaudited) and August 31, 1994 (Audited)



NOTE 12 - CONCENTRATION OF CREDIT RISK

Receivable  are due from various  Partnerships,  substantially  all of which are
engaged in the real  estate  industry.  Such  Partnerships  are  dependent  upon
scheduled annual capital  contributions  from their limited partners in order to
pay the Company. Substantially all of the Partnerships are located in California
while the limited  partners to such  Partnerships  are  located  throughout  the
United States.

The Company maintains cash balances at certain financial  institutions in excess
of  amounts  insured  by  federal  agencies.   The  potential  uninsured  amount
aggregates  approximately  $349,000  (unaudited) and $70,000 (audited) as of May
31, 1995 and August 31, 1994, respectively.


NOTE 13 - STOCKHOLDERS' EQUITY

In July,  1992,  4,750 shares of the  Company's  common stock were issued to key
management  personnel  for notes  receivable  aggregating  $100,310.  Such notes
receivable are  collateralized  by the underlying  shares of common stock issued
and bear interest at the rate of 5% per annum.  Unpaid principal and interest on
such notes are due in July, 1995.


NOTE 14 - SUBSEQUENT EVENTS (UNAUDITED)

The company renewed its line of credit. The line-of-credit allows the Company to
borrow up to $500,000 at 1% over the prime rate as  published in The Wall Street
Journal  (10.5% per annum at May 31, 1995).  This  line-of-credit  is secured by
certain  property  and  equipment  and the  personal  guarantee  of the majority
stockholder of the Company and expires July 31, 1995.

In  November  1994,  the  Company  entered  into a capital  equipment  lease for
computer equipment and software. This capital lease requires monthly payments of
$1,558 for principal and interest at 11.25% per annum through August 1998.

The Company  renewed its lease for office  space and has a  commitment  under an
operating lease commencing  November 1, 1994. This lease is  non-cancelable  and
expires  November 1, 1997.  Future minimum rental payments due on this lease for
years ended August 31 follow:


                       1995                     $60,180
                       1996                      82,886
                       1997                      88,100
                       1998                      14,786
                                                 ------
                                               $245,952

The  shareholder  loans in the  aggregate  amount of $80,000 were  extended upon
their  maturity date (March 31,  1995).  The interest rate remained the same and
the notes are now due March 31, 1996


                                     FS-14
<PAGE>

                               

                                    EXHIBIT A
                            PRIOR PERFORMANCE TABLES


         The tables set forth below present  financial  information with respect
to programs  which were  sponsored  by the  Sponsor.  Each of these  programs is
considered to have  investment  objectives  similar to those of the Fund in that
they each own  interests  in local  limited  partnerships  which own  properties
generating low income housing  credits.  None of these tables are covered by the
reports of independent public accountants set forth in this document.

         For additional information as to the investment objectives and policies
of such prior programs see "Prior Performance  Summary." Additional  information
concerning  prior  performance  is  included  in  Part  II of  the  Registration
Statement  of the Fund and for the  public  programs  in the  Form  10-K  annual
reports.  Copies of these 10-K Forms are  available to any investor upon request
to the  Sponsor.  Any such request  should be directed to 3158  Redhill  Avenue,
Suite 120, Costa Mesa, California 92626.

         The  purpose  of the  tables  is to  provide  information  on the prior
performance of these partnerships so as to permit a prospective purchaser of the
Units to evaluate  the  experience  of the Sponsor in  sponsoring  such  limited
partnerships. The tables consist of:

         Table I           Experience in Raising and Investing Funds
         Table II          Compensation of Sponsor
         Table III         Operating Results of Prior Programs

         Tables  IV and V have been  omitted  since  none of the prior  programs
which were  sponsored  by the Sponsor  have sold their  properties  or completed
operations.

Definitions

The  following  terms used in the prior  performance  tables have the  following
meanings:



                                      A-1
<PAGE>



"Acquisition  Cost" includes all costs related to the acquisition of partnership
interests,  including  equity  contributions,  acquisition  and  selection  fees
payable to the  general  partners  and other fees and  expenses  incident to the
acquisition of partnership interests.

"Capital  Contributions"  represents the  contributions by investors in the
prior partnerships.

"GAAP" means generally accepted accounting principles.

"Months to Invest 90% of Amount  Available for  Investment"  means the length of
time, in months, from the offering date to the date of the closing of properties
which,  in the aggregate,  represented  the investment  commitment of 90% of the
amount available for investment.

"Percent leverage" means mortgage financing divided by total acquisition costs.

         IT  SHOULD  NOT  BE  ASSUMED  THAT  INVESTORS  IN  THIS  OFFERING  WILL
EXPERIENCE  RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THE
PARTNERSHIPS  DESCRIBED IN THE  FOLLOWING  TABLES.  INVESTORS  WILL NOT HAVE ANY
INTEREST  IN ANY OF THE  PARTNERSHIPS  DESCRIBED  IN THE TABLES OR IN ANY OF THE
PROPERTIES OWNED BY THE LOCAL LIMITED  PARTNERSHIPS IN WHICH THOSE  PARTNERSHIPS
HAVE INVESTED AS A RESULT OF THE ACQUISITION OF UNITS.

                                      A-2
<PAGE>



                                     TABLE I

TABLE I provides  information  regarding  the raising and  investing of funds by
partnerships  sponsored by the Sponsor which raised funds during the  three-year
period and one quarter  ended March 31, 1995.  The table  presents the aggregate
dollar amount of the offering,  the percentage of dollars raised which were used
to pay offering costs,  establish reserves and acquire  investments,  as well as
information  regarding  percent of leverage  and the timing for both raising and
investing funds. The information concerns investor capital  contributions as the
sole  source  of  funds  for  investment   and  excludes  the  nominal   capital
contributions by the general partners.

                                      A-3
<PAGE>



<TABLE>
                                     TABLE I

                    EXPERIENCE IN RAISING AND INVESTING FUNDS
                       (January 1, 1992 - March 31, 1995)



                                 
                                   HTCF II        %        CHTC II         %               HTCF III         %
<S>                              <C>                     <C>                          <C> 
Dollar amount offered            $12,000,000             $20,000,000                  $15,000,000
                                  
<S>                                <C>        <C>         <C>          <C>             <C>             <C>
Dollar amount raised               7,000,000  100.0       17,726,000   100.0           15,000,000      100.0

Less offering expenses:
  Selling commissions & discounts
  paid to non-affiliates             560,000    8.0        1,418,080     8.3            1,125,000        7.5
  Organizational expenses (a)        490,000    7.0          934,069     5.3            1,125,000        7.5
  Reserves                           269,000    3.8          648,974     3.7              803,220        5.4
                                     -------  -----           -------    ---              -------       ----                     
                                                                            

Percent invested as of
  close of offering                5,681,000   81.2        14,724,877   83.0           11,946,780       79.6

Acquisition costs:
  Prepaid items and fees
    related to purchase of
    property                          ------    ---          -------     ---               56,423        0.4
  Cash down payments (b)           5,051,000   72.2         3,129,537   74.0           10,767,000       71.8
  Acquisition fees                   630,000    9.0         1,595,340    9.0            1,123,357        7.5
  Other                               ------    ---         ---------    ---           ----------        ---
                                   _________   ____         _________    ___           __________       ____               
                                   
                                   
Total acquisition cost             5,681,000   81.2        14,724,877   83.0           11,946,780       79.6

Percent leverage (mortgage
  financing divided by total
  acquisition cost)                      82%                      68%                         82%

Date offering began                  4/27/90                  1/22/91                     1/02/92

Length of offering (months)               20                       24                          21

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                  20                       24                          21                              
- ------------------------------
<FN>

(a)      Consists of estimated legal, accounting, printing and other 
         organization and offering expenses.
(b)      Represents the capital  contributions of the partnership  paid or the 
         required payments to be paid to the local limited partnerships.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-4


<PAGE>

<TABLE>
                                     TABLE I


                    EXPERIENCE IN RAISING AND INVESTING FUNDS
                       (January 1, 1992 - March 31, 1995)



                                           CHTC III          %                        HTCF IV-I         %

<S>                                       <C>                                       <C>        
Dollar amount offered                     $30,000,000                               $10,000,000
                                          ===========                               ===========
<S>                                        <C>            <C>                       <C>              <C> 
Dollar amount raised                       18,000,000     100.0                     10,000,000       100.0

Less offering expenses:
  Selling commissions & discounts
  paid to non-affiliates                    1,440,000       8.0                        750,000         7.5
Organizational expenses (a)                   909,000       5.0                        686,300         6.9
  

Reserves                                      855,000       4.8                        280,600         2.8
                                              _______       ___                        _______         ___

Percent invested as of
  close of offering                        14,796,000      82.2                      8,283,100        82.8

Acquisition costs:
  Prepaid items and fees
   related to purchase of
   property                                   104,000       0.6                         34,100         0.3
  Cash down payments (b)                   13,072,000      72.6                      7,449,000        74.5
  Acquisition fees                          1,620,000       9.0                        800,000         8.0
  Other                                    ------           ---                         ------         ---


Total acquisition cost                     14,796,000      82.2                      8,283,100        82.8

Percentage leverage (mortgage
  financing divided by total
  acquisition cost)                               64%                                       77%

Date offering began                           2/17/93                                  10/20/93

Length of offering (months)                        17                                         9

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                           17                                         9
- -------------------------------
<FN>
(a)      Consists of estimated legal, accounting, printing and other organization and offering expenses.
(b)      Represents the capital  contributions of the partnership  paid or the required  payments to be paid to
         the local limited partnerships.
</FN>
</TABLE>

                                   UNAUDITED
                                      A-5
<PAGE>

<TABLE>
                                     TABLE I

                    EXPERIENCE IN RAISING AND INVESTING FUNDS
                       (January 1, 1992 - March 31, 1995)



                                      HTCF IV-2(c)            %                 CHTC IV-4(c)           %

<S>                                   <C>                                       <C>        
Dollar amount offered                 $20,000,000                               $25,000,000
                                      ===========                               ===========

<S>                                     <C>               <C>                     <C>              <C>  
Dollar amount raised                    8,085,000         100.0                   3,400,000        100.0

Less offering expenses:
  Selling commissions & discounts
  paid to non-affiliates                  606,000           7.5                     238,000          7.0
 Organizational expenses (a)              530,000           6.6                     255,000          7.5
  

Reserves                                   25,000           0.3                      ------          ---


Percent invested as of
  close of offering                           (c)                                       (c)

Acquisition costs:
  Prepaid items and fees
   related to purchase of
   property                                32,000           0.3                      34,000          1.0
  Cash down payments (b)                6,263,000          77.5                   5,855,000         ----
  Acquisition fees                        629,000           7.8                     238,000          7.0
  Other                                   ------            ---                      ------          ---
 

Total acquisition cost                        (c)                                       (c)

Percentage leverage (mortgage
  financing divided by total
  acquisition cost)                           (c)                                       (c)

Date offering began                          9/94                                      9/94

Length of offering (months)                   (c)                                       (c)

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                      (c)                                       (c)
- -------------------------------
<FN>

(a)      Consists of estimated legal, accounting, printing and other 
         organization and offering expenses.
(b)      Represents the capital  contributions of the partnership  paid or the 
         required payments to be paid to the local limited partnerships.
(c)      The offering was  continuing  as of March 31, 1995 and the  information
         presented  here is as of  March  31,  1995.  The  amount  of cash  down
         payments represents the aggregate capital  contribution and acquisition
         costs for local limited partnership  interests acquired as of March 31,
         1995.  As of March 31, 1995,  HTCF IV-2 and CHTC IV-4 are  committed to
         investments  that  require  cash down  payments in excess of the amount
         raised as of March 31, 1995. HTCF IV-2 and CHTC IV-4 require $8,351,000
         and $7,807,000, respectively of dollar amount raised for the properties
         acquired as of March 31, 1995.

</FN>
</TABLE>
                                   UNAUDITED
                                      A-6
<PAGE>

<TABLE>
                                     TABLE I

                    EXPERIENCE IN RAISING AND INVESTING FUNDS
                       (January 1, 1992 - March 31, 1995)



- -----------------------------P  R  I  V  A  T  E   O F F E R I N G S---------------------

                                          Four                      Four                          Two
                                  Partnerships              Partnerships                 Partnerships
                                 Organized  in              Organized in                 Organized in
                                  1992               %              1993       %                 1994      % 
                                              

<S>                                  <C>                      <C>                       <C>        
Dollar amount offered                $9,834,264               $7,419,969                $13,177,000
                                  =============               ==========                 ===========

<S>                                   <C>        <C>           <C>         <C>           <C>           <C>  
Dollar amount raised                  9,834,264  100.0         7,419,969   100.0         13,177,000    100.0

Less offering expenses:
  Selling commissions & discounts 
  paid to non-affiliates                959,472    9.8           696,627     9.4            475,866     3.6
  Organizational expenses (a)           167,623    1.7           142,999     1.9            354,314     2.7
  Reserves                              231,715    2.4           162,801     2.2            391,800     3.0
                                        -------    ---           -------     ---            -------     ---
  
Percent invested as of
  close of offering                   8,475,454   86.1         6,417,542    86.4         11,955,020    90.7

Acquisition costs:
  Prepaid items and fees
    related to purchase of
    property                             ------    ---            ------    ---              ------     ---
  Cash down payments (b)              7,505,501   76.3         5,500,686    74.1          11,141,539    84.6
  Acquisition fees                      631,184    6.4           750,000    10.1             655,000     5.0
  Other                                 338,769    3.4           166,856     2.2             158,481     1.2
                                        -------    ---           -------     ---             -------     ---
 
Total acquisition cost                8,475,454   86.1         6,417,542    86.4          11,955,020    90.7

Percent leverage (mortgage
  financing divided by total
  acquisition cost)                         74%                      77%                         72%

Date offering began                     Various                  Various                     Various

Length of offering (months)                   3                        3                          3

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                      3                        3                          3
- ------------------------------
<FN>

(a)      Consists of estimated legal, accounting, printing and other 
         organization and offering expenses.
(b)      Represents the capital  contributions of the partnership  paid or the 
         required payments to be paid to the local limited partnerships.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-7


<PAGE>






                                         


                                    TABLE II

TABLE II presents information concerning the cumulative compensation paid to the
Sponsor  for the period from  January 1, 1992 to March 31, 1995 with  respect to
programs  presented  in TABLE I and on an  aggregate  basis with  respect to all
other programs  which have been  sponsored by the Sponsor.  None of the programs
presented  in TABLE II have been  liquidated,  nor have  there been any sales or
refinancing of any of the programs' investments.

                                      A-8
<PAGE>

<TABLE>
                                    TABLE II

                             COMPENSATION TO SPONSOR
                       (January 1, 1992 - March 31, 1995)



                                                     HTCF IV-1             HTCF IV-2            CHTC IV-4
                                                                                (a)                  (a)

<S>                                                      <C>                    <C>                  <C> 
Date offering commenced                                  10/93                  9/94                 9/94

<S>                                                <C>                    <C>                  <C>       
Dollar amount raised                               $10,000,000            $8,085,000           $3,400,000

Amount paid to sponsor from 
 proceeds of offering:
     Underwriting fees                                       0                     0                    0
     Acquisition fees                                  750,000               629,040              238,000
     Syndication fee                                         0                     0                    0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                         65,636              (22,811)             (19,803)

Amount paid to sponsor from operations: 
   Property management fees                                  0                     0                    0
   Partnership management fees                               0                     0                    0
   Reimbursements                                            0                     0                    0
   Leasing commissions                                       0                     0                    0
   

Dollar amount of property sales and
  refinancing before deducting
  payments to sponsor: 
     Cash                                                    0                     0                    0
     Notes                                                   0                     0                    0
     
Amount paid to sponsor from property 
 sales and refinancing:
     Real estate commissions                                 0                     0                    0
     Incentive fee                                           0                     0                    0
     Other                                                   0                     0                    0
- ------------------------------------
<FN>

(a)      The offering was continuing as of March 31, 1995.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-9


<PAGE>


<TABLE>
                                    TABLE II

                             COMPENSATION TO SPONSOR
                       (January 1, 1992 - March 31, 1995)



                                                       HTCF II               CHTC II             HTCF III

<S>                                                       <C>                   <C>                  <C> 
Date offering commenced                                   4/90                  1/91                 1/92

<S>                                                 <C>                  <C>                  <C>        
Dollar amount raised                                $7,000,000           $17,726,000          $15,000,000

Amount paid to sponsor from 
 proceeds of offering:
     Underwriting fees                                       0                     0                    0
     Acquisition fees                                  549,000             1,595,340            1,350,000
     Advisory fee (a)                                        0                     0                    0
     Syndication fee                                         0                     0                    0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                       (86,549)             (174,808)            (317,036)

Amount paid to sponsor from operations:
   Property management fees                                  0                     0                    0
   Partnership management fees (b)                      42,655                43,201              101,558
   Reimbursements                                            0                     0                    0
   Leasing commissions                                       0                     0                    0
   

Dollar amount of property sales and
  refinancing    before    deducting
  payments to sponsor:
     Cash                                                    0                     0                    0
     Notes                                                   0                     0                    0
     

Amount paid to sponsor from property 
 sales and refinancing:
     Real estate commissions                                 0                     0                    0
     Incentive fee                                           0                     0                    0
     Other                                                   0                     0                    0
- ------------------------------------
<FN>

(a)      Advisory fee in some instances includes development fee paid by local 
         limited partnership to sponsor.
(b)      Partnership management fees were paid from partnership reserves in the 
         instances where amounts paid to sponsor from operations exceeds dollar 
         amount of cash generated from operations.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-10

<PAGE>

<TABLE>
                                    TABLE II

                             COMPENSATION TO SPONSOR
                       (January 1, 1992 - March 31, 1995)



                                                              CHTC III            Other Public
                                                                                  Programs (b)

<S>                                                               <C>                         
Date offering commenced                                           2/93                 Various

<S>                                                        <C>                     <C>        
Dollar amount raised                                       $18,000,000             $16,221,500

Amount paid to sponsor from 
 proceeds of offering:
     Underwriting fees                                               0                       0
     Acquisition fees                                        1,620,000               1,320,600
     Advisory fee (a)                                                0                 733,050
     Syndication fee                                                 0                       0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                                111,775                  12,230

Amount   paid   to   sponsor    from
operations:                                                          
   Property management fees                                          0                 290,798
   Partnership management fees (b)                                   0                       0
   Reimbursements                                                    0                       0
   Leasing commissions                                               0                       0 

Dollar amount of property sales and
  refinancing    before    deducting
  payments  to sponsor:
     Cash                                                             0                       0
     Notes                                                            0                       0
     

Amount paid to sponsor from property 
 sales and refinancing:
     Real estate commissions                                         0                       0
     Incentive fee                                                   0                       0
     Other                                                           0                       0
- ------------------------------------
<FN>

(a)      Advisory fee in some instances includes development fee paid by local 
         limited partnership to sponsor.
(b)      Includes three public programs.
(c)      Partnership management fees were paid from partnership reserves in the 
         instances where amounts paid to sponsor from operations exceeds dollar 
         amount of cash generated from operations.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-11

<PAGE>

<TABLE>
                                                  TABLE II

                                           COMPENSATION TO SPONSOR
                                     (January 1, 1992 - March  31, 1995)



                                       ------------P  R  I  V  A  T  E  O  F  F  E  R  I  N  G  S-------------



                                                Four                  Four                Two               All
                                         Partnerships         Partnerships       Partnerships             Other
                                         Organized in         Organized in       Organized in           Private
                                                 1992                 1993               1994      Partnerships      
                                          

<S>                                               <C>                <C>                 <C>       <C>         
Date offering commenced                           1/92               1/93                7/94      1990 & prior

<S>                                         <C>                <C>                <C>                          
Dollar amount raised                        $9,834,264         $7,419,969         $13,177,000               N/A

Amount paid to sponsor from proceeds of offering:
     Underwriting fees                               0                  0                   0               N/A
     Acquisition fees                                0                  0                   0               N/A
     Advisory fee (a)                          652,281                  0                   0               N/A
     Syndication fee                           288,184            750,000             655,000               N/A

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                 98,371            454,434            (90,610)              N/A

Amount   paid   to   sponsor    from
operations:
   Property management fees                          0                  0                   0                0
   Partnership management fees                  11,500              7,000                   0          290,798
   Reimbursements                                    0                  0                   0                0
   Leasing commissions                               0                  0                   0                0
   

Dollar amount of property sales and
  refinancing    before    deducting
  payments  to sponsor:
     Cash                                            0                  0                   0                0
     Notes                                           0                  0                   0                0
     

Amount paid to sponsor from property 
  sales and refinancing:
     Real estate commissions                         0                  0                   0                0
     Incentive fee                                   0                  0                   0                0
     Other                                           0                  0                   0                0
- ------------------------------------
<FN>

(a)  Advisory  fee in some  instances  includes  development  fee  paid by local
     limited partnership to sponsor. 
(b)  Includes 28 private programs sponsored since January  1984.  
(c)  Partnership  management  fees were  paid  from  partnership
     reserves in the instances where amounts paid to sponsor from operations  
     exceeds dollar amount of cash generated from operations.

</FN>
</TABLE>
                                   UNAUDITED
                                      A-12
<PAGE>

                                                                        
                                    TABLE III

TABLE III presents the operating  results for all partnerships  sponsored by the
Sponsor  which  closed  during the five years and three  months  ended March 31,
1995. The prior partnerships are structured as investment partnerships acquiring
interests in operating  partnerships.  The investment  partnerships  account for
such investments  using the equity method of accounting which recognizes each of
such partnership's pro rata share of the operating partnership's total income or
loss. Revenues generated by the investment partnerships consist substantially of
interest on short-term  investments.  This interest income  generally  decreases
after the initial two years of  operations  as funds  available  for  investment
decrease.  This  decrease  in funds  arises  from the  investment  partnership's
payments of capital contributions due.

For the prior public partnerships presented, which report on a GAAP basis, "Cash
generated  (or used) from  operations"  is per the  program's  Statement of Cash
Flows.  The prior private  programs  maintain their books and records on the tax
basis of  accounting  and not on the  basis  of  generally  accepted  accounting
principles  (GAAP),  and "Cash  generated(or  used)  from  operations"  for such
programs is per their respective books and records.  The significant  difference
is that  depreciation  expense  on a tax basis as  compared  to a GAAP  basis is
greater in the early years of operations.

Other  information  included in the table  includes data on cash  generated from
operations  and tax and  cash  distribution  information  per  $1,000  invested,
including Tax Credit  allocations.  Federal Tax Credit  information for HTCF and
CHTC reflects a one-time  election to increase the  allocations for 1990 to 150%
of the amount which would otherwise have been allocable,  which will result in a
corresponding reduction in total credits allocable in future years.

                                      A-13
<PAGE>

<TABLE>
                                                                     TABLE III
                                                         OPERATING RESULTS OF PRIOR PROGRAMS



                                               ----------------------------------- HTCF -----------------------------------------

                                          1990        1991         1992         1993          1994       1995(a)
                                          

<S>                                  <C>           <C>        <C>            <C>            <C>          <C>   
Gross revenue                        $  60,541     $ 7,149    $     237      $   123        $  817       $   31
Less:
<S>                                    <C>         <C>           <C>          <C>           <C>          <C>   
   Operating expenses                  108,442     101,340       99,448       96,723        87,721       22,174
   Interest                                  0           0            0            0             0            0              
   Depreciation and amortization        44,789      10,707       11,949       34,982        14,922        3,155
Equity in losses in local partnerships 485,776     384,102      373,851      319,090       320,319      120,000 
                                       -------     -------      -------      -------       -------      -------

Net income (loss) - GAAP basis        (578,466)   (489,000)    (485,011)    (450,672)     (422,145)    (145,298)

Taxable loss from operations          (707,276)   (639,735)    (611,210)    (521,016)     (520,437)    (169,505)

Cash generated (used) from operations (184,068)      34,960     (10,046)      (6,227)         (292)        (124)
Cash generated from sales                    0            0           0            0             0            0
Cash generated from refinancing              0            0           0            0             0            0

Less: Cash distributions to investors        0            0           0            0             0            0

Cash generated (deficiency) after cash  
 distributions and special items      (184,068)      34,960     (10,046)      (6,227)         (292)        (124)


TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                     (128)         (133)       (127)        (108)         (108)          (36)
     From gain on sale                      0             0           0            0             0

Federal tax credits                       164           140         141          141           141           N/A
California tax credits                      0             0           0            0             0             0

Cash distributions to investors             0             0           0            0             0             0

Amount (in percentage terms)
 remaining invested in program
 properties at end of year
 (original total acquisition
 costs of properties retained
 divided by total original
 acquisition costs of all
 properties)                              100           100         100          100           100           100
- --------------------------------
<FN>

(a)     Three months ended March 31, 1995.

N/A     The amount of tax  credits is not  available  until the  preparation  
        of the partnership's tax return which will be after December 31, 1995.
</FN>
</TABLE>


                                   UNAUDITED
                                      A-14

<PAGE>

<TABLE>
                                   TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS




                               ------------------            CHTC              -------------------------------\



                                          1990        1991       1992          1993         1994        1995(a)                
                                          ----        ----       ----          ----         ----        -------
 
<S>                                   <C>         <C>        <C>          <C>            <C>           <C>       
Gross revenue                         $ 52,531    $ 27,252   $  4,698     $   2,885      $ 2,764       $   914   
Less:
<S>                                     <C>         <C>       <C>           <C>          <C>            <C>   
   Operating expenses                   91,946      90,384    131,686       130,982      126,127        32,490
   Interest                                  0           0          0             0            0             0 
   Depreciation and amortization       101,240      26,730     26,730        26,728       19,509         3,762 
Equity in losses in local partnerships 438,696     868,859    506,785       375,550      437,264       108,755


Net income (loss) - GAAP basis        (579,351)  (958,721)  (660,503)     (530,375)    (580,136)     (144,057)

Taxable loss from operations          (509,877)  (892,555)  (478,715)     (593,734)    (581,116)     (154,253)

Cash generated (used) from operations (399,791)   (17,055)   (15,946)      (17,055)     (11,490)         2,712
                                         
Cash generated from sales                    0           0          0            0             0             0
Cash generated from refinancing              0           0          0            0             0             0

Less: Cash distributions to investors        0           0          0            0             0             0
                                     
Cash generated (deficiency) after cash (399,791)   (17,055)   (15,946)     (17,055)      (11,490)         2,712
 distributions and special items

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                       (68)       (119)       (64)         (80)         (117)           (21)
     From gain on sale                       0           0          0            0             0              0

Federal tax credits                         82          83         98          100           101           N/A
California tax credits                     145         176        137           74            19             0

Cash distributions to investors              0           0          0            0             0             0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs of
 properties retained divided by total
 original acquisition costs of all
 properties)                               100         100        100          100           100           100
 --------------------------------
<FN>

(a)     Three months ended March 31, 1995.

N/A     The amount of tax credits is not available until the preparation of the
        partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>


                                   UNAUDITED
                                      A-15
<PAGE>

<TABLE>
                                                             TABLE III
                                               OPERATING RESULTS OF PRIOR PROGRAMS


                                     /---------------------------------------------- HTCF II ---------------------------------



                                       1990(a)        1991       1992          1993          1994         1995(c)
                                       -------        ----       ----          ----          ----         -------

<S>                                 <C>             <C>        <C>         <C>            <C>            <C>     
Gross revenue                       $    1,991      23,597     23,054      $  11,193      $ 9,287        $  2,467
Less:                                                                           
<S>                                     <C>        <C>        <C>            <C>          <C>              <C>    
   Operating expenses                   39,023     108,494    145,784        154,060      157,875          42,161 
   Interest                                  0           0          0              0            0               0 
   Depreciation and amortization         4,038      15,710     23,584         22,079       23,905           5,338
Equity in losses in local partnerships 198,483     384,244    551,431        634,893      544,630         128,700
                                       -------     -------    -------        -------      -------         -------
                                               
Net income (loss) - GAAP basis        (239,553)   (484,851)  (697,745)      (799,839)    (717,123)       (173,732)

Taxable loss from operations          (262,584)   (541,209)     6,481         (8,894)      40,620           5,687

Cash generated (used)from operations   542,786    (541,209)     6,481         (8,894)      40,620           5,687
Cash generated from sales                    0           0          0              0            0               0
Cash generated from refinancing              0           0          0              0            0               0

Less: Cash distributions to investors        0           0          0              0            0               0
 
Cash generated (deficiency) after cash 542,786    (541,209)     6,481         (8,894)      40,620           5,687
 distributions and special items

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                   (b)(11)        (98)      (116)           (125)        (116)           (28)
     From gain on sale                      0           0          0               0            0              0

Federal tax credits                        71         130        121             138          146            N/A
California tax credits                      0           0          0               0            0              0

Cash distributions to investors             0           0          0               0            0              0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties                        100         100        100             100           100           100
- --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's  entry date.  Amount shown is partnership's average.
(c)      Three months ended March 31, 1995.

N/A      The amount of tax  credits is not  available  until the  preparation  
         of the partnership's tax return which will be after December 31, 1995.
</FN>
</TABLE>

                                   UNAUDITED
                                      A-16

<PAGE>

<TABLE>
                                                        TABLE III
                                               OPERATING RESULTS OF PRIOR PROGRAMS

                      /--------------------------------------------- CHTC II ------------------------------------------\


                                               1991(a)            1992                    1993            1994        1995(d)
 
<S>                                          <C>            <C>                    <C>              <C>            <C>      
Gross revenue                                $   7,243      $   72,092             $   133,580      $   61,226     $   7,465
Less:                                                          
<S>                                              <C>           <C>                     <C>             <C>            <C>   
   Operating expenses                            8,896         105,481                 158,082         355,671        55,899
   Interest                                      7,239           2,157                       0               0             0
   Depreciation and amortization                 9,312          32,961                  52,480          47,565        13,709
Equity in losses in local partnerships          54,679         731,542               1,081,114       1,194,095       253,000

Net income (loss) - GAAP basis                 (72,883)       (800,049)             (1,158,096)     (1,536,105)     (315,143)

Taxable loss from operations                   (64,627)       (794,969)             (1,208,709)     (1,425,376)     (364,475)

Cash generated (used) from operations           (1,407)          3,637                (221,444)         42,033       (42,436)
Cash generated from sales                            0               0                       0               0             0
Cash generated from refinancing                      0               0                       0               0             0  

Less: Cash distributions to investors                0               0                       0               0             0

Cash generated (deficiency) after cash          (1,407)          3,637                (221,444)         42,033       (42,436)
 distributions and special items

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                           (b)(11)           (114)                     (68)           (85)           (21)
     From gain on sale                              0               0                        0              0              0

Federal tax credits                                14              53                       74             85            N/A
California tax credits                             50             132                      104            109            N/A

Cash distributions to investors                     0           (c)44                        0              0              0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                               100             100                      100             100           100

- --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's  entry date.  Amount shown is partnership's average.
(c)      This amount was  distributed  from CHTCII's  reserves to investors who 
         purchased their units prior to January 1, 1991.
(d)      Three months ended March 31, 1995.

N/A      The amount of tax credits is not available until the preparation of the
         partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-17
<PAGE>

<TABLE>
                                    TABLE III

                         OPERATING RESULTS OF PRIOR PROGRAMS



                              ----------------------    HTCF   III     -------------------------


                                                     1992(a)           1993          1994      1995(c)
                                                     -------           ----          ----      -------

<S>                                              <C>              <C>              <C>          <C>   
Gross revenue                                    $    45,236      $ 137,116        87,521       17,731
Less:
<S>                                                   <C>           <C>           <C>           <C>    
   Operating expenses                                 13,036        120,054       313,134       74,290 
   Interest                                              679              0             0            0
   Depreciation and amortization                       3,394         24,478        45,724       11,792
Equity in losses in local partnerships                68,933        779,251     1,323,487      295,000

Net income (loss) - GAAP basis                       (40,806)      (786,667 )  (1,594,824)    (363,351)

Taxable loss from operations                         (36,895)      (850,051)    1,594,118)    (402,523)

Cash generated (used) from operations                 53,333       (393,615)      (38,224)     (40,088)
Cash generated from sales                                  0              0             0            0
Cash generated from refinancing                            0              0             0            0

Less:  Cash distributions to investors                     0              0             0            0

Cash generated (deficiency) after cash
 distributions and special items                      53,333       (393,615)      (38,224)     (40,088)

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                  (b)(4)           (56)           (105)        (27)
     From gain on sale                                    0              0               0           0

Federal tax credits                                       2             71             119          N/A
California tax credits                                    0              0               0            0

Cash distributions to investors                           0              0               0            0

Amount (in percentage terms) remaining  
invested in program properties at end of
year (original total acquisition costs 
of properties  retained divided by total
original acquisition costs of all properties)           100            100             100          100
- --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's entry date.  Amount shown is partnership's  average.
(c)      Three months ended March 31, 1995.

NA       The amount of tax credits is not available until the preparation of the
         partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>


                                   UNAUDITED
                                      A-18

<PAGE>
<TABLE>
                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS



                         /------------------------------    CHTC  III   ---------------------------\


                                                1993(a)                1994          1995(c)
                                                -------                ----          ------

<S>                                         <C>                <C>                <C>       
Gross revenue                               $    22,885        $    156,271       $   51,632
Less:
<S>                                               <C>                <C>              <C>   
   Operating expenses                             7,204              86,306           38,313
   Interest                                           0                   0                0
   Depreciation and amortization                      0              41,757           14,368
Equity in losses in local partnerships           32,260             352,511          127,000
                                               --------           ---------          -------
 

Net income (loss) - GAAP basis                  (17,579)           (324,303)        (128,049)

Taxable loss from operations                    (30,475)           (388,247)        (126,617)

Cash generated (used) from operations            (9,831)           (225,005)          346,622
Cash generated from sales                             0                   0                 0
Cash generated from refinancing                       0                   0                 0

Less: Cash distributions to investors                 0                   0                 0

Cash generated (deficiency) after cash           (9,831)           (225,005)          346,622
 distributions and special items

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                             (b)(4)                (21)                (7)
     From gain on sale                               0                   0                  0

Federal tax credits                                  6                  61                N/A
California tax credits                               0                  81                N/A

Cash distributions to investors                      0                   0                  0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties                                 100                 100                100
- --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's entry date.  Amount shown is partnership's average.
(c)      Three months ended March 31, 1995.

NA       The amount of tax credits is not available until the preparation of the
         partnership's tax return which will be after December 31, 1995.
</FN>
</TABLE>


                                   UNAUDITED
                                      A-19


<PAGE>

<TABLE>
                                               TABLE III
                                    OPERATING RESULTS OF PRIOR PROGRAMS



                              /-----------------HTCF   IV-1--------------\   /--------------HTCT VI-2----------------\


                                          1994(a)          1995(c)                  1994(a)           1995(c)
                                                                                                  
<S>                                   <C>             <C>                         <C>               <C>      
Gross revenue                         $    85,261     $    17,307                 $  3,475          $   8,469
Less:     
<S>                                        <C>              <C>                    <C>                  <C>  
   Operating expenses                      47,149           8,379                  27,269               6,167
   Interest                                     0               0                       0                 376
   Depreciation and amortization           20,797           7,701                   1,638               4,404
Equity in losses in local partnerships    413,316         173,000                 240,698              69,000

Net income (loss) - GAAP basis           (396,001)       (171,773)               (266,130)            (71,478)

Taxable loss from operations             (417,185)       (173,328)               (228,979)            (60,024)

Cash generated (used) from operations      46,649          19,058                 (25,518)               2,707
Cash generated from sales                       0               0                       0                    0
Cash generated from refinancing                 0               0                       0                    0

Less: Cash distributions to investors           0               0                       0                    0

Cash generated (deficiency) after cash     46,649           19,058                (25,518)               2,707
 distributions and special items

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                       (b)(41)             (17)                 (b)(40)                 (9)
     From gain on sale                          0                0                       0                   0

Federal tax credits                            31              N/A                      22                 N/A
California tax credits                          0                0                       0                   0


Cash distributions to investors                 0                0                       0                   0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                            100              100                    100                 100
 --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's  entry date.  Amount shown is partnership's average.
(c)      Three months ended March 31, 1995.

N/A      The amount of tax credits is not available until the preparation of the
         partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-20

<PAGE>

<TABLE>
                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS



                           /-------------------------CHTC  IV-4--------------------------\


                                                                       1994(a)
                                                                                                      1995(c)

<S>                                                                 <C>                            <C>       
Gross revenue                                                       $    1,613                     $    2,930
Less:
<S>                                                                     <C>                            <C>   
   Operating expenses                                                   13,399                         11,042
   Interest                                                                  0                         25,954
   Depreciation and amortization                                             0                          1,496
Equity in losses in local partnerships                                  (2,212)                         5,674
                                                                        -------                         -----

Net income (loss) - GAAP basis                                          (9,574)                       (40,876)

Taxable loss from operations                                           (11,786)                       (43,388)

Cash generated (used) from operations                                    1,602                        (21,405)
Cash generated from sales                                                    0                              0
Cash generated from refinancing                                              0                              0

Less: Cash distributions to investors                                        0                              0
    
Cash generated (deficiency) after cash                                 
 distributions and special items                                         1,602                        (21,405)

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                                    (b)(5)                           (16)
     From gain on sale                                                      0                              0

Federal tax credits                                                         0                            N/A
California tax credits                                                      0                            N/A

Cash distributions to investors                                             0                              0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties                                                        100                            100

- --------------------------------
<FN>

(a)      Partial year of operations.
(b)      Tax loss allocated to an investor in the first year is dependent upon 
         an investor's  entry date.  Amount shown is partnership's average.
(c)      Three months ended March 31, 1995.

N/A      The amount of tax credits is not available until the preparation of the
         partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>


                                   UNAUDITED
                                      A-21

<PAGE>
<TABLE>
                                    TABLE III

                       OPERATING RESULTS OF PRIOR PROGRAMS





                                                                     THREE PRIVATE
                                  /--------------------------------OFFERINGS CLOSED DURING 1990--------------------------------\


                                         1990(a)           1991        1992           1993         1994      1995(c)
                                         -------           ----        ----           ----         ----      -------

<S>                                   <C>             <C>         <C>            <C>             <C>          <C>  
Gross revenue                         $   66,706      $ 119,509   $  88,034      $  64,216       31,868       1,238
Less:
<S>                                          <C>         <C>          <C>            <C>          <C>         <C>    
   Operating expenses                        967         10,907       9,631          4,679        9,733       5,000  
   Interest                                8,134         33,951      33,123         20,328        6,542       1,636
   Depreciation and amortization             200          1,700       8,373          1,200        3,200         800
Equity in losses in local partnerships   130,580        430,758     439,073        446,146      430,952     105,583
                                       ---------       --------     -------        -------      -------     -------

Net income (loss) - GAAP basis           (73,175)      (357,807)   (402,166)      (408,137)    (418,559)   (111,781)

Cash generated (used) from operations     (8,560)       (32,807)    (32,646)       (19,122)     (10,106)     (3,762)
Cash generated from sales                      0              0           0              0            0           0
Cash generated from refinancing                0              0           0              0            0           0

Less: Cash distributions to investors          0              0           0              0            0           0

Cash generated (deficiency) after cash
  distributions and special items          (8,560)       (32,296)    (32,646)       (19,122)     (10,106)     (3,762)
  

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                     (b)(27)            (135)      (103)           (104)        (108)        (29)
     From gain on sale                        0                0          0               0            0           0

Federal tax credits                          35              107        137             132          140         N/A
California tax credits                      114              114        114              36           36         N/A

Cash distributions to investers               0                0          0               0            0           0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                         100          100          100          100          100         100
 
- --------------------------------
<FN>

(a)     Partial year of operations.
(b)     Tax loss  allocated  to an  investor in the first year is  dependent  
        upon an investor's entry date.  Amount  shown is partnership's average.
(c)     Three months ended March 31, 1995

N/A     The amount of tax  credits is not  available  until the  preparation of 
        the partnership's tax return which will be after December 31, 1995.
</FN>
</TABLE>

                                   UNAUDITED
                                      A-22

<PAGE>


<TABLE>
                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS



                                                                  TWO PRIVATE
                            /---------------------------OFFERINGS CLOSED DURING 1991------------------------------\


                                             1991(a)          1992            1993          1994        1995(c)
                                             -------          -----           -----         -----       -------

<S>                                       <C>             <C>           <C>             <C>           <C>      
Gross revenue                             $   71,701      $156,628      $   145,987     $ 100,394     $  45,352
Less:        
<S>                                            <C>           <C>             <C>            <C>             <C>
   Operating expenses                          1,284         6,391           11,897         3,149           391
   Interest                                    2,113        12,612           16,556        14,397         3,599
   Depreciation and amortization               1,000         2,000            2,000         2,000           500
Equity in losses in local partnerships       255,066       293,823          405,742       447,351       109,601
                                            ---------      ---------        -------       -------       -------

Net income (loss) - Tax basis               (187,762)     (158,198)        (290,208)     (366,503)      (68,739)

Cash generated (used) from operations          1,660        (8,643)         (20,287)      (12,155)       44,661
Cash generated from sales                          0             0                0             0             0
Cash generated from refinancing                    0             0                0             0             0

Less: Cash distributions to investors              0             0                0             0             0

Cash generated (deficiency) after cash 
 distributions and special items               1,660        (8,643)         (20,287)      (12,155)        44,661
   
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                         (b)(69)          (64)            (102)          (102)           (24)
     From gain on sale                            0             0                0              0              0

Federal tax credits                               62           124             141            141             N/A
California tax credits                             0             0               0              0               0

Cash distributions to investors                    0             0               0              0               0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                              100           100             100            100             100
 
- --------------------------------
<FN>

(a)    Partial year of operations.
(b)    Tax loss  allocated  to an  investor in the first year is  dependent  
       upon an investor's  entry date.  Amount shown is partnership's average.
(c)    Three months ended March 31, 1995

N/A    The amount of tax  credits is not  available  until the  preparation  of the
       partnership's tax return which will be after December 31, 1995.
</FN>
</TABLE>


                                   UNAUDITED
                                      A-23
<PAGE>


<TABLE>
                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS





                                                                           FOUR PRIVATE
                                                 /--------------------OFFERINGS CLOSED DURING 1992----------------\


                                                                              
                                                           1992(a)            1993                 1994        1995(c)
                                                           -------            ----                 ----        -------

<S>                                                      <C>           <C>                   <C>          <C>        
Gross revenue                                            $ 179,081     $   394,031           $  261,322   $   166,719
Less:                                                     
<S>                                                          <C>            <C>                   <C>           <C>  
   Operating expenses                                        9,951          12,208                9,958         8,000
   Interest                                                 38,574          40,265               20,139         4,830
   Depreciation and amortization                                 0           1,346                2,619           655
Equity in losses in local partnerships                     535,833         967,507            1,098,116       269,038


Net income (loss) - Tax basis                             (405,277)       (627,295)            (869,510)     (115,804)

Cash generated (used) from operations                      (31,736)        (28,897)              (6,385)      153,889
Cash generated from sales                                        0               0                    0             0
Cash generated from refinancing                                  0               0                    0             0

Less: Cash distributions to investors                            0               0                    0             0

Cash generated (deficiency) after cash
 distributions and special items                           (31,736)        (28,897)              (6,385)      153,889


TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                       (b)(47)             (73)                 (110)         (14)
     From gain on sale                                          0                0                     0            0

Federal tax credits                                            63              122                   134          N/A
California tax credits                                        104               92                    92          N/A

Cash distributions to investors                                 0                0                     0            0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                                            100             100                   100            100
 
- --------------------------------
<FN>

(a)    Partial year of operations.
(b)    Tax loss  allocated  to an investor in the first year is  dependent upon 
       an investor's entry date. Amount shown is partnership's average.
(c)    Three months ended March 31, 1995.

N/A    The amount of tax  credits is not  available  until the  preparation  of 
       the partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-24
<PAGE>

<TABLE>
                                    TABLE III
                       OPERATING RESULTS OF PRIOR PROGRAMS
                                   (Continued)







                                              FOUR PRIVATE                            TWO PRIVATE
                             ---OFFERINGS    CLOSED   DURING    1993---    ---OFFERINGS CLOSED DURING 1994---



                                                                                         
                                         1993(a)        1994      1995(c)                1994(a)               1995(c)
                                         -------        ----      -------                -------               -------

<S>                                    <C>           <C>         <C>                     <C>                 <C>       
Gross revenue                          $ 130,878     $ 332,016   $ 206,020               $  7,619            $  14,720 
Less:      
<S>                                        <C>          <C>          <C>                  <C>                   <C>    
   Operating expenses                      2,834        16,958       7,325                111,523               10,019 
   Interest                                6,111        14,094       3,524                      0                    0 
   Depreciation and amortization          13,808        12,262       5,111                  1,305                4,392
Equity in losses in local partnerships   435,734       959,392     192,432                129,352              131,919

Net income (loss) - Tax basis           (327,609)     (670,690)     (2,372)              (234,561)            (131,610)

Cash generated (used) from operations    121,645      (127,094     198,695                (39,826)             (48,453)
Cash generated from sales                      0             0           0                      0                    0
Cash generated from refinancing                0             0           0                      0                    0

Less: Cash distributions to investors          0             0           0                      0                    0

Cash generated (deficiency) after cash 
  distributions and special items         121,645     (127,094)    198,695                (39,826)             (48,453)


TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                    (b)(48)           (113)          2                    
     From gain on sale                       0               0           0                 (b)(76)                  (43)
                                                                                              

Federal tax credits                          49            101         N/A                      31                   N/A
California tax credits                       46             46           0                       0                     0

Cash distributions to investors               0              0           0                       0                     0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties)                         100            100         100                     100                   100
- --------------------------------
<FN>

(a)    Partial year of operations.
(b)    Tax loss  allocated  to an investor in the first year is  dependent upon 
       an investor's entry date. Amount shown is partnership's average.
(c)    Three months ended March 31, 1995.

N/A    The amount of tax  credits is not  available  until the  preparation  of the
       partnership's tax return which will be after December 31, 1995.

</FN>
</TABLE>

                                   UNAUDITED
                                      A-25
<PAGE>



                                    EXHIBIT B

                           WNC HOUSING TAX CREDIT FUND V

                         AGREEMENT OF LIMITED PARTNERSHIP

                                 Table of Contents

                                                                          Page
ARTICLE 1         DEFINITIONS.............................................. B-4

ARTICLE 2         FORMATION; NAME; PLACE OF BUSINESS;
                  PURPOSE AND TERM.........................................B-17

         Section 2.1       Formation of Partnership........................B-17
         Section 2.2       Name............................................B-17
         Section 2.3       Place of Business...............................B-17
         Section 2.4       Purpose.........................................B-17
         Section 2.5       Agent for Service of Process....................B-18
         Section 2.6       Term............................................B-18

ARTICLE 3         PARTNERS AND CAPITAL.....................................B-18

         Section 3.1       General Partner.................................B-18
         Section 3.2       Initial Limited Partner.........................B-18
         Section 3.3       Additional Limited Partners;
                                    Terms of Offering......................B-19
         Section 3.4       Payment or Return of Additional
                                    Limited Partners' Capital..............B-20
         Section 3.5       Liability of Limited Partners...................B-23
         Section 3.6       Miscellaneous...................................B-23

ARTICLE 4         DISTRIBUTIONS OF CASH; ALLOCATIONS OF
                  PROFITS AND LOSSES.......................................B-23

         Section 4.1       Distributions of Cash Available
                                    for Distribution.......................B-23
         Section 4.2       Distributions of Sale or Refinancing Proceeds...B-23
         Section 4.3       Profits and Losses..............................B-25
         Section 4.4       Certain Provisions Related to Partnership
                                    Allocations and Distributions..........B-26
         Section 4.5       Allocation of Tax Credits.......................B-31
         Section 4.6       Determinations of Allocations and Distributions
                                    Within Classes of Partners.............B-32
         Section 4.7       Installment Obligations.........................B-33

                                        B-1

<PAGE>




ARTICLE 5         RIGHTS, POWERS AND DUTIES OF
                  GENERAL PARTNER..........................................B-35

         Section 5.1       Management of the Partnership...................B-35
         Section 5.2       General Authority of General Partner............B-35
         Section 5.3       Authority of General Partner and its
                                    Affiliates to Deal with Partnership....B-40
         Section 5.4       Restrictions on Authority of General Partner....B-44
         Section 5.5       Duties and Obligations of General Partner.......B-47
         Section 5.6       Compensation of Sponsor.........................B-48
         Section 5.7       Other Business of Partners......................B-51
         Section 5.8       Limitation on Liability of
                                    General Partner; Indemnification.......B-51

ARTICLE 6         ADMISSION OF SUCCESSOR AND ADDITIONAL
                  GENERAL PARTNERS; WITHDRAWAL OF
                  GENERAL PARTNER..........................................B-53

         Section 6.1       Admission of Successor or
                                    Additional General Partners............B-53
         Section 6.2       Restrictions on Transfer of
                                    General Partner's Interest.............B-54
         Section 6.3       Consent of Limited Partners to
                                    Admission of Successor or
                                    Additional General Partners............B-54
         Section 6.4       Event of Withdrawal of a General Partner........B-55
         Section 6.5       Interest and Liability of a
                                    Withdrawn General Partner..............B-55
         Section 6.6       Valuation and Sale of Interest of
                                    Former General Partner.................B-55

ARTICLE 7         TRANSFERABILITY OF UNITS.................................B-56

         Section 7.1       Right to Transfer Units.........................B-56
         Section 7.2       Restrictions on Transfers.......................B-56
         Section 7.3       Assignees and Assignment Procedure..............B-59
         Section 7.4       Substitute Limited Partners.....................B-61

ARTICLE 8         DISSOLUTION AND WINDING-UP OF
                  THE PARTNERSHIP..........................................B-61

         Section 8.1       Events Causing Dissolution......................B-61
         Section 8.2       Capital Contribution upon Dissolution...........B-62
         Section 8.3       Liquidation.....................................B-62


                                        B-2

<PAGE>



ARTICLE 9         BOOKS AND RECORDS, ACCOUNTING, REPORTS,
                  TAX ELECTIONS, ETC.......................................B-63

         Section 9.1       Books and Records...............................B-63
         Section 9.2       Accounting and Fiscal Year......................B-64
         Section 9.3       Bank Accounts and Temporary Investments.........B-64
         Section 9.4       Reports.........................................B-65
         Section 9.5       Depreciation and Other Tax Elections............B-66
         Section 9.6       Designation of Tax Matters Partner..............B-66

ARTICLE 10        MEETINGS AND VOTING RIGHTS
                           OF LIMITED PARTNERS.............................B-67

         Section 10.1      Meetings and Actions Without Meetings...........B-67
         Section 10.2      Voting Rights of Limited Partners...............B-67
         Section 10.3      Limitations on Roll-Ups; Dissenters' Rights.....B-68

ARTICLE 11        SPECIAL POWER OF ATTORNEY................................B-70

ARTICLE 12        AMENDMENTS...............................................B-71

         Section 12.1      Adoption of Amendments..........................B-71
         Section 12.2      Filing of Required Documents....................B-72
         Section 12.3      Required Change of Partnership Name.............B-72

ARTICLE 13        MISCELLANEOUS PROVISIONS.................................B-72

         Section 13.1      Security Interest and Right of Set-Off..........B-72
         Section 13.2      Notices.........................................B-73
         Section 13.3      Execution.......................................B-73
         Section 13.4      Binding Effect..................................B-73
         Section 13.5      Applicable Law..................................B-73
         Section 13.6      Counterparts....................................B-74
         Section 13.7      Separability of Provisions......................B-74
         Section 13.8      Captions........................................B-74
         Section 13.9      Mandatory Arbitration...........................B-74
         Section 13.10     Partnerships Treated as Separate................B-75



                                        B-3

<PAGE>



     AGREEMENT  OF LIMITED  PARTNERSHIP  dated as of March 28,  1995 among WNC &
Associates,  Inc., as General  Partner,  John B. Lester,  Jr. as Initial Limited
Partner and those Persons who shall  hereafter be admitted to the Partnership as
Additional Limited Partners, who hereby agree as follows:

                                     ARTICLE 1

                                    DEFINITIONS

     The  following  terms used in this  Agreement  shall,  unless  the  context
otherwise requires,  have the meanings specified in this Article 1. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter genders, and vice versa, as the context requires.

     "Accountants" means Corbin & Wertz, Irvine,  California, or such other firm
of independent  public accountants as from time to time shall be engaged for the
Partnership by the General Partner.

     "Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses,  travel and  communications  expenses,  costs of  appraisals,
non-refundable  option  payments on property not acquired,  accounting  fees and
expenses,  title insurance and  miscellaneous  expenses related to selection and
acquisition by the  Partnership of Local Limited  Partnership  Interests and the
selection  and   acquisition  of  Apartment   Complexes  by  the  Local  Limited
Partnerships, whether or not acquired.

     "Acquisition  Fees" means the total of all fees and commissions paid by any
party in  connection  with the selection or purchase by the  Partnership  of any
Local  Limited   Partnership   Interest,   and  the  purchase,   development  or
construction  of an Apartment  Complex by a Local Limited  Partnership,  whether
designated as a real estate commission, acquisition fee, finders' fee, selection
fee, Development Fee, Construction Fee, nonrecurring  management fee, consulting
fee or any fee of a similar  nature  however  designated,  with the exception of
Development Fees and  Construction  Fees paid to Persons not affiliated with the
Sponsor  in  connection  with the  actual  development  and  construction  of an
Apartment  Complex.  As used herein, a "Development  Fee" shall be a fee for the
packaging of an Apartment  Complex,  including  negotiating and approving plans,
and undertaking to assist in obtaining zoning and necessary variances, necessary
financing and Tax Credits for the Apartment  Complex,  either  initially or at a
later date, and a "Construction  Fee" shall be a fee or other  remuneration  for
acting  as  general   contractor  and/or   construction   manager  to  construct
improvements,  supervise  and  coordinate  projects or provide  major repairs or
rehabilitation for an Apartment Complex.


                                        B-4

<PAGE>



     "Act" means the California Revised Limited Partnership Act (Corp. Code
Section 15611, et seq.), as now in effect and as the same may be amended from
time to time hereafter.

     "Additional   Limited   Partners"  means  those  Persons  admitted  to  the
Partnership pursuant to Section 3.3 hereof.

     "Adjusted Capital Account Deficit" means, with respect to each Partner, the
deficit  balance in his  Capital  Account as of the end of the  relevant  fiscal
period of the Partnership, after giving effect to the following adjustments:

             (a) Increasing  such Capital  Account by any amounts such Person is
     obligated    to   restore    under   the    standards    set   by   Section
     1.704-1(b)(2)(ii)(c)  of the Regulations (or is deemed obligated to restore
     under Section 1.704-2(g)(1) and (i)(5) of the Regulations); and

             (b)  Decreasing  such  Capital  Account by the items  described  in
     Section      1.704-1(b)(2)(ii)(d)(4),      1.704-1(b)(2)(ii)(d)(5)      and
     1.704-1(b)(2)(ii)(d)(6) of the Regulations.

     "Adjusted Capital  Contribution" means, for each fiscal period, the Limited
Partners' Capital Contribution reduced by all distributions of noninvested funds
pursuant  to Section  3.4.2  hereof  and  distributions  of Sale or  Refinancing
Proceeds made to the Limited Partners through the end of such period.

     "Affiliate"  or "Affiliated  Person"  means,  when used with reference to a
specified  Person:  (i) any Person who,  directly or indirectly,  controls or is
controlled  by or is under common  control with the specified  Person;  (ii) any
Person who is an officer  of,  partner in, or trustee of, or serves in a similar
capacity with respect to, the specified  Person or of which the specified Person
is an officer, partner or trustee, or with respect to which the specified Person
serves in a similar capacity;  (iii) any Person who, directly or indirectly,  is
the  beneficial  owner  of,  or  controls,  10% or more of any  class of  equity
securities  of, or  otherwise  has a 10% or more  beneficial  interest  in,  the
specified  Person; or (iv) any Person of which the specified Person is, directly
or  indirectly,  the  owner of, or in  control  of,  10% or more of any class of
equity securities, or in which the specified Person has a 10% or more beneficial
interest.

     "Agreement"  means this  Agreement of Limited  Partnership,  as  originally
executed and as amended or restated  from time to time.  Words such as "herein,"
"hereinafter,"  "hereof,"  "hereto,"  "hereby" and  "hereunder,"  when used with
reference to this  Agreement,  refer to this  Agreement  as a whole,  unless the
context otherwise requires.


                                        B-5

<PAGE>



     "Apartment  Complex" or "Property" means a multi-family  residential rental
complex  owned  or  under  development  or  rehabilitation  by a  Local  Limited
Partnership.

     "Asset Based Fee" means compensation to the Sponsor computed in accordance
with Section IV.J. of the NASAA Guidelines.  No Asset Based Fee shall be payable
to the Sponsor.

     "Asset  Management Fee" means the annual fee payable to the General Partner
or an Affiliate of the General Partner pursuant to Section 5.6.6.

     "Capital Account" means,  with respect to any Partner,  the Capital Account
maintained for such Partner in accordance with the following provisions:  (i) to
each Partner's  Capital  Account there shall be credited such Partner's  Capital
Contribution and such Partner's  distributive  share of Profits for Tax Purposes
and (ii) to each Partner's  Capital Account there shall be debited the amount of
cash and the net fair  market  value of  property  distributed  to such  Partner
pursuant to any  provision of this  Agreement  and such  Partner's  distributive
share of Losses for Tax Purposes.  In the event any interest in the  Partnership
is transferred in accordance  with the terms of this  Agreement,  the transferee
shall succeed to the Capital Account of the transferror to the extent it relates
to the transferred interest. Subject to Section 4.4.1, Capital Accounts shall be
maintained in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).

     "Capital  Contribution"  means the total amount of cash  contributed to the
Partnership  (excluding any cash  contributed by the General Partner pursuant to
the last sentence of Section 3.3.3 hereof)  determined  without inclusion of any
interest or late charges paid on the Promissory Notes and without  reduction for
any discounts for  Designated  Investors  and Discount  Investors  (prior to the
deduction  of any  Syndication  Expenses)  by all the  Partners  or any class of
Partners or any one Partner,  as the case may be (or the predecessor  holders of
the Interests of such Partners or Partner),  reduced, in the case of the Limited
Partners, by the amount of any funds returned to them pursuant to Section 3.4.2.

     "Cash Available for Distribution"  means, with respect to any period,  Cash
Flow less any amounts set aside from Cash Flow for the  restoration  or creation
of Reserves.

     "Cash Flow" means, with respect to any period,  (i) all cash funds provided
to the Partnership from Local Limited Partnership  operations  (exclusive of any
proceeds  derived  from the  sale,  disposition,  financing  or  refinancing  of
Apartment  Complexes,  or other Sale or Refinancing  transactions) plus (ii) all
cash funds from Partnership  operations  (including any interest from Promissory
Notes, without

                                        B-6

<PAGE>



deduction for depreciation, but after deducting cash funds used to pay all other
expenses, Debt Service and capital expenditures.

     "Code"  means  the  Internal  Revenue  Code of  1986,  as  amended,  or any
corresponding provision or provisions of succeeding law.

     "Competitive," when applied to a fee, commission or other payment for goods
supplied or services  rendered,  means a payment equal to the amount customarily
charged by Persons not  Affiliated  with the payee for such goods or services in
the geographic area in which such goods are supplied or services rendered.

     "Consent"  means either (i) the approval  given by vote at a meeting called
and held in  accordance  with the  provisions  of Section  10.1, or (ii) a prior
written approval required or permitted to be given pursuant to this Agreement.

     "Dealer-Manager" means WNC Capital Corporation.

     "Dealer-Manager Fee" means the fee payable to the Dealer-Manager pursuant
to Section 5.6.2.

     "Debt  Service" means all payments  required to be made in connection  with
any  loan  to  the  Partnership  or any  loan  secured  by a lien  on any of the
Apartment Complexes.

     "Deemed  Liquidation  Distribution"  means,  with  respect  to the  Limited
Partners,  as a  class,  and the  General  Partner  the  amount  that  would  be
distributed to them as of the end of each fiscal year of the  Partnership if the
Partnership  were dissolved and liquidated and (i) the assets of the Partnership
(other than Installment Obligations,  as defined in Section 4.7.1) were sold for
cash  equal to their  Federal  adjusted  tax basis (or their Book  Value,  where
Section 4.4.2 applies);  (ii) the liabilities of the Partnership  were paid; and
(iii) the remaining cash of the  Partnership  were  distributed to such class of
Partners in  accordance  with  Section  4.2.1 (and not Section  4.2.2).  For the
purposes of this definition,  (a) the Capital Accounts of the Partners shall not
be  adjusted  for their  shares of any  Partnership  Minimum  Gain that would be
recognized  as a  result  of a  deemed  sale  of  Properties  or  Local  Limited
Partnership Interests;  and (b) Installment  Obligations shall be treated in the
manner provided in Section 4.7.

     "Designated  Investor"  shall have the meaning  specified in the Prospectus
under "Terms of the Offering and Plan of Distribution."

     "Discount  Investor"  means any  Additional  Limited  Partner (other than a
Designated  Investor)  who has paid or agreed to pay less than  $1,000  per Unit
subscribed for by him on account of reduced selling commissions and/or reduced

                                        B-7

<PAGE>



Sponsor  Acquisition  Fees  attributable  to  his  Units,  as  specified  in the
Prospectus under "Terms of the Offering and Plan of Distribution."

     "Economic  Risk of Loss"  means the  extent to which a Partner  or  Related
Person bears the economic risk of loss for a Partnership liability as determined
under Treasury Regulation Section 1.752-2.

     "Escrow Agent" means National Bank of Southern  California,  Newport Beach,
California,  or any other  escrow  agent  chosen by the General  Partner to hold
funds from investors pending their admission to the Partnership.

     "Event of Withdrawal"  means the occurrence of any of the following  events
as to a General  Partner:  (i) its withdrawal from the  Partnership  pursuant to
Section 15662 of the Act; (ii) its removal in  accordance  with this  Agreement;
(iii) it (a) makes an  assignment  for the  benefit  of  creditors,  (b) files a
voluntary  petition in bankruptcy,  (c) is adjudged a bankrupt or insolvent,  or
has  entered  against it an order for  relief in any  bankruptcy  or  insolvency
proceeding,   (d)  files  a   petition   or  answer   seeking   for  itself  any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute,  law or regulation,  (e) files an answer or
other  pleading  admitting or failing to contest the material  allegations  of a
petition  filed  against  it in any  proceeding  of this  nature,  or (f) seeks,
consents  to  or  acquiesces  in  the  appointment  of a  trustee,  receiver  or
liquidator of itself or of all or any substantial  part of its properties;  (iv)
the lapse of 120 days  after  the  commencement  of any  proceeding  against  it
seeking reorganization,  arrangement,  composition,  readjustment,  liquidation,
dissolution  or similar relief under any statute,  law or regulation,  if during
such period the proceeding has not been dismissed, or the lapse of 90 days after
the appointment,  without its consent or acquiescence, of a trustee, receiver or
liquidator of itself or of all or any  substantial  part of its  properties,  if
during such  period the  appointment  is not vacated or stayed,  or if within 90
days after the expiration of any such stay, the appointment is not vacated;  (v)
in the case of a General Partner who is a natural person,  (a) his death, or (b)
the entry by a court of competent  jurisdiction  adjudicating him incompetent to
manage his person or his property;  (vi) in the case of a General Partner who is
acting  as a general  partner  by  virtue  of being a  trustee  of a trust,  the
termination  of the trust (but not merely the  substitution  of a new  trustee);
(vii) in the case of a General  Partner  which is a  separate  partnership,  the
dissolution and commencement of winding up of the separate  partnership;  (viii)
in the  case of a  General  Partner  which is a  corporation,  the  filing  of a
certificate  of  dissolution,  or its  equivalent,  for the  corporation  or the
revocation of its charter;  or (ix) in the case of a General Partner which is an
estate, the distribution by the fiduciary of the estate's entire interest in the
Partnership.  Notwithstanding the foregoing, an Event of Withdrawal shall not be
deemed to have occurred as to a General Partner under the preceding  clause (iv)
until 120 days shall have elapsed

                                        B-8

<PAGE>



after  Notification  has been given to the Limited  Partners of the event which,
with or without lapse of time,  would  constitute an event  contemplated by such
clause.

     "FmHA" means the Farmers Home Administration of the United States
Department of Agriculture.

     "Front-End Fees" means fees and expenses paid by any party for any services
rendered during the  organizational  and acquisition  phases of the Partnership,
including  Organizational and Offering Expenses,  Acquisition Fees,  Acquisition
Expenses,  interest on deferred  fees and expenses and any other  similar  fees,
however  designated.  Front-End  Fees  which  are to be  paid  pursuant  to this
Agreement from  installment  payments on the Promissory  Notes shall be paid pro
rata as the installment payments are received by the Partnership.

     "General  Partner"  means WNC & Associates,  Inc., or any Person or Persons
who, at the time of reference  thereto,  has been admitted as a successor to any
such General Partner or as an additional General Partner,  in each such Person's
capacity as a general partner.  Restrictions  placed on the rights and powers of
the  "General  Partner"  throughout  this  Agreement  also serve to restrict the
rights and powers of the Affiliates of the General Partner.

     "Government   Assistance"  means  any  form  of  Federal,  state  or  local
government  assistance  provided  to  Properties  or their  tenants  or  owners,
including mortgage  insurance,  rental assistance  payments,  permanent mortgage
financing,  low interest  mortgage loans,  interest  reduction  payments and Tax
Credits.

     "Gross  Proceeds"  means the gross  proceeds  of the  Offering,  determined
without  inclusion of any interest or late charges paid on the Promissory  Notes
and without  reduction for any discounts for  Designated  Investors and Discount
Investors.

     "HUD" means the United States  Department of Housing and Urban  Development
or any successor thereto.

     "Historic Tax Credit" means the tax credit allowable pursuant to Section 47
of the Code for  rehabilitation  expenditures  incurred  with respect to certain
qualified buildings.

     "Independent  Expert"  means a Person  with no  material  current  or prior
business  or  personal  relationship  with  the  Sponsor  who  is  engaged  to a
substantial  extent in the business of rendering opinions regarding the value of
assets of the type held by the Partnership, and who is qualified to perform such
work.

     "Initial Limited Partner" means John B. Lester, Jr.


                                        B-9

<PAGE>



     "Interest"  means  the  entire  ownership  interest  of a  Partner  in  the
Partnership at any particular  time,  including the right of such Partner to any
and all  benefits  to  which a  Partner  may be  entitled  as  provided  in this
Agreement,  together with the obligations of such Partner to comply with all the
terms and provisions of this  Agreement.  Reference to a majority,  or specified
percentage,  in interest of the Limited  Partners means,  Limited Partners whose
combined Capital Contribution represents over 50%, or such specified percentage,
respectively, of the Capital Contribution of all Limited Partners.

     "Invested  Assets" means the sum of the  Partnership's  Investment in Local
Limited  Partnership  Interests  and the  Partnership's  allocable  share of the
amount of the  mortgage  loans on, and other  debts  related  to, the  Apartment
Complexes owned by such Local Limited Partnerships.

     "Investment Date" means, with respect to any Series,  the date of the final
admission  into the  Partnership  of Additional  Limited  Partners who purchased
Units during such Series.

     "Investment  in Local Limited  Partnership  Interests"  means the amount of
Capital   Contributions  used  by  the  Partnership  to  acquire  Local  Limited
Partnership Interests (except that, if a portion of the Partnership's investment
in a Local Limited  Partnership is used to fund working capital  reserves of the
Local Limited  Partnership,  there shall be excluded from this  calculation  any
amount which is used to fund working  capital  reserves which is in excess of 5%
of Gross  Proceeds)  plus Reserves of the  Partnership,  except that Reserves in
excess of 5% of Gross  Proceeds shall not be included,  but excluding  Front-End
Fees.  Notwithstanding the preceding,  the total amount of Capital Contributions
used to fund  Partnership  Reserves  or working  capital  reserves  of the Local
Limited  Partnerships  which shall be included in  Investment  in Local  Limited
Partnership Interests shall not exceed 5% of Gross Proceeds.

     "Investor  Closing"  means a  closing  at which  purchasers  of  Units  are
admitted as Additional Limited Partners pursuant to Section 3.3 hereof.

     "Limited  Partner"  means any Person who is a Limited  Partner,  whether an
Initial Limited Partner,  an Additional  Limited Partner or a Substitute Limited
Partner at the time of reference thereto, in such Person's capacity as a Limited
Partner of the Partnership.

     "Local General Partners" (whether or not capitalized) means the Persons who
are from time to time general  partners of Local  Limited  Partnerships,  except
that  where  reference  is made to Local  General  Partners  in  respect  of any
guaranties or  undertakings  provided to the  Partnership in connection with its
investment  in a Local  Limited  Partnership,  such term  shall  mean such Local
General Partners at the

                                       B-10

<PAGE>



date of such  investment  or such other  Persons  (including  Affiliates of such
Local General Partners) as actually provide such guaranties and undertakings.

     "Local Limited  Partnership"  means a limited  partnership which owns or is
developing or rehabilitating one or more rental housing projects to be qualified
under Section 42(g) of the Code.

     "Local Limited Partnership Interest" means the limited partnership interest
of the Partnership in a Local Limited Partnership.

     "Low Income Housing Credit" means the tax credit allowable under Section 42
of the Code for a qualified low income housing project.

     "Mortgage" (whether capitalized or not) means any mortgage,  deed of trust,
or  similar  security  instrument  and,  where  the sense of this  Agreement  so
requires, the indebtedness secured thereby.

     "NASAA Guidelines" means the Statement of Policy Regarding Real Estate
Programs adopted by the North American Securities Administrators Association,
Inc., as in effect on the date of this Agreement.

     "Net Proceeds" means the Gross Proceeds less Organizational and Offering
Expenses.

     "Nonaccountable  Expense Reimbursement" means the payment to be made to the
General  Partner or an  Affiliate  of the  General  Partner  pursuant to Section
5.6.3.

     "Nonrecourse Deductions" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(1).

     "Nonrecourse Liability" means a Partnership liability with respect to which
no Partner or Related Person bears the Economic Risk of Loss.

     "Note  Capital  Contribution"  means that  portion  of a Limited  Partner's
Capital Contribution, if any, paid in accordance with his Promissory Note.

     "Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person,  personally delivered to such Person
or sent by  registered,  certified or regular  mail,  postage  prepaid,  to such
Person at the last known address of such Person.  The date of personal  delivery
or the date of mailing thereof,  as the case may be, shall be deemed the date of
giving the Notification.


                                       B-11

<PAGE>



     "Offering" means, with respect to the Partnership, the offering and sale of
its Units pursuant to the Prospectus.

     "Offering  Commencement  Date"  means,  with  respect to an  Offering,  the
effective date of the registration statement or post-effective amendment thereto
filed with the Securities and Exchange Commission with respect to the Units.

     "Operating  Cash Expenses"  means,  with respect to any fiscal period,  the
amount of cash  disbursed  by the  Partnership  in that  period in the  ordinary
course of business for the payment of its operating  expenses,  such as expenses
for  management,   utilities,  repair  and  maintenance,   insurance,   investor
communications,  legal, accounting, statistical and bookkeeping services, use of
computing or accounting equipment,  travel and telephone expenses,  salaries and
direct expenses of Partnership  employees while engaged in Partnership business,
and any other operational and administrative  expenses necessary for the prudent
operation of the Partnership.  Without limiting the generality of the foregoing,
Operating  Cash Expenses  shall include the actual cost of goods,  materials and
administrative services used for or by the Partnership,  whether incurred by the
General Partner, an Affiliate of the General Partner or a non-Affiliated  Person
in performing the foregoing functions. As used in the preceding sentence, actual
cost of goods and materials  means the actual cost of goods and  materials  used
for or by the  Partnership  and obtained from entities not  Affiliated  with the
General Partner,  and actual cost of administrative  services means the pro rata
cost of  personnel  (as if  such  persons  were  employees  of the  Partnership)
associated therewith, but in no event to exceed the Competitive amount.

     "Organizational  and  Offering  Expenses"  means all  expenses  incurred in
connection  with  the  formation  of  the  Partnership,   the  registration  and
qualification  of the Units  under  Federal  and state  securities  laws and the
Offering,   including  selling   commissions,   the   Dealer-Manager   Fee,  the
Nonaccountable Expense Reimbursement and all advertising expenses.

     "Partner" means any General Partner or Limited Partner.

     "Partner Nonrecourse Debt" has the meaning given it in Treasury Regulation
Section 1.704-2(b)(4).

     "Partner  Nonrecourse  Debt Minimum  Gain" means the amount  determined  in
accordance with the principles of Treasury Regulation Section 1.704-2(i)(3).

     "Partnership"  means  the  partnership  formed  under  the  terms  of  this
Agreement.

     "Partnership  Minimum Gain" means the amount  determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).

                                       B-12

<PAGE>




     "Partnership  Register" means the schedule  listing the names and addresses
of all Limited Partners  together with the amounts of their  respective  Capital
Contributions  which shall be  maintained  by the General  Partner in accordance
with Section 3.3.

     "Person" means any  individual,  partnership,  corporation,  trust or other
legal entity.

     "Prime  Rate" means the prime or  reference  rate of interest  from time to
time announced by National Bank of Southern California as being charged by it on
short-term unsecured loans to its most creditworthy customers.

     "Profits"  and  "Losses"  means,  for each  fiscal  year or other  relevant
period,  an amount equal to the  Partnership's  taxable  income or loss for such
year or period  determined  in accordance  with Section  703(a) of the Code (for
this purpose all items of income,  gain, loss or deduction required to be stated
separately  pursuant  to  Section  703(a)(1)  of the Code shall be  included  in
taxable income or loss), with the following  adjustments:  (i) any income of the
Partnership  that is exempt from Federal income tax and not otherwise taken into
account in  computing  Profits or Losses  pursuant to this  definition  shall be
added to such taxable income or loss;  (ii) any  expenditures of the Partnership
described  in Section  705(a)(2)(B)  of the Code or treated as such  pursuant to
Treasury Regulation Section  1.704-1(b)(2)(iv)(i),  and not otherwise taken into
account in computing  Profits or Losses  pursuant to this  definition,  shall be
subtracted  from such taxable income or loss;  (iii) any adjustment  pursuant to
Section 743(b) of the Code shall be allocated solely to the Partner to whom such
adjustment  relates and shall not be taken into account in computing  Profits or
Losses;  (iv) any gain or loss which would have been realized by the Partnership
on the sale of assets distributed in kind to Partners, determined with reference
to the fair market value and the adjusted tax basis of such property for Federal
income tax purposes immediately prior to such distribution, shall be added to or
subtracted  from such  taxable  income or loss;  (v)  notwithstanding  any other
provision of this definition, any items that are specially allocated pursuant to
Section  4.4.3 shall not be taken into account in  computing  Profits or Losses;
and (vi) if required,  the adjustments specified in Section 4.4.2 shall be taken
into account.

     "Profits and Losses for Tax Purposes" means all items of Profits and Losses
as well as any items that are  specifically  excluded from Profits and Losses by
clause (v) of the definition thereof.

     "Promissory  Note" means the full recourse  promissory  note evidencing the
deferred  installments,  if any, of the Capital Contribution required to be made
for a Unit.


                                       B-13

<PAGE>



     "Property  Management  Fee"  means a fee paid for  day-to-day  professional
property management services in connection with the Properties.

     "Prospectus" means the prospectus  contained in the registration  statement
filed with the Securities and Exchange  Commission with respect to the Units, in
the final form in which said  prospectus  is filed with said  Commission  and as
thereafter  supplemented  pursuant to Rule 424 under the Securities Act of 1933,
as amended.

     "Purchase  Price"  means the  price  paid  upon the  purchase  or sale of a
particular Local Limited Partnership  Interest or Apartment Complex, as the case
may be,  including the amount of Acquisition Fees and all liens and mortgages on
the Apartment Complex, but excluding points and prepaid interest.

     "RECDS"  means  the  Rural  Economic  and  Community  Development  Services
(formerly, FmHA) of the United States Department of Agriculture.

     "Registration Date" has the meaning given it in Section 7.3.2.

     "Related  Person" means a Person having a relationship  with a Partner that
is described in Treasury Regulation Section 1.752-4(b).

     "Reserves"  means amounts set aside by the  Partnership for working capital
or  other  obligations  of the  Partnership  and  contingencies  related  to the
ownership of Local Limited Partnership Interests.

     "Return on Investment"  means an annual,  cumulative,  but not  compounded,
"return"  to  the  Limited  Partners  as  a  class  on  their  Adjusted  Capital
Contributions  commencing  for  each  Limited  Partner  on the  last  day of the
calendar  quarter during which the Limited  Partner's  Capital  Contribution  is
received by the  Partnership,  calculated at the following annual rates: (i) 14%
through  December  31,  2006,  and (ii) 6% for the balance of the  Partnership's
term.

     "Roll-Up" means a transaction involving the acquisition, merger, conversion
or  consolidation,  either  directly or indirectly,  of the  Partnership and the
issuance of securities of a Roll-Up Entity. Such term does not include:

     (i) any transaction if the securities of the  Partnership  have been for at
least  twelve  months  traded on a national  securities  exchange or through the
National  Association of Securities  Dealers,  Inc. Automated Quotation National
Market System; or

     (ii)  a  transaction  involving  the  conversion  to  corporate,  trust  or
association  form  of  only  the  Partnership,  if,  as  a  consequence  of  the
transaction,  there  will  be no  significant  adverse  change  in  any  of  the
following: (a) the Limited Partners'

                                       B-14

<PAGE>



voting rights;  (b) the term of existence of the  Partnership;  (c) the terms of
compensation of the Sponsor; or (d) the Partnership's investment objectives.

     "Roll-Up  Entity"  means the  partnership,  real estate  investment  trust,
corporation,  trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up transaction.

     "SLP Affiliate" means an Affiliate of the Fund Manager in its capacity as a
limited partner of Local Limited Partnerships.

     "Sale or Refinancing"  means any  Partnership or Local Limited  Partnership
transaction  not in the  ordinary  course of its  business,  including,  without
limitation, sales, exchanges or other dispositions of Apartment Complexes, Local
Limited Partnership  Interests and real or personal property of the Partnership,
or any borrowings or  refinancings.  Sale or  Refinancing  shall not include any
receipt  of  capital  contributions  by  the  Partnership  or  a  Local  Limited
Partnership;  provided, however, that the receipt by the Partnership of a return
of all or a portion of its capital  contribution to a Local Limited Partnership,
however funded, shall be treated as a Sale or Refinancing.

     "Sale or Refinancing  Proceeds"  means all cash receipts of the Partnership
arising from a Sale or Refinancing less the following:

     (i) the amount  paid or to be paid in  connection  with or as an expense of
such Sale or Refinancing,  and, with regard to damage recoveries or insurance or
condemnation proceeds,  the amount paid or to be paid for repairs,  replacements
or renewals  resulting  from damage to or partial  condemnation  of the affected
property;

     (ii) the amount applied to the payment of the debts and obligations of the
Partnership; and

     (iii) any Reserves funded with such proceeds.

     "Sponsor"  means  any  Person   directly  or  indirectly   instrumental  in
organizing, wholly or in part, the Partnership, or any Person who will manage or
participate in the management of the Partnership,  and any Affiliate of any such
Person,  but does not include a Person whose only relation with the  Partnership
is as that of an  independent  property  manager whose only  compensation  is as
such.  "Sponsor"  does not include  wholly  independent  third  parties  such as
attorneys,   accountants  and  underwriters   whose  only  compensation  is  for
professional  services  rendered in connection  with the Offering.  A Person may
also be a "Sponsor" of the Partnership  by: (i) taking the initiative,  directly
or  indirectly,  in founding or  organizing  the business or  enterprise  of the
Partnership,  either  alone or in  conjunction  with one or more  Persons;  (ii)
receiving a material participation in the Partnership in connection

                                       B-15

<PAGE>



with  the  founding  or  organizing  of  the  business  of the  Partnership,  in
consideration  of services or  property,  or both  services or  property;  (iii)
having a substantial  number of relationships and contacts with the Partnership;
(iv) possessing significant rights to control Partnership properties (other than
Local General  Partners whose only association with the Partnership is as such);
(v) receiving fees for providing services to the Partnership which are paid on a
basis  that is not  customary  in the  industry;  and  (vi)  providing  goods or
services to the  Partnership on a basis which was not negotiated at arm's length
with the Partnership.

     "Subordinated Disposition Fee" means the fee payable to the General Partner
in  connection  with   dispositions   of  Properties   owned  by  Local  Limited
Partnerships pursuant to Section 5.6.7.

     "Substitute  Limited  Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 7.3 and 7.4 hereof.

     "Syndication  Expenses"  means all  expenditures  classified as syndication
expenses  pursuant  to  Treasury  Regulation  Section  1.709-2(b).   Syndication
Expenses shall be taken into account under this Agreement at the time they would
be taken into account under the Partnership's  method of accounting if they were
deductible expenses.

     "Tax Credits" means any credit permitted under the Code against the Federal
income tax liability of any Partner as a result of activities or expenditures of
the Partnership or any Local Limited Partnership, including, without limitation,
Low Income Housing Credits and Historic Tax Credits.

     "Temporary   Investments"   means  United  States  Government   securities,
securities  issued or fully  guaranteed  by United States  Government  agencies,
certificates of deposit and time or demand deposits in, or repurchase agreements
constituting  obligations  of,  commercial  banks with  deposits  insured by the
Federal  Deposit  Insurance  Corporation  and other  short-term,  highly  liquid
investments.

     "Treasury  Regulation  or  Regulations"  means the Income  Tax  Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

     "Unit" means the Interest of a Limited  Partner  attributable  to a Capital
Contribution  of  $1,000  (determined   without  regard  to  any  discounts  for
Designated Investors and Discount Investors).

     "Voluntary  Withdrawal" by a General Partner means any withdrawal initiated
by the General Partner and excludes any withdrawal accomplished as the result of
a  settlement,   whether  or  not  incorporated  in  a  decree  of  a  court  or
administrative

                                       B-16

<PAGE>



agency,  between a withdrawing  General Partner and one or more of any remaining
General  Partners,  a  majority-in-interest  of  the  Limited  Partners  or  any
regulatory agency whether a Federal or state agency or a self-regulatory agency,
having jurisdiction over the affairs of the Partnership.


                                     ARTICLE 2

               FORMATION; NAME; PLACE OF BUSINESS; PURPOSE AND TERM

     2.1.    Formation of Partnership

     The parties hereto hereby form the  Partnership on the terms and conditions
set forth herein and pursuant to the provisions of the Act.

     2.2.    Name

     The name of the Partnership  shall be "WNC Housing Tax Credit Fund V, L.P.,
Series 3," or "WNC  Housing Tax Credit Fund V, L.P.,  Series 4," as the case may
be. The  General  Partner,  in its sole  discretion,  may change the name of the
Partnership at any time and from time to time provided that Notification thereof
is given to the Limited Partners within 30 days of the effective date thereof.

     2.3.    Place of Business

     The  Partnership  shall  continuously  maintain  an  office in the State of
California which shall constitute its principal office and place of business and
at which the records  required by Section 15615 of the Act and by Section 9.1 of
this Agreement  shall be maintained.  Such office shall  initially be located at
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626, but may be changed
from time to time by the General Partner provided that  Notification  thereof is
given to the Limited Partners within 30 days of the effective date thereof.

     The Partnership may maintain  additional  offices and places of business in
other locations selected by the General Partner.

     2.4.    Purpose

     The purpose and  character of the business of the  Partnership  shall be to
acquire,   hold,  sell,  dispose  of  and  otherwise  invest  in  Local  Limited
Partnership  Interests  and  to  engage  in  any  other  activities  related  or
incidental thereto.  The investment  objectives of the Partnership,  in order of
importance, shall be to:


                                       B-17

<PAGE>



     (i) provide  current  tax  benefits,  primarily  in the form of Tax Credits
which Limited Partners may use to offset Federal income tax liabilities;

     (ii)  preserve and protect the Partnership's capital; and

     (iii) provide cash distributions from Sale or Refinancing transactions.

     2.5.    Agent for Service of Process

     The Partnership shall continuously maintain an agent for service of process
on the  Partnership  at the  Partnership's  principal  office  in the  State  of
California. Such agent shall initially be David N. Shafer, Esq.

     2.6.    Term

     The term of the Partnership shall commence on the date of the filing of its
Certificate of Limited  Partnership with the office of the Secretary of State of
the State of  California  and shall  continue  in full  force and  effect  until
December 31, 2050, or until the  termination  and winding up of the  Partnership
prior to that time pursuant to the provisions of Article 8.


                                     ARTICLE 3

                               PARTNERS AND CAPITAL

     3.1.    General Partner

     The business  address of the General Partner is 3158 Redhill Avenue,  Suite
120,  Costa  Mesa,  California  92626.  The  General  Partner has made a Capital
Contribution to the Partnership of $100. Except as otherwise provided in Section
8.2 the General  Partner  shall have no personal  liability for the repayment of
the Capital Contribution of any Limited Partner nor any other obligation to make
Capital Contributions, loans or advances to the Partnership.

     3.2.    Initial Limited Partner

     The business address of the Initial Limited Partner is 3158 Redhill Avenue,
Suite 120, Costa Mesa,  California 92626. The Initial Limited Partner has made a
Capital  Contribution to the Partnership of $1,000. The Initial Limited Partner,
as such,  shall not be required to make any additional  Capital  Contribution to
the Partnership.


                                       B-18

<PAGE>



     3.3.    Additional Limited Partners; Terms of Offering

     3.3.1.  The Partnership  intends to make a public Offering of not more than
50,000  additional  Units and shall admit as Limited  Partners the Persons whose
subscriptions for such Units are accepted by the General Partner (who may refuse
to accept  any  subscription  for any  reason).  The  names  and the  residence,
business or mailing  addresses  of the  Additional  Limited  Partners  and their
Capital Contributions shall be set forth in the Partnership Register.

     3.3.2. The Capital Contribution required of each Additional Limited Partner
shall be not less than  $5,000  and may be such  greater  integral  multiple  of
$1,000 (in each case  determined  without regard to any discounts for Designated
Investors and Discount  Investors) as such  Additional  Limited  Partner and the
General Partner shall agree upon.  Notwithstanding  the preceding,  employees of
the General Partner and its Affiliates and/or investors in limited  partnerships
previously sponsored by the Fund Manager may make a minimum Capital Contribution
of $2,000.  Except with  respect to  subscribers  who qualify  for, and elect to
utilize,  the installment  payment procedure provided for in Section 3.4.1 below
for the  payment of up to  one-half  their  Capital  Contributions,  all of such
required Capital  Contribution shall be paid in cash at the time of subscription
for the Units.

     All subscribers  whose  subscriptions are acceptable to the General Partner
shall be admitted to the Partnership as Additional Limited Partners on or before
the  last  day of the  calendar  month  during  which  such  subscriptions  were
accepted.

     3.3.3.  All cash and Promissory  Notes received from  subscribers for Units
shall be received by the Partnership in trust and deposited in an escrow account
with the Escrow Agent.  Subscriptions for Units shall be accepted or rejected by
the General Partner within 30 days after their receipt by the Partnership.  Upon
receipt and deposit  into  escrow of Capital  Contributions  in the amount of at
least $1,400,000, the Escrow Agent shall release to the Partnership such Capital
Contributions   and  the   Promissory   Notes   evidencing   any  Note   Capital
Contributions,  and the  subscribers  for such Units  shall be  admitted  to the
Partnership as Additional Limited Partners within 15 days after the date of such
release.  Thereafter,  subscribers  whose  subscriptions  are  acceptable to the
General  Partner  shall be admitted to the  Partnership  as  Additional  Limited
Partners  on or before  the last day of the  calendar  month  during  which such
subscriptions  were  accepted.  All  cash  and  Promissory  Notes  deposited  by
subscribers  whose  subscriptions  are rejected by the General  Partner shall be
returned to such subscribers forthwith after such rejection. If the Escrow Agent
does not  receive  Capital  Contributions  in the amount of at least  $1,400,000
within one year from the  Offering  Commencement  Date,  it shall within 30 days
thereafter  return all cash and Promissory  Notes  deposited by subscribers  for
Units.  Any  interest  earned on  subscription  funds in the hands of the Escrow
Agent  received by the Escrow Agent from any  subscriber for Units shall be paid
to such

                                       B-19

<PAGE>



subscriber  promptly  after the  release of such  subscription  proceeds  by the
Escrow Agent to the Partnership or to such  subscriber,  as the case may be. The
General Partner, in its sole discretion,  may, but is not obligated to, increase
the total interest  earned by the subscribers on funds held by the Escrow Agent.
If so,  the  amount  of the  increase  in  interest  will be  identified  in the
Prospectus.  Any  funds  necessary  to  pay  such  additional  amount  shall  be
contributed to the Partnership by the General Partner.

     3.3.4.  The Offering  shall be terminated not later than two years from the
Offering Commencement Date, and may be terminated earlier at the election of the
General Partner.

     3.3.5.  To accomplish the purpose of this Section 3.3, the General  Partner
is hereby authorized to do all things necessary to admit such Additional Limited
Partners,  including,  but not  limited  to,  registering  the  Units  under the
Securities  Act of 1933,  as amended,  qualifying  the Units for sale with state
securities regulatory agencies or perfecting exemptions from qualification,  and
entering into  underwriting  or agency  arrangements  for the Offering upon such
terms and conditions as the General Partner may deem advisable.

     3.4.    Payment or Return of Additional Limited Partners' Capital

     3.4.1.  (a) Each Limited  Partner who  subscribes  for 10 or more Units may
elect to contribute only $500 in cash for each Unit which such Partner acquires,
provided  that he also shall make a Note Capital  Contribution  in the amount of
$500 for each such Unit.  The Note  Capital  Contribution  of each such  Limited
Partner shall be evidenced by a Promissory Note delivered upon  subscription for
the Units. Each Promissory Note shall be payable in one installment of principal
on (i) March 31,  1996 if the maker  subscribes  for his Units  between the date
hereof and December 31, 1995, (ii) January 31, 1997 if the maker  subscribes for
his Units  between  January 1, 1996 and June 1, 1996,  or (iii) the later of the
date of  subscription  or June 30,  1997 if the maker  subscribes  for his Units
after June 1, 1996.  Each  Promissory  Note  shall bear  interest  on the unpaid
balance as follows:  (i) for purchasers of less than 500 Units,  at a fixed rate
of 1.5% per annum above the Prime Rate,  such  interest rate to be determined at
the commencement of the Offering and identified in the Prospectus,  or (ii) at a
fixed rate of 1% per annum above the 1-year  Treasury Bill rate, such rate to be
determined  on the date of purchase.  Interest will be payable in arrears on the
principal payment dates.

             (b) Each  Limited  Partner  who  elects to pay for his Units in the
manner  described in Section  3.4.1.(a)  (an  "Installment  Contributor  Limited
Partner")  hereby grants to the  Partnership a security  interest in the Limited
Partner's  Units to secure all of the Limited  Partner's  obligations  under the
Promissory Note, any

                                       B-20

<PAGE>



modifications,  renewals or  extensions  of the  Promissory  Note and all of the
Limited Partner's other obligations under this Section 3.4.1.

             (c) If an Installment  Contributor  Limited Partner  defaults under
his Promissory Note or under any modifications, renewals or extensions, thereof,
at the option of the  Partnership,  the entire unpaid  principal  balance of his
Promissory Note shall be immediately due and payable,  the Promissory Note shall
continue  to bear  interest at the rate set forth in Section  3.4.1.(a),  a late
charge shall be imposed in an amount equal to 5% of any  delinquent  payment and
the Partnership  shall be entitled to retain and, in any event,  set off against
the amount  owed to the  Partnership  by the  defaulting  Limited  Partner,  all
distributions  attributable to the Units of the defaulting  Limited Partner.  In
addition,  the  Partnership  may pursue any remedy  available  (including  those
available under the provisions of the Uniform  Commercial  Code) or in equity to
collect,  enforce and satisfy the obligations of the defaulting Limited Partner,
including  the  filing of a suit to obtain a  judgment  against  the  defaulting
Limited Partner.

     The  defaulting  Limited  Partner  shall pay to the  Partnership  all costs
incurred by the Partnership in enforcing the Promissory Note,  including but not
limited  to  costs  of  obtaining  money  damages  and  attorneys'   fees.  Each
Installment  Contributor  Limited Partner  acknowledges that the Partnership may
pledge his Promissory Note as collateral  security for Partnership  debt. In the
event of a default  under the  Promissory  Note,  the  Partnership  or any other
holder of the Promissory Note, as applicable,  may foreclose upon the defaulting
Limited  Partner's  interest  in  the  Partnership  and  sell  the  Units  in  a
commercially  reasonable manner to  non-defaulting  Limited Partners or to other
qualified  investors on terms  approved by the  Partnership or any holder of the
Promissory  Note. It is acknowledged  by each  Installment  Contributor  Limited
Partner that the purchase of the Units is a suitable investment only for Persons
meeting  certain  suitability  standards  and that it will be difficult  for the
Partnership  to find a  suitable  purchaser  of the Units  and to make  adequate
disclosure of all of the then existing  risks of the  investment to  prospective
purchasers.  The General  Partner and its  Affiliates may (but are not obligated
to) purchase  any such Units,  but only if such Units have first been offered to
the  non-defaulting  Limited  Partners.  If Units are offered to  non-defaulting
Limited  Partners,  they  will be  sold on a  first-come,  first-sold  basis  in
increments of whole Units only.

     Each Installment  Contributor Limited Partner agrees that in the event of a
default under his Promissory Note and a foreclosure and sale of his Units by the
Partnership or any holder of his Promissory  Note, as applicable,  the purchaser
of the Units in such a sale may be substituted as a Limited  Partner in place of
the defaulting  Limited  Partner without any further consent being required from
the defaulting Limited Partner, and specifically  authorizes the General Partner
to execute on his behalf any amendment to the Partnership Agreement or other

                                       B-21

<PAGE>



documentation necessary to effect the substitution.  Units acquired by the
Partnership through a foreclosure sale or otherwise may be reissued by the
Partnership.

     Each  Promissory  Note shall (i) be made with full  recourse  to the maker;
(ii) not be a negotiable  instrument;  (iii) be  assignable  only subject to the
defenses  of  the  maker;  (iv)  be  subject  to  venue  for  collection  in the
jurisdiction in which the Installment  Contributor Limited Partner resides;  (v)
not be sold by the Partnership prior to maturity; (vi) provide that a default in
a payment due shall not occur until 30 days after its due date;  provided,  that
until 30 days after default and notice  thereof and intent to foreclose has been
given to the defaulting  Limited  Partner,  such Limited  Partner shall have the
right to cure such  default  with  interest due thereon  without  suffering  any
reduction in Interest in the  Partnership  and the  Partnership may not commence
proceedings to enforce its security interest in the defaulting Limited Partner's
Units; (vii) not contain any provision authorizing a confession of judgment; and
(viii) be  prepayable  at any time in whole (but not in part)  without  penalty.
Subject  to the  foregoing,  the  Partnership  may  pledge  and  grant  security
interests in Promissory Notes as security for any Partnership obligation.

     3.4.2. In the event that any portion of the amount available for Investment
in Local Limited  Partnership  Interests is not so invested  within the later of
(i) 24 months  after the  Offering  Commencement  Date,  or (ii) 12 months after
termination of the Offering, such uninvested portion (except for Reserves) shall
be  distributed  to the Limited  Partners who invested in the  Partnership  as a
return of capital.  In addition,  in order to refund to the Limited Partners the
amount of Front-End  Fees  attributable  to such returned  capital,  the General
Partner shall contribute to the Partnership and the Partnership shall distribute
pro rata to the  Limited  Partners  the amount by which the  quotient of (x) the
amount of uninvested  capital  distributed  pursuant to the foregoing  sentence,
divided by (y) the  percentage of the Capital  Contributions  which remain after
payment of all Front-End  Fees,  exceeds the uninvested  capital so distributed.
Any funds (i) with  respect  to the  investment  of which  the  Partnership  has
executed a written agreement in principle,  commitment letter,  letter of intent
or understanding,  option agreement or other similar  understanding or contract,
or (ii) which the Partnership has set aside or temporarily invested for Reserves
or to fund capital  contributions  to any Local Limited  Partnerships  as of the
later of (i) the date 24 months after the Offering Commencement Date or (ii) the
date 12 months after termination of the Offering will be deemed invested on that
date and will not  subsequently  be  returned to the  Limited  Partners  even if
investment of such funds is not  consummated or the contingent  payments are not
made.


                                       B-22

<PAGE>



     3.5.    Liability of Limited Partners

     3.5.1.  A  Limited  Partner  shall  be  liable  only  to make  his  Capital
Contribution,  including his Note Capital Contribution,  and shall not be liable
for  the  debts,  liabilities,   contracts  or  any  other  obligations  of  the
Partnership.

     3.5.2. A Limited  Partner may be obligated to return a distribution of cash
or other  property  received  by him from the  Partnership  to the extent  that,
immediately  after giving effect to the  distribution,  all  liabilities  of the
Partnership,  other than  liabilities  to Limited  Partners  on account of their
Interests  in the  Partnership  and  liabilities  as to  which  recourse  of the
creditors is limited to specified  property of the Partnership,  exceed the fair
value of the Partnership's assets,  provided that the fair value of any Property
that is subject to a liability  as to which  recourse of creditors is so limited
shall be included in the  Partnership's  assets only to the extent that the fair
value of the Property exceeds the liability.

     3.6.    Miscellaneous

     3.6.1.  No Partner shall be paid interest on any Capital Contribution.

     3.6.2. No Partner shall have the right to withdraw prior to the dissolution
and  winding  up of the  Partnership  or to receive  any  return of his  Capital
Contribution except as specifically provided in Article 4 and Sections 3.4.2 and
8.3. No Capital  Contribution may be returned in the form of property other than
cash, except as specifically provided in Section 8.3.

     3.6.3. A creditor who makes a nonrecourse  loan to the Partnership will not
have or  acquire,  at any time as a result of making  the  loan,  any  direct or
indirect  interest in the profits,  capital or property of the Partnership other
than as a creditor.

                                     ARTICLE 4

             DISTRIBUTIONS OF CASH; ALLOCATIONS OF PROFITS AND LOSSES

     4.1.    Distributions of Cash Available for Distribution

     Any Cash Available for  Distribution at the end of any fiscal year shall be
distributed,  within  120 days  after the end of such  fiscal  year,  99% to the
Limited Partners and 1% to the General Partner.

     4.2.    Distributions of Sale or Refinancing Proceeds

     4.2.1.  Subject  to  other  provisions  of this  Section  4.2,  all Sale or
Refinancing   Proceeds,  to  the  extent  not  used  to  acquire  Local  Limited
Partnership Interests as

                                       B-23

<PAGE>



permitted by Section 5.4.1(x), shall be distributed in the following amounts and
order of priority:

     (i) First, to the Limited Partners in the amount of their Adjusted Capital
Contribution;

     (ii) Second, to the Limited Partners as a class until they have received an
additional amount equal to (a) their Return on Investment minus (b) (i) any cash
distributed by the Partnership to the Limited  Partners  pursuant to Section 4.1
or this  Section  4.2.1(ii)  on or  before  the  close of the year in which  the
distribution of Sale or Refinancing Proceeds occurs, and (ii) an amount equal to
the Tax Credits allocated to the Limited Partners on or before the close of such
year  (reduced by any  recapture  thereof  arising other than as a result of the
disposition of a Unit by a Limited Partner);

     (iii) Third,  to the General  Partner in an amount equal to (a) its Capital
Contribution  minus (b) any amounts  previously  distributed  to it from Sale or
Refinancing Proceeds; and

     (iv)  Fourth  (after  payment  of  any  accrued  but  unpaid   Subordinated
Disposition Fee), the balance 90% to the Limited Partners and 10% to the General
Partner.

     4.2.2.  Upon termination and winding up of the  Partnership,  after payment
of, or adequate provision for, the debts and obligations of the Partnership, and
the  funding of any  Reserves  deemed  reasonable  by the General  Partner,  the
remaining  assets of the  Partnership  shall be distributed to all Partners with
positive  Capital  Accounts in the ratio of their  respective  positive  Capital
Accounts to the sum of all such positive Capital  Accounts.  For purposes of the
preceding  sentence,  the Capital  Account of each Partner  shall be  determined
after  all  adjustments  in  accordance  with  this  Article  4  resulting  from
Partnership operations and from all Sales or Refinancings.  If any assets of the
Partnership  are to be conveyed to a  liquidating  trust for the Partners  under
Section 8.3.2,  then prior thereto the Capital  Account of each Partner shall be
credited or charged in accordance with this Article 4 with the amount of Profits
and Losses for Tax Purposes  that would have been credited or charged to reflect
the  distribution  of such assets as though the adjusted basis of such assets to
the  Partnership  were  equal  to the  fair  market  value  of such  assets,  as
determined under Section 8.3.2.

     4.2.3.  Notwithstanding  any  other  provision  of  this  Agreement  to the
contrary,  the interest of the General  Partner and of its Affiliates in cash to
be distributed by the Partnership or by any Local Limited  Partnership from Cash
Available for Distribution,  from Sale or Refinancing  Proceeds, or from similar
sources in the case of a Local Limited Partnership, will not exceed, in the case
of Cash Available for Distribution, 10% of total Cash Available for Distribution
and, in the case of Sale

                                       B-24

<PAGE>



or  Refinancing  Proceeds,  after the  payment to Limited  Partners of an amount
equal to 100% of their Capital Contributions and their Return on Investment, 15%
of remaining  Sale or  Refinancing  Proceeds.  Furthermore,  the interest of the
General  Partner and its Affiliates as Local General  Partners and/or as the SLP
Affiliate in operating  cash flow of all Local  Limited  Partnerships,  plus the
Asset  Management Fee payable  pursuant to Section  5.6.6,  will not in any year
exceed an  amount  equal to 0.5% of that  portion  of  Invested  Assets in Local
Limited  Partnerships  which  are  attributable  to  apartment  units  receiving
Government Assistance.

     4.3.    Profits and Losses

     After  taking into  account all special  allocations  of income or gain and
Profits  and Losses for Tax  Purposes  and  otherwise  adjusting  the  Partners'
Capital  Accounts in accordance  with the applicable  provisions of Section 4.4,
any  remaining  Profits  and Losses  shall be  allocated  among the  Partners in
accordance with this Section 4.3, subject to Section 4.7.

     4.3.1.  Unless  Section  4.3.3  applies,  if  there  is an  aggregate  Loss
remaining, such remaining aggregate Loss shall be allocated:

     (i) First, to the extent of the positive  Capital  Account  balances of the
Partners,  in such manner and amount as is necessary to cause such balances,  as
so  adjusted,  to be in the ratio of 99% to the Limited  Partners  and 1% to the
General Partner until such balances are reduced to zero;

     (ii) Second,  to the extent of the excess of Partnership  Minimum Gain over
the  aggregate  negative  Capital  Account  balances of the  Partners  with such
balances,  to the General  Partner  and the Limited  Partners in such manner and
amount as is necessary to cause their negative Capital Account  balances,  as so
adjusted,  to be in the  ratio  of 99% to  the  Limited  Partners  and 1% to the
General Partner; and

     (iii) Third, to the General Partner.

     4.3.2.  Unless  Section  4.3.3  applies,  if there is an  aggregate  Profit
remaining, such remaining aggregate Profit shall be allocated:

     (i)  First,  in the  event  that the  Limited  Partners  have an  aggregate
positive  Capital Account balance and the General Partner has a negative Capital
Account  balance or vice versa,  to the class of Partners with and to the extent
of such negative balances;

     (ii)  Second,  to the  extent of the  aggregate  negative  Capital  Account
balances of the  Partners,  to the Limited  Partners and the General  Partner in
such manner and

                                       B-25

<PAGE>



amount as is necessary to cause the negative  Capital  Account  balances of such
Partners,  as so adjusted, to be in the ratio of 99% to the Limited Partners and
1% to the General Partner; and

     (iii)  Third,  to the Limited  Partners  to the extent that their  positive
Capital Account balances are less than their Adjusted Capital Contributions.

     4.3.3.  Notwithstanding  any provision of this Section 4.3 to the contrary,
to the  extent of (i) any  aggregate  Profit  remaining  after  the  allocations
provided  in  Section  4.3.2.(iii),  or (ii)  the  lesser  of the  Partnership's
remaining  aggregate  Losses  and the  excess of the  positive  Capital  Account
balances of the Limited Partners over their Adjusted Capital Contributions,  any
such  Profits or Losses shall be  allocated  among the Limited  Partners and the
General  Partner in such manner and amount as is necessary to cause the positive
Capital  Account  balances of the Partners to be equal to such Partners'  Deemed
Liquidation Distribution.

     4.3.4.  Whenever in this  Section  4.3 a  reference  is made to the Limited
Partners,  such  reference  shall be deemed  to be a  reference  to the  Limited
Partners as a class.

     4.3.5.  Notwithstanding  any  provision  of this  Agreement to the contrary
other than Sections 4.4.3(i) and 4.4.3(v), in no event shall the General Partner
receive less than 1% of any cash distribution of the Partnership or be allocated
less than 1% of all Profits and Losses for Tax Purposes or Tax  Credits,  except
as otherwise  required by Treasury  Regulations.  For the purpose of determining
the  allocation  of Profits and Losses for Tax Purposes to the General  Partner,
the General  Partner shall be deemed to have made a Capital  Contribution to the
Partnership equal to 1.01% of the Capital  Contributions of the Limited Partners
to the Partnership.

     4.3.6.  Profits  and  Losses  for  Tax  Purposes  and  the  amount  of  any
expenditure  giving rise to a Tax Credit shall be determined  and allocated with
respect to each fiscal year of the  Partnership as of, and within 75 days after,
the end of such year.

     4.4.    Certain Provisions Related to Partnership Allocations and
             Distributions

     4.4.1.(i) The  provisions of this Agreement  related to the  maintenance of
Capital Accounts,  the allocation of Profits and Losses for Tax Purposes and Tax
Credits and the  distribution  of cash and property to the Partners are intended
to comply with the  requirements of Treasury  Regulation  Section  1.704-1(b) by
causing the amount of such  Profits and Losses for Tax  Purposes to be allocated
among  the  Partners'  Capital  Accounts  so that the  amount  in their  Capital
Accounts as of the end of each fiscal  year of the  Partnership  is equal to the
Partners'  Deemed  Liquidation  Distributions.  Where  there  would be no Deemed
Liquidation Distribution to the Partners, such provisions are intended to comply
with the above-referenced

                                       B-26

<PAGE>



Treasury Regulations by (a) limiting the maximum negative balance in the Capital
Accounts  of the  Limited  Partners,  as a class,  to an amount not in excess of
their aggregate share (determined in accordance with Treasury Regulation Section
1.704- 2(g)) of  Partnership  Minimum Gain,  (b)  allocating  the  Partnership's
aggregate Nonrecourse  Deductions to cause the negative Capital Account balances
of the Limited Partners,  as a class, and the General Partner to be in the ratio
of 99% to the Limited Partners and 1% to the General Partner, and (c) allocating
to the  Partners  an amount of gross  income or gain of the  Partnership  to the
extent  necessary to cause the Partnership to comply with clauses (a) and (b) of
this  sentence at the end of each fiscal year of the  Partnership.  In addition,
such provisions are intended to cause the amount  distributable  to each Partner
in an actual  distribution  pursuant  to Section  4.2.2 to equal the amount that
would be  distributable  to each  Partner if Section  4.2.1  rather than Section
4.2.2 applied to such distribution.

     (ii) If the  Partnership  is  advised  at any  time by its  Accountants  or
counsel that the  allocations of Profits and Losses for Tax Purposes  and/or Tax
Credits are unlikely to be respected for Federal  income tax purposes or that an
actual  distribution  to the Partners in accordance with Section 4.2.2 would not
result in each  Partner  receiving  the amount  that he would have  received  if
Section  4.2.1  rather than  Section  4.2.2  applied to such  distribution,  the
General  Partner is  authorized  and  empowered,  without any Consent of Limited
Partners,  to amend this  Agreement  (other than Sections 4.1 and 4.2 hereof) to
cure such defect consistent with the principles of Section 4.4.1(i).

     4.4.2. The Partners acknowledge that under certain circumstances  specified
in the Treasury  Regulations,  the allocations of taxable income or loss and any
item thereof may not be respected for Federal  income tax  purposes,  unless the
assets of the  Partnership  are revalued to reflect  their fair market value and
the  Capital  Accounts  of the  Partners  are  properly  adjusted to reflect the
difference  between  this fair  market  value  (referred  to herein as the "Book
Value")  and the  Partnership's  tax basis in such  assets (or, in the case of a
prior  revaluation,  the Partnership's  prior Book Value).  The circumstances in
which  such  revaluation  may  be  required  include,  without  limitation,  the
contribution  of property  (other than cash) to the Partnership by a Partner and
certain  distributions  of property by the Partnership to a Partner,  as well as
any deemed  distribution and contribution in accordance with Treasury Regulation
Section  1.708-1(b)(1)(iv).  This  Agreement  does not permit or provide for the
contribution  of  property  (other  than cash) to the  Partnership  and does not
provide  for the  distribution  of property  (other than cash) to the  Partners,
except for  distributions to a liquidating  trust for the Partners under Section
8.3.2.  However,  in the event that the Treasury  Regulations  are determined to
require  such a  revaluation,  the  Capital  Accounts of the  Partners  shall be
properly   adjusted  to  reflect  such   revaluation  and  the  effect  of  such
contribution  or distribution  on liabilities  that the recipient  assumes or to
which the revalued property is subject.

                                       B-27

<PAGE>



Any  allocation of Profits and Losses for Tax Purposes and any adjustment to the
Partners' Capital Accounts  required by the Treasury  Regulations as a result of
such  required  revaluation,  including,  without  limitation,  any  adjustments
required by Section  704(c) of the Code,  shall be made in  accordance  with the
principles of Section 4.4.1(i).

     4.4.3.(i)  In the event  any  Limited  Partners  unexpectedly  receive  any
adjustments,  allocations,  or  distributions  described in Treasury  Regulation
Section 1.704-1(b)(2)(ii)(d)(4)-(ii)(d)(6), items of Partnership income and gain
(consisting  of a pro rata  portion  of each item of the  Partnership's  income,
including gross income, and gain for such year) shall be specially  allocated to
such Partners in an amount and manner  sufficient  to  eliminate,  to the extent
required by the  Regulations,  the Adjusted  Capital  Account Deficit created by
such adjustments, allocations, or distributions as quickly as possible.

     (ii) In the  event the  adjusted  tax basis of any  investment  tax  credit
property  that has been  placed  in  service  by the  Partnership  is  increased
pursuant to Section 50(c)(2) of the Code, such increase shall be allocated among
the  Partners  (as an  item  in the  nature  of  income  or  gain)  in the  same
proportions as the investment tax credit that is recaptured with respect to such
Property is shared among the Partners.

     (iii) The Capital  Account of each  Limited  Partner  shall be reduced by a
charge equal to the amount of the selling  commission paid by the Partnership to
the  soliciting  dealers  that is properly  allocable  to the Units held by such
Limited  Partner.  Notwithstanding  any  provision  of  this  Agreement  to  the
contrary,  the Partnership  shall be deemed to have  distributed to each Limited
Partner,  and the Capital  Account of each Limited Partner shall be reduced by a
charge equal to, the excess of a 7.5% selling commission over the amount charged
such Limited  Partner's  Capital  Account as a selling  commission in accordance
with the preceding sentence (the "Discount").  Any deemed distribution  pursuant
to this Section  4.4.3(iii) shall not be deemed a return of a Partner's  Capital
Contribution,  but rather shall be deemed to be a compromise  within the meaning
of Section  15636(c) of the Act,  and no Partner  shall be  obligated to pay any
such  amount to or for the  benefit of the  Partnership  or any  creditor of the
Partnership.  With  respect  to  each  Designated  Investor  and  each  Discount
Investor:  (a) the Capital  Contribution  of such Investor shall be deemed to be
equal  to  $1,000  for  each  Unit  purchased;  (b) the  amount  of the  selling
commission paid by the Partnership that is properly  allocable to the Units held
by such Investor shall be deemed to be the reduced selling  commission;  and (c)
such Investor  shall not receive an actual  distribution  but shall be deemed to
have received a distribution  pursuant to this Section  4.4.3(iii)  equal to the
Discount.  All other  Syndication  Expenses  for any fiscal year or other period
shall be specially  allocated  to the Limited  Partners in  proportion  to their
Units,  provided  that  if  additional  Limited  Partners  are  admitted  to the
Partnership pursuant to Section 3.3 hereof on different dates, all of such other
Syndication

                                       B-28

<PAGE>



Expenses  shall be divided among the Partners who own Units from time to time so
that, to the extent possible,  the cumulative  amount of such other  Syndication
Expenses  allocated with respect to each Unit at any time is the same amount. In
the event the General  Partner shall determine that such result is not likely to
be achieved through future allocations of such other Syndication  Expenses,  the
General Partner may allocate a portion of Profits and Losses for Tax Purposes so
as to achieve the same effect on the  Capital  Accounts of the Limited  Partners
subject to the principles of Section 4.4.1.

     (iv) Any  reduction  in the  adjusted  tax basis  (or cost) of  Partnership
property  pursuant to Section  50(c)(1) of the Code shall be allocated among the
Partners  (as an  item  in  the  nature  of  expenses  or  losses)  in the  same
proportions  as the basis (or cost) of such  property is  allocated  pursuant to
Treasury Regulation Section 1.46- 3(f)(2)(i).

     (v) (a) Except as otherwise provided in Treasury  Regulation Section 1.704-
2(f),  if there is a net  decrease in  Partnership  Minimum Gain during a fiscal
year of the  Partnership,  each Partner shall be allocated  items of Partnership
income  and gain  for  such  year  (and,  if  necessary,  subsequent  years)  in
proportion  to,  and to the extent  of, an amount  equal to the  portion of such
Partner's  share of the net  decrease in  Partnership  Minimum  Gain during such
year.

             (b) Except as  otherwise  provided in Treasury  Regulation  Section
1.704- 2(h), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during  a fiscal  year of the  Partnership  determined  in  accordance  with the
principles  of Section  1.704-2(i)  of the  Regulations,  each Partner who had a
share of Partner  Nonrecourse  Debt Minimum  Gain at the  beginning of such year
shall be allocated  items of Partnership  income and gain for such year (and, if
necessary,  subsequent  years) in proportion to, and to the extent of, an amount
equal to the  portion of such  Partner's  share of the net  decrease  in Partner
Nonrecourse  Debt Minimum Gain during such year that is allocable (in accordance
with the principles set forth in Treasury  Regulation Section 1.704-2(i)) to the
disposition of Partnership  property subject to the related Partner  Nonrecourse
Debt.

             (c) For the purposes of this Section 4.4.3(v), the date of any Sale
or Refinancing  shall be treated as the end of a fiscal year of the Partnership.
The character and origin of any income or gain allocated in accordance with this
Section  4.4.3(v)  shall be determined in  accordance  with Treasury  Regulation
Section 1.704-2(j).

     (vi) The  allocations  set forth in Sections 4.4.2 and 4.4.3 hereof,  other
than this  Section  4.4.3(vi)  and Section  4.4.3(vii)  hereof (the  "Regulatory
Allocations")  are  intended to comply  with  certain  requirements  of Treasury
Regulations.  It is the intent of the Partners that, to the extent possible, all
Regulatory Allocations shall

                                       B-29

<PAGE>



be offset either with other Regulatory  Allocations or with special  allocations
of other items of Partnership  income,  gain, loss or deduction pursuant to this
Section  4.4.3(vi).  Therefore,  notwithstanding  any  other  provision  of this
Article 4 (other than the  Regulatory  Allocations),  the General  Partner shall
make such offsetting special  allocations of Partnership  income,  gain, loss or
deductions in whatever  amount it  determines  appropriate  so that,  after such
offsetting  allocations are made, each Partner's  Capital Account balance is, to
the extent  possible,  equal to the Capital  Account  balance such Partner would
have  had if  the  Regulatory  Allocations  were  not  part  of the  Partnership
Agreement and all Partnership items were allocated pursuant to the provisions of
this  Article  4 other  than  the  Regulatory  Allocations.  In  exercising  its
discretion  under this Section  4.4.3(vi),  the General  Partner shall take into
account future Regulatory  Allocations  under Section  4.4.3(v)(a) and (b) that,
although  not yet  made,  are  likely  to offset  other  Regulatory  Allocations
previously made under Sections 4.4.3(viii) and (ix).

     (vii) In any fiscal year in which  Section  4.3.1(i) or (ii) applies to the
allocation of Losses or Section  4.3.2(ii) applies to the allocation of Profits,
the General Partner shall be specially allocated an amount of income,  including
gross income, or gain from such fiscal year to the extent necessary to cause the
Capital  Accounts of the Limited  Partners and the General  Partner to be in the
ratios stated in whichever of such sections is applicable.

     (viii) Notwithstanding Section 4.3.1, any deduction attributable to Partner
Nonrecourse  Debt shall be allocated to the Partners that bear the Economic Risk
of Loss for the Partner Nonrecourse Debt.

     (ix) Except as otherwise expressly provided herein,  Nonrecourse Deductions
shall be allocated 99% to the Limited Partners and 1% to the General Partner.

     4.4.4.  For the purpose of making any allocation of Profit and Loss for Tax
Purposes, the Capital Account of each Partner shall first be deemed to have been
reduced by the amount of any distribution that, at the end of the fiscal year of
the  Partnership  with  respect  to which  such  allocation  is to be made,  was
reasonably  anticipated  to be made to such  Partner  pursuant to Section 4.1 or
Section 4.2.1, except to the extent that, in compliance with Treasury Regulation
Section 1.704-  1(b)(2)(ii)(d)(6),  the General Partner  reasonably  anticipates
that the Partnership will subsequently have offsetting income or gains.

     4.4.5.  To the  extent  that  any  amount  of gain  from  the sale or other
disposition  of a  Property  is treated as gain  subject  to the  provisions  of
Section 1245 or 1250 of the Code (other than as a result of the  application  of
Section  291 of the Code),  such gain shall be  allocated  between  the  Limited
Partners, as a class, and the General Partner in the manner and amount necessary
to offset the amount of depreciation  previously allocated to them that is being
recaptured as a result of such sale or other

                                       B-30

<PAGE>



disposition  (including any amount so treated as a result of the  application of
Section  50(c) of the Code);  provided,  however,  that  nothing in this Section
4.4.5 shall alter the  aggregate  amount of Profits and Losses for Tax  Purposes
allocable to any Partner  pursuant to this Article 4, and the character of other
items  included in such  Profits and Losses for Tax  Purposes  for the  relevant
period shall be appropriately adjusted to give effect to this provision.

     4.4.6.  All amounts  withheld  pursuant to the Code or any provision of any
state or local tax law with respect to any  distribution  to, or allocable share
of,  the  Partners  shall be  treated as  amounts  distributed  to the  Partners
pursuant to this Article 4 for all purposes  under this  Agreement.  The General
Partner may allocate any such amounts  among the Limited  Partners in any manner
that is in accordance with applicable law.

     4.4.7.  Where relevant in determining  the allocation of Profits and Losses
for Tax Purposes  among the  Partners,  including the character of any amount so
allocated, such Profits and Losses arising other than from a Sale or Refinancing
shall be allocated  among the Partners before the allocation of such Profits and
Losses from a Sale or  Refinancing,  and where more than one Sale or Refinancing
occurs  during the fiscal year,  Profits and Losses for Tax  Purposes  from such
transactions shall be allocated among the Partners in chronological order.

     4.4.8.  To the extent  permitted by Section  1.704-2(h)(3)  of the Treasury
Regulations,   the  General   Partner  shall   endeavor  to  treat   Partnership
distributions  as having been made from the proceeds of a Nonrecourse  Liability
or a Partner  Nonrecourse Debt only to the extent that such distributions  would
cause or increase an Adjusted Capital Account Deficit for any Limited Partner.

     4.5.    Allocation of Tax Credits

     4.5.1.  Except as provided in Section  4.5.2,  in accordance  with Treasury
Regulation  Section  1.704-1(b)(4)(ii),  all  expenditures  giving  rise  to the
allowance of any Tax Credits shall be allocated among the Partners in the manner
in which the deductions  arising from such  expenditures are allocated among the
Partners for the relevant  taxable  year, it being the intention of the Partners
that such expenditures,  including, without limitation, expenditures giving rise
to the allowance of Low Income Housing Credits,  be allocated 99% to the Limited
Partners, as a class, and 1% to the General Partner.

     4.5.2.  For purposes of the investment  tax credit,  including the Historic
Tax Credit,  each Partner shall be allocated a share of the Partnership's  basis
in the property  qualifying for the investment tax credit.  Each Partner's share
of such basis  shall be  determined  in  accordance  with the ratio in which the
Partners are  allocated  Profits of the  Partnership  (other than Profits from a
Sale or Refinancing) for the

                                       B-31

<PAGE>



year during which the property is placed in service. If the Partnership realizes
no Profits  during such year,  then such share of such basis shall be determined
in accordance with the ratio in which the next dollar of such Profits would have
been allocated if such Profits had been realized.

     4.5.3.  Any  recapture of any Tax Credits  shall be  allocated  between the
Limited  Partners,  as a class,  and the  General  Partner in the same manner in
which they shared the Tax Credits.

     4.5.4.  Notwithstanding  Section 4.5.3, in the case of any recapture of any
Tax Credits  resulting  from the sale,  exchange,  transfer or assignment of any
Units,  the Limited  Partners  holding  such Units prior to the sale,  exchange,
transfer or  assignment  shall  indemnify the  Partnership  and the Partners not
transferring  their  Units  for  the  consequences  of  such  recapture  in  the
proportion in which such transferred Units shared the Tax Credits.

     4.6.    Determinations of Allocations and Distributions
             Within Classes of Partners

     4.6.1. All Cash Available for Distribution and Sale or Refinancing Proceeds
distributable to the Limited Partners as a class, and all Profits and Losses for
Tax  Purposes  and Tax  Credits  (including  each item of  income,  gain,  loss,
deduction  or credit  included  therein,  except as  provided  in  Section  4.4)
allocable to the Limited Partners as a class, shall be distributed or allocated,
as the case may be,  to each  Limited  Partner  entitled  to a  distribution  or
allocation,  in the ratio which the number of Units held by each Limited Partner
bears to the total number of Units held by all Limited Partners  entitled to the
distribution or allocation.

     4.6.2.  Except a provided in Sections 3.3.3,  4.6.3,  4.6.4, and 4.6.5, all
Profits and Losses for Tax Purposes not arising from a Sale or  Refinancing  and
all  Tax  Credits  allocable  to the  Limited  Partners  as a  class,  shall  be
allocated, and all Cash Available for Distribution  distributable to the Limited
Partners  as a  class  shall  be  distributed,  to the  Persons  recognized  (in
accordance with Section 7.3.3 in the case of a transfer of Units) as the holders
of Units for this purpose as of the last day of the fiscal  period for which the
allocation or distribution is to be made.

     4.6.3.  Subject to Section  4.6.5,  all Profits and Losses for Tax Purposes
not  arising  from a Sale or  Refinancing  and all Tax Credits for a fiscal year
allocable to any Unit which is transferred  during the year shall be divided and
allocated  between the transferee and the  transferror  based upon the number of
quarterly periods that each was recognized (in accordance with Section 7.3.3) as
the holder of the Unit for this purpose,  without regard to whether  Partnership
operations  during  particular  quarterly  periods of such fiscal year  produced
profits or losses or cash distributions.


                                       B-32

<PAGE>



     4.6.4.  All  Profits  and Losses for Tax  Purposes  arising  from a Sale or
Refinancing allocable to the Limited Partners as a class shall be allocated, and
all Sale or  Refinancing  Proceeds  distributable  to the Limited  Partners as a
class  shall be  distributed,  to the Persons  recognized  (in  accordance  with
Section  7.3.3 in the case of a transfer  of Units) as the  holders of Units for
this  purpose as of the date of the Sale or  Refinancing,  except as provided in
the  following  sentence.  All  Profits  and Losses for Tax  Purposes  which are
attributable to, and all Sale or Refinancing  Proceeds which represent,  Sale or
Refinancing  Proceeds  not received by the  Partnership  as cash upon a sale but
later received by the Partnership as a result of an Installment Sale (as defined
in Section 4.7) or other  deferred  payment  arrangement  and  distributable  or
allocable  to the Limited  Partners as a class in  accordance  with Section 4.7,
shall be allocated or distributed, as the case may be, to the Persons recognized
as the  holders of Units for this  purpose as of the date the  deferred  Sale or
Refinancing  Proceeds  are  received  by the  Partnership  (or, in the case of a
transfer of such Unit that is treated,  under Section 7.3.3,  as occurring after
the date of such Installment Sale or other deferred payment arrangement,  to the
transferee of such Unit).

     4.6.5. In the event that there is more than one Investor Closing,  all Cash
Available for  Distribution  and Profits and Losses for Tax Purposes not arising
from a Sale or Refinancing,  distributable or allocable,  as the case may be, to
the Limited Partners as a class for the period  commencing with the first day of
the month of the Investor Closing and ending on the last day of the month of the
Investor  Closing will be  distributed  or  allocated,  as the case may be, on a
monthly  basis in accordance  with Section 4.6.1 solely to the Limited  Partners
admitted to the  Partnership  as of or prior to the Investor  Closing date which
occurs during such month.

     4.6.6. All Cash Available for Distribution,  Sale or Refinancing  Proceeds,
Profits and Losses for Tax Purposes  and Tax  Credits,  prior to the date of the
initial  Investor  Closing shall be allocated 99% to the Initial Limited Partner
and 1% to the General  Partner.  For this purpose,  the amount of Cash Available
for  Distribution,  Sale or  Refinancing  Proceeds,  Profits  and Losses for Tax
Purposes and Tax Credits, will be determined on a daily basis.

     4.7.    Installment Obligations

     4.7.1.  If as a result of the sale by a Local  Limited  Partnership  of its
Property or of a sale by the Partnership of a Local Limited Partnership Interest
which results in the receipt of an installment  obligation,  including,  without
limitation,  a purchase money mortgage or a purchase contract prescribing one or
more payments  following  closing of the sale (an  "Installment  Obligation") as
part of the  purchase  price  (an  "Installment  Sale"),  after  payment  of, or
adequate  provision  for, the  currently  payable debts and  obligations  of the
Partnership and any Reserves deemed

                                       B-33

<PAGE>



appropriate by the General Partner,  the aggregate of the cash, if any, received
and the  principal  and  interest  payments  to be made  under  the  Installment
Obligation shall be distributed following actual receipt of such payments by the
Partnership  between the General Partner and the Limited  Partners as a class in
accordance  with their  Distribution  Percentages  in such sales  proceeds.  The
"Distribution  Percentages" of the General Partner and the Limited Partners as a
class with respect to an  Installment  Obligation  shall equal the percentage of
the total  distributions that they would have been entitled to receive under the
provisions  of Section 4.2, if the  Partnership  had received the amount of cash
actually  received  from such  Installment  Sale plus cash equal to the  present
value of such Installment  Obligation at the closing of the related  Installment
Sale. The present value of an Installment  Obligation  shall be determined  with
respect to the total  payments of  principal  and  interest to be made under the
Installment Obligation (without regard to any rights of prepayment or prepayment
premiums),  by applying a discount rate equal to the current yield,  on the date
of the Installment Sale, on a United States Treasury obligation, selected by the
General  Partner,  having a stated  maturity  comparable to the ultimate  stated
maturity date of such Installment Obligation.

     4.7.2.  Notwithstanding  the  provisions  of Section  4.3,  any Profits and
Losses for Tax Purposes  resulting from an Installment Sale (including,  without
limitation,   any  amount  of  income  or  gain  attributable  to  the  relevant
Installment Obligation as a result of (i) the application of Section 453C of the
Code or (ii)  the  disposition  thereof  by the  Partnership  or  Local  Limited
Partnership,  but excluding any interest  income to which Section 4.7.3 applies)
shall be  allocated  between the General  Partner and the Limited  Partners as a
class in accordance with their Allocation Percentages in such Profits and Losses
for Tax Purposes.  The  Allocation  Percentages  of the General  Partner and the
Limited  Partners as a class shall equal the percentage of the total Profits and
Losses for Tax Purposes deemed  recognized by the Partnership in accordance with
this sentence that would have been properly allocable to the General Partner and
the  Limited  Partners  as a class  under the  provisions  of Section 4.3 if the
Partnership  had  received  the  amount  of cash  actually  received  from  such
Installment  Sale  plus  cash  equal to the  present  value  of the  Installment
Obligation at the closing of the Installment  Sale, as determined  under Section
4.7.1.

     4.7.3. Any interest income on an Installment Obligation shall be allocated,
when and if accrued by the  Partnership,  between  the  General  Partner and the
Limited Partners as a class in accordance with their Distribution Percentages in
such Installment Obligation.

     4.7.4.  For purposes of  calculating  each  Partner's  share of Profits and
Losses for Tax Purposes and Tax Credits,  the Partnership will be deemed to have
distributed  to the General  Partner  and the Limited  Partners as a class their
respective  Distribution  Percentages,   on  the  date  of  the  closing  of  an
Installment

                                       B-34

<PAGE>



Sale, of the present value of the Installment  Obligation,  as determined  under
Section  4.7.1.  Any  amounts  deemed to have been  distributed  to the  Limited
Partners  as a class will  reduce  Adjusted  Capital  Contributions  and Capital
Accounts as of the date of the  Installment  Sale, and the actual receipt by the
Partners of any  proceeds  from an  Installment  Sale shall not  further  reduce
Adjusted Capital Contributions and Capital Accounts.

                                     ARTICLE 5

                   RIGHTS, POWERS AND DUTIES OF GENERAL PARTNER

     5.1.    Management of the Partnership

     5.1.1.  Subject to the Consent of the Limited  Partners  (or of a specified
percentage thereof) where required by this Agreement,  the General Partner shall
have the exclusive right and authority to manage and control the business of the
Partnership  and is hereby  authorized  to take any action and to do anything it
deems  necessary to achieve the purposes of the  Partnership in accordance  with
the provisions of this Agreement and applicable law.

     5.1.2.  The General  Partner  shall,  except as otherwise  provided in this
Agreement,  have  all  rights  and  powers  and  shall  be  subject  to all  the
restrictions  and  liabilities  of a partner in a  partnership  without  limited
partners.

     5.1.3. No Limited  Partner  (except one who may also be a General  Partner,
and then only in its capacity as a General Partner) shall participate in or have
any control over the Partnership  business or have any authority or right to act
for or bind the Partnership.

     5.2.    General Authority of General Partner

     5.2.1. Subject to Sections 5.2.2, 5.3 and 5.4, the General Partner for, and
in the name and on behalf  of, the  Partnership  is hereby  authorized,  without
limitation:

     (i) to acquire,  hold,  encumber,  sell, dispose of and otherwise deal with
Local  Limited  Partnership  Interests,  at such price and upon such terms as it
deems to be in the best interests of the Partnership,  including exercise of the
Partnership's  voting and other  rights  and powers as a limited  partner in the
Local Limited Partnerships;

     (ii) to acquire by purchase,  lease, exchange or otherwise,  any other real
or personal property;


                                       B-35

<PAGE>



     (iii) to borrow money and issue  evidences of  indebtedness,  and to secure
the same by pledge or other lien on any Local Limited  Partnership  Interests or
other assets of the Partnership;

     (iv)  to  employ  agents,  employees,  managers,  accountants,   attorneys,
consultants and other Persons necessary or appropriate to carry out the business
and operations of the Partnership,  and to pay fees, expenses,  salaries,  wages
and other compensation to such Persons;

     (v)  to  pay,  extend,  renew,  modify,   adjust,  submit  to  arbitration,
prosecute,  defend or  compromise,  upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation,  suit, liability, cause
of  action  or  claim,  including  taxes,  either  in  favor of or  against  the
Partnership;

     (vi) to  cause  the  Partnership  to make or  revoke  any of the  elections
referred to in the Code;

     (vii) to offer and sell Units in the  Partnership to the public directly or
through any licensed Person and to employ personnel, agents and dealers for such
purpose;

     (viii) to  establish  and maintain  Reserves for such  purposes and in such
amounts  as it deems  appropriate  from time to time,  it being  understood  and
agreed that,  after the  termination of the Offering,  the General Partner shall
establish  initial  Reserves  out  of  Capital  Contributions,   in  the  manner
contemplated by the  Prospectus,  in an amount equal to not less than 3% of such
Capital Contributions;

     (ix)  to  invest  the  Net  Proceeds  in  Temporary  Investments  prior  to
investment in Local Limited Partnership Interests;

     (x) to engage in any kind of activity  necessary to, or in connection with,
or incidental to the accomplishment of the purposes of the Partnership;

     (xi) to withhold income taxes as required by, and to otherwise  comply with
and take actions necessary as a result of, provisions of the Code (or comparable
provisions of law in any state or other  jurisdiction  in which the  Partnership
does business) requiring withholding; and

     (xii) in the absolute  discretion of the General Partner, at any time after
conclusion  of the  Offering,  to  repurchase  any Units upon the request of the
holder thereof on terms mutually agreeable to the Partnership and such holder if
the repurchase does not impair the capital or the operations of the Partnership.
Neither the  Partnership  nor the General  Partner shall,  at any time, have any
obligation whatsoever to repurchase any Units.


                                       B-36

<PAGE>



     5.2.2.  Notwithstanding any provision in this Agreement to the contrary, it
is understood and agreed that in selecting Local Limited  Partnership  Interests
for  investment  by the  Partnership  the General  Partner shall be bound by the
following  investment  policies  which may not be  changed,  altered or amended,
except as provided in Section 10.2:

     (i)  the  Partnership   shall  make   investments  only  in  Local  Limited
Partnerships  which own completed  Apartment  Complexes or are in the process of
developing new Apartment  Complexes or rehabilitating  Apartment Complexes which
shall be  eligible,  in the opinion of counsel,  (a) for the Low Income  Housing
Credit, and (b) the Historic Tax Credit,  provided that none of the Net Proceeds
may be invested  in Local  Limited  Partnerships  that own  Apartment  Complexes
eligible for Historic Tax Credits but not Low Income Housing Credits;

     (ii) the  Partnership  shall  not  acquire  any Local  Limited  Partnership
Interest  unless the  Partnership  has  received,  with respect to the Apartment
Complex of such Local Limited Partnership, either (i) an appraisal prepared by a
competent,  independent  appraiser  or (ii) RECDS Forms  1924-13  (estimate  and
certificate of actual cost) and 1930-7 (statement of budget, income and expense)
or HUD project cost and budget  analysis on Form 2264,  or a comparable  form of
any  successor  of  RECDS or HUD or of a state  or  other  governmental  agency,
including any applicable Tax Credit allocation  agency,  setting forth estimates
with respect to  construction  and mortgage  financing  costs and initial rental
income and operating  expenses,  which in either case shall be maintained in the
Partnership's  records  for at least  five  years,  and shall be  available  for
inspection and duplication by any Partner;

     (iii)  no  part  of  the  Partnership's   investment  in  a  Local  Limited
Partnership  (other  than a Local  Limited  Partnership  which owns a  completed
Apartment Complex at the time of the Partnership's  initial investment  therein)
shall be made prior to receipt of a commitment for the construction loan, and no
more  than  75%  of  the  Partnership's  investment  in  such  a  Local  Limited
Partnership  shall be made prior to receipt of a  commitment  for the  permanent
loan;

     (iv) the agreements with respect to each Local Limited  Partnership  (other
than a Local Limited Partnership which owns a completed Apartment Complex at the
date of the Partnership's  initial  investment  therein) must contain provisions
whereby the  completion of  construction  of the Apartment  Complex at the price
contracted  is  secured by an  adequate  completion  bond or other  satisfactory
arrangements.  For the purposes of this Section  5.2.2(iv),  other  satisfactory
arrangements include, but are not limited to, the following:


                                       B-37

<PAGE>



             (a) a written  guarantee of completion by the Local General Partner
supported  by  financial  statements   demonstrating  sufficient  net  worth  or
adequately collateralized by other real or personal properties or other Persons'
guarantees; or

             (b)  a  retention   of  a   reasonable   portion  of  the  purchase
consideration as a potential offset to such purchase  consideration in the event
the Local General Partner does not perform in accordance with such agreement.

     (v) the  Partnership  shall not  invest in any  Local  Limited  Partnership
unless an experienced  real estate developer has agreed in writing for a minimum
term acceptable to the General  Partner to supervise  management of the Property
or to serve as its managing Local General Partner or Property manager;

     (vi) the Partnership shall invest only in Local Limited  Partnerships which
restrict the payment of real estate commissions by any Person to any Person upon
resale of an Apartment  Complex to a maximum of the lesser of (a) a  Competitive
real estate  commission  or (b) 6% of the sales price of the  Apartment  Complex
(including the amount of the commission paid);

     (vii) the  Partnership  shall invest only in Local Limited  Partnerships as
follows:

             (a) If the Local General  Partner of the Local Limited  Partnership
is a Sponsor,  the partnership  agreement of the Local Limited  Partnership must
include provisions (1) complying with Section IX.F. of the NASAA Guidelines, (2)
acknowledging  privity  between  the  Local  General  Partner  and  the  Limited
Partners,  (3)  providing  that the  compensation  payable to the Sponsor in the
aggregate from both the Partnership and the Local Limited  Partnership shall not
exceed the amounts  permitted  under  Section IV. of the NASAA  Guidelines,  (4)
providing that the Local Limited  Partnership  have as its limited partners only
publicly  registered  partnerships,  except that  special  limited  partners not
affiliated  with the Sponsor  shall be permitted if the  interests  taken by the
special limited  partners result in no diminution in the control  exercisable by
the other limited partners of the Local Limited  Partnership,  and (5) providing
that the Partnership's  investment in the Local Limited Partnership shall not be
structured through more than a two-tier arrangement;

             (b) If the Local General  Partner of the Local Limited  Partnership
is not a Sponsor,  the  partnership  agreement of the Local Limited  Partnership
must include provisions which contain in their partnership agreements provisions
not less  favorable  to the limited  partners  therein  than those  contained in
Sections 3.3.3 (respecting admissions),  3.6.2, 5.4.2, 5.5.4, 5.5.5, 5.5.6, 5.8,
6.1, 9.1, 9.4.1,  9.4.2,  9.4.3,  10.1.1,  10.1.2,  10.2.1,  10.2.3,  12.1.2 and
Article 7 hereof;


                                       B-38

<PAGE>



     (viii) the Partnership shall invest in Local Limited  Partnerships  jointly
with  other  limited  partnerships  (including  limited  partnerships  which are
controlled by or otherwise affiliated with the General Partner) (the Partnership
and any other limited  partnership being referred to hereinafter as a "Program")
only if each of the following conditions is satisfied:

     (a) the two Programs have substantially identical investment objectives;

     (b) there are no duplicate property management or other fees;

     (c) the  compensation  to the  sponsor  of each  Program  is  substantially
identical in each Program;

     (d) each  Program will have a right of first  refusal if the other  Program
wishes to sell its Local Limited Partnership Interest;

     (e) the investment of each Program is on  substantially  the same terms and
conditions;

     (f) if the other Program is controlled by or otherwise  affiliated with the
General  Partner,  the  other  Program  must be  publicly  registered  under the
Securities Act of 1933; and

     (g) if the other Program is not controlled by or otherwise  affiliated with
the General Partner,  the Partnership must acquire a Controlling Interest in the
joint  venture.  For  this  purpose  the  phrase  "Controlling  Interest"  means
possessing  the power to direct or cause the  direction  of the  activities  and
policies of the joint  venture,  whether  through  ownership of  securities,  by
contract,  by the exercise of a power of veto over its  activities  and policies
other than in the ordinary course of business, or otherwise; and

     (ix) The  Partnership  shall commit a percentage  of the Limited  Partners'
Capital Contributions to Investment in Local Limited Partnership Interests which
is at least equal to the greater of (i) 80% of the Capital Contributions reduced
by 0.1625% for each 1% of the aggregate indebtedness secured or to be secured by
all  liens  and  mortgages   encumbering   Properties  owned  by  Local  Limited
Partnerships  or (ii) 70% of the  Capital  Contributions.  For  purposes of this
calculation,  the percentage of "aggregate indebtedness secured or to be secured
by all  liens  and  mortgages  encumbering  Properties  owned by  Local  Limited
Partnerships" is the percentage  resulting when the Partnership's  share of such
aggregate indebtedness is divided by the Partnership's share of the aggregate of
the  Purchase  Prices  of all  Properties  held by Local  Limited  Partnerships,
excluding  Front-End Fees. If the total amount of Front-End Fees must be reduced
in order to enable the  Partnership to satisfy the foregoing  restrictions,  the
General Partner shall, and shall cause its Affiliates or

                                       B-39

<PAGE>



other Persons to,  reimburse the  Partnership  for the amount of Front-End  Fees
received by them as necessary to enable the  Partnership to meet this investment
requirement.

     5.2.3. With respect to each of its obligations, powers and responsibilities
under this Agreement,  the General Partner is authorized to execute and deliver,
for and on  behalf  of the  Partnership,  such  notes  and  other  evidences  of
indebtedness,   contracts,   agreements,   assignments,   deeds,   leases,  loan
agreements,  mortgages and other security instruments and agreements as it deems
proper, all on such terms and conditions as it deems proper.

     5.2.4.  Any Person dealing with the  Partnership or the General Partner may
rely upon a certificate signed by the General Partner as to:

     (i) the identity of the General Partner or any Limited Partner;

     (ii) the Persons who are  authorized to execute and deliver any  instrument
     or document of or on behalf of the Partnership;

     (iii) the existence or  non-existence of any fact or facts which constitute
a condition  precedent to acts by the General Partner or in any other manner are
germane to the affairs of the Partnership; or

     (iv) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner.

     5.3.    Authority of General Partner and its Affiliates to Deal with
             Partnership

     5.3.1.  Without  limitation  upon the other  powers set forth  herein,  the
General  Partner is expressly  authorized for, in the name of, and on behalf of,
the Partnership to:

     (i) subject to the limitations set forth herein, pay to the General Partner
or any of its  Affiliates  designated by them the  compensation  provided for in
Section 5.6 hereof;

     (ii)  borrow  funds  from the  General  Partner  or any of its  Affiliates;
provided,  however,  that such borrowings may only be made on a short-term basis
(not to exceed one year) and provided  further that the  Partnership may not pay
in  connection  therewith  (a)  interest or other  financing  charges or fees in
excess of the amounts which would be charged by unrelated  lending  institutions
on  comparable  loans for the same purpose in the same locality (and in no event
may interest on

                                       B-40

<PAGE>



such borrowings exceed 2% per annum above the Prime Rate, or (b) any
prepayment charge or penalty;

     (iii)  in  connection  with the  organization  of the  Partnership  and the
Offering,  the  Partnership  shall pay, or reimburse the General  Partner or its
Affiliates  for advances made to cover,  Organizational  and Offering  Expenses,
including  salaries and direct  expenses of employees of the General Partner and
its  Affiliates  directly  engaged  in  the  organization  and  Offering  of the
Partnership  to the extent such  salaries and expenses  are  allocable  thereto;
provided that the General Partner or its Affiliates shall pay all Organizational
and Offering Expenses (with the exception of retail selling commissions equal to
7.5%  of  the  Capital   Contributions,   the   Dealer-Manager   Fee,   and  the
Nonaccountable   Expense   Reimbursement)   in  excess  of  4%  of  the  Capital
Contributions.  However, if and to the extent Acquisition Expenses are less than
the maximum permitted amount, as set forth in Section 5.3.1(iv),  the difference
between the actual  Acquisition  Expenses  and the maximum  permitted  amount of
Acquisition  Expenses will reduce the General  Partner's  obligation to pay such
Organizational and Offering Expenses,  provided,  however, that in any event the
General Partner shall pay all such  Organizational  and Offering  Expenses which
exceed 5% of the Capital  Contributions.  In addition, the General Partner shall
pay  any  Organizational   and  Offering  Expenses   (including  retail  selling
commissions equal to 7.5% of the Capital Contributions,  the Dealer-Manager Fee,
and the Nonaccountable  Expense Reimbursement) in excess of 14.5% of the Capital
Contributions.  The  limitations  set forth  herein  shall be  applied as if WNC
Housing Tax Credit Fund V, L.P.,  Series 3 and Series 4 were conducting a single
Offering,  rather than a series of Offerings.  In the event that  Organizational
and  Offering  Expenses on a per-Unit  basis are higher for one such issuer than
for another  (excluding  discounts  attributable  to  Designated  Investors  and
Discount Investors),  the total of Organizational and Offering Expenses incurred
by all such issuers shall be allocated among them so that the per-Unit amount is
the same (excluding discounts);

     (iv) in connection  with the  acquisition by the Partnership of investments
in Local  Limited  Partnerships,  the  Partnership  shall pay, or reimburse  the
General  Partner  or its  Affiliates  for  advances  made to cover,  Acquisition
Expenses,  provided that the General Partner shall pay any Acquisition  Expenses
in excess of 1% of Capital Contributions;

     (v) deal with, or otherwise engage in business with, or provide services to
and receive compensation therefor from, any Person who has provided any services
to, lent money to, sold  property to, or purchased  property  from,  the General
Partner or any of its Affiliates;

     (vi) require in any or all  Partnership  contracts that the General Partner
shall not have any personal  liability  thereon but that the Person  contracting
with the

                                       B-41

<PAGE>



Partnership   shall  look  solely  to  the   Partnership   and  its  assets  for
satisfaction; however, if any additional cost is imposed upon the Partnership as
a  result  of such a  requirement,  such  additional  cost  shall be paid by the
General  Partner  from  its own  funds,  without  recourse  to the  funds of the
Partnership;

     (vii) subject to the provisions of Section 5.2.2(vii) hereof,  exercise the
right to cause an  Affiliate  of the General  Partner to become a Local  General
Partner,  including  the  sole  Local  General  Partner,  in  the  event  of the
bankruptcy,   death,  dissolution,   withdrawal,   removal  or  adjudication  of
incompetence of a Local General  Partner,  or in the event of a material default
by a Local General  Partner or any of its Affiliates on any  obligations of such
Local General  Partner or Affiliate to the Local Limited  Partnership  or to the
Partnership,  if the General Partner  determines that the exercise of such right
would best  protect  the  interest  of the  Partnership  in such  Local  Limited
Partnership; and

     (viii)  exercise  the right to cause the SLP  Affiliate to become a special
limited  partner of each Local  Limited  Partnership  upon the terms and for the
interest in the Local Limited Partnership described in the Prospectus.

     5.3.2.  Other than as  specifically  authorized  in this  Section  5.3, the
General Partner is prohibited  from entering into any  agreements,  contracts or
arrangements  on behalf  of the  Partnership  with the  General  Partner  or any
Affiliate  of the General  Partner.  Such  prohibition  shall  include,  without
limitation, the following:

     (i) the  Partnership  shall  not  purchase  any Local  Limited  Partnership
Interest or Apartment  Complex from the Sponsor unless such Person purchased the
Local  Limited  Partnership  Interest  or the  Apartment  Complex  which  is the
principal  asset  of the  Local  Limited  Partnership  in its  name in  order to
facilitate  the  acquisition  of such  Local  Limited  Partnership  Interest  or
Apartment Complex by the Partnership;  provided,  however,  that in the event of
such an  acquisition  from  the  Sponsor  (a)  the  purchase  price  paid by the
Partnership  may  not  (except  to  the  extent  of  any  reimbursement  by  the
Partnership of carrying costs) exceed the cost of such Local Limited Partnership
Interest  or  Apartment  Complex to the  seller;  (b) no  compensation  or other
benefit  from the  transaction  may accrue to the  Sponsor  except as  otherwise
permitted  by this  Agreement;  (c) the  seller  has not held the Local  Limited
Partnership  Interest  or  Apartment  Complex  for a period  in excess of twelve
months prior to  commencement  of the  Offering;  (d) there is no  difference in
interest terms of the loans secured by the Local Limited Partnership Interest or
Apartment  Complex at the time  acquired by the Sponsor and the time acquired by
the  Partnership;  (e) all income and expense  which accrues to the Sponsor as a
result of the ownership of such Local Limited Partnership  Interest or Apartment
Complex shall be treated as belonging to the Partnership;  and (f) the seller is
not a Program in which the General  Partner has an interest.  For this  purpose,
the term "Program" shall mean a limited or general  partnership,  joint venture,
unincorporated

                                       B-42

<PAGE>



association or similar organization other than a corporation formed and operated
for the primary  purpose of  investment  in and the operation of or gain from an
interest in real property  including  such entities  formed to make or invest in
mortgage loans;

     (ii) neither the General Partner nor any of its Affiliates shall enter into
an agreement or contract with a Local Limited Partnership for the development of
any Apartment  Complex or the  construction of improvements  with respect to any
Apartment Complex;

     (iii) neither the General  Partner nor any of its Affiliates  shall receive
directly or indirectly a commission or fee in connection  with the  reinvestment
of the  proceeds  of the sale,  exchange  or  refinancing  of any Local  Limited
Partnership Interest or any Apartment Complex;

     (iv) neither the General Partner nor any of its Affiliates shall receive an
insurance  brokerage fee or write any insurance  policy covering the Partnership
or any Apartment Complex;

     (v) neither the General Partner nor any of its Affiliates shall be given an
exclusive  right  to sell or  exclusive  employment  to sell any  Local  Limited
Partnership  Interest for the Partnership or any Apartment Complex for any Local
Limited Partnership;

     (vi)  except  as  provided  in  Section  5.3.1(viii)  hereof,  neither  the
Partnership  nor any Local  Limited  Partnership  shall  sell any Local  Limited
Partnership  Interest or Apartment Complex to, or lend any funds to, the General
Partner or any of its Affiliates; and

     (vii) no rebates or give-ups may be received by the General  Partner or any
of its  Affiliates,  nor  may  the  General  Partner  or  any of its  Affiliates
participate in any reciprocal  business  arrangement which would have the effect
of circumventing any of the provisions of this Agreement.

     5.3.3.  All of the  Partnership's  expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the General
Partner or any of its  Affiliates by the  Partnership  shall be allowed only for
the Partnership's Organizational and Offering Expenses, Acquisition Expenses and
Operating Cash Expenses and only subject to the limitations on the reimbursement
of such expenses
set forth herein.

     5.3.4.  Reimbursement  to the General  Partner or any of its  Affiliates of
Operating Cash Expenses pursuant to Section 5.3.3 hereof shall be subject to the
following:


                                       B-43

<PAGE>



     (i) No such  reimbursement  shall be  permitted  for services for which the
General Partner or any of its Affiliates is entitled to compensation by way of a
separate fee; and

     (ii) No such  reimbursement  shall be made  for (a)  rent or  depreciation,
utilities,  capital  equipment  or  other  such  administrative  items,  and (b)
salaries,  fringe  benefits,  travel  expenses  and other  administrative  items
incurred or allocated to any "controlling  person" of the General Partner or any
Affiliate of the General  Partner.  For the purposes of this Section  5.3.4(ii),
"controlling  person"  includes,  but is not  limited  to, any  Person,  however
titled,  who performs  functions for the General Partner or any Affiliate of the
General  Partner  similar  to those of: (1)  chairman  or member of the board of
directors; (2) executive management, such as president, vice president or senior
vice president, corporate secretary or treasurer; (3) senior management, such as
the vice  president of an operating  division who reports  directly to executive
management;  or (4) those  holding 5% or more  equity  interest  in the  General
Partner or any Affiliate of the General  Partner or a person having the power to
direct or cause the  direction  of the General  Partner or any  Affiliate of the
General Partner, whether through the ownership of voting securities, by contract
or otherwise.

     5.4.    Restrictions on Authority of General Partner

     5.4.1.  The General Partner shall not:

     (i) do any act in contravention of this Agreement;

     (ii) do any act which  would make it  impossible  to carry on the  ordinary
     business of the Partnership;

     (iii) possess Partnership  property,  or assign the Partnership's rights in
specific Partnership property, for other than a Partnership purpose;

     (iv)  admit a Person  as a General  Partner,  except  as  provided  in this
     Agreement;

     (v)  admit a Person  as a  Limited  Partner,  except  as  provided  in this
     Agreement;

     (vi)  directly  or  indirectly  pay  or  award  any  commissions  or  other
compensation  to any Person engaged by a potential  investor in the  Partnership
for investment advice as an inducement to such adviser to advise the purchase of
Units, but this clause shall not prohibit the payment of the selling commissions
and other underwriting  compensation contemplated herein or in the Prospectus to
a registered broker-dealer or other properly-licensed Person for selling Units;


                                       B-44

<PAGE>



     (vii) cause the  Partnership to lend any funds to any Person (other than in
connection  with  Temporary  Investments),  except that the General  Partner may
cause the  Partnership  to make loans to or to post  letters of credit for Local
Limited Partnerships in which the Partnership is expected to own a Local Limited
Partnership Interest, provided that in the case of any such loan (a) the loan is
made  prior  to  the  date  that  the  Partnership  makes  its  initial  capital
contribution to the Local Limited Partnership,  (b) the total amount of all such
loans  does  not  exceed  50%  of the  Limited  Partners'  Capital  Contribution
committed to the  investment  in such Local  Limited  Partnership,  and (c) such
borrowings  may only be made on a short-term  basis (not to exceed one year) and
must, unless earlier repaid,  be repaid from the  Partnership's  initial capital
contribution  to the Local Limited  Partnership at the time such initial capital
contribution is made;

     (viii) cause the Partnership to acquire  unimproved or nonincome  producing
property  (but this clause shall not restrict the rights of the  Partnership  to
invest  in  Local  Limited   Partnerships   owning  Apartment   Complexes  under
construction or rehabilitation or Apartment  Complexes as to which  construction
or  rehabilitation  has not  commenced  but with respect to which closing of the
construction  loan has occurred or the Apartment  Complex site has been acquired
and a construction loan commitment has been obtained);

     (ix) cause the  Partnership to utilize Cash Available for  Distribution  to
     acquire Local Limited Partnership Interests;

     (x) cause the Partnership to reinvest Sale or Refinancing Proceeds unless a
sufficient portion thereof is distributed to the Limited Partners to enable each
Limited  Partner,  assuming  that he is in a combined  Federal,  state and local
marginal  income tax bracket of 30%, to pay the Federal,  state and local income
tax  liability  arising  from  the  Sale or  Refinancing  which  generated  such
proceeds,  and in any event Sale or Refinancing Proceeds shall not be reinvested
following  the second  anniversary  of the first day of the calendar  quarter in
which the Investment Date occurs,  except to the extent of any Reserves retained
therefrom;

     (xi)  cause  the  Partnership  to  acquire  any Local  Limited  Partnership
     Interest in exchange for Units;

     (xii)  change the  Partnership's  purposes  from those set forth in Section
     2.4;

     (xiii)  facilitate  or  recognize  the  trading of Units on an  established
securities market or on a secondary market, if, in the opinion of counsel,  such
action would result in the  Partnership  being  classified as a publicly  traded
partnership  under Section 7704 of the Code and such  classification  would have
material adverse tax consequences for the Limited Partners;


                                       B-45

<PAGE>



     (xiv) cause the Partnership to invest in Local Limited  Partnerships  under
circumstances  where  duplicate  fees for the same service may be payable by the
Partnership and/or the particular Local Limited Partnership;

     (xv)  except  as  set  forth  below  in  this  subsection,   following  the
termination  of the offering of Units,  cause the total  amount of  indebtedness
incurred  by  the  Partnership  to at  any  time  exceed  the  sum of 85% of the
aggregate  purchase  price  of all  Apartment  Complexes  which  have  not  been
refinanced,  and  85%  of the  aggregate  fair  market  value  of all  Apartment
Complexes which have been refinanced, as determined by the lender as of the date
of refinancing.  Notwithstanding the preceding, with respect to all indebtedness
insured  or  guaranteed  by the full  faith  and  credit  of the  United  States
government, a state or local government,  or an agency or instrumentality of any
of them, and with respect to all indebtedness  provided by any such Person,  the
total amount of indebtedness incurred by the Partnership shall at no time exceed
the sum of 100% of the aggregate purchase price of all Apartment Complexes which
have not been  refinanced,  and 100% of the  aggregate  fair market value of all
Apartment  Complexes which have been refinanced,  as determined by the lender as
of the date of  refinancing.  For  purposes of this  subsection  only,  the term
"indebtedness"  shall  include  the  principal  of any  loan  together  with any
interest that may be deferred  pursuant to the terms of the loan agreement which
exceeds 5% per annum of the principal  balance of such  indebtedness  (excluding
contingent  participations  in income  and/or  appreciation  in the value of the
Apartment  Complexes),  and  shall  exclude  any  indebtedness  incurred  by the
Partnership for necessary working capital reserves;

     (xvi) cause the Partnership to invest in a Local Limited  Partnership under
circumstances  where the General Partner or any of its Affiliates  would receive
compensation  for  administrative  services  performed  on  behalf  of the Local
Limited Partnership;

     (xvii)  cause the  Partnership  to pay  aggregate  Acquisition  Fees to all
Persons in an amount which exceeds the lesser of (a) the Competitive rate or (b)
18% of the Gross Proceeds.  The foregoing  limitation  shall be complied with at
any given time and on an ongoing basis; or

     (xviii)  cause the  Partnership  to invest in junior  trust  deeds or other
similar obligations,  except for junior trust deeds which arise from the sale of
Properties.

     5.4.2.  Without  the  Consent  of a  majority-in-interest  of  the  Limited
     Partners, the General Partner may not:

     (i)  sell  at  one  time  all  or  substantially  all  the  assets  of  the
Partnership,  except in connection  with the  liquidation  and winding up of the
Partnership's business upon its dissolution; or

                                       B-46

<PAGE>




     (ii) elect to dissolve the Partnership.

     5.4.3. The General Partner shall not sell, assign or otherwise transfer the
Promissory  Notes at a  discount;  provided  that  this  restriction  shall  not
prohibit  the General  Partner from  pledging or  otherwise  granting a security
interest in the Promissory Notes as security for any Partnership obligation.

     5.5.    Duties and Obligations of General Partner

     5.5.1.  The General  Partner shall take such actions as may be necessary or
appropriate  to  form,  qualify  and  continue  the  Partnership  as  a  limited
partnership  under the laws of the State of  California  and in order to form or
qualify the  Partnership  under the laws of any other  jurisdiction in which the
Partnership  is doing business or in which such  formation or  qualification  is
necessary to protect the limited  liability of the Limited  Partners or in order
to continue in effect such formation or  qualification.  In this  connection the
General Partner shall cause a Certificate of Limited  Partnership to be filed on
behalf of the  Partnership in the office of the  California  Secretary of State,
and shall cause an amendment to the Certificate to be filed in such office,  and
in each other  public  office in which the  Certificate  was  previously  filed,
within 30 days after the happening of any of the following events:

     (i) A change in the name of the Partnership;

     (ii) A change in the address of the Partnership office;

     (iii) A change  in the  name or  address  of the  Partnership's  agent  for
     service of process;

     (iv) The withdrawal of a General Partner;

     (v) The admission of a General Partner; or

     (vi) The discovery by a General Partner of any false or erroneous  material
statement contained in the Certificate.

     5.5.2.  The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal,  state or
local tax returns required to be filed by the Partnership.

     5.5.3.  The General  Partner  shall use its best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940 and shall use its best efforts to obtain from
the Securities and Exchange Commission an order exempting the Partnership from

                                       B-47

<PAGE>



the  provisions  of the  Investment  Company Act of 1940.  The General  Partner,
acting by and through its general partner,  is expressly  authorized to prepare,
execute and file with the  Securities  and Exchange  Commission  an  application
pursuant to Section 6(c) of the Investment  Company Act of 1940 for an exemption
from all the provisions of such Act, together with such other documents,  and to
do such other acts and things, as may be necessary or convenient in seeking such
an exemption.  In the event that delay is  encountered  in obtaining such order,
the  General  Partner  is  authorized  to rely upon an opinion of counsel to the
effect that the  Partnership  is exempt from the  provisions  of the  Investment
Company Act of 1940 until such time as such order is obtained, if ever.

     5.5.4.  The General  Partner shall have  fiduciary  responsibility  for the
safekeeping and use of all funds and assets of the  Partnership,  whether or not
in its immediate possession or control. The General Partner shall not employ, or
permit  another  to employ,  such  funds or assets in any manner  except for the
exclusive benefit of the Partnership.

     5.5.5. The funds of the Partnership  shall not be commingled with the funds
of any other Person.  Nothing  contained in this Section 5.5.5,  however,  shall
prohibit  the  General  Partner or an  Affiliate  of the  General  Partner  from
establishing a master  fiduciary  account  pursuant to which  separate  subtrust
accounts are  established  for the benefit of Affiliated  limited  partnerships,
provided  that  Partnership  funds  are  protected  from  claims  of such  other
partnerships and/or their creditors.

     5.5.6.  The General Partner shall not contract away the fiduciary duty owed
at common law to the Limited Partners.

     5.5.7. The General Partner is authorized,  in its discretion,  to cause the
Partnership  to acquire  policies of limited  partnership  liability  insurance,
insuring the Partners and their  Affiliates  against  liabilities  in connection
with the  business of the  Partnership  and  insuring  the  Partnership  against
liabilities  with  respect  to any  indemnification  it is legally  required  or
permitted to provide Partners and their Affiliates; subject to the provisions of
Section 5.8.4 hereof.

     5.6.    Compensation of Sponsor

     5.6.1.   The  Sponsor  shall  not  receive  any  salary,   fees,   profits,
distributions   or  allocations  from  the  Partnership  or  any  Local  Limited
Partnership in which the Partnership invests except as expressly allowed by this
Agreement.

     5.6.2. The Dealer-Manager shall be entitled to receive from the Partnership
retail selling  commissions and the Dealer-Manager Fee in respect of the sale of
Units, all as set forth in the Prospectus.

                                       B-48

<PAGE>




     5.6.3.  In connection  with the Offering of the Units,  the  Dealer-Manager
shall receive from the Partnership a Nonaccountable  Expense Reimbursement in an
amount equal to 1% of the Capital Contributions.

     5.6.4.  For  services  actually  rendered  or to be  rendered,  directly or
indirectly,   by  the  Sponsor  in  connection   with  acquiring  Local  Limited
Partnership  Interests  (including  services  performed for the  Partnership  in
connection  with Local Limited  Partnership  Interests  which are the subject of
review, evaluation and, ultimately,  rejection as potential acquisitions for the
Partnership),  which services may include  selecting,  evaluating,  structuring,
negotiating  and  closing  the   Partnership's   investments  in  Local  Limited
Partnership  Interests,  the Partnership  and/or the Local Limited  Partnerships
shall pay to the Sponsor an amount  equal to 7.5% of the Capital  Contributions,
provided  that the amount  payable may be reduced by the General  Partner in its
sole  discretion.  Such  Acquisition  Fee  shall be  payable  at the time  Gross
Proceeds are received.  Notwithstanding  the amount of Sponsor  Acquisition Fees
set forth herein,  the total amount thereof shall be reduced in connection  with
the purchase of Units by Discount  Investors,  as  described  in the  Prospectus
under  "Terms of the  Offering  and Plan of  Distribution."  The  amount of such
reduction  shall be treated as a distribution  to a Discount  Investor but shall
not be deemed a return of the Discount Investor's Capital Contribution;  rather,
the  reduction  amount shall be deemed to be a compromise  within the meaning of
Section 15636(c) of the Act, and no Discount  Investor shall be obligated to pay
any such amount to or for the benefit of the  Partnership or any creditor of the
Partnership.  Except as set forth in this Section  5.6.4,  no  Acquisition  Fees
shall be paid to the Sponsor.

     5.6.5.  For any  property  management  services  actually  rendered  by the
General  Partner or its  Affiliates  respecting  the  Properties  owned by Local
Limited  Partnerships,  the General  Partner or any such  Affiliate  may receive
Competitive   property  management  or  leasing  fees  from  the  Local  Limited
Partnerships.  Included in any such property management fee shall be bookkeeping
services  and  fees  paid to  non-Affiliated  Persons  for  property  management
services. In no event shall any leasing fee be paid to the General Partner or to
any of its Affiliates for performing  leasing  services  unless the services are
necessary for the leasing of space in a Property of a Local Limited  Partnership
and would be required to be performed by a  non-Affiliated  Person but for their
performance by the General Partner or an Affiliate of the General  Partner.  The
maximum  property  management  fees paid to the  General  Partner  or any of its
Affiliates  (including  all  leasing  and  releasing  fees and bonuses and other
payments for leasing related  services,  paid to any Person) shall be the lesser
of 5% of the gross revenues from the Property or a Competitive amount.


                                       B-49

<PAGE>



     5.6.6. For services  rendered by the General Partner or an Affiliate of the
General  Partner in  connection  with the  administration  of the affairs of the
Partnership,  the General  Partner or any such Affiliate  shall receive from the
Partnership  in 1995 and 1996 an annual Asset  Management Fee in an amount equal
to the greater of (i) $2,000 for each Apartment Complex, or (ii) 0.275% of Gross
Proceeds  (the  "Base  Fee  Amount").  On  January  1,  1997 and each  January 1
thereafter  the Base  Fee  Amount  shall be  multiplied  by the CPI  factor  and
increased or decreased accordingly.  For purposes hereof, the "CPI factor" means
the Consumer  Price Index for Urban Wage Earners and  Clerical  Workers,  United
States, all items (1967=100), or any successor index, as published by the Bureau
of Labor  Statistics of the United States  Department of Labor.  Notwithstanding
the  preceding,  the annual Asset  Management  Fee shall not exceed 0.2% of that
portion of Invested Assets in Local Limited  Partnerships which are attributable
to apartment units receiving  Government  Assistance.  The Asset  Management Fee
shall be payable with respect to the previous  calendar quarter on the first day
of each calendar quarter during the year, provided that the Asset Management Fee
shall only accrue and be payable as follows:  (i) if the Asset Management Fee is
equal to $2,000 for each  Apartment  Complex,  the  $2,000  portion of the total
Asset Management Fee attributable to any Apartment Complex shall only accrue and
be payable  commencing with the date on which such Apartment  Complex  commences
operations;  and (ii) if the  Asset  Management  Fee is equal to 0.275% of Gross
Proceeds,  the total Asset Management Fee shall be allocated among the Apartment
Complexes in proportion to the amount of the Partnership's  capital contribution
to each Local Limited  Partnership,  and the portion of the Asset Management Fee
so  attributable  to any  Apartment  Complex  shall  only  accrue and be payable
commencing with the date on which such Apartment Complex  commences  operations.
Accrued but unpaid Asset  Management Fees for any year shall be deferred without
interest and shall be payable in  subsequent  years from any funds  available to
the  Partnership   after  payment  of  all  other  costs  and  expenses  of  the
Partnership, including any Reserves then determined by the General Partner to no
longer be necessary to be retained by the Partnership, or from the proceeds of a
Sale or Refinancing.

     5.6.7. For services  rendered by the General Partner or an Affiliate of the
General  Partner in  connection  with the sale of any Property  owned by a Local
Limited  Partnership,  the General  Partner shall receive from the Partnership a
Subordinated Disposition Fee in an amount equal to 1% of the sales price of such
Property if the General Partner or its Affiliate  provides a substantial  amount
of  services  in the sales  effort.  This fee shall be  payable  only  after the
distributions in Section 4.2.1(i), (ii) and (iii) have been made, and may accrue
if  there  are  insufficient  Sale  or  Refinancing   Proceeds  payable  to  the
Partnership  upon any such sale. This fee is subject to the limitations  imposed
by Section 5.2.2(vi).


                                       B-50

<PAGE>



     5.7.    Other Business of Partners

     5.7.1.  The General  Partner shall devote to the affairs of the Partnership
such  time  as may  be  necessary  for  the  proper  performance  of its  duties
hereunder,  but neither the General  Partner,  its general  partner,  any of the
officers  and  directors  of such  general  partner nor any  successors  to such
parties shall be expected to devote their full time to the  performance  of such
duties.

     5.7.2.  Any Partner or any of his  Affiliates may engage  independently  or
with  others  in other  business  ventures  of  every  nature  and  description,
including,  without  limitation,  the  rendering  of advice or services to other
investors  and  the  making  or  management  of  other  investments,   including
investments in real  properties  receiving  Government  Assistance.  Neither the
Partnership nor any Partner shall have any rights by virtue of this Agreement or
the  partnership  relationship  created  hereby in or to such other  ventures or
activities or to the income or proceeds derived therefrom, provided that nothing
in this Section 5.7.2 shall relieve the General Partner of its general fiduciary
obligation to the Partnership.

     5.7.3.  The Sponsor may be presented with an investment  opportunity  which
could be availed of by the  Partnership and one or more other entities which the
Sponsor or one of its  Affiliates  manages.  The  decision as to the  particular
entity which shall make the  investment  shall be based upon such factors as the
effect of the acquisition on  diversification  of each entity's  portfolio,  the
estimated income tax effects of the purchase on each entity, the amount of funds
of each entity  available for  investment and the length of time such funds have
been available for  investment.  If a particular  investment is determined to be
suitable  for more than one  entity,  priority  generally  shall be given to the
entity having uninvested funds for the longest period of time; except that (i) a
partnership which was formed to invest primarily in apartment complexes eligible
for state low income  housing  credits as well as the Low Income  Housing Credit
shall be given priority over the  Partnership and other  partnerships  which are
not seeking to provide  such state tax credits  with  respect to any  investment
which is eligible  for such state tax credits  and (ii) the  Partnership  or any
other  partnership  which was formed to invest primarily in apartment  complexes
eligible  only for the Low Income  Housing  Credit shall be given  priority with
respect to any  investment  which is not eligible for state tax credits over any
partnerships  (or series  thereof)  which are seeking to provide  such state tax
credits as well as the Low Income Housing Credit.

     5.8.    Limitation on Liability of General Partner; Indemnification

     5.8.1. Neither the General Partner nor any Designated Affiliate (as defined
in Section 5.8.5) shall have any liability to the  Partnership or to any Partner
for any loss  suffered  by the  Partnership  which  arises  out of any action or
inaction of such General Partner or Designated Affiliate if the General Partner,
in good faith,

                                       B-51

<PAGE>



determined  that  such  course  of  conduct  was in  the  best  interest  of the
Partnership  and  such  course  of  conduct  did not  constitute  negligence  or
misconduct of such General Partner or Designated Affiliate.  The General Partner
and each of its Designated  Affiliates  shall be indemnified by the  Partnership
against  any  losses,  judgments,  liabilities,  expenses  and  amounts  paid in
settlement  of any  claims  sustained  by them  when  acting  on  behalf  of, or
performing  services for, the  Partnership,  provided that the same were not the
result of  negligence  or  misconduct  on the part of such  General  Partner  or
Designated  Affiliate  and were the  result  of a course  of  conduct  which the
General  Partner,  in good  faith,  determined  was in the best  interest of the
Partnership.  Any indemnity  under this Section 5.8 shall be provided out of and
to the extent of Partnership  assets only, and no Limited Partner shall have any
personal liability on account thereof.

     5.8.2. Notwithstanding anything to the contrary contained in Section 5.8.1,
neither the  General  Partner,  any Person  acting as a  broker-dealer,  nor any
Designated  Affiliate  shall  be  indemnified  for any  losses,  liabilities  or
expenses  arising  from or out of an  alleged  violation  of  Federal  or  state
securities  laws  unless  (i) there has been a  successful  adjudication  on the
merits of each count  involving  alleged  securities  law  violations  as to the
particular  indemnitee  and the court  approves  indemnification  of  litigation
costs, or (ii) such claims have been dismissed with prejudice on the merits by a
court of competent  jurisdiction  as to the particular  indemnitee and the court
approves  indemnification  of  litigation  costs,  or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that  indemnification  of the  settlement  and related costs should be
made.

     5.8.3. In any claim for indemnification for Federal or state securities law
violations,  the party seeking such indemnification shall place before the court
the  positions  of  the  Securities  and  Exchange  Commission,  the  California
Commissioner of  Corporations,  the Missouri  Securities  Division and any state
securities  regulatory  authority in which Units of the Partnership were offered
and sold as to indemnification  for violations of securities laws; provided that
the court need only be advised of and consider the  positions of the  securities
regulatory  authorities of those states (i) which are  specifically set forth in
this Section 5.8.3 and (ii) in which plaintiffs claim they were sold Units.

     5.8.4. The Partnership shall not pay for any insurance  covering  liability
of any party as to which such party is hereby prohibited from being indemnified;
provided,  however, that nothing contained herein shall preclude the Partnership
from  purchasing  and  paying for such types of  insurance,  including  extended
coverage liability and casualty and workers' compensation, as would be customary
for any Person owning comparable  assets and engaged in a similar  business,  or
from naming the General Partner or a Designated Affiliate as additional insured

                                       B-52

<PAGE>



parties  thereunder,  provided  that such  addition does not add to the premiums
payable by the Partnership.

     5.8.5.  As  used  in this  Section  5.8,  a  "Designated  Affiliate"  is an
Affiliate performing services on behalf of the Partnership,  within the scope of
the authority of the General Partner: (i) which directly or indirectly controls,
is  controlled  by, or is under common  control with the General  Partner;  (ii)
which owns or controls 10% or more of the outstanding  voting  securities of the
General Partner; (iii) which is an officer,  director, partner or trustee of the
General  Partner;  (iv) which is a company for which the General Partner acts in
the capacity of officer,  director,  partner or trustee;  or (v) as to which the
General  Partner  owns  or  controls  10%  or  more  of the  outstanding  voting
securities.

     5.8.6.  The  Partnership  may advance funds to the General Partner and each
Designated  Affiliate  for legal  expenses  and other costs  incurred by them in
connection with any legal action brought against them, provided that each of the
following is satisfied:  (i) the legal action  relates to acts or omissions with
respect to the  performance of duties or services on behalf of the  Partnership;
(ii) the  legal  action  is  initiated  by a third  party  who is not a  Limited
Partner,  or the legal action is  initiated by a Limited  Partner and a court of
competent jurisdiction specifically approves the advancement of funds; and (iii)
the General Partner or Designated  Affiliate  receiving the funds  undertakes to
repay  the  funds  to  the  Partnership  in the  event  he is  not  entitled  to
indemnification at the conclusion of such legal action.


                                     ARTICLE 6

                       ADMISSION OF SUCCESSOR AND ADDITIONAL
                  GENERAL PARTNERS; WITHDRAWAL OF GENERAL PARTNER

     6.1.    Admission of Successor or Additional General Partners

     6.1.1.  With the Consent of all other  General  Partners,  if any,  and the
Consent of at least a majority-in-interest  of the Limited Partners, any General
Partner may at any time  designate one or more Persons to be its successor or to
be an additional General Partner,  with such Interest in the Partnership as such
General  Partner and the  successor or  additional  General  Partner agree upon,
provided that the Interests of the other Partners shall not be affected thereby.

     6.1.2.  If at any time any material  reduction shall occur in the aggregate
net worth of the General  Partner and its general  partner,  the General Partner
shall  consult  with legal  counsel  and, if such counsel is of the opinion that
such reduction might  adversely  affect the treatment of the Partnership as such
for Federal income tax purposes,  the General Partner shall use its best efforts
either (i) to admit as

                                       B-53

<PAGE>



General  Partners one or more Persons  having a net worth  sufficient  to offset
such  reduction,  the  additional  General  Partner or General  Partners to have
whatever  participation in the General  Partner's  Interests the General Partner
and the additional  General  Partners  agree upon,  provided that the additional
General Partners have no authority to manage or control the  Partnership,  there
is no change in the  identity  of the Persons  who have  authority  to manage or
control the  Partnership,  and the admission of the additional  General Partners
does not  materially  affect the Interests of the Limited  Partners;  or (ii) if
necessary in the opinion of legal counsel,  to obtain additional  capitalization
sufficient to satisfy any then  existing  requirements  of the Internal  Revenue
Service  for a  ruling  that  an  entity,  whether  or  not a  corporation,  has
sufficient  net  worth so that a  limited  partnership  of which it is a general
partner has the characteristic of unlimited liability.

     6.1.3.  Except in  connection  with a transfer to a successor or additional
General Partner pursuant to Section 6.1.1. or 6.1.2.,  the General Partner shall
have no right to retire or withdraw voluntarily from the Partnership or to sell,
transfer,  or assign all or any  portion  of its  Interest,  except  that it may
substitute  in its stead as General  Partner  any entity  which has,  by merger,
consolidation or otherwise,  acquired  substantially  all of its assets or stock
and continued its business.

     6.1.4. Any Voluntary Withdrawal by the General Partner from the Partnership
or any sale, transfer or assignment by the General Partner of its Interest shall
be effective  only upon the  admission in  accordance  with this Section 6.1 and
Section 13.3 of a successor or additional General Partner, as the case may be.

     6.1.5.  No assignee or transferee of all or any part of the Interest of the
General  Partner  shall  have any right to become a  General  Partner  except as
provided in this Article 6.

     6.2.    Restrictions on Transfer of General Partner's Interest

     Notwithstanding  anything to the contrary in this Article 6, the assignment
or transfer of the General  Partner's  Interest shall at all times be subject to
the same restrictions applicable to an assignment or transfer of Units set forth
in Sections 7.2.1 and 7.2.2.

     6.3.    Consent of Limited Partners to Admission of Successor or
             Additional General Partners

     Each of the Limited Partners, by the execution of this Agreement,  Consents
for all  purposes of the Act to the  admission  of any Person as a successor  or
additional    General   Partner   for   which   the   express   Consent   of   a
majority-in-interest  of the  Limited  Partners  has been  obtained  at the time
pursuant to Section 6.1. Upon receipt of such a Consent to such admission from a
majority-in-interest of the

                                       B-54

<PAGE>



Limited Partners,  then, subject to the provisions of Section 6.2, the admission
shall,  without any further Consent or approval of the Limited  Partners,  be an
act of all the Limited Partners.

     6.4.    Event of Withdrawal of a General Partner

     If,  at the time of an Event  of  Withdrawal  of a  General  Partner,  such
General Partner was not the sole General Partner,  the remaining General Partner
or General  Partners shall  immediately:  (i) give  Notification  to the Limited
Partners of such  event;  and (ii) make any  amendments  to this  Agreement  and
execute and file for recordation any amended  Certificates or other  instruments
necessary to reflect the  termination of the Interest of the General  Partner as
to which such event has occurred and such General  Partner's having ceased to be
a General Partner.

     6.5.    Interest and Liability of a Withdrawn General Partner

     6.5.1.  Upon an Event of Withdrawal as to a General  Partner,  such General
Partner shall immediately cease to be a General Partner,  and its Interest shall
be subject to purchase in accordance with Section 6.6; provided,  however,  that
such a  termination  shall not affect any rights of such General  Partner  which
arose  prior to such event,  or the value,  if any, at the time of such event of
the Interest of such General Partner.

     6.5.2. Any General Partner who voluntarily or involuntarily  for any reason
(including  bankruptcy,  death,  dissolution or  adjudication  of  incompetence)
withdraws from the Partnership or sells, transfers or assigns its Interest shall
be and shall remain liable for all obligations  and liabilities  incurred by the
Partnership  prior to the time the  withdrawal,  sale,  transfer  or  assignment
becomes effective,  but it shall be free of any obligation or liability incurred
on account of the activities of the Partnership after that time.

     6.6.    Valuation and Sale of Interest of Former General Partner

     6.6.1.  If the business of the  Partnership is continued after the Event of
Withdrawal of a General Partner, or if, following such event, the Partnership is
reconstituted,  in each case as  contemplated  by Section 8.1,  the  Partnership
shall  purchase  such General  Partner's  Interest for a price equal to the then
present fair market value thereof. Such fair market value shall be determined by
agreement of the former General Partner and the Partnership,  or, if they cannot
agree,  by  arbitration  in  accordance  with the current  rules of the American
Arbitration  Association.  The  expense of  arbitration  will be shared  equally
between such former General Partner and the Partnership.


                                       B-55

<PAGE>



     6.6.2.  Promptly after  determination  of the fair market value of a former
General  Partner's  Interest  pursuant to Section 6.6.1,  the Partnership  shall
deliver to such former General  Partner a promissory note of the Partnership for
such fair market  value  payable in no less than five equal  consecutive  annual
installments  commencing on the first anniversary of the date of such note. Such
promissory note shall bear simple interest at the rate per annum which is at all
times equal to the Prime Rate,  but not to exceed the maximum rate  permitted by
law,  payable  on the last  day of each  calendar  quarter  while  such  note is
outstanding;  provided,  however,  that if such note is  delivered  following an
Event of Withdrawal of a General Partner which is a Voluntary  Withdrawal on its
part then (i) such note shall  neither be secured nor bear interest and (ii) the
principal payable to the withdrawing  General Partner shall be limited in amount
and date of payment to  distributions  which such  withdrawing  General  Partner
would have received under this  Agreement had it not withdrawn.  Within 120 days
after the determination of the fair market value of the former General Partner's
Interest,  the  Partnership  may,  with the  Consent  of all  remaining  General
Partners and the Consent of a majority-in-interest of the Limited Partners, sell
such  Interest to one or more  Persons,  who may be  Affiliates of the remaining
General Partner or General  Partners,  and admit such Persons to the Partnership
as substitute General Partners; provided, however, that the purchase price to be
paid to the Partnership for the Interest of the former General Partner shall not
be less than its fair market value as  determined  by the procedure set forth in
Section 6.6.1.  above. Such substitute  General Partner or Partners may pay said
purchase  price in  installments  in the manner set forth above in this  Section
6.6.2.

                                     ARTICLE 7

                             TRANSFERABILITY OF UNITS

     7.1.    Right to Transfer Units

     A  Limited  Partner  may  assign  his  Units  by a  written  instrument  of
assignment,  the  terms  of  which  shall  conform  to the  provisions  of  this
Agreement.

     7.2.    Restrictions on Transfers

     7.2.1. No sale,  exchange,  transfer or assignment of any Units may be made
if, in the opinion of counsel to the Partnership,  such sale, exchange, transfer
or assignment would:

     (i) when added to the total of all other Units sold or  exchanged  within a
period of 12 consecutive  months prior thereto,  result in the Partnership being
considered to have terminated  within the meaning of Section 708 of the Code and
such termination  would have adverse tax consequences to any Partner;  provided,
that any deferred sales or exchanges  shall be made (in  chronological  order to
the extent

                                       B-56

<PAGE>



practicable) as of the first day of a fiscal quarter after the end of any
such 12-month period, subject to the provisions of this Article 7;

     (ii) cause the  Partnership  to become a  publicly-traded  partnership  for
Federal  income tax purposes,  and such result would have  material  adverse tax
consequences to any Partner;

     (iii) cause the  Partnership to cease to qualify under Section  42(j)(5)(B)
     of the Code;

     (iv)  result in the  Partnership  or any other  Partner  being  required to
recapture  any Tax  Credits  unless  the holder of such  Units  indemnifies  the
Partnership and its Partners for such recapture; or

     (v) result in the Partnership being treated as an association  taxable as a
corporation for Federal income tax purposes and, in this connection,  no Limited
Partner shall at any time, either directly or indirectly, own any stock or other
interest in the General  Partner or in any  Affiliate of the General  Partner if
such  ownership,  by itself or in  conjunction  with the stock or other interest
owned by other  Limited  Partners,  would,  in the  opinion of  counsel  for the
Partnership,  jeopardize the  classification of the Partnership as a partnership
for Federal income tax purposes.

     7.2.2. No sale, exchange,  transfer or assignment of any Unit shall be made
to any Person  exempt from Federal  income tax under Section 501 of the Code, to
any  Person  defined  in  Section  168(h)(2)  of the  Code,  to  any  Individual
Retirement  Account as defined in Section 408(a) of the Code, to any Keogh Plan,
to any nonresident alien, or to any foreign Person.

     7.2.3.  Any transfer of a Unit to a Person who makes a market in securities
shall be void ab initio unless such Person shall certify to the General  Partner
that it has acquired  such Unit solely for  investment  purposes and not for the
purpose of resale.

     7.2.4. No purported sale, exchange, transfer or assignment by a transferror
of a Unit shall be permitted unless the transferror  shall have represented that
such transfer:

     (i) was effected through a broker-dealer or matching agent whose procedures
with respect to the transfer of Units have been approved by the General  Partner
as not being  incident  to  trading  on an  established  securities  market or a
secondary market and not through any other broker-dealer or matching agent; or


                                       B-57

<PAGE>



     (ii) otherwise was not effected through an established securities market or
through a broker-dealer or matching agent which makes a market in Units or which
provides a readily available,  regular and ongoing opportunity to the holders of
Units to sell or exchange  their Units  through a public  means of  obtaining or
providing information of offers to buy, sell or exchange Units.

     7.2.5.  All Units shall be subject to, and all documents of assignment  and
transfer evidencing such Units shall bear, the following legend condition:

     "IT IS UNLAWFUL TO  CONSUMMATE  A SALE OR TRANSFER OF THIS  SECURITY OR ANY
INTEREST THEREIN,  OR TO RECEIVE ANY CONSIDERATION  THEREFOR,  WITHOUT THE PRIOR
WRITTEN CONSENT OF THE  COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

     Such  restriction  shall  be  noted  in  the  appropriate  records  of  the
Partnership,  and no transfer of any interest in the  Partnership  shall be made
except in compliance with the terms of such legend condition.

     7.2.6. No sale, exchange,  transfer or assignment of any Unit shall be made
to any Person who does not satisfy the investor suitability standards imposed by
the Partnership in connection with the public Offering of the Units or such more
restrictive  standards,  if  any,  as may be  required  under  applicable  state
securities laws.

     7.2.7.  No purported  sale,  exchange,  assignment or transfer by a Limited
Partner of any Unit after which any  transferror  or  transferee  would hold any
fraction of a Unit,  will be permitted or  recognized  (except for  transfers by
gift, inheritance,  bequest or family dissolution, or transfers to Affiliates of
the transferror).

     7.2.8.  The General  Partner  (i) shall be entitled to make any  reasonable
inquiry of the Limited  Partners and prospective  Limited Partners in connection
with the  provisions of this Section 7.2, and (ii) may, in its sole  discretion,
on behalf of the  Partnership,  impose any restrictions on transfers of Units or
any other additional  procedures or requirements  which it deems  appropriate in
order to prevent  the  Partnership  from being  treated  for tax  purposes as an
"association" taxable as a corporation or as a publicly-traded  partnership, if,
in the  opinion of  counsel,  such  treatment  would have  material  adverse tax
consequences  for the Partners,  or to give effect to the intent of this Section
7.2, and shall be  permitted,  in order to give effect to any such  restriction,
procedures or requirements,  to amend this Agreement  without the Consent of the
Limited Partners. The General Partner shall give

                                       B-58

<PAGE>



Notification  to all  Limited  Partners  in the  event  that  sales,  exchanges,
transfers or assignments have generally been suspended.

     7.2.9.  The General  Partner will review from time to time the  limitations
and restrictions on the sale, exchange, transfer or assignment of Units and will
eliminate  or  modify  such  limitations  or  restrictions  to  make  them  less
restrictive  if the  Partnership  shall have received an opinion of counsel that
such  elimination  or  modification  may be made  without  material  adverse tax
consequences to the Partners.

     7.3.    Assignees and Assignment Procedure

     7.3.1.  If a  Limited  Partner  who is an  individual  dies or a  court  of
competent  jurisdiction  adjudges him to be  incompetent to manage his person or
his  property,  such  Limited  Partner's  executor,   administrator,   guardian,
conservator  or other legal  representative  may  exercise  all of such  Limited
Partner's  rights for the purposes of settling his estate or  administering  his
property,  including  any power  under  this  Agreement  to join with a proposed
assignee in satisfying conditions precedent to the assignment of his Interest to
such assignee and to such assignee becoming a Substitute  Limited Partner.  If a
Limited  Partner  which is not an  individual  is dissolved or  terminated,  the
powers of that Limited Partner may be exercised by its legal  representative  or
successor. Notwithstanding the foregoing, the Partnership shall not be under any
duty to recognize the authority of any such executor,  administrator,  guardian,
conservator or other legal representative or successor's rights unless and until
the Partnership shall have received such evidence of the authority of such party
as counsel for the Partnership may request. The death, dissolution, adjudication
of  incompetence  or  bankruptcy  of a Limited  Partner  shall not  dissolve the
Partnership.

     7.3.2.  In order to give  effect to the  restrictions  on transfer of Units
contained in this Article 7, a purported or proposed  assignment of a Unit shall
not take effect for any purpose until it has been  registered on the Partnership
Register (the date of such registration  being called the "Registration  Date").
The General Partner shall not be under any duty to cause any assignment to be so
registered until (i) the assigning Limited Partner and/or the proposed assignee,
as  applicable,  shall have  delivered to the  Partnership  a duly  executed and
acknowledged  counterpart of the  instrument of  assignment,  signed by both the
assignor and the assignee,  evidencing written acceptance by the assignee of all
the terms and provisions of this Agreement and representing  that the assignment
was made in  accordance  with all  applicable  laws and  regulations  (including
investment suitability requirements); (ii) the Partnership shall have received a
fee in an amount  established by it from time to time sufficient to reimburse it
for all its actual costs in connection with such assignment,  including, but not
by way of limitation,  any advice of counsel  contemplated  by this Agreement in
connection with such assignment, and, if the

                                       B-59

<PAGE>



Partnership  has made an election under Section 754 of the Code, any incremental
accounting  fees resulting from  compliance  with Section 754 in connection with
such  assignment;  provided,  however,  that the  amount of such fee shall in no
event exceed the lower of the Partnership's  actual costs in connection with the
transfer or $100; (iii) the Partnership shall have received such evidence of the
authority of the parties to such  assignment as counsel for the  Partnership may
request; (iv) if a Promissory Note of the transferror has not been paid in full,
the Partnership  shall have received a written  statement signed by the assignee
or transferee  which  acknowledges  the material terms of the  Promissory  Note,
including  the  payment  due date,  the status of  payments,  the  Partnership's
security interest in the Units, the terms of default, the consequences  thereof,
and the terms  for  curing  the  default;  and (v) the  Partnership  shall  have
received such further  evidence of compliance of such  assignment with the terms
and  conditions of this  Agreement and the  Prospectus  as the  Partnership  may
reasonably  request,  including,  but  not  by way  of  limitation,  instruments
complying with Section 13.3 and any required  consent to such  assignment of the
Commissioner  of  Corporations  of the State of California.  The General Partner
shall cause such an assignment,  upon compliance  with the foregoing  conditions
and the conditions of Section 7.2, to be registered on the Partnership  Register
promptly following satisfaction of such conditions.

     7.3.3. Except as otherwise provided in this Section 7.3.3, if an assignment
of a Unit is  registered  on the  Partnership  Register  as  provided in Section
7.3.2,  the assignee of such Unit shall:  (i) for the purposes of Sections 4.6.2
and  4.6.3,  be  recognized  as a holder  of the Unit as of the first day of the
fiscal  quarter  following  the fiscal  quarter in which the  Registration  Date
occurs; and (ii) for the purposes of Section 4.6.4, be recognized as a holder of
the Unit as of the date specified by the parties in the instrument of assignment
provided for in Section 7.3.2, or if no date is specified therein, the first day
of the fiscal  quarter  following the fiscal  quarter in which the  Registration
Date occurs.

     7.3.4. The rights of an assignee of a Unit who does not become a Substitute
Limited  Partner  shall be  limited  to the right to  receive  his share of Cash
Available for Distribution, Sale or Refinancing Proceeds, Profits and Losses for
Tax Purposes and Tax Credits, as determined under Article 4. Any assignee of all
or any of the  Units of a  Limited  Partner  who does  not  become a  Substitute
Limited  Partner and desires to make a further  assignment  of any of such Units
shall be subject to all the  provisions of this Article 7 to the same extent and
in the same manner as any Limited Partner  desiring to make an assignment of his
Units.

     7.3.5.  Upon receipt of documents  purporting to create or release a pledge
or other security interest in a Limited Partner's Interest,  the General Partner
shall  promptly  cause such  transaction  to be  registered  on the  Partnership
Register.  Any purported or proposed  pledge of, or other security  interest in,
any  Limited  Partner's  Interest  shall not take  effect for any  purpose or be
deemed perfected unless and until

                                       B-60

<PAGE>



the same has been registered on the Partnership Register and shall be subject to
any existing pledge and security interest granted to the Partnership pursuant to
Section 13.1. The  Partnership  may charge a fee in an amount  established by it
from  time to time  sufficient  to  reimburse  it for all its  actual  costs  in
connection with such pledge, including but not by way of limitation,  any advice
of counsel in  connection  with such  pledge,  and no pledge  shall be effective
until such fee is paid.

     7.3.6.  The  General  Partner  shall  provide to each  Limited  Partner and
registered  pledgee,  if  any,  from  time to time  the  transaction  statements
required  to be  provided  to such  respective  parties by  Section  8408 of the
California Commercial Code.

     7.4.    Substitute Limited Partners

     Subject  to the  Consent  of the  General  Partner  (which  Consent  may be
withheld for any  reason),  the  assignee of any Units duly  transferred  to him
pursuant to this Section 7 shall be admitted to the  Partnership as a Substitute
Limited Partner upon  satisfaction of the conditions  contained in Section 13.3.
The  Partnership  Register  shall be amended  not less often than  quarterly  to
recognize the admission of Substitute Limited Partners.

                                     ARTICLE 8

                   DISSOLUTION AND WINDING-UP OF THE PARTNERSHIP

     8.1.    Events Causing Dissolution

     8.1.1.  The  Partnership  shall  dissolve and its affairs shall be wound up
upon the  happening of any of the following  events:  (i) an Event of Withdrawal
shall occur as to a General Partner;  (ii) the sale or other  disposition of all
the Local Limited  Partnership  Interests  and other assets of the  Partnership;
(iii) the election by the General Partner pursuant to Section 5.4.2, or the vote
by the  Limited  Partners  pursuant  to  Section  10.2.1(ii),  to  dissolve  the
Partnership;  or (iv) the expiration of the term of the Partnership specified in
Section 2.6.

     8.1.2.   Notwithstanding  the  foregoing,  the  Partnership  shall  not  be
terminated,  liquidated or wound up upon the occurrence of an event specified in
clause 8.1.1(i) above if (a) a remaining General Partner,  if any, elects within
120 days after such an event to continue  the business of the  Partnership,  or,
(b) a  majority-in-interest  of the Limited Partners elect within 120 days after
such event to admit a successor General Partner effective as of the date of such
event and to continue the business of the Partnership.


                                       B-61

<PAGE>



     8.1.3.  Dissolution  of the  Partnership  shall be  effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the Partnership's  Certificate of Limited  Partnership shall
have been canceled and the assets of the Partnership shall have been distributed
as provided in Section 8.3.  Notwithstanding the dissolution of the Partnership,
until the  termination  of the  Partnership  the  business  and  affairs  of the
Partnership shall continue to be governed by this Agreement.

     8.2.    Capital Contribution upon Dissolution

     Upon  the  winding-up  of  the  Partnership,   the  General  Partner  shall
contribute to the capital of the  Partnership  an amount equal to the lesser of:
(i) any negative balance in its Capital Account existing after the distributions
and  allocations  required by Article 4 and  Section  8.3; or (ii) the excess of
1.01% of the Capital  Contributions made by the Limited Partners over the amount
of  capital  previously  contributed  by the  General  Partner.  Any  amount  so
contributed by the General Partner shall be distributed first to any Partnership
creditors entitled thereto,  and the balance shall be included among the general
assets of the Partnership.

     8.3.    Liquidation

     8.3.1.  Upon  dissolution  of the  Partnership,  unless the business of the
Partnership  is continued  pursuant to Section 8.1,  the General  Partner  shall
liquidate the assets of the  Partnership  and apply and  distribute the proceeds
thereof as contemplated by this Section 8.3. After payment of liabilities  owing
to  creditors  of the  Partnership,  the  General  Partner  shall set aside as a
Reserve  such  amount  as it  deems  reasonably  necessary  for  any  contingent
liabilities or obligations of the Partnership.  Said Reserve may be paid over by
the  General  Partner to a bank,  to be held in  Temporary  Investments  for the
purpose of paying any such  contingent  liabilities or  obligations  and, at the
expiration of such period as the General Partner may deem advisable,  the amount
in such Reserve shall be distributed to the Partners in accordance  with Section
4.2.2.

     8.3.2.  Notwithstanding  the  foregoing,  in the event the General  Partner
determines that an immediate sale of part or all of the Partnership assets would
cause undue loss to the  Partners,  the General  Partner,  in order to avoid any
such loss may, after having given  Notification to all the Limited Partners,  to
the extent not then prohibited by applicable  law,  either defer  liquidation of
and  withhold  from  distribution  for a  reasonable  time  any  assets  of  the
Partnership  except  those  necessary  to satisfy  the  Partnership's  debts and
obligations,  or convey the remaining assets of the Partnership to a liquidating
trust for the benefit of the Partners. In such event, the trustee will be a bank
authorized to accept such trusts, having deposits insured by the Federal Deposit
Insurance Corporation and having a combined capital and surplus of not less than
$50,000,000; such trustee will

                                       B-62

<PAGE>



liquidate  such assets in an orderly  manner and distribute the proceeds of such
liquidation,  net of costs associated  therewith,  to the Partners in accordance
with  Section  4.2.  The  fair  market  value  of any  assets  conveyed  to such
liquidating  trust shall be determined,  promptly after such  conveyance,  by an
independent  appraiser  to be  selected  by random  number  from a list of three
qualified appraisers obtained by the General Partner from the American Institute
of Real Estate Appraisers.

     8.3.3.  The General  Partner shall cause the business of the Partnership to
be wound up and cause  the  cancellation  of the  Partnership's  Certificate  of
Limited  Partnership  following  the  liquidation  and  distribution  of all the
Partnership's assets.


                                     ARTICLE 9

                          BOOKS AND RECORDS, ACCOUNTING,
                           REPORTS, TAX ELECTIONS, ETC.

     9.1.    Books and Records

     (a) The General  Partner shall cause the  Partnership  to keep and maintain
full and complete books and records which shall include each of the following:

             (i) a current list  (updated at least  quarterly)  of the full name
     and last known business or residence address and business telephone of each
     Partner  set  forth  in  alphabetical   order  together  with  the  Capital
     Contribution  and the share in  Profits  and  Losses of each  Partner  (the
     "Participant List");

             (ii) a copy  of the  Certificate  of  Limited  Partnership  and all
     certificates  of amendment  thereto,  together with executed  copies of any
     powers of attorney pursuant to which any certificate has been executed;

             (iii) copies of the Partnership's  Federal,  state and local income
     tax  information  returns  and  reports,  if any,  for the six most  recent
     taxable years;

             (iv) copies of the original of this Agreement and all amendments
     thereto;

     (v) financial  statements of the Partnership for the six most recent fiscal
     years; and

             (vi) the  Partnership's  books and records for at least the current
     and past three fiscal years.


                                       B-63

<PAGE>



     (b) Upon the request of a Limited Partner, the General Partner shall within
10 days of the receipt of the request mail to the Limited  Partner copies of the
Participant List (which shall be on white paper in a readily readable form of no
less than 10-point type), and the information set forth in Section 9.1(a)(ii) or
(iv) above and of the  provisions of the Act described in Section 10.1.2 of this
Agreement.  A reasonable charge for copy work may be charged by the Partnership.
Each  Limited  Partner  shall have the right  upon  request  and  during  normal
business  hours to  inspect  and copy any of the  foregoing  records  at his own
expense,  and, upon request,  to obtain from the General  Partner  copies of the
Partnership's  Federal,  state  and local  income  tax or  information  returns,
promptly after such returns become available.

     (c) If the Sponsor  neglects or refuses to exhibit,  produce or mail a copy
of the Participant List as requested, the Sponsor shall be liable to any Limited
Partner requesting the list for costs,  including  attorneys' fees,  incurred by
the Limited Partner for compelling the production of the  Participant  List, and
for actual damages  suffered by the Limited Partner by reason of such refusal or
neglect.  It shall be a defense  that the  actual  purpose  and  reason  for the
requests for  inspection or for a copy of the  information is to secure the list
of Limited Partners or other information for the purpose of selling such list or
information  or copies  thereof,  or of using the same for a commercial  purpose
other  than in the  interest  of the  requesting  Person  as a  Limited  Partner
relative to the affairs of the Partnership.  The Sponsor may require the Limited
Partner  requesting  the  Participant  List to  represent  that  the list is not
requested for a commercial  purpose unrelated to the Limited Partner's  interest
in  the  Partnership.  The  remedies  provided  hereunder  to  Limited  Partners
requesting  copies of the Participant  List are in addition to, and shall not in
any way limit,  other remedies  available to Limited Partners under Federal law,
or the laws of any state.

     9.2.    Accounting and Fiscal Year

     The  books  of the  Partnership  shall  be  kept on the  accounting  method
selected by the General Partner. The fiscal year of the Partnership shall end on
December  31 in  each  year,  or on  such  other  date  as the  General  Partner
determines.

     9.3.    Bank Accounts and Temporary Investments

     The bank  accounts  of the  Partnership  shall  be  maintained  in  banking
institutions  determined by the General Partner,  and withdrawals  shall be made
only in the regular course of Partnership  business on signatures  determined by
the General Partner. All deposits and other funds not needed in the operation of
the business or not yet invested may be invested in Temporary Investments.


                                       B-64

<PAGE>



     9.4.    Reports

     9.4.1.  Within 60 days after the end of each of the first three quarters of
each fiscal year of the  Partnership,  the  General  Partner  shall send to each
Person who was a Limited  Partner at any time  during  such  quarter one or more
reports which, taken together, provide the following information (which need not
be audited): (i) a balance sheet as at the end of such quarter; (ii) a statement
of  operations  for such  quarter;  (iii) a  statement  of cash  flows  for such
quarter;  (iv) a  statement  setting  forth  the  amount  of all fees and  other
compensation and distributions  and reimbursed  expenses paid by the Partnership
for the quarter to the General Partner or any Affiliate of the General  Partner;
(v) a  report  of the  significant  activities  of the  Partnership  during  the
quarter; and (vi) until the Limited Partners' Capital  Contributions (except for
any amounts utilized to pay Organizational  and Offering  Expenses,  Acquisition
Fees,  Acquisition Expenses or Operating Cash Expenses, or any amounts set aside
for Reserves) are fully invested,  a special report of Local Limited Partnership
Interests acquired during the quarter, describing the terms of such investments.
If the Partnership acquires a Local Limited Partnership Interest during the last
quarter of any fiscal year, a report containing the information described in the
preceding clause (vi) shall be sent on or before the date of transmission of the
report for such year required by Section 9.4.3.  Until all Promissory Notes have
been paid in full,  each  quarterly  report  shall  reflect any  defaults in the
payment of the Promissory Notes, actions taken by the Partnership in response to
any  defaults,  and a discussion  and analysis of the impact  thereof on capital
requirements of the Partnership.

     9.4.2.  Within 75 days after the end of each  calendar  year,  the  General
Partner  shall  provide  to each  Person  who was a Limited  Partner at any time
during the fiscal year  ending  during that  calendar  year all tax  information
necessary  for the  preparation  of his Federal and state income tax returns and
other tax returns with regard to  jurisdictions  in which the  Partnership  or a
Local Limited Partnership is formed or qualified or owns Properties.

     9.4.3.  Within  120  days  after  the  end  of  each  fiscal  year  of  the
Partnership,  the  General  Partner  shall send to each Person who was a Limited
Partner at any time during such fiscal year:  (i) a balance  sheet as of the end
of such fiscal year and  statements  of  operations,  partners'  equity and cash
flows for such  fiscal year  prepared  in  accordance  with  generally  accepted
accounting  principles  and  accompanied  by an auditor's  report  containing an
opinion of the  Accountants;  (ii) a report (which need not be audited)  setting
forth any  distributions  made to Persons who were Limited  Partners at any time
during the fiscal year, separately identifying  distributions from (a) Cash Flow
from Local Limited Partnership or Partnership operations during the fiscal year,
(b) Cash Flow from Local Limited Partnership or Partnership  operations during a
prior  fiscal  year  which had been held as  Reserves,  (c) Sale or  Refinancing
Proceeds, and (d) amounts previously set aside as Reserves

                                       B-65

<PAGE>



from  Gross  Proceeds;  (iii) a  report  of the  significant  activities  of the
Partnership  during the year;  (iv) a special report setting forth the amount of
all fees and other  compensation and distributions and reimbursed  expenses paid
by the Partnership and the Local Limited Partnerships for the fiscal year to the
General  Partner  or any  Affiliate  of the  General  Partner  and the  services
performed  in  consideration  therefor,  which  report  shall be verified by the
Accountants,  with the method of verification to include, at a minimum, a review
of the time records of individual  employees,  the costs of whose  services were
reimbursed,  and a review of the specific  nature of the work  performed by each
such employee, all in accordance with generally accepted auditing standards and,
accordingly,  including  such  tests of the  accounting  records  and such other
auditing   procedures   as  the   Accountants   consider   appropriate   in  the
circumstances.  The additional costs of such special report shall be itemized by
the  Accountants  among all programs  sponsored  by the General  Partner and its
Affiliates  on a  program-by-program  basis and may be reimbursed to the General
Partner or its Affiliates to the extent that such  reimbursement,  when added to
the cost for administrative  services rendered,  does not exceed the Competitive
rate for such services.  Until all Promissory Notes have been paid in full, such
annual report shall reflect any defaults in the payment of the Promissory Notes,
actions taken by the  Partnership in response to any defaults,  and a discussion
and analysis of the impact thereof on capital requirements of the Partnership.

     9.5.    Depreciation and Other Tax Elections

     The Partnership may elect to use with respect to depreciable  assets of the
Partnership  any  depreciation  method  which  is  permitted  by  the  Code  and
appropriate in the opinion of the General Partner.  All other Federal income tax
elections  required or permitted to be made for or by the  Partnership  shall be
made by the General Partner after consulting with the  Accountants.  The General
Partner may, but shall not be under any duty to, cause the  Partnership  to make
an election under Section 754 of the Code (or any successor provision thereto).

     9.6.    Designation of Tax Matters Partner

     The General  Partner is hereby  designated as the "Tax Matters  Partner" of
the  Partnership  under  Section  6231(a)(7)  of the  Code  and,  in  connection
therewith  and in addition to all powers given  thereunto,  shall have all other
powers needed to fully perform as the Tax Matters  Partner,  including,  without
limitation, the power to retain all attorneys and accountants of its choice, the
right to settle any audits  without the consent of the Limited  Partners and the
right to challenge any final  partnership  administrative  adjustment in a court
action. The designation made in this Section is hereby expressly consented to by
each  Limited  Partner as an express  condition  to becoming a Limited  Partner.
Expenses of any administrative proceedings undertaken by the Tax Matters Partner
will be paid for out of

                                       B-66

<PAGE>



Partnership  assets.  Each  Limited  Partner  who elects to  participate  in the
proceedings  will be responsible for any expenses  incurred by him in connection
with his participation, and the cost of any resulting audits or adjustments of a
Limited  Partner's  tax  return  will be borne  solely by the  affected  Limited
Partner.  The General Partner is hereby designated as the "notice partner" under
Section  6231(a)(8)  of the Code to receive any notice  provided by the Internal
Revenue  Service to the Limited  Partners as a group in accordance  with Section
6223(b)(2) of the Code.


                                    ARTICLE 10

                  MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS

     10.1.   Meetings and Actions Without Meetings

     10.1.1.  Meetings of the Limited  Partners for any purpose may be called by
the General Partner at any time, and shall be called by the General Partner upon
receipt of a request in writing, containing a proposal for the holding of such a
meeting,  signed by 10% or more in interest of the Limited  Partners and stating
the purpose of the meeting.  In addition,  the General  Partner may,  and,  upon
receipt  of a  proposal  in  writing  signed  by the  holders  of 10% or more in
interest  of the  Limited  Partners  shall,  submit any matter  (upon  which the
Limited  Partners  are  entitled to act) to the Limited  Partners  for a vote by
written Consent without a meeting.

     10.1.2.  All meetings and actions of the Limited Partners shall be governed
in all respects,  including  matters  relating to notice,  quorum,  adjournment,
proxies,  record  dates and  actions  without a meeting,  by the  provisions  of
Section  15637 of the Act, as said  Section  15637 shall be amended from time to
time.  Notwithstanding  the foregoing,  upon receipt of a written  request for a
Partnership  meeting  from one or more Limited  Partners  either in person or by
certified mail stating the purpose(s) of the meeting,  the General Partner shall
provide  all Limited  Partners,  within 10 days after  receipt of said  request,
written  notice  (either in person or by certified  mail) of the meeting and the
purpose of such meeting to be held on a date not less than 15 days nor more than
60 days after  receipt of said  request,  at a time and place  convenient to the
Limited Partners.

     10.2.   Voting Rights of Limited Partners

     10.2.1. The holders of a majority of the outstanding Units may, without the
concurrence of the General Partner:

     (i) amend this Agreement, subject to the provisions of Section 12.1 hereof;


                                       B-67

<PAGE>



     (ii) dissolve the Partnership;

     (iii) remove the General Partner and elect a replacement General Partner;

     (iv)  approve or  disapprove  the sale of all or  substantially  all of the
assets of the Partnership in a single  transaction other than in connection with
the liquidation of the Partnership; or

     (v) if the Partnership  invests in a Local Limited Partnership of which the
Local General  Partner is a Sponsor,  to direct the General  Partner  (acting on
behalf  of the  Partnership)  to take any  action  permitted  to be taken by the
Partnership  pursuant  to  the  partnership   agreement  of  the  Local  Limited
Partnership.

     10.2.2.  Notwithstanding  any  provision  of the Act to the  contrary,  the
Limited  Partners  shall only have the right to vote on the matters set forth in
Paragraph 10.2.1. of this Agreement.

     10.2.3. In any vote of the Limited Partners,  each Limited Partner shall be
entitled  to cast  one vote for  each  Unit  which he owns as of the  designated
record date.  Notwithstanding  any other provision of this Agreement,  any Units
held by the Sponsor will not be entitled to vote,  and will not be considered to
be  "outstanding"  Units for purposes of any vote,  upon matters which involve a
conflict between the interests of such Sponsor and the  Partnership,  including,
but not limited to, any vote on the proposed  removal of the General  Partner or
regarding any transaction between the Partnership and the Sponsor.

10.3.        Limitations on Roll-Ups; Dissenters' Rights

     10.3.1.  In  connection  with  a  proposed  Roll-Up,  an  appraisal  of all
Partnership  assets shall be obtained from a competent,  Independent  Expert. If
the appraisal will be included in a prospectus used to offer the securities of a
Roll-Up  Entity,  the appraisal  shall be filed with the Securities and Exchange
Commission  and the states as an exhibit to the  registration  statement for the
offering.  Accordingly,  an  issuer  using the  appraisal  shall be  subject  to
liability  for  violation  of  Section  11 of the  Securities  Act of  1933  and
comparable  provisions under state laws for any material  misrepresentations  or
material omissions in the appraisal.  Partnership assets shall be appraised on a
consistent  basis. The appraisal shall be based on an evaluation of all relevant
information,  and shall indicate the value of the  Partnership's  assets as of a
date  immediately  prior  to the  announcement  of  the  proposed  Roll-Up.  The
appraisal  shall  assume an orderly  liquidation  of  Partnership  assets over a
12-month  period.  The terms of the engagement of the  Independent  Expert shall
clearly state that the engagement is for the benefit of the  Partnership and its
Limited  Partners.  A  summary  of the  independent  appraisal,  indicating  all
material assumptions

                                       B-68

<PAGE>



underlying the appraisal,  shall be included in a report to the Limited Partners
in connection with a proposed Roll-Up.

     10.3.2.  In connection with a proposed  Roll-Up,  the Person sponsoring the
Roll-Up shall offer to Limited Partners who vote "no" on the proposal the choice
of:

     (i) accepting the  securities of the Roll-Up Entity offered in the proposed
Roll- Up; or

     (ii)  one of the  following:  (a)  remaining  as  Limited  Partners  in the
Partnership,  and  preserving  their  interests  therein  on the same  terms and
conditions as existed  previously;  or (b) receiving  cash in an amount equal to
the Limited Partners' pro-rata share of the appraised value of the net assets of
the Partnership.

     10.3.3. The Partnership shall not participate in any proposed Roll-Up which
would result in Limited  Partners  having  democracy  rights which are less than
those provided for under this Agreement. If the Roll-Up Entity is a corporation,
the voting  rights of Limited  Partners  shall  correspond  to the voting rights
provided for in this Agreement to the greatest extent possible.

     10.3.4. The Partnership shall not participate in any proposed Roll-Up which
includes  provisions  which would operate to materially  impede or frustrate the
accumulation  of shares by any purchaser of the securities of the Roll-Up Entity
(except  to the  minimum  extent  necessary  to  preserve  the tax status of the
Roll-Up Entity).  The Partnership  shall not participate in any proposed Roll-Up
which would limit the ability of a Limited Partner to exercise the voting rights
of the securities of the Roll-Up Entity on the basis of the number of Units held
by that Limited Partner.

     10.3.5.  The Partnership  shall not participate in any proposed  Roll-Up in
which Limited  Partners'  rights of access to the records of the Roll-Up  Entity
will be less than those provided for under this Agreement.

     10.3.6.  The Partnership  shall not participate in any proposed  Roll-Up in
which any of the costs of the  transaction  would be borne by the Partnership if
the Roll-Up is not approved by the Limited Partners.

     10.3.7. In addition to those set forth above,  Limited Partners who dissent
with respect to a proposed  Roll-Up will have the rights provided under Sections
15679.1 through 15679.14 of the Act.



                                       B-69

<PAGE>



                                    ARTICLE 11

                             SPECIAL POWER OF ATTORNEY

     Each  Limited  Partner,  including  each  Additional  Limited  Partner  and
Substitute  Limited  Partner,  by the execution of this  Agreement,  irrevocably
constitutes and appoints the General Partner, with full power of substitution in
the premises, his true and lawful attorney-in-fact with full power and authority
in his name, place and stead to execute,  acknowledge,  deliver,  swear to, file
and  record  at the  appropriate  public  offices  any  documents  necessary  or
appropriate to carry out the provisions of this  Agreement,  including,  but not
limited to:

     (i) all certificates and other instruments (including  counterparts of this
Agreement),   and  any  amendment  thereof,  which  the  General  Partner  deems
appropriate in order to form,  qualify or continue the  Partnership as a limited
partnership  (or a partnership  in which the Limited  Partners will have limited
liability comparable to that provided by the Act) in the State of California and
in the  jurisdictions  in which the Partnership may conduct business or in which
formation,  qualification  or  continuation  is, in the  opinion of the  General
Partner,  necessary or desirable to protect the limited liability of the Limited
Partners;

     (ii) all amendments to this Agreement adopted in accordance with its terms,
and all  instruments  which the General  Partner deems  appropriate to reflect a
change or  modification  of the Partnership in accordance with the terms of this
Agreement;

     (iii) all financing statements,  continuation statements or other documents
and amendments thereto which the General Partner deems appropriate to perfect or
continue the  perfection  of the  Partnership's  security  interest in his Units
provided  for in Section  13.1,  and, if the Limited  Partner is an  Installment
Contributor  Limited  Partner,  Section  3.4.1(b),  of this  Agreement,  and all
instruments  relating to the admission of any  Additional or Substitute  Limited
Partner,  including  any  amendment to this  Agreement  which  substitutes  as a
Limited Partner the purchaser at a foreclosure sale of Units previously given as
security by a defaulting Limited Partner for his Promissory Note; and

     (iv) all conveyances and other  instruments which the General Partner deems
appropriate  to implement  the  provisions  of this  Agreement or to reflect the
dissolution  and winding up of the  Partnership in accordance  with the terms of
this Agreement.

     The  appointment by each of the Limited  Partners of the General Partner as
his attorney-in-fact  shall be deemed to be a power coupled with an interest, in
recognition  of the fact that each of the Partners  under this Agreement will be
relying  upon the power of the General  Partner to act as  contemplated  by this
Agreement in

                                       B-70

<PAGE>



any  filing  and other  action by it on  behalf  of the  Partnership,  and shall
survive  and  shall  not  be  affected  by  the  subsequent  bankruptcy,  death,
adjudication of incompetence or insanity, disability,  incapacity or dissolution
of any Person  hereby  giving the power nor by the transfer or assignment of all
or any part of the  Units of any such  Person;  provided,  however,  that in the
event of the transfer by a Limited  Partner of all of his Units,  the  foregoing
power of attorney of a  transferror  Limited  Partner shall survive the transfer
only until the transferee is admitted to the Partnership as a Substitute Limited
Partner and all required documents and instruments are duly executed,  filed and
recorded to effect the substitution.


                                    ARTICLE 12

                                    AMENDMENTS

     12.1.   Adoption of Amendments

     12.1.1. In addition to the amendments authorized herein,  amendments may be
made to this  Agreement  from  time  to  time by a  majority-in-interest  of the
Limited Partners,  without the Consent of the General Partner;  provided that no
such  amendment  shall (a) in any manner allow the Limited  Partners to take any
action  which  would  constitute  their  participation  in  the  control  of the
Partnership's  business  within  the  meaning of  Section  15632 of the Act,  or
otherwise cause the loss of their limited liability, nor (b) without the Consent
of the General Partner,  alter the rights,  power, duties or compensation of the
General  Partner  or any of its  Affiliates  or its (or any of its  Affiliates')
interest in Profits and Losses for Tax Purposes, Tax Credits, Cash Available for
Distribution  or Sale or Refinancing  Proceeds or alter any of the provisions of
Sections 6.6 or 8.2 or this Section 12.1.1.

     12.1.2.  In  addition  to  the  amendments   otherwise  authorized  herein,
amendments  may be made  to  this  Agreement  from  time to time by the  General
Partner,  without the Consent of any of the Limited Partners:  (i) to add to the
representations,  duties or obligations of the General  Partner or surrender any
right or power  granted to the General  Partner  herein,  for the benefit of the
Limited  Partners;  (ii) to cure any  ambiguity,  to correct or  supplement  any
provision herein which may be inconsistent  with any other provision  herein, or
to make any other provisions with respect to matters or questions  arising under
this  Agreement  which  will not be  inconsistent  with the  provisions  of this
Agreement;  and (iii) to delete or add any provision of this Agreement  required
to be deleted or added by the staff of the Securities and Exchange Commission or
other Federal agency or by a state "Blue Sky"  commissioner or similar  official
and deemed by the  Commission,  agency,  commissioner  or official to be for the
benefit or protection of the Limited Partners.


                                       B-71

<PAGE>



     No amendment shall be adopted pursuant to this Section 12.1.2 (except under
the preceding  clause  (iii)) unless its adoption:  (i) is for the benefit of or
not adverse to the interests of the Limited  Partners;  (ii) is consistent  with
Section 5.1 hereof; (iii) does not affect the distribution of Cash Available for
Distribution  or Sale or  Refinancing  Proceeds or the allocation of Profits and
Losses for Tax  Purposes  or of Tax  Credits  among the  Partners or between the
Limited Partners as a class and the General  Partner;  and (iv) does not, in the
opinion of counsel  for the  Partnership,  affect the limited  liability  of the
Limited Partners under the Act or the status of the Partnership as a partnership
for Federal income tax purposes.

     In addition to the amendments otherwise authorized herein,  notwithstanding
the preceding  paragraph,  amendments may be made to this Agreement  without the
Consent of any Limited  Partner with respect to the  provisions  of Article 4 of
this Agreement in accordance with Section 4.4.1 and/or Section 4.4.2.

     12.2.   Filing of Required Documents

     In making any amendments, there shall be prepared and filed for recordation
by the General  Partner all documents and  certificates  required to be prepared
and filed under the Act and under the laws of any other  jurisdictions under the
laws of which the Partnership is then formed or qualified.

     12.3.   Required Change of Partnership Name

     If at any time there is no General  Partner  which is an Affiliate of WNC &
Associates,  Inc., a California  corporation  (or any  successor  thereto),  the
Partnership  shall forthwith  change its name in such a manner as not to include
the initials "WNC." All parties to this Agreement  recognize that damages at law
may be an inadequate  remedy for breach of the foregoing  covenant,  and consent
that the same may be enforced by specific  performance,  injunction or equitable
remedy as well as in an action at law.


                                    ARTICLE 13

                             MISCELLANEOUS PROVISIONS

     13.1.   Security Interest and Right of Set-Off

     As security for any  withholding  tax or other  liability or  obligation to
which the  Partnership  may be  subject  as a result of any act or status of any
Limited Partner, or to which the Partnership becomes subject with respect to the
Interest of any Limited  Partner,  the Partnership  shall have (and each Limited
Partner  hereby  grants to the  Partnership)  a  security  interest  in all Cash
Available for Distribution and Sale

                                       B-72

<PAGE>



or Refinancing  Proceeds  distributable  to the Limited Partner to the extent of
the amount of the withholding tax or other liability or obligation.

     13.2.   Notices

     Except as otherwise  specifically provided herein, all notices,  demands or
other  communications  hereunder shall be in writing and shall be deemed to have
been given, if given in any manner specified in the definition of "Notification"
herein, when dispatched,  and shall be sent to the respective addresses referred
to in such definition.

     13.3.   Execution

     Each  Limited  Partner,   including  any  Additional  Limited  Partner  and
Substitute  Limited Partner,  additional  General Partner and successor  General
Partner,  shall  become a Partner  in the  Partnership  by  signing  counterpart
signature pages to this Agreement or a power of attorney to the General Partners
therefor,  and any other  instrument  or  instruments  deemed  necessary  by the
General Partners. By so signing, each Limited Partner,  including any Additional
Limited Partner and Substitute  Limited Partner,  additional  General Partner or
successor General Partner,  as the case may be, shall be deemed to have adopted,
and to have  agreed to be bound by,  all the  provisions  of this  Agreement.  A
Person may be admitted as an Additional  Limited  Partner and shall become bound
by this  Agreement  (i) if such Person (or a  representative  authorized by such
Person  orally,  in writing or by other  action  such as payment  for his Units)
executes this Agreement or any other writing,  including without limitation, the
Subscription  Agreement  included with the Prospectus,  evidencing the intent of
such  Person  to become an  Additional  Limited  Partner  or (ii)  without  such
execution, if such Person (or a representative authorized by such Person orally,
in writing or by other action such as payment for his Units)  complies  with the
conditions  for  becoming  an  Additional  Limited  Partner as set forth in this
Agreement  and requests  (orally,  in writing or by other action such as payment
for his Units) that the Partnership Register reflect such admission.

     13.4.   Binding Effect

     The covenants and  agreements  contained  herein shall be binding upon, and
inure  to  the  benefit  of,  the  heirs,  executors,  administrators,  personal
representatives, successors and assigns of the respective parties hereto.

     13.5.   Applicable Law

     This Agreement  shall be construed and enforced in accordance with the laws
of the State of California.


                                       B-73

<PAGE>



     13.6.   Counterparts

     This  Agreement  may be  executed  in  several  counterparts,  all of which
together  shall  constitute  one  agreement   binding  on  all  parties  hereto,
notwithstanding that all the parties have not signed the same counterpart.

     13.7.   Separability of Provisions

     Each provision of this Agreement shall be considered separable,  and if for
any reason any provision or provisions  hereof are  determined to be invalid and
contrary to any  existing or future law,  no such  invalidity  shall  impair the
operation or affect those portions of this Agreement which are valid.

     13.8.   Captions

     Section  titles and the table of contents are for  convenience of reference
only and shall not control or limit the meaning of this  Agreement  as set forth
in the text hereof.

     13.9.   Mandatory Arbitration

     Except as provided in Article 6 hereof,  mandatory arbitration shall not be
required  in  connection  with any  dispute  between a Limited  Partner  and the
Sponsor or the Partnership.  Nothing  contained in this Section 13.9 shall apply
to pre-existing contracts between Limited Partners and their broker-dealers.


                                       B-74

<PAGE>


     13.10.  Partnerships Treated as Separate

     This Partnership Agreement shall apply to each Partnership separately,  and
each Partnership shall file its own Certificate of Limited Partnership.

     IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of the
date first above written.

                                        General Partner:

                                        WNC & Associates, Inc.,
                                        General Partner

                                        By:     /s/ JOHN B. LESTER, JR.
                                                John B. Lester, Jr.,
                                                President

                                        Initial Limited Partner:

                                        /S/JOHN B. LESTER, JR.
                                        John B. Lester, Jr.

                                       B-75

<PAGE>


                                    EXHIBIT C
                                  INVESTOR FORM

WNC Housing Tax Credit Fund V, Series ____

Amount of Investment
______________ x $1,000  _________________
# Units                             Total Dollar Amount

Minimum Investments:  $5,000 ($2,000 for certain investors);
Additional increments:  $1,000

____ New Account
____ Addition to Existing Account
____  Initial  Here if the investor is paying for his Units with a check for the
total subscription amount.
____ Initial Here if the investor elects to use the installment payment. In such
case he shall make a check for one-half of the total subscription  amount (i.e.,
the number of Units subscribed for in 1 above x $500) and pay the remaining half
with  interest  pursuant  to the terms of the  Promissory  Note.  An investor is
eligible to use this installment payment method only if he is subscribing for at
least 10 Units ($10,000).

Make Check Payable To:
National Bank of Southern California
WNC/HTCF V

Submit To:
National Bank of Southern California
4100 Newport Place, Suite 100
Newport Beach, CA  92660
Attention:  WNC Escrow Manager

INVESTOR INFORMATION

Investor  ____  Dr.   ____  Mr.   ____  Mrs.   ____  Ms. Social Security Number

- -------------------------------------------------------------------------------
Investor  ____  Dr.   ____  Mr.   ____  Mrs.   ____  Ms. Social Security Number

- -------------------------------------------------------------------------------
Entity Name                                     Taxpayer Identification Number

- --------------------------------------------    -------------------------------
Occupation                                      Income

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

Mailing Address                                 Residence Address
                                            (if different from mailing address)

- --------------------------------------------    -------------------------------
City                                            City

- --------------------------------------------    -------------------------------
State                      Zip                  State                     Zip

- --------------------------------------------    -------------------------------
Daytime Phone                                   Daytime Phone

wncnat5-7/subdoc.3
                                      

<PAGE>



                            INVESTOR FORM (CONTINUED)

LEGAL FORM OF OWNERSHIP

     ____  Individual  ____ Community  Property ____ Other  (Specify) ____ Joint
Tenants  with Rights of  Survivorship  ____  Tenants in Common ____  Partnership
(copy of  partnership  agreement  must be sent with this  form)  ____  Corporate
(Certified  Corporate Resolution must be completed and sent with this form) ____
Revocable  Trust  (Trustee(s)  is required to sign below.  Copy of trust must be
sent with this form)        
____  Custodian for:_________________________________ 
          Under Uniform Gift to Minors Act of the State of _______________

The Units are being purchased in the State of __________________________
(Complete if different from the state of residence)

____ Check here if the Investor is not a citizen of the United States.
____ Check here if the  Investor  is subject to backup  withholding  pursuant to
Section 3406(a)(1)(C) of the Internal Revenue Code.

Investor Signature
Execution of the Investor Form below constitutes the undersigned's  subscription
for the number of Units  indicated  above and his  acceptance  and  agreement to
perform  the  terms and  conditions  of the  Agreement  of  Limited  Partnership
included as Exhibit B to the  Prospectus of WNC Housing Tax Credit Fund V, dated
July 26, 1995.

Signature of First Investor                Date

- -----------------------------------        ---------------------------
Signature of Second Investor               Date

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

     In order to  induce  the  General  Partner  to  accept  this  subscription,
Investor  represents  by  initialing  in the space  provided  that  Investor has
received a copy of the final Prospectus. ____________ (Initial Here)

Broker/Dealer Information
The  undersigned  represents  that he has complied with the  requirements of the
Rules of Fair  Practice of the NASD with  respect to the  subscriber  whose name
appears on the above  Investor Form and hereby  certifies that he has reasonable
grounds  to  believe  on the basis of  information  obtained  from the  investor
concerning  his  objectives,   financial  situation  and  needs  and  any  other
information  known to the  undersigned  that the  investment in the interests is
suitable for the investor, and, in addition, has informed the investor as to the
lack of liquidity and marketability of the interests.  The undersigned  warrants
that a Prospectus  was delivered to the subscriber not less than five days prior
to submission of this subscription to the Series.

Account Executive                           Broker/Dealer Firm

- -----------------------------------         ---------------------------
Branch Office Address     ____ Please check if new address


- -----------------------------------------------------------------------------
City                                State            Zip               Phone


- ------------------------------------------------       -----------------------
Account Executive's Signature and/or Branch Manager    Date

wncnat5-7/subdoc.3
                                       C-1

<PAGE>



                                 PROMISSORY NOTE

$500 PER UNIT

FOR VALUE RECEIVED, the undersigned ("Maker"),  promises,  jointly and severally
if more than one,  to pay to the order of WNC  Housing  Tax Credit Fund V, L.P.,
Series __, a California limited partnership  ("Payee"),  at the office of Payee,
3158 Redhill Avenue, Suite 120, Costa Mesa,  California  92626-3416,  or at such
other  location as Payee may from time to time  designate,  the principal sum of
FIVE HUNDRED DOLLARS ($500),  multiplied by the number of Units set forth in his
Investor Form,  together with interest on the unpaid principal  balance from the
date of the Maker's  admission  as a limited  partner of the Payee until paid at
the  rate of ___%  per  annum.  Said  principal  sum  shall  be  payable  in one
installment  as follows:  (i) March 31, 1996, if Maker  subscribes for his Units
before  December 31, 1995,  (ii) January 31, 1997, if Maker  subscribes  between
January 1, 1996 and June 1, 1996, or (iii) the later of the date of subscription
or June 30,  1997,  if Maker  subscribes  for his Units  after June 1, 1996.
Interest accrued to the principal installment payment date shall also be due and
payable on such date.

This  Promissory  Note is  delivered  pursuant to the terms of the  Agreement of
Limited Partnership of Payee, and shall be governed by the following provisions:

1.       This Promissory Note shall be paid in lawful money of the United 
         States.
2.       The occurrence of any of the following shall constitute an "Event of 
         Default":
         (a) Default in the payment of any amount  payable  hereunder  when due,
         which  default in  payment  is not cured  within 30 days after such due
         date ("Payment  Default");  or default in the  performance of any other
         obligation of Maker under this Promissory Note;

         (b) A  materially  false  or  misleading  omission  or  representation,
         statement, certificate, warranty or other assertion in the Subscription
         Agreement  or any other  document  executed by the Maker in  connection
         with the purchase of Units of limited partnership interest in Payee;

         (c)      The filing by, or against, the Maker of any proceeding under 
                  the Federal Bankruptcy Code;

         (d)      An assignment for the benefit of creditors made by the Maker; 
                  or

         (e)      The appointment of, or application for, a receiver or trustee 
                  by any party for all or any part of the assets of the Maker.

3. Upon the occurrence of an Event of Default,  then at the option of Payee, the
entire  unpaid  balance of  principal on this  Promissory  Note,  together  with
accrued  interest and any other amounts due hereunder,  shall be immediately due
and payable.

4. In the event that any amount payable under this  Promissory  Note is not paid
when due, a late charge in the amount of 5% of the late amount  shall be due and
payable in addition to the interest provided herein.

5. If this  Promissory  Note is not paid  when  due or if an  Event  of  Default
occurs,  Maker  promises  to pay all  costs of  collection,  including,  but not
limited  to,  reasonable  attorneys'  fees  incurred by Payee on account of such
collection whether or not suit is filed hereon.

6. In the  event  this  Promissory  Note is not paid  when due or if an Event of
Default  occurs,  Payee  may set off  all  amounts  owed  to  Payee  under  this
Promissory Note against all distributions to which Maker is entitled relating to
Maker's Units of limited partnership interest in Payee.

7. In the event of a Payment Default,  Maker shall be given a notice by Payee of
the Payment Default and the Payee's intent to foreclose on its security interest
given by Maker to secure the payment of this Promissory Note. For a period of 30
days after such notice (the "Cure Period"), Maker shall be entitled to cure such
Payment  Default by paying the delinquent  principal  payment,  with interest as
provided in this Promissory  Note, to the Payee.  Prior to the expiration of the
Cure  Period,  the Payee shall not be entitled  to  commence  to  foreclose  its
security interest in the Maker's Units of limited partnership  interest in Payee
and Maker's  interest in Payee shall not be subject to any reduction as a result
of such Payment Default. However, Payee may withhold any distributions otherwise
payable or issuable to Maker  pending the cure of the Payment  Default  prior to
the  expiration of the Cure Period.  Any reduction in Maker's  interest in Payee
effective  upon the  expiration  of the Cure  Period  will relate back and shall
apply to and affect any  withheld  distributions.  Upon  expiration  of the Cure
Period Payee may commence to foreclose and  foreclose  its security  interest in
the Maker's Units of limited partnership interest in Payee.

wncnat5-7/subdoc.3
                                       

<PAGE>



8. The Promissory  Note is made with full recourse to Maker, is by its terms not
a negotiable  instrument,  is assignable  only subject to the defenses Maker may
have, is subject to venue for collection in the state in which Maker resides and
may not be sold by Payee prior to its maturity.  Subject to the foregoing, Payee
may pledge and grant security  interests in this Promissory Note as security for
any obligation of Payee.

9.   This  Promissory  Note shall be governed by, and construed in accordance
with, the laws of the State of California.

10.  Reference in this  Promissory Note to "Payee" shall mean the original Payee
hereunder so long as the Payee shall be the holder of this  Promissory  Note and
thereafter shall mean any subsequent holder of the Promissory Note.

11.      Time is of the essence of each obligation of Maker hereunder.

12. No delay or  omission  on the part of the  Payee in  exercising  any  rights
hereunder or under the  Agreement of Limited  Partnership  of Payee or any other
instrument  given to secure this  Promissory  Note shall  operate as a waiver of
such rights or any other right hereunder or under said instruments.

13. This  Promissory  Note may be prepaid in full at any time without premium or
penalty; provided, however, that no partial prepayments shall be permitted.

14. Maker waives presentment,  demand for payment, notice of dishonor, notice of
protest,  protest  and all other  notices  or  demands  in  connection  with the
delivery,  acceptance,  performance,  default,  endorsement  or guaranty of this
instrument, except as provided in paragraph 7 above.

                                    This note is executed as of _______, 199__.


                                                  ---------------------------
                                                  Maker

wncnat5-7/subdoc.3
                                       C-2

<PAGE>


    No dealer,  salesman  or any other  person has been  authorized  to give any
information or to make any  representations  other than those  contained in this
Prospectus, and, if given or made, such information and representations must not
be  relied  upon.  This  Prospectus  does not  constitute  an offer to sell or a
solicitation  of an offer to buy any of the  securities  offered  hereby  in any
state to any  person to whom it is  unlawful  to make such  offer.  Neither  the
delivery  of this  Prospectus  nor any sale  made  hereunder  shall,  under  any
circumstances,  create  any  implication  that  there  has been no change in the
affairs of the Fund since the  respective  dates at which  information  is given
herein,  or the date hereof.  However,  if any material change occurs while this
Prospectus is required by law to be delivered,  this  Prospectus will be amended
or supplemented accordingly.

                                  TABLE OF CONTENTS

                                                                           Page
Summary of the Offering..................................................    10
Risk Factors..............................................................   23
Who Should Invest; Limitations on Use of Credits and Losses...............   41
Estimated Use of Proceeds.................................................   47
Management Compensation...................................................   52
Conflicts of Interest.....................................................   59
Fiduciary Responsibility..................................................   64
Investment Objectives and Policies........................................   66
The Low Income Housing Credit.............................................   85
Other Government Assistance Programs......................................  100
Management................................................................  106
Prior Performance Summary.................................................  113
Federal Income Tax Considerations.........................................  122
State and Local Tax Considerations........................................  167
Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions...  167
Summary of Certain Provisions of the Partnership Agreement................  172
Transferability of Units..................................................  177
Reports...................................................................  179
Terms of the Offering and Plan of Distribution............................  180
Sales Material............................................................  186
Management's Discussion and Analysis of Financial Condition...............  187
Legal Matters.............................................................  188
Experts...................................................................  189
Further Information.......................................................  189
Glossary..................................................................  189
Financial Statements......................................................  F-i
Exhibit A - Prior Performance Tables......................................  A-1
Exhibit B - Partnership Agreement.........................................  B-1
Exhibit C - Subscription Agreement........................................  C-1

         For a period of 90 days after the  effective  date of this  Prospectus,
all dealers effecting transactions in the registered securities,  whether or not
participating in the distribution, may be required to deliver a Prospectus. This
obligation  is in addition to the  obligation of dealers to deliver a Prospectus
when acting as  underwriters  and with  respect to their  unsold  allotments  or
subscriptions.



<PAGE>


                                   APPENDIX A

                        Description of Graphic Materials

1.   At the upper portion of page 86 there are two adjacent pie charts.  The 
pie chart to the left is unsegmented, and the legend below it reads "Taxable
Income ($125,000)."  The pie chart to the right is segmented, with the larger
segment denoted "Income After Taxes ($94,000)" and the smaller segment denoted
"Tax Payment ($31,000)." 

     At the lower portion of page 86 there is a single pie chart consisting of
three segments.  The largest segment is denoted "Income After Taxes ($94,000),"
the second-largest segment is denoted "Recomputed Tax Payments ($23,250) and 
the smallest segment is denoted "Additional Income From Tax Credits ($7,750.)

2.   On page 87 there appears a graph.  The horizontal line represents the 
years 1970 through 1993, and the vertical line represents the shortage of
affordable rental units in the United States.  The graph is entitled "Supply/
Demand of Affordable Housing."

3.   On page 113 there appears a map of the contiguous United States.  The map
is in black, with white outlines for state borders.  The approximate locations
of properties purchased by prior programs of the sponsor are represented by
white dots.

<PAGE>

   
                      WNC HOUSING TAX CREDIT FUND V, L.P.,
                                    SERIES 4
                               -------------------
                         Supplement Dated March 20, 1997
                        To Prospectus Dated July 26, 1995
    

         This Supplement is part of, and should be read in conjunction with, the
Prospectus  of WNC Housing Tax Credit Fund V, L.P.,  Series 4 ("Series 4") dated
July 26,  1995 (the  "Prospectus").  THIS  SUPPLEMENT  SUPERSEDES  ALL  PREVIOUS
SUPPLEMENTS.  Capitalized terms used but not defined in this Supplement have the
meanings given to them in the Prospectus.

TABLE OF CONTENTS                                                        Page
   
Termination of Series 3 Offering.....................................      2
Status of Series 4 Offering..........................................      2
Investment Objectives and Policies ..................................      2
Management...........................................................      2
Local Limited Partnership Investments................................      3
Prior Performance Summary............................................      11
Management's Discussion and Analysis of Financial Condition and
 Results of Operations...............................................      15
Federal Income Tax onsiderations.....................................      17
Plan of Distribution.................................................      17
Experts..............................................................      17
Financial Statements....................................................  FS-i
Prior Performance Tables................................................   A-1
First Amendment to Agreement of Limited Partnership.....................   B-1
Investor Form...........................................................   C-1
    

     As indicated in the chart which follows,  the information  presented herein
either adds to or supersedes similar information included in the Prospectus,  or
constitutes   information   which  has  no  corresponding   information  in  the
Prospectus.

Supplement Presentation                 Relationship to Prospectus Presentation
- -----------------------                 ---------------------------------------
   
Termination of Series 3 Offering                New Information
Status of Series 4 Offering                     New Information
Investment Objectives and Policies              Supersedes  a  portion  of 
                                                "Investment   Objectives  and
                                                Policies"
Management                                      Adds to "Management"
Local Limited Partnership Investments           New Information
Prior Performance Summary                       Adds to "Prior Performance 
                                                Summary"

Management's Discussion and Analysis of         Supersedes "Management's  
                                                Discussion  and  Analysis  of
Financial Condition and Results of Operations   Financial Condition"
Federal Income Tax Considerations               New Information
Plan of Distribution                            Adds to "Terms of the Offering 
                                                and Plan of Distribution"
Experts                                         Adds to "Experts"
Financial Statements                            Adds to "Financial Statements"
Prior Performance Tables                        Adds to "Prior Performance 
                                                Tables"
First Amendment to Agreement of Limited         Adds to "Partnership Agreement"
Partnership
Investor Form                                   Supersedes "Subscription 
                                                Agreement"

    

wncnat5-24-03.su


<PAGE>



TERMINATION OF SERIES 3 OFFERING

         The Fund sold a total of 18,000  Units with  respect to Series 3 to 856
investors for aggregate Capital Contributions to Series 3 of $17,565,000.  As of
the  date  hereof,  of the  total  capital  raised  by  Series  3  approximately
$2,144,000  was  paid  to  the  Sponsor  for  selling  commissions,  wholesaling
activities and in reimbursement of other organization and offering expenses (all
of which was reallowed to  non-Affiliates),  approximately  $720,000 was paid to
the Sponsor as Acquisition Fees,  approximately $180,000 was paid to the Sponsor
in  reimbursement  of  Acquisition  Expenses  (all of  which  was  reallowed  to
non-Affiliates),  and approximately $14,521,000 was or will be invested in Local
Limited  Partnership  Interests  or Reserves.  The  sections of this  Supplement
entitled  "Prior  Performance  Summary" and "Prior  Performance  Tables" contain
certain statistical data regarding Series 3 as of the respective dates specified
therein.

STATUS OF SERIES 4 OFFERING
   
     The Fund is now offering a maximum of 25,000 Units in Series 4 on the terms
set forth  herein and in the  Prospectus.  As of the date  hereof,  Series 4 has
received  and  accepted  subscriptions  in the amount of  $12,073,680  (12,098
Units), of which $227,000 currently is represented by Promissory Notes. Series 4
and  Series  3 have  been  organized  as  separate  limited  partnerships  under
California law and investors in Series 4 will have no rights or interests in the
properties acquired by Series 3.
    
INVESTMENT OBJECTIVES AND POLICIES

         The principal investment objective of Series 4 is to provide Low Income
Housing Credits to its investors in an amount of from $1,200 to $1,400 per Unit.
See "Investment  Objectives and Policies - Principal  Investment  Objectives" in
the Prospectus. There can be no assurance that this objective will be satisfied.
See  "Summary  of the  Offering  -  Risk  Factors"  and  "Risk  Factors"  in the
Prospectus. In this regard, the Partnership Agreement utilizes a defined term to
determine whether the General Partner can receive distributions from the sale of
Apartment Complexes. The defined term is "Return on Investment." As set forth in
the  Prospectus,  investors  should  note  that the use of the term  "Return  on
Investment"  is not  intended  to suggest  that this  return will be provided to
investors.  It means only that if proceeds from the sale of Apartment  Complexes
are available  after payment of all current and accrued fees and expenses,  they
will be distributed to investors  before  distributions  to the General Partner.
For  purposes  of  Series 4 the term  "Return  on  Investment"  will mean 13% of
"unreturned capital" (i.e., the capital contribution originally paid for a Unit,
less  distributions of Sale or Refinancing  Proceeds) each year through 2006 and
6% of unreturned capital thereafter.  See "Summary of the Offering - Profits and
Losses for Tax Purposes,  Tax Credits and Cash  Distributions,"  "Summary of the
Offering - Management  Compensation,"  "Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" and "Management Compensation" in the Prospectus.

MANAGEMENT

WNC & Associates, Inc.

         WNC & Associates,  Inc., the General Partner, was organized in 1971 for
the  purpose  of  structuring  and  sponsoring   private  placements  of  equity
securities in limited partnerships  organized to develop and operate residential
rental  properties  which benefit from  Government  Assistance,  and  thereafter
monitoring the  investments  made by such  partnerships  and  administering  the
partnerships  for their  investors.  Janice Wong and Donald S.  Belanger  are no
longer employed by the General Partner or its Affiliates.  Sy Garban retains his
position as Vice President - National Sales but is no longer associated with the
Dealer Manager. See "Management" in the Prospectus.




     NOT TO BE USED  IN  ARIZONA,  MAINE,  MASSACHUSETTS,  MINNESOTA,  MISSOURI,
NEBRASKA, PENNSYLVANIA, TENNESSEE OR TEXAS



                                       2a
<PAGE>




TERMINATION OF SERIES 3 OFFERING

         The Fund sold a total of 18,000  Units with  respect to Series 3 to 856
investors for aggregate Capital Contributions to Series 3 of $17,565,000.  As of
the  date  hereof,  of the  total  capital  raised  by  Series  3  approximately
$2,144,000  was  paid  to  the  Sponsor  for  selling  commissions,  wholesaling
activities and in reimbursement of other organization and offering expenses (all
of which was reallowed to  non-Affiliates),  approximately  $720,000 was paid to
the Sponsor as Acquisition Fees,  approximately $180,000 was paid to the Sponsor
in  reimbursement  of  Acquisition  Expenses  (all of  which  was  reallowed  to
non-Affiliates),  and approximately $14,521,000 was or will be invested in Local
Limited  Partnership  Interests  or Reserves.  The  sections of this  Supplement
entitled  "Prior  Performance  Summary" and "Prior  Performance  Tables" contain
certain statistical data regarding Series 3 as of the respective dates specified
therein.

STATUS OF SERIES 4 OFFERING

     The Fund is now offering a maximum of 25,000 Units in Series 4 on the terms
set forth  herein and in the  Prospectus.  As of the date  hereof,  Series 4 has
received and accepted subscriptions in the amount of $12,073,680 (12,098 Units),
of which $227,000  currently is represented  by Promissory  Notes.  Series 4 and
Series 3 have been organized as separate limited  partnerships  under California
law and investors in Series 4 will have no rights or interests in the properties
acquired by Series 3.

INVESTMENT OBJECTIVES AND POLICIES

         The Partnership  Agreement utilizes a defined term to determine whether
the  General  Partner  can  receive  distributions  from the  sale of  Apartment
Complexes.  The  defined  term is  "Return on  Investment."  As set forth in the
Prospectus,  investors  should  note  that  the  use  of  the  term  "Return  on
Investment"  is not  intended  to suggest  that this  return will be provided to
investors.  It means only that if proceeds from the sale of Apartment  Complexes
are available  after payment of all current and accrued fees and expenses,  they
will be distributed to investors  before  distributions  to the General Partner.
For  purposes  of  Series 4 the term  "Return  on  Investment"  will mean 13% of
"unreturned capital" (i.e., the capital contribution originally paid for a Unit,
less  distributions of Sale or Refinancing  Proceeds) each year through 2006 and
6% of unreturned capital thereafter.  See "Summary of the Offering - Profits and
Losses for Tax Purposes,  Tax Credits and Cash  Distributions,"  "Summary of the
Offering - Management  Compensation,"  "Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" and "Management Compensation" in the Prospectus.

MANAGEMENT

WNC & Associates, Inc.

         WNC & Associates,  Inc., the General Partner, was organized in 1971 for
the  purpose  of  structuring  and  sponsoring   private  placements  of  equity
securities in limited partnerships  organized to develop and operate residential
rental  properties  which benefit from  Government  Assistance,  and  thereafter
monitoring the  investments  made by such  partnerships  and  administering  the
partnerships  for their  investors.  Janice Wong and Donald S.  Belanger  are no
longer employed by the General Partner or its Affiliates.  Sy Garban retains his
position as Vice President - National Sales but is no longer associated with the
Dealer Manager. See "Management" in the Prospectus.



     TO BE USED ONLY IN  ARIZONA,  MAINE,  MASSACHUSETTS,  MINNESOTA,  MISSOURI,
NEBRASKA, PENNSYLVANIA, TENNESSEE OR TEXAS




                                       2b

<PAGE>
   
LOCAL LIMITED PARTNERSHIP INVESTMENTS

         Included  herein  is a  discussion  of  10  Local  Limited  Partnership
Interests  acquired or  identified  for  acquisition  by Series 4. The Apartment
Complexes owned by these Local Limited  Partnerships are located in seven states
and are being  developed and  constructed by nine different  development  teams.
Each of the Apartment Complexes has received a reservation of Low Income Housing
Credits.  While the Fund Manager believes that Series 4 is reasonably  likely to
acquire  or retain an  interest  in each of these  Local  Limited  Partnerships,
Series 4 may not do so as a result of the failure by a Local Limited Partnership
to satisfy one or more conditions  precedent to the payment of each  installment
payment,  the  inability of Series 4 to raise  additional  capital  necessary to
complete  the purchase of the Local  Limited  Partnership  Interests  identified
herein,  the purchase of Local Limited  Partnership  Interests  other than those
identified herein, or other factors.  Moreover, the terms of any acquisition may
differ from those as described.  Accordingly,  investors  should not rely on the
ability  of  Series 4 to  acquire  or retain an  investment  in all these  Local
Limited  Partnerships  on the indicated  terms in deciding  whether to invest in
Series 4.
    
   
         Series 4 has acquired a Local Limited  Partnership  Interest in Ashford
Place, L.P., an Oklahoma limited  partnership  ("ASHFORD PLACE");  Crescent City
Apartments,  a California limited  partnership  ("CRESCENT CITY");  Lamar Plaza,
L.P., a Missouri limited partnership ("LAMAR");  Mesa Verde Apartments,  Limited
Partnership,   a  New  Mexico  limited  partnership  ("MESA  VERDE");  Ogallalla
Apartments I, L.P., a Nebraska limited partnership  ("OGALLALLA");  and Woodland
Townhomes, L.P., an Alabama limited partnership ("WOODLAND TOWNHOMES");  and has
acquired one-half of the Local Limited  Partnership  Interest in Blessed Rock of
El Monte, a California  limited  partnership  ("BLESSED ROCK").  WNC Housing Tax
Credit Fund V, L.P.,  Series 3 ("Series 3") has  acquired the other  one-half of
the Local  Limited  Partnership  Interest in BLESSED  ROCK.  Series 4 expects to
become a limited partner in Belen Vista, L.P., a New Mexico limited  partnership
("BELEN VISTA");  Hilltop,  L.P., a Texas limited partnership  ("HILLTOP");  and
Mountain Vista  Associates,  L.P., a New Mexico limited  partnership  ("MOUNTAIN
VISTA").
    
   
         ASHFORD PLACE owns the Ashford Place  Apartments in Shawnee,  Oklahoma;
BELEN VISTA owns the Belen Vista Apartments in Belen,  New Mexico;  BLESSED ROCK
owns the Blessed Rock of El Monte Apartments in El Monte,  California;  CRESCENT
CITY owns The Surf  Apartments in Crescent  City,  California;  HILLTOP owns the
Hilltop Apartments in Palestine, Texas; LAMAR owns the Lamar Plaza Apartments in
Lamar,  Missouri;  MESA VERDE owns the Mesa Verde  Apartments  in  Roswell,  New
Mexico;  MOUNTAIN  VISTA owns the Mountain Vista  Apartments in Los Alamos,  New
Mexico;  OGALLALLA  owns the Ogallalla  Apartments in Ogallalla,  Nebraska;  and
WOODLAND TOWNHOMES owns the Woodland Townhomes in Marion, Alabama.
    
    
     The  following  tables  contain  information  concerning  the Apartment
Complexes and the Local Limited Partnerships identified herein:
<TABLE>
   
                                         ACTUAL OR                                                         LOCAL LIMITED   YEAR
                                         ESTIMATED   ESTIMATED                             PERMANENT       PARTNERSHIP'S   CREDITS
                                         CONSTRUC-   DEVELOP-                              MORTGAGE        ANTICIPATED     TO BE
LOCAL       PROJECT                         TION     MENT COST     NUMBER OF    BASIC      LOAN            AGGREGATE       FIRST
LIMITED     NAME/NUMBER     LOCATION OF  COMPLETION  (INCLUDING    APARTMENT    MONTHLY    PRINCIPAL       TAX CREDITS     AVAIL-
PARTNERSHIP OF BUILDINGS    PROPERTY     DATE        LAND COST)    UNITS        RENTS      AMOUNT          (1)             ABLE   
- ----------  --------------  -----------  ----------  -----------   -----------  ---------  -------------   --------------  -------
<S>         <C>             <C>          <C>         <C>           <C>          <C>        <C>             <C>             <C> 
ASHFORD     Ashford         Shawnee      December    $4,748,683    32 1BR units $360       $2,187,000      $3,901,370      1997
PLACE       Place           (Pottawa-    1997                      60 2BR units $438       Greystone &
            Apartments      tomie                                   8 3BR units $506       Co. (2)
                            County)
            7  buildings    Oklahoma



BELEN       Belen Vista     Belen        August       $1,998,882   30 1BR       $470       $1,546,000      $896,740        1997
VISTA       Apartments      (Valencia    1997                      26 2BR       $509       RECDS (5)
                            County),
            15 buildings    New Mexico
            (3) (4)

</TABLE>



                                       3
<PAGE>




<TABLE>
                                        ACTUAL OR                                                          LOCAL LIMITED   YEAR
                                        ESTIMATED    ESTIMATED                             PERMANENT       PARTNERSHIP'S   CREDITS
                                        CONSTRUC-    DEVELOP-                              MORTGAGE        ANTICIPATED     TO BE
LOCAL       PROJECT                     TION         MENT COST     NUMBER OF    BASIC      LOAN            AGGREGATE       FIRST
LIMITED     NAME/NUMBER    LOCATION OF  COMPLETION   (INCLUDING    APARTMENT    MONTHLY    PRINCIPAL       TAX CREDITS     AVAIL-
PARTNERSHIP OF BUILDINGS   PROPERTY     DATE         LAND COST)    UNITS        RENTS      AMOUNT          (1)             ABLE
- ---------- --------------- ------------ ----------- ------------   ------------ ---------- --------------  --------------- --------
<S>         <C>            <C>          <C>          <C>           <C>          <C>        <C>             <C>             <C> 
BLESSED     Blessed        El Monte     August       $9,867,800    36 1BR units $402       $2,600,000      $9,147,920      1997
ROCK        Rock of El     (Los         1997                        1 2BR unit  $0         FENB (7)
            Monte          Angeles                                              (mgr
            Apartments     County),                                             unit)      $275,000
                           California                                                      EMCRA
           14 buildings                                                                    (8)
           (6)
                                                                                           $650,000
                                                                                           DCF (9)


CRESCENT    The Surf        Crescent    October      $3,251,878    18 Studio    $266       $1,960,000      $2,220,520      1996
CITY        Apartments      City (Del   1995                          units                CDHCD (10)
                            Norte                                  37 1BR units $300
            1  building     County),                             
            (3) ( 6)        California
 

HILLTOP     Hilltop         Palestine    December    $596,919       8 1BR       $262       $371,450        $221,880        1997
            Apartments      (Anderson    1996                      16 2BR       $320       RECDS (5)
                            County),
            4 buildings     Texas
            (3)


LAMAR       Lamar           Lamar        June        $1,679,720    24 2BR       $285       $888,400        $1,343,440      1997
            Plaza           (Barton      1997                       4 3BR       $320       MHDC (11)       (federal)
            Apartments      County),                                                                       $53,738
                            Missouri                                                                       (Missouri)
            7 buildings


MESA        Mesa Verde      Roswell      December    $6,840,387    11 1BR       $256       $2,280,000      $6,427,180      1998
VERDE       Apartments      (Chaves      1997                      45 1BR       $314       Bank of
                            County),                                6 2BR       $305       America
            18 buildings    New Mexico                             23 2BR       $374       (12)
                                                                   11 3BR       $351       $277,904
                                                                   46 4BR       $431       HOME (13)


MOUNTAIN    Mountain        Los          July        $1,960,261    16 1BR       $317       $1,450,000      $884,480        1997
VISTA       Vista           Alamos       1997                      36 2BR       $374       U.S. Dept.
            Apartments      (Los                                                           of
                            Alamos                                                         Agriculture
            7 buildings     County),                                                       (FmHA)
            (3)             New Mexico                                                     (14)


OGALLALLA   Ogallalla       Ogallalla    September   $1,029,400    10 2BR units $310       $400,000        $723,170        1997
            Apartments      (Keith       1997                       6 3BR units $390       FNBO (15)
                            County),
            8 buildings     Nebraska


WOODLAND    Woodland        Marion       September   $2,616,040    32 1BR units $178       $51,500         $2,230,740      1997
TOWNHOMES   Townhomes       (Perry       1997                      10 2BR units $212       Regions Bank
                            County),                                                       (16)
            6 buildings     Alabama
                                                                                           $1,245,000
                                                                                           HOME (17)

    
<FN>

     (1)  Low Income Housing Credits are available over a 10-year period. For the year in which the credit first becomes available,
Series 4 will receive only that  percentage of the annual credit which  corresponds to the number of months during which Series 4 
was a limited  partner of the Local  Limited  Partnership, and during which the Apartment  Complex was  completed  and in service.  
See the discussion under "The Low Income Housing Credit" in the Prospectus.

   
     (2)  Greystone & Co. will provide the mortgage  loan for a term of 18 years at an annual  interest  rate of 8.5%.  Principal  
and  interest  will be payable monthly based on a 30-year amortization schedule.  Outstanding principal will be due on maturity.
    
   
     (3)  Rehabilitation property.
    
   
     (4)  Property designed for both families and senior citizens.
    
                                       4
<PAGE>
   
     (5) RECDS provides mortgage loans under the RECDS Section 515 Mortgage Loan Program.  Each of these  mortgage  loans  will be 
a  50-year  loan and will bear annual  interest at a market rate prior to reduction  of the interest  rate by a mortgage  interest 
subsidy to an annual rate of 1%, with principal and interest payable monthly based on a 50-year amortization schedule.
    
     (6) Property designed for senior citizens.
   
     (7) Far East National  Bank  ("FENB") will provide the first  mortgage loan for a term of 30  years  at an  annual  interest  
rate of  8.5%.  Principal  and interest  will be payable  monthly,  based on a 20-year amortization schedule. Outstanding principal 
will be due on maturity.

     (8) El Monte  Community  Redevelopment  Agency  ("EMCRA")  will provide the second  mortgage loan for a term of 15 years at an 
annual  interest rate of 4%. The loan will be repayable based on residual receipts.

     (9) Deferred  City Fees ("DCF") will provide the third  mortgage loan for a term of 30 years at an annual interest rate of 1%. 
The loan will be  repayable based on residual receipts.

     (10) California  Department of Housing and Community  Development ("CDHCD") will provide the mortgage loan for a term of 50 
years at an annual interest rate of 3%.  Principal  and interest will be payable annually based on a 50-year amortization schedule.

     (11)  Missouri  Housing  Development  Commission  ("MHDC") will provide the mortgage loan for a term of 40 years at an annual
interest rate of 1%. Principal and interest will be payable monthly based on a 40-year amortization schedule.

     (12) Bank of America will provide the first mortgage loan for a term of 15 years at an annual interest rate equal to the 15-
year  Treasury Bond yield plus 225 basis  points.  Principal  and interest  will be payable monthly based on a 30-year amortization
schedule. Outstanding principal will be due on maturity.

     (13) HOME will provide the second  mortgage  loan for a term of 30 years at an annual interest rate of 7.13%. Principal and
interest will be payable monthly based on a 30-year amortization schedule.

     (14) U.S.  Department of Agriculture  (FmHA) will provide the mortgage loan for a term of 50 years at an annual interest  rate 
of  7.25%.  Principal  and interest will be payable monthly based on a 50-year amortization schedule.

     (15) First  National Bank of Omaha  ("FNBO") will provide the mortgage loan for a term of 15 years at an annual interest rate 
of 9%.  Principal and interest will be payable monthly based on a 25-year  amortization  schedule.  Outstanding principal will be 
due on maturity.

     (16)  Regions Bank will  provide the first  mortgage  loan for a term of 20 years at an annual interest rate of 9.5%. Principal
and interest will be payable monthly based on a 20-year amortization schedule.

     (17) HOME will provide the second  mortgage  loan for a term of 30 years at an annual interest rate of 0.5%.  Principal and 
interest will be payable monthly based on a 30-year amortization schedule.
    

</TABLE>

   
          The  following  is a  discussion  of the  approximate  population  and
general  location  of,  and the  employers  in,  the  communities  in which  the
Apartment Complexes are located:

          Shawnee (ASHFORD  PLACE):  Shawnee  (population  26,800) is in central
Oklahoma near the  intersection  of Interstate  Highway 40 and U.S.  Highway 177
approximately  35 miles east of Oklahoma City.  The major  employers for Shawnee
residents are TDK Ferrites  (ceramic  magnets),  Mobil Chemical,  Wolverine Tube
(copper tubing) and Shawnee Regional Hospital.

          Belen (BELEN VISTA):  Belen (population  7,700) is in west-central New
Mexico,  approximately 20 miles south of Albuquerque,  the state's  capital,  on
Interstate  Highway 25. The major  employers  for Belen  residents are Los Lunas
Hospital  and  Training  School,  Belen  Consolidated  School  District  and the
Atchison, Topeka and Santa Fe Railroad.
    
                                       5
<PAGE>

          El Monte  (BLESSED  ROCK):  El Monte  (population  106,000)  is in Los
Angeles County,  California,  in the San Gabriel Valley,  approximately 12 miles
east of downtown Los Angeles.  The major  employers  for El Monte  residents are
Wells Fargo Bank, Von's Co., Inc. (distribution warehouse), and Sargent-Fletcher
(air frames).

          Crescent City (CRESCENT CITY): Crescent City (population 4,000) is the
county seat of Del Norte  County,  California,  and is on the Pacific coast near
the Oregon  border on U.S.  Highway  101,  approximately  370 miles north of San
Francisco. The major employers for Crescent City residents are Pelican Bay State
Prison, Del Norte Unified School District, and Del Norte County.
   
          Palestine (HILLTOP): Palestine (population 18,100) is in eastern Texas
at the  intersection of U.S.  Highways 287, 79 and 84,  approximately  100 miles
southeast of Dallas.  The major  employers  for  Palestine  residents  are Texas
Department of Corrections, Memorial Hospital, and Murray Corp. (air conditioning
compressors).

          Lamar (LAMAR): Lamar (population 4,500) is in southwestern Missouri on
U.S.  Highway 160 near the  intersection of U.S.  Highway 71,  approximately  51
miles  northwest of  Springfield.  The major  employers for Lamar  residents are
O'Sullivan Furniture, Thorco Display Metal Racks and Barton County Hospital.

          Roswell (MESA VERDE):  Roswell (population 48,700) is in southeast New
Mexico at the intersection of U.S. Highways 380 and 285, approximately 175 miles
southeast of Albuquerque.  The major employers for Roswell residents are Roswell
Independent School District, Eastern New Mexico Medical Center and Levi Strauss.

          Los Alamos  (MOUNTAIN  VISTA):  Los Alamos  (population  12,000) is in
north-central  New Mexico on State Route 4  approximately  16 miles northwest of
Santa Fe. The major employers for Los Alamos  residents are the U.S.  Department
of Energy and the Los Alamos National Laboratory.
    
          Ogallalla (OGALLALLA): Ogallalla (population 5,000) is the county seat
of Keith  County,  in the western part of  Nebraska,  near the  intersection  of
Interstate  Highway 80, U.S. Highway 30 and State Highway 61,  approximately 110
miles south of Rapid City, South Dakota.  Lake McConaughy,  which is the largest
lake in Nebraska, is five miles north of Ogallalla, and plays a role in the area
economy by generating  tourism.  The major employers for Ogallalla residents are
American Shizuki  (capacitors),  Ogallalla  Electronics Mfg. Co. (electronic and
magnetic components) and U.S. Aprons (aprons, dog beds, decoy bags).
   
          Marion (WOODLAND  TOWNHOMES):  Marion (population 4,400) is in central
Alabama,  approximately  91 miles  northwest of Montgomery on State Route 5. The
major  employers for Portage  residents are the Perry County Board of Education,
C-T South (iron  casting),  Niemands  Industries  (packaging  and  filling)  and
Griffin Wood (lumber).
    
<TABLE>
                                                                                                               ESTIMATED
                                                                                                            ACQUISI-
                                            LOCAL                          SHARING RATIOS:                  TION FEES
                                            GENERAL                        ALLOCATIONS (4) SERIES 4's       PAYABLE
LOCAL           LOCAL                       PARTNERS'      SHARING RATIOS: AND SALE OR     CAPITAL          TO
LIMITED         GENERAL        PROPERTY     DEVELOPMENT    CASH FLOW       REFINANCING     CONTRIBUTION     FUND
PARTNERSHIP     PARTNERS       MANAGER (1)  FEE (2)        (3)             PROCEEDS (5)    (6)              MANAGER
- --------------- -------------- ------------ -------------  --------------- --------------- ---------------  -----------
<S>             <C>            <C>          <C>            <C>             <C>             <C>              <C>     
ASHFORD PLACE   The Cowen      Insignia     $591,714       WNC: 15% but    98.99/.01/1     $2,317,180       $231,700
                Group,         Management                  no less than    50/50
                L.L.C. (7)     Group (8)                   $2,500 per year
                                                           LGP: 67% of
                                                           the balance
                                                           The balance:
                                                           WNC: 25%
                                                           LGP: 75%

BELEN VISTA     Monarch        Monarch      $205,101       WNC: 33% but    99/1            $488,274         $48,800
                Properties,    Properties,                 no less than    50/50
                Inc.  (9)      Inc. (9)                    $1,944 per
                                                           year; maximum
                                                           46%
                                                           LGP: The balance

BLESSED         Everland,      Professional $1,061,100     WNC:Greater     98.99/.01/1     $2,581,086       $258,000
ROCK            Inc.  (10)     Apartment                   of 30% or       50/50           (12)             (13)
                               Management, Inc.            $12,000 
                               (11)                        LGP: 40% of the
                                                           balance
                                                           The balance:50/50
</TABLE>
                                       6
<PAGE>
<TABLE>

                                                                                                              ESTIMATED
                                                                                                              ACQUISI-
                                            LOCAL                          SHARING RATIOS:                    TION FEES
                                            GENERAL                        ALLOCATIONS (4) SERIES 4's       PAYABLE
LOCAL           LOCAL                       PARTNERS'      SHARING RATIOS: AND SALE OR     CAPITAL          TO
LIMITED         GENERAL        PROPERTY     DEVELOPMENT    CASH FLOW       REFINANCING     CONTRIBUTION     FUND
PARTNERSHIP     PARTNERS       MANAGER (1)  FEE (2)        (3)             PROCEEDS (5)    (6)              MANAGER

- --------------- -------------- ------------ ------------- ---------------- --------------- ---------------- -----------
<S>             <C>            <C>          <C>            <C>             <C>             <C>     
CRESCENT CITY   Crescent       Crescent     $311,546       WNC: Greater    99/1            $1,191,878       $119,000
                City Surf,     City                        of 15% or       50/50
                Inc. (14)      Surf,                       $800 LGP:  40%
                               Inc. (14)                   of the balance
                                                           The balance:
                                                           50/50


HILLTOP         Donald W.      Wilmic       $72,330        WNC: 1/3        99/1            $120,814         $12,000
                Sowell         Ventures,                   LGP: 2/3        50/50
               (15)            Inc. (16)


LAMAR           MBL            The Remus    $146,700       WNC: 15% but    (19)            $797,842           $79,800
                Development,    Company                    no less than
                Co.            (18)                        $850 per year
                (17)                                       LGP: 40% of
                                                           the balance
                                                           The balance:
                                                           WNC: 50%
                                                           LGP: 50%


MESA VERDE      Trianon-Mesa   Trianon      $735,611       WNC: 15% but    99/1            $3,940,587       $394,100
                Verde, L.L.C.  Development                 no less than    50/50
                (20)           Corporation                 $5,000 per
                               (20)                        year
                                                           LGP: $5,000
                                                           plus 40% of
                                                           the balance
                                                           The balance:
                                                           WNC: 50%
                                                           LGP: 50%


MOUNTAIN VISTA  Monarch        Monarch      $202,500       WNC: 33% but    99/1            $481,602         $48,200
                Properties,    Properties,                 no less than    50/50
                Inc. (9)       Inc. (9)                    $2,015 per
                                                           year
                Low Income                                 LGP: The
                Housing                                    balance
                Foundation
                of New
                Mexico
               (21)


OGALLALLA       Most           Retro        $125,550       WNC: Greater    98.99/.01/1     $400,905         $40,000
                Worshipful     Management                  of 15% or       50/50
                Prince         Group,                      $500 LGP:  40%
                Hall           Inc. (23)                   of the balance
                Grand                                      The balance:
                Lodge   (22)                               50/50


WOODLAND        Alabama        Charter      $267,400       WNC: 30% but    98.99/.01/1     $1,347,008       $134,700
TOWNHOMES       Council on     Property                    no less than    50/50
                Human          Management                  $1,200 per
                Relations,     Co., Inc.                   year
                Housing Corp.  (25)                        LGP: 40% of
                (24)                                       the balance
                                                           The balance:
                                                           WNC: 15%
                                                           LGP: 85%
                                       7
<PAGE>
    

<FN>
(1) The maximum annual  management fee payable to the property manager generally
is determined  pursuant to lender  regulations.  Each Local  General  Partner is
authorized to employ either itself or one of its  Affiliates,  or a third party,
as property manager for leasing and management of the Apartment  Complex so long
as the fee therefor  does not exceed the amount  authorized  and approved by the
lender for the Apartment Complex.
   
(2) Each Local Limited  Partnership will pay its Local General  Partner(s) or an
Affiliate of its Local General  Partner(s) a  development  fee in the amount set
forth,  for  services  incident  to  the  development  and  construction  of the
Apartment Complex, which services include: negotiating the financing commitments
for the  Apartment  Complex;  securing  necessary  approvals and permits for the
development and construction of the Apartment Complex; and obtaining allocations
of Low Income Housing Credits.  This payment will be made in installments  after
receipt of each installment of the capital  contributions  made by Series 4 (and
Series 3 in the case of BLESSED ROCK).

(3)  Reflects  the amount of the net cash flow from  operations,  if any,  to be
distributed  to Series 4 (and Series 3 in the case of BLESSED  ROCK) ("WNC") and
the Local General Partner(s)  ("LGP") of the Local Limited  Partnership for each
year of operations.  Generally,  to the extent that the specific  dollar amounts
which are to be paid to WNC are not paid annually,  they will accrue and be paid
from  sale  or  refinancing  proceeds  as an  obligation  of the  Local  Limited
Partnership.

(4) Subject to certain special allocations,  reflects the respective  percentage
interests in profits,  losses and Low Income Housing  Credits of (i) in the case
of ASHFORD PLACE,  BLESSED ROCK,  OGALLALLA and WOODLAND  TOWNHOMES (a) Series 4
(and Series 3 in the case of BLESSED ROCK), (b) WNC Housing,  L.P., an Affiliate
of the Sponsor which is the special limited  partner,  and (c) the Local General
Partner; and (ii) in the case of BELEN VISTA, CRESCENT CITY, HILLTOP, MESA VERDE
and MOUNTAIN  VISTA (a) Series 4, and (b) the Local  General  Partner(s).  For a
discussion of LAMAR, see note 19.

(5) Reflects the respective  percentage  interests of (i) Series 4 (and Series 3
in the case of BLESSED ROCK) and (ii) the Local General  Partner(s),  in any net
cash proceeds from sale or refinancing of the Apartment  Complex,  after payment
of the mortgage loan and other Local Limited Partnership obligations (see, e.g.,
note 3), and the following,  in the order set forth:  the capital  contributions
(the tax  liability  in the case of ASHFORD  PLACE) of Series 4 (and Series 3 in
the case of BLESSED  ROCK);  the capital  contribution  of the  special  limited
partner (if any); and the capital contribution (the tax liability in the case of
ASHFORD PLACE) of the Local General Partner(s).
    
(6) Series 4 (and Series 3 in the case of BLESSED  ROCK) will make their capital
contributions to the Local Limited Partnership in stages, with each contribution
due  when  certain  conditions  regarding  construction  or  operations  of  the
Apartment Complex have been fulfilled.  See "Investment  Policies" and "Terms of
the Local Limited  Partnership  Agreements"  under  "Investment  Objectives  and
Policies" in the Prospectus.
   
(7) The Cowen  Group,  L.L.C.  is owned by E. Allen  Cowen II, who has more
than nine years' experience in affordable housing  development.  The Cowen Group
has  represented  to Series 4 that,  as of August 6, 1996, it had a net worth in
excess of $13,000.

(8) Insignia  Management  Group has more than 10 years'  experience  in property
management.  The company manages in excess of 207,000 apartment units, 51,800 of
which are affordable housing units.

(9) Monarch Properties,  Inc. is a Texas corporation which is involved with
the management of conventionally-financed  and government-assisted  multi-family
apartment  communities.  Monarch  Properties,  Inc.  has  more  than  20  years'
experience in affordable  housing property  management.  It manages in excess of
4,300 properties of which 92% are affordable  housing units. The corporation has
represented  to Series 4 that,  as of  October  31,  1996,  its net worth was in
excess of $2,500,000.

(10) Everland,  Inc. is a California  corporation which was formed in 1986.
It has acted as developer of projects in El Monte and Rosemead,  California. The
corporation's president, Tom Y. Lee, is a Certified Public Accountant and one of
the founding  organizers  and directors of First  Continental  Bank in Rosemead.
Everland,  Inc. has represented  that, as of June 30, 1996, its total equity was
approximately ($382,000); however, construction and operating deficit guarantees
will be provided by Tom Y. Lee.  Mr. Lee,  age 47, has  represented  to Series 4
that, as of December 31, 1995, he had a net worth in excess of $3,500,000.

(11)  Professional  Apartment  Management,  Inc. is a  California-licensed  real
estate broker which provides full property management services for more than 100
facilities,  consisting of more than 5,000 units, and having a combined value of
more than $200 million.  The company has been managing affordable housing for 26
years, and currently manages approximately 500 Tax Credit units.
    
                                       8
<PAGE>
   
(12) Series 3 will make a capital contribution in the same amount.

(13) Series 3 will pay an  acquisition  fee to the Fund Manager in the same
amount.

(14) Crescent City Surf, Inc. is a California  corporation which was formed
in 1993.  William L. Kjelland is the president of the  corporation.  He has been
involved in the development and management of five other  subsidized  properties
in California. The corporation has represented to Series 4 that its net worth is
negligible.  Construction and operating  deficit  guarantees will be provided by
Mr. Kjelland.  Mr. Kjelland, age 86, has represented to Series 4 that, as of May
1, 1996, he had a net worth in excess of $1,000,000.
    
   
(15) Donald W. Sowell has been a principal and chief  executive  officer of
D.W. & S.  Construction  Inc.  since 1985.  The  corporation  was formed for the
purpose of  providing  construction  and  construction-related  services  to the
multi-family,  single-family and commercial-use markets. D.W. & S. Construction,
Inc. has completed more than $12,000,000 in  multi-family,  light commercial and
residential  construction.  Since 1979 Mr. Sowell has been a principal and chief
executive  officer  of Don Sowell  Development,  Inc.,  a  property  development
company which has developed $19,000,000 of real estate in Texas and Mississippi.
Mr.  Sowell,  age 58, has  represented to Series 4 that, as of June 30, 1996, he
had a net worth in excess of $3,100,000.

(16) Wilmic Ventures, Inc. is a Texas corporation which was incorporated in
1984.  The  corporation  is comprised of Wilmic  Property  Management and Wilmic
Laundries,  two separate  divisions.  Donald W. Sowell is a principal  and chief
executive  officer of Wilmic  Ventures,  Inc. Wilmic Property  Management  began
operating in 1979 and manages more than 1,200 apartment  units, 386 of which are
Tax Credit units.

(17) D. Kim Lingle is the president of MBL  Development  Co., which has the
primary goal of developing and constructing  affordable housing. Ted Scwermer is
vice president of MBL Development Co., and is also the uncle of Mr. Lingle.  Mr.
Lingle and Mr.  Scwermer  have a  background  in banking  and  development.  MBL
Development Co. has represented to Series 4 that, as of June 30, 1996, its total
shareholder's equity was in excess of $400,000.

(18) The Remus  Company is owned by William  F.  Gillen,  who has 26 years'
experience in multi-family and commercial property management.  Prior to forming
The  Remus  Company,  Mr.  Gillen  was  vice  president  of  administration  and
operations of Midland Property Management, Inc., a Kansas City-based real estate
development and property  management  firm,  where he was employed for 14 years.
The Remus Company  currently manages seven apartment  complexes  including three
government-subsidized properties.

(19) Subject to certain special  allocations,  Federal Tax Credits,  losses
and income are  allocated  98.98% to Series 4, .01% to WNC  Housing,  L.P.,  the
special limited  partner,  .01% to D. Kim Lingle,  the original limited partner,
and 1% to the Local General Partner. This property also has Missouri Tax Credits
which are allocated solely to the original  limited  partner.  Net cash proceeds
from sale or refinancing of the Apartment Complex, after payment of the mortgage
loan  and  other  Local  Limited  Partnership   obligations,   and  the  capital
contributions  of Series  4, the  special  limited  partner,  the Local  General
Partner and the original limited partner,  are distributable 50% to Series 4 and
50% to the Local General Partner.

(20) Trianon-Mesa  Verde,  L.L.C, is a New Mexico limited liability company
recently formed by Trianon Development  Corporation,  a California  corporation,
and Foundation For Social Resources, Inc., a Delaware non-profit corporation, to
serve as the Local General Partner.  Trianon Development  Corporation was formed
in 1986 by Lester G. Day. Mr. Day, who is currently the corporation's  chairman,
has 40  years'  experience  in  property  development  and  management.  Trianon
Development   Corporation  currently  manages  72  affordable  housing  projects
consisting  of  approximately   6,500  units.  The  Local  General  Partner  has
represented to Series 4 that its net worth is nominal.  Construction,  operating
deficit and Tax Credit  guarantees  will be provided by Lester Day. Mr. Day, age
70, has  represented  to Series 4 that,  as of December 31,  1996,  he had a net
worth in excess of $3,000,000.

(21) Low Income Housing  Foundation of New Mexico is a  newly-formed  non-profit
organization  whose primary goal is to develop affordable housing for low-income
New Mexico  residents.  The organization has represented to Series 4 that, as of
September 30, 1996, its net worth was approximately $19,000.
    
   
(22) Most  Worshipful  Prince Hall Grand Lodge  ("MWPHGL")  was formed 103 years
ago, and was incorporated in 1982. One of its goals is to foster the development
of safe, decent and affordable  housing to individuals and families earning less
than 60% of the median income of the area. The  corporation  has  represented to
Series  4 that,  as of  September  1,  1995,  it had a net  worth in  excess  of
$3,000,000.
    
                                       9
<PAGE>
   
(23) Retro Management Group, Inc. was formed in 1993. The company currently
manages more than 2,200 units of conventional and government-financed  apartment
projects in Oklahoma,  Nebraska and Iowa.  The company's  principal,  Douglas E.
Hiner, has been involved in property management since 1974.

(24) Alabama Council on Human Relations,  Housing Corp. was founded in 1954
as a forum for interracial  communication  throughout Alabama.  It is now a private
non-profit  organization.  The organization has represented that, as of February
29, 1996, its net assets were in excess of $600,000.

(25) Charter Properties  Management Co., Inc. was incorporated in 1991. The
company's  emphasis  is  the  professional  management  of  affordable  housing,
particularly  multi-family  properties.  Charter Properties Management Co., Inc.
currently manages 28 properties (946 units).

</TABLE>
    

                                       10

<PAGE>




          PRIOR PERFORMANCE SUMMARY

         WNC & Associates, Inc. and Wilfred N. Cooper, Sr., directly and through
their  Affiliates have had significant  prior  experience in the syndication and
management of real estate programs.  Since its formation the General Partner and
its  Affiliates  have raised  equity from more than 10,700  investors to acquire
interests in more than 450  properties  located in 33 states and one  territory,
and representing more than $710,000,000 in aggregate acquisition costs.

         In  addition  to the  Syndicated  Partnerships  for which  the  General
Partner has  performed  syndication  and related  services for third  parties as
discussed under "Management" in the Prospectus,  as of June 30, 1996 the General
Partner and its Affiliates had sponsored a total of 13 public  (excluding Series
4) and 46  non-public  real  estate  programs.  As of June  30,  1996,  these 59
partnerships  had  raised  an  aggregate  of  approximately   $221,300,000  from
approximately  10,300  investors.  These 59 programs  invested in a total of 402
apartment   properties  at  an  aggregate   acquisition  cost  of  approximately
$629,618,000 in the following jurisdictions:


Alabama                           (15)     Missouri                        (11)
Arizona                           ( 7)     Nebraska                        ( 4)
Arkansas                          (10)     New Mexico                      (11)
California                        (93)     North Carolina                  (26)
Florida                           ( 4)     Ohio                            ( 4)
Georgia                           ( 5)     Oklahoma                        ( 8)
Idaho                             ( 1)     Oregon                          ( 4)
Illinois                          (10)     South Carolina                  (14)
Indiana                           ( 4)     South Dakota                    ( 1)
Iowa                              ( 7)     Tennessee                       (26)
Kansas                            ( 2)     Texas                           (85)
Kentucky                          ( 2)     U. S. Virgin Islands            ( 1)
Louisiana                         (13)     Virginia                        ( 5)
Maryland                          ( 2)     West Virginia                   ( 1)
Michigan                          ( 1)     Wisconsin                       (17)
Mississippi                       ( 8)


         Of these 59 partnerships, 11 public and 36 private real estate programs
commenced their offerings  during the 10 1/2-year  period  beginning  January 1,
1986 (the  "Prior  Programs").  See "Public  Programs  Sponsored"  and  "Private
Programs  Sponsored"  below.  The Prior  Programs  were  organized  to invest in
apartment complexes (by acquiring limited partnership interests in other limited
partnerships  which owned the apartment  complexes)  benefiting from one or more
forms of Government  Assistance,  generally  consisting of low interest mortgage
financing pursuant to Section 515 of the Housing Act of 1949, Low Income Housing
Credits  and/or  rental  assistance  payments  under the Section 8 Program.  See
"Other Government  Assistance  Programs" in the Prospectus.  Four of the private
programs did not have as their  principal  investment  objective  providing  Low
Income  Housing  Credits to their  investors.  Such Prior  Programs were offered
prior to the  effective  date of the 1986 Act (which  both  established  the Low
Income Housing  Credit  program and restricted  other types of tax benefits) and
were principally intended to provide their investors with tax losses which could
be used to reduce taxable  income from other  sources.  As will be the case with
respect to the Apartment Complexes in which the Fund will invest, management and
operational  control of the properties in which the Prior Programs have invested
is exercised by the general partners of the local limited partnerships.

Public Programs Sponsored

         The 11 public  Prior  Programs  are WNC Housing Tax Credit  Fund,  L.P.
("HTCF"),  WNC California Housing Tax Credits,  L.P.  ("CHTC"),  WNC Housing Tax
Credit Fund II, L.P.  ("HTCFII"),  WNC  California  Housing Tax Credits II, L.P.
("CHTCII"),  WNC Housing Tax Credit Fund III, L.P.  ("HTCFIII"),  WNC California
Housing Tax Credits III, L.P. ("CHTCIII"), WNC Housing Tax Credit Fund IV, L.P.,
Series 1 ("HTCFIV  Series 1"),  WNC Housing Tax Credit Fund IV,  L.P.,  Series 2
("HTCFIV  Series 2"),  WNC  California  Housing Tax Credits IV,  L.P.,  Series 4
("CHTCIV  Series 4"),  WNC  California  Housing Tax Credits IV,  L.P.,  Series 5
("CHTCIV  Series 5") and WNC Housing  Tax Credit Fund V, L.P.,  Series 3 ("HTCFV
Series 3").  Each of the public Prior  Programs had completed its offering as of
June 30, 1996.

                                       11
<PAGE>

         Through  June 30,  1996,  the 11 public  Prior  Programs  had raised an
aggregate  of  approximately  $130,103,000  in  capital  contributions  from  an
aggregate  of  approximately  7,970  investors  and  invested  in a total of 198
apartment properties located in the following jurisdictions:

Alabama                           (13)     Missouri                        ( 2)
Arizona                           ( 3)     Mississippi                     ( 6)
Arkansas                          ( 5)     Nebraska                        ( 4)
California                        (46)     New Mexico                      ( 4)
Florida                           ( 1)     North Carolina                  (15)
Georgia                           ( 2)     Ohio                            ( 4)
Idaho                             ( 1)     Oklahoma                        ( 2)
Illinois                          ( 8)     Oregon                          ( 2)
Indiana                           ( 4)     South Carolina                  ( 1)
Iowa                              ( 7)     South Dakota                    ( 1)
Kansas                            ( 1)     Tennessee                       ( 6)
Kentucky                          ( 1)     Texas                           (40)
Louisiana                         ( 3)     Virginia                        ( 4)
Maryland                          ( 1)     Wisconsin                       (11)

         The   aggregate   mortgage  debt   encumbering   the   properties   was
approximately  $236,530,000 and the aggregate acquisition cost of the properties
was approximately $326,624,000.  At the times of the Prior Programs' investments
therein 71 of the  properties  were  existing  apartment  complexes and 127 were
under development or construction by the local  partnerships which own them. All
of the properties are current in their  mortgage  obligations  and are otherwise
being  constructed  or operating  approximately  as  anticipated at the time the
local partnership investments were made by the respective public programs.

         All of the public Prior  Programs  have as their  principal  investment
objective  providing  Federal Low Income Housing  Credits to their investors and
CHTC, CHTCII,  CHTCIII,  CHTCIV Series 4 and CHTCIV Series 5 have the additional
objective  of  providing   California  Low  Income  Housing   Credits.   Certain
information  with regard to the public Prior Programs is set forth in the tables
which follow:

<TABLE>
                                                     Federal Credit Programs

Offering       Partnership  Invested                            Credits Received Per $10,000 Investment         Credit Years
Commencement   Name         Assets (1)   Totals     1995    1994     1993    1992     1991     1990      1989   Remaining(2)
- ------------   ----         ----------   ------     ----    ----     ----    ----     ----     ----      ----   ------------

<C>                         <C>           <C>       <C>     <C>      <C>     <C>      <C>      <C>       <C>       <C>
1989           HTCF         $17,755,000   $8,760    $1,410  $1,410   $1,410  $1,410   $1,400   $1,640    $80       5
1990           HTCFII        28,963,000    7,560     1,450   1,460    1,380   1,210    1,300      760     --       7
1992           HTCFIII       60,201,000    3,430     1,520   1,190      680      40       --       --     --      10
1993           HTCFIV        33,228,000    1,330     1,010     320       --      --       --       --     --      10
               Series 1
1994           HTCFIV        30,168,000      910       700     210       --      --       --       --     --      11
               Series 2
1995           HTCFV         32,185,000       30        30      --       --      --       --       --     --      11
               Series 3

                                               Federal and California Credit Programs
                                                                                                                   Federal
Offering       Partnership   Invested                           Credits Received Per $10,000 Investment      Credit Years
Commencement   Name          Assets(1)    Total    1995     1994    1993     1992    1991    1990    1989   Remaining(2)
- ------------   ----          ---------    -----    ----     ----    ----     ----    ----    ----    ----   ------------

1989           CHTC         $22,340,000  $12,670   $  990  $1,180  $1,720   $2,360  $2,590  $2,270   1,560      6
1991           CHTCII        41,300,000    8,240    2,060   1,940   1,780    1,810     650      --      --      9
1993           CHTCIII       36,625,000    2,660    1,800     800      60       --      --      --      --     10
1994           CHTCIV        16,768,000      710      710      --      --       --      --      --      --     10
               Series 4
1995           CHTCIV         7,091,000       --       --      --      --       --      --      --      --     11          
               Series 5

<FN>
(1)  As of the earlier of the date the Prior Program was fully invested in Local Limited Partnerships or March 31, 1996.
(2)  As of December 31, 1995.
</FN>
</TABLE>
                                       12
<PAGE>


Private Programs Sponsored

         As of  June  30,  1996,  the 36  private  Prior  Programs  involved  an
aggregate of approximately  $80,147,000 in commitments for capital contributions
payable in  installments  from an aggregate of  approximately  1,600  investors.
These private  Prior  Programs  invested in a total of 175 apartment  properties
located in the following jurisdictions:

 Alabama                    ( 2)             Missouri                   ( 6)
 Arizona                    ( 3)             New Mexico                 ( 6)
 Arkansas                   ( 5)             North Carolina             (11)
 California                 (42)             Oklahoma                   ( 5)
 Florida                    ( 3)             Oregon                     ( 2)
 Georgia                    ( 2)             South Carolina             (10)
 Illinois                   ( 1)             Tennessee                  (19)
 Kentucky                   ( 1)             Texas                      (40)
 Louisiana                  ( 7)             Virginia                   ( 1)
 Maryland                   ( 1)             Wisconsin                  ( 6)
 Mississippi                ( 2)

         The   aggregate   mortgage  debt   encumbering   the   properties   was
approximately  $202,281,000 and the aggregate acquisition cost of the properties
was  approximately  $264,330,000.  All of the  properties  are  current on their
mortgage   obligations   and  are  otherwise   being   constructed  or  operated
approximately  as  anticipated  at  the  times  of  their   respective   private
placements.

         Thirty-two of these Prior Programs have as their  principal  investment
objective  providing Federal Low Income Housing Credits to their investors,  and
12 of the 32 programs have the additional  objective of providing California Low
Income  Housing  Credits.  These 32 programs have an aggregate of  approximately
$75,891,000  (approximately  95% of the  total  for  all  of the  private  Prior
Programs) in commitments  for capital  contributions  from  approximately  1,470
investors.  These  Prior  Programs  have  invested  in a total of 159  apartment
properties  with  an  aggregate  mortgage  debt  of  approximately  $184,654,000
(approximately  92% of the total) and aggregate  property  acquisition  costs of
approximately $243,842,000 (approximately 92% of the total).
These properties are located in the following jurisdictions:

Alabama                    ( 2)             Missouri                   ( 6)
Arizona                    ( 3)             New Mexico                 ( 6)
Arkansas                   ( 5)             North Carolina             ( 9)
California                 (35)             Oklahoma                   ( 3)
Florida                    ( 3)             Oregon                     ( 2)
Georgia                    ( 2)             South Carolina             ( 7)
Illinois                   ( 1)             Tennessee                  (18)
Kentucky                   ( 1)             Texas                      (39)
Louisiana                  ( 7)             Virginia                   ( 1)
Maryland                   ( 1)             Wisconsin                  ( 6)
Mississippi                ( 2)

Certain  information with regard to these 32 programs is set forth in the tables
which follow:


                                       13

<PAGE>
<TABLE>



                                                                             Federal Credit Programs                         Credit
Offering                                                                                                                     Years 
Commence-  Partnership        Invested                   Credits Received Per $10,000 Investment(2)                          Remain-
ment       Name               Assets(1)     Total     1995     1994    1993    1992    1991    1990(4)   1989   1988   1987  ing(3)
- ---------  ----               ---------     -----     ----     ----    ----    ----    ----    -------   ----   ----   ----  ------

<C>                  <C>   <C>          <C>       <C>       <C>     <C>    <C>      <C>      <C>      <C>      <C>     <C>      <C>
1987     Pepper Tree (5)   $6,105,000   $12,180   $1,470    1,470   1,470  $1,470   $1,470   $2,370   $1,530   $  900  $   30   4
1987     East Bay           3,861,000    12,580    1,350    1,360   1,360   1,360    1,360    1,670    1,700    1,400   1,020   2
1987     Sequoia Manor      5,989,000    12,070    1,370    1,370   1,370   1,350    1,380    2,220    1,460    1,340     210   3
1987     Bayou              5,296,000    11,600    1,290    1,290   1,290   1,290    1,290    2,110    1,400    1,330     310   2
1987     Laurel Hill        5,496,000    11,450    1,320    1,320   1,320   1,320    1,300    2,090    1,320    1,230     230   3
1988     Ridgetop           6,354,000    10,920    1,390    1,390   1,390   1,390    1,390    2,250    1,500      220      --   3
1989     Alta Mesa          4,840,000     9,090    1,320    1,320   1,320   1,320    1,320    1,950      540       --      --   5
1990     WNC-90             4,735,000     7,250    1,400    1,400   1,400   1,400    1,400      250       --       --      --   6
1991     Shelter Resource 
           XIX              4,340,000     6,480    1,440    1,440   1,440   1,440      720       --       --       --      --     6
1991     WNC Tax Credits 
           XX               7,454,000     6,780    1,460    1,460   1,460   1,460      940       --       --       --      --     6
1991     WNC Tax Credits 
           XXI              8,203,000     5,160    1,360    1,360   1,360   1,030       50       --       --       --      --     7
1992     WNC Tax Credits 
           XXII             8,873,000     5,320    1,410    1,410   1,410   1,090       --       --       --       --      --     7
1992     WNC Tax Credits 
           XXIII            9,279,000     5,040    1,400    1,400   1,370     870       --       --       --       --      --     7
1992     WNC Tax Credits 
           XXV              7,939,000     3,680    1,380    1,280     870     150       --       --       --       --      --     9
1993     WNC Tax Credits 
           XXVI             7,557,000     3,490    1,330    1,320     840      --       --       --       --       --      --     8
1993     WNC Tax Credits 
           XXVIII           5,446,000     2,050    1,300      640     110      --       --       --       --       --      --     9
1993     WNC Tax Credits 
           XXIX             6,826,000     1,930    1,110      790      30      --       --       --       --       --      --     9
1994     WNC Tax Credits 
           XXX              8,852,000     1,110    1,000      110      --      --         --       --       --       --      --  10
1994     WNC Institutional 31,449,000     1,190      780      410      --      --         --       --       --       --      --  11
1995     WNC Institutional 
           II              33,811,000        80       80       --      --      --         --       --       --       --      --  11

                                                                  Federal and California Credit Programs
                                                                                                                           Federal
Offering                                                                                                                   Credit
Commence- Partnership       Invested                   Credits Received Per $10,000 Investment(2)                          Years Re-
ment       Name             Assets(1)    Total   1995     1994    1993       1992    1991   1990(4)  1989    1988   1987  maining(3)
- --------   ----             ---------    -----   ----     ----    ----       ----    ----   -------  ----    ----   ----  ----------

<C>                       <C>           <C>       <C>      <C>     <C>     <C>      <C>     <C>      <C>     <C>     <C>    <C>
1987      Beech Villa     $4,067,000    $16,390   $1,360   $1,350  $1,350  $1,350   $1,350  $2,670   $3,210  $3,210  $540   3
1988      Elmwood Villa    3,850,000     16,040      990      990     990   1,330    2,610   4,010    3,460   1,660    --   5
1988      Poplar Villa     5,752,000     15,680      970      970     970     970    2,280   3,420    3,410   2,690    --   3
1988      Olive Tree       4,468,000     15,520      970      970     970     970    1,620   3,990    3,310   2,720    --   4
1988      Pine Rock        3,920,000     14,590      940      940     880   1,220    3,280   3,810    3,240     280    --   5
1988      Mesa Verde       4,622,000     14,010    1,030    1,030   1,030   1,870    1,690   3,610    2,760     990    --   5
1988      Sunfield         6,408,000     12,970    1,340    1,340   1,340   1,340    1,650   3,090    2,080     790    --   5
1988      Foxglove         6,136,000     10,520    1,360    1,360   1,550   2,020    2,020   1,920      290      --    --   6
1989      Elliot Place     4,194,000     12,960    1,200    1,200   1,200   1,670    2,460   3,200    2,030      --    --   6
1990      Wheatridge       4,302,000      9,760    1,120    1,120   1,480   2,240    2,230   1,570       --      --    --   6
1992      WNC Tax Credits
           XXIV            8,054,000      7,330    1,740    2,180   2,180   1,230       --      --       --      --    --   7
1993      WNC Tax Credits
           XXVII           7,981,000      4,510    1,750    1,740   1,020      --       --      --       --      --    --   9

<FN>
     (1) As of the earlier of the date the Prior  Program was fully  invested in
Local Limited Partnerships or June 30, 1996.

     (2) Represents the return received by investors  utilizing deferred payment
purchase plans. In many instances the respective  returns to cash investors were
higher than those listed above inasmuch as the use of deferred  payment purchase
notes entailed the payment of interest.

     (3) As of December 31, 1995.

     (4) In 1990 certain partnerships elected to utilize 150% of the Federal Low
Income Housing Credit otherwise allowable for 1990.

     (5) Pepper Tree  originally  offered  Federal Tax Credits  only.  After the
investors  were  admitted  to the  Prior  Program,  the Local  General  Partners
obtained  California Low Income Housing Credits as well, which are not reflected
in this chart.
</FN>
</TABLE>

                                       14
<PAGE>


Additional Information

     There  will  be  made  available  to  any  prospective  investor  by  WNC &
Associates,  Inc.,  3158  Redhill  Avenue,  Suite  120,  Costa  Mesa,  CA  92626
(714-662-5565),  upon  request  and  without  charge,  copies of the most recent
report on Form 10-K filed with the  Securities  and Exchange  Commission  by any
Prior Program that has reported to the Commission within the last 24 months, and
upon request for a reasonable fee, the exhibits to each such Form 10-K.

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

Liquidity and Capital Resources
   
     As of May 15, 1996,  Series 4 had only nominal funds, had not yet commenced
operations and the capital  anticipated to be raised through its public Offering
of Units had not yet  become  available.  As of  August  23,  1996  Series 4 had
received cash subscription  funds of $1,400,000,  thereby satisfying the minimum
Offering  condition.  As of December 31, 1996 and March 20,  1996,  Series 4 had
received  and accepted  subscription  funds in the amount of  $8,388,680  (8,413
Units) and $12,073,680 (12,098 Units), respectively, of which $227,000 currently
is represented by Promissory Notes.

     All of the  proceeds  from the sale of Units  have  been  committed  to the
purchase price and  acquisition  fees and costs of 10 Local Limited  Partnership
Interests,  Reserves and expenses of this Offering. Series 4 requires a total of
approximately $18,225,000 in this regard.

     As of March 10,  1997,  Series 4 had made  capital  contributions  to Local
Limited  Partnerships  in the  amount of  approximately  $6,981,000,  and had an
earnest  money  deposit  to  LAMAR  in  the  amount  of  approximately   $52,000
outstanding.  Series 4 does not make earnest money  deposits in connection  with
all the Local  Limited  Partnerships  it  investigates;  however,  certain Local
Limited  Partnerships  require  such  deposits as evidence of the  sincerity  of
Series 4 in pursuing the investigation.  If as a result of its due diligence and
other  investigative  activities Series 4 determines that acquisition of a Local
Limited  Partnership  Interest  as to  which  a  deposit  has  been  made is not
appropriate  for Series 4 (e.g.,  the  investment  would not satisfy the minimum
investment  parameters set forth in the  Prospectus),  Series 4 would reject the
investment  and the Local  Limited  Partnership  would be required to return the
deposit.  If Series 4 determines that acquisition of a Local Limited Partnership
Interest is  appropriate,  the investment is made and the deposit is credited to
Series  4's  capital  obligation  to  the  Local  Limited  Partnership;  if  the
investment is not consummated, the deposit is forfeited.
    
     Overall,  as reflected in its  Statement of Cash Flows,  Series 4 had a net
increase in cash and cash equivalents of  approximately  $766,000 for the period
July 1, 1996 (date operations commenced) to September 30, 1996. This increase in
cash was provided by Series 4's  financing  activities,  including  the proceeds
from the  Offering.  Cash  from  financing  activities  for July 1,  1996  (date
operations  commenced) to September  30, 1996 of  approximately  $2,232,000  was
sufficient  to fund the  investing  activities of Series 4 during such period in
the aggregate amount of approximately  $1,475,000,  which consisted primarily of
capital contributions to Local Limited  Partnerships.  Cash provided and used by
the  operating  activities  of  Series  4 was  minimal  compared  to  its  other
activities.  Cash  provided  from  operations  consisted  primarily  of interest
received on cash deposits,  and cash used in operations  consisted  primarily of
payments for  operating  fees and  expenses.  The major  components of all these
activities are discussed in greater detail below.

     It is not  expected  that any of the Local  Limited  Partnerships  in which
Series  4 has  invested  or will  invest  will  generate  cash  from  operations
sufficient to provide  distributions  to the Limited Partners in any significant
amount. Such cash from operations, if any, would first be used to meet operating
expenses of Series 4,  including the payment of the Asset  Management Fee to the
Fund Manager. See "Management Compensation" in the Prospectus.

     The  investment  of  Series 4 will  not be  readily  marketable  and may be
affected  by  adverse  general  economic   conditions   which,  in  turn,  could
substantially increase the risk of operating losses for the Apartment Complexes,
the Local Limited  Partnerships  and Series 4. These  problems may result from a
number of factors,  many of which cannot be controlled by the Fund Manager.  See
"Risk  Factors  -  Investment  Risks - Risks of Real  Estate  Ownership"  in the
Prospectus.  Nevertheless, the Fund Manager anticipates that capital raised from
the sale of the Units will be sufficient to fund future  investment  commitments
and proposed operations.

                                       15
<PAGE>

     Series 4 will establish  working capital Reserves of at least 3% of Capital
Contributions,  an amount  which is  anticipated  to be  sufficient  to  satisfy
general  working  capital and  administrative  expense  requirements of Series 4
including  payment of the Asset Management Fee as well as expenses  attendant to
the  preparation  of tax returns and reports to the Limited  Partners  and other
investor  servicing  obligations  of  Series 4.  Liquidity  would,  however,  be
adversely affected by unanticipated or greater than anticipated operating costs.
Liquidity  could  also be  affected  by  defaults  or delays in  payment  of the
Promissory  Notes,  from  which a portion of the  working  capital  Reserves  is
expected  to be  funded.  To  the  extent  that  working  capital  Reserves  are
insufficient  to satisfy the cash  requirements  of Series 4, it is  anticipated
that additional funds would be sought through bank loans or other  institutional
financing.  The Fund Manager may also apply any cash distributions received from
the Local  Limited  Partnerships  for such  purposes or to replenish or increase
working capital Reserves.

     Under  the  Partnership  Agreement  Series 4 does not have the  ability  to
assess its Partners for additional  Capital  Contributions to provide capital if
needed by Series 4 or Local Limited Partnerships.  Accordingly, if circumstances
arise that cause the Local Limited  Partnerships  to require capital in addition
to that  contributed  by Series 4 and any equity of the Local General  Partners,
the only  sources  from which such  capital  needs will be able to be  satisfied
(other than the limited  Reserves  available  at the Series 4 level) will be (i)
third-party  debt  financing  (which may not be available  if, as expected,  the
Apartment  Complexes  owned  by  the  Local  Limited  Partnerships  are  already
substantially  leveraged),  (ii) additional equity  contributions or advances of
the Local General  Partners,  (iii) other equity sources (which could  adversely
affect the  interest of Series 4 in Tax  Credits,  cash flow and/or  proceeds of
sale or  refinancing  of the  Apartment  Complexes  and  result in  adverse  tax
consequences  to the Limited  Partners),  or (iv) the sale or disposition of the
Apartment  Complexes  (which could have the same adverse effects as discussed in
(iii)  above).  There can be no  assurance  that funds from any of such  sources
would  be  readily   available  in  sufficient   amounts  to  fund  the  capital
requirements of the Local Limited  Partnerships  in question.  If such funds are
not available,  the Local Limited  Partnerships  would risk foreclosure on their
Apartment  Complexes if they were unable to renegotiate the terms of their first
mortgages  and any other debt secured by the  Apartment  Complexes to the extent
the capital  requirements of the Local Limited Partnerships relate to such debt.
See "Risk Factors - Investment  Risks - Risks  Associated  with Use of Leverage"
and "Investment Objectives and Policies - Use of Leverage" in the Prospectus.

     The capital  needs and  resources of Series 4 are expected to undergo major
changes  during  the  first  several  years of  operations  as a  result  of the
completion  of its  Offering  of  Units  and  its  acquisition  of  investments.
Thereafter,  the  capital  needs and  resources  of Series 4 are  expected to be
relatively  stable over the holding  periods of the  investments,  except to the
extent of proceeds received in payment of Promissory Notes and disbursed to fund
the deferred  obligations of Series 4. See, however,  "Risk Factors - Investment
Risks - Risks of Real Estate Ownership" in the Prospectus.

Results of Operations
   
     As discussed above under "Local Limited Partnership Investments," as of the
date hereof  Series 4 has acquired  seven Local Limited  Partnership  Interests.
Each of the Apartment  Complexes  owned by such Local Limited  Partnerships  has
received a reservation for Low Income Housing  Credits.  As of December 31, 1996
and September 30, 1996,  Series 4 had invested in four (ASHFORD  PLACE,  BLESSED
ROCK,  CRESCENT CITY and  OGALLALLA)  and two (BLESSED ROCK and CRESCENT  CITY),
respectively,  of the seven Local Limited Partnerships.  As of December 31, 1996
and  September  30, 1996,  only one  (CRESCENT  CITY) of the seven Local Limited
Partnerships had commenced operations.  Accordingly,  the "Equity in losses from
limited partnerships" for the period July 1, 1996 (date operations commenced) to
September  30, 1996  reflected in the Statement of Operations of Series 4 is not
indicative of the amounts to be reported in future years.
    
     Consistent  with the investment  objectives of Series 4, each Local Limited
Partnership is generating or is expected to generate Low Income Housing  Credits
for  a  period  of  approximately  10  years,   commencing  with  completion  of
construction or rehabilitation of its Apartment Complex, and is generating or is
expected to generate Losses until sale of the Apartment Complex.

     As  reflected  on its  Statement  of  Operations,  Series  4 had a loss  of
approximately  $75 for the period July 1, 1996 (date  operations  commenced)  to
September  30, 1996.  The  component  items of revenue and expense are discussed
below.

                                       16
<PAGE>


     Revenue.  Series 4's  revenues  consisted  entirely of  interest  earned on
Promissory  Notes  and  cash  deposits  held in  financial  institutions  (i) as
reserves,  or (ii) pending  investment in Local Limited  Partnerships.  Interest
revenue in future years will be a function of prevailing  interest rates and the
amount of cash  balances.  It is  anticipated  that Series 4 will  maintain cash
Reserves in an amount not materially in excess of the minimum amount required by
its Partnership Agreement, which is 3% of capital contributions.

     Expenses.  The most significant  component of operating expenses was and is
expected to be the Asset  Management  Fee. The Asset  Management Fee is equal to
the  greater of (i) $2,000 for each  Apartment  Complex or (ii)  0.275% of gross
proceeds,  and will be decreased or increased  annually  based on changes to the
Consumer Price Index.

     Amortization expense consists of the amortization over a period of 30 years
of the  Acquisition  Fee and other expenses  attributable  to the acquisition of
Local Limited Partnership Interests.

         Because  the  amounts  of the  Asset  Management  Fee and  amortization
expense  primarily are determined by the gross  proceeds from the Offering,  the
number  and size of  Apartment  Complexes  and the  number of  investors,  until
termination of the Offering and investment of the net proceeds  therefrom Series
4 cannot predict with any accuracy what these amounts will be.

         Equity in Losses from Limited Partnership.  Series 4's equity in losses
from Local Limited  Partnerships is equal to approximately  99% of the aggregate
net losses of each Local Limited Partnership  incurred after admission of Series
4 as a limited partner thereof.

         After rent-up all Local Limited  Partnerships  are expected to generate
losses  during  each year of  operations;  this is so because,  although  rental
income  is  expected  to  exceed  cash  operating  expenses,   depreciation  and
amortization  deductions claimed by the Local Limited  Partnerships are expected
to exceed net rental income.

         Series 4 accounts for its  investments  in Local  Limited  Partnerships
using the equity method of  accounting,  whereby Series 4 reduces its investment
balance for its share of Local Limited  Partnerships'  losses and distributions.
Losses are not  recognized  to the extent that the  investment  balance would be
adjusted below zero.

FEDERAL INCOME TAX CONSIDERATIONS

         The taxpayer  identification number and tax shelter registration number
of Series 4 are 33-0701612 and  96226000105,  respectively,  See "Federal Income
Tax Considerations - Tax Shelter Registration" in the Prospectus.

PLAN OF DISTRIBUTION

How to Subscribe

         As discussed in the Prospectus, investors who subscribe for 10 Units or
more in Series 4 may elect to pay for their  subscriptions $500 per Unit in cash
and $500 per Unit by a Promissory  Note.  See "Terms of the Offering and Plan of
Distribution - How to Subscribe" in the Prospectus. For Series 4, the Promissory
Notes will be payable as follows:  (i) June 30, 1997, if the investor subscribes
between the date hereof and December 31, 1996, and (ii) January 31, 1998, if the
investor  subscribes  after  December 31, 1996.  For  purchases of less than 500
Units, the interest rate on Promissory Notes will be 9.75% per annum.

EXPERTS

         The balance sheet of Series 4 as of May 15, 1996, and the balance sheet
of WNC &  Associates,  Inc.  as of August 31,  1996 which are  included  in this
Supplement  have been audited by Corbin & Wertz,  independent  certified  public
accountants,  as set forth in their reports thereon  appearing  elsewhere herein
and are included in reliance  upon such reports given upon the authority of said
firm as experts in  accounting  and  auditing.  The  statement of  operations of
Crescent  City Surf,  Inc.  for the eight  months ended August 31, 1996 which is
included  in this  Supplement  has  been  audited  by  Burke & Rea,  independent


                                       17
<PAGE>

certified  public  accountants,  as set forth in their report thereon  appearing
elsewhere  herein and is included in  reliance  upon such report  given upon the
authority of said firm as experts in accounting and auditing.


                                       18
<PAGE>

                                   FINANCIAL STATEMENTS

                                          INDEX
                                                                         Page

WNC Housing Tax Credit Fund V, L.P., Series 4
     Independent Auditors' Report.........................................FS-1
     Balance Sheet, May 15, 1996..........................................FS-2
     Notes to Balance Sheet...............................................FS-3

     Balance Sheet, September 30, 1996 (Unaudited)........................FS-6
     Statement of Operations For the Period July 1, 1996
       (date operations commenced) to September 30, 1996..................FS-7
     Statement of Partners' Equity For the Period July 1, 1996
       (date operations commenced) to September 30, 1996..................FS-8
     Statement of Cash Flows For the Period July 1, 1996
       (date operations commenced) to September 30, 1996..................FS-9
     Notes to Financial Statements........................................FS-11

     Proforma Balance Sheet, September 30, 1996 (Unaudited)...............FS-16
     Proforma Statement of Operations for the Period July 1, 1996
         (date operations commenced) to September 30, 1996 (Unaudited)....FS-17
     Notes to Proforma Financial Statements...............................FS-18

Pursuant to Rule 3-14(a)(2) of Regulation S-X, there is presented a statement of
estimated  taxable  operating  results  to  Series  4  from  the  Local  Limited
Partnership  for  which  audited  income  statements  have been  provided  below
pursuant to Rule 3-14(a)(1).
   
     Estimated Taxable Operating Results for the Twelve Months Ended 
October 31, 1996....................................................      FS-20
    
Pursuant to Rule  3-14(a)(1) of Regulation S-X,  certain audited  statements are
required to be presented  for one of the Local  Limited  Partnerships.  The Fund
Manager is not aware of any  material  factors  relating  to this Local  Limited
Partnership which would cause the audited  financial  statement listed below not
to be  necessarily  indicative  of future  operating  results.  Those  financial
statements are as follows:
   
     Crescent City
     Independent Auditor's Report......................................   FS-21
     Statement of Operations, Eight Months Ended August 31, 1996.......   FS-22
     Notes to Financial Statement......................................   FS-23
    
   
WNC & Associates, Inc.
     Independent Auditors' Report........................................ FS-26
     Consolidated Balance Sheet, February 28, 1997 (Unaudited) 
       and August 31, 1996............................................... FS-27
     Notes to Consolidated Balance Sheet................................. FS-28
    



                                      FS-i



<PAGE>
                          INDEPENDENT AUDITORS' REPORT



To the Partners
WNC Housing Tax Credit Fund V, L.P., Series 4


We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund V,
L.P.,  Series  4  (a  California  limited   partnership)  (the  Partnership)  (a
development-stage  enterprise)  as of May 15,  1996.  The  balance  sheet is the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the balance sheet based on our audit.

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

In our opinion,  the  accompanying  balance  sheet  referred to above,  presents
fairly,  in all material  respects,  the  financial  position of WNC Housing Tax
Credit  Fund  V,  L.P.,   Series  4  (a  California   limited   partnership)  (a
development-stage  enterprise)  as of May 15, 1996 in conformity  with generally
accepted accounting principles.







                                       CORBIN & WERTZ


Irvine, California
May 22, 1996


                                      FS-1
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                                  BALANCE SHEET

                                  May 15, 1996




                                     ASSETS

Cash                                                       $             1,000
                                                                         -----
                                                           $             1,000
                                                                    ==========

                          LIABILITIES AND PARTNERS' CAPITAL

Commitments and contingencies (Note 2)

Partners' capital (Note 1):
  General partner                                          $               100
  Original limited partner                                                 900
                                                                    ----------
     Total partners' equity                                              1,000

                                                                   $     1,000
                                                                     ==========

nat5-4.596             See accompanying notes to balance sheet
                                      FS-2

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                             NOTES TO BALANCE SHEET

                                  May 15, 1996



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

WNC  Housing  Tax Credit  Fund V, L.P.,  Series 4 (the  Partnership)  was formed
pursuant  to the  laws of  California  on July 26,  1995  and has not  commenced
operations.  The  Partnership  was formed to invest  primarily in other  limited
partnerships which will own and operate multi-family housing complexes that will
qualify for low income housing credits.

The general partner is WNC & Associates,  Inc.  Wilfred N. Cooper,  Sr., through
the  Cooper  Revocable  Trust,  owns  70%  of  the  outstanding  stock  of WNC &
Associates, Inc. John B. Lester, Jr. will be the original limited partner of the
Partnership  and owns,  through the Lester Family Trust,  30% of the outstanding
stock of WNC & Associates, Inc.

Allocations Under the Terms of the Partnership Agreement

The General Partner has a 1% interest in operating  profits and losses,  taxable
income and loss and in cash available for distribution from the Partnership. The
limited  partners  will  be  allocated  the  remaining  99% of  these  items  in
proportion to their respective investments.

After the limited  partners  have received  proceeds from a sale or  refinancing
equal to their capital  contributions and their return on investment (as defined
in  the   Partnership   Agreement)  and  the  General  Partner  has  received  a
subordinated disposition fee (as described in Note 2 below), any additional sale
or  refinancing  proceeds will be  distributed  90% to the limited  partners (in
proportion to their respective investments) and 10% to the General Partner.







Continued

                                      FS-3

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                       NOTES TO BALANCE SHEET - CONTINUED

                                  May 15, 1996



NOTE 2 - COMMITMENTS AND CONTINGENCIES

The Partnership is offering up to 25,000 limited partnership units at $1,000 per
unit. The accompanying balance sheet does not include certain Partnership legal,
accounting, and other organization and offering costs paid and to be paid by the
General  Partner  and/or  affiliates  of the  General  Partner.  If the  minimum
offering  amount of $1,400,000 is raised,  the  Partnership  will be required to
reimburse the General  Partner  and/or its  affiliates  for such fees out of the
proceeds of the offering,  up to certain  maximum levels set forth below. In the
event  the  Partnership  is unable to raise the  minimum  offering  amount,  the
General Partner will absorb all organization and offering costs.

Further, if the minimum offering amount of $1,400,000 is raised, the Partnership
will be obligated to the General Partner or affiliates for certain  acquisition,
management and other fees as set forth below.

         Acquisition  fees up to 7.5% of the  gross  proceeds  from  the sale of
         Partnership units.

         Reimbursement  for  organizational,  offering,  selling and acquisition
         expenses advanced by the General Partner or affiliates on behalf of the
         Partnership.  These  reimbursements  plus all other  organizational and
         offering expenses  inclusive of sales commissions will not exceed 14.5%
         of the gross proceeds.

         An annual  management  fee equal to the  greater of (i) $2,000 for each
         apartment  complex or (ii) .275% of the gross proceeds,  in either case
         increased or decreased  based on annual  changes in the Consumer  Price
         Index.  However,  the  maximum  fee may not exceed .2% of the  invested
         assets (defined by the  Partnership's  capital  contributions  plus its
         allocable  percentage  of  the  permanent  financing)  of  the  limited
         partnerships.



                                      FS-4

<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                       NOTES TO BALANCE SHEET - CONTINUED

                                  May 15, 1996



NOTE 2 - COMMITMENTS AND CONTINGENCIES, continued

         A  subordinated  disposition  fee in an amount equal to 1% of the sales
         price of real estate sold.  Payment of this fee is  subordinated to the
         limited  partners  receiving   distributions  equal  to  their  capital
         contributions  and  their  return  on  investment  (as  defined  in the
         Partnership's  Agreement of Limited Partnership) and is payable only if
         services are rendered in the sales effort.

NOTE 3 - INCOME TAXES

The  Partnership  will not incur a provision  for income  taxes since all income
taxes and losses  will be  allocated  to the  Partners  for  inclusion  in their
respective returns.




                                      FS-5


<PAGE>







                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                                 BALANCE SHEETS
                               September 30, 1996

                                                                       1996

                                    ASSETS

                 
Cash and cash equivalents                                 $            766,107
Subscriptions receivable - Note 5                                      450,000
Investment in limited
 partnerships - Note 3                                               3,973,325
Other assets
                                                                           702
                                                           $         5,190,134


                        LIABILITIES AND PARTNERS' EQUITY


Liabilities:
                 
Payable to limited partnerships - Note 2                    $         2,482,421
Accrued fees and expenses due to
 general partner and affiliates - Note 3
                                                                         83,373
                                                                      2,565,794
Commitments and contingencies - Note 7 
Partners' equity (deficit):
 General partner                                                        (3,578)
 Limited partners (25,000 units
  authorized, 3075 units issued
  and outstanding)                                                    2,627,918

Total partners' equity                                                2,624,340
                                                                      ---------
                                                            $         5,190,134
                                                                      ---------
                                                                      ---------


                                    UNAUDITED
                 See Accompanying Notes to Financial Statements



                                      FS-6
<PAGE>



                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                             STATEMENT OF OPERATIONS
             For the Period July 1, 1996 (date operations commenced)
                              to September 30, 1996




                 
Interest income                                $              2,427

Operating expenses:
Amortization
                                                                418
Asset management fees (Note 4)
                                                                  -
Legal and accounting
                                                                44


Total operating expenses
                                                               462

Income (loss) from operations
                                                              1,965

Equity in loss from
 limited partnerships
                                                            (2,040)

Net loss                                       $
                                                               (75)

Net loss allocated to:
  General partner
                                                                (1)

  Limited partners
                                                               (74)

Net loss per weighted limited
  partner unit (1,446)                         $
                                                             (0.05)



                                    UNAUDITED
                 See Accompanying Notes to Financial Statements


                                      FS-7
<PAGE>

<TABLE>

                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                          STATEMENT OF PARTNERS' EQUITY

             For the Period July 1, 1996 (date operations commenced)
                              to September 30, 1996



                                           General              Original       Limited
                                           Partner              Limited             Partner              Total
                                                                Partner

<S>                                        <C>                 <C>                  <C>              <C>  
Equity (deficit), December 31, 1995        $    ----           $       ---               ---         $       --
                                                                                                               

Capital contributions                                                                        
                                                 100                    900         3,073,980           3,074,980

Offering expenses
                                             (3,677)                                 (363,988)           (367,665)

Capital issued for notes receivable
                                                                                      (82,000)            (82,000)
Withdrawals                                                           (900)                                  (900)
Net loss                                        (1)                      -                (74)                (75)
                                                ---                   ----               ----                 ----

Equity (deficit), September 30, 1996       $ (3,578)            $        0          $2,627,918           2,624,340
                                        ===============          =========    ================     ================

</TABLE>








                                    UNAUDITED
                 See Accompanying Notes to Financial Statements

                                      FS-8
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                         STATEMENT OF CASH FLOWS For the
                 Period July 1, 1996 (date operations commenced)
                              to September 30, 1996

Cash flows used by operating activities:
            
  Net loss                                               $                (75)
    Adjustments to  reconcile  net loss to net 
        cash used in  operating activities:
        Equity in loss of limited partnerships                           2,040
        Amortization                                                       418
        Change in other assets                                            (702)
        Accrued fees and expense due to
        general partner and affiliates                                   7,631
                                                                         -----
             Net cash provided by operating activities                   9,312
                                                                         -----

Cash flows used by investing activities:
       
  Investment in limited partnerships                                (1,289,643)
  Acquisition fees                                                    (185,100)
             Net cash used by investing activities                  (1,474,743)
                                                                  -------------

Cash flows provide by financing activities:
  Capital contributions                                               2,542,080
  Offering costs                                                      (310,542)
                                                                  -------------
             Net cash provided by financing activities                2,231,538
                                                                      ---------

Net increase in cash and cash equivalents                               766,107
Cash and cash equivalents, beginning of period                                -
                                                                        -------
Cash and cash equivalent, end of period                      $          766,107
                                                                        =======



                                    UNAUDITED
                 See Accompanying Notes to Financial Statements


                                      FS-9
<PAGE>



                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                       STATEMENT OF CASH FLOWS(CONTINUED)

             For the Period July 1, 1996 (date operations commenced)
                              to September 30, 1996

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:

During the period July 1, 1996 (date  operations  commenced)  to  September  30,
1996,  the  Partnership  incurred,  but did not  pay,  $82,473  of  payables  to
affiliates for acquisitions costs and offering expenses (see Note 3).

During the period July 1, 1996 (date  operations  commenced)  to  September  30,
1996,  the  Partnership  incurred,  but did not pay,  $2,482,421  of payables to
limited   partnerships   (in   connection   with  its   investments  in  limited
partnerships) (see Note 4)

During the period July 1, 1996 (date  operations  commenced)  to  September  30,
1996,   $450,000  of  capital   contributions  were  recorded  as  subscriptions
receivable.














                                    UNAUDITED
                 See Accompanying Notes to Financial Statements

                                     FS-10
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
WNC Housing Tax Credit Fund, V, L.P.,  Series 4 (the  "Partnership")  was formed
under the  California  Revised  Limited  Partnership  Act on March 28,  1995 and
commenced  operations  on July 1,  1996.  The  Partnership  was formed to invest
primarily in other limited  partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.

The information  contained in the following notes to the financial statements is
condensed  from that  which  would  appear in the annual  financial  statements;
accordingly,  the  financial  statements  included  herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's  Annual Report. The Partnership  commenced  operations July 1,
1996, consequently their is no Annual Report for prior years.

In  the  opinion  of  the  Partnership,  the  accompanying  unaudited  financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
accruals)  necessary to present  fairly the  financial  position as of September
30,1996 and the results of  operations  and changes in cash flows for the period
July 1, 1996 (date  operations  commenced)  to September  30,  1996.  Accounting
measurements at interim dates  inherently  involve greater reliance on estimates
than at year end. The results of operations for the interim period presented are
not necessarily indicative of the results for the entire year.

The general  partner of the  Partnership  is WNC &  Associates,  Inc.  (the
"General Partner").  Wilfred N. Cooper, Sr., through the Cooper Revocable Trust,
owns 70% of the outstanding stock of WNC & Associates,  Inc. John B. Lester, Jr.
is the original limited partner of the Partnership and owns,  through the Lester
Family Trust, 30% of the outstanding stock of WNC & Associates, Inc.

Allocations Under the Terms of the Partnership Agreement
The General Partner has a 1% interest in operating  profits and losses,  taxable
income and loss and in cash available for distribution from the Partnership. The
limited  partners  will  be  allocated  the  remaining  99% of  these  items  in
proportion to their respective investments.

After the limited  partners have received sale or refinancing  proceeds equal to
their capital  contributions  and their return on investment  (as defined in the
Partnership's  Agreement  of Limited  Partnership)  and the general  partner has
received a  subordinated  disposition  fee any  additional  sale or  refinancing
proceeds.

                                     FS-11
<PAGE>



                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                     NOTES TO FINANCIAL STATEMENTS-CONTINUED


NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allocations Under the Terms of the Partnership  Agreement  (Continued) will
be distributed  90% to the limited  partners (in proportion to their  respective
investments) and 10% to the General Partner

Method of Accounting For Investment in Limited Partnerships The Partnership
accounts for its investments in limited  partnerships using the equity method of
accounting, whereby the Partnership adjusts its investment balance for its share
of each limited  partnership's  results of operations and for any  distributions
received.  Costs  incurred by the  Partnership  in acquiring the  investments in
limited partnerships are capitalized as part of the investment.

Losses from the limited  partnerships  will not be recognized to the extent
that the individual investment balance would be adjusted below zero.

Cash and Cash Equivalents 
The Partnership  considers all bank  certificates of deposit with a maturity of
less than three months to be cash equivalents.

Offering Expenses
Offering  expenses consist of underwriting  commissions,  legal fees,  printing,
filing and  recordation  fees,  and other costs  incurred  with selling  limited
partnership  interests in the  Partnership.  The General Partner is obligated to
pay all  offering  and  organization  costs in  excess of 15%  (including  sales
commissions) of the total offering proceeds.  Offering expenses are reflected as
a reduction of partners' capital.

Organization Costs
Organization costs will be amortized on the straight-line method over 60 months.

                                     FS-12
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                     NOTES TO FINANCIAL STATEMENTS-CONTINUED


NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS

As of  September  30,1996,  the  Partnership  had acquired  limited  partnership
interests in two limited  partnerships each of which owns one apartment complex.
As of September 30,1996, construction and rehabilitation of one of the apartment
complexes had completed construction.  The Partnership, as a limited partner, is
a 99% owner and is  entitled to 99% of the  operating  profits and losses of the
limited partnerships.

The  following  is a summary  of the  investment  in  limited  partnerships  and
reconciliation to the limited partnership accounts as of September 30,1996:

                                                                        1996


    Capital contributions to limited partnership                  $3,772,964
           Capitalized acquisition fees and costs                    202,819
            Equity in loss of limited partnership                     (2,040)
    Amortization of capitalized acquisition costs                       (418)

               Investment Balance - end of period                 $3,973,325

Selected  financial  information  for the period  July 1, 1996 (date  operations
commenced) to September 30, 1996 from the combined  financial  statements of the
limited partnerships in which the partnership has invested is as follows:

   Total revenue                                                  $     12,900
                                                                        ------

   Interest expense                                                      5,500
   Depreciation                                                          1,500
   Operating expenses                                                    8,000
                                                                         -----
   Total expenses                                                       15,000
                                                                        ------

   Net Loss                                                         $  (2,100)
                                                                    ==========

   Net loss allocable to the Partnership                            $  (2,040)
                                                                       =======

                                     FS-13
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                     NOTES TO FINANCIAL STATEMENTS-CONTINUED


NOTE 3- RELATED PARTY TRANSACTIONS

Under the terms of its  Agreement of Limited  Partnership,  the  Partnership  is
obligated to the General Partner or its affiliates for the following items:

         Acquisition  fees up to 7.5% of the  gross  proceeds  from  the sale of
     Partnership  units.  Acquisition  fees of $186,282  were  incurred  for the
     period July 1, 1996 (date operations commenced) to September 30, 1996.

         Reimbursement  for   organizational,   offering  and  selling  expenses
     advanced by the General Partner or affiliates on behalf of the Partnership.
     These  reimbursements  plus all other  organizational and offering expenses
     inclusive of sales commissions will not exceed 14.5% of the gross proceeds.
     During the period July 1, 1996 (date operations commenced) to September 30,
     1996,  the  Partnership  incurred  organizational,   offering  and  selling
     expenses of $0, $138,060, and $229,605, respectively.

         An annual  management  fee equal to the  greater of (i) $2,000 for each
     apartment  complex  or (ii)  .275% of the gross  proceeds,  in either  case
     increased or decreased based on annual changes in the Consumer Price Index.
     However, the maximum fee may not exceed .2% of the invested assets (defined
     as the Partnership's capital contributions plus its allocable percentage of
     the permanent financing) of the local limited partnerships. The Partnership
     has  incurred  no  fees  for  the  period  July 1,  1996  (date  operations
     commenced) to September 30, 1996.

         A  subordinated  disposition  fee in an amount equal to 1% of the sales
     price of real  estate  sold.  Payment  of this fee is  subordinated  to the
     limited  partners  receiving  a return on  investment  (as  defined  in the
     Partnership's  Agreement  of Limited  Partnership)  and is payable  only if
     services are rendered in the sales effort.

Accrued fees and advances due to affiliates of the General  Partner  included in
the accompanying balance sheet consists of the following at September 30,1996:

         Acquisition                                              $17,719
         Advances made for acquisition costs, organizational,
          offering and selling expense                             64,754
         Due to Original Limited Partner                              900
         Total accrued fees and advances                          $83,373

                                     FS-14
<PAGE>



                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                     NOTES TO FINANCIAL STATEMENTS-CONTINUED


NOTE 4 - PAYABLE TO LIMITED PARTNERSHIPS

Payable to limited  partnerships at September 30, 1996 represents  amounts which
are due at various times based on conditions  specified in the respective  local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited  partnership  achieving  certain  operating
benchmarks,  and are  generally  expected  to be paid  within  two  years of the
Partnership's initial investment.


NOTE 5 - SUBSCRIPTION AND INVESTOR NOTES RECEIVABLE

During the period July 1, 1996 (date  operations  commenced)  to  September  30,
1996,  the  Partnership  accepted  $82,000  in  promissory  notes  from  limited
partners.  Limited  partners  who  subscribe  for ten or more  units of  limited
partnership  interest  ($10,000) may elect to pay 50% of such purchase  price in
cash upon  subscription  and the  remaining  50% by the delivery of a promissory
note  payable  bearing  interest at the rate of 9.75% per annum.  Principal  and
interest are due (i) June 30, 1997 if the investor subscribes between January 1,
1996 and December  31, 1996 or (ii) January 31, 1998 if the investor  subscribes
after  December 31,  1996.  This amount is presented as a reduction in partners'
equity.

Subscriptions  receivable of $450,000 has been received  subsequent to September
30,1996 and accordingly has been classified as an asset.

NOTE 6 - INCOME TAXES

The Partnership  will not make a provision for income taxes since all income and
losses will be  allocated to the  Partners  for  inclusion  in their  respective
returns.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Subsequent to September 30,1996,  the Partnership acquired a limited partnership
interest in one limited partnership totaling approximately $400,905.



                                     FS-15


<PAGE>

<TABLE>

                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                             PROFORMA BALANCE SHEET
                               September 30, 1996




                                     ASSETS

                                                               Historical         Proforma            Proforma
                                                               Balance            Adjustments         Balance

<S>                                                            <C>                <C>                 <C>
Cash                                                           $  766,107        $ 6,526,965
                                                                                    (120,750)         $ 6,598,160
                                                                                    (574,163)             570,750

Subscriptions receivable                                          450,000            120,750
Investment in limited partnerships                              3,973,325          9,894,212
                                                                                     574,163           14,441,700

Other assets                                                          702                  0                  702
                                                               ----------        -----------          -----------
                                                               $5,190,134        $16,421,177          $21,611,311
                                                               ==========        ============         ===========


                        LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:

Notes payable to limited partnerships                          $2,482,421        $ 9,894,212          $12,376,633
Accrued fees and expenses due to general partner and
affiliates                                                         83,373                  0               83,373
                                                               ----------        -----------          -----------
                                                                2,565,794          9,894,212           12,460,006
                                                               ----------        -----------          -----------


Partners' capital:
  General partner                                                  (3,578)             (11,285)           (14,863)
  Limited partners                                              2,627,918            6,538,250          9,166,168
                                                               -----------        ------------        -----------
              Total partners' equity                            2,624,340            6,526,965          9,151,305
                                                               -----------        ------------        -----------

                                                               $5,190,134          $16,421,177        $21,611,311
                                                              ============         ===========        ===========
,
                                  - Unaudited -
             See Accompanying Notes to Proforma Financial Statements
          
</TABLE>

                                     FS-16
<PAGE>


<TABLE>

                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)

                        PROFORMA STATEMENT OF OPERATIONS

             For the Period July 1, 1996 (date operations commenced)
                              to September 30, 1996




                                             Historical      Proforma             Proforma
                                             Balance         Adjustments          Balance

<S>                                          <C>             <C>                  <C>   
Interest income                              $2,427                               $ 2,427
                                             ------                               -------

Operating expense
Amortization                                    418                                   418
Legal and accounting                             44                                    44
                                             ------                               -------         --

Total operating expense                         462                                   462
                                             ------                               -------

Income from operations                        1,965                                 1,965

Equity in loss
of limited partnerships                      (2,040)          (3,200)              (5,240)
                                             -------          -------             --------

Net loss                                     $  (75)          $(3,200)            $(3,275)
                                             =======          ========            ========


                                   Unaudited
            See Accompanying Notes to Proforma Financial Statements

                                     FS-17
</TABLE>

<PAGE>

                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4
                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
                     NOTES TO PROFORMA FINANCIAL STATEMENTS


NOTE 1 - GENERAL

The  information  contained in the  following  notes to the  proforma  financial
statements is condensed  from that which  appears in the  financial  statements.
Accordingly,   these  proforma  financial   statements  should  be  reviewed  in
conjunction with the financial statements and related notes thereto contained in
the WNC  Housing Tax Credit Fund V, L.P.,  Series 4 financial  statements  dated
September 30, 1996. WNC Housing Tax Credit Fund V, L.P., Series 4 is referred to
in these notes as the "Partnership."

NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS

As of  September  30, 1996,  the  Partnership  was admitted as majority  limited
partner in two limited partnerships,  Blessed Rock and Crescent City Apartments.
Subsequent  to  September  30,  1996,  the  Partnership  has  acquired a limited
partnership  interest in five limited  partnerships,  Ashford Place, L.P., Lamar
Plaza, Mesa Verde, Ogallalla Apartments I, L.P. and Woodland Townhomes, L.P. and
is  negotiating  to  acquire  limited  partnership   interests  in  three  other
partnerships. The investments commit the Partnership to capital contributions as
follows:

                  Ashford Place                      $2,317,180
                  Belen Vista                           488,274
                  Hilltop                               120,814
                  Lamar                                 797,842
                  Mesa Verde                          3,940,587
                  Mountain Vista                        481,602
                  Ogallalla                             400,905
                  Woodland Townhomes                  1,347,008
                                                      ---------
                                                     $9,894,212


In accordance with Article 11, Proforma Financial  Information of Regulation S-X
of the Securities and Exchange  Commission,  the  accompanying  proforma balance
sheet was computed assuming that the limited  partnerships  discussed above were
acquired at the end of the period  presented.  The first  adjustment to cash and
the adjustment to partners' equity of $6,526,965  reflects the net proceeds from
October 1, 1996 to  February  21,  1997 from  issuance of 7,783 units of limited
partners' capital ($7,783,000 less notes receivable of $127,500, and commissions
and  offering  costs  of  $1,128,535.)  The  second  adjustment  to cash and the
adjustment to subscriptions  receivable of $120,750  reflects the  subscriptions
receivable from the above

                                     FS-18
<PAGE>



                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

                       (A California Limited Partnership)
                        (A Development-Stage Enterprise)
               NOTES TO PROFORMA FINANCIAL STATEMENTS (Continued)



subscriptions.  The adjustment to investment in limited  partnerships  and notes
payable  to  limited  partnerships  of  $9,894,212  reflects  the  Partnership's
acquisition of the eight limited  partnership  interests as if the Partnership's
date of acquisition was September 30, 1996. The second  adjustment to investment
in limited  partnerships and the third  adjustment to cash of $574,163  reflects
the acquisition fee for the acquisition of the identified limited partnerships.

The eight apartment  complexes were under construction or rehabilitation  during
the period  presented and had no operations  which should be reported.  Crescent
City  Apartments  had  operations  during  the  period  presented  prior  to the
Partnership's  acquisition of the limited partnership  interest therein (July 1,
1996 to September 25, 1996),  and a proforma loss of $3,200 had been recorded in
the Proforma Statement of Operations.  The Partnership uses the equity method of
accounting to account for its investments in these local limited partnerships.



                                     FS-19
<PAGE>


                  WNC HOUSING TAX CREDIT FUND V, L.P., Series 4

                       (A California Limited Partnership)
                       ESTIMATED TAXABLE OPERATING RESULTS
                  FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 1997


INTRODUCTORY PARAGRAPH

     The  following  Estimate of Taxable  Operating  Results was prepared by the
Fund Manager and  represents  the Fund  Manager's  estimated  taxable  operating
results of Series 4 for the twelve months ended February 28, 1997.  Accordingly,
the  estimate   reflects  the  Fund   Manager's   judgment,   based  on  present
circumstances,  of the expected  conditions  and Series 4's  expected  course of
action.

Estimated  operating results of the limited  partnerships  consist of the actual
tax losses for the  limited  partnership  that  Series 4 has  acquired  that has
operations for the period.

Cash to be made available from operations is not material.

There will usually be differences  between  estimates and actual results because
events and circumstances  frequently do not occur as expected. Those differences
may be  material.  Accordingly,  investors  should not assume  that the  results
estimated below will actually be achieved.

NET OF INTEREST INCOME AND OPERATING EXPENSES 
   FOR SERIES 4                                               $  8,000

EQUITY IN LOSS FROM LIMITED PARTNERSHIPS                      $(51,000)
                                                              =========

ESTIMATED TAXABLE LOSS                                        $(43,000)
                                                              =========

ESTIMATED TAXABLE LOSS ALLOCABLE  TO:
  General Partner                                             $   (430)
                                                              =========
  Limited Partner                                             $(42,576)
                                                              =========

ESTIMATED TAXABLE LOSS PER $1,000 INVESTED                    $     (4)
                                                              =========



                                     FS-20

<PAGE>
 BURKE & REA
 CERTIFIED PUBLIC ACCOUNTANTS
 EDWARD T. BURKE, C.P.A.
 BERNARD E. REA, C.P.A.
 


                          INDEPENDENT AUDITORS' REPORT

To the Stockholders
Crescent City Surf, Inc.
Sacramento, CA


We have audited the accompanying  statement of operations of Crescent City Surf,
Inc., for the eight months ended August 31, 1996.  This  financial  statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.

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

In our opinion, the accompanying statement of operations presents fairly, in all
material respects, the results of operations of Crescent City Surf, Inc. for the
eight  months  ended  August 31,  1996 in  conformity  with  generally  accepted
accounting principles.


                                                            /S/ Burke & Rea



Stockton, California
October 30, 1996


rea01.doc
                                     FS-21
<PAGE>




                            CRESCENT CITY SURF, INC.

                             STATEMENT OF OPERATIONS
                       Eight months ended August 31, 1996





REVENUE
     Rental income                                              $       101,461

     Other income
         Interest income                                                  1,566

              Total revenue                                     $       103,027
                                                                ---------------

EXPENSES

     Contract management fee                                    $         6,000
     Miscellaneous renting expenses                                         440
     Office supplies                                                        953
     Manager's salary and payroll taxes                                  16,440
     Legal                                                                1,826
     Bookkeeping / accounting services                                    1,415
     Telephone                                                            1,816
     Miscellaneous administrative expense                                   812
     Utilities                                                            6,832
     Garbage and trash removal                                            2,693
     Maintenance and repairs                                              4,847
     Elevator maintenance                                                 3,966
     Miscellaneous operating and maintenance expenses                       416
     Real estate taxes                                                   12,466
     Property and liability insurance                                     2,766
     Interest expense                                                    43,814
     Depreciation and amortization                                       11,975
                                                                     ----------

              Total expenses                                    $       119,477
                                                                ---------------


Net loss                                                       $       (16,450)
                                                                ===============


See Notes to Financial Statement.

                                     FS-22
<PAGE>


                            CRESCENT CITY SURF, INC.
                         (A California Limited Company)

                          NOTES TO FINANCIAL STATEMENT




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A summary of the Company's significant  accounting policies applied in the
      preparation of the accompanying financial statements follows.

      METHOD OF ACCOUNTING

      The Company uses the accrual method of accounting,  which reflects revenue
      when  earned,  which may be prior to receipt,  and  expenses as  incurred,
      which may be prior to payment.  Rental income reflects the gross potential
      rent that may be earned less vacancies.

      CAPITALIZATION AND DEPRECIATION

      Land,  buildings and  improvements  are recorded at cost.  Depreciation is
      computed using  straight-line  method over the following  estimated useful
      lives:


                                                                 Years

            Building                                              27.5

      Improvements  are  capitalized,  while  expenditures  for  maintenance and
      repairs are charged to expense as incurred.  Upon disposal of  depreciable
      property,  the  appropriate  property  accounts are reduced by the related
      costs and  accumulated  depreciation.  The resulting  gains and losses are
      reflected in the statement of operations.

      AMORTIZATION

      Organization  costs are amortized  over 84 months using the  straight-line
      method.

      S CORPORATION - INCOME TAX STATUS

      The Company with the consent of its  shareholders,  has elected  under the
      Internal  Revenue  Code to be an S  corporation.  In  lieu of  corporation
      income taxes,  the  shareholders  of an S  corporation  are taxed on their
      proportionate  share  of  the  Company's  taxable  income.  Therefore,  no
      provision or liability  for federal  income taxes has been included in the
      financial statements.

      ESTIMATES

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect certain reported amounts and disclosures.




                                     FS-23
<PAGE>



                    NOTES TO FINANCIAL STATEMENT





NOTE 2 - ORGANIZATION

      Crescent  City Surf,  Inc.  is a  Corporation  which was  incorporated  in
      January 1993, to own, and operate a 56-unit  apartment  complex,  known as
      The Surf Hotel, located in Crescent City, California. The major activities
      of the  Company  are  governed by the  Company  Agreement  and  regulatory
      agreements with the Department of Housing and Community Development (HCD),
      a  public  agency  of  the  State  of  California.  Under  the  regulatory
      agreements,  the Company is  required to provide low cost  housing to very
      low-income or lower-income households.

      Annual distributions to the Stockholders are limited by the HCD regulatory
      agreement and are not to exceed 8% of the actual  investment in the entire
      project.  Undistributed amounts are allowed to be deposited into a project
      account and be distributed in a subsequent year.


NOTE 3 - RESTRICTED DEPOSITS AND FUNDED RESERVES

      In accordance  with HCD Regulatory  Agreement,  the Company is required to
      maintain a replacement  reserve  account and a general  operating  reserve
      account.  These  accounts  are funded  monthly  with  payments  being made
      directly into separately maintained accounts.


NOTE 4 - LONG-TERM DEBT

      The  project  is  financed  by a mortgage  payable to HCD in the  original
      amount of $1,960,000.

      Under the terms of the Promissory  Note Secured By Deed Of Trust with HCD,
      the loan  provides for interest at 3.0% for a term of 55 years with annual
      payments based on a formula  generally related to the project's ability to
      pay.

      During the first thirty years, interest-only payments are due annually and
      payable at the lesser of the total amount of interest  accrued and unpaid,
      including deferred  interest,  or the amount of net cash flow available on
      the  interest  payment  due date.  Commencing  on the  thirty-first  year,
      principal  and  interest  payments  are  due  and  payable  annually.  The
      principal payments are based on one-half of the net cash flow remaining on
      the principal payment date after all payments of interest due are made.

      The apartment  complex is pledged as  collateral  for the mortgages and is
      secured by deeds of trust,  assignment of rents,  security  agreements and
      fixture filings against the property.





                                     FS-24
<PAGE>


                          NOTES TO FINANCIAL STATEMENT




NOTE 5 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

      MANAGEMENT FEE

      In accordance with the Management Agreement,  the Company paid the general
      partner  a  $750  per  month  management  fee  for  services  rendered  in
      connection with the leasing and operation of the project.  The fee for its
      services is approximately 5% of the project's rental income.











                                     FS-25
<PAGE>
                          INDEPENDENT AUDITORS' REPORT




The Board of Directors
WNC & Associates, Inc.


We have audited the  consolidated  balance sheet of WNC &  Associates,  Inc. and
subsidiary  (the  "Company") as of August 31, 1996.  This  consolidated  balance
sheet is the responsibility of the Company's  management.  Our responsibility is
to express an opinion on this consolidated balance sheet based on our audit.

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

In our  opinion,  the  consolidated  balance  sheet  referred to above  presents
fairly, in all material  respects,  the financial  position of WNC & Associates,
Inc. and subsidiary as of August 31, 1996 in conformity with generally  accepted
accounting principles.







                                              CORBIN & WERTZ


Irvine, California
October 28, 1996


                                     FS-26
<PAGE>



                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)







<TABLE>
<S>                                            <C>    <C>                       <C>    <C>

ASSETS                                                 February 28, 1997        August 31, 1996
                                                       (Unaudited)              (Audited)
Cash                                                   $  608,809               $  321,681
Fees receivable, net (Note 2)                             652,371                  665,547
Loans to property developers (Notes 3 and 6)            3,253,662                2,288,783
Offering costs advanced                                    36,246                  139,989
Advances to partnerships                                  156,600                  163,004
Income tax receivable                                           0                   19,527
Property and equipment, net (Note 4)                      261,161                  236,887
Other assets (Notes 5 and 9)                              298,718                  315,253
                                                       ----------               ----------
                                                       $5,267,567               $4,150,671
                                                       ==========               ==========
LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
  Notes payable to bank (Note 6)                        1,393,100               $  500,000
  Accounts payable and accrued expenses                   154,305                  129,747
  Deferred income taxes (Note 7)                          286,545                  183,772
  Income taxes payable                                     30,597                        0
  Interest payable (Note 6)                                58,000                   35,000
  Due to partnership                                            0                   68,510
  Accumulated losses of partnerships in excess of
    investments                                           575,982                  544,395
  Capitalized lease obligations (Note 8)                   69,320                   90,173
                                                       ----------               ----------
    Total liabilities                                   2,567,849                1,551,597
                                                       ----------               ----------
Commitments and contingencies (Note 8)

Stockholders' equity:
  Preferred stock, no par value, 1,000,000 shares
    authorized, none issued
  Common stock, no par value, 1,000,000 shares
    authorized, 104,750 issued and outstanding in
    1995 and 1996                                         177,677                  177,677
  Retained earnings                                     2,522,041                2,421,397
                                                       ----------               ----------
    Total stockholders' equity                          2,699,718                2,599,074
                                                       ----------               ----------

                                                       $5,267,567               $4,150,671
                                                       ==========               ==========
</TABLE>

              See accompanying notes to consolidated balance sheets
                                      FS-27
<PAGE>


                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                      NOTES TO CONSOLIDATED BALANCE SHEETS
           February 28, 1997(Unaudited) and August 31, 1996 (Audited)



NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

WNC & Associates,  Inc. (a California corporation) (the "Company"), acts as
a corporate  general partner and syndicator of both public and private placement
real  estate  partnerships  (the  "Partnerships"),  which  invest  in  apartment
complexes  throughout  the United  States,  the majority of which are government
assisted apartment complexes that qualify for low income housing tax credits.

The  Company  is the  general  partner of  various  Partnerships  which own
government  assisted housing apartment  complexes (either directly or indirectly
through  other  partnership  interests).   The  majority  of  the  Partnerships'
apartment  complexes are subsidized  through various United States  governmental
low-income housing programs. The Company's interest in the profits and losses of
each  Partnership,  as general  partner,  varies  between  one-quarter  and five
percent.

Principles of Consolidation

The  accompanying  consolidated  balance sheet includes the accounts of the
Company and its wholly owned subsidiary,  WNC Capital  Corporation.  WNC Capital
Corporation  was  incorporated  on February 23, 1994 and is registered  with the
Securities and Exchange Commission as a broker/dealer in securities. WNC Capital
Corporation  does not  carry  customers'  accounts  or hold  securities  for the
accounts of its customers. WNC Capital Corporation provides wholesaling services
to  affiliates  of  the  Company.  All  significant  intercompany  accounts  and
transactions have been eliminated in consolidation.

Interim Financial Statements

The financial  information presented as of February 28, 1997 is prepared in
conformity with generally accepted accounting principles and such principles are
applied on a basis  consistent with those reflected in the Annual Report for the
year ended August 31, 1996.  The financial  information  presented  herein as of
February 28, 1997 has been prepared by management  without audit by  independent
certified public accountants who do not express an opinion thereon.  The balance
sheet  presented  as of February 28, 1997 has been  derived  from,  but does not
include all the disclosures  contained in the audited balance sheet as of August
31,  1996.  The  information  furnished  as of February  28, 1997  includes  all
adjustments  (consisting of only normal recurring  accruals),  which are, in the
opinion of management,  necessary for a fair presentation of financial  position
as of the interim date.

Use of Estimates

The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that effect the reported amounts of assets and liabilities,  as well
as  disclosure  of  contingent  assets  and  liabilities  at the  date of  these
consolidated  balance sheets.  Actual results could materially differ from those
estimates.



                                     FS-28
<PAGE>

                     WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued


Fair Value of Financial Instruments

The consolidated  balance sheets contain financial  instruments whereby the
fair market value of the  financial  instruments  could be different  than those
recorded on a historical basis in the accompanying  consolidated balance sheets.
The Company's financial  instruments consist of cash, fees receivable,  loans to
property  developers,  offering costs advanced,  advances to partnerships,  note
payable to bank,  accounts payable and due to partnership.  Management  believes
that the  carrying  amounts of the  Company's  financial  instruments  generally
approximate their fair market values at February 28, 1997 (unaudited) and August
31,  1996  (audited).  In the case of certain  financial  instruments  which are
non-interest  bearing,  it was not practical to determine fair market values due
to the lack of a market for such financial instruments.

Concentration of Credit Risk

The  Company,  at times,  maintains  cash  balances  at  certain  financial
institutions in excess of the federally insured amounts.

Risks and Uncertainties

Net Capital  Requirements WNC Capital Corporation,  as a broker/dealer,  is
required  under  provisions of Rule 15c-1 of the  Securities and Exchange Act of
1934, to maintain a ratio of aggregate  indebtedness to net capital, as defined,
not to exceed 15 to 1. The basic concept of the rule is liquidity, its objective
being to require a broker or dealer have, at all times, sufficient liquid assets
to cover its current  indebtedness.  WNC Capital Corporation is also required to
maintain  a minimum  net  capital of the  greater  of $5,000 or 2% of  aggregate
indebtedness,  as defined. At February 28, 1997 and August 31, 1996, WNC Capital
Corporation  had net  capital  of  $5,854  (unaudited)  and  $89,548  (audited),
respectively, which are in excess of the required minimum capital and a ratio of
aggregate  indebtedness  to net  capital of .49 to 1  (unaudited)  and .57 to 1
(audited), respectively.

Registration WNC Capital  Corporation must register with state  departments
which  govern  compliance  with  securities  laws in the states in which it does
business.  Various  regulatory  requirements  exist in each state with which WNC
Capital  Corporation must comply.  Because of the various compliance laws, there
is a risk  that one or more  regulatory  authorities  could  determine  that WNC
Capital  Corporation  has not complied with  securities laws necessary for it to
conduct business in a given state. Regulatory actions, if ever taken, could have
a material adverse effect on WNC Capital Corporation's financial condition.

Fees Receivable

Fees receivable  consist of syndication fees due from various  Partnerships
in which the  Company  acts as general  partner.  Certain  syndication  fees are
received by the Company from the Partnerships as the limited partners make their
capital  contributions to the Partnerships.  Syndication fees that are scheduled
to be collected more than one year from the Company's year end are discounted to
reflect their present value.

                                     FS-29
<PAGE>

                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Loans to Property Developers

Loans to property  developers  are comprised of amounts  loaned or deposits
made to the general  partners of limited  partnerships in which the Partnerships
have or will have an equity  interest.  All such loans receivable are secured by
the respective  general partners  interest in the limited  partnerships.  In the
event a property is not  acquired,  deposits may not be refunded to the Company.
Accordingly, such amounts are written off in the period determined by management
that a property  will not be acquired and the deposit will not be refunded.  The
Company's  historical  losses related to its loans to property  developers  have
been minimal.

Offering Costs Advanced

Offering costs advanced  represent  funds that the Company  advances to the
Partnerships  for certain  costs and expenses to produce the offering  materials
and to qualify the  Partnership  interests  for sale under the various  state or
federal  securities  laws.  Such  advances  are repaid to the Company out of the
Partnerships'  initial  capital  proceeds and may be subject to  limitations  as
defined in the individual partnership agreements.

Organization Costs

Organization  costs  consist  principally  of  legal  and  regulatory  fees
incurred  to  incorporate  WNC  Capital  Corporation  and obtain  the  necessary
approvals to commence  operations.  These costs are being  amortized over a five
year period on a  straight-line  basis and are  included in other  assets in the
accompanying  consolidated balance sheets.  Accumulated amortization at February
28,  1997 and  August  31,  1996 was $8,387  (unaudited)  and $7,400  (audited),
respectively.

Property and Equipment

Property and equipment and  improvements  which extend the economic life of
assets are recorded at cost and are depreciated using the  straight-line  method
over the estimated  useful life of the related  asset,  generally  from three to
five years. Leasehold improvements and capitalized leases are amortized over the
shorter of the life of the lease or estimated useful life of the related asset.

Investments in Partnerships

The Company  records its  investment in the  Partnerships  using the equity
method, which recognizes the Company's  proportionate share of income or loss as
an increase or decrease in the  investment  in the  Partnership.  As the Company
acts as the General  Partner,  losses in excess of the Company's  investment are
recorded as Accumulated Losses of Partnerships in Excess of Investments.

                                     FS-30
<PAGE>

                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued


Income Taxes

The Company  accounts for income taxes under the provisions of Statement of
Financial  Accounting  Standards  No.  109 (SFAS  109),  "Accounting  For Income
Taxes."  Under the asset and liability  method of SFAS 109,  deferred tax assets
and liabilities are recognized for the future tax  consequences  attributable to
differences  between the financial statement carrying amounts of existing assets
and liabilities and their respective bases.  Deferred tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is  recognized  as income in the period  that  includes  the
enactment date.

 
NOTE 2 - FEES RECEIVABLE

Aggregate  annual  future  minimum  collections  as of  February  28,  1997
(unaudited) and August 31, 1996 (audited) are as follows:




                                     FS-31
<PAGE>
                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 2 - FEES RECEIVABLE, continued
<TABLE>
<S>                                                    <C>  <C>                 <C> <C>

                                                       February 28, 1997        August 31, 1996
                                                            (Unaudited)             (Audited)
                                                            -----------             ----------
1997                                                        $  536,595              $  555,655
1998                                                           150,000                 150,000
                                                            ----------              ----------
Total                                                          686,595                 705,655
Less: Discounts recorded on fees receivable
       at an effective rate ranging from 8% to 9.5%            (34,224)                (40,108)
                                                            ----------              ----------
Present value of future minimum fees receivable             $  652,371              $  665,547
                                                            ==========              ==========

At February  28, 1997 (unaudited), fees receivable from four Partnerships represented 29%, 19%, 12% and 12%, respectively, of total 
fees receivable. At August 31, 1996 (audited), fees receivable from four Partnerships represented 24%, 17%, 13% and 11%,  
respectively, of total fees receivable.
</TABLE>

NOTE 3 - LOANS TO PROPERTY DEVELOPERS

Loans to property developers consist of the following:

<TABLE>
<S>                                                    <C>  <C>                 <C> <C>

                                                       February 28, 1997        August 31, 1996
                                                          (Unaudited)                (Audited)
                                                          ------------              -----------
Notes receivable due on demand, non-interest bearing        $1,483,161              $  777,386
Notes receivable due on demand with interest
  at the Company's borrowing rate                               46,659                  46,659
Notes receivable with interest at the Company's
  borrowing rate.  The 1996 amount is due May
  1997 (audited).  The 1997 amount is due at
  various dates from May 1997 to September
  1997 (unaudited)                                             962,196                 400,000
Notes receivable past due, generally with interest
  at the Company's borrowing rate                              761,646               1,064,738
                                                            ----------              ----------
                                                            $3,253,662              $2,288,783
                                                            ==========              ==========

The Company's  borrowing  rate at February 28, 1997 and August 31, 1996 was 9.75% (unaudited) and 10.75% (audited), respectively.

The Company  has loans to three property developers at February 28, 1997 (unaudited) which represent 31%, 14% and 13% respectively,
of total loans to property developers. The  Company has loans to three property developers at August 31, 1996 (audited) which 
represent 29%, 27% and 12%, respectively, of total loans to property  developers.
</TABLE>

                                     FS-32
<PAGE>

                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<S>                                                    <C>  <C>                 <C> <C>

                                                       February 28, 1997        August 31, 1996
                                                            (Unaudited)              (Audited)
                                                            -----------              ----------
Furniture, fixtures and computer software                   $  363,341               $  318,067
Automobiles                                                     23,388                   23,388
Leasehold improvements                                          36,321                   36,321
Equipment subject to capital leases (see Note 8)               157,046                  157,046
                                                            ----------               ----------
                                                               580,096                  534,822
Less accumulated depreciation and amortization                (318,935)                (297,935)
                                                            ----------               ----------
                                                            $  261,161               $  236,887
                                                            ==========               ==========
</TABLE>

NOTE 5 - OTHER ASSETS

Other assets consist of the following:

<TABLE>
<S>                                                    <C>  <C>                 <C> <C>

                                                       February 28, 1997        August 31, 1996
                                                            (Unaudited)              (Audited)
                                                            -----------               ---------
Real estate joint venture costs                             $  181,674               $  169,109
Due from stockholders (Note 9)                                  81,206                   86,000
Prepaid insurance                                                    0                   28,000
Deposits, advances and other                                    28,076                   24,747
Organization costs                                               7,762                    7,397
                                                            ----------               ----------
                                                            $  298,718               $  315,253
                                                            ==========               ==========

NOTE 6 - NOTES PAYABLE
 

On October 15, 1996, the Company  renewed its  line-of-credit  with a bank. The renewed  line-of-credit  allows for
borrowings  of up to  $3,600,000  at the  bank's  index  rate plus 1.5%  (10.25%  (audited)  at August  31,  1996).
Interest  is  payable  monthly.  The  line-of-credit  is  secured  by  assignment  of the  Company's  interests  in
Partnership  properties to be acquired for which amounts are borrowed and is personally  guaranteed by the majority
stockholder  of the Company.  The  line-of-credit  matured  January 15, 1997 and requires the Company to maintain a
certain debt to net worth ratio level and profitable operations for future years.

Unaudited - On January 15, 1997, the Company  established a line-of-credit  with a bank which allows for borrowings
of up to  $1,500,000  at the bank's  index rate plus 1.5% (9.75% at  February  28,  1997).  This line of credit was
used to repay the amount  outstanding on the $3,600,000 line of credit.  Interest is payable  monthly.  The line of
credit is also personally guaranteed by the majority stockholder of the Company and matures April 15, 1997.

</TABLE>
                                     FS-33
<PAGE>
                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 7 - INCOME TAXES

     The deferred tax liability of $286,545  (unaudited) and $183,772 (auduited)
as of February 28, 1997 and August 31, 1996, respectively,  represents primarily
the tax effect of the temporary  difference between  syndication fees recognized
on the accrual basis for financial  statement purposes and on the cash basis for
tax return purposes.


NOTE 8- COMMITMENTS AND CONTINGENCIES

Leases

The Company lease office space,  automobiles  and furniture under operating
leases and certain  equipment  under capital leases.  Aggregate  monthly capital
lease payments amount to $3,631  (audited) as of August 31, 1996. The leases are
non--cancelable  and require future minimum lease payments as of August 31, 1996
(audited) as follows:

                                              Capitalized          Operating
                                                   Leases             Leases
Fiscal year:
  1997                                           $ 43,571           $109,548
  1998                                             43,571             96,857
  1999                                             17,940             92,412
  2000                                              1,494             15,402
                                                  -------            -------
Total minimum lease payments                     $106,576           $314,219
                                                                    ========
Less amounts representing interest at rates
  ranging from 9.5% to 12.5%                      (16,403)
                                                 --------
Present value of future minimum capitalized
  lease obligations                              $ 90,173
                                                 ========

Guarantees  
The  Company is a guarantor  of certain  bank loans made to the
Partnerships.  The  aggregate  amounts  outstanding  on these  notes was $50,000
(unaudited)  and $50,000  (audited) as of February 28, 1997 and August 31, 1996,
respectively.  These  loans will be repaid by the  Partnerships  as the  limited
partners make their capital contributions to the respective Partnerships.


NOTE 9 - RELATED PARTY TRANSACTIONS

The  Company  entered  into an equity  participation  agreement  with a key
officer of the Company and his spouse. This agreement provided for an investment
of $80,000 by the Company to acquire a 50% interest in certain  property,  which
was later  converted  into  rental  property,  owned by the key  officer and his
spouse. Pursuant to terms of this agreement,  all income and losses arising from
the  operations of the rental  property,  including the allocation of income and
losses upon a sale or refinance shall be allocated 50% to the Company and 50% to
the key officer and his spouse.  During fiscal 1995,  the investment was written
down to $65,000 to reflect current market conditions.

                                     FS-34
<PAGE>

                      WNC & ASSOCIATES, INC. and SUBSIDIARY
                NOTES TO CONSOLIDATED BALANCE SHEETS - CONTINUED
           February 28, 1997 (Unaudited) and August 31, 1996 (Audited)

NOTE 9 - RELATED PARTY TRANSACTIONS, continued

In April,  1993,  the Company's  majority  stockholder,  who is an officer,
borrowed  $55,000.  This note  bears  interest  at 7.5% per  annum.  The  note's
maturity date was extended  along with accrued  interest to March 31, 1997.  The
note,  together  with  accrued  interest,  is  included  in other  assets in the
accompanying consolidated balance sheets.

During 1994, an officer and  stockholder of the Company  borrowed  $25,000.
This note  bears  interest  at 7.5% per  annum.  The  note's  maturity  date was
extended along with accrued interest to March 31, 1997. The note,  together with
accrued interest,  is included in other assets in the accompanying  consolidated
balance sheets.

























                                     FS-35
<PAGE>





                                    EXHIBIT A
                            PRIOR PERFORMANCE TABLES


         The tables set forth below present  financial  information with respect
to programs  which were  sponsored  by the  Sponsor.  Each of these  programs is
considered to have  investment  objectives  similar to those of the Fund in that
they each own  interests  in local  limited  partnerships  which own  properties
generating low income housing  credits.  None of these tables are covered by the
reports of independent public accountants set forth in this document.

         For additional information as to the investment objectives and policies
of such prior programs see "Prior Performance  Summary." Additional  information
concerning  prior  performance  is  included  in  Part  II of  the  Registration
Statement  of the Fund and for the  public  programs  in the  Form  10-K  annual
reports.  Copies of these 10-K Forms are  available to any investor upon request
to the  Sponsor.  Any such request  should be directed to 3158  Redhill  Avenue,
Suite 120, Costa Mesa, California 92626.

         The  purpose  of the  tables  is to  provide  information  on the prior
performance of these partnerships so as to permit a prospective purchaser of the
Units to evaluate  the  experience  of the Sponsor in  sponsoring  such  limited
partnerships. The tables consist of:

         Table I           Experience in Raising and Investing Funds
         Table II          Compensation of Sponsor
         Table III         Operating Results of Prior Programs

         Tables  IV and V have been  omitted  since  none of the prior  programs
which were  sponsored  by the Sponsor  have sold their  properties  or completed
operations.

Definitions

The  following  terms used in the prior  performance  tables have the  following
meanings:



                                      A-1
<PAGE>



"Acquisition  Cost" includes all costs related to the acquisition of partnership
interests,  including  equity  contributions,  acquisition  and  selection  fees
payable to the  general  partners  and other fees and  expenses  incident to the
acquisition of partnership interests.

"Capital  Contributions"  represents the  contributions by investors in the
prior partnerships.

"GAAP" means generally accepted accounting principles.

"Months to Invest 90% of Amount  Available for  Investment"  means the length of
time, in months, from the offering date to the date of the closing of properties
which,  in the aggregate,  represented  the investment  commitment of 90% of the
amount available for investment.

"Percent leverage" means mortgage financing divided by total acquisition costs.

         IT  SHOULD  NOT  BE  ASSUMED  THAT  INVESTORS  IN  THIS  OFFERING  WILL
EXPERIENCE  RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THE
PARTNERSHIPS  DESCRIBED IN THE  FOLLOWING  TABLES.  INVESTORS  WILL NOT HAVE ANY
INTEREST  IN ANY OF THE  PARTNERSHIPS  DESCRIBED  IN THE TABLES OR IN ANY OF THE
PROPERTIES OWNED BY THE LOCAL LIMITED  PARTNERSHIPS IN WHICH THOSE  PARTNERSHIPS
HAVE INVESTED AS A RESULT OF THE ACQUISITION OF UNITS.

                                      A-2
<PAGE>



                                     TABLE I

TABLE I provides  information  regarding  the raising and  investing of funds by
partnerships  sponsored by the Sponsor which raised funds during the  three-year
and  six-month  period ended June 30,  1996.  The table  presents the  aggregate
dollar amount of the offering,  the percentage of dollars raised which were used
to pay offering costs,  establish reserves and acquire  investments,  as well as
information  regarding  percent of leverage  and the timing for both raising and
investing funds. The information concerns investor capital  contributions as the
sole  source  of  funds  for  investment   and  excludes  the  nominal   capital
contributions by the general partners.

                                      A-3
<PAGE>
<TABLE>
                                                                TABLE I

                                                EXPERIENCE   IN   RAISING    AND
                                                    INVESTING  FUNDS (January 1,
                                                    1993 - June 30, 1996)



                                          CHTC  II          %          HTCF III        %
                                             
<S>                                    <C>                            <C>        
Dollar amount offered                  $20,000,000                    $15,000,000
                                       ===========         ==         ===========

Dollar amount raised                    17,726,000      100.0          15,000,000     100.0

Less offering expenses:
  Selling commissions & discounts 
  paid to non-afiliates                  1,418,080        8.3           1,125,000       7.5
  Organizational expenses (a)              934,069        5.3           1,125,000       7.5
  Reserves                                 648,974        3.7             402,500       2.7
                                           -------       ----            -------        ---
  Reserves                                               83.0                          82.3  

Percent invested as of
  close of offering                     14,724,877       83.0          12,347,500      82.3

Acquisition costs:
  Prepaid items and fees
    related to purchase of
    property                               -------       ---               65,300       0.4
  Cash down payments (b)                13,129,537      74.0           10,932,200      71.8
  Acquisition fees                       1,595,340       9.0            1,350,000       9.0
  Other                                     ------        --               ------       ---
                                          --------     -----           ----------      ----


Total acquisition cost                  14,724,877      83.0           12,347,500      82.3

Percent leverage (mortgage
  financing divided by total
  acquisition cost)                            68%                             80%

Date offering began                        1/22/91                         1/02/92

Length of offering (months)                     24                              21

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                        24                              21
- ------------------------------

     (a)  Consists  of   estimated   legal,   accounting,   printing  and  other
organization and offering expenses.

     (b) Represents the capital  contributions  of the  partnership  paid or the
required payments to be paid to the local limited partnerships.




                                       A-4
                                   UNAUDITED
<PAGE>



                                     TABLE I


                            EXPERIENCE IN RAISING AND
                           INVESTING FUNDS (January 1,
                              1993 - June 30, 1996)



                                           CHTC III          %                        HTCF IV-I         %

Dollar amount offered                     $30,000,000                              $10,000,000
                                          ===========         ==                   ===========

Dollar amount raised                       18,000,000       100.0                    10,000,000       100.0

Less offering expenses:
  Selling      commissions     &
discounts                                   1,440,000         8.0                       750,000         7.5
   paid to non-affiliates                     909,000         5.0                       686,300         6.9
  Organizational expenses (a)

Reserves                                      855,000         4.8                       280,600         2.8
                                              -------        ----                       -------         ---

Percent invested as of
  close of offering                        14,796,000        82.2                     8,283,100        82.8

Acquisition costs:
  Prepaid items and fees
   related to purchase of
   property                                   104,000         0.6                        34,100         0.3
  Cash down payments (b)                   13,072,000        72.6                     7,449,000        74.5
  Acquisition fees                          1,620,000         9.0                       800,000         8.0
  Other                                        ------         ---                        ------         ---
                                           ----------      -------                   ----------       -----

Total acquisition cost                     14,796,000        82.2                     8,283,100        82.8

Percentage leverage (mortgage
  financing divided by total
  acquisition cost)                               64%                                       77%

Date offering began                           2/17/93                                  10/20/93

Length of offering (months)                        17                                         9

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                           17                                         9
- -------------------------------

     (a)  Consists  of   estimated   legal,   accounting,   printing  and  other
organization and offering expenses.

     (b) Represents the capital  contributions  of the  partnership  paid or the
required payments to be paid to the local limited partnerships.

                                      A-5
                                   UNAUDITED
<PAGE>



                                     TABLE I

                            EXPERIENCE IN RAISING AND
                           INVESTING FUNDS (January 1,
                              1993 - June 30, 1996)



                                                             HTCF IV-2        %                CHTC IV-4         %

Dollar amount offered                                       $20,000,000                        $25,000,000
                                                            ===========     ====               ===========

Dollar amount raised                                         15,241,000     100.0               11,099,000    100.0

Less offering expenses:
  Selling commissions &
  discounts                                                   1,000,500       6.6                  554,000      4.9
   paid to non-affiliates (c)                                   969,900       6.4                  827,000      7.5
  Organizational expenses (a)

Reserves                                                        241,600       1.7                  387,000      3.5
                                                                -------       ---                  -------      ---

Percent invested as of
  close of offering                                          13,029,000      85.3                9,331,000     84.1

Acquisition costs:
  Prepaid items and fees
   related to purchase of
   property                                                     136,000       0.9                   80,000       .7
  Cash down payments (b)                                     11,835,000      77.5                8,590,000     77.4
  Acquisition fees                                            1,058,000       6.9                  661,000      6.0
  Other                                                          ------       ---                   ------      ---
                                                            -----------     -----               ----------      ---

Total acquisition cost                                       13,029,000      85.3                9,331,000     84.1

Percentage leverage (mortgage
  financing divided by total
  acquisition cost)                                                 66%                                60%

Date offering began                                                9/94                               9/94

Length of offering (months)                                          13                                 12

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                                             17                                 15
- -------------------------------

     (a)  Consists  of   estimated   legal,   accounting,   printing  and  other
organization and offering expenses.

     (b) Represents the capital  contributions  of the  partnership  paid or the
required payments to be paid to the local limited partnerships.

     (c)  Selling  commissions  were first paid to an  affiliated  broker-dealer
which reallowed all selling commissions to non-affiliates.

                                      A-6
                                   UNAUDITED
<PAGE>



                                     TABLE I


                            EXPERIENCE IN RAISING AND
                           INVESTING FUNDS (January 1,
                              1993 - June 30, 1996)



                                                          HTCF V-3 (c)        %              CHTC IV-5 (d)     %

Dollar amount offered                                      $25,000,000                          25,000,000
                                                           ===========                          ==========

Dollar amount raised                                        17,554,580      100.0                6,254,800    100.0

Less offering expenses:
  Selling      commissions     &
discounts                                                    1,063,730        6.1                  297,600      4.7
   paid to non-affiliates (e)                                1,080,000        6.1                  391,700      6.3
  Organizational expenses (a)

Reserves                                                       781,250        4.5                1,575,600     25.2
                                                               -------        ---                ---------     ----

Percent invested as of
  close of offering                                         14,629,600       83.3                3,989,900     63.8

Acquisition costs:
  Prepaid items and fees
   related to purchase of
   property                                                    180,000        1.0                    7,000       .1
  Cash down payments (b)                                    13,756,900       78.4                3,689,500     59.0
  Acquisition fees                                             692,700        3.9                  293,400      4.7
  Other                                                         ------        ---                    -----      -0-
                                                           -----------        ---                 --------      ---

Total acquisition cost                                      14,629,600       83.3                3,989,900
                                                                                                               63.8
Percentage leverage (mortgage
  financing divided by total
  acquisition cost)                                                (c)                                 (d)

Date offering began                                               7/95                               11/95

Length of offering (months)                                         11                                 (d)

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                                           (c)                                 (d)
- -------------------------------

     (a)  Consists  of   estimated   legal,   accounting,   printing  and  other
organization and offering expenses.

     (b) Represents the capital  contributions  of the  partnership  paid or the
required payments to be paid to the local limited partnerships.

     (c) The offering was closed as of July 1, 1996.

     (d) The offering was continuing as of June 30, 1996.

     (e)  Selling  commissions  were first paid to an  affiliated  broker-dealer
which reallowed all selling commissions to non-affiliates.

                                      A-7
                                   UNAUDITED
<PAGE>






                                     TABLE I

                            EXPERIENCE IN RAISING AND
                           INVESTING FUNDS (January 1,
                              1993 - June 30, 1996)


                          P R I V A T E  O F F E R I N G S



                                          Four                       Two                        One
                                  Partnerships              Partnerships                Partnership
                                     Organized                 Organized                  Organized             
                                      in  1993       %           in 1994       %           in  1995     % 

Dollar amount offered                $7,419,969              $13,177,000                $15,000,000
                                  =============     ===      ===========      ===       ===========   ===

Dollar amount raised                  7,419,969   100.0       13,177,000    100.0        15,000,000   100.0

Less offering expenses:
  Selling commissions & discounts
   paid to non-affiliates (c)           696,627    9.4           475,866      3.6           337,500     2.2
  Organizational expenses (a)           142,999    1.9           354,314      2.7           337,500     2.2
  Reserves                              162,801    2.2           391,800      3.0           591,000     4.0
                                        -------   ----          --------      ---           -------  ------
  
Percent invested as of
  close of offering                   6,417,542   86.4        11,955,020     90.7          13,734,000  91.6

Acquisition costs:
  Prepaid items and fees
    related to purchase of
    property                             ------    -.-            ------    -.-             150,000     1.0
  Cash down payments (b)              5,500,686   74.1        11,141,539   84.6          12,984,000    86.6
  Acquisition fees                      750,000   10.1           655,000    5.0             600,000     4.0
  Other                                 166,856    2.2           158,481    1.2               -----     -.-
                                        -------  -----          ---------  ----          ----------     ---
                                                   
Total acquisition cost                6,417,542   86.4        11,955,020   90.7          13,734,000    91.6

Percent leverage (mortgage
  financing divided by total
  acquisition cost)                         77%                      72%                        60%

Date offering began                     Various                  Various                       3/95

Length of offering (months)                   3                        3                          7

Months to invest 90% of
  amount available for
  investment (measured from
  beginning of offering)                      3                        3                         11
- ------------------------------

     (a)  Consists  of   estimated   legal,   accounting,   printing  and  other
organization and offering expenses.

     (b) Represents the capital  contributions  of the  partnership  paid or the
required payments to be paid to the local limited partnerships.

     (c)  Selling  commissions  were first paid to an  affiliated  broker-dealer
which reallowed all selling commissions to non-affiliates.



                                      A-8
                                   UNAUDITED
<PAGE>

                                   TABLE II

TABLE II presents information concerning the cumulative compensation paid to the
Sponsor  for the period from  January 1, 1993 to June 30,  1996 with  respect to
programs  presented  in TABLE I and on an  aggregate  basis with  respect to all
other programs  which have been  sponsored by the Sponsor.  None of the programs
presented  in TABLE II have been  liquidated,  nor have  there been any sales or
refinancing of any of the programs' investments.

                                      A-9

<PAGE>




                                                     TABLE II

                                              COMPENSATION TO SPONSOR
                                         (January 1, 1993 - June 30, 1996)



                                                              HTCF V-3                   CHTC IV -5
                                                                                            (a)

Date offering commenced                                           7/95                        11/95

Dollar amount raised                                       $17,554,580                   $6,254,800

Amount paid to sponsor from
  proceeds of offering: (b)
     Underwriting fees                                               0                            0
     Acquisition fees                                          692,000                      293,400
     Syndication fee                                                 0                            0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                                 15,600                       18,763

Amount   paid   to   sponsor    from
operations:                                                          0                            0
   Property management fees                                          0                            0
   Partnership management fees                                       0                            0
   Reimbursements                                                    0                            0
   Leasing commissions

Dollar amount of property sales and
  refinancing    before    deducting
payments
  to sponsor:                                                        0                            0
     Cash                                                            0                            0
     Notes

Amount paid to sponsor from property sales and refinancing:
     Real estate commissions                                         0                            0
     Incentive fee                                                   0                            0
     Other                                                           0                            0
- ------------------------------------

(a)      The offering was continuing as of June 30, 1996.
(b)      Represents amounts paid to sponsor which were not reallowed to 
         non-affiliates.


                                      A-10
                                   UNAUDITED
<PAGE>



                                    TABLE II

                             COMPENSATION TO SPONSOR
                        (January 1, 1993 - June 30, 1996)



                                                     HTCF IV-1             HTCF IV-2            CHTC IV-4



Date offering commenced                                  10/93                  9/94                 9/94

Dollar amount raised                               $10,000,000           $15,241,000          $11,099,000

Amount paid to sponsor from
  proceeds of offering: (a)
     Underwriting fees                                       0                     0                    0
     Acquisition fees                                  800,000             1,058,000              661,000
     Syndication fee                                         0                     0                    0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                         61,314               135,022               70,526

Amount   paid   to   sponsor    from
operations:                                                  0                     0                    0
   Property management fees                                  0                     0                    0
   Partnership management fees                               0                     0                    0
   Reimbursements                                            0                     0                    0
   Leasing commissions

Dollar amount of property sales and
  refinancing    before    deducting
payments
  to sponsor:                                                0                     0                    0
     Cash                                                    0                     0                    0
     Notes

Amount paid to sponsor from property sales and refinancing:
     Real estate commissions                                 0                     0                    0
     Incentive fee                                           0                     0                    0
     Other                                                   0                     0                    0
- ------------------------------------

(a)      Represents amounts paid to sponsor which were not reallowed to 
         non-affiliates.


                                      A-11
                                   UNAUDITED

<PAGE>



                                    TABLE II

                             COMPENSATION TO SPONSOR
                        (January 1, 1993 - June 30, 1996)



                                                   CHTC II            HTCF III

Date offering commenced                               1/91                1/92

Dollar amount raised                           $17,726,000         $15,000,000

Amount paid to sponsor from
  proceeds of offering: (c)
     Underwriting fees                                   0                   0
     Acquisition fees                            1,595,340           1,350,000
     Advisory fee (a)                                    0                   0
     Syndication fee                                     0                   0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                  (183,443)           (325,152)

Amount   paid   to   sponsor    from
operations:                                              0                   0
   Property management fees                         43,000             152,002
   Partnership management fees (b)                       0                   0
   Reimbursements                                        0                   0
   Leasing commissions

Dollar amount of property sales and
  refinancing    before    deducting
payments
  to sponsor:                                            0                   0
     Cash                                                0                   0
     Notes

Amount paid to sponsor from property sales and refinancing:
     Real estate commissions                             0                   0
     Incentive fee                                       0                   0
     Other                                               0                   0
- ------------------------------------

     (a) Advisory fee in some instances  includes  development fee paid by local
limited partnership to sponsor.

     (b) Partnership  management fees were paid from partnership reserves in the
instances where amounts paid to sponsor from operations exceeds dollar amount of
cash generated from operations.

     (c)  Represents  amounts  paid to  sponsor  which  were  not  reallowed  to
non-affiliates.


                                      A-12
                                   UNAUDITED
<PAGE>


                                    TABLE II

                             COMPENSATION TO SPONSOR
                        (January 1, 1993 - June 30, 1996)



                                                              CHTC III            Other Public
                                                                                  Programs (b)

Date offering commenced                                           2/93                 Various

Dollar amount raised                                       $18,000,000             $23,221,500

Amount paid to sponsor from
  proceeds of offering: (d)
     Underwriting fees                                               0                       0
     Acquisition fees                                        1,620,000                 549,000
     Advisory fee (a)                                                0                       0
     Syndication fee                                                 0                       0

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                                220,209               (470,372)

Amount   paid   to   sponsor    from
operations:                                                          0                       0
   Property management fees                                    150,000                   5,000
   Partnership management fees (c)                                   0                       0
   Reimbursements                                                    0                       0
   Leasing commissions

Dollar amount of property sales and
  refinancing    before    deducting
payments
  to sponsor:                                                        0                       0
     Cash                                                            0                       0
     Notes

Amount paid to sponsor from property sales and refinancing:
     Real estate commissions                                         0                       0
     Incentive fee                                                   0                       0
     Other                                                           0                       0
- ------------------------------------

     (a) Advisory fee in some instances  includes  development fee paid by local
limited partnership to sponsor.

     (b) Includes four public programs.

     (c) Partnership  management fees were paid from partnership reserves in the
instances where amounts paid to sponsor from operations exceeds dollar amount of cash generated from operations.

     (d)  Represents  amounts  paid to  sponsor  which  were  not  reallowed  to
non-affiliates.


                                      A-13
                                   UNAUDITED
<PAGE>


                                    TABLE II

                             COMPENSATION TO SPONSOR
                        (January 1, 1993 - June 30, 1996)



- -----------------------------P  R  I  V  A  T  E   O F F E R I N G S---------------------



                                              Four                Two              One           All                             
                                          Partnerships        Partnerships    Partnership         Other
                                         Organized  in       Organized  in   Organized in       Private                          
                                               1993               1994            1995      Partnerships (b)
                                            ----------        -----------      ----------   -----------------       

Date offering commenced                        Various              Various             3/95     1992 & prior

Dollar amount raised                        $7,419,969          $13,177,000      $15,000,000              N/A

Amount paid to sponsor from
  proceeds of offering: (d)
     Underwriting fees                               0                    0                0              N/A
     Acquisition fees                                0                    0          600,000              N/A
     Advisory fee (a)                                0                    0                0              N/A
     Syndication fee                           750,000              655,000                0              N/A

Dollar amount of cash generated
  from (used in) operations before
  deducting payments to sponsor                    645            (100,881)           47,847              N/A

Amount   paid   to   sponsor    from
operations:                                          0                    0                0                0
   Property management fees                     12,000               15,000                0          299,754
   Partnership management fees (c)                   0                    0                0                0
   Reimbursements                                    0                    0                0                0
   Leasing commissions

Dollar amount of property sales and
  refinancing    before    deducting
payments
  to sponsor:                                        0                    0                0                0
     Cash                                            0                    0                0                0
     Notes

Amount paid to sponsor from property sales
 and refinancing:
     Real estate commissions                         0                    0                0                0
     Incentive fee                                   0                    0                0                0
     Other                                           0                    0                0                0
- ------------------------------------

     (a) Advisory fee in some instances  includes  development fee paid by local
limited partnership to sponsor.

     (b) Includes 39 private programs sponsored since January 1984.

     (c) Partnership  management fees were paid from partnership reserves in the
instances where amounts paid to sponsor from operations exceeds dollar amount of
cash generated from operations.

     (d)  Represents  amounts  paid to  sponsor  which  were  not  reallowed  to
non-affiliates.



                                      A-14
                                   UNAUDITED
<PAGE>

                                   TABLE III

TABLE III presents the operating  results for all partnerships  sponsored by the
Sponsor  which closed  during the five years and six months ended June 30, 1996.
The prior  partnerships  are  structured  as investment  partnerships  acquiring
interests in operating  partnerships.  The investment  partnerships  account for
such investments  using the equity method of accounting which recognizes each of
such partnership's pro rata share of the operating partnership's total income or
loss. Revenues generated by the investment partnerships consist substantially of
interest on short-term  investments.  This interest income  generally  decreases
after the initial two years of  operations  as funds  available  for  investment
decrease.  This  decrease  in funds  arises  from the  investment  partnership's
payments of capital contributions due.

For the prior public partnerships presented, which report on a GAAP basis, "Cash
generated  (or used) from  operations"  is per the  program's  Statement of Cash
Flows.  The prior private  programs  maintain their books and records on the tax
basis of  accounting  and not on the  basis  of  generally  accepted  accounting
principles  (GAAP),  and "Cash  generated(or  used)  from  operations"  for such
programs is per their respective books and records.  The significant  difference
is that  depreciation  expense  on a tax basis as  compared  to a GAAP  basis is
greater in the early years of operations.

Other  information  included in the table  includes data on cash  generated from
operations  and tax and  cash  distribution  information  per  $1,000  invested,
including Tax Credit  allocations.  Federal Tax Credit  information for HTCF and
CHTC reflects a one-time  election to increase the  allocations for 1990 to 150%
of the amount which would otherwise have been allocable,  which will result in a
corresponding reduction in total credits allocable in future years.



                                      A-15
<PAGE>

                                                             TABLE III
                                               OPERATING RESULTS OF PRIOR PROGRAMS


                                       /------------------ HTCF II ----------------------------\



                                         1991       1992         1993        1994         1995      1996 (a)
                                      -------     ------       ------      ------         ----      -----
                                        
Gross revenue                        $ 23,597     23,054       11,193       9,287       11,368       5,245
Less:
   Operating expenses                 108,494    145,784      154,060     157,875      163,151      85,452
   Interest                                 0          0            0           0            0           0
   Depreciation and amortization       15,710     23,584       22,079      23,905       23,266      10,676
Equity in losses in local 
  partnerships                        384,244    551,431      634,893     544,630      602,163     285,000
                                               ---------  -----------   ---------    ---------   -------
Net income (loss)-GAAP basis         (484,851)  (697,745)    (799,839)   (717,123)    (777,212)   (375,883)

Taxable loss from operations         (541,209)  (824,186)    (888,131)   (818,566)    (858,138)   (410,445)

Cash generated (used) from
  operations                         (541,209)     6,481       (8,894)     40,620       (5,443)     (9,327)
Cash generated from sales                   0          0            0           0            0           0
Cash generated from refinancing             0          0            0           0            0           0
                  
Less:Cash distributions to investors        0          0            0           0            0           0
                                    
Cash generated (deficiency) after cash 
  distributions and special items    (541,209)     6,481       (8,894)     40,620       (5,443)     (9,327)
 
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED


Federal income tax results
  Ordinary income (loss)
     From operations                     (98)      (116)        (125)       (116)        (121)       ( 59)
     From gain on sale                     0          0            0           0            0           0

Federal tax credits                      130        121          138         146          145         N/A
California tax credits                     0          0            0           0            0           0

Cash distributions to investors            0          0            0           0            0           0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of all 
properties                               100        100          100         100          100         100
- --------------------------------

(a)      Six months ended June 30, 1996.

N/A The amount of tax  credits is not  available  until the  preparation  of the
partnership's tax returns after December 31, 1996.


                                      A-16
                                   UNAUDITED
<PAGE>



                                                       TABLE III
                                        OPERATING RESULTS OF PRIOR PROGRAMS


                     /-------------------------------- CHTC II ----------------------------\

 
                                             1991(a)         1992         1993           1994          1995       1996 (d)
                                           ---------       ------     --------          -----         -----       --------

Gross revenue                             $   7,243    $   72,092      133,580         61,226        52,399        12,684
   Operating expenses                         8,896       105,481      158,082        355,671       251,425       122,421
   Interest                                   7,239         2,157            0              0             0             0
   Depreciation and amortization              9,312        32,961       52,480         47,565        54,836        27,418
Equity in losses in local partnerships       54,679       731,542    1,081,114      1,194,095     1,579,652       778,000
                                            -------     ---------    ---------      ---------     ---------       -------
                                
Net income (loss) - GAA P basis             (72,883)     (800,049)   (1,158,096)   (1,536,105)   (1,833,514)   (  915,155)

Taxable loss from operations                (64,627)     (794,969)   (1,208,709)   (1,425,376)   (2,079,433)   (1,130,555)

Cash generated (used) from operations        (1,407)         3,637     (221,444)       42,033       (68,921)        21,889
Cash generated from sales                         0             0             0             0             0             0
Cash generated from refinancing                   0             0             0             0             0             0

Less: Cash distributions to investors             0             0             0             0             0             0
                                     
Cash generated (deficiency) after cash
 distributions and special items             (1,407)         3,637     (221,444)        42,033      (68,921)        21,889
                   
TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED


Federal income tax results
  Ordinary income (loss)
     From operations                        (b)(11)        (114)          (68)          (85)           (116)        ( 64)
     From gain on sale                           0            0             0             0               0            0

Federal tax credits                             15           52            74            85             107           N/A
California tax credits                          50          129           104           109              99           N/A

Cash distributions to investors                  0        (c)44             0             0               0            0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs of 
 properties retained divided by total
 original acquisition costs of all 
 properties                                    100          100           100            100            100           100
- --------------------------------
 
     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average. 

     (c) This amount was  distributed  from  CHTCII's  reserves to investors who
purchased their units prior to January 1, 1991.

     (d) Six months  ended June 30,  1996.  N/A The amount of tax credits is not
available until the preparation of the  partnership's tax returns after December
31, 1996.


                                      A-17
                                   UNAUDITED
<PAGE>



                                                                               TABLE III

                                                                OPERATING RESULTS OF PRIOR PROGRAMS




                                          /-------------------------------------- HTCF III --------------------------------\


                                              1992(a)               1993              1994           1995         1996 (c)
                                              -------             -------            -----           ----        -----
                                                                                                                    
Gross revenue                             $    45,236        $   137,116        $   87,521    $    57,741       $ 8,209
Less:
   Operating expenses                          13,036            120,054           313,134        314,320       169,551
   Interest                                       679                  0                 0              0             0
   Depreciation and amortization                3,394             24,478            45,724         47,176        23,588  
Equity in losses in local partnerships         68,933            779,251         1,323,487      1,312,540       648,000
                                                                                                          

Net income (loss) - GAAP                      (40,806)          (786,667)       (1,594,824)    (1,616,295)     (832,930)

Taxable loss from operations                  (36,895)          (850,051)       (1,594,118)    (1,715,667)     (924,992)

Cash generated (used) from operations          53,333           (393,615)          (38,224)       (16,170)      (29,145)
Cash generated from sales                           0                  0                 0              0             0
Cash generated from refinancing                     0                  0                 0              0             0

Less:Cash distributions to investors                0                  0                 0              0             0
                                    
Cash generated (deficiency) after cash 
 distributions and special items               53,333           (393,615)          (38,224)       (16,170)      (29,145)
                   

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                           (b)(4)               (56)             (105)          (113)         ( 62)
     From gain on sale                             0                  0                 0              0             0

Federal tax credits                                4                 68               119            152           N/A
California tax credits                             0                  0                 0              0           N/A

Cash distributions to investors                    0                  0                 0              0             0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
(original total acquisition costs of
properties retained divided by total
original acquisition costs of all
properties)                                      100                100               100            100           100
- --------------------------------

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months  ended June 30,  1996.  N/A The amount of tax credits is not
available until the preparation of the  partnership's tax returns after December
31, 1996.



                                      A-18
                                   UNAUDITED

<PAGE>


                                                                        TABLE III
                                                                 OPERATING RESULTS OF PRIOR PROGRAMS

                                           /-----------------------------CHTC III ---------------------------\


                                                1993(a)                1994             1995         1996 (c)
                                   
Gross revenue                               $    22,885        $    156,271      $   145,959     $    37,760
Less:
   Operating expenses                             7,204              86,306          193,916         109,526
   Interest                                           0                   0                0               0
   Depreciation and amortization                      0              41,757           57,466          28,732
Equity in losses in local partnerships           33,260             352,511        1,155,114         525,000

Net income (loss) - GAAP basis                  (17,579)           (324,303)      (1,260,537)       (625,498)

Taxable loss from operations                    (30,475)           (388,247)        (126,617)       (866,034)

Cash generated (used) from operations            (9,831)           (225,005)          437,400       (132,355)
Cash generated from sales                             0                   0                0               0
Cash generated from refinancing                       0                   0                0               0

Less: Cash distributions to investors                 0                   0                0               0
                                     
Cash generated (deficiency) after cash
 distributions and special items                 (9,831)           (225,005)          437,400       (132,355)
 

                 TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                             (b)(4)                (21)             (71)            (48)
     From gain on sale                               0                   0                0               0

Federal tax credits                                  6                  32               95             N/A
California tax credits                               0                  48               85             N/A

Cash distributions to investors                      0                   0                0               0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs of
 properties retained divided by total
 original acquisitions costs of all
 properties                                        100                 100              100             100
 --------------------------------

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.



                                      A-19
                                   UNAUDITED
<PAGE>


                                                                           TABLE III
                                                               OPERATING RESULTS OF PRIOR PROGRAMS



                                     /-----------HTCF IV-1----------------\      /-------------HTCT VI-2--------------\


                                        1994(a)          1995      1996 9c)        1994(a)         1995        1996 (c)
                                   

Gross revenue                         $  85,261        66,645       25,046         3,475        179,927     $  94,076
Less:                                   
   Operating expenses                    47,149        53,536       19,099        27,269         57,965        35,330
   Interest                                   0             0            0             0         39,148         5,350
   Depreciation and amortization         20,797        30,926       29,440         1,638         26,208        18,746
Equity in losses in local partnerships  413,316       574,538      392,400       240,698        628,521       353,400


Net income (loss) - GAAP basis         (396,001)     (592,355)    (415,893)     (266,130)      (571,915)     (318,750)

Taxable loss from operations           (417,185)     (874,044)    (533,233)     (228,979)      (702,048)     (420,990)

Cash generated (used) from operations    46,649        19,058      (4,393)      (25,518)         62,653        97,887
Cash generated from sales                     0             0            0             0              0             0
Cash generated from refinancing               0             0            0             0              0             0

Less: Cash distributions to investors         0             0            0             0              0             0
                                     
Cash generated (deficiency) after cash
 distributions and special items         46,649        19,058       (4,393)      (25,518)         62,653        97,887
  

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                    (b)(41)          (86)         (53)       (b)(40)           (56)          (21)
     From gain on sale                       0            0             0              0             0

Federal tax credits                         32           101          N/A            21             70           N/A
California tax credits                       0             0            0             0              0


Cash distributions to investors              0             0                          0             0              0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
(original total acquisition costs of
 properties retained divided by total
 original acquisitions costs of all
 properties                                100            100          100           100
 --------------------------------


     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.



                                      A-20
                                   UNAUDITED

<PAGE>



                                                                           TABLE III
                                                               OPERATING RESULTS OF PRIOR PROGRAMS



                                                       /-------------------CHTC IV-4------------------\



                                                          1994(a)             1995        1996 (c)

Gross revenue                                          $    1,613     $    160,888     $  80,480
Less:
   Operating expenses                                      13,399           41,325          25,618
   Interest                                                     0           79,853               0
   Depreciation and amortization                                0           16,056          12,212
Equity in losses in local partnerships                     (2,212)         100,224         172,000
 
Net income (loss) - GAAP basis                             (9,574)         (76,570)       (129,350)

Taxable loss from operations                              (11,786)         (60,108)       (173,737)

Cash generated (used) from operations                       1,602           26,322          90,329
Cash generated from sales                                       0                0               0
Cash generated from refinancing                                 0                0               0

Less: Cash distributions to investors                           0                0               0
                                     
Cash generated (deficiency) after cash 
 distributions and special items                            1,602           26,322          90,329
                   

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                       (b)(5)             (29)            (23)
     From gain on sale                                         0                0               0

Federal tax credits                                            0               18             N/A
California tax credits                                         0               53             N/A

Cash distributions to investors                                0                0               0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs of
 properties retained divided by total
 original acquisitions costs of all
 properties                                                  100              100             100               
 --------------------------------


     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.




                                      A-21
                                   UNAUDITED

<PAGE>


 
                                                                           TABLE III
                                                               OPERATING RESULTS OF PRIOR PROGRAMS




                                                     /----------HTCF V-3-----------\             /------CHTC IV-5-------\


                                                      1995(a)        1996 (c)                     1996(c)
                                                      -------        --------                     -------

Gross revenue                                      $    3,487     $    36,504                 $    16,315
Less:
   Operating expenses                                  12,379          29,861                         893
   Interest                                                 0               0                           0
   Depreciation and amortization                          454           8,155                       2,468
Equity in losses in local partnerships                (10,200)         45,200                           0
                                                    ----------         ------                     -------      
                                     
Net income (loss) - GAAP basis                            854         (46,712)                     12,954

Taxable loss from operations                           (3,520)        (37,782)                     12,954

Cash   generated (used) from operations                 3,402          12,198                      18,763
Cash generated from sales                                   0               0                           0
Cash generated from refinancing                             0               0                           0

Less: Cash distributions to investors                       0               0                           0


Cash generated (deficiency) after cash
  distributions and special items                       3,402          12,198                      18,763
                   

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                     (b)0             (2)                        (b)4
     From gain on sale                                      0               0                           0

Federal tax credits                                         3             N/A                         N/A
California tax credits                                      0             N/A                         N/A

Cash distributions to investors                          (d)5               0                           0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
(original total acquisition costs of
properties retained divided by total
original acquisition cots of all
properties                                                100             100                         100
__________________________ 

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's  average.  For HTCF V-5,
amount is less than $1 per $1,000 invested.

     (c) Six months ended June 30, 1996.

     (d) This amount was distributed in 1995 by the general partner.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.






                                      A-22
                                   UNAUDITED
<PAGE>


                                                                       TABLE III 

                                                          OPERATING RESULTS OF PRIOR PROGRAMS





                                                                    THREE PRIVATE
                                    /----------------------OFFERINGS CLOSED DURING 1990----------------------\


                                           1991         1992         1993         1994        1995       1996 (a)
                                        -------       -------       ------       -----       -----       --------
                                                                                                        

Gross revenue                           119,509       88,034       64,216       31,868       3,975        1,529
Less:
   Operating expenses                    10,907        9,631        4,679        9,733       9,424       15,577
   Interest                              33,951       33,123       20,328        6,542       3,345            0
   Depreciation and amortization          1,700        8,373        1,200        3,200       2,000          500
Equity in losses in local partnerships  430,758      439,073      446,146      430,952     379,832      189,916
                                        
                                                                                         
Net income (loss) - Tax basis          (357,807)    (402,166)    (408,137)    (418,559)   (390,626)    (204,464)

Cash generated (used) from operations   (32,296)     (32,646)     (19,122)     (10,106)     (5,449)     (14,048)
Cash generated from sales                     0            0            0            0           0            0
Cash generated from refinancing               0            0            0            0           0            0

Less: Cash distributions to investors         0            0            0            0           0            0
                                     
Cash generated (deficiency) after cash
 distributions and special items        (32,296)     (32,646)     (19,122)     (10,106)     (5,449)     (14,048)
 

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                      (135)        (103)        (104)        (108)       (100)        ( 52)
     From gain on sale                       0            0            0           0            0

Federal tax credits                         107          137          132          140         132          N/A
California tax credits                      114           36           36            0           0

Cash distributions to investors               0            0            0            0           0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition cots 
 of properties retained divided by
 total original acquisition costs
 of all properties)                         100         100           100          100          100
- ----------------------------------

     (a) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.



                                      A-23
                                   UNAUDITED
<PAGE>




                                                                            TABLE III
                                                               OPERATING RESULTS OF PRIOR PROGRAMS




                                                                           TWO PRIVATE
                                        /---------------------------OFFERINGS CLOSED DURING 1991----------------------------\


                                          1991(a)          1992           1993          1994           1995         1996 (c)
                                                                                                                       

Gross revenue                          $   71,701       156,628        145,987       100,394         58,900         22,561 
Less:     
   Operating expenses                       1,284         6,391         11,897         3,149          4,585         13,325
   Interest                                 2,113        12,612         16,556        14,397         20,515              0
   Depreciation and amortization            1,000         2,000          2,000         2,000          2,000          3,675
Equity in losses in local partnerships    255,066       293,823        405,742       447,351        450,959        225,480


Net income (loss) - Tax basis            (187,762)     (158,198)      (290,208)     (366,503)      (419,159)      (219,919)

Cash generated (used)from operations        1,660       (8,643)       (20,287)      (12,155)          8,143          9,236
Cash generated from sales                       0             0              0             0              0              0
Cash generated from refinancing                 0             0              0             0              0              0

Less: Cash distributions to investors           0             0              0             0              0              0
                                     

Cash generated (deficiency) after cash
 distributions and special items            1,660       (8,643)        (20,287)      (12,155)          8,143          9,236
                  

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                      (b)(69)          (64)          (102)         (102)          (141)          ( 74)
     From gain on sale                         0              0             0              0              0

Federal tax credits                           62            124            141           141            145            N/A
California tax credits                         0              0             0              0              0

Cash distributions to investors                0              0             0              0              0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs of 
 all properties                              100           100            100           100            100            100
 
- --------------------------------

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.



                                      A-24
                                   UNAUDITED
<PAGE>





                                                                            TABLE III
                                                               OPERATING RESULTS OF PRIOR PROGRAMS





                                                                       FOUR PRIVATE
                                        /--------------------OFFERINGS CLOSED DURING 1992--------------------\


                                            1992(a)          1993         1994          1995           1996(c)
                                   

Gross revenue                           $   179,081      $394,031      261,322       219,584          100,015
Less:
   Operating expenses                         9,951        12,208        9,958        15,822           17,978
   Interest                                  38,574        40,265       20,139        13,392            3,006
   Depreciation and amortization                -0-         1,346        2,619         3,518           12,395
Equity in losses in local partnerships      535,833       967,507    1,098,116     1,129,379          676,843   

Net income (loss) - Tax basis              (405,277)     (627,295)    (869,510)     (942,527)        (610,207)

Cash   generated    (used)   from          (31,736)      (28,897)      (6,385)         1,999           79,031
Cash generated from sales                         0             0            0             0                0
Cash generated from refinancing                   0

Less: Cash distributions to investors             0             0            0             0                0
                                     
Cash generated (deficiency) after cash 
 distributions and special items            (31,736)      (28,897)      (6,385)         1,999           79,031
                 

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                        (b)(47)          (73)        (110)         (114)            ( 77)
     From gain on sale                           0             0            0             0                0

Federal tax credits                             63           122          134           136              N/A
California tax credits                         104            92           92            49              N/A

Cash distributions to investors                  0             0            0             0                0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs of
 properties retained divided by total
 original acquisition cots of all
 properties                                     100           100          100           100              100
 --------------------------------

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.


                                      A-25
                                   UNAUDITED

<PAGE>

                    
                                                                            TABLE III
                                                          OPERATING RESULTS OF PRIOR PROGRAMS
                                                                           (Continued)







                                                        FOUR PRIVATE                                    TWO PRIVATE
                                    /-----------OFFERINGS CLOSED DURING 1993------------\    /---OFFERINGS CLOSED DURING 1994-----\



                                        1993(a)         1994        1995        1996(c)        1994(a)       1995           1996(c)
                                       -------         ----        ----        -------       -------        ----           ---

Gross revenue                           130,878      332,016     242,791        137,893         7,619     112,058           44,439
Less:
   Operating expenses                     2,834       16,958      10,944         14,587       111,523      36,529           40,784
   Interest                               6,111       14,094      14,427          5,357             0           0                0
   Depreciation and amortization         13,808       12,262      15,457         10,000         1,305      12,906           18,837
Equity in losses in local partnerships  435,734      959,693     878,965        439,483       129,352     861,238          311,811

Net income (loss) - Tax basis          (327,609)    (670,691)   (677,002)      (331,534)     (234,561)   (798,615)        (326,993)

Cash generated (used) from operations   121,645      302,422       6,094        117,949      (39,826)    (61,055)        34,529
Cash generated from sales                     0            0           0              0             0           0             0
Cash generated from refinancing               0            0           0              0             0           0             0

Less: Cash distributions to investors         0            0           0              0             0           0             0
  
Cash generated (deficiency) after cash  121,645      302,422       6,094        117,949      (39,826)    (61,055)        34,529

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                    (b)(48)        (113)       (112)          ( 55)                     (133)         ( 54)
     From gain on sale                       0            0           0         (b)(76)             0          0
                                                                                                    0

Federal tax credits                         49          101         126            N/A             31          20           N/A
California tax credits                      46           46          46            N/A              0           0           0     

Cash distributions to investors              0            0           0              0              0           0           0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs 
 of all properties                          100          100         100            100           100         100           100
 
- --------------------------------

     (a) Partial year of operations.

     (b) Tax loss  allocated to an investor in the first year is dependent  upon
an investor's entry date. Amount shown is partnership's average.

     (c) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.

                                      A-26
                                   UNAUDITED

<PAGE>

          
                                                                       TABLE III
                                                          OPERATING RESULTS OF PRIOR PROGRAMS
                                                                      (Continued)

                                                                      ONE PRIVATE
                                                /------OFFERING CLOSED DURING 1995-------\



                                                     1995 (a)             1996 (b)
                                          

Gross revenue                                      $   58,335           $   41,900
Less:
   Operating expenses                                  10,488               13,181
   Interest                                                 0                    0
   Depreciation and amortization                        6,099                5,772
Equity in losses in local partnerships                188,245                5,900
                                       
Net income (loss) - Tax basis  (146,497)               17,047

Cash generated (used) from operations                  47,847               22,442
Cash generated from sales                                   0                    0
Cash generated from refinancing                             0                    0


Less: Cash distributions to investors                       0                    0
                                    
Cash generated (deficiency) after cash
 distributions and special items                       47,847               22,442
                   

TAX AND DISTRIBUTION DATA PER $1,OOO INVESTED

Federal income tax results
  Ordinary income (loss)
     From operations                                     (10)                  (1)
     From gain on sale                                     0                    0

Federal tax credits                                        1                  N/A
California tax credits                                     0                    0

Cash distributions to investors                            0                    0

Amount (in percentage terms)
 remaining invested in program
 properties   at  end   of   year
 (original total acquisition costs
 of properties retained divided by
 total original acquisition costs
 of all properties                                      100                  100
 
- --------------------------------

     (a) Partial year of operations.

     (b) Six months ended June 30, 1996.

     N/A The amount of tax credits is not available until the preparation of the
partnership's tax returns after December 31, 1996.



                                      A-27
                                   UNAUDITED


</TABLE>

<PAGE>
                  WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

                               FIRST AMENDMENT TO

                        AGREEMENT OF LIMITED PARTNERSHIP


         The AGREEMENT OF LIMITED  PARTNERSHIP of WNC HOUSING TAX CREDIT FUND V,
L.P.,  SERIES 4 dated as of March 28,  1995  among  WNC &  Associates,  Inc.,  a
California  corporation,  as General  Partner,  John B. Lester,  Jr., as Initial
Limited  Partner,  and those  Persons  who shall  hereafter  be  admitted to the
Partnership as Additional Limited Partners, is hereby amended as follows:

1.       The definition of "Return on Investment" included in Article
I thereof is hereby amended to read in its entirety as follows:

         "Return on Investment" means an annual, cumulative, but not compounded,
"return"  to  the  Limited  Partners  as  a  class  on  their  Adjusted  Capital
Contributions  commencing  for each such Limited  Partner on the last day of the
calendar  quarter during which the Limited  Partner's  Capital  Contribution  is
received by the  Partnership,  calculated at the following annual rates: (i) 13%
through December 31, 2006 and (ii) 6% for the balance of the Partnership's term.

2.   Section 3.4.1(a) thereof is hereby amended to read in its
entirety as follows:

         3.4.1 (a) Each Limited  Partner who subscribes for 10 or more Units may
elect to contribute only $500 in cash for each Unit which such Partner acquires,
provided  that he also shall make a Note Capital  Contribution  in the amount of
$500 for each such Unit.  The Note  Capital  Contribution  of each such  Limited
Partner shall be evidenced by a Promissory Note delivered upon  subscription for
the Units. Each Promissory Note shall be payable in one installment of principal
on (i) June 30, 1997, if the investor  subscribes  between the commencement date
of the offering of Series 4 and December 31, 1996,  and (ii) January 31, 1998 if
the investor subscribes after December 31, 1996. Each Promissory Note shall bear
interest on the unpaid  balance as follows:  (i) for purchasers of less than 500
Units,  at a fixed rate of 1.5% per annum  above the Prime Rate,  such  interest
rate to be  determined  at the  commencement  of the  Offering  of  Series 4 and
identified in the Prospectus, or (ii) at a fixed

                                       B-1

<PAGE>


rate of 1% per annum  above  the  1-year  Treasury  Bill  rate,  such rate to be
determined  on the date of purchase.  Interest will be payable in arrears on the
principal payment date.

         IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of
the 15th day of May, 1996.

                                    GENERAL PARTNER:

                                    WNC & Associates, Inc.

                                    By:     /s/ JOHN B. LESTER, JR.
                                            John B. Lester, Jr.,
                                            President

                                    INITIAL LIMITED PARTNER:

                                    /s/JOHN B. LESTER, JR.
                                    John B. Lester, Jr.



wncnat5-22/07.lpa

                                       B-2

<PAGE>
                                                                      EXHIBIT C
                                  INVESTOR FORM

WNC Housing Tax Credit Fund V, Series 4

Amount of Investment
______________ x $1,000  _________________
# Units                                     Total Dollar Amount

Minimum Investments:  $5,000 ($2,000 for certain investors);
Additional increments:  $1,000

____ New Account
____ Addition to Existing Account
____  Initial  Here if the investor is paying for his Units with a check for the
total subscription amount.
____ Initial Here if the investor elects to use the installment payment. In such
case he shall make a check for one-half of the total subscription  amount (i.e.,
the number of Units subscribed for in 1 above x $500) and pay the remaining half
with  interest  pursuant  to the terms of the  Promissory  Note.  An investor is
eligible to use this installment payment method only if he is subscribing for at
least 10 Units ($10,000).

Make Check Payable To:
National Bank of Southern California
WNC/HTCF V

Submit To:
National Bank of Southern California
4100 Newport Place, Suite 100
Newport Beach, CA  92660
Attention:  WNC Escrow Manager

INVESTOR INFORMATION

Investor  ____  Dr.   ____  Mr.   ____  Mrs.   ____  Ms. Social Security Number

- -------------------------------------------------------------------------------
Investor  ____  Dr.   ____  Mr.   ____  Mrs.   ____  Ms. Social Security Number

- -------------------------------------------------------------------------------
Entity Name                                      Taxpayer Identification Number

- --------------------------------------------   -------------------------------
Occupation                                       Income

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

Mailing Address                                Residence Address
                                            (if different from mailing address)

- --------------------------------------------   -------------------------------
City                                            City

- --------------------------------------------   -------------------------------
State                               Zip         State                      Zip

- --------------------------------------------   --------------------------------
Daytime Phone                                   Daytime Phone

wncnat5-24/04.sub

                                      
<PAGE>

                            INVESTOR FORM (CONTINUED)

LEGAL FORM OF OWNERSHIP

____  Individual  ____  Community  Property  ____ Joint  Tenants  with Rights of
Survivorship  ____  Tenants  in Common  ____  Partnership  (copy of  partnership
agreement  must be sent with this  form)  ____  Corporate  (Certified  Corporate
Resolution  must be sent with this form) ____  Revocable  Trust  (Trustee(s)  is
required  to sign  below.  Copy of  trust  must be sent  with  this  form)  ____
Custodian for: _______________________________________________
Under Uniform Gift to Minors Act of the State of ________________.  
The Units are being purchased in the State of _______________________.
         (Complete if different from the state of residence)
____ Other (Specify)

____ Check here if the Investor is not a citizen of the United States.
____ Check here if the  Investor  is subject to backup  withholding  pursuant to
Section 3406(a)(1)(C) of the Internal Revenue Code.

Investor Signature
Execution of the Investor Form below constitutes the undersigned's  subscription
for the number of Units  indicated  above and his  acceptance  and  agreement to
perform  the  terms and  conditions  of the  Agreement  of  Limited  Partnership
included as Exhibit B to the  Prospectus of WNC Housing Tax Credit Fund V, dated
July 26, 1995.

Signature of First Investor                     Date

- -----------------------------------            ---------------------------
Signature of Second Investor                    Date

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

In order to induce the General Partner to accept this subscription, 
Investor represents by initialing in the space provided that Investor
has received a copy of the final Prospectus.                   ____________
                                                              (Initial Here)

Broker/Dealer Information

     The undersigned  represents  that he has complied with the  requirements of
the Rules of Fair Practice of the NASD with respect to the subscriber whose name
appears on the above  Investor Form and hereby  certifies that he has reasonable
grounds  to  believe  on the basis of  information  obtained  from the  investor
concerning  his  objectives,   financial  situation  and  needs  and  any  other
information  known to the  undersigned  that the  investment in the interests is
suitable for the investor, and, in addition, has informed the investor as to the
lack of liquidity and marketability of the interests.  The undersigned  warrants
that a Prospectus  was delivered to the subscriber not less than five days prior
to      submission     of     this      subscription      to     the     Series.

- -----------------------------------      ---------------------------     
Account Executive                       Broker/Dealer Firm

- ------------------------------------------------------------------------------
Branch Office Address     ____ Please check if new address

- -------------------------------------------------------------------------------
City                                State                     Zip        Phone

- ------------------------------------------------      -------------------------
Account Executive's Signature and/or Branch Manager   Date

wncnat5-24/04.sub

                                      C-1
<PAGE>
                                PROMISSORY NOTE

$500 PER UNIT

     FOR VALUE  RECEIVED,  the  undersigned  ("Maker"),  promises,  jointly  and
severally  if more than one,  to pay to the order of WNC Housing Tax Credit Fund
V, L.P., Series 4, a California limited partnership ("Payee"),  at the office of
Payee, 3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626-3416,  or at
such other location as Payee may from time to time designate,  the principal sum
of FIVE HUNDRED DOLLARS  ($500),  multiplied by the number of Units set forth in
his Investor Form,  together with interest on the unpaid principal  balance from
the date of the Maker's  admission as a limited  partner of the Payee until paid
at the rate of 9.75% per  annum.  Said  principal  sum shall be  payable  in one
installment  as follows:  (i) June 30, 1997,  if Maker  subscribes  on or before
December 31, 1996, and (ii) January 31, 1998 if Maker  subscribes after December
31, 1996. Interest accrued to the principal  installment payment date shall also
be due and payable on such date.

This  Promissory  Note is  delivered  pursuant to the terms of the  Agreement of
Limited Partnership of Payee, and shall be governed by the following provisions:

     1. This Promissory Note shall be paid in lawful money of the United States.

     2. The  occurrence  of any of the following  shall  constitute an "Event of
Default":  (a) Default in the payment of any amount payable  hereunder when due,
which  default  in  payment  is not  cured  within 30 days  after  such due date
("Payment  Default");  or default in the performance of any other  obligation of
Maker under this Promissory Note;

     (b) A materially false or misleading omission or representation, statement,
certificate,  warranty or other assertion in the  Subscription  Agreement or any
other document executed by the Maker in connection with the purchase of Units of
limited partnership interest in Payee;

     (c) The  filing  by,  or  against,  the Maker of any  proceeding  under the
Federal Bankruptcy Code;

     (d) An assignment for the benefit of creditors made by the Maker; or

     (e) The  appointment  of, or application  for, a receiver or trustee by any
party for all or any part of the assets of the Maker.

3. Upon the occurrence of an Event of Default,  then at the option of Payee, the
entire  unpaid  balance of  principal on this  Promissory  Note,  together  with
accrued  interest and any other amounts due hereunder,  shall be immediately due
and payable.

4. In the event that any amount payable under this  Promissory  Note is not paid
when due, a late charge in the amount of 5% of the late amount  shall be due and
payable in addition to the interest provided herein.

5. If this  Promissory  Note is not paid  when  due or if an  Event  of  Default
occurs,  Maker  promises  to pay all  costs of  collection,  including,  but not
limited  to,  reasonable  attorneys'  fees  incurred by Payee on account of such
collection whether or not suit is filed hereon.

6. In the  event  this  Promissory  Note is not paid  when due or if an Event of
Default  occurs,  Payee  may set off  all  amounts  owed  to  Payee  under  this
Promissory Note against all distributions to which Maker is entitled relating to
Maker's Units of limited partnership interest in Payee.

7. In the event of a Payment Default,  Maker shall be given a notice by Payee of
the Payment Default and the Payee's intent to foreclose on its security interest
given by Maker to secure the payment of this Promissory Note. For a period of 30
days after such notice (the "Cure Period"), Maker shall be entitled to cure such
Payment  Default by paying the delinquent  principal  payment,  with interest as
provided in this Promissory  Note, to the Payee.  Prior to the expiration of the
Cure  Period,  the Payee shall not be entitled  to  commence  to  foreclose  its
security interest in the Maker's Units of limited partnership  interest in Payee
and Maker's  interest in Payee shall not be subject to any reduction as a result
of such Payment Default. However, Payee may withhold any distributions otherwise
payable or issuable to Maker  pending the cure of the Payment  Default  prior to
the  expiration of the Cure Period.  Any reduction in Maker's  interest in Payee
effective  upon the  expiration  of the Cure  Period  will relate back and shall
apply to and affect any  withheld  distributions.  Upon  expiration  of the Cure
Period Payee may commence to foreclose and  foreclose  its security  interest in
the Maker's Units of limited partnership interest in Payee.
wncnat5-24/04.sub
<PAGE>
     8. The Promissory Note is made with full recourse to Maker, is by its terms
not a negotiable  instrument,  is assignable  only subject to the defenses Maker
may have, is subject to venue for collection in the state in which Maker resides
and may not be sold by Payee prior to its  maturity.  Subject to the  foregoing,
Payee may  pledge  and  grant  security  interests  in this  Promissory  Note as
security for any obligation of Payee.

     9. This  Promissory  Note shall be governed by, and construed in accordance
with, the laws of the State of California.

     10.  Reference in this  Promissory  Note to "Payee" shall mean the original
Payee hereunder so long as the Payee shall be the holder of this Promissory Note
and thereafter shall mean any subsequent holder of the Promissory Note.

     11. Time is of the essence of each obligation of Maker hereunder.

     12. No delay or omission on the part of the Payee in exercising  any rights
hereunder or under the  Agreement of Limited  Partnership  of Payee or any other
instrument  given to secure this  Promissory  Note shall  operate as a waiver of
such rights or any other right hereunder or under said instruments.

     13. This Promissory Note may be prepaid in full at any time without premium
or penalty; provided, however, that no partial prepayments shall be permitted.

     14.  Maker  waives  presentment,  demand for  payment,  notice of dishonor,
notice of protest,  protest and all other notices or demands in connection  with
the delivery, acceptance,  performance, default, endorsement or guaranty of this
instrument, except as provided in paragraph 7 above.

                                    This note is executed as of _______, 199__.

                                                   ____________________________
                                                                         Maker
wncnat5-24/04.sub
                                      C-2
<PAGE>
                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS


Item 35.          Financial Statements and Exhibits.

         (a)      Financial Statements

                  The Index under the heading "Financial Statements" included in
the Prospectus is hereby incorporated herein by reference.

                  The Index under the heading "Financial Statements" included in
the Supplement to the Prospectus is hereby incorporated herein by reference.

         (b)      Exhibits.

                  1.1
                  to
                  1.3      Superseded

                  1.4      Selling Agreement (2)

                  1.5      Selected Dealers Agreement (2)

                  1.6      Investor Form (filed as Exhibit C to the
                           Prospectus) (3)

                  3.1      Superseded
                  and
                  3.2

                  3.3      Agreement of Limited Partnership (filed as Exhibit
                           B to the Prospectus) (3)

                  5.1      Superseded

                  5.2      Opinion of Counsel (3)

                  8.1      Superseded

                  8.2      Opinion of Tax Counsel (3)

                  10.1     Superseded
                  and
                  10.2

                  10.3     Executed Escrow Agreement (3)

                  10.4     Amended and Restated Agreement of Limited
                           Partnership of Evergreen Apartments I Limited
                           Partnership (4)


wncnat5-24/12.rs
                                      II-1

<PAGE>



                  10.5     Amended and Restated Agreement of Limited
                           Partnership of Shepherd South Apartments I, Ltd.
                           (5)

                  10.6     Amended and Restated Agreement of Limited
                           Partnership of Patten Towers, L.P. II (6)

                  10.7 Second Amended and Restated Agreement of Limited
                           Partnership of Alliance Apartments I Limited
                           Partnership(7)

                  10.8     Amended and Restated Agreement of Limited
                           Partnership of Hastings Apartments I Limited
                           Partnership(7)

                  10.9     Agreement of Limited Partnership of Raymond S. King
                           Apartments Limited Partnership(7)

             10.10         Amended and Restated Agreement of Limited
                           Partnership of Talladega County Housing, Ltd.(7)

             10.11         Amended and Restated Agreement of Limited
                           Partnership of The Willows Apartments Limited
                           Partnership(7)

             10.12         Amended and Restated Agreement of Limited
                           Partnership of Cascade Pines, L.P. II (8)

             10.13         Amended and Restated Agreement of Limited
                           Partnership of Rosedale Limited Partnership (8)

             10.14         Amended and Restated Agreement of Limited
                           Partnership of Blessed Rock of El Monte (9)

             10.15         Agreement of Limited Partnership of Crescent City
                           Apartments (10)

             10.16         Amended and Restated Agreement of Limited
                           Partnership of Ogallalla Apartments I Limited
                           Partnership (11)
   
             10.17         Amended and Restated Agreement of Limited
                           Partnership of Ashford Place, A Limited Partnership
                           (12)
    
   
             10.18         Amended and Restated Agreement of Limited
                           Partnership of Lamar Plaza Apartments, L.P. (12)
    
   
             10.19         Amended and Restated Agreement of Limited
                           Partnership of Woodland, Ltd. (12)
    
   
             10.20         Amended and Restated Agreement of Limited
                           Partnership of Mesa Verde Apartments, Limited
                           Partnership (13)
    

wncnat5-24/12.rs
                                      II-2

<PAGE>



                  23.1     Superseded

                  23.2     Consent of Derenthal & Dannhauser as to securities
                           opinion is set forth in Exhibit 5.2 to this
                           Registration Statement (3)

                  23.3     Consent of Derenthal & Dannhauser as to tax opinion
                           is set forth in Exhibit 8.2 to this Registration
                           Statement (3)
   
              23.4 Superseded
              and
              23.5
    
   
                  23.6 Consents of Corbin & Wertz
    
   
                  23.7 Consent of Burke & Rea
    
                  24.1     Superseded
                  to
                  24.12

                  25.1     Power of attorney is included in signature page
                           contained in Part II of this Registration Statement
                           (1)



(1)      Included in the Registration Statement on Form S-11.
(2)      Included in Pre-Effective Amendment No. 1 to the Registration
         Statement on Form S-11.
(3)      Included in Pre-Effective Amendment No. 2 to the Registration
         Statement on Form S-11.
(4)      Included in the Current Report on Form 8-K dated November 14,
         1995.
(5)      Included in the Current Report on Form 8-K dated December 14,
         1995.
(6)      Included in the Current Report on Form 8-K dated December 21, 1995.
(7)      Included in Post-Effective Amendment No. 2 to the Registration
         Statement on Form S-11.
(8)      Included in the Current Report on Form 8-K dated April 26,
         1996.
(9)      Included in the Current Report on Form 8-K dated September 17,
         1996.
(10)     Included in the Current Report on Form 8-K dated September 25,
         1996.
(11)     Included in the Current Report on Form 8-K dated October 15,
         1996.
   
(12)     Included in the Current Report on Form 8-K dated December 31,
         1996.
(13)     Included in the Current Report on Form 8-K dated February 21,
         1997.
    


wncnat5-24/12.rs
                                      II-3

<PAGE>



                                   SIGNATURES
   
         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
Registrants  certify that they have reasonable grounds to believe that they meet
all of the  requirements  for  filing  on Form S-11 and have  duly  caused  this
amendment  to  Registration  Statement  to be  signed  on  their  behalf  by the
undersigned,  thereunto  duly  authorized,  in the City of Costa Mesa,  State of
California, on the 21st day of March, 1997.
    
                      WNC HOUSING TAX CREDIT FUND V, L.P.,
                              SERIES 3 AND SERIES 4

                           By: WNC & ASSOCIATES, INC.,
                                 General Partner

                                 By:  /s/ JOHN B. LESTER, JR.
                                      John B. Lester, Jr.,
                                      President


         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
amendment  to  Registration  Statement  has been signed  below by the  following
persons in the capacities and on the dates indicated.


SIGNATURE                     CAPACITY                          DATE

   
WILFRED N. COOPER, SR.*       Director and chief                March 21, 1997
- ----------------------
Wilfred N. Cooper, Sr.        executive officer of
                              WNC & Associates, Inc.


/s/ JOHN B. LESTER, JR.       Director, president,              March 21, 1997
- -----------------------       chief operating officer
John B. Lester, Jr.           and secretary of WNC &
                              Associates, Inc.


THEODORE M. PAUL*             Chief financial officer           March 21, 1997
- ----------------              and chief accounting
Theodore M. Paul              officer of WNC &
                              Associates, Inc.

    
* By: /s/ JOHN B. LESTER, JR.
          John B. Lester, Jr.,
          as attorney-in-fact


wncnat5-24/12.rs
                                      II-4

<PAGE>


                                INDEX TO EXHIBITS


Exhibit
Number                     Exhibit Description
   
 23.6                      Consents of Corbin & Wertz

 23.7                      Consent of Burke & Rea
    




<PAGE>






                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



WNC Housing Tax Credit Fund V, L.P., Series 3 and 4


We  consent  to  the  use  in  this  post-effective   Amendment  No.  6  to
Registration  Statement  No.  33-91136  of WNC  Housing Tax Credit Fund V, L.P.,
Series 3 and 4, on Form S-11 of our report on the consolidated  balance sheet of
WNC & Associates, Inc. as of August 31, 1996 dated October 28, 1996 appearing in
the  Prospectus,  which  is a part of  this  Registration  Statement  and to the
reference to us under the heading "Experts" in such Prospectus.




                                                             /s/ CORBIN & WERTZ

   
Irvine, California
March 25, 1997
    




















corbin.edg
<PAGE>






                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



WNC Housing Tax Credit Fund V, L.P., Series 3 and 4


We  consent  to  the  use  in  this  post-effective   Amendment  No.  6  to
Registration  Statement  No.  33-91136  of WNC  Housing Tax Credit Fund V, L.P.,
Series 3 and 4, on Form S-11 of our  report  dated May 22,  1996 on the  balance
sheet  of WNC  Housing  Tax  Credit  Fund V,  L.P.,  Series  4 of May 15,  1996,
appearing in the Prospectus,  which is a part of this Registration Statement and
to the reference to us under the heading "Experts" in such Prospectus.




                                                             /s/ CORBIN & WERTZ

   
Irvine, California
March 25, 1997
    




















corbin.edg
<PAGE>






                                     CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



WNC Housing Tax Credit Fund V, L.P., Series 3 and 4


We  consent  to  the  use  in  this  post-effective   Amendment  No.  6  to
Registration  Statement  No.  33-91136  of WNC  Housing Tax Credit Fund V, L.P.,
Series  3 and 4, on Form  S-11  of our  report  on the  balance  sheet  of WNC &
Associates,  Inc. as of August 31, 1994 dated October 30, 1994  appearing in the
Prospectus,  which is a part of this Registration Statement and to the reference
to us under the heading "Experts" in such Prospectus.





                                                             /s/ CORBIN & WERTZ

   
Irvine, California
March 25, 1997
    




















corbin.edg
<PAGE>





                                     CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



WNC Housing Tax Credit Fund V, L.P., Series 3 and 4


We  consent  to  the  use  in  this  post-effective   Amendment  No.  6  to
Registration  Statement  No.  33-91136  of WNC  Housing Tax Credit Fund V, L.P.,
Series 3 and 4, on Form S-11 of our  report  dated  June 7, 1995 on the  balance
sheet of WNC  Housing  Tax  Credit  Fund V, L.P.,  Series 3 as of May 31,  1995,
appearing in the Prospectus,  which is a part of this Registration Statement and
to the reference to us under the heading "Experts" in such Prospectus.




                                                             /s/ CORBIN & WERTZ

   
Irvine, California
March 25, 1997
    




















corbin.edg
<PAGE>






WNC Housing Tax Credit Fund V, L.P., Series 3 and 4
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626



                       Consent of Independent Accountants




We consent to the use in this  Registration  Statement No.  33-91136 of WNC
Housing Tax Credit Fund V, L.P., Series 3 and 4 on Form S-11, as amended, of our
report  dated  October 30, 1996 on the  statement  of  operations  for the eight
months ended August 31, 1996 of Crescent City Surf, Inc.


                                                              /S/ Burke & Rea

   
March 24, 1997
Stockton, California
    





















rea.edg



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